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Top Testing Tuesday Morning

ESH10 Mint ScalperWow, what a market!

Not the actual daily market but that pre-market continues to be the BEST place to invest as we're now (8am) up 70 points from yesterday's 2:30 low.  2:30 is the traditional beginning of the "stick save" phase of the day's trading and the expectations of low-volume market shenanigans kept us on the sidelines yesterday although we were shorting the S&P futures at 1,125 early on but that was pretty obvious as you can see from this Fibozachi chart and we were done with that trade at 1,122 – not trying to be heroes.

I was pointing out to members yesterday afternoon that, as impressive as this little holiday rally may seem, it's very lame compared to last year's 1,500-point run (20%) from Thanksgiving (11/21) through January 2nd with a nice 600-point move between Dec 24th and Jan 2nd.  This is a very low-volume spike up – the kind of pride that often comes before the fall:

What is it we're all excited about?  On November 20th the Dow was at 10,318 and now we're at 10,550, up a whopping 2.2% over the same period.  What's up with that?  I thought things were FANTASTIC this year, I thought on-line sales signaled the second coming, I thought the consumer is back and demand for commodities is through the roof and we're going to be hiring people again and our credit problems are solved and the banks are all solvent (other than the 150 that were seized, of course) and that rates were going to stay at zero forever and the government was going to spend Trillions on infrastructure with borrowed money that we'll never have to pay back so we'll all be rich, rich, RICH! 

Is that not true?  Well, to be fair, if we pull way back to November 2nd, we were way down at 9,500 so we could say we're having a 1,000-point rally (10%) since then.  There – doesn't that make you feel better?  We first broke 10,400 on Nov 16th and we've hovered pretty much between 10,300 and 10,500 since then until Christmas Eve, when Santa popped us through the top and yesterday we raced up to just under 10,500 at the close and this morning, the futures are pointing to 10,580 – a level we haven't seen since the beginning of October last year, when we were in the first 1/3 of a 3,000-point drop.  Ah, good times!  

Global markets have already made a spectacular 85% turnaround in growth rate and we are pretty much at the halfway point back to the tops we enjoyed in late 2007 with global markets closing back in on that $50,000,000,000,000 mark.  It takes roughly a 10 cent inflow of cash to move the markets up a dollar so, to get back to $62Tn from here ($46Tn) ALL we need to do is coax another $1.6Tn off the sidelines.  Is there $1.6Tn on the sidelines?  I don't think that matters as GS and the Fed manufactured far more than that this year between discount window borrowing and high-frequency trading – they've built this house of straw up in record time – let's just hope there aren't any big, bad wolves out there looking to knock it down…

The Hang Seng ran into a roof of bricks today at 21,500 while the Nikkei flatlined just under 10,650, waiting for the US markets to confirm a breakout before they test their own highs for the year.  The high for the Hang Seng was 23,000 this year but it's understandable that Hong Kong is tentative as the mainland Shanghai Composite is still struggling to retake 400.  The FTSE is making new highs for the year at 5,400 and the DAX is coasting along above the 6,000 mark so this is our race to lose this week as the rest of the World looks ready to rumble. 

7,285 is the magic number on the NYSE.  That's the only thing holding the US markets down this week.  Cynics might say that that's because it's a broad index and can't be manipulated like the Dow and Nasdaq can but I like to say it's just waiting to be sure and, at 7,261 yesterday – it shouldn't take much to pop us over this morning. 

We've got good news on Retail Sales from the ICSC (up 2.3% from last year) and from Redbook (up 1.9%) and Case-Shiller indicates housing is "only" 7.3% worse than last year vs. -7.7% expected although there is no improvement from last month, I doubt anyone will care – or at least not anyone who has any control of the markets as "THEY" are determined to finish this year off with a bang and we are just lucky to be able to sit back and watch. 

With a global terror alert and Billions of people scheduled to be gathered together in very exact places at the stoke of midnight on Thursday – you'll forgive me if I'm not in the mood to go long into the holiday – even if we do break our levels.  But, if we hold up here next week, when the volume comes back – THEN I'll be impressed

Be careful out there!

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  1. Hey Phil – any thoughts on S? They’ve dropped well below $4 and Barron’s sure seemed to like them long-term with the advent of 4G. I’m also still trying to decide between C and GS for a long-term financial position. GS might have found support in the lower $160′s and I think they’re still the Cadillac of all the financials.

