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Testy Tuesday – Have the Markets Become Comfortably Numb?

"There is no pain you are receding
A distant ship's smoke on the horizon.
You are only coming through in waves.
Your lips move but I can't hear what you're saying.
When I was a child
I caught a fleeting glimpse
Out of the corner of my eye.
I turned to look but it was gone
I cannot put my finger on it now
The child is grown,
The dream is gone.
but I have become comfortably numb
." – Pink Floyd
 

I have a theory that the markets (and the American people in general) aren't irrational, they are simply shell-shocked after suffering a very traumatic group financial experience… 

To be shell-shocked is to be "mentally confused, upset, or exhausted as a result of excessive stress" and the most common symptoms are: Fatigue, slower reaction times, indecision, disconnection from one's surroundings, and inability to prioritize – That certainly sounds like our Congress doesn't it?  Combat stress disorder was first diagnosed in WWI, when 10% of the troops were killed and 56% wounded – far worse than had been experienced in previous wars.  Our current financial crisis has similarly affected more people than any previous crisis with almost everyone knowing someone who is bankrupt or lost their jobs or homes and almost no one escaped the carnage of the downturn without some financial damage. 

Combat fatigue may go a long way to explaining the severe drop-off in volume that has plagued the markets since March, with participation now down to 25% of where we were last January and that leaves us open to the blatant sort of market manipulation that Karl Denninger caught last week as well as the usual nonsense we get daily from HFT programs that drive the market with such precision that we are able to tell how the day is going to go by simply checking our hourly volume targets.  Here's a clip from CNBC where a floor trader discusses market manipulation as a fact of trading (2 mins in).  

As Nicholas Santiago points out on In The Money Stocks,   "January is usually a very high volume month, yet it has started off the New Year even lighter than the last two months of 2009.  Light volume markets are very difficult to short. Hence the old saying, 'never short a dull market'."  Not only is the market volume light, but over 60% of the trading volume is concentrated on 5 stocks:  AIG, C, BAC, FNM and FRE!

We have often noted that high-volume (relatively) days almost always tend to be down days and PSW Members can tell you how the day is going simply by checking the volume against our "norms," which comes in very handy with our day-trading.  I had expected more normal volume to return in January and send us into a correction but that hasn't happened yet – even Friday's big drop came on just 20% more than "average" volume for the past 90 days, which is still less than 1/2 of a good day last winter. 

As I detailed in the Weekly Wrap-Up, we expected a further sell-off but we weren't brave enough to bet heavily on it over the long weekend as we've now been burned often enough to be conditioned not to go too short into a Monday although my comment to Members at 10:46 on Friday for weekend positioning was:

"A big loss by us today can send Asia into a nice tailspin on Monday AND Tuesday (because we won’t be open to dispute it) and that would lead to a gap down open for us on Tuesday and then the guys who are selling today can buy back the same shares into the retail panic on Tuesday, before resuming business as usual after once again teaching the bears a lesson that they can never win."  Because we got such a nice sell-off on Friday, however, we actually flipped bullish on Friday afternoon and then rode a mainly cash position into the weekend uncertainty. 

Over in Asia, the Nikkei did indeed spend 2 days selling off, dropping 250 points in two days and falling back to 10,750 on a poor finish this morning.  Not so the Hang Seng, that had a phenomenal 300-point rally after lunch today, taking them right back to where they were on Friday's close on no particular news and the Shanghai Composite also finished up 0.3%. but the Bombay Sensex was down 0.8% so mixed to say the least over in Asia. 

EU markets, like the US futures, have staged a huge comeback off a poor open starting at about 8am EST also on no particular news other than C's earnings not sucking very much.  As I said, we have been "comfortably numbed" to weak earnings so a loss of "just" $7.5Bn at C sounds just fine compared to last year's $17.25Bn loss.  Even better, if we exclude $6.2Bn in charges relating to repayment of government aid, then we can call ordinary losses at Citi just 6 cents per $3.30 share so yay, I guess…  Keeping expectations low is going to be the key to winning this earnings season – we shorted JPM last week because they committed the sin of letting investors get excited about their earnings – this week we hear from 200 reporting companies and it's going to be a wild ride as we gauge investor sentiment by watching the reactions to each announcement.

Speaking of high expectations – I was discussing in Member Chat this weekend my conversation with a commodities trader that soured me on gold again (working out the fundamental math of the situation) and it looks like Credit Suisse must have taken note of my comments as they issued a report arguing: "against all this peak gold nonsense" with the very dire warning that "Our calculations show a large oversupply of around 420 tonnes in our supply-and-demand equation for 2010. In summary, we believe that the steam has run out of investment demand as the economic environment has and is changing to the positive. Muted investment demand coupled with a change in market sentiment and a projected large oversupply in the supply equation all point to a downward correction in the gold price from the highs reached at the end of 2009."

It's an uninspiring data week so our focus is on earnings.  FAST, FHN, IIVI, EDU and AMTD missed this morning with C, FRX, MMR, PH and PETS meeting or beating expectations.  Tonight we hear from ADTRN, CREE, CSX, FULT, HBHC, IBM, PNFP, SUPX, WIT and IBM can punch a hole in the Dow if they miss as they have been flying very high in anticipation of more than doubling last year's results as the stock trades near it's all-time highs, even those crazy 1999 levels!

Tuesday's earnings of interest include BAC, EAT, COH, HCBK, MTB, MS, NTRS, PGR, STT, USB and WFC and if the financials don't implode by then, we're in good shape.  Tuesday evening we see EBAY, FFIV, KMP, LOGI, OHB, RJF, STX, SLM, SBUX and XLNX.  There's plenty of BIG names Thursday and Friday as well but let's see if we survive Tuesday and Wednesday first, before we start worrying about those…

Earnings season is like party time for options traders – even with the low, low VIX, there's still plenty of fun to be had but we'll be taking it easy this week as we try to get a grip on sentiment from reading the early tea leaves.  If the volume stays low, it should, as I predicted on Friday, be back to business as usual and business is usually up as long as bad news continues to roll right off the shell-shocked public's back.

 


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  1. BIDU should get smacked pretty good today after last week’s nonsense.
    CTO follows COO out the door.


  2. You hit on something here I have been thinking about a long time…. For many months, MSM has been talking about low volumes and how kazzillions of dollaras were "sitting on the sideline" waiting to jump into market at the right time. 1. I think that these phantom kazzillions do not exist, that this wealth was destroyed in the crash and does not exist anymore. 2. What wealth is left suffers from the phenomenon you detail here. The result could be low-volume market for even longer, ripe for the manipulators to paw around with as they please. When the volume does come back, it is going to get damned ugly. 


  3. Phil- do you feel these price wars are already priced in to metro pcs’ price? Do you stilll consider it a buy with verizon and at&t slashing prices this weekend?


  4. " In a major structural shakeup, Berkshire Hathaway (BRK.A, BRK.B) will likely approve a 50-to-1 Class B share split tomorrow, bringing share price down to $65 from Fri.’s $3,247, boosting trade volume and potentially getting the stock added to the S&P 500. "
     
    Phil, can we see if there are any opportunities for options plays on the new Berkshire stock once it comes out tommorow?


  5. Phil -
    Are we going to take our dia covers off if we can rally? I went full cover into the weekend – which I was unhappy about but am trying to stop guessing – might just leave 1/2 cover on all the time
    Follow normal rules and try and get a quarter?


  6. BIDU down $14 so far (3%) pre market


  7. BIDU volume seems high also. It will be interesting to see if it tanks at the opening bell.


  8. JRW,judah – any early train rides today.  The indexes are opening outside of their flags for the first time.  THEY may fight to get it back in.  I may wait for the afternoon ride.  In any case, I see IWM 15dma(63.78), 20dma(63.45), 10dma(64.06).


  9. Good morning! 

    No change at all in our watch levels: Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 – we’ll be using the 3 of 5 rule to indicate direction but we have to take everything with a grain of salt until we see some earnings this week.  Still, no being bearish if we’re holding 3 of 5 above.

    We sold those DIA Feb $105 puts as a full cover at $1.75 and they are already $1.50 so we want to set a stop here on 1/2 if we head back down and raise that stop .25 as they cross each line as we are THRILLED to make a quarter on these plays (as well as getting back to a 1/2 cover)

    We’ve already had 5 of 10 reporters miss this morning – not enough data to go by but I can’t recall a single day last Q where we had half the companies miss so we’ve got to keep a sharp eye on that trend!

    Volume is already a very lame 20M at 9:40 but, so far, it’s all been up…


  10. The Wall – A masterpiece…..


  11. Phil:  What are your thoughts on AAPL Feb 210 calls ahead of their announcement of new device as well as earnings…


  12. everything’s green now. truly amazing.


  13. Phil: Any thoughts on IBM ahead of earnings tonight?


  14. Phil – also LED plays seem to be on quite a run, how do you like CREE and VECO ahead of CREE’s earnings?


  15. Phil,
    This is effectively a MONDAY !


  16. All big pharma’s are jumping out of the gate!  GSK 35 Jan11s for 7.4. They bounced right off their support at ~41.  I am scaling in, but I do like them long term.


