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Just Another Manic Monday – Retail Edition

[Growth and Deflation chart]Good morning! 

Japan had a huge GDP beat (+1.2% for the Q, 4.8% annualized)) and they leaked it early (to oil executives!) but, strangely, deflation is accelerating at the same time.  That’s great news for stimulus watchers as the government can continue to pump money into the economy, even while it’s growing and, of course, the carry trade can continue.

Despite the robust third-quarter report, Japanese officials said they were still concerned about the economy’s strength going forward, and didn’t intend to pull back plans for further spending to ensure continued growth.

"There is no change in the severe condition of the country’s economy," Naoto Kan, the deputy prime minister, told reporters after the report’s release. "We are concerned about whether the economy falls into a deflationary situation," he added.

The domestic demand deflator — a measure of changes in prices of goods and services, excluding exports and imports — plunged 2.6%, the fastest pace since 1958. It was the third straight quarter of falling prices.

Another sign of concern in the report: The contribution of private consumer spending to growth slipped in the third quarter, suggesting measures to convert Japan from export-led growth to domestic-demand-led growth were facing limits. In the third quarter, private consumer spending, rose 0.7%, compared with a revised 1% climb in the second quarter.

It’s all stimulus but there’s no sign stimulus is stopping so party on markets.  Japan also got a huge benefit from the Chinese auto sales – more stimulus!  The Nikkei itself isn’t thrilled and is up just 0.25%, barely hitting Friday’s high on a stick-save into the close but that didn't stopping the futures from jumping up more than half a point and gold from hitting $1,130.  I sent out an Alert to Members at 2:24 this morning saying:

"Once the Nikkei closes (2am EST) the Hang Seng will have an hour to themselves and that should top out our futures (the Hang Seng is up at 22,900 (+1.5%).  The shorting move on gold futures is to short them as they cross below $1,130 with zero tolerance for holding gold above that line.  The same can be done with the S&P futures at 1,100, the Dow at 10,316 and the Nas at 1,800 and you can even use the 2 out of 4 rule to short one of the laggards only AFTER two others break down to be a little safer.  We have Retail Sales at 8:30, which should be the next big market mover and keep in mind that Retail Sales were LOWER than expected in Japan for Q3

So far that strategy has worked out fine for some pre-market fun, as we made our futures highs as predicted, but have steadliy bounced off those levels since – making for a series of small, successful futures wins so far this morning (8:20) while we wait for the big dip on Retail Sales.

Oil is $77.33 and we’re still watching that $77.50 mark.  Copper is very excited about Japan and is back over $3 while silver hit $17.75.  As usual, the dollar is the World’s whipping boy at $1.4975 to the Euro and $1.6725 to the Pound and still under 90 Yen at 89.59.  That $1.50 line on the Euro is going to be critical, if that one breaks, the markets could break higher as the dollar heads to new lows. 

There are some great charts this morning in our Chart School section from Fallond Stock Picks and Pragmatic Capitalist and it’s this Russell Chart we’ll be watching closely today as that’s the index that needs to turn (back over 600) for us to get more comfortable with our bull side

Europe seems just thrilled this morning as well, with the FTSE well above the 5,250 danger zone at 5,358 (8:25am) but we still need the Dax to give us the go signal at the 8,750 mark, where it is right at the resistance line we predicted last week.  Let us first keep in mind that we are pessing the break UP levels and we do have to respect those lines, not try to buck the trend if we get over them but I am STILL skeptical as I'm also reading in Europ that mega-retailer H&M had worse-than-expected October sales, especially in hard-hit unemployed nations like France, Spain and the United States.  "There are large differences between markets," an analyst noted. "The U.S. was not good during [the third quarter], and it has continued in October." 

What are the concerns that keep us from running with the bulls?  We are concerned about Retail Sales and we are concerned about a bounce in the dollar dumping commodities and leading to a major market sell-off.  The pain being caused by the weak dollar to foreign manufacturers is evident in EADS's report, where they swung to a net loss in the third quarter as it was hit by the strength of the Euro, cost increases and as the economic downturn and crisis in the airline industry forced its Airbus unit to lower prices for its jets.  EADS said the drop largely extent reflected a €965 million ($1.47Bn) revaluation in contract provisions at the closing spot rate in the year-earlier period

Another concern out of Europe (sorry) is British Business Confidence falling again in October as access to credit remained tight, while house prices dipped in the first half of November.  33% of companies said it was more difficult to access bank finance in the three months to October, up from 20% in the three months to June.  The Bank of England Wednesday said that while the U.K. economy has begun its recovery, activity won't return to its 2007 level until 2011 at the earliest. The Central Bank once again highlighted weak bank lending as a significant drag on growth.

The decline of the dollar and decisions in the U.S. not to raise interest rates have caused “huge” speculation in foreign exchange trading and seriously affected global asset prices, said Liu Mingkang, chairman of the China Banking Regulatory Commission.  “The continuous depreciation in the dollar, and the U.S. government’s indication, that in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” he told reporters in Beijing today at the International Finance Forum.  Liu said this has “seriously affected global asset prices, fuelled speculation in stock and property markets, and created new, real and insurmountable risks to the recovery of the global economy, especially emerging-market economies.”

8:30 Update:  Well, we got our Retail Sales and woo-hoo on our futures bets as they were a bit disappointing.  The headline number was a strong 1.4%, double expectations of 0.7% but strip out autos and we fall to 0.2%, 1/2 the expected 0.4% move.  Even worse, to those who are paying attention, is the 50% downward revision to September sales from -1.5% to -2.3% so, essentially, this whole monh's gain is due to shoving Sept Auto Sales forward into October.  Worse than Retail Sales is the Empire State Manufacturing Survey, which fell from 34.57 in October to 23.51 in the November survey.  Employment Index fell to 1.3 vs. 10.4 prior and new orders dove to 16.7 vs. 30.8 in October. Price dropped -2.6 but better than October's -5.2. More than 40% of manufacturers expect cash holdings to increase over the next year, vs. 24% expecting decline; a year ago more manufacturers had expected cash holdings to decline than to rise. 

There is plenty of data in the week ahead including tomorrow's PPI and Industrial Production reports.  Wednesday is CPI and Housing Starts and Thursday we get Jobless Claims, Leading Economic Indicators and the Philly Fed so lots of ways to yank the market around this options expiration week.  We also have a lot of retail earnings from PSUN tonight, HD, SKS, TGT, TJX, and LZB tomorrow.  BJ, CHS, PERY, GYMB, HOTT, JACK, LTD, PETM and PVH report on Wednesday.  Thursday is huge with PLCE, DKS, GME, ROST, SHLD, SCVL, SI, SMRT, BKE, TWB, WSM, DEL, DBRN, FL, GPS, WTSLA and ZUMZ and Friday we get ANN and SJM as well as DHI with a peak at the housing market.

We're just watching our major breakouts today to see if we get any:  Dow 10,300, S&P 1,100, Nasdaq 2,200, NYSE 7,200 and Russell 600.  Anything less than that is going to be a disappointing week for the bulls, who must prove we're not topping out here ahead of the short holiday week next week.  


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  1. sold DIA November 101 at .41 on Friday to see what happened over the weekend.  I’m still awaiting "approval" from Schwab for complex spreads, most shorting puts which is why this position was unhedged.  I’m guessing I should sell at the opening given premium decay and buy something in December, or should I wait to see what levels are breached or failed?

  2. Poor little PARD, lol. IV will still be elevated this morning so I’m going to sell Dec. 2.5 calls early against the stock and hopefully recover the loss within a couple of months.

  3. Chaps & (Tcha),
    Thanks much for the elegant formula you delivered at the end of the day on Friday, re: converting deltas to DIA beta weighted deltas;

    You’d go through the following chain:
    ($ EXM / % EXM)* (%EXM / %SPX) * (%SPX / %DIA) * (%DIA / $ DIA) = (6.60/100) * .55 * (1/.97) * (100 / 102.91) = .03636. So 1,000 shares would be 36.36.

    Someday you might explain where you found it, or if you had it in your head,    WHY!! 
    In any case, it’s appreciated and seems accurate.  I do have another question that it raised, however.  Are you sure that the conversion factor arrived at above, ( .03636 ) should be multiplied by 1000 shares, or should it be multiplied by ( the unweighted delta of the position in question), in this case D=1000.  It seems that multiplying by the shares would ignore the added deltas of more complex positions with options sold against the shares, for instance.
    If I’m wrong, I’ve got a spread sheet in developement that needs correcting.
    Chaps, I’m also curious & think I’ve seen you comment before, but have you figured out a way to use TOS to beta weight theoretical positions or only positions that you have taken.  I’ve only been able to work on existing positions thus far, but I’m pretty new to TOS.

  4. For PARD, I was lucky enough to close out my Dec 5 putters last week, but still have the stock and the Dec 7.5 caller. I think my recovery plan will be to try and sell the Dec 2.5 puts for hopefully $1.5 or so this morning. Although their cash burn is pretty high, at a $1.75 share price, you’re basically just paying for their cash and investments on the balance sheet.

  5. PARD/Eric – You may want to sell the puts!  I forgot the result was pending, which is good otherwise I don’t think I would have gone into the weekend with just the sold $5 calls (bought back the puts a while ago).  Now I would flip to the upside if the deal is good enough, I think the company will survive this but it may take  a while for that to be clear. 

    DIA/Jcm – Use the 3 of 5 rule to decide.  We either break out or we don’t today, lots of effort being made to get us as highe as possible.  

  6. Bass/
    yes this number per one share, so you need to multiply it to amount of shares,
    if you need to calculate this number for option, you need to get delta of option (for example at the money option delta is 0.5)
    and wighting delta for this option will be: 0.5 x 0.036 x 100 shares = 1.8
    but in TOS you don’t need to do it manualy, system will calculate it for you, just need to choose beta wighting and input DIA

  7. Bass/
    yes you can multiply this number to unweighting delta of you position (which is the same thing)

  8. Based on the Phil’s Black Monday discussion last Friday, I have waaaay to much TZA today, so you can thank my anti-trading gift for this little rally!