  2.  AAPL…..More articles today on the iPhone straining the ability of AT&T and British 02 to carry the load brought about by iPhones surging popularity.  Two sides to this……..It means iPhone use ramping up, but also a thorn in their side.   Doesn’t help much to have an iPhone in your hand if the data can’t be streamed.  It will be interesting to see how this plays out.  Remember, every time one of these services, such as RIMM’s blackberry, has a temporary shutdown, the stock gets hit, at least temporarily.

  3. Phil, I have March bull call spread on SDS 38/50. I’m up a little over 50% on the short 50′s and down about 40% on the long 38′s. I’m thinking of rolling the shorts to 45. Maybe you would have a better plan? Thanks

  4. The most frustrating this about this rally to me is the lack of participation by UYG.  It’s the one "long" position I have and it’s a big position relative to my shorts – SRS, QID, RTH.  To have it go nowhere by the other three get crushed is making me feel snake bitten.

  5. VVus is up-next one is Arexnia-diet drugs. Knew it was coming at some pt.

  6. STEC continues its ascent…it’s gonna fill that gap back up to 21 in the coming week or two. 

  7. ARNA / Pharm – What’s your take on ARNA given the recent news about the MRK deal falling through and their submission to FDA for a drug approval? Still long or time to get out?

  8. Good morning!

    S/Llorens – I do like them, I think they were on the Watch List but I didn’t get a chance to write them up.  Them or Q, I was kind of between the two as a pick and I forget which way I went.  Between C and GS, I think the C 2012 $5s at .60 are great for a long-term play but you can probably make more money selling front-month GS calls against leaps.

    AAPL/Iflan – There’s a big extra strain as people who get millions of new phones download music and movies and TV shows and games for the first time.  Once you settle into the IPhone, it’s really just a phone with some useful features that I don’t think is particularly stressful to T’s lines long-term.

    SDS/Jomp - SDS is at $34.15 and you can roll down the $38s ($1.45) to the $35s ($2.25) for .80 and that’s worth it and, for .45 more, you can roll to June $39s at $2.70.  You can do that (net $1.25) and buy out the $50 calls for .40 and then see what you can get away with selling for $1.50 in June when you have to (right now it’s the $49s).    You can roll lower than that, of course but then you have to cover (unless you want to spend a lot more).  I figure you can always roll down later if the S&P goes the wrong way.

    Snakes/JCM – The best thing to do for the last 2 weeks of the month is usually just cash out an go on vacation.  There’s no rationale to this kind of trading.  The volume is a joke so you can get all kinds of moves that make no sense.  Also, there’s very little news so the MSM can control the newsflow and make a headline out of whatever they need to make their point.

    Levels – We are simply waiting to see the NYSE take out 7,285 although 7,380 is their proper break-out level.  Dow 10,549 needs to hold and now RUT 630 becomes important.

    Gold is failing $1,100 – that’s worth watching.  Oil dropped like a rock from $79.40 before the bell and now just over $78.50 again and I still like shorting the futures there as they cross that line.  We’re still watching copper at $3.30 and silver failed $17.50 and is back at $17.25 so lame there too.

    All that makes me think the dollar is coming back so we’ll see how that plays out today.

  9. Trying a ‘mutant short condor’ MA trade selling the Jan 260 C/Ps, buying the Jan 270 Cs and April 250 Ps. Lightly bearish but best profit comes at 260 by opex. Cost 3.20.

  10. OSIS – a company that makes security systems for Airports….well, let’s just say they flew up (literally) on the bomb scare.  Putting on the watch list for a balloon to lose its air…

  11. Consumer Confidence 52.9 and last month upgraded a point to 50.6 so that’s all the day’s data prior to the 5-year and it has all been good(ish).   No excuse at all for that NYSE not to pop…

  12. ASEI – C above….my oh my, how they do follow trends.

  13. I swear I saw SRS turn positive a few minutes ago, or maybe I saw a UFO.  Rally must really be getting tired for SRS to go green, even for a few minutes…

  14. Phil,
    Saw oil near 80 this am, but couldn’t get organized to ask your view on shorting the futures. I see you like it if it crosses 78.5, but what if it touches 80….do you think it is worth a shot there? Also when are the weekly oil reports out--Wed?

  15. Phil, what do you think the overriding premise for VLO isbetween?
    lower price of oil = lower costs / more profit . . .  so stock goes up
                                  = because of less demand / poor economy . . . so stock goes down
    higher price of oil = higher costs / less profit . . . stock down
                                     = because of more demand / better economy . . . stock up 

  16. SNY @ 52-week high. Looking at the chart below and the RSI levels of 73.66 d, 70.11 w & 74.11 m suggests it is topping.
    I own the stock with avg. cost of $35-ish, sell some now or wait for more gains? Would appreciate any opinions…

  17. Sold some bullish condors on ICE too (short the 115 line, long the surrounding strikes). I’m thinking it’s going to at least 115, at which point it will be pretty overbought.