  17. JRW – Where are your lines today?  Everyone back safely in the flag.


  18. Long SDS (2x short S&P).
     
    BIDU now down $24 !


  19. SS, Just watching for now to see if it gets to last week’s highs, where I might enter a small TZA position, but I’m really waiting for 65 to test resistance there.  Curious about JRW’s lines, too.


  20. BIDU/Cap – Something very fishy is going on over there.

    Volume/Bord – Sure, my bullish investing premise counts on low-volume manipulation to continue as the top 10% celebrate the gains of the stocks they care about and ignore the rest (until it finally bites them in the ass, that is).

    PCS/Jrom – I do think it’s baked in already, which is why PCS is so low.  The bet is whether they can outlast the big boys, who tend to only drop price to capture market share and then revert. 

    CROX on the move.  V and MA happy with C’s CC numbers.  V is a nice mo trade with the $85s at $3.35 as they were $4 on Friday am.

    BRK.B/Where – I’m excited about Berkshire having options but I do expect a sell-off early on as some investors will flee if they start getting more volatile.  I’m not looking to jump on it out the gate but I do expect it to be a long-term favorite. 

    DIA/Samz – See above.  Just always remember why you sell those front-month puts – we want to make 24 quarters to pay off our longs over the course of 3 months…

    BIDU at 5% rule at $444.50.

    Wall/1020 – One of the best concerts I ever saw

    AAPL/Jeff – You can play them up BEFORE the announcement but make sure you get out on a good swing up.  I’m not touching them as I prefer to wait for a sell-off on some disappointment – $210 just makes me nervous, even though I do love AAPL. 

    IBM/Stej – I love IBM so I wouldn’t bet against them but it will be easy for them to disappoint after getting such a good move.

    CREE. VECO/Jrom – I think they are in a great space but there is no way in hell I’d go long on them with a p/e of 100+ and up 400% from last year.  Let them show us blockbuster earnings that justify it first and we can look at the longer term.

    Monday/JRW – Yes, same kind of action and we’re off Friday’s floor by about 100 points so things get interesting right about here at good old 10,650 with Nas considering 2,314 again and everybody else over thier marks. 

    $1.27 is a good spot to go all naked again on the DIA June calls as that’s a nice .47 profit in a day, enough to pay for a roll and, if the Nas breaks 2,314, we can sell the Feb $106 calls, now $1.65 as a full cover until the Nas blows that line again or the Dow fails 10,650 – when we could drop to 1/2 cover again. 


  21. ss,
    64.72, support at64.28, 63.55 and 63.28


  22. Phil
    PGH:
    have stock, base 10$,
    have 0.2x caller july 10,
    0.2x putter july 10,
    0.3x putter july 7.5,
    any adjustments ?


  23. QQQQ March $47/46 bear put spread is .45 and .55 in the money so I like that for a downside play!


  24. BIDU’s drop is probably due in no small part to the resignation of the CTO, 2nd C level executive to leave the company in the last 2 weeks.  Despite Google’s threat to leave China, I think the timing of these departures is raising serious questions about what’s going on inside BIDU.


  25. Phil/The Wall  Thanks for the goosebumps :)


  26. Question for all, there’s a lot of talk about volatility going up on options right before earnings announcements. My question is when does it usually hit its peak, is it the day before earnings, or the day that earnings are released? For example, BAC, which announces pre-market tomorrow I believe. Will their volatility (eg- price) be higher today or tomorrow?


  27. Hi Phil,
    currently holding some long INTC 21C…what can you tell me about the future?  ..thinking of getting out……thanks.


  28. Market Internals update at 10:30amET NYSE volume 255M shares, about even to its three-month average; advancers lead decliners by 3.1:1. NASDAQ volume 495M shares, about even to its three-month average; advancers lead decliners by 2.2:1. VIX index flat to just under 18.00


  29. PGH/RMM – I would lock in the gains while the $10s still have premium ($1.10) and sell more, maybe up to .6 if you are still so bullish but I’d full cover because even if you get called away at $11.10, that’s still another 4% and a very nice overall gain (plus the dividends).  Also, you can buy back .3x July $7.50 puts at .15 and sell .1x the July $10 puts for .80 and that seems like a much better deal to me.  If you add .2x to the put side and fully cover with the callers, it’s a nice little 6-month collection. 

    BIDU/Chuaeu – Yes, we thought they were going to make a great short play last week when the COO left suddenly but that night came the GOOG announcement.  Now the CTO also quits – this is strange…

    U.K. prices rose a higher-than-expected 0.6% in December, bringing the annual rate up to 2.9% and adding to speculation that interest rates may rise faster than expected.

    The U.K.’s triple-A rating is "extremely vulnerable" and the economic and political situation is "highly toxic," warns Standard Life, one of the U.K.’s largest money-management firms. (see also)

    As expected, Bank of Canada leaves its benchmark rate unchanged at 0.25%. (statement)

    For the second time this year, the PBOC pushes up the 1-year bill rate, resuming its efforts at quantitative tightening after a recent slowdown.

    Nov. International Capital Flow: Net foreign purchases of long-term securities of $126.8 vs. $25B expected and $20.7B in Oct. Private foreign investors bought $96B, official institutions another $33.3B, while U.S. residents purchased $2.5B of long-term foreign securities.

    Investors in high-yield debt seem to have forgotten the miseries of 2008; investors are piling back into the market, pushing credit-issued to record highs.

    The FHA is walking a fine, fine line between protecting its own tanking finances and supporting a still-fragile housing market recovery.

    All that money the government poured into the mortgage market helped substantially boost the profitability margin for banks’ mortgage businesses, suggesting rates were higher than they should have been. Not exactly the kind of help homeowners had been hoping for.

    In a move that surprised nobody, JAL filed for bankruptcy today, wiping out shareholders in the process. The airline must now begin a ¥900B ($10B) turnaround plan that will slash 15,700 jobs, cut unprofitable routes and retire older planes.

    German and French agencies take a strong stance against Microsoft’s (MSFT) Internet Explorer, warning of a security hole and suggesting users switch to a different browser. Duly annoyed, Microsoft says users should simply upgrade to the newest version of IE.

    Google (GOOG) delays the planned launch of its mobile phone in China today, without specifying a new release date. The move is almost certainly a direct result of its recent fracas with the Chinese over internet censorship and cyber-attacks.

    Indian officials blame the Chinese for an attempted cyber-attack on government computers, while Chinese officials insist such claims "are entirely without basis," and point out that China itself is one of the biggest victims of cyber-attacks.

    Of course, with all these viruses:  2010 will be "The Year of the Mac," writes Piper Jaffray’s Gene Munster in a note today, with Apple (AAPL) shares reaching new heights on a strong holiday quarter, better than expected Mac sales and hype about a rumored tablet. Munster’s price target is $279. Shares +0.7% premarket.

    Sector ETF strength: Healthcare Providers– IHF +1.6%. Pharma– PPH +1.6%. Steel– SLX +1.4%. Biotech– BBH +1.4%. Silver– SLV +1.2%.
    Sector ETF weakness: Heating Oil– UHN -1.8%. Solar– TAN -1.2%. Solar– KWT -1.1%.

    Dow leaders: MRK +2.3%. PFE +2%. CSCO +1.4%. MCD +1.4%. VZ +1.4%.
    Dow laggards: KFT -2%. BAC -1.7%. XOM -0.7%.

    Oil cannot get it going today, just failed $78 again. 

    I’m wondering how much of this Mass. Senate race is just media hype?  I went to school up there and have many friends and maybe we’re all too liberal but they do not understand how people see this race as possibly going to the Republicans.  Nonetheless, Health Care is moving up on hopes that the legislation will die along with Pharma and Biotech as they anticipate many more years of price gouging ahead. 


  30. PHIL…YOUR OPINION, pls., re CAKE as a buy/write or straddle/strangle.  I’ve had lunch there once a week and they;re ALWAYS crowded with a 35-45 minute wait………………………GABBY


  31. Phil, i have a gut feeling that the dems are gonna pull it off in the very end.  But i’m hoping for a little balance so i’m pulling for the repub.


  32. I know Scott Brown personally.  This vote is not about Republican or Democrats IMO.  It’s about the fact that people are sick of Washington and corruption so anything that sways the momentum in another direction is favored right now. 


  33. Nice win on the V trade, $4.50 already - Don’t let it get away!


  34. JRW – this is a Monday.  Yuk.


  35. Phil/Mass Senate.  Here’s a number that tells you something: number of campaign stops since primary--Brown 55, Coakley 19.  Nobody likes being taken for granted.  If voters don’t think you care enough about them to ask for their vote, you can’t expect them to care enough about you to show up to vote.


