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Whig Party Wednesday – Republicans Take Kennedy’s Seat at the Table!

WTF?  I mean, REALLY, how can the Dems fall apart this quickly?

I’m not going to get into a whole political thing here – Jon Stewart already said it very well on Monday when this Senate race was looing bad but – HOLY COW, did the Democrats just blow Massachusetts?  And don’t write in to tell me that technically, the Whigs and the Republicans were two different parties – Lincoln was a Whig, so if you want to keep claiming him you’d better embrace your party’s roots…  The Whig party was on quite a roll at one time with Harrison, Tyler and Fillmore all holding the Presidency as Whigs but after Lincoln made it 3 out of 4 Whigs to die in office, re-branding as Republicans seemed like a good idea!

I didn’t think Brown would win yesterday and, with the Health Care sector flying in anticipation of his victory, we went short into the close – figuring that was a better percentage play anyway as the market still seems nearer a top than a bottom and we have Housing Starts at 8:30 and PPI plus a lot of questionable earnings reports but, as I said to Members, if we do get through this and are still holding our highs – it’s going to be impossible to stay bearish.

SCHW missed last night, as did PNFP but we got good reports from ADTN, CREE, CSX, IBM, SUPX and WIT.  BAC is our big miss so far this morning and that was my big concern with BK, HCBK, MTB, MS, NTRS, STT, USB and WFC all on deck with them.  BK, USB and STT already cleared their bar – nothing too impressive, but surviving despite still very low revenues.  Low revenues still concern me – EAT beat low expectations but revenues were down 17.6% from last year and last year was terrible.  COH is holding up my rich getting richer theory as business there is up 11% with earnings about the same.  In-line with our theory that retail investors have abandoned the markets, SCHW reports 23.2% lower revenues than last year.

The tone of earnings so far, companies making profits on lower revenues through cost-cutting, does not bode well for the bottom 90% of society and a Global Insight study indicates that unemployment may persist above 10% in parts of this country through 2013.  "What is just as alarming as the double-digit unemployment in many of the nation’s major metro areas is the lethargic rate at which it will recede once the job market turns around," the report said.  In November, the last month for which city-wide data is available, 17 metropolitan areas had unemployment rates topping 15 percent, according to the Labor Department.  According to Global Insight, metropolitan areas account for 86 percent of U.S. employment and 90 percent of its economic output

Isn’t that fantastic?  That means we (the top 10%) won’t have to pay them jack!  They don’t need no stinikin’ health care benefits – they are lucky to have jobs.  I bet we can even squeeze another 10% more productivity out of the 145M people who are working by increasing unpaid hourse and decreasing paid vacation time and other benefits and then we can lay off another 14M people – they they will come crawling on their knees BEGGING for minimum wage.  Muhaha – I love capitalism

The only thing falling faster than US Consumer Confidence (down 2 more points to -49),  is German Investor Confidence, which dropped 2.5% this month to 47.20 and is now down 20% since October.  Germans are understandably concerned about the ongoing crisis in Greece while Americans don’t understand where Greece is on a map and many people think it’s just a musical anyway, which is how US investors are able to plow money into the markets with such blind faith – as if nothing that happened in the past two years could ever happen again.  Rational German caution running headlong into irrational American exuberance is pushing the Euro down against the dollar and that is going to be bad for the commodity pushers today. 

We’ve been short oil since the $80s ($77.50 is critical) and I warned you about gold yesteray ($1,118 is their breakdown), but let’s watch copper and see if they fail the critical $3.40 level, which is a very negative sign for the market.  $5.50 is breaking down in nat gas and $18.50 is silver’s silver bullet – all should fail today if the dollar gets rolling back to $1.40 to the Euro.  Keep in mind that our working theory is that companies that service the top 10% will do great this earnings season but companies that rely on the masses to consume will have problems as the masses are broke and getting broker and even forced purchases like commodities are unaffordable and people are simply learning to do without (ie. demand destruction). 

Speaking of demand destruction – Producer Prices are in and they are up just 0.2% and 0% at the core, indicating that producers are unable to pass along increased costs to the consumers.  Housing Starts fell another 4% this month, to 557,000 annualized homes, off the 572,000 projected.  Keep in mind that this is down from 2.2M starts in 2004, 2005 and 2006 so 557,000 starts would be considerably less.  Keep this chart in mind when some idiot analyst tries to tell you how there are signs of improvement in the housing market… 

We were building 2.2M $250,000 homes back then, that’s $550Bn of economic activity and now we are building 557,000 $220,000 homes and that’s $122.5Bn so $427.5Bn (77%) LESS in that industry alone.  What the hell are these people talking about on TV when they say things are turning around???

557,000 homes works out to less than 1,000 homes per month, per state.  How many people can that possibly employ?  How many mortgage brokers or realtors will be able to live off those commissions?  How much money can the banks be making lending money on those homes?  How many fixtures will your local Home Depot sell based on that number of homes?  5?  10?  THAT is what the economy looks like to THE PEOPLE.  Yet Sears (SHLD) is trading at 46 times forward earnings (they don’t have any current earnings) and the XHB (homebuilder’s index) is up 100% from where it was in March and only about 1/2 of where it was when we were selling 4 times more homes.

Yes hope springs eternal in the markets but I still think it’s a silly, irrational hope that has no grounding in reality and, even though we are quite content to make money on the silliness (we made 33% betting V up yesterday but got the hell out – because it was silly!), I will still do my best to keep you aware of what is really going on under the hood.

Concerns about the economic engine of China were voiced by Premier Wen Jiabao yesterday and that sent the Hang Seng tumbling 1.8% while the Shanghai fell 2.9%.  “In terms of monetary policy, China’s overall trend is heading for tightening this year to keep economic bubbles from bursting, but officials are also trying to sustain and expand the economic growth with budgetary tools,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “That’s a difficult and narrow path to walk through.”  The Nikkei held up fairly well, falling just 0.25% on the day as the dollar was pumped back over 91 Yen at 10 pm (Japan’s open) but it fell right back down below it as soon as the Nikkei closed and the show was over. 

Europe is down about a point ahead of our open as German Producers are also having trouble passing along increasing commodity prices with deflation still rearing it’s ugly head in the EU.  On the other hand, the UK has inflated their money supply enough to create record INflation for their people, up an annualized 1% in a month to 2.9% for December and 50% over the BOE’s target.  Funny how fast these things can explode up on you! 