  18. Phil
    I like idea to protect long portfolio with EDZ play, but my EDZ major position is short Jan 5s puts and it is not much left there ( sold @0.65 and now only 0.275), how you recommend to improve this protection? (margin is tight)

  19. Check out GGWPQ …. down $2 since about 10:30

  20. Cap / GGWPQ
    Well they are up 400% in four months.

  21. Phil, what’s your thought on RTH in $100KP?  In $100KP, I believe you did QD (quad down or 4x) and the average cost was $0.5-ish.  I only did DD and my average cost was $0.85.  What do you think if I buy more to further lower the average cost?  Or wait and see?

  22. Nice hangman forming on OSIS.  Taking  shot at a few P at the 25 strike to see if it pans out back to 22 area.

  23. SRS-UFO/Judah – About the same odds of each happening I think, maybe leaning more towards the UFO…

    Oil/Ocelli – In thin trading, it is safer to play breakdown lines than breakouts (from the short side).  They are right on the line now but holding it so not a very attractive play here unless we see gold failing $1,100 or copper failing $3.30.   The oil report should be out tomorrow on time (it was last week anyway) but it’s not going to be very reliable with this ultra-low import volume.

    VLO/B1 – My premise on VLO is they always manage to figure out how to make a profit, regardless of the price of oil.  What’s killing them recently is the instablility but that will pass and they will find a nice spot to hedge production down the road.  In general, fuel consumption is fairly ineleastic so VLO does better when oil prices are dropping as they tend to fall faster than gas prices but they sure did manage to make a few bucks as oil raced to $140 last year too!

    SNY/M2 – You can always cover with the March $40s at $2.30 but that’s effectively selling it $1.50 from here so it’s almost why bother unless you really love them long-term. 

    ICE/Eric – I can’t play them up as they should follow commodities down but lots of cross currents there.

    EDZ/Tcha – Selling puts is the way to go.  You can sell some Feb $5s for .55 now….

    RTH/Cwan – Very hurting (as are all bearish positions).   I’m still expecting a pullback so I’m not ready to shift yet.  We have 80 $90 puts at .52 so $4K committed and down $2,500 but, with 3 weeks to go, I still feel we can get a run back to $92.50 and get out even at least so I’m not messing with it.   With 40 at .85, it’s going to be harder to get even but I also wouldn’t do anything and plan on buying the $95 puts if they get to .90, which means you can offer .90 for a roll (about .15 short). 

    Got a huge move in the buck but not much fun elsewhwhere so far.  $1.587 to the Pound, $1.435 to Euro and a whopping 92 Yen all of a sudden.  That finally gave us a good dunking for oil so we got our quarter there and gold is $1,098 but, so far, not a big effect on the indexes.

  24.  AAPL    Sold Jan 210 covered calls at 5.40.  Almost all premium.  Plan:  If AAPL moves upward I take the spread profits expiration day.  If down significantly for any reason,  I’ll buy back the covers and buy more LEAPS.  General philosophy for this trade is …..AAPL up long term, variable short term with an upward trend.  

  25. Nasdaq halts trading on Philadelphia’s PHLX exchange because of smoke on the trading floor.

  26. Great comment on Seeking Alpha about the trading halted on the PHLX floor due to smoke:
    "Hmmm I wonder if they will also detect the mirrors as well?"

  27. Phil good article from Keith R. McCullough is CEO of ResearchEdge. Miller and Kudlow are wrong!
    Hope your new year is filled with health and many blessings. RE bio Company in Onc. I never recived any info to review. Maybe Pharmboy took care of it.
    We have to really hit the road with Kalos after year end, any of your help with the VC’s or Hedge funds is appreciated.
    Keep up the great work,

  28. Sold the AAPL Feb 220 puts naked. I’m betting on good earnings when AAPL reports their 1st quarter Jan 20

  29. Pharm – Posted this earlier too. What’s your take on ARNA given the recent news about the MRK deal falling through and their submission to FDA for a drug approval? Still long or time to get out?

  30. Phil
    do you expect a stick from here?

  31. GM is offering huge incentives to its dealers to speed up the sales of leftover inventory from its defunct Saturn and Pontiac brands. Until Jan. 4, GM will pay dealers $7,000 for each new Saturn or Pontiac on their lots that is moved to their rental-vehicle or service-vehicle fleets.