  36. Hey Phil do you see WFR down around 14.0X


  37. Volatility/Bord – It depends but usually you’ll get a good spike starting 2 days before earnings that peaks out either a full day before or on the day (time of earnings plays a big role in that).  I usually like to look 2 days ahead for potential earnings plays so today, if I had more data, I’d be looking at Thursday’s reporters to play and that would be anyone reporting tomorrow night or Thursday morning.  

    Price-earnings ratios may have reached eight-year highs, but cash is king again for S&P 500 companies – and measured by cash flow, the index is half the value it was in 2007. S&P 500 companies generated $1.29T in cash over the four quarters ended in September.  Strange mix!

    INTC/Oncmed – As a long-term bullish position, I wouldn’t abandon them.  They are firing on all cylinders and device use is a perfect top 10% play.  Actually, I was just thinking that our future is looking a lot like a Gibson novel, where Asian mega-corps dominate the planet and most of the world lives in relative squalor but the scraps technology discarded by the top 10% is enough for the bottom 90% to amuse themselves with.

    Internals/Steve – Thanks!  We’re hitting 60M at 10:54 so 20% ahead of schedule on Dow volume.  We are now up 1205 points from the 8am Dow futures and testing 10,700 again but the Nas still can’t close the deal at 2,314 with AMZN, GOOG, BIDU and RIMM all weak.   SOX are up 1.5% so don’t blame them.

    YRCW back to .89 but FDX and UPS coming off the floor so we should watch them.

    ZION up 2% and back to $16.50 and what an insane stock that is!   XLF barely holding $15 and that is a key downside indicator if they break. 

    CAKE/Gabby – I like them a lot but I’m worried they re-test at $20 so, for a new entry, I’d take advantage of the low VIX and take the 2011 $17.50/25 bull call spread for $4 and sell the March $22.50 calls for $1.30.  If CAKE breeaks over $23, then you can buy more (at least 1/2) of the 2011 $17.50s or add 1x the 2012 $20s, now $6 to set up for a 2x roll of the callers.

    Mass/Jo – Sounds like big turnout (because all this talk of losing a seat got all the Dems out of the house) and that should keep Mass firmly blue. 

    Corruption/TM – I agree that he has benefitted from voter frustration, otherwise he wouldn’t have stood a chance but, when push comes to shove, I don’t think the Mass voters will throw away a hard-fought Senate majority after just 12 months of having it – especially trouncing on Ted’s memory to do it…

    Coakly/Judah – Oh no doubt she totally blew it and she wasn’t even a good choice in the first place.

    WFR/B1 – As usual, we love to buy them at $13.50 or less so selling the Feb $14 puts for .85 is a nice entry (as is selling the March $13 puts for .65) and the 2011 $10s for $5 give you good bang for the buck while you wait for a bounce.


  38. Phil
    The pundits are predicting a victory for the GOP candidate in MA. If it materializes, I see a huge pump in the indexes as well as Pharma. How do you see the voting outcome when the dust settles, and what are the best ways to play this today?


  39. Phil/Senate  Coakley. No Passion – No Vote. We have enough empty suits in Washington….


  40. JRW – the rounded top have you thinking about TZA?


  41. Phil
    MA goes blue? I’m a contrarian, so how would you play "big blue" (IBM). The Feb 135 puts look attractive.


  42. Good Morning Phil! Hope you enjoyed Avatar as much as I did. Want to see it again, this time in 3D. I have a large long stock position in WFC ( I know… what was I thinking?…. but I’ve had it since before the melt down). Have been selling calls against it, but with decreasing volatility the premiums have been coming down. Don’t really want to own more; don’t really care if I keep it. Suggestions? Thanks.


  43. Phil; I am loving your wishful thinking re: MA.
     
    Your liberal buds just don’t get it.  Coakley is a political hack / dead body / product of the corrupt machine.
     
    The people are in revolt over Obama, healthcare, etc.  It just doesn’t register w/ the liberal true believers.
     
    Why should people vote for Coakley just b/c she has a D on her name.  She is a horrible candidate & folks are fed up.
     
    Isn’t Democracy wonderful ?   All that’s left is to keep the D’s can be prevented from stealing / litigating another election.  The ACORN option is Coakley’s only hope at this point IMO. 
     
    Dunno if that’s why the market is rallying (Brown victory and death of ObamaCare).  Could be just an opposite move to last week’s expiration to kill the puts.
     
    Personally, I don’t think Coakley losing will necessarily be the death of ObamaCare as O, Pelosi and Reid are hell bent on ramming it through no matter what the electorate thinks.  If that makes O a 1-termer, they don’t care.


  44. Phil,
    Thinking about scaling into SPWRA for a retirement account. Despite the low VIX, the Feb 21 Puts look pretty attractive at .80, where I wouldn’t mind owning the stock and selling front-month premiums against it. Your thoughts? Thanks.


  45. Phil, you still have time to place your bet here:  http://www.intrade.com/


  46. Look at AAPL; wow, Piper pumping it again !


  47. Cap/Liberals   I think what you would find with most of us "liberals" is that the dems are showing us that they don’t have the political "Guts" will to do the work we sent them to Washington to get done. THATS why we’re pissed….


  48. Phil, Is there some kind of volatility drop today? I am noticing many of my long options positions are down even though the common stock is flat or even up, and it appears to be fairly wide ranging (AMZN, GS, GLD, TBT, etc.). Not a good day to sell options?


  49. A bit of political humor on a political day. Feel Free to insert you own favorite Dem or Repub:
    Nancy Pelosi and Father O’Malley
    Father O’Malley rose from his bed. It was a fine spring day in his new Washington, D.C. parish. He walked to the window of his bedroom to get a deep breath of air and to see the beautiful day outside.
    He then noticed there was a jackass lying dead in the middle of his front lawn. He promptly made a phone call. The conversation went like this:
    "Good morning. This is Speaker Pelosi. How might I help you?"
    "And the best of the day te yerself. This is Father O’Malley at St.Brigid’s. There’s a jackass lying dead in me front lawn. Would ye be so kind as to send a couple o’yer lads to take care of the matter?"
    Speaker Pelosi, considering herself to be quite a wit, replied, "Father, it was always my impression that you people took care of last rites!"
    There was silence on the line for a moment, and Father O’Malley replied:
    "Aye, that’s certainly true, but we are also obliged to first notify the next of kin."


  50. Gel -
    Thanks for the response over the weekend on kmp and epd and others.
    I would be ineterested if you feel ok about posting your options trades on the mlps and rational.
    Also very interested in the fx trading. I am a novice at this but I was making good income selling puts against fxa while it was in the 70s and 80s – when it got to the high 80s and above I stopped selling the puts – just seemed pricey to me. If I had just bought the aussie dollar I obviously would have made a lot more money but I got into that trade too early and actually lost some – as a resulty got a little scared of fx trading – although I was doing it on a non-levarage basis – the IB interface is a little confusing – i did not understand that if you had a profit / loss it was actually sitting there in your account in the other currency – I ended up with a short yen position – its actually not that easy to zero those out on their system – originally designed for institutional use. Rookie mistake.
    Aussie Dollar vs Yen or Euro also seems interesting – my one concern is that if China blows up the Aussie is going to tank but I guess everything commodity related will as well.
    If you have fx ideas – would love to read about them.
    thanks again Sam


  51. ss,
    We’ll see, I don’t think the Bulls are done for today, but if they can’t hold it above 64.28 it could get interesting.


  52. I believe the GOP has a chance to occupy Ted Kennedy’s seat. If that plays out, then the healthcare bill is toast. The House will never pass the Senate version in a "accept as is" vote for the reason the members will be assuming they will have a very good chance of being replaced by the voters in November. Personal survival is their ONLY concern. This post is not political, as I believe this might be a great opportunity to play the dynamics of this very big change in direction.


  53. Seems like Mr. Stick struck early and that may be all she wrote as we hit the real resistance up here.  For the record it’s Dow 10,700, Nas 2,314, S&P 1,145, NYSE 7,400 and RUT 645.  We can keep an eye on thse but I’d be inclined to call it Dow 10,750, Nas 2,325, S&P 1,150, NYSE 7,500 and RUT 650 for a show of real strenght but any of these breaking out would keep us bullishly inclined. 

    Voting/Gel – I think the media is lying to you and there is no Republican victory happening.  That seat hasn’t been held by a Republican since 1952 and it’s one thing for a life-long Democrat to tell some pollster they will vote for Brown but quite another to actually go into a booth an pull a lever on the "R" side…  

    IBM/Gel – I’d rather sell the Feb $130s for $4.70 on the hype and cover with July $140s at $3.70 and be prepared to take your lumps and DD the $140s and roll the $130s to 2x Apr $140s (now $1.85) if things go agains you.  I’d rather do that then risk $4.75 straight up on the Feb $135 puts.

    Avatar/Jb – I saw it in IMAX and I highly recommend that!   On WFC, I’m worried that the more bank-centric a bank is, the worse they will do.  C had good performance in 5 divisions but retail banking wiped it all out.  If you want to keep WFC long-term then why not just sell Apr $28s for $1.85 and buy yourself 10% protection – just to be safe(ish)?

