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Thrill-Ride Thursday – Retail Sales and Maybe Some Jobs?

Beware the data!

The first thing you will hear this morning is that COST had a 9% rise in sales, with International sales up a whopping 25%.  What you are less likely to hear is that COST sells a lot of gasoline, which has doubled in price since last December and, excluding inflation in gas prices, same-store sales are up just 2%, a tremendous miss of the 7.9% expected.  Out of the 25% increase in International sales, 15% is attributable to currency exchange so up 10% is the real number

This is nothing against Costco, I like that company, but it's a caution sign to look carefully at the retail numbers we're going to be seeing today as there are several outside factors that are skewing the results drastically – to the point where the numbers, whether good or bad, are almost meaningless.  It's also good to keep in mind that we are comping sales to the WORST CHRISTMAS EVER so anything less than double digit gains over last year is still pretty sad. 

Mish did a good job yesterday of pointing out the statistical nonsense known as the Non-Farm Payroll Report, where "Birth/Death" model revisions that were as much as 356,000 a month last year (January) make the data beyond useless for any kind of serious analysis.  Nonetheless, analyze it they will and if we manage to avoid posting our 24th CONSECUTIVE month of losses, surely they will be pouring champagne on CNBC and acting like Capitalism has once again triumphed over evil (evil being people without money who still want to live with dignity). 


Speaking of dignity – if you know 100 people in Nevada then, statistically, 3 of them went bankrupt this year, up 61% from last year as our economy "recovers".  In Tennessee, Georgia and Alabama, just 2 of your 100 friends filed while California, surprisingly "only" had one in 66 households file for bankruptcy so you can go almost a whole day and not run into someone who lost everything in California – too bad the same can't be said for the State overall!  California needs $21Bn over the next 18 months to keep the lights on.  This doesn't seem so bad, GMAC is losing $13Bn this quarter and we're bailing them out but if we bail out CA then NY, NJ and 47 other states will come knocking to the tune of $230Bn in state deficits and that we can't afford

pboc0107China says they can't afford runaway inflation and the PBOC unexpectedly raised a key interbank market interest rate Thursday for the first time in nearly five months, signaling a change in its policy focus toward pre-empting inflation risks in the new year.  The tightening move, in the form of a higher yield in its weekly bill sale, came less than a day after the People's Bank of China hinted its priorities had shifted toward managing inflation expectations and away from single-mindedly supporting economic growth.  Imagine that – the government says they will do something and then —-- THEY DO IT!  That is amazing! 

The PBOC drained a net 137 billion yuan from the money market this week, its biggest weekly fund withdrawal in nearly three months. The central bank has been draining liquidity for 13 consecutive weeks.  Outlining its tasks for the new year, the PBOC said in a statement Wednesday it "must maintain policy efforts to support steady economic growth and stabilize prices and effectively manage inflation expectations."  In a rare interview with the state-run Xinhua News Agency late last month, Chinese Premier Wen Jiabao discussed growing inflation expectations and expressed concerns about fast-rising property prices.

That sent the Shanghai Composite down another 2% this morning and the Hang Seng dropped 147 points (.66%) and the Nikkei also fell half a point as the dollar dropped back to 92 Yen.  Japan's new finance minister, Naoto Kan, hit the ground running this morning and said he wants the Japanese currency to weaken a bit more and that he would cooperate with the Bank of Japan to guide the yen exchange rate to "appropriate" levels, specifically 95 Yen to the dollar.  "It's a strong message, particularly for overseas players," said Hideaki Inoue, chief foreign exchange manager at Mitsubishi UFJ Trust and Banking Corp. "Speculation is growing that the government will be more likely to intervene in the market" if the yen rises sharply." 

Here we have the Shanghai measured against other international indexes.  Note the Hang Seng is fairly closely tied while the Nikkei (who we got out of yesterday) has been the best performer for the month, followed by the Nasdaq – both up around the 5% rule for the month.  It's interesting that the China growth story that the Western economies are chasing isn't being bought by China at the moment but don't tell that to some sucker who just paid $83 for a barrel of oil (we shorted oil yesterday) or the guy who paid $1,140 for an ounce of gold (we shorted the gold futures yesterday).  That's -2% in China for the month.  

Last January and February, our markets fell DESPITE China staging a huge recovery.  How will we fare this year if China leads the way lower?  Over in Europe, we discussed yesterday that Sarkozy also want the dollar stronger – I would think all these global leaders wanting a stronger dollar should put somewhat of a floor under our currency, don't you?  The FTSE is struggling to hold 5,500 this morning and the DAX is at the 6,000 mark with the CAC testing 3,000 so it's a hat trick in the EU if they can all hold their levels but that's going to depend on our Unemployment Report, which we get – Now…

Only 439,000 people lost their jobs last week, up 1,000 from Christmas week but well below the 500,000+ we've gotten used to.   The number of people receiving unemployment insurance dropped in the prior week to 4.8 million, and those receiving extended benefits increased.  Of course, in another statistical anomoly from our government, continuing claims no longer include people receiving extended benefits under Federal Programs and today’s report showed the number of people who’ve used up their traditional benefits and are now collecting extended payments INCREASED by about 165,000 to 5.44 million in the week ended Dec. 19.   

We are reaching a milestone that America hasn't seen since the glory of the Carter years – 1/3 of our Noninstitutional Population (those of us who are not in jail) does not have a job.  That's up from 26% in 1999.  Another milestone we reached last year is that, for the first time ever, the number of Government jobs (now 23M) has surpassed the number of Goods Producing jobs (now 18M) as 6M goods producing jobs disappeared since 2006 just as the government went on a hiring spree (Homeland Security mostly).  Government now employs one in 10 working aged Americans and is about 15% of the total labor force so when your political party decided to campaign against big government – just make sure they are in very tight with the other 85% who's jobs they aren't threatening!


Of course, SOMEONE needs to do some hiring.  In Member Chat yesterday we were discussing how the Fed Minutes (see my highlights HERE and HERE) indicated that smaller businesses (the ones not being bailed out) are being crushed by the Corporate Wellfare clients as public companies still have access to credit are rolling over small caps and, especially, non-public companies, who have more luck getting blood from a stone than a loan from a bank.   That's led to a 38% increase in Business Bankruptcies this past year with 89,402 businesses going under in 2009.

89,402 businesses bankrupt and 1,357,565 personal bankruptcies in 2009.  Party on markets as it really is, as I said in my outlook, A Tale of Two Economies and God help you if you are on the wrong side of that top 10% line…  Apartment vacancies are also up 8% this year, hitting a 30-year high as people can't even afford those (and the average rent has been cut 3%) yet CRE is flying – go figure.  Even New York City building owners had to cut rents by 5.6% last year with an average apartment now renting for "just" $2,646 a month.  Saving on rents must have put people in a shopping mood though because December Same-Store Sales were SUPER with hardly a miss in site.  The early results are:

BKE +6.6% vs. +2.2%.
COST +9% vs. +8.2%.
HOTT -10.9% vs. -8.4%.
LTD -2% vs. -1.3%.
PLCE +4% vs. -5%.
SSI -2.2% vs. -4.9%.
WTSLA -4.6% vs. -5.9%.
ZUMZ +0.3% vs. -6.2%.
AEO +7% vs. +2.1%.
APP -5% vs. -5%.
ARO +10% vs. +3.3%.
BJ +4.8% vs. +4.7%.
BONT -2.6% vs. -3%.
CATO +7% vs. 0%.
DDS -7% vs. -7.5%.
JCP -3.8% vs. -4.1%.
SKS +9.9% vs. +2.6%.
TJX +14% vs. +5.5%.
ANF -19% vs. -12.3%.
FRED +1.3% vs. +0.1%.
GPS +2% vs. +2.5%.
KSS +4.7% vs. +3.5%.
M +1%, in-line.
JWN +7.4% vs. +2.4%.
ROST +12% vs. +7%.
SMRT -2% vs. -4.5%.
TGT +1.8% vs. -0.2%. 

That's not too terrible!  Of course we know COST is misleading but SHLD is up 15% pre-market (raised guidance), SONS is up 10%, BBBY up 8%, PLCE up 7%, SKS up 6%, TJX up 6% while GME is getting spanked for cutting estimates with an 8.6% drop in sales - down 15% in pre-market trading

In Monday's 2010 Technical Outlook we predicted that we'd have a pop followed by two days of churn and today is the day we expected a 150-point drop.  We may escape that with the strong retail numbers but the macro picture is still questionable and anything less than a nice up day today will keep us bearish. 

As we have all month, we're looking for Dow 10,457, S&P 1,127, Nasdaq 2,242, NYSE 7,380 and Russell 630 to hold and we're looking for a full set of Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 to confirm a breakout, where we can get serious about making new highs.


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  1. Sears – up 15% pre market.  WOW!!  Over $102/share.

  2. Just reported on CNBS that the Euro Zone Retail #’s are the worst on record.  Are they a year behind us or are they smarter about spending than the US?

  3. ssdirk
    probably they just lie less

  4. Good morning!

    As I said in the above post:   We’re looking for Dow 10,457, S&P 1,127, Nasdaq 2,242, NYSE 7,380 and Russell 630 to hold and we’re looking for a full set of Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 to confirm a breakout, where we can get serious about making new highs.