BOE Governor, Mervyn King, said trade imbalances that helped push the global economy into its biggest recession since World War II are widening and “urgent” action must be taken to prevent more turmoil.  “If countries do not work together to reduce the ‘too high to last’ imbalances, a crisis of one sort or another in financial markets is only too likely.  Concrete steps to reduce the scale of global imbalances have, to date, been notable by their absence,” King said. “Smiling family photographs marking the attendance at international gatherings are no substitute for specific actions.”

So happy Wednesday to you!  Looks like we’re glad we were short yesterday and we’ll have to see in chat if our levels hold up, giving us yet another chance to flip bullish and have a 2-way day or if we finally have a proper sell-off, maybe with some volume this time..

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  1. Phil – Not sure what is going on this morning – Dollar rising, other currencies crumbling as well as oil, gold and other commodities. Chalk that to yesterday’s elections. But listening to Kudlow yesterday, the market should be in a huge rally by now! What are we missing?

  2. Good Morning! Banana cream pie!? :)

  3. First big one of the year…CEPH is in buyout discussions.

  4. pharm – do you have any ceph positions?  Not even Harwood could spin yesterday’s election.

  5. Phil, in light of decent bank earnings, is XLF a short in the near term? thanks

  6. yes, I am 3/4 covered front 60s with Jan11 same.   I also sold puts yesterday at the same strike.

  7. Now they are falling like a knife.  Man I love this stuff.

  8. It makes total sense that the markets are down with Brown’s win.  I predicted it yesterday.  The status quo has been that both parties have been participants in bailing out wall street.  Brown’s win is more than just about the health care bill.  It’s about main street’s rebellion against the status quo in Washington and all the bailouts.   Coakley said she would back the status quo, Brown did not.  It’s not that Republicans can relish this win and think they can take over in 2010.   Brown’s win signals that the masses don’t really want more progressivism.   The 90% are sick of hearing about bailouts and bonuses. They assumed that Brown was more for main street than Coakley.  The opposite of what you normally would expect.

  9. Good morning Phil,
    Yesterday you mentioned to close some protection options on a down market as we had last week it looks like today will be an other opportunity to close on certain protection options please give us some indication which once to close and take a loss. thanks

  10. Missing/Stj - Well, for one thing you are missing the fact that Kudlow is an idiot.  We had our rally on a Republican victory yesterday and the premise made no sense, which is why we went bearish.  As I said mid-day, had we not been up 1.5%, I wouldn’t have risked it but, once we were up there, the bearish rewards outweighed the risks. 

    Let’s not get too ahead of ourselves though – the only good bear move for many moons has been take 20% and run and we need to not be greedy with these nice, quick profits!

    Yesterday, I decided our new upside resistance points were:  Dow 10,750, Nas 2,325, S&P 1,150, NYSE 7,500 and RUT 650 and that ANY of those are considered impressive. 

    Our failure levels are still good old  Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 applying the 3 of 5 rule for bullish and bearish decisions.  So far, the Nas is still giving us trouble and is the only index below but I do expect them to be joined by the RUT, testing 635, and the S&P at 1,135 – if those hold and the Dow holds 10,550, then we may want to flip bullish for a possible stick. 

    Volume is key but it will take a hell of a lot of it for us to break lower, otherwise, the trade-bots kick in to save the market between 10 and 10:30 so stay on your toes! 

  11. PCU down to 32.41 (1.26)

  12. ZION out of control up 4.5% 17.89

  13. I got out of the DIA 106s a little early at 1.69.  But hey thats 22% so its ok with me.  Now waiting to sell the same 106s against my June 109s.

  14. the market gave me a gift this morning and dropped PCX enough to pull a small profit after my DD yesterday. Wasn’t looking good at the end of the day when it hit $21.20. Hooray.
    Phil – thoughts on Shorting COF or ZION even with the potential 10am pump? They’re really flying this morning – can’t figure out why COF is going up.

  15. XLF/1020 – I wouldn’t short it.  The banks are holding up pretty well and they are still trading at lows that assume another disruption will come.  It might but, if it doesn’t, this is still the lowest you will be able to buy XLF for many years.

    See, being bearish can be fun – just not very often!  8-)

    Brown/Tm – I hope so because if it is a signal for back to Republican Rule then we are all doomed (no offense to Republicans out there, of course). 

    Protection/Yodi – What??  It would help if you tell me what you have rather than me trying to guess.

    Actually NOW is a good time to take money and run as it’s just about 10 and the volume is too low (35M on the Dow) for a sustained sell-off so be very careful as we may bounce here.

  16. Phil, what do you think about buying really deep in the money calls for DIA for 2012 in a retirement account?  Very little premium.  Can’t sell puts in this account.

  17. Phil thanks on your opinion on RMBS yesterday closed for a fat profit taday

  18.  Phil
    ABX Puts looking attractive – what do you think?

  19. Phil, i have FCX 80 Feb puts uncovered from rom Jan/Feb spread.  If i close it out, it will be a small loss – but earnings are tomorrow, i believe.  Any thoughts – they have had quite a runup, with a bunch of upgrades – could they be a sell on the news?

  20. BIDU coming back strong.  AAPL weak.  I saw Gartner estimates for about $45Bn in App sales by 2013, which is $15Bn for AAPL so undervalued is an understatement if that’s true.

    CREE is going nuts.  XLF didn’t fail $15, that’s always a good clue that the bears have no teeth….  SOX 350 is  good to hold as is Nas 2,300…

    ZION/Yodi – Like I said, the banks are not looking bad so far. 

    DIA Mattress – We want to sell those Feb $105 puts for $1.50+ if we can (bought them back yesterday a bit early at $1.25) although a 1/2 sell of the Feb $106 puts at $2 is even more appealing as it’s nice collections and flexible.

  21. 64.15 is MAJOR support on IWM ( Russell ), if it breaks,but TZA.

  22. Phil — do you prefer shorting the TBT Feb 48′s or the March? 

  23. JRW – Is that buy TZA?

  24. JRW:  too late to buy TZA given IWM now at $63.66?

  25. COF, ZION/Llorens – I like ZION so I prefer to bet them up when they are down, not vs. vs.   COF is Cap’s Waterloo and yes, they are overvalued but C and BAC and JPM all issued optimistic statements on CC defaults so I’m sure there are better short plays to take. 

    DIA/Jrom – I’d feel better about a bull vertical.  The market could still fall 20% or more and I’d rather put the money on AAPL or GOOG than bet on American manufacturing for the next 24 months. 