    Rally/Cap – This is just the move we expected on Friday, a jerk down at the open that is violently reversed only the jerk down came in pre-markets but the net effect is the same as the bears are bitch-slapped once again – much like Brown will be this evening once we bring out the dead (voters) in Mass! 

    SPWRA/Chuaeu – $20 is a nice entry price but be aware that this nonsense in Germany can send solars quite a bit lower so REALLY scale in carefully.

    AAPL/Cap – On yesterday’s post I had a graphic that shows AAPL getting $900M in App revenue alone – that’s just crazy!   Also creazy in Intrade with only 30% odds on Coakley – I would take that bet as a 3:1 payout!   The problem with Intrade (which is good because you can take advantage of it) is they have national nutballs betting on local elections based on soundbytes they hear in the media which completely overwhelms the informed local voting…

    Pissed/1020 – I agree, I was pissed at the Dems in Friday’s post, very disappointed but still not dumb enough to give up and hand the keys back to the guys who drove the country off the cliff…

    Volatility/Bord – Yes, the VIX is down quite a bit from Friday, not a very good day to sell.


  54. Oh Boy!…. Thunderstorms all week here in California. Adding to the noise is the racket coming from somewhere. – Could be Teddy rolling in his grave.


  55. Phil/IBM
    Thanks!… I plan to sell some Pharma puts today, as well, on the assumption Pharma will jump over the next week.


  56. When is the MA vote final?


  57. Phil, any place you have a summary of the various rules you employ for TA — 5% rule, 2.5%, 1.25% (?), 3 of 5 indexes (ever more, like 4 or 5 of 5) to confirm breakouts in either direction… I’m sure I’m missing some others. Also, how do you draw the Big Chart, define levels, etc. and how often do you replace that? Also looking forward to Pharm’s TA piece whenever he can get to that… no rush. Thanks much!


  58. I got nine separate calls this weekend reminding me to vote for Brown.   Overkill don’t you think!   It’s good that there’s a Kennedy on the ballot (Libertarian) so some of those Kennedy lover’s can still vote for a Kennedy and feel good.   If Brown wins it will send an awesome message for those of us that are sick of most of the 535 that are in Washington.   We are screwed long term based on our debt so something needs to give.


  59. Phil/Coakley. You shouldn’t make predictions with your heart. Moderate R’s win statewide often enough in MA, especially against poor candidates, like ones who don’t know who Curt Schilling is.  Brown by 5. 
     
    More importantly, I like gel’s question.  Brown wins and there is a short term perception that health insurance legislation is on the rocks.  IMO, Snowe, Grassley, Hatch, Brown and others step into the breach and make a deal by Spring.  But for a while, everyone that was going to be loser in the House and Senate bills will get a bounce.


  60. Hi Phil It is all quite about RMBS looking to set up a Jan 11 strangle 15/40 p/c short at 5.60 your thoughts pls


  61. Phil,  Why do you favor SPWRA rather than SPWRB?   The B shares give you the same ownership with 7x more votes but they trade at a 11% discount.   I own B shares since I am an Ex-Cypress employee.   One disadvantage is that the volume/liquidity is much lower.  Maybe that’s a good enough reason but in the long term I would think that the B and A shares gap would close.


  62. You do sound angry 1020 …


  63. Phil … LOL …. that’s what O should have been yelling yesterday … "Bring out yer dead !".
     
    Luv Monty Python …


  64. Phil/Rules… just thinking about the fact that my questions are more general in nature and better discussed after hours, so no rush. Don’t post too often so I just fired when I had a thought I was really curious about, so I’ll look forward to any responses after market close when you have a chance. Thanks!


  65. A Democratic operative working for Coakley recently shoved to the ground a reporter who was trying to ask Coakley a question. Yesterday, Democrats released footage of a Brown sign-holder repeatedly deriding Coakley supporters as “Nazis.’’ A woman drew State Police attention by writing “Hope she gets shot’’ on a Facebook post about Coakley’s appearance with Bill Clinton last week.

    And at a recent campaign event in West Springfield, a Brown supporter shouted out a violent comment about Coakley and a curling iron, in an apparent reference to a sexual crime she investigated as a district attorney. (Brown’s campaign said he did not hear the comment; in the video provided by Democrats, Brown smiles and continues his speech.)

    MA vote/Llorens – It should be tonight unless we have a month of recounts to look forward to.

    Rules/Fein – There’s a linked article in the Strategy Section on Scaling In and the comments of that have a discussion of the 5% rule, which is also the 2.5% and 1.25% rule.  The 3 of 5 thing is just obvious – we set 5 levles we’re watching as critical so 3 of 5 over the line leans us in that direction, right?  I draw the Big Chart when I see a good reason to, like we have established a new channel.  Right now we are in the upper end of the range we’ve been using since last year and I haven’t been convinced to calculate a new range just yet..

    Calls/Tm – Brown does seem to have a stunning amount of money to spend, doesn’t he? 

    Well I must say the markets are having a hell of a party.  EDU doing very well after a miss.  Gold and oil finally got going and now the Nas popped 2,314 so no holdouts left!  Copper up to $3.45 with the dollar still weak at $1.43 to the Euro and $1.64 to the Pound and 91.1 Yen.  Silver is $18.77 and gold is back at $1,138 with oil at $78.33 and nat gas in the red at $5.58 as they seem to be the only commodity that remembers that last week happened. 

    12:30 Dow volume is 87M, with 90M being "normal" at 1pm so volume is trailing off fast but we’re still going up and up and up.  I’m getting very interested in the idea of going short again here on the Dow as they are about 20 points off Thursday’s high (from which we fell 150-points).  DIA $106 puts dropped to $1.38 so that’s my put of choice with a DD at $1.12 for a $1.25 avg entry and a stop at $1


  66. Mass is the only states where independents outnumber Dem and Rep combined; that is where the swing is coming from


  67. from the VWRC, good info here (pro Brown warning):  http://www.nationalreview.com/baystate/
     
    The media is lying to us about Brown possibly winning ??   ROFL !   They can’t believe it themselves and didn’t even cover the story until this weekend.
    The Obama fawning media lies in favor of Republicans winning elections ?
    I watched a piece on NBC news last night where they finally covered it … but they told you nothing, particularly why Brown came out of nowhere to possibly win; the whole story of repudiating this agenda is the story.
    Here’s what some in "the media" are saying:
    from MSNBC’s Keith Olbermann:

    In Scott Brown we have an irresponsible, homophobic, racist, reactionary, ex-nude model, teabagging supporter of violence against woman.

    The Brown-Coakley contest, say E. J. Dionne and Joan Vennocchi of the Boston Globe, is really about local issues. Heck, Massachusetts isn’t even all that much of a Democratic state! Bay State voters really have a "love-hate" relationship with the Democratic party.


  68. LLY – now that’s what I call $$$$…..MYGN is getting hammered again.  Selling the 22.5 or 24 Feb10 P for 65 or 1.4 makes for a nice entry on them (depending upon your aggressiveness).  Waitng until they test the 23 range, and will go long for the 20 Jan11s for $5.3 or so.


  69. Hey Gel1, I am from California (near Sacramento) , grew up near San Diego; where u from ?


  70. TMDecay — excellent comment…


  71. Phil / MA vote
    The MSM has been asked to say it’s a GOP win by the Dems so they can get out the vote and get it close enough to STEAL; the experts are already on their way from Seattle !


  72. Samz
    Re your post on covered calls and my FX trading activities, I am happy to oblige and share my trades and research behind the decisions..I am not the worlds best FX trader, but have been trading for about seven years. I am very conservative in this type of trading and not one who is constantly trying to make wins every few minutes. The market trades 24 hours a day, and this can be a negative as if you have insomnia, you will find yourself sleepless as you are following your trades. I therefore play it with a longer term perspective that is less stressful. The timing is really good at this time to get active, as the volitility in currencies will be active for quite a while, as the economies aroud the world deal with their overleverage problems. To me the direction of many of the stronger currencies is quite clear, and the weaker currencies are getting weaker so the pairing is a lot easier. I believe the greatest opportunity, is in cross-trading (non-dollar) currencies. The idea is to trade the strongest currencies against the weakest as they fight their debt problems and the economic consequences that are created through political decisions. As an example, I think selling the GBP (a disaster getting worse) against the CHF (also a disaster BUT getting much better). I have an account at GFT Forex Trading, which is a very good choice as they are very solid and have, I think< the best trading platform, as well as the best research and assistance in the industry. A really good guy at GFT is Jamie Spoors and he can be reached at (616) 956-9273 x11409. He will set you up with a trial trading platform ( GFT 360) and get you started. You will be very impressed. I’ll follow up with trades that I’m in for reference.


  73. Phil:
    got assigned EDZ jan 5, have calls EDZ apr 3,
    overall a small loss,
    maybe should close this 3x EEM BEAR ??? or what ?


  74. Phil do I have this correct you are buying the 106 feb put right? as you expect the market to drop the 106 goes up together with the matress?