    Interesting that we are still gapping down at the open despite all the "great" retail numbers but money seems to be moving into that sector with a little volume conviction (13M in 5 mins).

    Dollar back to 93 Yen and $1.434 to the Euro and $1.595 to the Pound so a little stronger but not too much.

    Copper is $3.47, silver is $18.21 and gold is $1,134 (stopped out on our futures shorts on the bounce off $1,128) and oil is still at $83 (but a short at that line) with Nat gas at $5.94.  The nat gas inventory is 10:30 and they’d better get a +200 Bcf draw or that’s going to fail. 

    Looks like I’m not the only guy who figured out COST numbers were bogus as they are dropping like a rock off the initial excitement.

    No great trading ideas right now, just watching and waiting to see where we’re going this morning.  Those EU levels are key to hold:  DAX 6,000, CAC 3,000, FTSE 5,500.

  5. Any advice = we bought AMZN Jan 130 call at 5.75 it’s been a painful could of days….what would you suggest?

  6. EU Retail/SS – They won’t go out and charge things when they have no money like we do. 

    And what Tcha said!

    So this is it – I’m not sure if I can stand to stay bearish if we don’t get a nice sell-off today.  Of course we don’t have to do EXACTLY the same thing as last year so we may not get a move down until Friday or even next week but we can’t afford to have Jan short positions at risk like that.  As I said above though – this is very good news today and there’s no excuse not to pop the highs today if they are going to do it at all. 

    ZION up another 3.5%, XHB up 3.5% but SRS holding up.  MA is down but COF and V are up with AXP flat.  TIF making new highs servicing the top 10%, BA STILL going up and they are now responsible for every single Dow point gained this week. 

    POT spiked but it’s getting expensive for them to try to get rid of us and that’s making me happy.  FCX is still pulling back nicely and USO is under control at the moment so all is well(ish).

    AMZN/Jim – You were long on AMZN?  Ouch.  We are short in general.  You still have $3.35 and you can roll to the Feb $140s at $5 and sell some other sucker the $130s or you can be more aggressive on the way down and sell the $125 calls for $6.50 but only if you are a very good momentum trader.   I’d go with the roll and sell as they SHOULD have very nice earnings but short-term, down is easier. 

  7. JRW – IWM testing the lower band and the 5dma.  A breakdown could get ugly. Taking a stab again with TZA.

  8. Phil – every index chart I have has them running into major resistance in a narrowing flag.  Something has to happen big one way or another.  I am hedging down.

  9. Phil,
    New entry on POT short play?

  10. Ohh. I like the action so far….down down down.

  11. Phil, If the sell-off continues this morning, are you looking for a bounce off 10,457 and thinking of selling DIA Jan puts when/if we get down around there?

  12. POT hit 123.89 which is very close to its dual dec highs of 123.86 and 124.1, and pulled back. we’ll see, but i increased the position with a tight stop above….

  13. JRW – Joining in the fun?  Took 1.5% profit out of TZA in 5 minutes.

  14. ss / TZA
    Igot in at 9:33; just trying to do a couple of things at once !

  15. Phil,
    Any knowledge of how many private wealth or other such clients GS has that would potentially follow their CL, outlook, etc.? I’m wondering if their impact is somehow quanitifiable?

  16. Phil if you are right and this is the 150 pt drop that you were looking for to mimic last year; what happened on Friday? More of the same or a bounce?

  17. ZION going nuts, that’s usually a good indicator the market is heading up.  XLF over $15 too so be careful not to get complacent but this might really be the day that the early stick fails as we’re up to 34M on the Dow at 10:12 so unless volume dries up to 5M per 15mins through 11, Mr. Stick may run out of firepower.

    Sector ETF weakness: Base Metals– DBB -1.7%. Biotech– BBH -1.4%. Basic Materials– XLB -1.3%. Gold Miners– GDX -1.3%. Internet– HHH -1.3%.

    Sector ETF strength: Homebuilders– XHB +2.9%. Healthcare Providers– IHF +0.6%.

    Dow laggards: AA -3.6%. MMM -1.1%. VZ -1.1%. MSFT -1.1%. INTC -1%.

    Dow leaders: BAC +1.2%. TRV +1%.

    Something/SS – I agree with that!

    POT/Pstas – I love selling the $125s at $2.50 but maybe you get $3 if you wait (assuming the stick works this morning). 

    Put sales/Judah – I was considering it but this is a weaker bounce than we had on Tuesday morning so far and Tuesday broke down after the bounce (painful though it was) so I’m thinking we see another leg down here and then we see. 

    Good call on those level tests yesterday Hanna!

    SOX leading us down at 1.25% already so we’ll watch that.  Transports down just 0.6% but the TRANQ was rejected at 2,000, just like we thought so, on the whole and to quote the great Palpatine:  "Everything is proceeding as I have foreseen."

  18. XLF still going up. I’m watching GS and BAC at this point.
    DECK finally snapped, heh heh.

  19. REITS trying to stage a recovery too. They are oversold (SPG down 7 consecutive days — yay!); so if they can’t bounce here it looks bad for them.
    I suspect they bounce though.

  20. Market Internals update at 10:30amET – NYSE volume 250M shares, about even to its three-month average; decliners lead advancers by 2 1:1. – NASDAQ volume 500M shares, about 2% above its three-month average; decliners lead advancers by 1.6:1. – VIX index +2% to just over 19.50

  21. POT breaking out.

  22. Actually, I just realized that that’s what the Emperor said right before he was killed and his Death Star was blown up so let’s continue to be cautious!

    GS/Ac – I don’t know the numbers but GS conviction buys are usually good for a 2-day run in the stock and then it’s a good time to short. 

    BA still going up, NOC doing well, DNDN making new highs, ZION now up 7.5% today.  BDK having yet another great day – that should mean HD and LOW are doing well (assuming the BDK buyers aren’t nuts).

    Drop/EMC – Trading day 3 of Jan was breakdown day and we went down and down from there, pretty much all the way to the March lows.   For our purposes, I’d be taking money and running at 10,400ish.

    Nat gas inventories was only a 153Bcf draw – that is not very exciting.  We’ll see if they can hold $6 but I don’t think so.

    BAC/Eric – They got a circle-jerk upgrade from CS today.

    Ideally, I’d like to see the Dow not break 10,550 as that’s a nice downward channel on the 10-minute chart but it does look like they’re going to squeeze through and then 10,564 is the real point of resistance.  Voluem at 10:33 is 43M though so a bit hot for the stick man but we have to assume there was a legitimate surge of buyers plowing into retail stocks and LEN gave a nice boost to the builders (I still like HOV long-term).

    POT going for it again, the $125 calls can now be sold for $3.30, maybe $3.60 if they touch $125.

  23. yup, POT made a new 52 week high. will be very careful if they break 125 or maintain 124 for long…although the 125 calls that phils suggesting look tempting. but then, i thought the 120 calls looked great yesterday. <sigh>

  24. ss
    64.08 on IWM, that’s the lower level of the channel, they didn’t futures over it and they didn’t jam it at the open; now, with an hour gone ( and the usual sellers ), they need to get back there or they’ve got problems. But this is NOT 2008, no 500 point drops any more just be happy with 3-6% a day.

  25. I’m looking at writing naked puts on these 3-6 months out, ideally at the bottom of a correction to possibly take possession and write calls against or as an intiial scale-in. Please tell me what you think of them or other trade ideas related to them: ALB, PM, LRCX, SPR. Thanks.

  26. I have some 120 POT Call shorts @ 3.80, should I roll them up to the Feb 130′s soon (today) as it looks like POT is taking off?  Is there a general strategy for when to roll.  Thanks

  27. JRW – I have an upper channel resistance going back to late Sept and mid Oct and testing it now at 64.08.  I also have a narrowing flag with the upper channel of resistance going back to 11/16 and 12/28, and the lower channel of support on the flag going back to 11/30, 12/13 and being tested now along with the 5dma.  So, with all of these I have support at 63.50 and resistance at 64.08.  Is that what you see?

  28. Wow, up 90 points off the low in 45 mins – no matter how many times I see them do that I’m still amazed! 

    POT – If you are scaling in, then rolling the $6.70 $120 caller to 2x the $3.70 $125 caller is a good move.  You can also hedge by selling 1x the $125 puts, now $3.30 with a stop at $3.50 as that provides a nice buffer

    POT/Thelern – The $120s have $1.50 in premium and I’d hang tough if you can’t do the 2x roll up.  This is the same depseration attack of the upper levels as yesterday and if they fail it again that will be 4 times this week.  Of course they may finally break over and THEN it’s time to roll!

  29. ss
    4% the fist half hour, 3% so far on TNA ( predictable ) We’ll see from here, but they WILL try !!

  30. Buying DIA 105 Jan10 P for 66c.  They ain’t gonna make it…..

  31. What do you think about selling BAC Jan 17.5 calls (~.15) against a substantial long stock position??

  32. Phil,
    Sorry about all the brief posts but I am being more responsible and thoughtful in my portfolio management. :-)   I am still in DIA Mar 106p as disaster hedge. If we break higher, do I close those out at the break and reset at a higher strike after some upward movement, ideally? Thx.

  33. JRW – I see maybe 2 more days before the flag is closed.  Then what?????

  34. ace – roll up the the 107 or 108s for 50c or $1.  I am naked the 107s now. if you are worried about the break up, sell 1/2 the 105 febs for 2.1.