    Hong Kong leader Donald Tsang says he’s pessimistic about the pace of the city’s economic recovery, and warned of a double dip in 2010. Yesterday, a weak sale of two waterfront sites raised concerns the Hong Kong real-estate bubble – fueled largely by short-term capital inflows – may be bursting.  Sounds a bit like Miami

    China’s National Audit Office uncovers $35B in government fraud YTD, over which more than 1,000 officials were facing prosecution or disciplinary action (let’s see – that’s about $35M per official!). "The announcement is the latest indication of how widespread corruption has become among government agencies and how difficult it will be for Beijing to root out."  Sounds even more like Miami!

    Emerging-market equity funds inflows tripled last week as the outlook improved for developing-nation exporters, according to EFPR. Emerging-market stock funds have attracted a record $80.3B in 2009, compared with outflows of $48B in 2008. U.S. equity fund inflows of $11.1B made for the strongest week since June 2008, helping to improve the record YTD outflow to $69B.

    Dec. State Street Investor Confidence Index: 103.9 vs. 100.8 in November. "This month’s uptick in global investor confidence stemmed largely from an improvement in the mood in Asia, where risk appetite rose to an eight-month high… institutions are continuing to add to their risky asset positions, but at a slower pace than was evident earlier in the year."

    U.S. employers expect to hire more new workers in 2010 than they did in 2009, according to’s 2010 Job Forecast. Twenty percent of employers plan to add full-time positions next year, up from 14% in 2009, while just 9% plan to cut head count in 2010, down from 16%. While the job market appears to be on the mend, the firm said it doesn’t expect a return to growth until at least Q2 2010.

    The Fed’s balance sheet increased in the latest week, hitting its highest level in nearly a year, to $2.221T from $2.218T in the prior week. That was the highest since the first week of 2009, when the financial crisis was still relatively fresh. After declining earlier this year, the balance sheet has been growing as the Fed buys agency debt and MBS.

    It’s time to get out of bonds, strategist Dan Deighan of Deighan Financial Advisors says. The economy may be able to withstand the coming rise in interest rates, he says, but "there is going to be a meltdown in the bond market." Presently, March 30-year bonds are +0.22% at 115-08. The rest of the curve is flat.

    November U.S. credit card chargeoffs rose half a percentage point to 10.56%, halting a two-month run of improvement, Moody’s says. Delinquencies also rose, to 6.2%. Trends suggest bad debts will continue to rise through much of the winter, and support Moody’s outlook that chargeoffs will peak at 12-13% in mid-2010, firm says.

    Major accounting firms’ application of fair value is all over the map, with Ernst pegging Regions Financial’s (RF) loan book at 19.3% below cost, while PWC values Bank of America’s (BAC) loans at just a 4.4% discount. While it’s possible some firms have a less-healthy group of clients, if the gap reflects widely different audit policies, it could have consequences on the strength of banks’ regulatory capital.  Sounds like a good reason to buy RF

    Hedge fund manager Eric Sprott, whose fund returned 496% over the past nine years, says investors are delusional. "We’re in a bear market that will last 15 or 20 years, and we’ve had nine of them." Sprott predicts the S&P will collapse below its March low of 676.5, while gold (GLD) is the only asset about which he remains positive.

    Britain’s FTSE closes up 0.7% to 5437.61, becoming the first major-economy stock index to erase its losses since the Lehman Brothers collapse.

    Mirrors/SS – LOL!

    Thanks Colberg.  Yeah, things have been nuts here and I still have the bio thing up in the air, hopefully this weekend I’ll get caught up – your thing too!

    Stick/Tcha – We always have to expect a stick.  I was hoping we’d at least pull back to test 10,520 but no luck so far…

  32. SRS showing a little life for a change.

  33. Did a Buy/Write on DOW – buying stock and selling a short straddle of Feb 29′s

  34. Phil,
    Since this week is about GS and JPM maximizing their bonuses, and most people expect a pullback in Jan., do you see a short squeeze next week ? I’m wondering when to buy TZA.

  35. Next week/JRW – Very tough call.  Last year, Jan 2nd was a huge up day.   The year before we had a Santa slice of 1,500 points from Xmas through Jan but it’s the short, sharp shock that we’re worried about.  The downside may be a gamble but I think going bullish into next week is insane – too many things can go wrong.

    I just went back on my DIA $105 puts (.30) as a day trade but I’m in and out of those for pennies. 