  75. Humvee.
    Pebble Beach, and the rain keeps coming. Sacto is a great place!


  76. Call me crazy; but I am shorting COF right here; its been a relentlessly profitable strategy for me !
     
    Can’t predict the top; but I like the entry !


  77. Hi guys could I please just check what is the official mattress position just now? thx


  78. FMD baby !


  79. Gel -
    Thanks – for the forex info -
    I like your thinking about the longer term trades – I don’t want to be up in the middle of the night checking this stuff – I am already up at 5am to get in a little research before my son gets up at 6am.
    What do you think about the Aussie against GB or Euro? The Aussie economy seems a lot stronger with lowere debt to GDP – I have to go  back and look at that nice chart that Phil posted a couple of days ago - guess the negative with the aussie is that the trade is crowded bc of yeild. Aussie / GB might be less crowded than Aussie / US -


  80. Gel -
    Thanks – for the forex info -
    I like your thinking about the longer term trades – I don’t want to be up in the middle of the night checking this stuff – I am already up at 5am to get in a little research before my son gets up at 6am.
    What do you think about the Aussie against GB or Euro? The Aussie economy seems a lot stronger with lowere debt to GDP – I have to go  back and look at that nice chart that Phil posted a couple of days ago - guess the negative with the aussie is that the trade is crowded bc of yeild. Aussie / GB might be less crowded than Aussie / US -


  81. In light of the state police ‘turning their attention’ to someone posting "I hope Coakley gets shot" on facebook, I would like to formally withdraw my previous comment wishing someone would fly a plane into the GS building…. Instead, I hope they all die of natural causes…..Preferably soon. VERY soon.


  82. Legislation/Judah – I think the worst thing that can happen for the Republicans is for health care not to pass thanks to a victory tonight that allows them to use a minority position to block it.  The Dems will take control of the issue again as no health care has already proven to be a losing issue for Republicans – it’s a bad health care bill that Reps been able to capitalize on but flat out denying coverage again into the next election will give the Dems such a majority that the next 2 years will be a conservative bloodbath – JMHO…

    RMBS/Yodi – Seems like a winning range with the stock at $20 – just make sure it’s worth the margin.

    SPWRA/Tm – I don’t get the discount and the liquidity issue trumps it for me.  There must be some disadvantage to owning the B shares or they wouldnt’ be 11% cheaper.   Also, I don’t know if the options are as liquid (haven’t tried) so it just doesn’t interest me to mess around. 

    Obama/Cap – I don’t think it occured to him as it’s expected in Chicago so there’s no need to remind people there…  8-)

    Responses/Fein – Just be sure to actually remind me.  I have zero memory for going back on things!

    EDZ/RMM – The idea of EDZ is it’s very good long-term protection against a major failure overseas.  If you have it for that purpose, it’s a good bet but if you have it as a short-term bear trade, it’s very unpredictable.  For me you own the stock at $4.55 and can sell the March $4 puts and calls for $1.05, which drops the basis to $3.50 with a 14% 2-month profit if called away and a DD at net $4.25 if put to you below $4.  To me, 7% a month is a lot of money.

    DIA/Yodi – The Short-term DIA $106 puts is a day trade, independent of a mattress hedge.  Pretty much I’m risking a quarter against the fact that the $106 calls were almost .75 higher this morning so I’m getting 3:1 odds on my bet that we make a double top at Thursday’s high. 

    Mattress/Steve – June $106 puts now naked again


  83. Pharm
    Your analysis on LLY is moving this stock. Have had additional order in, but not filled. Tomorrow might be even more difficult as the prospects for the healthcare bill passage is dimming IMO


  84. Chevron (CVX -0.6%) is reshuffling its downstream operations, cutting refinery jobs and planning to exit some markets, though details are hazy. The company last week warned its refining margins – and consequently, its fourth-quarter earnings – would take a hit.

    NAHB Housing Market Index: -1 to 15, still the lowest point since June. Current sales conditions -1 to 15; Buyer traffic -1 to 12. Sales expectations for the next six months steady at 26. “We stand poised and ready to deliver new homes as soon as our customers are ready" to take advantage of tax credits and conditions, says NAHB Chairman Joe Robson.

    Obama is clearly wrong – Bankers do need another vote in the Senate, hence today’s rally!


  85. Cap/Angry  Cap, you’re right. I am angry and embarrassed by our political system. The dems were doing a victory dance in the end zone last November and forgot why most of us who voted for "change" really meant. As a taxpayer who has "invested" well north of seven figures over the years, I figure we have spent enough money on war and tax cuts and I now want to see something good come from it…. I know, wishful thinking Randy :(


  86. Sorry for the comment – Let’s make some $$$$ :)


  87. Phil/legislation.  I agree, but that’s why there still will be health insurance legislation if Brown wins--just one that requires the moderate Republicans in the Senate to agree.  My contrarian trading point is not to bet on the death of health insurance legislation.  It will not pass before the State of the Union, but it will be resurrected when the likes of Snowe, Grassley, Hatch and other Senate Finance committee Republicans cut a deal this Spring. 


  88. Phil…People don’t want a health care plan like the democrat’s want to enact.   Who gives a crap what the republican’s want either?   People don’t want either party’s plan right now.   Anti-Washington is all that matters right now period IMHO.


  89. Samz
    The past two years, I have been trading the AUD, NOK and CDN against the USD and this has worked out VERY well. The dynamic in currency trading, IMO, is determining the probability of movement in the pairs. The Australian $ and the Canadian $ are still very good plays, particularily against the EURO and Pound (both are disasters in the making and will be for some time). I think there is a good chance the Australian interest rates might get another pump and this could be very bullish for the currency. Your question re the pairing of the Euro vs the AUD – that makes a lot of good sense, as they are most likely moving in opposite directions for some time to come. Same story for the AUD vs GBP. I think the GBP is on life support and the Euro not there yet but lots of clouds on the horizon. The Brits are not spending money and the banks will not lend, so the economy is in big trouble IMO


  90. JRW/SS.  This is a sleepy range.  You think there’s a play this afternoon?


  91. Phil,
    Sold some 51 TBT Feb puts a few weeks ago at 1.57; is now a good time to roll them into March or June?  What do you suggest.


  92. judah – not in either at the moment.  Low volume doesn’t sit well for a TZA run.


  93. Gel,
    I recently went short GBP and EUR (vs the dollar) and sold puts against them; what do you think of that for income generation.  GBP recently moved up with talk of interest rate increase. 


  94. It is a sad commentary on the political process in America when reference to illegal absentee ballot tactics are an accepted nature of voiting:
     
    No Exit Polls   --  John Fund of WSJ.com explains:

    The Massachusetts Senate race was a complete snoozer until January 5, when pollster Scott Rasmussen released a survey showing Republican Scott Brown trailing Democrat Martha Coakley by only nine points. That surprised many, but still wasn’t a true wake-up call that the race would be a barnburner. As late as January 10, the Boston Globe carried a headline trumpeting a poll showing Ms. Coakley with a 15-point lead. Mr. Brown’s surge was so sudden that many of the usual accoutrements of closely-contested elections are missing in the Bay State.
    One is exit polls. There will be none tonight from Massachusetts, disappointing journalists and political scientists alike. As Mike Allen of Politico.com reports, the consortium of news outlets that normally organizes such surveys didn’t bother when the race was expected to be a blowout and now "wasn’t confident a reliable system could be built so fast."
    Another casualty of the expectation that the race would be a cakewalk for the Democrat will be an absence of absentee ballot fraud, the preferred method of putting an illegal thumb on the scale in a close race. Applications for absentee ballohad to be submitted ts by last Friday, providing little opportunity for those with ill intent to organize such an effort once they realized the race had tightened up . . . Both parties have concerns about vote fraud or intimidation in today’s election. Hundreds of lawyers and observers have been deployed at key polling places. But it’s likely to be a relatively quiet election from a litigation angle unless the final margin is razor-thin. The Brown surge came so suddenly there was no time to plan anything devious beyond the usual negative commercials — which in this race ran everywhere, including, for the first time in anyone’s memory, The Weather Channel.


  95. edward brook was the last republican senator from ma.


  96. 1020; I appreciate your comment and frustration; I too am angry and embarrassed by our political system, for both similar and different reasons.  Which is why, for the most part, I would throw all the bums out.
     
    As for making money; not dong much of that today yet either; still like COF short, may roll over yet today.  But I can wait.


  97. Cap – I can’t wait for the day when ACORN is only a nut in a tree :)


  98. Phil, if you had no positions on now at all, what would you put on with $100,000 ?
     
    and can you recommend a trade on the SRS,  XHB  or TBT  ?
     
    thanks
    DAvid


  99. Anyone buying SRS or SDS here?


  100. b1ll/buying  I would love to load up on SDS, i just don’t have the acorns to do it :)


  101. My take on elections:  it’s anti-incumbent, anti washington, anti wall street fever
    Does anyone smell a serious third party in the making? 