    RMBS/Yodi – Cool, finally!

    Wheee, down we go again!  This should give us that level test and a chance to sell those puts for $2+.

    On the upside (if we bounce), I’ll be looking for the DIA $107 puts, now $1.05 for about $1 with a stop at 10,550 (very tight) so say .90.

    ABX/Deano – I’ve gone more negative on gold (see weekend comments) so I think it’s best to let it find a lower level first.

    VIX up 9% already – what fun!

    FCX/Jo – You own naked puts?  I’d hang on to see if they fail the 50 dma at $82.25 and, if they do, then stick around for some fun.  News doesn’t matter for them, copper and gold pricing matters and those are both heading down nicely today.

  26. JRW, Thanks, you saved me from playing a TNA bounce (but I moved a bit to slowly to get on TZA).  Mistake avoided, and I’m in your debt.

  27. Thanks Phil. I guess I’ll enjoy the Hi-Pro Glow from this morning’s PCX cover that produced a profit a little bit longer. Watching WFR closely to see if I can get in under $14. I’ve also seen PCX climb throughout the day on multiple occasions so this might actually be a good entry point for a day trade assuming we hit a stopping point on the DOW soon.

  28. Out of TZA at IWM 63.66

  29. I hope Cramer was long and strong, and is getting his teeth kicked in.

  30. Hi, Phil, what do you think about a new trade on TBT today, sincce it’s down so much..
    Buying the June 48 call and selling the Feb. 49 call ?

  31. Phil – sold spy feb calls 116 and 115 strike yesterday - take the 20% and run, yes

  32. On the upside (if we bounce), I’ll be looking for the DIA $107 puts, now $1.05 for about $1 with a stop at 10,550 (very tight) so say .90.
    Is this a mis-print Phi, they’re at 2.65 now

  33. phil, yes naked puts- left over from a spread – I had covered FCX Feb puts 80 with Jan 80 puts – now they are naked.

  34. Upside resistance at /ES 1145 and downside support at 1132 have now each been tested 3 times in seven sessions. Now sitting right on support.

  35. dia covers – is that half or full thanks

  36. look at biden standing behind obama – he looks like he needs a hug.

  37. Alsos/Phil.  Phil meant Calls, not Puts.

  38. Phil,
    Do not like my positions with ZION closed my short puts last week but holding still FEB 14 and 15 c short at .73 now 3.85 and 15c 1.05 now 3.12. shall I sell Feb or Mar puts to stop the bleeding ? thks for your advice

  39. and in FAZ, does it make sense to buy FAZ here at 17.00  and then sell the 17 call and 17 put for February, bringing in $2.28 , so cost basis w=ould be $14.72 and if goes up you get called away and make 16% for 4 weeks work?
    or how else to take advantage of FAS and FAZ ?

  40. Bank of America (BAC): "We are encouraged by signs the economy is improving, as we have seen in the stabilization of our credit costs, particularly in the consumer businesses. That said, economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth." (PR)

    MBA Mortgage Applications: +9.1% vs. +14.3% last week. Thirty-year fixed mortgage rate decreased to 5% from 5.13%

    Fannie Mae (FNM) and Freddie Mac (FRE) "could be the next chapter in our financial crisis," say six senators, calling for the Senate Banking Committee to hold public hearings over the decision to turn the government-sponsored entities into ‘public utilities.’

    Dec. Housing Starts: -4% to 557K vs. 573K expected and 574K last month. Permits +10.9% to 653K vs. 590K expected and 589K last month.

    Dec. Producer Price Index: +0.2% vs. 0% expected and +1.8% in November. Core PPI flat vs. +0.1% expected and +0.5% last month.

    ICSC Retail Store Sales: +2% W/W, vs. -3% last week. +2.6% Y/Y, vs. +1.7% last week. Strength at discounters helped boost sales, but January is a low volume month that’s easily affected by small swings in demand. Jan. sales overall expected to be flat to +1%

    Redbook Chain Store Sales: +0.9% Y/Y vs. +1.4% last week. Despite the relative softness, sales are +1.1% M/M, pointing to a stronger January. (also: ICSC sales)

    Chinese banking regulator Liu Mingkang tells certain banks to limit lending and plans to restrict overall credit growth to 7.5T yuan ($1.1T). Liu declined to specify which banks, but said the lenders had insufficient capital among other regulatory shortfalls. (ETFs: PGJ, FXI)

    Morgan Stanley (MS): Q4 EPS of $0.14 misses by $0.22. Revenue of $6.8B (-153%) vs. $7.8B. Shares -1.5% premarket. (PR)

    I love it when the Gang of 12 upgrade one and other:  RBS upgrades HSBC (HBC) to Buy from Hold, because it expects a "compelling cyclical uplift in earnings and profitability" from the H2 2010 or H1 2011. The upgrade has failed to lift shares, which are -1.9% premarket.

    Sector ETF weakness: Coal– KOL -3.4%. Steel– SLX -3.4%. Gold Miners– GDX -3.3%. Silver– SLV -2.7%. Solar– KWT -2.3%. Oil Services– OIH -1.9%.
    Sector ETF strength: Regional Banks– RKH +1.7%. Commercial Banks– KBE +1.6%.

    Dow laggards: IBM -2.8%. KFT -2.3%. AA -2.2%. CAT -2.1%. BA -2%.
    Dow leaders: BAC +1.1%. PFE +1%.

    This is it, we’re testing yesterdyay’s lows here.

  41. JRW, You switching to TNA, or waiting to see if IWM tests lower--at the 63.25 range.

  42. ss
    Yes that was BUY TZA, next support at IWM 63.55 then 63.28

  43. Phil, what do think about ABX at this level, Thanks.

  44. judah,
    I’m out and waiting now with my finger on the trigger to get back in TZA; if that doesn’t happen there will be time to get into TNA

  45. AAPL lovers……I’ll be re-entering bullishly on AAPL at about 210.  I’m going to go out on a limb here and say they will reach 225 plus before Feb expiration and will ‘pin’ on expiration day at 220.

  46. TBT/Dman – Same as usual, selling puts and being patient is the way to go.  You can do the spread but you must be ready to buy more longs fast as TBT can shoot up on you, especially if there’s a major currency default or bank failure.  As recently as October, they jumped 10% in 2 days. 

    Running/Samz – I do think this is a bottom and I’ve flipped to the DIA Feb $107 CALLS now.