  35. …and sell Jan 106p for momentum trade?!  8-)

  36. Naked puts/AC – At the top of a rally with a low VIX is not the best time to be writing naked puts.  Of the 4, I like PM and LRCX best for that strategy as they both have reasonable support below them but, on the whole, you are so much better off just tracking stocks you want to sell puts to and then waiting for them to go on sale.  If you catch them on a big market drop, you might also catch the VIX on the way up and get better premiums too.

    MOS making 52-week highs (and they missed earnings!), DKS too. 

    How am I supposed to listen to anything the guy on CNBC says after he talks about the BOJ wanting $95 to each Yen?  Clearly he doesn’t understand the subject matter at all so why should I believe anything he says?

    11am Dow volume just 55M after all that work – right back to program trading norms.  Keep in mind all this action is off a good jobs report and FANTASTIC retail news.  I’d hate to see what happens if we ever get bad news….

    BAC/Hanna – Well it can’t hurt you as you can only get called away and it’s good to sell into the excitement so I do like it.

    Posts/Ac – That’s fine.  The DIAs, if they are a true hedge and not a bet on the Dow going down, are insurance and I think I said yesterday the move is to roll over to the June $107 puts for $2.80 and sell 1/2 the Feb $105s for $2.06, and now your goal is to collect $6 from putters over the next 6 months.

  37. JRW – Back on TZA for another ride up hopefully.

  38. ss / Flag
    As I said in my 12:05 post yesterday, these formations tend to resolve to the downside.

  39. ss/when to double down for short strangle question yesterday,
    This is a good topic for discussion.  There are 2 common types of doubling down for short strangles:
    1- Adding a short strangle without touching the old spread.  An example is on 10/30/2009 where the market has drop 7% in a few days and VIX spiked.  We were in the Nov 925, 950 and 975 short PUT at that time, and the 950 putters went from $2.3 on 10/23 (normal value) to $7.3 a week later.  The 950 was still 7-8% OTM and there were only 3 weeks to expiration, signaling a clear case for doubling down at the 950 strike.  By 11/10/2009, the 950 putters were down to $0.43.  A big win, and why we have cash on the sideline for such occasions.
    2- Moving the short strangle to a different strike with 2X the shorts.  Say if you have a SPX Feb 1180 short CALL ($7.6) and feel that you need more upside cushion and want to roll to the SPX Feb 1200 short CALL ($3.75).   This can be achieved by rolling 1X Feb 1180 to 2X Feb 1200 so that the net cost is approximately zero.  This would double the margin and use up the reserve.  Since you think the market is going up, the Feb 950 short PUT can be roll higher to 990 or 1000 to give $1 to $1.5 credit and the new putters in the second spread is at the 990 or 1000 strike.  In theory, this doubling down reduces the chance of loosing on the upside.  This is an example, not a recommendation for a trade. 
    Note that the usual escape route is to roll out a month, Feb 1180 callers can be rolled to Mar 1205 or 1210 for even (affectively not increasing the margin requirement).  The closer to the money, the less you can roll.  We currently have Feb 1210 to 1225 callers, so no worries.  The Feb 1210 callers can be rolled to Mar 1245 callers for even as of today.

  40. AMZN just below the 50 dMA. I know it has an impossible P/E & valuation, but perhaps this is a good entry point if you think it continues up – at least till the next earnings announcement. Chart is sure nice.

    Can someone suggest a bullish options spread…

  41. Phil — what do you think of Pharm’s call to buy the DIA Jan 105 puts?  If today’s the best that can happen with great news, then perhaps we see the same thing tomorrow with good news, but a serious slide down if there’s bad news?

  42. I’m not seeing this morning as selling an good news. We followed the global markets down on the China stimulus contraction and then promptly bounced.   We’re incredibly overbought, but I don’t see any change in sentiment.

  43. DIA/AC – Very risky as we’re up here but the dollar is on a roll ($1.59 to the Pound, $1.43 Euro and 93 Yen) so other things may start snapping soon so – yes, I like the DIA $106 puts at $1.08.  Oops, I just realized you want to do it the other way – no to that!

    AMZN/M2 – If you want to play them bullish you can start by selling the Feb $120 puts at $4.40.  Otherwise you can sell 3 Feb $130s for $8.65 against 5 Apr $135s at $9.50 for a net $7.18 per long so pretty well protected down, a winner flat and easy to roll callers up if they head higher.

    DIA/JCM – I agree with Pharm but (see above) I like the $106 puts better as they are slighly in the money and have a better delta.

    Boeing’s (BA +2.9%) gross plane orders slipped 61% last year, to 263 planes, with carriers re-evaluating their fleets. Net orders were 142 planes after cancellations. Deliveries – more closely tied to immediate financial performance – were in line, at 481 planes (up 28% Y/Y).

    The Treasury sets $44B in longer-term note sales, including $21B in 10-year notes (Wednesday), $10B in 10-year TIPS (Monday) and $13B in 30-year bonds (next Thursday).

    The Fed buys $950M in agency debt with maturities from 2016-2032, bringing cumulative purchases to $160.858B of its planned $175B. Dealers submitted $3.169B for consideration.

    GE having a nice day. 

  44. Have to say, i dont really understand this market. Strong selling early followed by a rapid move to near flat, and then drifting….while the Nas is drifting slightly lower, the Dow & S&P are drifting flatish. Financials seem to be strong. i’m 80% cash, and seem to be staying that way until we can find some conviction…however, those DIA puts seem appealing if we break down again…

  45. Very good timing Pharm!

    Wheee again!

  46. JRW, looking at the strong dollar, your TZA trade would have a big chance of winning today. 

  47. I meant if we got a clean break up for the 106′s…

  48. Man GOOG just can’t catch a bid.

  49. ss / Flag
    Actually, we broke the lower line on Tue, closed below it on Wed, and haven’t yet gotten over it today; if this were a " free market " we would be all in TZA right now !!

  50. Peter – Great!  That’s what I needed.  Do you use a rule of thumb or a gut feel about when to roll out to the next month?  For example, I had the Jan 650/530 RUT strangle.  When RUT got to 640 on Tues I rolled to Feb 680.  It was a little to close for comfort for me after seeing it run up 35 points in a week.  I will now use this Feb 680 as the beginning of my Feb strangle.

  51. GOOG is coming into some support though; maybe worth a gamble if it gets down to 590-area.

  52. EricL,
    I agree with your read about the initial drop and bounce. I think the question is what to read into the Chinese announcement. I think the stimulus contraction is good long term for China, especially if it pops the growing asset bubbles there, but bad short to medium term for global markets, considering how much everyone’s been looking to China to lead the rest of the world out of this mess.

  53. chuaeu,  yeah, it seems like that has to hit commodities near-term, which is why the moves in ags, crude, etc. this morning are frustrating. I think it’s just a shake-out of the shorts, though.

  54. Peter D
    I’m currently in TNA ( since 10:25 ), thinking  " they " will try for 64.08 or even 64.45 before the fall.

  55. Thx Phil – that’s the TAer in me!  8)

  56. We may just flat line here waiting for the coin flip on unemployement tomorrow.

  57. ss, how much margin you have dictates when the shorts need to move.  If we have a small position and have enough cushion and believe in a reverse (so that it moves out of the money), then we don’t need to move until the Expiration week.  If you have margin issues, then you’d need to move to avoid the margin call.
    JRW, man, you are a real trader.  It’s hard for most people to swing $800,000 roundtrip a few times a day!   TNA/TZA are not bad as they are volatile, so the odds is in your favor with day trading.  Have fun!

  58. Phil
    Got a question…. Do you have a seatbelt on your chair? I hear WHEEEEEE and I get concerned.

  59. GS going straight up.

  60. The rolling short squeeze continues.  Today its financials and select retail.
    Not all was so good in retail land.  TGT was fair.  ANF was a disaster. 
    COF still a great short here; but very challenging today given that HAL9000 has control for the moment.
    But look what happened to SNDK.  jammed from 29 to $32 yesterday; today; back to almost 30.
    same should happen to COF, just prob not today.  good entry here IMO.  could also sell 42 or 43 calls.

  61. NPR just noted that employment was a bit worse than past months, but only by 1000 or so.  It’s gonna give them pause, then this market is gonna pop – UP.  They want so badly to move us over 10600.

  62. Looks like we’re heading up for now…BAC doing great.

  63. Tech getting hammered.  REITs were down early; now up.  SPG up $2 from lows.   That’s enough of a bounce if you ask me !

  64. Phil -
    How important do you think the jobs number will be – I am really hoping that good numbers are already baked in here but kind of worried if we get a very good number.
    Any thoughts now on a disaster plan for our shorts if we get a great number and a surge upward -
    I know our longs should more than make up for it – but anything we can do besides putting on covers?
    Thanks Sam

  65. Markets/Hanna – Totally irrational at the moment.  Nas is near lows, Dow and S&P near highs – it doesn’t even make sense…

    DIA/AC – If we go over 10,600 then sure as you can use that as a stopping point. 

    GOOG – Lots of concern they Zune-up their smart phone.  AMZN’s stroke of genius with the Kindle was to let it catch on quietly, without much hype.  That way people were upside surprised every step of the way.  When you do major rollouts like this, they pick it to death before it gets out the door. 