  102. Humvee
    I am very careful when trading the USD at the moment. My position the dollar is trending up because of safety issues. This same reasoning is keeping the bond market alive. My concren is in trying to determine how long this will last. The dollar is a wild card, and therefore too risky to pair it with any currency. Cross trading is safer and is easier, IMO. If we see a significant correction in the equity markets ( a good possibility), then the rotation will be into bonds. Once the correction plays out , then the focus will be rotation back into equities and the bond market will die and ultimately the Fed will adjust the interest rates in order to attract fools (buyers). The problem for the Fed is growing, because the amount of new bond buyers is increasing due to the nedd to cover the increasing deficits. This increase is about 75%, so it is clear how this will play out.


  103. Just shorted some more COf at 42.80 !


  104. I was so close to buying some AAPL calls on Friday, and now I’m kicking myself for not doing so.  I guess I will wait until after earnings and hope they fall some as Phil is predicting, for a better entry point.
    Phil, what do you think about C as a longer-term investment?  They were up to well over 5 recently, and the Jan 2011 5.00 calls are pretty cheap (and have a lot of open interest).  I’m thinking those could pay off big time with just a bit of patience.


  105. Great points gel
    I agree with your underlying scenario
    Thanks


  106. humvee – Do you think people could adopt a third party here? I never understood how people "are" republican or "are" democrat. How can you "be" a political party? Is it really not possible to believe in universal healthcare and otherwise reduced taxation at the same time? How can so many people believe in everything one of only two parties stands for? How is it even possible for only two choices to define 90% of the population?
     
    IMHO the party politics in this country is found more important than the actual issues at hand and I think that’s a crying shame. People don’t discuss issues as much as bandy political dogma. It’s asinine, boring and ineffective all at the same time.
     
    End of rant :)


  107. Historically we never get a viable third party, just viable enough to hand elections to one of the existing parties (such as Ross Perot giving Clinton the election with a pleurality).  Even Teddy R couldn’t win on the Bull Moose party; so we don’t have a history of really throwing out the bums.  Unfortunately the vast majority of the electorate are lazy and get fed pablum in the form of 8 sec bites of entertainment mascarading  as news. 
    Hell as long as we all get our mind numbed by sports, reality tv shows, porno, hip-hop, celebrity culture, alcohol or drugs who cares?  IMHO


  108. Not one wheeee! all day.  Where’s the fun in that?


  109. High time for the dollar to break out.


  110. I believe Brown is on his way to Washington, what is with the barn jacket? I have lived in DC and never saw this closet fopaw while there – not even the reps from Iowa.


  111. TBT/Humvee – Yes, you want to take advantage of a panic, which increases the longer VIX that you’ll be rolling to.  The June $47 puts are $2.25 and you can roll to 1.2X about even or be more agressive and go to 2x the March $48 puts at $1.47.

    $100K/DMan – TBT is still my favorite as it strains my brain to come up with a way we make it through another year with the 20-year at 4%.  You can go for the 2011 $45/52 bull call spread at $3 and sell 1/2 March $51 calls for .95 and March $45 puts for .50 – that’s almost 1/2 your money back in a month.  Since higher interest is already kind of short Real Estate, you don’t need to mess around with SRS or XHB but you can buy some balance with the UYG buy/write I described earlier or XLF at $15.10, selling March $15 puts and calls for $1.22, which is net $13.88./14.44 and picking up that $1.22 6 times a year is $7.32 back on $15 or 48% – not the worst annual return.

    SDS/B1, 1020 – You can go for the June $30/34 bull call spread at $1.70 and sell March $31 puts for $1.70 if SDS drops $2 (now .83) and also sell March $37 calls for .85 but you’ll have to add long calls if they break $35 to set up for rolling the caller.

    3rd Party/Humvee – Dream on!  I wish it could happen but, sadly, the voters in this country can’t handle 2 parties and pretty much stick with one no matter what.  And what Steve said!  And what you said too!

    COF/Cap – I hope that works out better than the Mass election for you!   8-)  Seriously, C made nice CC noises today, that’s why we went long on V for the day-trade earlier. 

    Wheee/Judah – You have to be patient when they take you up the really steep incline, right before the big finish. 

    Oil up to $79 – there’s a wheee but it’s more like a "squeal louder" kind of wheee….


  112. stevenparker/humvee4me  Great points. Independent thinkers who care ARE the minority…..


  113. TWM $21 calls at $2.65 as mo play, out if RUT gets back over 647.50.


  114. re:
    there’s a wheee but it’s more like a "squeal louder" kind of wheee….
     
    paddle faster. i think i hear banjo music…..


  115. What did C say on the CC ?


  116. COF is such a joke; totally controlled by HAL 9000.   Just look at the 2-day chart and intra-day.  But its a POS company.


  117. Chaps… LOL


  118.  C said not to short COF. ;-)


  119. There ya go; another reason to go short COF !


  120. BIDU recovers $12 from its lows today; now down only $26.50


  121. To stick or anit-stick, that is the question

    Brazil’s plan to weaken its currency with a tax on foreigners’ stock purchases has worked – with a 3.1% decline in the real against the dollar – which strategists call a "dangerous" precedent and maybe a precursor to increasing the tax: “The government has had a surprising success in putting the fear in the carry-trade community.” (ETFs: EWZ, BZF)

    A note from Jefferies’ Katherine Egbert restarts the "Project Pink" rumors that Microsoft (MSFT) is following Google (GOOG) into the smartphone market by introducing its own handset, as soon as a few weeks from now. But on the success meter, would a Microsoft phone be more of a "Zune" – or an "Xbox"?

    As Avatar (NWS) nears a global box-office record with $1.62B in receipts, it’s being pulled from 1,628 screens in China – but reasons range from "ending a normal run cycle" to "it’s hurting homegrown films" to "displaced-people themes sensitive to Beijing."

    A different problem: In the U.K., Bank of England Governor (and stimulus supporter) Mervyn King says inflation will be kept in check by "undesirably low" money supply growth. The country’s 10-year breakeven rate (a gauge of investor expectations for inflation) rose to a two-year high today.

    Paul Farrell’s 10 reasons Obama is failing investors. Reason No. 7: Letting fat-cat bankers hijack your presidency.


  122. Oh Oh… MA is 3000 miles away from CA – the SF Chronicle just predicted the seat of Sen Boxer is very much up for grabs, and Pelosi is equally in trouble. Wow!


  123. AAPL lover, as you know.  Profits taken today on a 4% runup in the stock. ( April 210 calls sold.)  I think it’s going higher but having made a significant jump today I’ll now wait for a pullback before reentering.   I think Phil might agree with this strategy. 


  124. Pelosi reminds me of Kathryn Helmond in "Brazil"


  125. Gel -
    thanks re aud / eur -
    i think you are right about not shorting dollar right now – i did just sell some puts on fxa but small position


  126. Phil – what’s the call on covers – still naked.


  127. Sorry to keep beating a dead horse, but Vix options expire today (strange) and with the vix at 17.60, 18 puts are 0.05/0.10 (and 0.40 in the money), while 19 puts are (0.30/0.35), while being $1.40 in the money?  This would be predicting a major sell-off (spike in vix) in the next hour, otherwise, this is basically free money, is it not Phil?


  128. Samz/AUD
    That is a very safe play and I would do the same.


  129. phil you gonna hold or sell dia puts? Long DIA 106 puts at 1.37


  130. Hi Phil : On WFR, I sold Feb.$14 puts for $.84 ,now $.40.thinking of rolling to March $14 for $.95 or April $14 puts for $1.15.I  then can capture my 50% profit  & get more protection on the downside. what do you think?
    Dflam


  131. We could see a  follow through tomorrow given the political ramifications of a victory for the GOP… card check and Cap & Tax could bite the dust. This will energize the market IMO


  132. JRW/SS. Got on TZA at 63.75, using a tight stop. Probably be a wash.


  133. Billman
    VIX settlement value is set tomorrow morning it is not EOD. So there is still risk.


  134. judah – nice.  Good luck.  I would love to see a pullback from this ridiculous pump.  JRW sure knows how to scout those lines.


  135. 5500 americans missing in Haiti. What will Rush have to say about that….


  136. More manipulation:  Today, Buffett is in the headlines regarding POSCO (PKX), another company in which he is a large shareholder (4.5%). This morning Reuters quoted PKX’s CEO as saying that Buffett was looking to buy more shares in the company "after missing the opportunity to buy them on dips last year when the global financial crisis depressed equity asset values." In reaction to the news, the stock is trading 3.5% higher, partially erasing a one-week slide in the company’s shares. The only question for investors is, why would Buffett, or for that matter any other investor, be telegraphing his moves before acually making them. Does anyone seriously believe that Buffett is going to go out and buy more shares in the company after publicly saying he liked the company?

    AAPL/Iflan – Yes, too dependent on IBM numbers tonight.

    Brazil/Cap – That was a cool film. 

    Covers/Samz – Yep, playing for some disappointment tonight.  We either pull back or zip to new highs where there’s no point in shorting anything as we will have broken the bonds of gravity. 