  9. We are above breakout levels except RUT and NYSE:  Dow 10,300, S&P 1,100, Nasdaq 2,200, NYSE 7,200 and Russell 600.

    This is, of course, well over last week’s watch levels and we need to get more bullish up here.  XLF is still under $15 and oil is under $77.50 at the moment and the DAX isn’t staying over 5,750 but those are weak concerns at the moment.

    Still cheap if we’re going to be heading higher

    • WFR – $13.32, selling Jan $12.50 puts and calls for $2.50 nets $10.82/11.66
    • VLO – $17.29, selling Jan $17.50 puts and calls for $2.35 nets $15.15/16.32
    • XLF - $14.90, selling Jan $15 puts and calls for $1.65 nets $13.25/14.13
    • UYG $5.83, selling Jan $6 puts and calls for $1.10, nets $4.73/4.87

    These are all plays we won’t mind owning long-term if they go down as they will always make for good upside hedges if we get more bearish again. 

    Not rolling up DIA March puts but looking to go naked again if RUT fails to break 600 and the dollar is below $1.50 to the Euro but, other than that, we need more upside plays!

  10. Bass/
    if you would like to see how new position will change your total portfolio delta you need to go to Analyze tab: make sure that your portfolio Beta weighted to DIA, and add simulated trade – you will see how your delta will change

  11. This is crazy ….

  12. Phil: is this VLO you say a buy/write ?

  13. TZA/MrM – Those things are way too dangerous for prop trading.  I hope they are Dec at least..

    Crazy/Cap – Yeah but what are you gonna do at this point?  It is just like 1999, anything that can even be spun mildly bullish brings in another wave of new highs.

    V and MA are selling off on the retail news, at least someone is realistic.

    Business Inventories down 0.4%, pretty lame bu not enough to hurt the market. 

    It’s unlikely that natural gas prices will rebound next year, as producers continue to pursue growth. The natural-gas rig count, an indicator of drilling activity, bottomed in mid-July and has since climbed 10%.

    This is interesting, DIA is way ahead of the Dow at $104.20 so sentinment there is getting SUPER-bullish.

  14. BRCD / Phil – Do you think there’s still a trade in Brocade? They were the frontrunner for the HP acquisition and got dumped on when HP chose 3Com. Will other big players in the market still make a play for Brocade in trying to play catchup with HP?

  15. Phil: whith OPEX in a few days, what move should I make with my short calls in BIDU nov 420 ? cannnot grab why this is going up for weeks, now running out of time .

  16. Hi Tchayipov & chaps,
    Well after our various discussions on Delta and beta I chewed through you advises and landed up with the following holding at TOS three portfolios using the TOS monitor
    I hold 1. acc a beta of .64  2. acc 1.85 and 3. acc .763 this is beta weighting against DIA
    So it looks as my average of all acc is 1.5 meaning if DIA put goes up by .96% I am going down 1.08% have I got this right so fare. How many DIA mattresses do I need to buy to fill up the house? Taking Phils base of  2/1 at 6.7%

  17. Sorry down 1.5

  18. Yodi/
    Delta weighting to DIA shows how much you gonna win/loose if DIA move 1 point in $$ not in %%, so let’s say 10% market correction (about 10 DIA points) your 1st acc. will loose only $6.4, your 2nd acc. loose $18.5 and your 3d acc. $7.63,
    so your portfolios don’t need any mattresses because they already hedged( if you did everything correctly)

  19. Buy-write/RMM – All 4 of the above plays were buy/writes.  I’m willing to go bullish but I’m still worried. 

    HOV is still a fun upside play at $4.39, you can sell the Jan $5 puts and calls against them for $1.55 for net $2.84/3.92

    If the economy is going to survive then C might too, I always like the speculative bet of the 2011 $5/7.50 spread for .40.

    Keep in mind that I am NOT flipping bullish based on this morning’s move but these are bullish ads to balance out what was 55% bearish.  You can use positions like these to replace more mature bullish positions that have already done their job and may look a little toppy (like ISRG, AAPL, CAT, AXP, CVX..). 

    With the RUT far behind in breaking up, UWM $25s at $1.40 have very low premium and we can use the 600 line on the RUT to get out BUT, I think we are running low on gas here so let’s not get ahead of ourselves until we see 600 hold for a bit. 

    BRCD/Trad – I think they make an excellent buy/write as there will be plenty of rumor volatility and that should keep a nice floor under them but I think, ultimately, they are a little pricey to buy out but who knows in this crazy market. 

  20. Thanks tchayipov

  21. well, Phil, i’m glad you’re not going bullish like everyone else, but I guess the tape does not lie.  Got to follow it, right?
    i’m getting killed in my TZA and SRS positions, so i got out of the TZA today, as the Russell could catch up and go much  higher if the SPX decides to stay high, what are your thoughts?  would you buy TZA and SRS here? instead of getting out?  the covered call idea definitely does NOT work, and I think I’ll have to do what you do – when an extreme comes along, either sell the puts or calls….. to let premium help me…. the 3 x are too volatile…

  22. Good Morning Phil
    DIA holding Jan 105 at 5.15  now 3.92 against the 1/2 Dec 102 sold for 2.51 now 1.65 any move you recommend ? thks

  23. Doubled my SRS at this level. New basis is $8.78 – thinking this will turn at some point, even if temporarily, with so many folks on the bullish bandwagon. VIX approaching 20 as well (now at $22.97).

  24. Phil: if you go bullish, what index or ETF will you like ?

  25. Hi Phil on C I take it buy the 5 and sell the 7.5 call 2011 right

  26. BIDU/RMM – Notice they last touched $439.90 on 10/26 and gapped down 100 the next day.  That was earnings though but I think you have to grit your teeth until $440 actually breaks.  Of course your $420 caller is just $20.40 and you can roll them up to the $430 puts and calls at $17.20 and gain $5 in premium.  Otherwise, not too tragic as you can go to Dec $450 calls at $15 and Dec $400 puts at $8 so only worry if that spread falls below even to you. 

    Selling SRS Dec $8 puts for .45 net’s $1,150 in margin (ordinary account) on a net $450 cash credit.  That’s a really nice return if CRE doesn’t keep going to the moon.  $8.46 was the all-time low for SRS in Sept and they bounced back to $10+ a week later so I like the stock here ($8.57) as well as well as all the ways we played them last week.

    TZA/DMan – As I’ve told you before, I would NOT play TZA as it’s too risky but SRS (see above) I have great fundamental faith in.  I don’t care how hard they push it, CRE is in trouble and, eventually, someone will realize it. 

    Shippers not doing all that well, MA and V are weak but AXP made new highs so we’ll see what gives.  Selling the AXP $41s for .75 is just a play you have to do if you hate idiots (someone paying +2% for a week AFTER a 5% run from Friday’s open. 

  27. phil, do you mean , selling the calls naked on AXP?
    Selling the AXP $41s for .75 is just a play you have to do if you hate idiots (someone paying +2% for a week AFTER a 5% run from Friday’s open.

  28. Its official if your a bear your just plain nuts,  Don’t expect to see any bears on any of the financial networks.

  29. Dow 10,400, S&P 1,110, Nas 2,195, NYSE 7,250 and RUT still at 600.

    DIA/Yodi – Just the stops on the Dec $102s, maybe a .15 trailing stop.  That locks in .70 which is .35 per long and pays for most of one roll so not terrible as the Dow is "only’" up 132 at the moment.  March puts are holding their value well with the March $104 puts at $5.40 and they can now be rolled up to the March $105 puts at $5.90 if people are not already in them.  In your case Yodi, since you are in the Jans, $1.90 seems like a lot to roll back 2 months to the same delta so I’d rather spend $1 to roll up to the $107 puts and you can sell 1/2 the Nov $104 puts at .85 to pay for 1/2 of it if you want to but I’d put a sell-stop at .75 and hope for a nice move down where you can stop out your other 1/2 cover and go naked from the $107 puts.

    VIX/Llor – You would think the VIX would be happier (lower) with a big gain like this.  Someone is still buying puts besides us…

    Bullish/RMM – I always like the laggards and that’s the RUT and the SOX at the moment.  Note my 10:23 play on UWM and for the SOX you can go with USD (Ultra Semis) like the May $25/30 bull call spread at net $2.50 for a 100% upside and they are already at $28.88.

    C/Yodi – Right.

    AXP/DMan – Yes, naked call selling but it it, of course, dangerous and you have to be willing to roll to next month (still on our premise that retail sales will disappoint – not that anyone may care if they do judging from today’s move).

    Bears/Kustom – Not a good profession to be in at the moment! 

    Philly Fed’s Q4 Survey of Professional Forecasters: The U.S. economy will grow over each of the next five quarters, with GDP growth 2.7% in Q4, and rising 2.4%, 3.1% and 3.3% in 2010-2012. However, group says labor market has deteriorated since last quarter. Inflation seen moderate throuth the end of 2011.

    Steven Schork says natural gas is the Yugo of the energy complex: If it can go from $2.409 to $5.318, with no discernible fundamentals backing such a move, then there’s no reason it can’t go back to $2.409. And a warning: "Once bubbles pop, they tend to not only retrace to whence they began, but more importantly, overshoot this area."

    Sector ETF strength: Silver– SLV +4.4%. Regional Banks– KRE +1.3%. Coal– KOL +4%. Solar– KWT +3.7%. Steel– SLX +3.7%. Solar– TAN +3.5%. Clean Energy– PBW +3.4%. Oil Services– OIH +3.3%. Energy– XLE +2.7%. Commodities– GSG +2.7%. Gold Miners– GDX +2.7%. Energy– IYE +2.7%. Homebuilders– XHB +2.6%.