    DIA/Alsos – Damn that was CALLS, not puts!!!!  I’m so used to buying puts I write it automatically!

  47. PHil – you are buying the calls? or selling?

  48. FCX/Jo – Well, now they broke below so just stop out if they get back over. 

    DIA covers/Samz – I’m liking the 1/2 cover with the Feb $106 puts, now $2.12.

    ZION/Yodi – I hope you have the stock to back that up.  It’s very bad to take a hedges spread and turn it into a one-way risk because THIS can happen.  Luckily you can roll the Feb calls to the March $17 puts and calls for not too much money or you can roll out to Apr $16s at $3.70 and pick up some money and still keep really good protection at a higher call-away. 

    FAZ/Dman – I’m against the anti-bank trade right now.  They are not giving bad reports and the ultra is playing with fire.  I don’t like FAS or FAZ right now, just the XLF and UYG spreads we discussed yesterday and Monday. 

    ABX/Wii – See above.

    Calls/Samz – Buying – it’s a bullish play on the Dow holding (more or less) yesterday (and last Tuesday’s) floor.  So far, I hit the entry on the nose at $1, now back to $1.08 already.

  49. Phil, i like the risk reward of selling XTO puts and buying XOM 65 leaps.  If deal doesn’t go through, XOM will go ape, and XTO will go down a bit – if deal goes through, no change in XOM and cha-ching on XTO puts?  I know about all of these hearings etc, but at the end of the day – i believe the deal will go through, just like the kraft deal.

  50. Phil, Do you any recommended spreads on GS right now?

  51. wow what a head fake. Looking to jump long on something today when the selling cools down.

  52. With builders defaulting on loans and valuations still falling, banks trying to keep their real estate investments afloat are stuck pumping in more cash, extending loans or agreeing to collect less of the debts they’re owed.

    XTO/Jo – I think the deal goes through but I’m just playing XOM up.  COP and CVX did quite well after major acquisitions and XOM is a far better-run company who is getting a better deal than they did, buying at the stupid top. 

    GS/Bord – Too much of a wildcard.  If the VIX was higher I’d say straight put sales but $3.70 for the March $155 puts isn’t enough to justify what is a risk they will fall back to the $140s if they miss.  For $5 I’d do it.

    Whoa, what just happened???   Volume getting near 75M coming into 11, that’s 50% better than usual but much slower since first half hour so I’m not convinced the bears have the gas to break us down further but now we’re looking like we’re going to test 10,520 again and below that would be very bad.  This is that hyper-critical 10,549 line on the Dow (I bet you didn’t think we’d see that again yesterday!) and we’ve lost EVERYONE ELSE – isn’t this market crazy?

    Covering downside with DIA $103 puts at $1.13 (not selling $107 calls yet, this should be about neutral).

  53. Phil…When would you (if you would) DD on the DIA 107 calls?

  54. Phil,
    I’m looking for a long-term play on GOOG or AAPL. Any suggestions right now?

  55. Phil — Do you prefer selling TBT Feb 48 puts, or the March puts?  Maybe the 47s now?

  56. yodi
    January 20th, 2010 at 9:42 am | Permalink  
    Good morning Phil,
    Yesterday you mentioned to close some protection options on a down market as we had last week it looks like today will be an other opportunity to close on certain protection options please give us some indication which once to close and take a loss. thanks

  57. Market Internals update at 10:30amET – NYSE volume 270M shares, about 6% above its three-month average; decliners lead advancers by 12.5:1. – NASDAQ volume 605M shares, about 22% above its three-month average; decliners lead advancers by 4.4:1. – VIX index +8% to just under 19.00

  58. The FXI pattern from the other day is now good.  The right shoulder has now broken down through.  Confirmation tomorrow, but looks like FXI will continue to go down to support in the 39.5 range, then a big cliff to 35.  Time will tell.

  59. Phil, any plays on ABX ($37.50) selling puts?

  60. with the high volume so far I wonder if this is another head fake before another leg down in the pm.

  61. DIA- Fair to assume you are watching for a retake of 10549 for confirmation before selling the 103′s. If so, what is the down side watch level on this trade?

  62. Phil, I have bought UYG 2011 $4 calls and $4 puts for buy/write purposes. Should I take out the $4 puts now since it lost 50% in value or should I leave it for protection?

  63. DIA/Iflan – I’m still inclined to just get out at .90, not DD but the answer is, off a $1 entry, that if you want to stick with it, the goal would be a DD at .80 and getting 1/2 back out at .90.  That’s a good 50 points down from here though, testing 10,500 or a bit lower. 

    GOOG/Ac – Pretty much the play from the Buy List is the way to go.  On AAPL, I’d like to see them retest that low ($205) and then take advantage of VIX 20 again and sell some naked puts, since there are certainly worse things in life than owning AAPL cheap!  The March $185 puts are $3.55 and $5 would be a great sale entry there.

    TBT/Jcm – I’d rather just take the .82 for the Feb $47 puts, which should be an even roll to the March $45 puts (now .65) and I wouldn’t mind owning TBT there and turning it into a buy/write as you can sell June $45 puts and calls for $6, which would drop the net basis to $39/42 and that’s the lowest TBT has been since Jan ’09. 

    Protection/Yodi – Once again, what ones do you have? 

    Dow volume 88M at 11:30, well above normal still but 13M in half hour is not too swift.  Now it’s about looking for whether it’s speeding up or slowing down.

    ABX/Foss – Very popular request today but I still think it’s too early to buy in (and I’m a big ABX fan). 

    DIA/Pstas – That was buying the $103 puts at $1.13 with a stop to the upside if we break OVER 10,550.  Sorry, the cover reference was to covering the earlier $107 calls, not the mattress play, which we already 1/2 covered with $106 puts at $2.12.  In general, I’m still playing for the bounce but it is looking weak at the moment.

  64. Phil,
    At what price are you looking to buy NSM. Any thoughts or suggestions.

  65. Doug Kass feels that the S&P will be down 10% in six months…..

  66. JRW/SS, I played TZA between the lines--63.55 to 63.28.  Now just watching, thinking about TNA for the afternoon ride home.  You guys?

  67. 1020 – I hope Doug Kass is right but Kass also called a top about 15% lower tahn we are now, so take it for what it is.

  68. 1020-- I like Doug Kass, but he has been saying that since about June, 2009 onward-- and if you listened to him during summer 2009, like I did unfortunately, you would have gotten killed in the market. So you have to take what he says with a grain of salt. Anyone would keeps saying the same thing over extended periods (the market will go down, the market will go down) will be right eventually. But your P/L statement probably does not have the luxury of an indefinite timeframe. 