    DIA/Hanna – Depends if they make money or not.  If I can get $1.50+ for them, I’ll be happy and, if not, I’d rather give them overnight. 

    WFR/Dflam – Nice job!  I like the March idea, April is getting a little far out.   You could also wait and see if we get some SOX earnings misses to give you a better re-entry.

    Missing Americans/1020 – Is that from the earthquake or did that happen to the rescue workers we sent down after the fact?  8-)


  137. Looking at SO for a mo play on the dividend, interesting option pricing.  Seems that the options are priced for the stock to drop after ex-div on Feb 1.  Even after the ex date, the Jan11 35 C are $1, the 30 P are 1.5.  With the stock closer to 35 and 30, something fishy is going on.


  138. Phil/Missing  I hope everyone knows to watch their backs, but the 5500 figure comes from the family and freinds of the un-accounted-for. Hopefully the number is much lower than that….


  139. Phil:  Any thoughts on Feb XLF 16 strike calls at this point….


  140. pHIL: HAVE NOT MADE SOME $ LATELY BY SELLING dia PUTS to have $ to roll the MAR107 puts.


  141. Wow, there might be nothing stopping this crazy train!  We just got jammed up big time.

    So what’s the story today?  We have the promise of the Republicans being able to block up Congress for a year but health-care stocks have been doing great up till now but now they are going to do even better if there’s no legislation – only a trade-bot can have that kind of logic..  We also have the anticipation of great earnings from IBM, BAC (???), EAT, COH, HCBK (???), MTB (???), MS, NTRS, PGR, STT (???), USB (???) and WFC (???) all before tomorrow’s open.  This is very brave considering JPM and INTC tanked us Friday and I was previously unaware that MS was so much better than JPM or that BAC et al had it so together that there was no reason to fear what they have to say.

    They may do well, they may not do well – I would have been neutral about it had we not gained 1.5% ahead of it but now the gamble on the sell-off makes more sense since clearly, no one buying today has considered the possibility of a disappointment tomorrow. 

    Note the VIX at 17.43 now, down 2.5%.

    XLF/Jeff – If the banksters pull it out tomorrow, then sure but I wouldn’t go in ahead of it.

    RMM – THAT IS TOO BAD, THEN MAYBE DON’T ROLL UNTIL YOU DO.


  142. Phil: are you that smart, of course.


  143. Calling the state’s special election "an uphill battle to put it mildly," Senate Majority Whip Dick Durbin, D-Ill., said "there are options to still pursue health care" should Democrat Martha Coakley lose to Brown. 

    Congressional Democrats have been discussing several options, since a Brown win would break the party’s 60-vote, filibuster-proof majority at a critical time for health care reform. Durbin, the No. 2 Democrat in the Senate, described a combination of tactics to get what his party wants out of health care reform. 

    First, he said the House could simply approve the Senate bill, sending it straight to President Obama’s desk. 

    Then, Durbin said, the Senate could make changes to the bill by using the nuclear option, known formally as "reconciliation," a tactic that would allow Democrats to adjust parts of health care reform with just a 51-vote majority. 

    I really think this is all about the fundies dumping their health care stocks on a whole new round of suckers as the spin a brand new tale right before they collapse the tent

     


  144. (sq)WHEEEE!!!!


  145. RECONCILIATION – TAKE ONE FOR THE TEAM BOYS AND GIRLS!


  146. i doubled down on DIA 106 puts at 1.32. Maybe too early, but its good hedging for me anyways.


  147. dflam
    WFR I see the Feb 14p trading for .70 not for .40 pls check


  148. AAPL getting close to 5% rule – what a craazy day.  BIDU down 6%, GOOG up 1.5% with the market. 

    SNDK having a hell of a day, up 7%.  X up 5%, VZ looking good, SHLD at $105, MCD up 2% as someone noticed this morning that they are trailing the Dow by a mile and pay a 3.5% dividend.  EBAY up huge ahead of earnings, ADBE up 3%, ZION at 5% rule.

    Volume is lamish 148M on the Dow with 10 mins to go. 

    DIA/Hanna – The main reason we DD is to lower the basis and get 1/2 out even, generally just setting our break-even lower. 

    This will probably be my last bearish judgement call because if they crack up from here, it’s just going to be foolish to be bearish but I’ll give it one more night and see if all those reporting companies can send us higher tomorrow (plus the miracle in Mass).


  149. judah,
    TNA is above my target and I don’t want to carry overnight, so I’m getting out.



  150. IBM finishing at the high of the day, up 2.5% and up 5% since last week – they’d better be worth it!


  151. Prediction… The healthcare bill and all of its 2000 pages with be buried next to Ted Kennedy, and a whole new bill will be created over a very long period of time, with participation from both parties. The majority of the voting population have spoken and the parasite politicos are listening for a change. Hope is in the air. The end result will be the insurance coverage of the uninsured, but the tort lawyers will be history along with many of the control properties in the current bill. Socialist Security, Medicare, Medicaid and many of the other entitlement programs have an unfunded 60 Tril liability, and the voting population are starting to realize the catastrophic ramifications of the debt/GDP imbalance. Lesson to the politial potentates – Do not take the voting public for granted, and do not make the assumption they are dumb. ( My last editorial)


  152. JRW, I got out for the same price I paid. That’s an hour of my life and 2 commissions I won’t get back again.  Nothing ventured… If IWM goes to 65, I’m jumping on TZA.  This is ridiculous.  Do you ever carry TNA/TZA overnight? 


  153. IBM pretty much thrashed it.  3.59 vs 3.47, EPS upped to 11 from 10.88.  Stock going down….


  154. Phil,
    I’m still in DXD and SMN bear plays. I’m assuming, if we do break up and hold, we just stop those out. Also, I’m 75% cash so waiting for the signal to BUY BUY BUY. I have been scaling into small positions over the past week but, like you, I feel like it sucks to have to buy up here, I really hoped for a nice correction. Anyway, I might need some extra advice and if you give us the ALL-CLEAR (relatively speaking) signal when it is time to pull the trigger, I’d really appreciate it. :-)


  155. judah,
    I have carried over in the past with a record of about 2 and 15. I’m hoping for a neutral open, a pump, and then I’ll load up on TZA.


  156. Yodi: Your’e correct. I meant the $13 puts.I did a buy/write with the $14 calls & $13 puts.
    Dflam


  157. IBM manages earnings anyway; a chunk comes from stock buybacks.  No big beat.  It should be down.  And it is.


  158. Gel, That’s an awfully optimistic prediction.  I’m afraid such a path would take leadership from the president, and at the risk of stirring up some on this board, our president decided early on to follow the Hill Democrats rather than lead them.  Congressional losses could be the best thing for Obama, as it would permit him to tack toward the center, but only if he wants to.


  159. Uh oh, IBM only beat by .12 (3%), that doesn’t quite justify a 5% run. 

    IBM (IBM): Q4 EPS of $3.59 beats by $0.12. Revenue of $27.2B (+1%) vs. $27B. Expects 2010 EPS of at least $11.00 vs. $10.88. Americas revenue down 3%; Asia-Pacific up 6%. Gross profit margin 48.3% vs. year-ago 47.9%. Shares -0.8% AH. (PR)

    One could only hope Gel – I’m pretty sure it will get rammed through if Brown is elected as the House won’t kick it back to the Senate and leave things to chance (Pelosi will go nuts). 

    Bear plays/AC – Either get out or get a bunch of very bullish plays to cover.  We pretty much got a BUYBUYBUY signal today as bears were simply executed (the ones who didn’t take money and run on Friday’s dip). 

    CREE did have a nice beat!  Cree (CREE): FQ2 EPS of $0.38 beats by $0.08. Revenue of $200M (+35%) vs. $187M. Shares +7.9% AH. (PR)

    CSX (CSX): Q4 EPS of $0.77 beats by $0.01. Revenue of $2.3B (-13%) vs. $2.4B. Shares -1.5% AH. (PR)

    How bullish are healthcare investors as Massachusetts Republicans try to get a Senate seat considered critical to reform efforts? Call options are at five times the four-week average. Dollar-volume leaders: PFE +2.6%, JNJ +1.3%, MRK +2.7%, LLY +4.5%. (ETF: XLV)  – Yeah, what could possibly go wrong?


  160. Wow I guess  I should call my family and friends tonight to say goodbye because, based on many of today’s postings, the fate of all mankind is apparently riding on one congressional district in Mass. Let’s step back here people, aren’t we letting MSM getting us all frothed up on this one seat? OK give dumbo the elephant one more seat… has the balance of power shifted that much? Are we to assume that each member of Congress is a robot who will vote the party line, despite all the goodies that the lobbyists, Administration, etc dangle in front of them? Baloney. I damn well guarantee you the sun will rise tomorrow no matter who wins. Jesus, maybe upwards of 200,000 dead in Haiti and we’ve all got our undies in a twist because Coakley didn’t shake some Southie’s hand at a ball game, and because according to Glenn Beck Obama’s gonna come to your house twice a week and personally kick your puppy-dog in the nuts if he has his way on health care??? Come on, we denigrate MSM daily on how they spin and manipulate financial reporting, and get the sheeple dancing to the tune they choose. Isn’t this the same thing, only in a political context? Sure,  the pundits will be tearing each other a new one tonight and it will be great fun, just like watching professional wrestling. But is January 20 gonna be forever known as "the day everything changed?"  