    Dow leaders early on: XOM +2.9%. AA +2.7%. MRK +2.5%. BA +2.4%. CAT +2.1%. INTC +2%. DDD +2%. GE +1.9%. CVX +1.9%. AXP +1.8%. HD +1.7%.

  30. Good By PARD… Why gamble on a recovery strategy that is iffy at best. With the cash out of PARD, I’m doubling down on ISRG and will capitalize on the surge coming from their big move into Japan. Stick with the "sure winners" as they have the growth and earnings.

  31. Volume on this amazing breakout at 11am is 52M, about normal for a program trading day.

    Barring a second ‘conventional’ stimulus, which probably isn’t in the cards for a deficit phobic Washington, Paul Krugman opts for a cheaper alternative: A $300B jobs program.

    DIA $104 calls can be sold naked for .90 with a $1 stop.  As I mentioned, DIA is way ahead of the Dow at $104.30 and maybe they are right or maybe they are nuts but the bottom line is they are paying a lot of money considering they need to hit 10,500 to get their money back

    PARD/Gel – You are right, the easy money is sure gone.  The Japan deal was a game-changer for ISRG but I still think $280 may be a little rich and I’d rather play them after a pullback from $300 (if they get there). 

    PARD can still be played selling the June $2.50 puts and calls for $1.70, which is net .80 if put to you and you can buy 2011 $5s at .30 to cap a possible move up.  Actually, it looks like it may be possible to get the 2011 $2.50/5 spread for .05, in which case I’d rather have 3 of those than 1 of the $5s.

  32. FXP Dec $8 puts can be sold for $1.05.  In TOS that’s a net margin of $1,500 to get $1,000 in cash but the putter is .75 in the money.

  33. Buy / Write (December) on TBT I think it’s fairly safe idea?

  34. I entered the ISRG position, selling the April 300′s puts. Nice premium income – over $40,000 on 10 contracts. Phil, I do not see much of a downside risk on this play, as the earnings are strong, and they are looking at good growth potential for the da vinci in new markets, which will pump their earnings for sure. I feel as strong about this company as I do with AAPL.

  35. PARD/Pharm, Phil or anyone else: I’m not clear on the remaining  fundamentals for PARD. Are they dead in the water, basically worth only their cash so better take the loss and move on, or does their science still hold some promise so worth considering some of the trades that have been suggested? Thanks.

  36. Yeah, MA looks rough. I thought it might be forming a bull flag but it’s looking less likely. Nice to have at least one short position working this morning.
    I hate to say anything remotely bearish when so many charts say up, up, up, but a low-volume, blow-off top was probably needed IF there is to be a reversal at all. So far we have the ‘low volume’ part at least.

  37. PARD / Phil – How are you seeing the Jan 11 2.5/5 spread for 5c? I see atleast 20c.

  38. Phil, are you really still bearish after all this up move melt up ridiculous stuff?  will we ever go down for more than a day or two?Russell now breaking back to the upside…. confirming.. even Dow Theory is bullish now

  39. Here’s a nice bullish indicator though:

    Probably a lot of short covering today, plus option shorts forced to chase stock higher right before opex. So this morning was the perfect time to stage a rally.

  40. RIMM and MOT not participating – MOT short with a stop at $9

  41. any thoughts on LDK? Selling Dec $7.50 puts for $1.10? (cant do naked calls) & already have Dec $9 short put.

  42. Phil:
    my BMY calls dec22 went from 1.58 to 2.32, 51 % gain
    my Jan 2011 calls 20 went from 4.01-4.6, 15 % gain
    not bad, what action now to take ?

  43. Credit-card defaults fell in the U.S., but delinquencies are up across the board. Capital One (COF) and JPMorgan Chase (JPM) reported the biggest increases in late payments to 5.72% and 4.95%. BofA’s (BAC) charge-off rate fell to 13.22% from 14.25% – still the highest among issuers.

    This article from Friday still making the rounds as if it’s new:  China says the Fed is endangering global recovery with its insistence on keeping domestic interest rates near zero for the next 12-18 months. China’s chief bank regulator rebuked the U.S. for fueling speculative capital flows that may spur asset-price inflation, which he said has already led to massive dollar arbitrage speculation.  They are using this against the dollar but China is really saying they want the dollar to go higher

    TBT/That – You know I always like them!  They don’t pay too much on a buy/write.  I’d rather go artificial with 2011 $30s at $17.70 ($1.50 in premium) and work down the basis with a 1/2 sale of Jan $46s at $2.20 and 1x the Dec $45 puts at .85 for net $15.75 on the 1/2 covered $16 spread and, of course, the short side can just be rolled along (March $42 puts are $1.40)

    ISRG/Gel – Long-term I still like them but I just think they are a bit ahead of themselves at the moment but so is much of the market and if the Russell confirms a breakout (and XLF $15) then we may as well bet everything to go to p/e 100 and start calling anything with a p/e of 50 or less a BARGAIN!

    PARD/Allen – Pharm is way better equipped to address this than I am but my understanding is that they still believe they will be getting another chance.  There were 18% less deaths adding picoplatin to BSC, which is not statistically significan in a 320 person trial but it’s enough to convince investors to stay on board.  The product works, the question is whether it works well enough to be considered an improvement.  Tomorrow they discuss the phase II colorectal trial but this company is already trading as if that failed too.  To me, that makes the June $5/7.50 spread a good fun bet as it pays 25x on a dime (and I’m offering .05). 

    EWJ is our global laggard at the moment plus they actually benefit from the thing we fear over here – a strong dollar.  The Dec $9 calls are just .75 and are .08 out of the money – Discovering Japan.

  44. Is PARD now a dead stock? I still have the original position of the buy/write, although I dumped the puts last week. I’m pretty deep in the hole on the stock.

  45. did something just happen to financials?  XLF and UYG both dropped at the same time while mkt still trading up

  46. Eric / Pump timing
    That’s exactly right, as I told Cap Friday afternoon, " watch out for a short squeeze on Monday " . I bought a bunch of TNA to go into the weekend on that premiss.

  47. Should have bought back the ERY Nov $11 puts last week. I was being bearish.  Any advice for this week? Sell now, 30% profit or roll to DEC?

  48. Phil: caller and putter saga:
    MO, caller dec18, from 0.74 to 1.52 $, putter dec 18, from .23 to 0.07,    what now ?
    FXP naked shorts, nov 9, from 0.99 to 1.99, (BIDU way up, FXP down, hail China)
    MDT caller nov36, from 1.49 to 4.30, this happens with this stock all the time,
    Please advise.

  49. PARD/Trad – Sorry I meant the June $5/7.50s, not the Jan 2011s! 

    Bearish/Dman – I am 1999 bearish which is kind of like when you have a broken roulette wheel that always comes up black so you keep betting black even though you know someone is going to come by soon and shut the game down.  That’s what 1999 was like, you just buy any POS tech IPO that had a cool name, wait a few days and sell – wash, rinse repeat.  You don’t make as much as the people who really BELIEVE in the stocks and hold them for a month and make 5x but you make 50% 5 times and you sleep better.

    AMZN going nuts (again/as usual) at $134.50.  AXP still going up but MA still going down.  I wonder who will turn first?

    This move is not much different than last Monday’s with a big gap up at the open and then a free money day so let’s not assume we’re going to pull back.

    MOT/Samz – Watch the 50 dma at $8.50, you may have a hard time getting below it. 

    LDK/Morx – Earnings are this week so whatever the results are, your premiums will probably squash and you’ll need to live with the play – keep that in mind.

    BMY/RMM – That was a good one!  We like BMY long-term so what you have are cheap $20 calls on the whole.  I’d take the opportunity to sell the Jan $24s for $1 and put a stop on the Dec $22s (assuming you own them, not sold them) at $2.25 or, if you sold them, at $2.60.

    PARD/Barf – Not a dead stock.  We bought back the putters and rode the callers naked but I guess you still have the stock, which sucks.  What was the basis?  They are not dead and may still get good news tomorrow but you have to plan on them staying here for quite a while.

    Fiancials/JCM – I’m still seeing XLF $4.90 and UYG $5.84, there was a jump down on volume but seems to be erasing already.  Some fund may have hit a sell trigger to pull some off the table as we toppped out.

    Yay APOL!  Apollo Group (APOL) up 8.1% as its University of Phoenix was recertified to participate in financial aid programs – which wasn’t a sure thing after news broke of an SEC probe into its revenue booking methods.  

    Bernanke speaks in a few minutes about the overall economy.  Not likely he says anything new but anything he says about liquidity will be used to move the markets one way or another.  I doubt he’ll say the word dollar as Obama is in China and it’s really not something he should be talking about but it is a good day to demonstrate to China that we can pop the dollar 2.5% any time we want to.  Could be interesting…

    Deck hitting the magic $100 mark.  No big deal as they are a good co but if we start seeing people fly through $100 levels then it’s bullish mania out there. 

    TXN making 52-week highs (good for semis) along with CREE, CLF, WLT, FSYS, WIT, IPHS, VMED…. 

  50. JRW, I bought longs too Friday (SPY calls), but not enough unfortunately.
    There’s suddenly a lot of bullish sentiment on the web from this move. Everyone I’m reading this morning seems giddy over the ‘dollar carry trade rally’. This could end very quickly and badly, at any time, IMO.

  51. ERY/Morx – Well if you didn’t take 50% and run then taking 30% and running is the next best thing.  $76.50 was our break point on oil and still is.  You just lucked out though – see below. 

    Woops, Bernanke is talking about the dollar.  Very interesting.  Says "safe haven flows to the dollar have abated" but then starts saying things about strong dollar.  Holy cow – he’s doing just what I said he’d do but I didn’t think he’d address the dollar so directly! 