    Speaking of which – whatever happened to all those states that were going broke?  I know my property tax bill just went up 30% for next year – there’s another nail in the coffin of property values…

    Calculated Risk charts the Case-Shiller Composite 10 against the stress-test scenarios (upshot: much better than the worst case), along with a couple of other price measures.

    Despite its woes (huge deficit; anemic economy; broken political system), Joel Kotkin says the U.S. is a great long-term bet. His reasoning: 1) Viable demographics. 2) Energy resources. 3) Agriculture. 4) Military prowess. 5) Entreprenurial hotbed. "If the U.S. stays true to its unique traditions, it will remain the world’s best investment for decades to come."

    MF Global’s 10 themes for 2010 include: growing uncertainty over the ability of governments to fund large deficits; a jobless recovery; increased U.S. tax burden; and continuing low volatility trading.

    $78.50 cross setting up on oil again!

  36. $42Bn 5-year note auction was at 2.665% with 2.59 bid to cover – average but I think average is pretty good for a slow week with Japan closed.   This makes me nervous about my DIA puts already but I really do expect a dip to 10,520 before the obligatory stick. 

    Ignoring the wisdom of the ages, Geithner made what appears to be unlimited funds available to Freddie Mac (FRE) and Fannie Mae (FNM) on the day when most of the nation is more concerned about getting presents under the tree than the policy machinations of Washington.  

    Apparently this little item was lost in the Christmas rush – seriously, could this even compare to the endless fascination with the status of holiday sales? The point is that hanging in the background was the likelihood that Mae and Mac were expecting some very, very bad fourth quarter numbers. Indeed, despite the massive efforts to support the housing market, Fannie Mae reported yesterday that serious delinquencies continue to climb at an alarming rate.

  37. Would you sell any puts into an anticipated stick?

  38. There are two ways to reduce your taxes for 2009. – vote out the tax and spend politicos ( that idea failed miserably ), or, close out everything that is red, and that is working well, and is far easier.

  39. Phil, i think there will be a considerable effort to pump up the price of C.  It will be in everyone’s best interest including the govt and GS.

  40. Opt, I am in the WYNN Jan 60 puts, should I sell the 55′s to cover or stay straight 60′s?  It would seem that over any long holiday it would be benificial to have a vertical to reduce the effects of theta.  Is that correct?

  41. Phil, Fighting the Fat through work on the Pharm:\
    Vivus files NDA, updates on ARNA, and Orexigen

  42. Sorry, wrong board.

  43. Gel1 – we have pretty crappy options but I would  vote for tax and spend over spend and start wars that ultimately will cost over 3 trillion $s….. Give me the guy who can speak coherently in public, rather then the guy that forces me to defend our country’s foreign policy in random bars around the world when Id much rather be chasing skirts!! lol… Sry, got to let Phil know he’s not the only Dem on this board!

  44. Phil, do you see suggest any trade positions on AMZN at this point?

  45. How do big deficits of the states such as CA and NJ affect their municipal bonds?  I used to have NNJ (I live in NJ) and sold them when they went above $13.  They’ve flatlined around $13.30 for quite a while.  I thought they would go down because of the financial problems with the NJ state.

  46. Put selling/JCM – It’s a great way to protect yourself.  I can’t do it on WSS because they are too slow filling things but if you sell puts on momentum with tight spots you can ride out the moves up. 

    Taxes/Gel – Dying is also a good strategy with the new estate rules kicking in.  8-)

    C/Jo - I agree and also keep in mind that they have $2Tn, which is still considered a lot of money, even if they don’t make a lot of interest on all of it, every 1% is $20Bn.  Their losses are write-downs, not cash, cash keeps coming in and the write-downs may end…

    Fat fighting/Colberg – That is going to be huge business when they get it right.

    AMZN/Ago – They got a double upgrade today with $155 at Kaufman and a big $172 at Piper (one of the few I actually respect) but my take on them is they are struggling with their main revenues and enjoying a gold rush from the Kindle that is masking internal problems.  Unfortunately, they seem to be able to get away with not breaking out Kindle sales and profits on the reporting hand, but are able to brag about Kindle sales (and imply profits) on the pumping/outlook side.  Will the Kindle survive being one of 5 major EBook readers in 2010? 

    Fun Project:  Anyone with an IPhone, please download the free App from BeamItDown Software of Alice in Wonderland (the book) and try it.  Then let us know if there is any chance at all that Kindle will survive (it would be really great if a Kindle user could compare).  Thanks!