  161. Center- I think it has been Pres Obama’s plan all along to pivot towards the center after the health care bill was behind him. It would be the only way to be re-elected. His handlers (the guy behind the guys) will insist on it. A defeat in MA will just hasten the inevitable. The folks who pull the strings and jerk the levers like having him in charge as it feeds their coffers richly. Pres. Obama is more idealogue than crafty politition. The handlers have only a single interest- theirs. Should he choose otherwise, they will cut him loose; subtly at first then more openly. Watch the signs- some key resignations or a policy challenge from some a congressional supporter. The MA situation, regardless of the actual vote counting is a "defeat" for the Dems and a "victory" for the Repubs, at least in the short term. In dramatic fashion, it demonstrates how vulnerable they are and they will be heading for the tall grass in droves. The boys behind the curtain are surely working feverishly on getting in front of this train.


  162. Phil
    My premise is that the House Dems are 1. Not going to accept the Senate version as they do not like it, and their version which is very different, squeaked through on only a couple of votes. 2 Most importantly, if Brown wins, it sends a VERY strong message to the Dem reps that passage of the bill is a death certificate for their re-election. 3. The ONLY important thought in their mind is to please their constituincy and re-election, and 60% of the population is against this bill. Health care legislation is wanted, but in a much different version than was is currently under consideration.


  163. Yeh-great if a R gets Ma. With 50 MIll with no insurance & 35 million getting food stamps &  mega bail-out ochestrated by the Bushy Boys for billions upon billions of bail-out money to line their pockets-Yep u bet we ALL need those R’s back!! Have u all been living in a cave for the past nine years??HOw much worse does it have to be for anyone to be grounded in some reality?? Just keep taking those mind numbing tranks & booze to keep those gray cells numbed-I’m surprised we all don’t keep lubricated when we realize what the American publ;ic has intrusted their lives & hard-earned dollars in-Some of us still TRY to see the big picture, not only our own petty concerns.


  164. Phil – was CREE’s earnings enough to be considered ‘blockbuster’ and look at them/VECO long term?


  165. Are we to assume that each member of Congress is a robot who will vote the party line, despite all the goodies that the lobbyists, Administration, etc dangle in front of them
    Yes


  166. Thx bord.  Agreed.  D or R, who cares.  Let’s play the game here, make a bit of change, and cheers each other for a good day a the desk.


  167. New SPX range bound.  Tighter than before….


  168. bord; yes it is just one seat.  But it does change the playing field and it portends disaster for Obama and the Democrats come November.
    Look, if the Dems can’t retain Ted Kennedy’s seat in liberal MA, that says quite a bit about the mood of the country towards the Democratic agenda.  Spin it any way you like; but that is what this is all about.
     
    And let me be clear; I have no ill will towards those of you who are Dems, or those of you who are Repubs (I am an independent); I dislike most pols; but as I have said here many time, I have a much greater dislike of certain Democratic politicians and am fundamentally opposed to the Obama/Reid/Pelosi agenda.  I don’t judge individuals by their party affiliations.  Frankly, I don’t know why anyone wants to or needs to be affiliated with a particular party; I am more of an issues and integrity guy.
     
    So when I criticize them, understand that I am not criticizing you.  I can respect your different views, even if I disagree with them. 
     
    I cannot however, respect the sleazebags in Congress and state and local government that are robbing us blind while they happily live off the public dole and do anything to stay in office.


  169. I hear Coakley is out now claiming voter fraud in Democratic MA.
     
    What’s her beef, that there wasn’t enough of it to get her elected ?


  170. Pharm/whocares  Pharm, I agree that we should concentrate on making a bit of change, but for some of us, it’s personal and for me, it’s hard to look away from MA. The decisions, or lack of, that are made will impact all of us and  future generations to come. The d’s losing MA. is just another example that when a D or R have the majority, that they cannot get a damn thing done. It’s a shame that all of the effort and hours spent could be for naught.
    With any change,Movement towards a positive outcome can be uncertain, risky and certainly painful, but no movement at all is shameful. For me, Knowing there might be a train wreck with the possibilty of no survivors is a major distraction indeed.


  171. Chalres Biderman:  http://www.clipsyndicate.com/video/play/1264208/biderman_says_futures_driving_u_s_stock_market_rally_video
    zerohedge   New post: ABC Consumer Confidence At Three Month Low: Comes In At -49 On Expectations Of -44 http://tinyurl.com/yelnu5x


  172. 1020 – that locomotive already left the station years ago, and this country is getting more divisive every election.  Not gonna get sucked into this one. 


  173. 1020; have to disagree.  Change for change’s sake does not make sense.  And in ObamaCare’s case; it really makes no sense.  The choice is not between "doing something, anything, no matter how stupid" and "doing nothing".
     
    Do it right.  Obama made promises … transparency, bipartisanship, Cspan, etc.  Hasn’t kept any of ‘em.
     
    Fix medicare for example.   Don’t create a fiscal sinkhole.  This isn’t a plan; its a rube goldberg pork fest to expand government and take from many to give to favored political constituencies.
     
    That is not change, my friend.


  174. And with that, I bid y’all adieu for the evening; looking for some positive change in the Senate tonite !


  175. Cap – you mean there will be less career politicians?


  176. MA special election …….results according to local Boston radio station, in the the town of Nahant, just a few miles from downtown Boston…Brown 880, Coakley 877…… most towns reporting so far also going to Brown. Rasmussen poll indicating that 22 % of registered Democrats voted for Brown.


  177. Cap…. Sleep well my friend – Your dreams will materialize overnight and the world will be better for it. I lived in Boston for a few years, and I can tell you the majority of people in the Commonwealth are intelligent and this decision is a no-brainer!


  178. Pharm/locomotive   Respect :)


  179. Just heard that it got very chilly in Washington DC tonight. Something about a cold wind blowing in from the Northeast. 
    It was so cold that politicians could be seen walking around with their hands in their OWN pockets!


  180. I’m back !  What a compelling story; and I think it will help somewhat.  Let’s see if Obama and Pelosi go all out on walking the plank from here.
     
    Stevenparker … I wish that were the case.  Sadly,no.
     
    If you haven’t seen Frank Luntz’ focus group of MA voters tonite, you should check it out.  You can see what happened and why …  the basic message is people are fed up w/ DC; fed up w/ backroom deals and bribes; the out of control spending and taxes on the horizon, the DC business as usual.  As for Obama, independents are chucking him overboard b/c they see he is not what he claimed to be.   He is not the outsider agent of change he claims to be; he is more of the same; but worse.  [these are not my words; these are the voters]. 
     
    Coakley making concession speech right now; the most human she has sounded in the last 2 weeks.
     
    Politics … still a dirty, ugly business.
     
    Have a good night all; tomorrow lets get back to making money.


  181. Cap/change   Cap, I loath the current bill. It is not change, It’s what I call "goodenuf"  Obama promised change, thats why I voted for the man. Thank goodness I’ve always been a skeptical optimist :)
    I would have like to see health insurance reformed to run more like auto insurance, with lots of compitition, legal reforms and costs based on your personal choices. Besides, who would’nt want to buy their health insurance from a gekko?


  182. I did have one sign that the rally is about to go into the next phase.  A friend who invests but usually does not talk about it, bragged about how well he has been doing being invested in the market and specific stocks in particular.  For me this is a sign on the way to a potential fall.


  183. Good morning!

    Fate of all mankind/Bord – Jon Stewart had a great take on this.  He does a great job of keeping the whole thing in perspective. 

    Plan/Pstas – At this point, the Dems remind me of what the Joker says in Batman: "Do really look like a guy with a plan…  I just do things…" (1:35)

    House Bill/Gel – I think the House Bill "squeaked by" only because the Dems thought there was a fight to be won.  Now they have to choose between the bill they have or, possibly, nothing and that’s a very different decision.  At this point, I would love it if the Health Care Bill went down in flames because your read on what the people want is wrong – the people want social reform and they are angry with the Dems for not being more liberal and a year of Republican fillibusters will radicalize the voters quite nicely – and it won’t be a radical right, I can assure you….  One key to the Dems Mass loss is that Mass already has a health care system that’s better than what’s being offered by Congress so the bill as advertised would be a step backwards for them…

    CREE/Jrom – Not blockbuster but enough to justify their value at this trend.  If we hear more good outlooks from techland, then I like them long-term.

    And what Steve said!

    And what Cap said – let’s get a 3rd party going for real (although I very much doubt Cap and I will agree on a plank)

    Consumer Confidence/Cap – Well, what did they expect with $80 oil?  Man these "economists" really do not get it do they?