    Watch those commodity bets guys.  We’ll see what the whole speech is and if the dollar bounces on it.

    Naked on our long DIA puts!  We’re probably going down.

  52. University of Phoenix – what a freaking joke.  I live in phoenix and have yet to meet anyone who has hired a person from this "institution"  It’s a joke that they can receive federal dollars. 
    UTI – is coming out with earnings on 12/2.  They are based in phoenix as well.  they gapped up after last earnings.  with co’s like autozone doing better, and people keeping their cars longer, unemployment high – they may benefit.

  53. Phil:
    Do like buying any DIA puts up here with this surge?

  54. Only getting snippets, can’t find whole speech

    Federal Reserve Chairman Ben Bernanke says the central bank will keep a close eye on the sliding U.S. dollar even as he pledges anew to keep interest rates at record-lows to nurture the economic recovery. In remarks prepared for delivery to the Economic Club of New York, Bernanke engages in a delicate dance.

    He makes clear Fed policymakers will keep rates at super-low levels. Yet he also is trying to bolster confidence in the dollar without actually raising rates before the budding recovery could handle such a move.  Economists say a free-fall in the value of the dollar is remote but can’t be dismissed. The low interest rates are needed to encourage American consumers and businesses to spend more and fuel the recovery.

    NEW YORK (MarketWatch) – The U.S. economy still faces considerable challenges, but the most likely outcome is moderate economic growth with subdued inflation, Federal Reserve Chairman Ben Bernanke said Monday. "I expect moderate economic growth to continue next year," Bernanke said in remarks to the Economic Club of New York. "Final demand shows signs of strengthening, supported by the broad improvement in financial conditions." However, "significant economic challenges remain," he said. "The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible." Unfortunately, economic growth probably won’t be strong enough to significantly reduce the unemployment rate.

    UUP $22 calls at .35 have about .07 premium.  Fun gamble.

  55. Powder keg just waiting to explode, the markets just went haywire, stocks forex commodities

  56. Market Internals update at 12:00pmET – NYSE volume 465M shares, about 5% below its three-month average;

  57. Phil: BMY, good advice,
    I have the Dec22 call(not sold them), placed stoploss order at 2.25$, will cover (Full or less ?????) with jan 24 for 1$ min.
    and keep the 2011 , 20 calls.

  58.  Hey Phil,
    I have a position in LDK i need help adjusting. Have Dec 6 Calls and puts short and long 2x Jan 11 $10 calls. The 6 calls dont have much premium left. What is the rule of thumb for when to roll these and where should I roll to? What is the rule of thumb for taking profit on the short positions?

  59. Phil – CMTP , did you get a chance to look it over?

  60. Phil
    At the moment, I believe there is momentum toward higher levels in market valuation. In physics, momentum is the product of the mass and velocity of an object. (Highlander would agree). The market components in this upward movement are broader as time passes increasing the mass – even some of the real losers are getting suprise upgrades. As more time passes, the upward moves in the market attracts more investment, and as a result the market base becomes more stable, and resistant to a downdraft.. With the dynamics in place as they are, I believe the bulls have the advantage over the bears, and will prevail for some time to come. (end of editorial)

  61. Forgot, also wanted your thoughts on BYDDF as well? Thanks Phil!

  62. Phil, Sorry to be remedial here as I am new subscriber; your bullish calls this a.m.  (VLO, etc); are u saying buy the stock then sell cover Jan call and sell naked Jan put?  thanks

  63. Full Speech:

    When I last spoke at the Economic Club of New York a little more than a year
    ago, the financial crisis had just taken a much more virulent turn. In my remarks at that
    time, I described the extraordinary actions that policymakers around the globe were
    taking to address the crisis, and I expressed optimism that we had the tools necessary to
    stabilize the system.

     Today, financial conditions are considerably better than they were then, but
    significant economic challenges remain. The flow of credit remains constrained,
    economic activity weak, and unemployment much too high. Future setbacks are possible.
    Nevertheless, I think it is fair to say that policymakers' forceful actions last fall, and
    others that followed, were instrumental in bringing our financial system and our economy
    back from the brink. The stabilization of financial markets and the gradual restoration of
    confidence are in turn helping to provide a necessary foundation for economic recovery.
     We are seeing early evidence of that recovery: Real gross domestic product (GDP) in the
    United States rose an estimated 3-1/2 percent at an annual rate in the third quarter,
    following four consecutive quarters of decline. Most forecasters anticipate another
    moderate gain in the fourth quarter.
     How the economy will evolve in 2010 and beyond is less certain. On the one
    hand, those who see further weakness or even a relapse into recession next year point out
    that some of the sources of the recent pickup--including a reduced pace of inventory
    liquidation and limited-time policies such as the "cash for clunkers" program--are likely
    to provide only temporary support to the economy. On the other hand, those who are
    more optimistic point to indications of more fundamental improvements, including strengthening
    consumer spending outside of autos, a nascent recovery in home construction, continued
    stabilization in financial conditions, and stronger growth abroad.
     My own view is that the recent pickup reflects more than purely temporary factors
    and that continued growth next year is likely. However, some important headwinds--in
    particular, constrained bank lending and a weak job market--likely will prevent the
    expansion from being as robust as we would hope. I'll discuss each of these problem
    areas in a bit more detail and then end with some further comments on the outlook for the
    economy and for policy.
    Bank Lending and Credit Availability
     I began today by alluding to the unprecedented financial panic that last fall
    brought a number of major financial institutions around the world to failure or the brink
    of failure. Policymakers in the United States and abroad deployed a number of tools to
    stem the panic. The Federal Reserve sharply increased its provision of short-term
    liquidity to financial institutions, the U.S. Treasury injected capital into banks, and the
    Federal Deposit Insurance Corporation (FDIC) guaranteed bank liabilities. The Federal
    Reserve and the Treasury each took measures to stop a run on money market mutual
    funds that began when a leading fund was unable to pay off its investors at par value.
     Throughout the fall and early this year, a range of additional initiatives were required to
    stabilize major financial firms and markets, both here and abroad. (1)
     The ultimate purpose of financial stabilization, of course, was to restore the
    normal flow of credit, which had been severely disrupted. The Federal Reserve did its
    part by creating new lending programs to support the functioning of some key credit
    markets, such as the market for commercial paper--which is used to finance businesses'
    day-to-day operations--and the market for asset-backed securities--which helps sustain
    the flow of funding for auto loans, small-business loans, student loans, and many other
    forms of credit; and we continued to ensure that financial institutions had adequate access
    to liquidity. Additionally, we supported private credit markets and helped lower rates on
    mortgages and other loans through large-scale asset purchases, including purchases of
    debt and mortgage-backed securities issued or backed by government-sponsored
     Partly as the result of these and other policy actions, many parts of the financial
    system have improved substantially. Interbank and other short-term funding markets are
    functioning more normally; interest rate spreads on mortgages, corporate bonds, and
    other credit products have narrowed significantly; stock prices have rebounded; and some
    securitization markets have resumed operation. In particular, borrowers with access to
    public equity and bond markets, including most large firms, now generally are able to
    obtain credit without great difficulty. Other borrowers, such as state and local
    governments, have experienced improvement in their credit access as well.
     However, access to credit remains strained for borrowers who are particularly
    dependent on banks, such as households and small businesses. Bank lending has
    contracted sharply this year, and the Federal Reserve's Senior Loan Officers Opinion
    Survey shows that banks continue to tighten the terms on which they extend credit for
    most kinds of loans--although recently the pace of tightening has slowed somewhat.
    Partly as a result of these pressures, household debt has declined in recent quarters for the
    first time since 1951. For their part, many small businesses have seen their bank credit
    lines reduced or eliminated, or they have been able to obtain credit only on significantly
    more restrictive terms. (2) The fraction of small businesses reporting difficulty in obtaining
    credit is near a record high, and many of these businesses expect credit conditions to
    tighten further.
    To be sure, not all of the sharp reductions in bank lending this year reflect
    cutbacks in the availability of bank credit. The demand for credit also has fallen
    significantly: For example, households are spending less than they did last year on bigticket
    durable goods typically purchased with credit, and businesses are reducing
    investment outlays and thus have less need to borrow. Because of weakened balance
    sheets, fewer potential borrowers are creditworthy, even if they are willing to take on
    more debt. Also, write-downs of bad debt show up on bank balance sheets as reductions
    in credit outstanding. Nevertheless, it appears that, since the outbreak of the financial
    crisis, banks have tightened lending standards by more than would have been predicted
    by the decline in economic activity alone.
     Several factors help explain the reluctance of banks to lend, despite general
    improvement in financial conditions and increases in bank stock prices and earnings.
    First, bank funding markets were badly impaired for a time, and some banks have
    accordingly decided (or have been urged by regulators) to hold larger buffers of liquid
    assets than before. Second, with loan losses still high and difficult to predict in the
    current environment, and with further uncertainty attending how regulatory capital
    standards may change, banks are being especially conservative in taking on more risk.
    Third, many securitization markets remain impaired, reducing an important source of
    funding for bank loans. In addition, changes to accounting rules at the beginning of next
    year will require banks to move a large volume of securitized assets back onto their
    balance sheets. Unfortunately, reduced bank lending may well slow the recovery by
    damping consumer spending, especially on durable goods, and by restricting the ability of
    some firms to finance their operations.

    Doesn’t seem to be bothering the markets too much overall.  Euro felll from just under $1.50 to $1.488 so about 1% but barely budged against the Pound.  The Dollar made a run at 90 Yen but already fell back to 89.4.  Copper is still $3.08 (high was $3.10) and silver is $18.20 and gold held $1,130.  Oil fell to $78.50 and is holding there so Bernanke not exactly turning things around for the dollar with this speech. 