    Bonds/Cwan – As the states have to offer higher interest to finance their debt, the older, lower-paying bonds lose value.  Rates have stayed pretty low so far so your bond is as valuable as the new ones at the moment but once the new ones offer higher rates, the old ones can drop fast. 

    The government spending orgy of 2009 will haunt us in 2010, says Benn Steil, director at the Council on Foreign Relations. He likens today’s spending to that which Washington used to righteously condemn when undertaken south of the border. "But the effect of our doing it is far more consequential, since America possesses the exorbitant privilege of minting not only its own but the world’s money."

    Investors jumping on stocks of airport security systems makers after the Christmas day airline scare may be getting in prematurely, as orders could take a long time in the pipeline. Rallying for a second day: ICXT +8.4%, OSIS +2.7%, ASEI +2.6%. (earlier)

    Nas still red with SOX down .5%, Transports up .5% because high oil and terrorism are just such a good combination I guess and that’s keeping the Dow humming.

    Volume on Dow is mega-pathetic 50M at 2pm.

  47. jromeha…Actually I was thinking of chasing a few bikinis. Much more preferable in the winter. I really have no political affilliation, as I believe the political system in general is flawed.. A religious analogy for this belief is agnostic. There is, I’m sure, a term that fits my political beliefs, but no political party embraces it that I’m aware of.

  48. Is it moronic for me to short DIA Jan. puts in expectation of an afternoon stick, while at the same time owning QID calls?  Seems like I ought to pick a direction and go with it, don’t you?
    BTW — what’s WSS?  Why can’t you short puts?  I thought you did that all the time?

  49. WSS= wall st. survivor.  Just realized.  Sorry.

  50. Hi Phil: Thinking of do a buy/write on JDSU with stock at $8.50 & sell Mar.$9 calls & $8 puts for $1.20.comments?

  51. Phil
    what do you think to buy AMZN LEAPS puts and sell against it short term calls and puts?

  52. Phil, so are you bullish on RF or was that just a sarcastic quip, earlier?

  53. Taxes/Phil… Death is an option and a concern for me, as the taxes are really killing me.

  54. This will be fun:  A suit filed by a Virgin Islands pension fund alleges Morgan Stanley (MS) marketed a $1.2B CDO – collaborating with credit raters to get triple-A ratings – while shorting nearly all the assets. The Libertas CDO was 92% residential mortgage-backed securities.

    Direction/JCM – The market doesn’t pick one so you don’t have to either.  Just be aware that if you are paying premium on two sides and the market flatlines, then you really are screwing yourself.  WSS is WallStreetSurvivor, where I have the $100KP – some platforms just don’t perform well enough to day trade on.  I can short the puts but between the spread and their slow response, it’s safer not to and just take my lumps on the naked puts I buy.

    JDSU/Dflam – Nothing wrong with a 10% in 3 months plan. 

    Wow, just 3M Dow shares traded in last half hour, we’ve had much bigger minutes than that!

    AMZN/Tcha – To play AMZN long I would buy 2x the 2011 $120/140 bull call spread for $10 (net $20) and sell 1x the Feb $140s for $9.50 so you are in $40 worth of spreads for net $10.50 and you sold $9.50 in pure premium so AMZN has to be over $170 before you are even behind on this trade.

    RF/Jo – No, really, if they are taking aggressive mark-downs on their book values then they are probably good to invest in.  They are pretty cheap anyway at $5.38 and you can sell the May $5 puts and calls for $1.60 for net $3.78/4.39 so a 20% discount even if put to you and over 30% if called away.

    Looking at today’s Case-Shiller housing price numbers in terms of gains off the bottom of the trough shows bubbles still bursting in the worst hit markets, like Florida and Nevada.

  55. AMZN/phil
    I;m kind of bearish on AMZN in long term, think that as soon as AAPL inroduce a tablet it will kill AMZN silly reading device,
    I guess that it was kind of success as a Xmass gift because AAPL didn;t make anything new

  56. Phil, what do you think about a TZA feb vertical 8/9.  Buying 8′s and selling 9′s for a debit of .5.  Looks like a pretty good risk reward to me.

  57. Housing – Don’t forget there is a moratorium on foreclosures this month from many major banks and I very much doubt that there is a lot of foreclosure selling either so the Case-Shiller numbers could be seriously skewed up as it’s been the short sales that have dragged down the averages. 

    From the peak in the second quarter of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. With the relative improvement of the past few months, the peak-to-date figures through October 2009 are -29.8% and -29.0%, respectively.