  69. Hi Phil here we are SMN apr 10 call at 1.00 now .37 DXD Apr 27c 4.00 now 2.70
    EDZ stk @ 7.62  Feb 5p short .83, 6c short .40 now .12, 6p short 1.80 now 1.25, stk at 6.96 now 4.87
    Feb 6p short 1.80 now 1.25
    FXP stk 9.32 now 8.79   Mattress Jun 109p long 6.43 now 7.30 and 1/2 Feb 106p short 2.18 now 2.31

  70. judah -Watching to see which way we break to decide.

  71. Market Internals update at 12:00pmET – NYSE volume 465M shares, about 4% above its three-month average; decliners lead advancers by 10.9:1. – NASDAQ volume 1.12B shares, about 22% above its three-month average; decliners lead advancers by 4.6:1. – VIX index +11% to just under 19.50

  72. Phil: whta cover, full or 1/2 for matck 107 protective puts??

  73. Kass – I’ll give him 10% – from Dow 11k ;)

  74. Phil: march not matck.
    am sick again, bladder infection.

  75. Phil:
    solar suffering,
    have LKK stock, naked,
    have SPWRA stock and 0.5x caller feb 25.
    what premium to sell ?

  76. Copper at $3.34, silver tumbled all the way to $17.85 and gold now $1,109 with $1,107 another critical failure ahead of $998.   Oil holding up at $77.71 but nat gas at $5.49 so many commodity failures here.  As I expected, the dollar is down to $1.4094 to the Euro and $1.6283 to the pound and back over 91 Yen, which might cheer Japan up a bit but we don’t know if China is done going down (FXI says no and EDZ is getting a nice boost too).

    S&P 1,130 is a big deal as is NYSE 7,250 and, of course, Dow 10,500.  That should line up with RUT 630 and Nas 2,250 as we test the 2.5% rule for the day but I think it’s a bit extreme to think we go there in one day. 

    Warren Buffett weighs in on his own taboo subject – the value of Berkshire Hathaway (BRK.A) – by saying it’s undervalued, and that he was reluctant to issue Berkshire shares to buy Burlington Northern (BNI): “We are paying a penalty issuing shares at this price … If I could have done the deal for all cash, I would have done it.”  Talking his book, obviously but if Berkshire’s undervalued then so is the whole market.

    Sources say Apple (AAPL) is indeed in talks with Microsoft (MSFT) to replace Google (GOOG) as the iPhone’s default search engine. The discussions reflect the intensifying rivalry between Apple and Google. (previously)

    Carl Icahn’s $155M bid for the bankrupt $3.5B Fontainebleau Las Vegas casino project is the winner. (WSJ) - So CRE can be bought for a nickel on the dollar, nice!   And this one is a landmark hotel.

    UYG/Jlui – The thing is what better do you have to do than wait for that .32?   If you are going to sell March $6 puts for .38 or March $5 puts for .11 then, sure but don’t do it to leave the calls naked. 

    Just in the DIA $107 calls now (back to $1) – hopefully we get that run up.  On the mattress play, if you are inclined to day trade than a full cover with 1/2 the $105 puts at $1.75 added to the 1/2 $106 puts is a good trade as long as we’re over 10,550

  77. judah,
    Nice job on TZA, Igot in TNA at 63.30 on the bounce back through 63.28 and will buy another 5000 if we can get back above 63.55

  78. Fontainebleau – A STEAL! Carl is one sharp cat. The Fontainebleau will be the anchor for the north end of the strip. Carl took the Stratosphere over in the 90′s, finished it and made a mint when he sold it to the real estate arm of G.S. at about the top of the market. Talk about getting over!  :)

  79. STEC – closed that gap in that charts, and now have fallen back a bit.  If they can hold the little support they have, they might be a good flier for a few quarters. 

  80. Great trade on the DIA 106 puts phil! made a killing! now in the calls long, with the 103 puts as hedge…any

  81. Great trade on the DIA 106 puts phil! made a killing! now in the calls long, with the 103 puts as hedge…any bottom fishing today? EXC and VZ down…

  82. Phil Like RMBS yesterday I am looking at AAPL today strangle jan 11 280c/165p @ 21.15 margin 1/1

  83. Phil
    Are option MMs known to try and move the b/a to "take out" a stop order, like stocks MMs do?

  84. NSM/Bass – I like the test of $14 although I would have preferred to see them break a little lower and get back over it fast.  If they make it up over $14.50 I’d feel comfortable getting in long-term but selling the March $14 puts for .65 is not a bad way to enter these guys.

    Kass/1020 – That’s not a big stretch.

    Stuff/Yodi – Ah, much better:

    • SMN I like for a roll down to the Apr $7s at $1.30 (+.95), I still like being short Basic Materials as a hedge
    • DXD I like selling the $29s for $1.80 and spending $1.80 to roll down to the July $25s – just looking to get even and buying some more time.
    • EDZ (you really need to adjust sooner than this) I can’t even figure out where you are!   Short $5s are obviously on target and we like the Feb $6 short puts too so the issue is the stock, now $4.85 but I say selling the puts is a fine way to DD if you have to so just keep doing that. 
    • FXP is fine as we’re playing for a possible China meltdown but you can sell the March $9 calls and $8 puts for $1.10 and that’s a 12% return in 60 days so why would you not?
    • Mattress is exactly where it should be right now.

    Cover/RMM – See above comment as I favor day-trading a full cover at the moment in anticipation of breaking back over 10,550 but back to 1/2 cover (with $106 puts) if we fail 10,520.  Try cranberry juice for bladder.

    LDK/RMM – I thought you were happy to go out even.  We don’t like them anymore as they lost their price advantage so, if you are going to stick it out, how about sellling the June $6 puts and calls for $2.80 and just hoping to get called away and be done with it.   SPWRA we do still like but we took money and ran at $25 and will reload at $21.  You can trade the .60 Feb $25 caller for $2 March $22 callers at $2.10 and stay 1/2 covered.  I’m for selling the SPWRA March $21 puts at $1.50 too but you can just sell the March $20 puts for $1.05 if you are worried about a DD.

    Fountainbleau/1020 – That does sound like a great deal, it’s still a nice hotel and you can’t beat the location.  