    Bottom line – We’re still over our levels so no choice but to stay on the bullish side.  Above Dow 10,400 we need to stay with a 1/2 cover of DIA Dec $104 puts and the Nov $104 puts, still .88, can be sold as an upside momentum play

  64. Gel – while you may be correct about the market continuing to move higher, one variable not implicit in physics is psychology.  I think people getting in now are doing so with a nervous-hair trigger.  They know that this has gone on all too long, and will exit en masse when they see a crack.  Now, the question is whether GS will let it happen.

  65. Greetings all from London!  Traveled here for business, and am still catching up on the board from the weekend.  On PARD, they are not dead, but the results do not help any short term. 
    One has got to remember with biotech, buy 3-4mo b’f an event, and ride it up to the final days, then either get out or cover hard when you have made your money.  Colberg and I agree that you will make more money betting against biotech than for…..that being said, we have made some very strategic bets on companies here.  Cancer is a VERY hard area to be in, and I will have to dive more into PARD in the coming days.  ARIA is another that is going to announce soon, so if you are up….take the money and run or get ready for a ride.

  66.  Phil,
    About your long play on VLO: won’t VLO hurt as oil rallies and that will likely happen if the market rallies?

  67. ABTs Nispan (nicotinic acid – the B vitamin niacin) beat out MRKs Zetia….that is not good.  MRKs data for a larger trial is due out soon, so IF you are in MRK, I would tend to cover a bit harder over the next few months.  I think they are gonna get clobbered…..Should that happen, I would expect a dividend reduction as well….JMHO

  68. Phil;
    I have KBR stock, 20.77 to 20.87 now,
    KBR putters dec19, .94 to .5 now,
    is KBR worth holding ?

  69. Are they almost done refueling his helicopter? I cant take this guys BS any longer

  70. Phil: have jan40 calls on WMT, they dropped quite a bit today, base 12.41, now 12.8.
    what’s there to be done with this ?

  71. Phil, after counting all premiums, I’m in PARD for about $4.45/share

  72. Phil,
    Any thoughts on the WHR trade. We bought the Jan 80 calls and sold Nov 75 calls for .10c debit.
    Currently closing the spread gives us a 1.50 CR.
    This has worked out great and I was wondering if we should close it out before Opex or let it ride out through Opex
    Looking at theoption position simulator, WHR would have to break above 77 or below 70 for the position to do worse than the 1.50CR we get today.

  73. Phil: IHI at a high, is this worth keeping ?

  74. Phil: this is OPEX week,
    how often have we seen the market go/be high and then they dump stocks and we end up lower at OPEX ??? Agree ?/

  75. On PARD….from the, so a bit of a downer is Adam F…but there are different ways to spin it 
    The company reported cash and marketable securities totaling $40 million at the end of the September quarter. But Poniard is also burning about $10 million a quarter and carries an $18 million loan on its books that requires the company to maintain cash reserves at least equal to the outstanding balance on the loan.
    At its current rate of spending, Poniard could be in violation of its loan agreement at the end of the year, which would make the loan callable and thereby force the company to restrict the use of its remaining cash.
    Poniard does have a $60 million equity line of credit that it could tap, but only if the company’s stock price is above $3 a share. Obviously, Monday’s negative picoplatin results make that impossible, unless the company can re-negotiate the terms of the deal. The stock is down 76% to $1.77 in recent trading.
    In many ways, the financial mess that Poniard finds itself is the biotech equivalent of the gamble taken Sunday night by New England Patriot’s head coach Bill Belichik, when he decided to go for it on fourth down, late in the game with the ball still deep in his own end of the field.
    Poniard could have partnered picoplatin earlier to bring in much-needed money, but CEO Jerry McMahon decided to hold off, betting that positive results from the picoplatin lung cancer study would boost the drug’s value and bring with it much better partnering deal terms. McMahon rolled the dice, even with the knowledge that the company was getting uncomfortably close to a financial cliff.

  76. ssdirk
    Good point… psychology, in particular emotion, can  blow this thesis out. There are many potential events that could reverse the current direction. The most important market direction mover IMO would be a move in interest rates upward here in the US. With elections just a year away, and with unemployment at historic lows, I do not see any movement in rates for at least a year. I am betting the incumbent politicians will do everything to hold the rates down, until after the election. It is a Fed decision, but influence still prevails. My hedge against a possible move against a bull market here, is to stay well covered with OTM calls, and well diversified into other markets primarily in Asia, Russia, Europe and Brazil.

  77. Uncomfortable with this move upward today.  Bet we see 10,000 DOW again before December.  In 90% cash, 10% bearish plays.

  78.  Weird, that SRS put play only cost me 160 per contract in margin on ToS (less the cash received for selling the puts). I must have a super-special account :)

  79. Oh that came out ugly – sorry! 

    IntercontinentalExchange chief Jeffrey Sprecher welcomes new commodities regulation – a contrast to rival NYMEX’s leader Terry Duffy, who thinks new rules would drive traffic to unregulated over-the-counter platforms. Sprecher says the rules seem to be more about fighting concentration than speculation.

    RMM list:

    • MO – If you have the stock then it’s fine.  If not, you cna just buy some 2011 $17.50s for $2.25 and then just roll the caller along to another put and call combo each month.  The Jan $19 puts and calls are $1.30 and almost all premium so no big deal so far.
    • FXP – I still like them but we don’t know when China will pull back (if ever).  You can just roll them along to Dec and pick up a dime or take advantage of the dip and give back his .99 to roll them down to the Dec $8 puts I suggested above.
    • MDT – Well I love these guys.  I hope you have the underlying.  If you do, it’s easy enough to go to 2x the 2011 $35s at $7.70 and roll callers to 2x the Jan $39s at $2.40, which is still good protection but they have to hit $41.40 to get even and that puts you $6.40 in the money. 

    UTI/Jo – That’s a good play!   They have nice Apr premiums to sell.  $18.52 for the stock, selling Apr $17.50 puts and calls for $4.50 nets $14.02/15.76.

    DIA/Bvar – Not looking at the reaction to Bernanke.  People are just BUYBUYBUYing and they don’t care what the risks are apparently.  Bernanke JUST said that getting loans is a problem constraining the purchase of durable goods and DE, who have earnings this week, is making fresh 52-week highs.   This is so 1999 all over again…

    DAX finished at 5,804 on a 50 point jump into the close.  There is no stopping this monstrosity. 

    BMY/RMM – Depends how bullish you are.  The same as buying a call, you can scale into selling one too if you think the stock has a chance to move even higher.  

    LDK/Roth – They have earnings coming up so if they don’t miss, you will have a problem.  It would be safer to spend .75 to roll down to the 2011 $7.50s now, rather than waiting as you won’t get so buried by a big pop and you are only increasing your delta by .13, which your caller is covering.  You can also buy 1x the Jan $10s for .15 in anticipation of having to roll the callers up to 2x the Dec $7.50s or $9s, depending on what happens.  And that cover would let you take a little off the table. 

    CMTP/Jrom – Yes, see the weekend comment.  I decided it was pretty much a stay-away due to the .ob designation and lack of options but they do sound like a nice company if you are just looking to toss something bullish for a long-term hold.

    Momentum/Gel – I agree.  Breaking over these levels and holding them sets us up for a very nice run up to Dow 11,000 and S&P 1,200.  Doesn’t matter whether we agree with it or not, that’s probably where we’re going and then we can get all bearish again at 11,000 until that one breaks and then we’ll play the next 1,000 points…

    BYDDF/Jrom – Penny stocks are just not my thing.  These are nothing more than casino games.  These guys have gone from $1.70 to $11.25 this year and are now at $9.30 and are down 3.6% today for no reason.  ALL of the news on this stock comes via Inde Research, a PR release firm.  There are no analysts covering the stock, no options to give you a vague clue as to risk and interest and no financials to determine whether this company is worth $1.70 or $11.25.  Those are my thoughts on this one..

    Welcome Humvee!  You can be remedial once but after that I reserve the right to make fun of you….  Yes, we call those "Buy/write" plays where we buy the stock and sell (short) puts and calls against the stock.  If you read the New Members Guide or Google "How to buy a stock for a 20% discount" you’ll find my original writings on this strategy. 

    VLO/Roth – It’s a long-term hold.  They are near the bottom of the cycle, where the crack spread is very against them.  After a while either oil prices go down or gas prices go up.  The bottom line is they are a major US refiner and operating at 80% of capacity due to low demand.  If they can EITHER sell more gas or sell this 80% volume for more money – they will improve quickly.  If they can’t do either, then this market is totally insane and that’s why they make a good upside cover..

    Hey Pharm!  Hope you are having fun in London…

    KBR/RMM – $19 is a long way back.  I take it you have no callers?  I’d sell the $21 callers for $1 and let the putters expire (with a .65 stop, of course).  That’s like collecting $1.50 to the upside, which is 7.5% vs buying back the putter.

    BS/Kustomz – We just have to go with the flow…

    WMT/RMM – I don’t know what you are doing with them if you have nothing sold against them.  WMT is a channel stock at the top of a channel.  You should be thrilled they go this high without burning you.

    PARD/Barf – OK, great.  If we allow for the possiblity they recover tomorrow, then perhaps now it the time to DD by collecting $1.45 for the 2011 $2.50 puts.  That puts your net down to $3/2.75 so if you can get $1 for the 2011 $2.50 calls (now .75) that would drop you to $2/2.25.   Still not good if they go down further but, hopefully, that doesn’t happen.

    WHR/Oncmed – Oh that’s huge money, taking 1/2 off the table is not a bad idea at least.  The Nov $75 calls are still way overpriced at $1.50, it’s a shame you didn’t take them out when they were cheap but keep in mind they can still bury you on a big move up. 