    Flat line/SS – Very frustrating, especially in a short expiration period.

    Government deficits have caused the U.S. savings rate to turn negative for the first time since the Great Depression. And the gap is widening, even as households and companies put away more money than ever before. (Bloomberg)

    After hitting a four-month high to close out 2009, bullish investor sentiment pulled back substantially, to 41% from 49.2%, according to AAII. Neutral sentiment gained 5.1 points to 33% and bearish sentiment 3 points to 26%. But allocations: still 64% in stocks and equity funds (a two-year high) vs. 18% in bonds/bond funds and 18% in cash.

    Seatbelt/Gel – I prefer the air bags. 

    XLF flying up to $15.25, BAC and ZION leading us up, C not participating.  Oil pesky at $83 but gold can’t get back over $1,134. 

    GS has been hot since Whitney downgrade. 

    S&P has been a reliable futures short at 1,135.

  66. Hi Phil,
    BAC is on fire C not a penny any comments ?

  67. you would think w/ aapl, rimm, goog, amzn, bidu, etc. down, we might have a weaker market.
    meanwhile crap retail, homebuilder and financials are flying

  68. why is cre up like crazy? SRS down and SPG up up up

  69. Jobs/Samz – I think it will be an excuse for the bulls to pop us up if it shows we added jobs and a reason to sell if we lose more than 50,000 but not much in between, which is the likely range.  It’s more important to see number of hours worked go up than jobs at the moment as that indicates pending labor demand.   If we’re holding up here today I’d say cover to neutral tomorrow, as it’s just not worth the risk

    C/Yodi – Well they had a nice run alreayd and money flow is being directed at sexier bets.   C will always be there to invest in but BAC and ZION may get away from people.

    Weak/Cap – We had our weak market, it lasted for about 8 minutes this morning and bears need to take any profits off the table right away in this crazy market.  They have the day traders trained now to pile in on any dip, which makes it very, very hard to get a good sell-off going.

    CRE/Foss - I think the Fed outlook on CRE was so bad yesterday that they are assuming the government will be bailing them out. 

  70. My pick for the MSFT acquisition (GME) was really hammered today – had to 3X my position to make it look good. Ballmer should make his play today, but what the hell does he know about timing?

  71. Hi Phil,
    Holding FSLR Jan 130c short sold @6.71 now 13.00 100p sold @ 4.11 now .24 thinking of rolling to Feb 150c and 125p debit 3.32 or to Mar same position for a crdit of 2.70 your thought pls tks

  72. VVUS gets a boost literally for its ED drug that works well.  Also their weigh loss drug helps with sleep apnea (duh)…..Lose weight, less issues on the ol’ esophogeal muscles….my oh my.  OREX is falling back down, ARNA is holding its 3.5 level.
    Still trying to get VIAP for 15c……

  73. CRE may be up w/ financials, plus malls on so called good retail sales; plus due for a bit of a bounce

  74. Phil-
    What kind of jobs numbers do you anticipate for tomorrow?  I saw the private employment estimates at -85K, but with govt jobs included that would move up.  Could the markets be waiting for that or is the current stalemate completely incomprehensible?

  75. Gov’t hired a ton of people for the census.  I would expect it to be better…as that will goose the markets, then they will revise it a day or two later as they have for the past 6 mo or so.

  76. Phil,
    I have DIA Jan 105 puts @ avg $.77 – so, looking to cover over night in anticipation of the jobs report- "neutral" – sell the 106puts to delta even?
    Also, I am naked Mar 107′s on the DIA mattress- what do you suggest? sell Jan 106 or go to Feb?

  77. Peter D
    I am looking at IWM a good candidate for a strangle. I believe the small caps might have a better performance than the S & P over the next 12 months, so I am bullish looking forward. Do you have a suggestion as to dates and strikes?

  78. Crox. Though I learned long ago not to fall in love with a stock, I sure do have a fondness for all the money I made playing Crox over the past year.  Up nicely again today. 

  79. GME/Gel – I don’t see MSFT doing that as they may piss off other outlets. 

    FSLR/Yodi – If you move back you are strangling them into earnings – very dangerous (maybe it’s March though).   This is not a stock I’d play this game (naked put and call selling) with, especially in the mdidle of a range like this.  If you are going to roll, just try to go as wide as poossible, perhaps the March $120 puts at $5.70 and the March $155 calls at $7.10 so about an even roll with a wider spread at least. 

    Malls/Cap – Yeah but the actual capacity numbers suck and then there’s delinquencies…

    Jobs/Jtiff – It all depends on what seasonal adjustment and birth/death figure they use but flat is baked into the cake and I don’t think "THEY" are going to let the jobs number blow it.  Pharm is right as loads of census hiring should have helped. 

    DIA/Pstas – Yes to the $106 puts as a cover but a 2/3 cover so you don’t get buried in delta, just go for about the same dollar amount, not the same # of contracts.  Of course if we get a nice sell-off into the close then nothing wrong with cash either!

    CROX/Judah – I like them too, they will be bought at some point.

    Er – Wheeeee!

  80. What’s our current thought on oil and the USO Jan 40 puts we bought a couple daze ago.

  81. Phil / Non-farm payrolls:
    It seems inevitable that the powers that be will get a positive NFP number tomorrow. Back on Dec 4th, when the number beat expectations (at -11k I think), it was a key catalyst for expectations of faster interest rate rises. Big winners from early Dec have been UUP (dollar) and TBT (interest rates). I’m already playing both of these in spreads longer term, but just wondering if you have a fun spread with January expiries which you like for UUP and TBT.
    And just my opinion on things for what it’s worth:  If rate expectations do spike up on a good NFP number, ironically this news could be ‘too good’ for the market, and could trigger that sell-off you’ve been waiting for. The whole run in commodities and stocks in the last few months is this ridiculous ‘Goldilocks’ idea, that muddling along is better than actually recovering and getting to normalised interest rates…

  82. Phil
    about CROX, I hold buy/write and my calls & puts are Jan$5, what your recommendation? roll them? or just let to call away and wait till it will go lower?

  83. Phil, with just 12 days left till expiration, you can buy vix 20 puts, which are >$1 in the money for ~ $0.50!  Somebody knows something.  I am thinking about buying the 20s and selling the 19s for $0.30 as a bullish hedge…  Thoughts?

  84. Again, if we are in a recovery, WSBC should explode upward.  They just repurchased their TARP shares….

  85. No options though….

  86. Phil/Crox. I got into them near their lows in a flukey way.  I was following a patent case they lost at the ITC, which they appealed.  I think their patents are pretty strong as these things go and that they had a good chance to win the appeal and thereby to block the import of the cheap knock-offs selling at the big box retailers.  So, I started buying calls last Spring soon after the ex-Reebok guy started.  (I’m a big believer that CEOs can make a real difference.)  The case is still pending (these things move glacially slowly) and I’m no longer sure a win at court will have much of an impact on the stock price.  But it is nice to be lucky once in a while.

  87.  INTC Jan ’11 10s have only .02 in premium! 

  88. 52 week lows on NYSE – DUG, SDS, SH, EDZ, EEV, etch. All Ultrashorts of some form or another.  Gotta love that.

  89. Phil
    when you buy DIA $106 Puts ( 100k) do you use any kind of stops?

  90. Phil,
    I bought the DIA Jan $103 puts a few days ago when you said they were cheap, at $0.44.  Now they are $0.22.  If you were me; would you just sell them and take the loss, wait for the crash to come later today or tomorrow, or would you have another strategy to recover losses?  Help!

  91.  deano, the only problem is that you are tying up close to 10k!  i would rather buy the 17.5′s 2012 for 4.65 – you have 24 months to work off premium, 29 seems to be the floor for intc.

  92.  sorry i meant 19 is the floor

  93. I think we mentioned this weirdness before, but the VIX Jan 20 puts are .50 with VIX at 19.

  94. Phil/GME
    I see MSFT trying to replicate the AAPL success in controlling their own destiny through their own stores. AAPL has 250 stores at present, and they are really elevating the Apple brand, because the in store employees are well trained and they showcase the products well. It would take MSFT too long to build one store at a time to catch up. The logical move for them is to buy a laggard chain (over 5000 stores) of which 4100 are in the US, balance in Canada and Europe. The key here is time and the prime locations that GME have at present. Also… a great time to re-negotiate long term leases. I understand MSFT has hired a WMT big guy to put them into retail. The success of the AAPL model is easy to follow if you have not too much creativity and slow to make decisions, which fits the MSFT historical performance. My theory is a "crapshoot", but I need at least one in my portfolio to make it fun.

  95. FNSR – now that is a chart.  One HUGE gap up and another smaller.   Anyone understand the business of FNSR?

  96. ERNST – roll them up to Phil’s new 106 DIAs 2 (103s) to 1 (106s) for now (meaning you will have to lay a bit more money out).  You should be able to recoup at least 1/2 your loss if not more on a 30 pt move down. CHarts look toppy here again.

  97. GENZ – Doing well. Thanks for the initial idea Pharmboy.
    Anyone long GENZ selling already or waiting for more upside? I think it will reach 52-55 today/tomorrow (5-10% more from here). I am long with Apr 45 Calls and also sold Feb $47.50 Puts

  98. DLB:
    I have 100 shares that I bought at 30.70 (now 50.33) and I sold short the Feb 45 Call at 4.04 (now 6.2).  I would like to somehow save the stock profit and get out from under the short call.  Any suggestions?