    Las Vegas remains the one market that has not seen a glimmer of hope so far this year. Prices have declined for 38 consecutive months, with a peak-to-trough reading of -55.4%. It is now barely 5% above its January 2000 level. This compares to its peak in August 2006, when the average home price was 135% above that same level.

    What happens in Vegas damn well better stay in Vegas or we are all in very deep trouble!

    I always thought the web was going to put this kind of data at our fingertips but you still need to dig like crazy to get to the truth!

    AMZN/Tcha – Well I agree but shorting AMZN has been a death sentence.  Best to hope they have a ridiculous run up to $150+ and then sell calls or buy puts. 

    TZA/Jo – I agree, it’s certainly worth it as you should not be too damaged if the RUT breaks 640 and you need to exit in the next couple of weeks.

  58.  It looks like X is going under th 5ma.

  59. Phil, what do you think about FCX feb puts – buy 80′s and sell 75′s for around a debit of 1.8.   The TZA’s were calls by the way.   Just looking for bearish plays for the sake of balance.

  60. tchayipov, if you are bearish and you want to be in long puts, you can analyze the opposite of Phil’s trade – buy the 2011 160/140 put spread and sell the FEB 140 put.   Same margin requirements, 20% more gain if AMZN stays at $140 and if AMZN runs up your breakeven isn’t until $190.

  61. AMZN/Tchay
    I would be somewhat concerned going out too far with this stock. Short term – OK. One of the companies I have (LPL – LG Display) just built a huge plant in China and will soon be introducing (next year) a solar battery e-reader. This could have an effect on Kindle sales. The solar version is good for eight hours without a re-charge. The solar feature will appeal to all the greenies.

  62. Tcha – kindle/iSlate – I agree it seems right iSlate could kill Kindle, but will this happen "right away"? if iSlate launches at $1000, and say Kindle comes down to $199 over the course of the next year, are they *really* competing for the same dollars? What if AMZN launch a third generation kindle at $149? Are they still competing? I’m jhust not sure it’s an overnight slam dunk.
    Similar thing with iPhone, yes it is possible to read a book on an iPhone, but book readers for the iphone predate Kindle, they’re hardly new. I think the iphone is the right size to be a phone, but simply too small to read books on in comfort.

  63. Mrmocha/ thanx
    I just don’t know yet how to fix this kind of position if market will go against me, I think much easy and comfortable ( at least for me) to buy LEAPS and short monthly puts and calls and roll them every month to reduce price of LEAPS

  64. X still going down but da bulls don’t seem to care.

    FCX/Jo – I think they are ripe for a fall but maybe best to let them either fail at $80 or take a nother run at $87.50 before establishing a position.  Of course watching copper prices is key.

    Oil never made it below $78.50 again, just that one dip that gave us a quarter and then they stayed over $78.50 – very annoying.  Gold finished at $1,098.

    Fast money actually asking if retail investors are suckers?  This I have to see…

    V and MA back to highs, COF and AXP must be in a different business.  I guess maybe it’s the default rate that’s dragging those two down and investors like to think the V and MA don’t care about defaults but more defaults = less lending and less lending = less transaction fees. 

  65. AAPL looks like Steve Jobs sneezed!

  66. Steven
    I agree, but my logic is:
    people who can and love to read – stay and will stay employed, and they can afford to pay couple of hundred more for nicer toy

  67. DIA- sitting here trying to figure is I should recover March puts?

  68. tcha – yeah it’s kinda interesting right?
    For me the iSlate would likely compete with my choice of a new laptop, I doubt I would consider it an alternative to a book reader costing perhaps 1/5th. Well, it isn’t even launched yet so all speculation :)

  69.  Tchayipov/Steven: I delayed buying a Kindle this Christmas because I’m waiting for the iSlate. This thing is iEverything, not just and iReader, that’s the big difference to me. It will be a winner if it is priced below 1000, but I doubt it will necessarily kill the Kindle right away. Ebooks are a huge growing market, so there is room for the much cheaper device. Also, the big thing is whether kindle books will be available on the iSlate or not. My guess is that they will be, and that will help Amazon and the ebook industry, as the money is in bits not hardware.

    Either way, I’m buying one as soon as it comes out :)

  70. Reading/Tcha – I was playing with a Kindle and I just don’t like it better than reading a book.  That BeamItDown app, on the other hand, if I could read that on a book-sized screen I’d never want to pick up a book again.

    DIA/Pstas – I’m still ignoring the market through next week so no covers until volume confirms the breakout.