    IHI/RMM – I like them long-term but this is sure a good place to cover with the Dec $50s at $2.  As to OpEx week, not too often lately.  We’ve been burned to the upside more often than not and you have to respect these technical levels – many other people will be trading off them. 

    PARD/Pharm – I get more of the impression that they simply did not believe they would get a poor study result.  The question remains – do they have a marketable drug or not?

  80. It’s not a new secular bull market, says David Rosenberg, counting the differences from before – from P/E multiples to government policies to trade barriers.

    Longer-term Treasurys made a move up following Bernanke’s speech; the 30-year Tsy +0.9%; 10-year +0.5%. Bernanke said the Fed is attentive to the dollar’s decline and is keeping a close watch on it; dollar currently -0.8% against pound, -0.4% against euro, -0.5% against yen, -0.4% against Swiss franc.

    Nordstrom (JWN +2.9%) is trying to arrange early delivery of orders, as sales have depleted inventories more than expected. The company says same-store sales for the year will decline 6-7%; it had expected up to a 12% decline before.

    Just in time for the holidays, the Fed clamps down on gift cards, proposing a prohibition on excessive dormancy/inactivity fees, and pushing expiration dates to five years.

    RUT is now our leader with a 2.8% gain followed by Transports (2.25%), SOX (2%), NYSE (1.8%), S&P (1.65%), Nas (1.5%) and Dow (1.42%).  Lots of miners making new highs, OIH up 3.5%, XLE up 3%, XLF STILL not over $15!!!

    Dow volume coming up on 2pm is 102M, maybe 105M by 2 – VERY low, if we are having a rally, then it is the most missed rally in stock market history. 

  81. Two quick ones that come to mind:  DNDN came back, ELN keeps humming, so…PARD could come back.  These companies have a life of their own.

  82. IWM is not even at the high from a few months back….

  83. Phil,
       Thoughts on FCX Puts?

  84. Fitch warns of downgrades to come for regional and smaller banks, who aren’t able to manage the risk from commercial real estate losses as well as big banks. The firm estimates a potential CRE loan loss rate of 11-24% at its rated companies.

    Wow, do you remember there was a time when the above news item would have put the markets into a tailspin.  11-24% loan losses on several Trillion in CRE.  La di dah…  Move along folks, nothing to see here…

    DNDN/Pharm – Good point.  I said when we began this trade that people had to keep in mind that DNDN went to $20 then down to $4 then back to $10 over the course of 2 years and then down to $2.55 right before they went to $20 for good.

  85. Wish I could just short everything here.
    Since I can’t, I like COF @ $40 as a short.

  86. Pharm…. Stay away from Picadilly. The pick-pocketers move faster than the PARD stock. Twice for me, and I was sober.

  87. Mega Bullish FMD conditions, albeit on low volumes.
    Remember, if no selloff; we may go out at the highs, whatever they may be.

  88. what would you do with FXP at this point? 8.42 avg cost on actual shares.  feeling very foolish about it.

  89. The volume issue is frustrating. It’s a major non-confirmation in a classical sense — every major rally stalls out into dwindling volume before reversing lower. It *should* be the same this time — but is it?

  90. Phil I need help.  I’m neg delta.  I’ve lost 8% in the last 2 weeks.  Really need some help.

  91. Watchout for illiquid options lol. They are asking me to pay 10 cents to roll a TASR 5 put from Nov to Dec.

  92. Hi Phil : Educate me ,please. On  WFR, why the $12.50 calls instead of $14 which are out of the money.Is it simply to minimize risk in event of a downturn?

  93. Dollar really getting hit now so a big squeeze into the close is looking more likely.

  94. What a beatdown of SRS …. unreal ….
    Almost 25% in past few sessions.

  95. Phil:
    on MDT: you would switch the stock(which I have) to2011, 35$ at 7.7$ (why 2x ???0 and roll the caller nov 36 to 2x jan 39 for 2.4$????

  96. between SRS and FXP i’m just getting creamed.  jesus.

  97. Phil, what would you do with the following positions expiring on Friday, wait it out or close it out?
    DIA Nov 105 Put (-40% from cost)
    QQQQ Nov 46 Put (-36% from cost)
    AMZN Nov 140 PUt (-27% from cost)
    Most of the losses came today. I figured I’d get aggresive by going naked into the weekend.

  98.       Pharmboy
       Any thoughts on Salix Pharmaceuticals Ltd. (SLXP)

  99. Phil:
    what to do with:
    BSX calls jan 10: base 1.88, now 5 cents,  baaaaaaaaaad,  is there a remedy ? can hardly fall more .

  100. Dollar getting dumped again.  Testing $1.50 to the Euro and back below 89 Yen.  If the US has $40Tn in dollar assets then each 1% move in the dollar costs us $400Bn and that’s how they are sucking money off the sidelines and putting it into the stock market. 

    FCX/Bgb – If you didn’t take any off the table at $7 then your basis is still $5.55 on the $85 puts, now $4.80.  Also I take it you did not sell the Nov $85 puts at our $83.50 line so the best thing to do is stick it out and if we still go up tomorrow, then you can always sell the Dec $80 puts, now $2.80 to reduce the basis and then roll to the Jan $80 puts (now $4.60) if you get worried. 

    FXP/Jcm – There is never any point to holding an ultra ETF other than either as a straight momentum play or as something you are going to sell contracts against.  FXP is now $7.19 and if you flip to 2x the 2011 $4s at $3.60, you are down about .60 per long and you can sell 1/2 the Jan $7s for .80, which lowers the basis on the covered half to $2.80 so you don’t even care if you are called away and, otherwise, you drop your basis on the longs from $4.20 to $3.80 with a whole year to sell more.  Of course if we fall below $7 you can always cover the rest at .60 and that still leaves you in a reasonable spread. 

    Negative/BGB – Well buying some longs or selling some short puts against your positions would be a big help.  What are your big short-side positions?

    WFR/Dflam – Yes, to minimize downside risk.  I’m still not buying the rally but I’m happy to buy more WFR in Jan and sell 2x the callers if things go well.  It’s the good old bird in the hand thing overall. 

    SRS/Cap – Don’t forget URE is an excellent cap on SRS losses.  Our old rule was to buy them over the $5.50 line, now they are heading to $6.50, which is amazing!

    SRS/FXP/Jcm – With any ultra, you must scale in and you must be willing to ride out some serious nonsense. 

    Friday/Zisimos – Ow, those are tough!  I am not a big fan of riding things into expiration as those premiums diie fast but you can sell the DIA $104 puts for .75 and roll yourself to the Dec $103 puts at $1.90.  If the $104 puts get to $1, you can just roll them to whatever Dec puts are $1 (currently the $100 puts) and then you are in a bear vertical.  Qs are not too different, you can sell the $45 puts for .66 and roll to the Dec $46 puts.  AMZN has just been a widow maker, the good news is you can sell $135 puts for $3.40 and roll out to Dec $140s if you want to stick with it but that is one crazy stock. 

    BSX/RMM – There’s nothing to do with the Jan $10s at this point.  Anything you do is just a new bet. 

  101. Thanks Phil.
    My big short delta is fcx, srs and I have some slightly delta neg on ndx, mdy, and mnx on calendar put spreads..  I’m looking for long suggestions.  Sorry that question came out in a panic.  This has been really painful.

  102. Phil: weird situation:
    have SPWRA stock, base 29.18, now 27.28,
    have partial cover: 1/4 callers dec28, base 1.59 now 1.35,  2/4 putters dec25, base1.44, now 0.85.

  103. would someone mind explaining to me why the CROX Mar $4 long call (from the $100k) with a .8 delta has not changed at all today?

  104. Phil,
      Here are my problem positions. Appreciate any advice:
    DXD Nov 31 put (short) @ 0.55
    DXD Nov 32 call (long) @ 1.4
    GLL Dec 10 call (long) @ 0.95
    AMZN Dec 130 call (short) @ 6.25
    OIH Dec 125 call (short) @ 4.35
    FCX Jan 65 put (long) @ 3.75
    FCX Jan 80 call (short) @ 8

  105. Phil:
    have FCG stock, base 14.05, now 17.05,
    and march 17 callers, base 1.44, now 1.65, full cover.
    Adjustment/Improvement please ??

  106. Phil/ TIE
    we got stock @9.26 and sold Jan calls & puts @2
    now it is up 50% of potential profit in 2 weeks, do you recomend to close it or roll samehow to increase up potential?

  107. "FXP is now $7.19 and if you flip to 2x the 2011 $4s at $3.60, you are down about .60 per long and you can sell 1/2 the Jan $7s for .80"
    Sorry — are you saying to sell twice as many Jan 2011 calls as shares?  If I have 4000 share, sell 80 calls?  Don’t know what you meant by "flip to 2x the 2011 $4′s"    I’ll catch on to the lingo sooner or later, but I don’t want to end up doing the opposite of what you suggest cuz I’m afraid of sounding dull witted.

  108. Is this a sign of something getting ready to pop?  I have noticed more people on the board today who are asking for help with under water positions.  Not that don’t have any, but I am just noticing.

  109. Breakouts: Phil, looks like the DOW and NYSE have broken above your breakout levels and the Nasdaq and S&P are right on the line. I have too many hedges in place – was too bearish expecting a correction. I hate to be whipsawed but is it time for me to take the loss,  close some of those hedges and move on? I know volume is low but it has been low for a long time….

  110. Phil: SAP is like MO, difficult to manage callers,
    have stock and nov 47 caller, base 0.84, now 2.15,
    roll to dec 48 ???

  111. Hi Phil, I bought a FXP Dec 7/9 bull call spread for $1.10 , should I buy back the putter and roll the caller now?
    I also bought the EDZ Jan 6/8 bull call spread for $1.00, should I buy back the putter and roll the caller?