  99. GENZ has a gap to fill up to 55, so yes, they are moving.  As I noted yesterday, any good news on them and they are off to 60.

  100. Rich,  yeah, since the VIX is European style the put holders can’t request assignment; so it’s just market valuation. Furthermore, the 20 calls are way higher at 1.35, so a huge put-call disparity but, sadly, no way to arb it since there is no underlying to buy since it’s also cash settled.
    Nice example of how different option trading would be if it weren’t U.S.-style contracts.

  101. Phil,
    Do you know if goog is reporting before jan expiry??

  102. HBSC finally broke its chart pattern as well.  Nice. 

  103. USO/Humvee – I’d give up except the dollar is strong so I’m giving them another day.  Good jobs numbers should push the dollar to a new high and hopefully knock commodities down a bit. 

    NFP/Never – Yes but we tumbled that week and the next.  I wouldn’t play UUP or TBT that short, there’s too many crazy factors that can hit them with only a week late.  More money is coming out of bonds today but TBT went lower and UUP is underperforming the dollar’s move.  We can hope for a breakout but I wouldn’t pay premium expecting it.   I agree with your assessment as right now corporate America is loving the high unemployment that’s keeping wages ultra- low while they slash costs and even the unions are rolling over and playing dead while they cut benefits – Goldilocks indeed!

    The central bank shouldn’t wait too long to raise rates, says Kansas City Fed President Thomas Hoenig (who’s rotating in to the rate-setting Open Market Committee this month). He expects strong GDP growth and calls for a Fed Funds rate between 3.5% and 4.5%.

    Treasurys are mostly flat ahead of a new round of auctions next week; the two-year yield is +0.02 to 1.02%. Meanwhile, the dollar can’t lose today: +1% against yen, +0.6% against euro, +0.5% against pound, +0.6% against Swiss franc, +0.4% against loonie, +0.2% against Aussie dollar.

    CROX/Tcha – You can roll them along to the March $6 or $7 puts and calls so no hurry as they are good protection right now. 

    SHLD with a hell of a sell-off after the morning excitement. 

    12 days/Bill – Actually I think next Friday is expiration day.  That happens to the VIX sometimes, it’s very strange.  I very much like the risk/reward on that play, especially as it’s $1.06 in the money already!

    Really strange today:  Nas down 0.3%, Transports down 0.5%, SOX down 1.25%, other indexes flat.  When you consider what a great day retail and builders and banks are having – this is NOT a good day.

    INTC/Deano – Nice way to get in at 1/2 price.  Lots of negative press on INTC being obsolete in the new smart-phone era, which is silly.

    DIA/Tcha – Probably out at EOD either way, 10,600 is my stop.

    $103s/Ernest – I’d give it another day.  The $102 puts are .15 so .07 loss if we break up 100 and, of course, we think 10,600 will not go easily and the $104 puts are .39, so we just hope for that 100-point drop and get the hell out.   If you want to get fancy you can roll back to the Feb $103s at $1.35 and sell the $102 puts for $1.12 (net .23) as a more or less even roll that buys you a month but the vertical means you need a drop all the way to 10,200 to fully collect.

    Sector ETF strength: Commercial Banks– KBE +3.6%. Homebuilders– XHB +3.5%. Regional Banks– KRE +3%.  Financials– XLF +1.8%. Healthcare Providers– IHF +1.7%.
    Sector ETF weakness: Internet– HHH -1.8%. Commodities– DBC -1%. Steel– SLX -1%. Basic Materials– XLB -0.9%. Semis– SMH -0.8%.

    Dow leaders: GE +5.2%. BAC +3.5%. BA +3.5%. TRV +1.7%.
    Dow laggards: AA -3.1%. INTC -1.7%. MSFT -1.2%. JNJ -0.9%.

    GME/Gel – I agree if you begin with the assumption that stores are the way to go but AAPL got de-emphasized in retailers like BBY since they opened their own stores and, while it’s working for them, it’s a very big risk for MSFT to piss off their vendors.  Don’t forget how many people they try to please with their XBox sales and Zune and Phone apps and operating system and software programs.   I can see them doing it because Ballmer hasn’t had an original idea since High School but more likely they are going to go AAPL’s way entirely as trying to transform 5,000 GME locations would be a futile exercise.  Another issue is MSFT has $58Bn in sales and makes $14Bn (24%) while GME has $8Bn in sales and makes $300M (4%) which would drag all of MSFTs profit margin down to 21.6% and they work VERY hard to keep that number up and that’s not even counting acquisition costs. 

    GOOG/Harip – They usually do but this Jan exp is so soon I don’t know that they’ll have time.  No announcement yet means I doubt they hit it next Friday.   All I see officially reporting next Friday is JPM in the morning and Thurs night is INTC and SHFL.


  104. GSK and VZ are below their lower Bollinger Bands.  If you like good paying dividends, selling a FEW P here could start a nice entry, although they may have a bit further to fall, so start small.

  105. Gel – GME downgraded by GS

  106. I am having to close a lot of long term puts with the low vix and slow bleed up in the market.  Just bought back a bunch of BAC 2011 15 puts for a nice 50% gain.  Hoping for a drop to reload.

  107. long RTH puts in $100KP – Hi, Phil, are we going to roll or do something or keep waiting?

  108. Jomama – Aside from RUT strangles and a few day trades, I have been waiting a long, looong, looooong time for a market drop to sell puts to start buy/writes.  It just has not come.

  109. Phil – you would think that the Mar DIA 107 roll to 108 should be easy to do for 50c now.  For the past week on this grind up, the spread has not changed 55-60c.  Not sure what that is due to, but it does not add up for me.  Every time I put my roll in, the MM moves it a nickle.  Has happened over and over again for the past week.

  110. actually GME news makes one look at ATVI which is on our buy list, time for an entry?

  111. OK, now this is officially frustrating.  It’s too weak to be bullish but to strong to stay bearish against.  This is one full week of trying to break up with no success and it is very rare that the 5th day is the one that makes it.  As a rule of thumb, once you fail 3 days you need a pullback to gather strength but, unlike any normal time, we are still operating on historically low volumes so anything can happen.  

    Copper is down to $3.425, silver is up to $18.35, Gold is STILL $1,133, Oil is $82.84 and Nat gas is $5.79 so a lot of damage there today. 

    XLF is $15.30, XOM still not over $70.  Volume at 2:15 is 130M, 140M at 3 is stickable but not to break new levels.  They need news for that. 

    S&P back at 1,135 for a futures short! 

  112. ssdirk,  yeah – i may have to get a little more bullish and sell the bac 17.5 puts – may be the 2012′s for 4 – if the market stays up and the vix stays down.  I have uncovered bac leaps – can’t bring myself to sell against them for the moment, probably will during earnings run up.

  113. I’ve got a great idea: let’s sell all our tech stocks and use the money to buy banks!

  114. ssdirk, i had to even sell my vlo common shares in my ira as well as my puts in my brokerage account.  Just waiting.  VZ is coming down to my buy zone. 

  115. RTH/Cwan – I’m going for it into tomorrow but then everything must roll or cash out. 

    Roll/Pharm – It’s a function of demand, no one is willing to capitulate and save you a nickel, that’s a good sign really as we have bears with conviction out there. 

    ATVI/Steve – Let’s give the downgrade police a chance to come in tomorrow but $10.50 is VERY attractive for them

    Buy banks/Eric – I agree with that play at these prices.

  116. Market Internals update at 2:00pmET – NYSE volume 675M shares, about 5% above its three-month average; decliners lead advancers by 1 1:1. – NASDAQ volume 1.45B shares, about 10% above its three-month average; decliners lead advancers by 1.1:1. – VIX index -1% to just under 19.00

  117. phil,
    looks like the manipulators are using goog’s drop to attack aapl stock. it steps down in lock step with goog with about 10 second lag. who in the hell comes up with these bot programs and what kind of market just sits there and follows along. by all logic aapl should be moving in the opposite direction after goog’s limp android intro done by (i presume) techies with  one guy barley registering on the life support monotor and the other who litterally could not speak english. 

  118. Jomama – VZ is the one I did sell puts on yesterday.  Will add more with a bigger pullback.  VLO I bought back my Jan puts sold on Tues when they were .05.  Didn’t want to chance it.  And I do have some sold AAPL Apr 180 puts.

  119. I don’t see it for banks Phil, unless you’re playing it for momentum, and with an exception for the banks with trading desks like GS, JPM (I’m long those two). I think the regionals may be in worse shape than ever.

  120. Phil
    When you look at a chart of last year’s first week the market was already in a serious downdraft since 5/08, so the trend was down.  Dec of 08 was an uptrending month but still clearly within a downtrend.  Now the market trend has been up since March so I’m not sure the comparison can be trusted.  Now with the bank index breaking out its seeming more likely these indexes are going higher, at least that’s my gut feel.

  121. phil,
    crammer on hyping banks! is he a member here incognito. come on jim, tell us what your handle is!!!

  122. BA still going up.  COF too!  ZION is like the energizer bunny. 

    X back over $60, PNC very strong,

    GOOG/High – You are right, there’s no threat there and even less threat from MSFT and HPQ with their "Slate PC" unless AAPL manages to make something just as lame. 