  85. DIA/Hanna – Nice job!  Not bottom fishing today, things are too crazy and 2% isn’t much of a drop.  At 5% (10,200ish) I would get into it but right now I’d like to see some more earnings.  Don’t forget, we can just pick up people who miss and sell off like crazy regardless of what the market is doing for the next few weeks so no pressure at all to "time it."

    AAPL/Yodi – I think that’s a good range but I’m simply bullish on AAPL so I’d rather go with the $185/230 bull call spread for $22 and sell the $185 puts for $18 so you are in the $50 spread for net $4 and worst case is you own AAPL at $189 (which you can roll, of course).

    MMs/Alsos – They do it all the time.  That’s why I try to avoid hard stops as they flush them every time.  MMs are the biggest thieves in the whole market.  I would say bigger than GS but GS is the top MM so it’s kind of like the snake that swallows it’s own tail in the great circle of evil…  8-)

    Exxon Mobil’s (XOM) $30B purchase of XTO Energy (XTO) draws concerns from House lawmakers, focused on reduced-competition issues and a possible increase in the controversial technique of hydraulic fracturing – a method that would be central to the combined company’s efforts.

    Brazilian stocks hit the skids as well, with the Bovespa sliding 2.8%, the most since November, as China’s moves to cut bank lending are expected to affect multiple exports. (ETF: EWZ)

  86. Phil:
    shorting emerging markets makes little sense, so I
    sold my EDZ stock,
    now have only EDZ call apr 3 (base 2.8$) and overall a small loss on all EDZ positions;
    so close or sell some premium ?

  87. The National Restaurant Association is expecting gradual improvement this year – where "improvement" means that sales will be flat, instead of dropping 2.9% as in 2009. Last year was the second year in the past 50 that the sector has lost jobs.

    Have commercial property values hit bottom? Bulls see a pickup in investment activity and shored-up REITs; bears see some metrics still in decline.

    Dow volume 115M at 1pm and we’re right back down to stickable levels (145M by 3pm).  Of course keep in mind we’re playing up for the irrational stick that has no basis in fundamentals – that is very different from being bullish.  We got the Mega-Stick on Friday afternoon that followed through to yesterdeayd morning and we got a similar move a week ago Tuesday into last Wednesday but, ONE DAY, the stick will fail us and we’ll sell and sell as people wake up from their stupor and realize the market is up 27% since last earnings and these earnings are NOT 27% better.

    TWM $25 calls are nice movers to the downside at .90, using the $24.25 line as a stop (right here).

  88. Phil:
    have VLO stock, base 17.29
    putters, base 0.68,
    stock is high: any change or selling calls ?

  89. Phil:
    have KBR stock, base 20.77
    have caller mar21, base 1.44,
    have putter mar  20, base 0.89.
    any adjustment ?

  90. Phil/Faith in the Stick.  "ONE DAY, the stick will fail us…"   Ahhh, then what will I have left to believe in? 

  91. On that TWM $25 play, there is an excellent chance, if we move lower, of being able to cover with the $26s for .90 so you are cashed out with a $1 upside – that makes it a fun trade!

    EDZ/RMM -  If we keep going lower then EDZ will do very well, I like them a lot as a global hedge, especially with commodies getting a possible correction, which is what most of those emerging economies depend on for their money.

  92. Phil,
    So you’re in DIA 107 calls AND TWM calls ?

  93. Phil, just a reminder, according to news sources the 50:1 split of BRKB (class B Berkshire stock) could occur SOON.( Stock is up today on the" good" news.)

  94. Phil:
    have MDT stock, base 49.5,
    have caller feb41 , base 3.47  DANGER for call,
    have putter feb 44, base 0.84.
    what adjustment ?

  95. Phil:
    have FCG stock, base 14.05,
    have caller mar 17, base 1.44,
    maybe sell put for premium ?

  96. DOW back to 10,550.  Will it hold?

  97. JRW, Got on the train at the last dip. Gotta play for the stick until it fails me.  About time to break through 63.55.

  98. KBR/RMM – Seems on target to me.

    Faith/Judah – Well I still have my overriding faith in fundamentals to fall back on.  The Stick God is one of many market deities that can be worshipped.  The Greeks and the Romans and the Vikings had many Gods and sometimes one’s influence was stronger than the other (hence horoscopes).  Even the Judeo/Christian bible’s God does not preclude the existence of other Gods, He simply says "Thou shall have no other Gods before me," which is flat out saying that there are other Gods but He’s the Big Kahuna and you’d better act like it.  Over the years, it’s been taken to mean that there are no other Gods – something that simply would never have caught on as a concept in 2000 BC.  So we can pray to the Stick without foresaking Fundamentals, which are prophesied to return on 12/12/12, I think…

    BRK.B/Silent – I think it’s tomorrow!  I’m just waiting for the options to come out. 

    DIA/JRW – No, stopped out of TWM at $24.25 (scalped a nickel).  I’m just grabbing various shorts on downturns to whittle down my baisis on the DIA $107 calls rather than selling them as I DO have faith in Mr. Stick!!!

    MDT/RMM – You should be thrilled you got a sell-off.  You can roll the caller out to the March $45s at $2.15, which is a more realistic strike and more rollable.   FCG is pretty much on target and you know I don’t like nat gas but you didn’t believe me when I said take the money and run when nat gas was at $6 so why would I think you’d listen now?

    Sector ETF strength: Commercial Banks– KBE +1.1%. Regional Banks– RKH +0.9%.
    Sector ETF weakness: Gold Miners– GDX -5%. Silver– SLV -4.6%. Solar– TAN -4.5%. Steel– SLX -4%. Coal– KOL -3.9%. Oil Services– OIH -3.1%.

    Dow leader: BAC +0.2%.
    Dow laggards: IBM -3.7%. AA -2.9%. CSCO -2.6%. CAT -2.6%. KFT -2.6%.

  99. judah,
    Welcome aboard !

  100. Phil,
    Re BIDU
    I know you have mentioned you think that they are worth $500. However in light of the fact that they have 2 C-level executives who quit in thepast 2 weeks and the fact that they are having trouble with their new advertising platform (Phoenix Nest) that has lowered revenue by 10%, my hypothesis is that they will disappoint earnings wise when they announce later this month. But then again one never knows.
    I am short 10 contracts each of the
    Feb 460 calls    sold 28.50    currently 13
    Feb 470 calls    sold 24.50    currently 10
    Feb 480 calls      sold 20        currently 7.80
    Feb 490 calls    sold 6.50    currently 6
    I would like to hedge and take some profits. Which calls would you recommend I cover?