  112. Just did a Buy/Short January Strangle on LLL. 17% discount. Good fundamentals and chart has lots of potential movement upwards. Dividend is close to 2% and the insiders are buying. FWIW

  113. Meredith Whitney -" I don’t know what’s going on in the market today.  It doesn’t make any sense.  There are no fundamentals to this."

  114. /ES finding a little toehold at 1005 after that nasty little drop. The safest place to be in this market may be cash, although you lose there too.

  115. Suffice it to say, no way we close at the highs; we could be witnessing blow off top reversal

  116. Phil et ALL
    Thanks for all your comments, information and teaching.!! – Spider

  117. Meredith… fundamentals!! We don’t need no stinking fundamentals


  118. DIA March $105s, 1/2 covered with Dec $104 puts at $2.50, now $2.40 is the official cover at the moment (almost certainly into the close). 

    Positions/BGB – That’s a lot of stuff.  How about just put down how many and the basis for each one and I can give you an idea to take some of the edge off the upsides.

    SPWRA/RMM – I don’t understand why you don’t sell more premium.  You are behind and you want to get even, forget winning.  You can still sell 1/2 the Dec $27s for $1.70 and that knocks .85 off your basis.  You know you can always roll them but look at this afternoon – you can’t count on anything in this market.

    CROX/Morx – If there were no bids and no offers, then it may not change. 

    Japar/List – Remind me after the close please.

    RMM/Stuff – Also after the close. 

    TIE/Tcha – Sure, 50% in 2 weeks is a fine time to go back to cash!

    FXP/Jcm – The idea is for you to swap the stock for 2x the 2011 $4s (about even), which lets you sell 1/2 the Jan $7s against them, collecting .80 against your original $8.20 (10%) for the quarter to begin catching up. 

    Oh great – Meredith Whitney says she doesn’t like the fundamentatls and HER they listen to!!!

    Signs/SS – Generally, this kind of capitulation is a sign of the top. 

    Allen – Case in point!

  119. Too early to end the party… the bar is still open, and the drunks have lost their ability to reason… nasty hangover is not a consideration as we are having too much fun !

  120. phil,
    cnbc gets her on and good ol ‘piss on the parade’ mary  kickes the banks in the balls

  121. Nasdaq up over 7% in 8 sessions.  That makes sense.

  122. Phil — got it.  thanks.  I think you used the term "widow maker" to describe amzn.  I think the term applies to the entire markt with these psychotic, whipsaw moves.

  123. Whole foods, i actually had a dream about their stock last night…it tanked big time…i wouldnt worry too much none of my dreams have ever come true :-(

  124. jcm….the whole world was at the brink a year ago…amazing isn’t it?

  125. we love Meredith Whitney, if we’re bearish
    ok, Phil, are you buying TZA now?   or SRS   or FAZ   or what of any other 3 x inverse funds?

  126. FXP/Jlui – Yes, I’d take them out for .20 but not roll the caller.  Your basis rises to $1.30 and, if we fall further you can sell the $6 calls for $1.30 and roll out to Jan or whatever.  These things can come back very quickly though and it’s a long time to Dec expiration.  On EDZ, Jan is even further away but there it seems worth spending .35 to roll down to the $5, which puts you in for net $1.35 on the .90 call with .60 delta. 

    In June, new accounting standards that eliminated off-balance sheet treatments meant banks would have to bring billions in assets back onto the balance sheet – and thus subject to capital rules. Now we have an idea how much: less than expected, but still hundreds of billions. 

    Dallas Fed President Richard Fisher is skeptical about low borrowing costs in the face of record debt issuance. "Rates are lower than I would have expected them to be," he said in remarks to a community forum. "We’ll see how long that continues." He expects Q3 GDP to be revised down from 3.5%, closer to 2.5%.

    Hola Spider!

    Balls/High – They need a swift one…

    AMZN coming back to $131 now.  What a crazy ride!




  127. Nice of Meredith. Remember to buy on the dips. Maybe her ex-colleagues at GS wanted some more time to go long.

  128. Executed a short straddle on DB – January 80 C & P . 14% discount off current price of stock. Germany showing strong fundamentals. Good premium income and not much risk, FWIW.

  129. Painting the close all over the place !

  130. Any one using IB (Interactive Brokers)?
    How do they charge $ for canceling or modifying an unfilled order?  Do they really charge ALL cancellations / modifications?  That policy is quite different than all other brokers.
    How do you like them?

  131. i’m probably a fool but I went long DIA 103 puts at $2 on the close. If this is anything like last week, my guess is the mkt opens down 50 points tomorrow before immediately ticking up.  I’ll sell on the opening one way or the other.  A fool and his money?

  132. Ultras/Dman – No changes at all.  Will be happy to see a strong move in either direction now and likely to have an itchy trigger finger to cash out winners and go into Thanksgiving mainly in cash. 

    High for the Euro was $1.5015, now $1.4973.  High for Pound was $1.6877, now $1.6832.  Dollar also fell to 88.74 Yen, now 89.1.  Gold topped out at $1,144, now $1,138, oil hit $79.50, now $78.90. 

    We certainly held every level we were looking for.  This is an example of we see it but we don’t believe it but all we can do is hold neutral at the moment to see if they can keep this up for another day.

    Volume came in at 200M overall, so not so bad but most of the volume surge came in the sell-off so still mixed signals overall. 

  133. My biggest loser today winds up being a big GS long position I took at 178.80 to hedge all my banking shorts. To add insult to injury, thanks to a timely roll of KRE puts that position finished almost flat today anyway. I sure hope the rest of the week goes easier than this.
    kustomz, I had a stock market dream this weekend too. I came into my office and looked at the screen, to find all the prices frozen. Then I couldn’t tell whether it was the market or my computer that crashed.

  134. SLXP/qc  – IBS is huge, and their drug is currently approved for traveler’s diarrhea.  Could be a nice little market for them, and I am sure they will get picked up for a $1B market cap.  Might want to do a buy/write, but B very conservative with amount.

  135. Eric, kustomz, at least you guys are sleeping!

  136. FSLR chart looking like it wants to move  back to 140ish.  Waiting for tomorrow to pull the trigger on that one.

  137. Pharmboy

  138. LDK / Phil – They release earnings next Monday (11/23) after OPEX. Do you recommend any earnings play for them?

  139. SeekingAlpha – Phil, you oil article on SA has sparked quite a discussion. 216 comments so far.

  140. Phil,
    REMINDER: Need some help with the following:
    DXD Nov 31 put (short) @ 0.55
    DXD Nov 32 call (long) @ 1.4
    GLL Dec 10 call (long) @ 0.95
    AMZN Dec 130 call (short) @ 6.25
    OIH Dec 125 call (short) @ 4.35
    FCX Jan 65 put (long) @ 3.75
    FCX Jan 80 call (short) @ 8
    Also, it seems that for these biotechs like PARD it may be best to buy ATM or OTM puts and calls and play it both ways. The calls I sold worked great, but they were covered (since it would be too risky to be naked) and now I’ve got 2000 shares at a basis of $4.85. I know you said that we did the trade b/c we didn’t mind owning them long-term (since they have the cash to sustain themselves + other trials in progress) but now we have to work on unwinding the position. The other way, at D-day you’re done. But I still haven’t found the best way to play biotech (except for guessing correctly of course which I haven’t done in a while)

  141. morx lol….

    We failed twice last year at 10500…. just saying

  142. Sadly, this is a market that will grind higher and higher and higher, and then, like Wily Coyote, will realize he’s fifty feet past the edge, and crash hard. That isnt the best for me. I dont know about the rest of you.

  143. barfinger
    On the Buy/Writes, I look at the discount, and factor in the end cost, whether I am called away or assigned more stock, I usually come out ahead. Based upon your sentiment on the stock at option expiration, you can then sell more calls for insurance, sell out altogether, or keep the stock for the dividend income, and set a stop loss you feel comfortable with. The one thing that does not enter into the equation is that you are in a position to take a loss, as there are so many options for profiting, or exiting on a profitable basis. This is my favorite play – it is not exciting, but can make a lot of sense when IV is up. Phil continually recommends great Buy/Writes. Why try to second guess the market movement – it just creates work and increased risk, IMO. I do a lot of other plays that are riskier, but are fun, as they offer a challenge – good for the ego.

  144. Sorry to hear about the PARD positions that you guys are stuck with.  Taking profit is a big lesson that I’ve learned with options, especially for premium sellers.  Out of The Money options that are close to zero can zoom up easily, so it’s best to take them off the table when you are ahead, especially if you are ahead 25%, 50%, or 75% on naked options.  Limiting time exposure is a good art to learn and can be a life saver.  I was lucky enough to sell out my PARD and POT position with 30% gain each a couple of weeks ago.  PARD would have lost money if I still have it, and POT would be breakeven, instead of +30%.   So now I have itchy fingers on taking profit rather than watching profit turning into a loss. 
    Hey barf, a market that grind higher and higher catches my interest today.  I’m starting with the SPX Dec 1150 short CALL, and will keep selling as it goes up.  The idea is to sell OTM CALLs on the indices so that we have a cushion to the upswing.  As Phil said, more money needs to come into the market to push it up, so at some point in time, people need to take profit.  One reasonable size drop (3-7%) means the callers are all toasted as time would be running out for the front month.   If you are more risk aversed, selling at higher strikes would work also.  I’m more leery of selling PUTs on the indices (let along selling PUTs on individual stocks).  If I had to sell PUT, I’d go for a big cushion on the downside.

  145. Peter D – Great advice on taking profits while you are ahead. Similarly, another important lesson is position sizing.

  146. Holey Moley:
    But actually, the New York Fed isn’t a government agency. The Fed itself maintains that:



    While the Fed’s Washington-based Board of Governors is a federal agency subject to the Freedom of Information Act and other government rules, the New York Fed and other regional banks maintain they are separate institutions, owned by their member banks, and not subject to federal restrictions.