    Here we go again – JPM, AXP, X pushing higher.  Cramer herding people into HBAN after it’s up 10% today and SHLD, also up 10%. 

    10,599 – sheesh!  Watching for RUT 640 and Nas 3,000 (not even there anymore) with NYSE right on goal and SPX at 1,140. 

    V turning it around, MA coming on strong. 

    Volume 137M, that’s 7M in 20 minutes but it was good for 30 Dow points.

  123.  gel1…is GME good for a about Feb 24s??

  124. gme at PE of 10 seems like a compelling value, GS just downgraded it;  time to back up the truck and load up?

  125. Banks/Eric – IF the economy is recovering, how can they lose?  They borrow at zero, lever is 10x and lend it for 5% – you have to be quite the moron to not make money with that scam.  Oh yes, and they get 1% origination fees too (x10).  As long as the government is letting them sweep their troubles under the rug and mark their assets to BS – then it doesn’t matter how many bad loans they have.  That $10M building loan that defaulted because the guy couldn’t cover his mortgage payment defaults and drops a building "worth" $15M onto their books where they can claim it as an asset and lever up another $150M worth of loans.   The government hopes they make enough money on loans to offset the eventual write-downs but, if not, then it’s bailout time again….

    Greater transparency and more centralized clearing are needed to reduce risk in the $450T OTC derivatives market, NY Fed says in a report. "Although OTC derivatives were not a central cause of the crisis, the complexity and limited transparency of the market reinforced the potential for excessive risk-taking, as regulators did not have a clear view into how OTC derivatives were being used."  Tick, tick, tick

    Is this a green shoot?  Positive trends in rail data – including breadth in commodity groups getting stronger – still point to a weak recovery, as carloads that are down 1.5% Y/Y are down 17.9% from pre-crisis numbers.

  126. Hi Phil, I had bought BAC 2011 $20 puts in the old $100KP for $5.8. What should I do with it?

  127. Big/GME
    Can’t say they will bounce, but the drop was way big. All of my plays on them are Jan ’11, as I believe they were really hit by the economy weakness. A lot of their stuff is discretionary purchases. My Jan ’11 strike is $25 of which some are long calls and the balance short puts sold to pay for the calls. My feeling is they should be able to recover to this strike in this time frame, meanwhile I can sit to see if my prediction plays out.

  128. Phil, I agree that’s the plan for the major banks, but also the regionals? We know what’s on their books and the ugliness is starting to hit for them. Political resistance to another round of bailouts, especially for CRE-impacted regional banks, may be heavy. But then, we can’t put it past them — maybe today’s buyers know something.

  129. Breakout or fakeout for the SPX? I think the Nas holds the key here.

  130. How’s about we follow up the first "Too Big to Fail" bailout with a second "Too Full of Crap to Dump" handout?

  131. Please tell me this is the blow off top.

  132. Just seven days into the new year, pump prices have surged past 2009 highs as winter storms and a flood of speculative money send oil prices higher.  With the average gallon of gas is now a shade under $2.71, a typical motorist using 50 gallons of fuel a month will pay about $135 a month to fuel up. Last year at this time consumers were paying only about $85 per month.

    Interesting that FXP is still up strong.

    BAC/Jlui – Bought puts?  I don’t know that one.  What did we buy 2011 $20 puts for?  I’m pretty sure we were bullish on BAC only.  Was it part of a combo?

    Banks/Eric – Looking at what’s going on lately, I have to assume any and all efforts are being made at all times to prop up the banks, the markets, the statistics….  You would think we are in some golden age of prosperity the way things are going.  Maybe we are, maybe I’m just old and cynical because when I see LEN lose $250M but show a gain due to previous tax write-offs due to Billions in other losses – I don’t consider that a reason to take them up 12%.

    SPX/Eric – Super tempting to get back into the futures puts up here (1,138) but I couldn’t sleep on it. 

    Blow-off/SS – It’s a blow top off the way Mount St. Helens was so far….

    Intel (INTC) unveils a flurry of 32-nanometer circuit chips for notebooks and desktops, more than a year ahead of rival AMD’s (AMD) planned release. "The juggernaut is rolling on, if you will," analyst David Kanter says. "This is where they already have a lead over AMD."



  133. The internals on the market are odd. You notice how for the first time since summer we’ve had financial leadership?….and a lot of the usual leaders (tech included) are lagging. I have no idea what this means, or portends. However, BAC is too hot to let go of now.
    Meanwhile, POT is floating after the morning run up.
    Also, i’m starting to think this market will never drop. Although i usually start feeling that way right before it does drop (i usually capitulate with the last bears standing).

  134. hanna, agreed, very strange. We’re getting reading for a big move in *some* direction, I think.
    Qs going back to the day’s lows now.

  135. Wheee, it’s like playing chutes and ladders! 

  136. JRW – 64.08 on the button.

  137. Hmmmmm, IWM, from 63.24 to 64.08; who would have guessed ?

  138. Now this is the way I remember it….violent and everyone is swinging away.  Where’s the last punch gonna land?

  139. Phil, the BAC 2011$ 20 puts was bought in a combo with 2011 $10 calls in the old $100KP. Should I now just close out the $20 putters?

  140. Our Sonic shares and puts (sold the calls); we just hold for long term now?

  141. StevenParker/GME
    Downgrade by GS…. that makes sense as they are probably working with MSFT on the acquisition and needed to get the stock price down prior to the offer. I know these people are market manipulators, so why not?

  142. JRW – MONEY

  143. Pharboy / GENZ longs,
    GENZ – Did you sell your long or waiting for the $55 gap-fill / Icahn proxy fight news to make it go higher?

  144. Time for me to take my lumps, step back battered and badly bruised, and reassess WTF is going on.

  145. 30 yr T bond looks like it’s going to flip to positive soon

  146. Hi there,
    I have been on the sidelines for a while but now its time to join your great discussion.
    Phil, I need your advice: I am short on FAS Jan 74 calls. Sold them at $3.90, now $12.60 The action in financials the last three days has put me in the whole quite  bit, especially today. What can be done to make this position saver? Should I roll now?

  147. In regards to interest rate, not price…..

  148. ss
    Thanks, I hope you got a piece !

  149. JRW – When I saw you were in TNA I got out of TZA, but not in TNA.  I promise there will be a next time.

  150. The Fed and other regulators have warned U.S. banks to guard against rising interest rates.

    From the NYTimes, pretty much what I said about the top 10% economy – Luxury stores do well, stores catering to middle classs sucking wind:

    Despite the good news, retailing analysts are concerned that against a backdrop of high unemployment, consumers could go into hiding again now that the holidays are over.

    Indeed, analysts at Thomson Reuters have noted in recent months that consumers are still holding fast to their discretionary dollars, and they cited as an example the weak numbers posted by many stores that cater to teenagers. That sector fared the worst in December, posting a 2.5 percent same-store sales decline.

    Same-store sales fell at Abercrombie & Fitch (down 19 percent), Hot Topic (down 10.9 percent), American Apparel (down 5 percent), Wet Seal (down 4.6 percent), and Limited Brands, which owns chains like Victoria’s Secret and Bath & Body Works (down 2 percent).

    The declines were not across the entire teenage clothing category, though. Sales increased at Aeropostale (up 10 percent), American Eagle Outfitters (up 7 percent), Buckle (up 6.6 percent), Gap (up 2 percent thanks largely to its value-priced Old Navy division), and Zumiez (up 0.3 percent). Sales at Children’s Place increased 4 percent.

    Mid-priced department stores, a sector that has been struggling for a while, posted some of the month’s weakest numbers. Sales declined 7 percent at Dillard’s, 3.8 percent at J.C. Penney, 2.6 percent at Bon-Ton Stores and 2 percent at Stein-Mart.

    At Macy’s, sales ticked up 1 percent. Terry J. Lundgren, the president and chief executive, said in a statement that sales at both Macy’s and Bloomingdale’s were better than 2008, and that Bloomingdale’s had a particularly robust December, with strong sales in gifts and designer brands.

    Wow, no dip goes unbought.  It is like snakes and ladders, every time we go down, they just roll again and move it back up.

    Best explanation yet of jobs numbers:

    Whatever is announced this Friday — whether it’s zero loss of jobs, a gain or maybe even another decline — that figure will have been attained only after the Labor Department does some Class A razzmatazz on the numbers.

    First, there will be invisible seasonal adjustments that will skew the figures.

    Since so few jobs were created in December 2008, the Labor Department’s computers were probably expecting the same pattern in this latest Christmas season, meaning that few jobs would be created in 2009 as well.

    So even a small increase in jobs last month compared with December 2008 could be magnified in the accounting into something much bigger.

    As I said, it’s statistical razzmatazz.

    And that one isn’t even the biggie.

    Friday’s figure will also be altered by job growth that the Labor Department is pretending has occurred at newly formed companies. The department calls this its birth/death model and by itself this assumption could be more destructive to the US economy than any terrorist attack could ever be.

    For instance, in December 2008 the Labor Department assumed that 60,000 jobs were created by infant companies that couldn’t be surveyed, and weren’t contacted, by its workers. Without that assumption, the job losses that month would have been worse than the almost incomprehensible figure of 681,000 that was publicly announced.