  101. judah,
    They should be able to get us to 63.78 at the very least.

  102. Phil,
    Are you feeling it for PCS after they’ve dropped .90 since last week, Now $6.24.

  103. Phil/Faith. LOL. As my moniker suggests, my faith lies with YHWH, but I like all the myths--Greek, Roman, Norse, and Mr. Stick who will try to bring us back to 106 today (and 64 on the RUT).

  104. Phil, sold the FCX 80 puts for 3.3.  Small profit, better than chancing with earnings and all the other nonsense.  Spread gave a small profit which is better than the loss i was looking at earlier this week.  Off to a bachelor party in Cancun, so i will catch you all later!

  105. Phil:
    NG positions: thru FCG and shorts on UNG I am ahead on all NG positions: maybe my patience on NG market is over and I take the profit.
    What is NG ouitlook ?
    also: please comment on my VLO question of 1:15. TXS.

  106. Kindda stupid question. Can someone explain the relatioship between the dollar, gold and TBT? I know if the dollar goes up, gold will go down. What happens to TBT in that case? Will it go down or up?

  107. Phil:
    MTW, have stock, base 145.27 , no options,
    what is outlook ? bearish/bullish ?
    sell some premium ?

  108. Phil
    what your recomendation about VZ today? I already have long LEAPS and short puts&calls, maybe DD here?

  109. Phil -
    If no stick – what’s the play for the full dia covers – take half off? thanks as always – nice trading today on the covers and everything else

  110. JRW/63.78.  Yeah, I think they’ve got time to run it back to 64.28 into the close, but I’m watching 63.78 to see if they’ll be able to hump it over that mark (and 63.55 for a fail).  I’ve never held overnight, and I’ve got a streak of 5 days running where my ending position TZA/TNA would have been the right one to hold overnight.  Of course, were I ever to hold even once, my streak would surely end.   

  111. Playing for a stick of any size with S. Jumped in at $3.51.

  112. Phil, I have SWY shares fully covered with Mar 22.5 calls I sold for $0.75, now ITM over $1. I still like SWY long-term but wondering what you’d do with those? I took the March b/c the Febs offered little premium as I recall… do you always cover with front month or sometimes longer dated (how far potentially?)? Would you pay $0.50 or so to roll up and out to June, leave it alone, or something else? Thanks.

  113. judah /holding overnite
    LOL; been there done that !

  114. judah/JRW – good calls today.  I’ll join you tomorrow.  JRW – it looks like IWM and few indeces are now trading in a straight channel sideways.  IWM from 64.85 to 63.20.  My strangles would love for this channel to hold up for a long time.

  115. ss
    See you tomorrow, be well.

  116. It’s possible that the now-more-likely failure of the health care reform will hurt private insurance companies (contrary to what Cramer would have us believe, of course). Some critics of the proposal alleged that it was basically a huge gift to the private insurance sector, like this one:

    It’s being such a gift would make more sense of the price movement of the insurers as the bill moved forward and has now (likely) stalled. Phil may have been right yesterday that a lot of overpriced insurance stock was being unloaded on the retail crowd.

  117. X might be another decent long for a bounce.

  118. SS/strangles.  Added some March strangles today--710/540 and 1240/990.   It seems to me that the Feb crazy plays still afford me some protection for the first month.  (Peter might not agree with that.)  What are you holding?

  119. BIDU/Onc – Damn man, you should have stopped out yesterday!  If we had a 3rd rule (which we kind of do as it falls under "ALWAYS" and "AT LEAST SELL HALF") it would be that if you make more than 50%, you get the hell out once the run fades.  You have a huge win yet you know that GOOG could officially bow out of China tomorrow and you are screwed as future expectations trump actual earnings (see the entire market for examples).  Clearly I would kill the $460s, 70s and $80s as they are all obtainable.  The $490s are very doubtful of course.  If you really want to be bearish, you can just go for the June $470/430 bull put spread for $20 and you are $30 in the money for a double there, rather than risking unlimited losses trying to make less than $20. 

    PCS/Bass – It’s a long-term play as they have a big war with S ahead.  They are not likely to be a pretty hold but the idea is to work it off selling calls and puts over time.

    $106/Judah – That’s a lot of faith!

    Have fun Jo!

    NG/RMM – There is simply too much of it and no more cold likely and no hurricanes until September so, overall, a bad time to have gas.

    TBT/Trad – In theory, gold goes up on inflation fears, which puts upward pressure on rates (TBT goes up).  If gold goes up because the dollar is weak, that can also be upward pressure on rates as you have to offer more interest to get people to tie money up in dollars long-term.  If gold goes down because the dollar is strong, then people may buy 20-year bonds as an investment in the dollar with the rates acting as a bonus (so they are willing to accept lower).  So, on the whole, it’s a complext relationship and not simply connected as they all rely on various factors but, in general, TBT will rise on dollar weakness with gold. 

    MTW/RMM – They had a huge 40% run, unless you want to ride out the retracement (and you already caught a nice bit of it this week) then just get out.  I don’t understand how you can watch a stock go from $8.94 to $14.60 in a month and then just let it drift down $1.60 on you.  How much is enough?  If you don’t turn profits into cash then they are not profits at all.   This is a good long-term stock but even with AAPL (my favorite), I get out at the top of a channel.   With the low VIX you get little protection from selling so why not just get out at $13 and sell the March $12.50 puts for $1 so you either keep the $1 (7.5%) or you re-enter at net $11.50, saving yourself a 10% drop.

    VZ/Tcha – A DD is a big deal.  We do love them at $30 but the market trend is still down and they are not immune.  The premiums are crap to sell too so I would just wait and see how your current set does unless you are really looking for a lot more.  Keep in mind rolling down your Leap when it’s cheap is often better than doubling down.  For example, if you have the 2012 $30s at $3, you can go to 2x and you need $36 to make $6 (2 x $3) but if you spend $3 to roll down to the $25s, you need $34 to make $6. 

    DIA/Samz – Yes, the full cover on the mattress is just a day trade.  Back to 1/2 by EOD.

    SWY/Fein – I would leave it along.  March is a long way away and the $1.15 they’re going for is all premium (well. most) and that premium is a 5% return on your stock.  The idea is to be in the BUSINESS of selling premium.  That’s your job so don’t look to get out of it.  If you sell 2.5% of premium per month on SWY that’s 15% a year in addition to whatever appreciation you get.  If you make 15% a year for 5 years you have doubled your money – is that so awful? 