    So really Geithner – as head of the private bank-owned and managed New York Fed – was simply serving his constituency: the giant New York money center banks. Geithner’s constituency never was the American public.
    The giant banks were the creditors of the giant banks. Like two sock puppets putting on a big show of good cop / bad cop show, the New York Fed pretended that it was negotiating hard, but ended up making sure that the boys got their full cut.
    I woud fire, or perhaps indict, Geithner ….

  147. Phil, a couple weeks ago I was considering a bull spread on aapl and financing it by selling a 175 put. You suggested two alternatives, both with much less risk, one being a few months out and the other was in the money spread (spend $2 to make $5). Anyway, both have earned 80-90% of their max with minimal risk.
    great suggestions and thanks!

  148. I have played the SPX short puts and calls since 2000. And I am short Dec 1100 and 1125 calls, so , a bit of a sweat right now. If needed, I can roll them. I hesitate to create new short calls, since the grind higher seems to be in motion.

  149. SPWRA – Getting hammered back to 25 on news of some accounting issues.

  150. Credit Cards comment:
    Something happened to my wife which I have read about but was nevertheless surprised over. My wife has a CITI credit card, always pays the complete bill each month, never carries a a balance, never been late with a payment. She just received a notice in the mail telling her that her APR has been increased to 20% (prime plus 14%).Imagine 20% interest! Now, it doesn’t matter to us because we don’t carry a balance but still….
    Now if this is happening to someone with a stellar credit history, and for no reason we can discern, imagine what is happening to consumers who are loaded to the gills with credit card debt and who don’t have such good credit. This has to be another significant hit to the American consumer’s pocketbook, in addition to reduced earnings, mortgage resets, more expensive gas, etc. The squeeze is coming from all sides.

  151. Twenty-seven banks that received TARP funds have been seized or threatened by regulators – adding up to as much as $5.1B in the program’s funds that may be lost by taxpayers (almost certainly including the entire $2.3B that CIT Group (CIT) got).

    Debt didn’t get out of hand because the system was broken, says James Surowiecki; it got out of hand because the system worked. The tax code nudges people and companies toward borrowing, but the benefits of those deductions may be an illusion (and the costs still real).

    Another indicator that after last year’s overstock, retailers will have much smaller inventories for the holidays this year: Inbound cargo container volume at Los Angeles and Long Beach is 14.7% below October 2008, while outbound traffic was 1% higher. (see chart)

    Speaking of 1999:  AOL returns to the New York Stock Exchange Dec. 10, under the symbol "AOL," as Time Warner (TWX) will spin off the unit on Dec. 9, with one AOL share for every 11 TWX shares. CEO Tim Armstrong’s job by then: Draw institutional investors’ attention to the media business and away from the declining ISP business.

    LDK/Trad – Well, I like them long-term, iffy short-term, but not much you can do with these low premiums.  Perhaps the 2011 $10s for $2, selling the Nov $7 puts and calls for .65 to capture the premium by Friday, then to sell the Dec $7 calls and $6 puts for another .80 and that means you are in the 2011 $10s for net .60ish.  If LDK heads up, you can DD the leaps and roll and if they go down, you have cheap leaps and you roll the put side. 

    SAlpha/Trad - Yes, but so much nonsense.  I’m spoiled by our own high-quality chat, can’t stand the crap in other chat rooms…


    • DXD – I don’t know why you would even try to strangle and ultra but not too much damage.  You should have taken out the caller for a dime as he’s not going to give that up until Friday so you will either luck out and get a run that wipes out your putter or not and get a dime from the caller AND pay the putter a lot.  By leaving the caller on you make it so you have less chance of winning if DXD shoots back up. 
    • GLL – Costs .55 to roll down $1 (to the $9 calls) and gain .78 of intrinsic value.  If you don’t have enough faith to do that then why be in the position at all?
    • AMZN – Those are on target.  If you are not comfortable with today’s spike up then just get out even and don’t play those positions as this is going to happen all the time.
    • OIH – Same as AMZN except more painful at the moment.  If oil goes over $80 again you have problems.  You already have a $6 obligation so you can sell Nov $125 puts for $1.50 (if oil is still high tomorrow) and just make sure you can roll them to the Dec $115 puts, now $1.79.  Then you’ve sold $6 in premium (at least) and your b/e moves to $109/131.
    • FCX – If they head higher just sell the $80 puts, now $4.60 as you already have a stop at $65 and you will have net $8ish so you have up to $88 on the call side and down to $72 on the put side as b/e, which means you are right on track at $84.
    • PARD – The gist of it is they have $40M in cash and can afford to get another study moving and they need their share price at $3 to tap another $60M line of credit on a $63M stock that trades about $8M worth of shares a day.  I can think of about 20 ways to make sure my stock is at $3 if I were PARD so I wouldn’t count on them rolling over and dying here.  This is what sucks about biotech investing, these dips are almost inevitable.  Of course, PARD was down at $1 last Dec then back to $3.70 in Jan then back to $1.70 in March, then $8+ last week…  That’s biotech.  All 35M shares of the stock traded today (1.5x the float) and it was rock steady at $1.84 so whoever wanted to buy PARD for $63M (1/4 of yesterday’s price) got their Christmas wish today…

    Good attitude on buy/writes Gel!  Dull is good…

    Fed/Cap – Surely you knew that. 

    Spreads/Ocelli – That’s great.  See, even with all this crazy volatility you can still make some money by hedging…

    Nas futures leading us down this evening.  Meaningless at the moment but back under 1,800.  S&P 1,103, Dow 1,036 and Rut 598 with oil at $78.64 and gold at $1,136.  We’ll see what happens in the morning but the Nikkei is not liking 89 Yen to the dollar one bit and is back below 9,750.  Our buddies at the Hang Seng are down 100 points too coming into lunch. 

  152. By the way, I will be taking a bow for this one:

    Phil - October 1st, 2009 at 11:48 am – "TM holding $77 and getting a little bit more interesting but I think they are lying about mat issue and they have to actually replace accelerator pedal so I wouldn’t buy here."

    Nov 16th, 2009 at 8:28 am – "Toyota has set aside more than $5 billion to handle the cost of recalls, and will apparently spend a lot of it fixing accelerator pedals on 3.8 million vehicles to try to put its sliding floor-mat nightmare behind it, says Reuters citing Kyoda News."

    Of course $5Bn isn’t all that much as they sell over $200Bn worth of cars a year and they make (usually) about $15Bn in profits so it is a lot of the profit but it’s not impacting the stock much, floating at $80 but I think it was pumped before the dump becasue their earnings and outlook MUST be lowered at some point.

  153. Phil -
    Have the details been worked out for the 100K portfolio?  I remember reading something about viewing live updates, or something to that affect., through a different mechanism that the link on this page?  I’m looking forward to adding some fairly longer term, lower risk position to my portfolio….my horizon recently has been days to 3-4 weeeks.
    BTW – I ran across a chart tonight on the SPY showing the last three drives.  Each was 21-22 days in length, and from start to peak 8 points.  I don’t normally take notice of this, but the symmetry  was interesting…Anyway, if the pattern (black magic?) holds, today or tomorow would be the peak for November.  meh — interesting chart anyway.
    If you’ve got any 100k portfolio early opportunities…I’m all ears :) (uhh – eyes)

  154. Zero hedge had this link….and is it a doozy….
    $550 Billion Disappeared in "Electronic Run On the Banks"

  155. Bob Doll commentary from Blackrock
    Despite a mid-week setback, stocks advanced last week, with the Dow Jones
    Industrial Average gaining 2.5% to close at 10,270, the S&P 500 Index advancing
    2.3% to 1,093 and the Nasdaq Composite climbing 2.6% to 2,167.
    We are now nearing the end of the third-quarter earnings season. More than 90%
    of companies have reported, and more than 80% of those have beaten expectations—
    the highest rate of positive surprise since 1983. Revenues also have exceeded
    forecasts, with roughly 60% of companies posting revenue gains that have beaten
    expectations (although, as the bears would point out, the magnitude of revenue
    advances has been marginal). Looking ahead, we expect that fourth-quarter earnings
    should show the first year-over-year advance in earnings growth since the third
    quarter of 2007. This would mark the end of the longest profits recession since
    the Great Depression.
    Fears of inflation remain a constant theme among many market participants as
    the economy continues to show signs of improvement while the dollar falls and
    commodity prices rise. For its part, the Federal Reserve continues to maintain
    that current economic conditions warrant keeping interest rates at exceptionally
    low levels and has been forecasting subdued inflation trends. By our analysis,
    inflation appears unlikely to be a near-term threat and we do not expect the Fed
    to change course any time soon.
    Taking a broader look at the economy and markets, it is in many ways remarkable
    how quickly conditions have changed from one year ago when many, if not most,
    investors were convinced that policymakers would be unable to prevent a full-scale
    financial meltdown and modern-day depression. The credit seizures and collapse
    in economic activity had created a self-enforcing downward spiral. Fortunately,
    extraordinary policy measures helped pull the global financial system from the
    brink, and eventually helped to trigger a cyclical equity bull market that is now in
    its eighth month.
    While conditions clearly have improved from one year ago, many uncertainties remain
    and the economy is still troubled. We expect that the recovery should be sustainable,
    but we are not forecasting robust levels of growth. Rather, we anticipate an ongoing
    back and forth in the economic data. For stocks, we believe the cyclical bull market
    should continue, but we acknowledge that the pace of advances we have seen over
    the past eight months is unlikely to continue. Earlier gains were based on the
    realization that the world would not be entering an Armageddon-like scenario, but
    future gains will have to depend more on real advances in earnings that are not
    based solely on cost-cutting measures. Looking ahead, we expect to see further
    dispersion between market sectors and individual stocks, and overall, we foresee
    a slow grind upward rather than a continued powerful advance.