    The trouble is, those extra 60,000 jobs don’t exist.

    In fact, the Labor Department has already said that when it reports its next set of statistics on Feb. 4 it will reduce the number of jobs that it believes existed in this country from April 2007 through March 2008 by around 820,000.

    And people inside Labor also admit that the department mistakenly believed these 820,000 jobs existed mostly because of incorrect assumptions by its birth/death model.

    Now get this!

    That 820,000 mistake only corrects the numbers as of last March.

    The birth/death model since this past April has added an additional 900,000 jobs. And eventually those 900,000 jobs will probably also have to be extracted from the Labor Department’s count.

    But it gets worse.

    The Labor Department tells me that despite the huge corrections, it still believes its birth/death model is working well because it is tracking closely the Census Bureau‘s quarterly surveys of employment and wages.

    In other words, the Labor Department doesn’t think it needs to change its belief that small companies are popping up everywhere and creating large numbers of jobs.

    So, here is what will happen next if the Labor Department doesn’t suddenly wake up.

    Remember, it’s called the birth/death model. And while the Labor Department adds jobs 11 months a year, it also subtracts jobs, the "death" part, during one month.

    And that month is January.

    In January 2009, a stunning 356,000 jobs were removed from the overall count because of the birth/death model. That resulted in a much larger-than-expected loss of jobs during the first month of the Obama administration. The panic was palpable.

    Without a change, the Labor Department will subtract a similarly large number of jobs this January. And when that month’s labor figures are reported on Feb. 4, watch out! The stock market will not like this.

    The good news comes after that.

    The birth/death model always adds jobs in the spring. And as I told you last year, that will make the economy look like it is pick ing up steam and will give Wall Street something to work with.

    You now understand this better than Bernanke, who is starting to hint that interest rates must rise.

  151. GENZ/m@ – I am long April 45/47.5, just rolled to 52.5 Feb from 50s Jan for 5c (4/5 cover ratio).  I also sold 1/2 position in the 50/45 P Febs for 1.25, but probably could have waited for a bit more.

  152. ss
    If they break 64.10, it may go to 64.45 + / -  and I’ll get back in ( TNA )

  153. JRW – and if it doesn’t that just means they have a smaller flag to work with tomorrow.

  154. JRW – It is hard for me to imagine how 2000 stocks can add up to manage hitting lines like this within split seconds and reverse.  Amazing.

  155. VIX still falling….making lower lows. 

  156. BAC/Jlui – Ah but weren’t we selling puts and calls against them?  If you just have them naked, hopefully they are still balanced at about $12 for the pair.  The idea was to sell, like the Feb $17 puts and calls for $1.70, which is about 15% over 5 weeks collected and your 2011 put/call can’t go below $10 so it’s just a question of selling the front-month premium each time on that trade. 

    SONC/Humvee – Just keep a stop on the calls (20% up) and we need to be patient as they fix the glitches in the new franchise model. 

    AFL looking good for a breakout.  X still going strong.   ZION up 11.3%. 

    Welcome Today!  I’d roll to the Feb $89s at $6.10 and also sell the Feb $83 puts for $6.10 so that’s $12.20 and you’ll just roll out the losing side to March.  With any luck, we stay in range but FAS would have to drop all the way down to $70 or over $101 before you’d be in worse shape than you are now. 

    More data points for 2009 as the worst year for dividends – though S&P thinks the worst is over, which could prove a boon for dividend investors looking for entry points.

  157. Phil,
    Are you covering the DIA’s tonight.  0 – 1/2 or full

  158. We need some longs, don’t we? 

  159. about AMZN Jan 25 puts here?

  160.  I mean 125 !!!!

  161. how ’bout a steep drop into the close…

  162. Actually, let me revise that.  I feel I need to have some longs, but only if there accompanied by a really good convered calls.  What’s your thought on that?

  163. Well we have to consider the possiblitlity that this morning’s dip was looking to shake out some bulls and THIS is the way the market’s going to go.  

    Now it’s just the Nasdaq that’s holding us back and they have been far higher than 2,314 so it shouldn’t take much to push them over (an AAPL upgrade could do it).  The NFP report is 8:30 tomorrow so it could be all over before we have a chance to do anything so, as I said earlier, try to balance out into the close unless you are REALLY willing to risk it.

    DIA/Bass – I’m not covering but that is a very high/risk position.  The Feb $105 puts should be fully sold at $1.95 against June $107 puts into the morning as it’s better to deal with adjusting a move too low than too high.

    Longs/JCM – Don’t forget the DIA Feb $104/106 spread from yesterday, now $1.30.  It’s a good bullish offset if you are too bearish. 

    AMZN/Big – I like them as a speculative play but AMZN is going to have a great Q and could pre-announce so dangerous. 

  164. They call me Dr. Feelgood.  It’s 3 mins Phil…so don’t watch it.

  165. Phil,
    I have 100 shares that I bought at 30.70 (now 50.33) and I sold short the Feb 45 Call at 4.04 (now 6.2).  I would like to somehow save the stock profit and get out from under the short call.  Any suggestions?

  166. don’t be an oinker….daveo

  167. Well that was a wild day.   Still, a hell of a lot of work for us to be 23 points above last Tuesday (29th)’s open. 

    Thanks for warning Pharm but I couldn’t resist.  Your videos are like slow motion car wrecks – terrible and hard to look away.  8-)

    DLB/Daveo – Well you can just roll out to March $50s at $3.20 so you spend $3 to push them up $5 but I’d rather just roll out to March $45s at $6.50, which puts another $1 in your pocket and gives you better protection.  If DLB keeps going up, then you can always push the caller to the June $50s (now $4.75) as the premium of the March caller erodes.  You never need to "get out" from under the short call, they are just protection against a downturn unless you are positive that DLB will go up more than $1 per month – otherwise, that’s another 20% a year you’re collecting and you are still well covered.

  168. Daveo,
    you can simply buy back the caller for a $2.16 loss and gain the $5.33 value of the stock you are set to give up.  If you offered to give me 5.33 if I gave you 2.16 – I’d take it!

  169. I’m not even sure what to say after watching Pharm’s video, other than that I found it deeply disturbing

  170. You would think these charts are so obvious that oil couldn’t possibly be above $80:

  171. Looking kind of like early April:

    Finl vs tech 010710

    Options traders boosted bets that Chinese stocks will fall, placing six times as many bearish wagers as bullish ones, on concern government steps to curb lending growth will slow the nation’s economic expansion.  More than 52,800 puts giving the right to sell the iShares FTSE/Xinhua China 25 Index Fund changed hands, compared with 8,981 calls offering the right to buy as of 2:35 p.m. New York time.   See - I knew FXI was acting funny! 

  172.  Phil…I held my YZC calls but bought Jan 25 put protection 1:1 When do you think China will crack?

  173. I really hope we have that 150-point drop tomorrow, or I’m SOL on my DIA puts.  This market is so screwed up.

  174. ern – you can always roll those DIAs out a month.  If the jobs suck, or someone decides to sell, U will be fine.

  175. Frustrating day; week.
    At least now I know why the Federal budget is such a disaster; Peter Orszag thinks he’s Tiger Woods and uses his position to sleep around instead of working.

  176. :wink:

  177. Yeah crazy start to the year; and I bought QQQQ calls to protect myself on the upside, silly me.

  178. Anyone – what month are we now in for DIA covers – I just read Phil – mention to Bass about June’s -
    when did the word go out to roll from March to June??
    Did I miss something – thanks

  179. Phil,
    I guess the official GS position rests on the assumption that you can trust the data behind the Chinese projections of 9% growth? I saw no hint of skepticism or caution in the report other than to say "rich valuations" on Chinese equities.

  180. Pharmboy – I am new on here, and I know this is going to be a basic question, but I need a quick answer if I am going to try and execute the correct strategy tomorrow (In case things keep going up).
    What is the process to roll to Feb DIA puts?  I understand the concept of rolling, but I’m not sure exactly what I do in my account to accomplish this.  I currently have 100 contracts that I paid a total of $4,400 for.  They are worth about $2,000 now.  Do I just sell those contracts, take the loss, and then purchase 100 new Feb 2010 $103 put contracts?  If so, then I’m just selling one option and buying another, which isn’t that complicated.  It’s just that I really don’t want to take the loss if there is even a remote chance that it might get back to $0.44 tomorrow.  I have enough funds to purchase the Feb puts without selling the Jan ones.  But of course then I might lose my entire investment in them.
    Phil, if you’re around, feel free to chime in :)

  181. I like Stuart Miller CEO of LNR, but I am reading this article about LNR’s earnings and Miller’s comments, and I am wondering "why was the stock up $2 + today".
    - with homebuyer tax credit, contracts (not even sales) up 3%
    - profit only w/ tax benefit
    - "free fall has stopped"  in some cases markets are even "stabilizing" and may even see increases.
    - Situation is fluid; "nothing I say today is set in stone".

  182. This is a good live blogging summary of the LNR news and conference call:

    LNR and the homebuilders are a short; probably right here.

  183. I’m sorry; I meant LEN – Lennar.
    Freudian slip !

  184. ernest
    Whether you roll to the new position, or alternatively sell or buy back your current position and exchange it for a new position, you are essentially doing the same. The roll ends your current position and effectively closes it out, and at the same time creates a new position for either a credit or debit at that point. Be sure to set a stop loss.