    Wheeee!  Interesting change of pace into the close.

  71. Kindle/Cris – They already have a kindle app for the IPhone so you can read all the books on one.  There is no way I want a big, fat, single-function Kindle when I can have a multi-function device that does the same thing.  The only problem I’m starting to have with the ISlate is I’m starting to think AAPL is not going to include a Phone function – that will piss me off.  If I have to walk around with something that big, why would I want to have my IPhone too?  Won’t stop me from getting one but will annoy me…

  72. steven/ cris/phil
    I agree iSlate will be one thing for everything, I love to read also and problem – I don’t have any space left on my bookshelfs,
    another argument:
    if AAPL start sale books through their itune store it is not only kill Kindle but also start herting AMZN main business
    and for sure it wont happened overnight, this is why I’m thinking to buy put LEAPS and as a protection sell monthly put and call against it

  73. What’s the official DIA stance now?
    I’m still covered by the Dec 31 putters.

  74. Phil,
    The other night I dreamt I was down to 3K in margin.  :-/  What do you think should be the max percentage that one should allocate to writing naked puts?

  75.   RE: iSlate 

    I’m pretty sure there will be NO phone feature. That would just make it too complicated. I don’t mind carrying both, it will replace my laptop not my iPhone, in situations where my iPhone has not already replaced my laptop. ;)
    And also add a lot of stuff that I can’t do easily on the laptop, eventually if not right away. 
    Tchayipov: content is the big thing, Apple has something big up their sleeve with magazines and newspapers, and if they decide to sell books like music, then definitely Amazon will get hurt.

  76. ARNA/Trad – sorry, I have been out all day at Legoland in Carlsbad… was busy!  Anyway, ARNA, still holding the stock.  On the dips, I buy more FWIW.  I hope they are not tying up too much capital…..I still have a ton of April 5 Ps that are up for now.  I still believe a deal is coming.  The MRK thing was to be expected with the efficiacy endpoints and they SGP deal, so not worried about it. 

  77. OSIS – come to Papa on that one….

  78. RF – could go under…I would stay AWAY…JMHO.  I have shorted them and they are moving in the right direction slowly.  MS is also on my short list. to move to $25 area.
    CEPH just filled the gap, so either take the money and run or get ready to roll to the 65 Feb10 and selling the 60 Jan10 for 1.1.  That was a nice pick Phil.  
    GILD still looking like it wants to move like the rest of the mid-tier Pharma.  40 Jan11s are 7.3 and are nice to write front months on them on the pops. 
    GENZ is also looking fine with its bottom, but don’ t like the chart as much today, as it looks a bit like a shooting star (see OSIS comments above when they formed a hanging man earlier, now it appears to be a shooting star). 
    ENDO moving up and looks like it wants to fill its gap up to 22.
    CELG needs to hold 55.5, otherwise 54ish is the next support level.

  79. Jumping the Border? There’s an App for That  
    This story has been making the rounds:

    SAN DIEGO (AP) — A group of California artists wants Mexicans and Central Americans to have more than just a few cans of tuna and a jug of water for their illegal trek through the harsh desert into the U.S.

    Faculty at University of California, San Diego are developing a GPS-enabled cell phone that tells dehydrated migrants where to find water and pipes in poetry from phone speakers, regaling them on their journey much like Emma Lazarus’ words did a century ago to the "huddled masses yearning to breathe free" on Ellis

    Probably designed by Janet Napoletano and paid for from stimulus funds.

  80. Phil
    I am bullish on emerging markets for the first half of the coming new year. Playing EDC by selling near the money short puts (objective is to earn premium income), do you have a suggestion for month and strike. I am not concerned about assignment, but just interested in premium income.

  81. Gel
    you scared me, we sold so many EDZ puts and you saying you bullish on emerging market????

  82. My 2 cents on FCX to all…. I watch it carefully and it’s one of the few few stocks I consistently made any money on (long) this year. It’s a tricky one to short… MSM seem to love it, and they pitch it as a 4-fer (Copper, gold, China, industrial recovery). So if you have a "short gold thesis," FCX can still burn you if MSM spins it as a industrial recovery or China play.   Also, this stock fell apart most dramatically when they suspended their dividend in early 09. One has to anticipate "some" dividend may be restored within the next 1 or 2 earnings calls. If that happens and you are short,…. have your running shoes on. Last few months seems to have real resistance at the 85 level. The technical and macro picture make it a rational short, but remember the axiom about the market’s ability to be irrational longer than you are solvent.