  185. The tale of two Janets… Reno and Napolitano. Lots of simmilarity beyond the name – Same haircut, gender and level of competence. Their bosses also believe they are irreplaceable, no matter what the evidence is to the contrary.

  186. Erns – at this point, as Phil noted earlier, just wait and see how the morning goes – the delta on those is 15 now, so if we jump 100 in the AM, then they will be 12c.  There is nothing to do now.  Earlier when I posted at 1:45, I noted to roll to the 106s.  Had that been done you would have made a bit of it back and when the market turned up at 2:10, you could have bailed.  This is not a knock on you at all, but these plays that Phil notes on front month DIAs are gambles, and either we DD at 25% – 30% loss or get out (I think he and I said that yesterday).  My rule of thumb is 10% loss on those (which can come quickly) or I am prepared to DD at 25% trying get my money back then out.  I also scale in, so if I am prepare to DD 4X, then I start with 5 contracts, or whatever I am comfortable with, no matter how small.  (I use TOS, so my commission fee has less of an impact on smaller lots). 
    Phil might be able to help you make some back, but if we dip in the a.m. and you can get to 30c, get out.  Then use it to buy VIAP!!  They will double your money back.  Just joking, but I do like them for a quick double!!!!

  187. Pharmboy – VIAP?  I’ll have to check on them.  I am with Options House.  I’ll have to check and see how you roll a position rather than sell/buy.  What do you pay for commissions with TOS?

  188. ernest -
    If you a new at this you should not be trading 100 contracts of anything.  Try 1 or 2 contacts till you get the feel of things or you will be broke in an instant.  We can all tell you horror stories about how much we lost starting out.
    With OptionsHouse you simply add another trade to your Option Ticket and enter your new position there.
    I am not sure rolling to the 103Puts makes sense in this bull market.  I would get out and cut my losses and see what the market does.
    Do not hold your position past tomorrow morning otherwise you will wake up Monday with no money – hope doesn’t pay the bills.

  189. Pharm/VIAP
    I put in a day order for 5000 @ .19. This stock is pretty much at the bottom, but can test new lows if I get filled.

  190. gel:
    dammit; janet (s) !

  191. Gel – I have had mine in for 3d with no luck on VIAP. 

  192. Erns – 1.1/option.

  193. Erns – 1.1/option.

  194. test

  195. Phil – have the dia covers been rolled out to June? Thanks

  196. Peter – What if I wanted to play it extremely safe and create a wider moat using the SPX/RUT strangles.  Instead of 10%/-15% cushions I would use say 15%/-20% strikes.  And instead of reserving money to DD I would instead plan to roll up and out if it got too close to my strikes to avoid a margin call.  Couldn’t I just sell more of these strangles with the lower premium in order to achieve the same desired % per month?  Wouldn’t this increase my chances of these strikes expiring worthless?  Thanks for all of your help.  You have been extremely helpful in my success using these strangles.

  197. Good morning!

    It looks like the global markets are on hold, waiting to see what we do today.  Our  futures have been flatlining at the highs so the tiniest little pop will push us over breakout levels across the board. 

    They got the Pound back to $1.60 but no such luck for the Euro, which is still $1.43 and we’re at 93.2 Yen with Copper at $3.41 (bounced of $3.39 at 5:30), Silver at $8.14, Gold at $1,124 (bounced off $1,120 at 1 am), Oil at $82.51 and Nat Gas at $5.80. 

    I would think job growth would strengthen the dollar but then the story of job growth can boost commodity speculation too but if we don’t see wage growth (number of hours worked, hourly wages) then there’s still no way people can afford the gas ($2.13 current wholesale) and the above charts show what a stockpile disaster the petroleum industry is heading into as gasoline usage drops off very sharply between Jan and April.

    Frustrating/Cap – Totally, I still can’t bring myself to flip bullish and I’m going to go back to cash and think about things if we don’t get a pullback today.

    Short-seller James Chanos called the fall of Enron, and now he’s on record about the coming biggest crash: China Inc. (Real estate there is “Dubai times 1,000 – or worse,” he says.) 

    Of course, if we do break levels today, the Watch List becomes the Buy List but let’s stay conservative in our covers through next week!

    Qs/Humvee – Good idea if they work but if Nas keeps having trouble at 3,000, don’t get too attached to them.

    DIA/Samz – June $107 puts 1/2 covered with Feb $105 puts.  We talked about rolling earlier in the week but there is no emergency until it’s time for you to sell the Febs as you DON’T want to be in a March/Feb spread (not enough room to adjust).

    GS/AC – They are currently expanding their operations in China (through Gao Hua Securities) so you won’t here ANYTHING critical of China out of GS for a long time.  "Goldman Sachs, which controls Gao Hua through the loan, may gain a head start over rival UBS Securities Co. as more of China’s 25.3 trillion yuan ($3.7 trillion) of household savings flow into the stock market."  Won’t it be great when GS gets their hooks into China too?

    Goldman Sachs (GS) is being sued by an Illinois pension fund trying to recover billions of dollars being paid out in 2009 bonuses. The suit claims this "highlights the complete breakdown" of corporate oversight and that Goldman’s revenue was artificially inflated by government bailouts.

    Rolling/Ernest – Rolling is just a shorthand for selling the position you are in and buying the next position.  Rather than say, sell the DIA Jan $103 puts for .25 and purchase the Feb $103 puts for $1.30, we say roll the Jan $103s to the Feb $103s for $1.05.  Many broker platforms let you put in rolling orders and that is smart to do as you can offer the net debit or credit and you get filled whenever the combination works out and, the way this market bops up and down, you can often save a nickel or a dime by doing the combo rather than selling, then buying. 

    Of course, it’s more complicated than that (isn’t it always) as you have 100 Jan $103 puts at .25 so of we head higher you can just sell the Jan $104 puts for .35 and THEN offer to roll out for $1 (as the Feb puts have a .32 delta and you have a .15 delta so they lose money twice as fast as you on the way up).  That makes your roll net .65 and you are in for .44 so $1.09 becomes your break-even on the Feb $103 puts.  Notice that the Feb $102 puts are $1.10 and the Feb $101 puts are .80 so, should the market turn down (and you have a 200-point cushion to your Jan $104 putters), you can simply roll the Jan $104 puts to the appropriate Feb puts and you are in a nice vertical. 

    LEN/Cap – I know, it’s madness!  Not only does the emporer have no clothes but when we point it out the people all take theirs off and march down the street with him.  Check out the way the street reports this and keep in mind 90% of the people see only the headline and 75% of the people who read an article never make it to the last paragraph (highlights mine, of course):

    Lennar Surges on Surprise Profit

    MIAMI (TheStreet) — Lennar(LEN Quote) posted a surprise fourth-quarter profit of 19 cents a share Thursday — the homebuilder’s first profitable quarter since 2007.
    Shares of Lennar jumped nearly 13% during Thursday’s regular session. Analysts hadn’t expected the company to post black figures until later in 2010. Wall Street’s consensus target for the fourth quarter called for a loss of 48 cents a share.  [So analysts who are paid to follow these companies are clueless and have no concept of how deferred tax credits work - that's nice

    The all-important new order number for Lennar came in much better than expected. Orders actually increased 3%, the first time in more than three years that the new order number was up for Lennar. FTN Equity Capital Markets, for example, had expected an order decrease of 20%. The cancellation rate also improved more than expected — the number came in at 18% versus an FTN expectation of 20% cancellations.

    The surprise Lennar profit may also indicate the extent to which the California market has recovered, as one of Lennar’s strengths on the road to recovery is expected to be its concentration in California neighborhoods where home prices and sales have been rebounding. It may be rebounding even quicker than expected.

    The quarterly profit was, in truth, driven by a one-time tax benefit, and it is the new order growth that should be the biggest boon to Lennar shares. Lennar earned $35.6 million, or the 19 cents-per-share profit, versus a loss of $811 million, or $5.12 a share, a year earlier. But there was a $1.34 earning-per-share charge related to a one-time deferred tax asset valuation. Lennar would have lost $1.15 per share without the tax treatment.  

    Financials were not as strong as the new-order data for Lennar. Revenue fell 29% to $913.7 million from $1.28 billion, as 22% fewer home deliveries were made — though that still bested an analyst revenue estimate. And the average selling price of homes dropped 9% to $238,000 as compared to the same quarter last year.

    Are they friggin’ insane?  That’s a pretty big BUT once you get to the "in truth" part isn’t it?  LEN gapped up on this news from $13.75 to open at $14.75 and finished the day at $15.46, up over 40% since mid December.  Estimates for LEN is that, even with this "surprise" that they will lose money this year (maybe .25 per share) and make as much as .50 in 2011 so $15 is paying 30x earnings for a home-builder, a sector that historically has p/es in single digits.  I liked them at $11 but not at $15.50 – as Johnny Cocran says "This does not make sense."   

    Friday’s economic calendar:
    2:30 Fed’s Bullard speaks in Shanghai
    8:30 Non-farm payrolls
    10:00 Wholesale Inventories
    10:15 Fed’s Rosengren speaks on the economy
    1:35 PM Fed’s Lacker speaks on the economy
    3:00 PM Consumer Credit

  198. BIDU:   COO resigns     ("personal reasons")

  199. test