    Health care/Eric – I agree, I don’t know why they are so excited about losing 40M prospective patients.

    Cramer now saying sell UNH and HUM – we’ll see if he’s got his mojo working…

  120. tradansh: All other things being equal, a rising dollar means treasury yields would go down, which would make TBT go down. But there’s lots of moving parts.
    There’s increasing worry about the euro in particular and sovereign debt in general, which would make the dollar go up.
    But the US gov is in unprecedented territory in terms of its borrowing needs this fiscal year, relative to the known buyers of such debt. The Fed has taken up a lot of the slack, either directly or indirectly in the last year, but that can’t go on forever. There’s already large pressure on the Fed to stop growing its balance sheet.
    Net/net: a lot of people, me included, think Treasury yields and TBT will rise.

  121. judah- SPX: Feb 970/1210, Mar 950/1240 with 1040/1050 crazy play
                 RUT: Feb 550/690, 540/690 with 590/600 crazy play; Mar 530/700, 540/710 with 600/610 and 580/590   
                             crazy plays.

  122. JRW/63.78,  Blowing by that station.  How are you playing the close?

  123. Phil, we’ve got the best democracy money can buy.

  124. Amazon (AMZN) said it will begin offering self-publishers a bigger cut of book sales on Kindle – but with strings attached aimed at keeping prices down for the consumers.

    Green shoot of the day!  Air cargo traffic increased in November for the first time since July 2008: up 7% from the previous year, the Air Transport Association says. December passenger revenue slipped 4% from the year before vs. a 7% Y/Y decline in November. Full-year passenger revenue slid 18%, the largest drop on recordOops, not so green

    FDIC Chairman Sheila Bair says lenders should be modifying troubled commercial real estate loans, but that they need to recognize losses where they are. Speaking to a CRE conference, Bair forecast more delinquent loans and that the sector would increasingly drive banks to failure this year.

    Zero Hedge looks for more evidence (in the form of the spike in direct bidding for Treasurys) that China is still stealth-buying U.S. notes.

    X/Eric – Scary to me above $60.  All the auto demand is in Asia, I’m not sure who X is selling steel to.

    I’m telling ya, I love playing the afternoon stick – just close your eyes and wish for a miracle and, what do you know, it happens at 2:30 almost every day!

  125. judah,
    63.78 is now my stop. Let eer role !

  126. Eric,
    We always have !!

  127. RMBS.  Congratulations to all the RMBS bulls!

  128. How about a shake up today…….a 3:00 anti-stick.  We can wish can’t we?

  129. Phil: based upon your psycho-insistance, I closed all my NG positions: now NG can climb.

  130. SPX chart on the alignment of the different crisis.  We are WAY above the others….OH MY!

  131. BRKB already has options. With stock at $3.4k, most of the options trading today are the ones in $100-$300 range. The stock has been bid up last 2 weeks with  ‘now after the split retail investors will buy it and hence it will be even higher’!
    I think these ‘news stories’ are so that big boys can sell it to us retail investors. After all, there will be lots of folks in BNI who do not want to be BRK-B shareholders and other way around, so for now it goes down with more sellers than buyers.

  132. Best/Eric – Oh I don’t know about that on a national basis.  I’m from Jersey and we get a hell of a lot of Democracy for the dollar around here!  8-)

    NG/RMM – Well I feel beter anyway!

    SPX/Pharm – I know but "this time it’s different?"

    BRKB/M2 – Yes, I mean when they have more liquid options, of course.

    3pm Dow volume at 151M, just a shade over stick territory but you have to think they want to finish at 10,600 at this point…

  133. Pharm,
    I read that as a 90% recovery in the making; the Fed is learning, they have 1 Yr 4 Mo and new tactics from the most recent crisis. Go out to 1.33 years and where are you, 90% !

  134. Hi, Phil, I sold 1/2 DIA covers Feb 106 puts at $2.20.  It’s now approx $1.95.  Hold them overnight?
    What’s your thinking on tomorrow in general?  Bullish? Bearish? Neutral?

  135. SPX chart, it truly is diff.. this time we have Gov’s around the world selling record amounts of debt to keep the beast alive.

  136. Opps forgot to mention the record amounts in corporate debt…silly me

  137. Tonight we have EBAY, FFIV, KMP, LOGI, OHB, RJF, STX, SWKS, SLM (possibly bad), SBUX, TSS and XLNX so not too scary a group I hope.

    Tomorrow morning is CMA, CAL (scary), FCS, FITB, FNFG, GS (whee!), HOMB, IIIN, KEY, NITE, LM, PNC, BPOP (danger), PPG, PCP, LUV (scary), SBIB, TSM, TCB, UNP (CSX did well but sold off), UNH (Cramer said sell), XRX and ZOLL. 

    UNP is holding up pretty well but if we figure they don’t excite people as with CSX, then we can sure sell the $65 calls for $1.35 and buy the March $67.50s for $1.15 for a net .20 credit and we keep whatever is left if the $65s expire worthless.

    DIA/Cwan – Yes, those were a steady position to cover us through whatever. 

    DEBT/Kustomz – Feed the beast!

    Equities have made a lot of progress off morning lows, but that doesn’t mean there’s not broad weakness, with commodities dragging and basic materials down nearly 3% as a sector. With an hour to go, the Dow -1.3% to 10,589; S&P 500 -1.2% to 1,136; Nasdaq -1.5% to 2,285. Crude -2%. Gold -2.4%. Silver -4.7%.

    Treasurys have trimmed gains but still remain up across the board: the 30-year yield now -0.05 to 4.54%; 10-year -0.04 to 3.66%. Euro -1.3% against dollar; pound -0.5%; Swiss franc -1.1%; yen -0.1%.

    Sector ETF strength: Commercial Banks– KBE +1.6%. Regional Banks– RKH +1.5%.
    Sector ETF weakness: Gold Miners– GDX -4.7%. Silver– SLV -4.6%. Solar– TAN -4.4%. Steel– SLX -3.4%. Coal– KOL -3.4%. Oil– USO -2.5%. Oil Services– OIH -2.5%.

  138. Punch it baby – 10,600 here we come!

    Oh yeah, forgot to mention we have Leading Economic Indicators tomorrow at 10 – those should be fun.  Also the Philly Fed (NY Fed was awful) and the delayed oil inventories (OIH at 2.5% rule, XLE down 1.7%).

  139. Llorens/S.  I took the drop below $3.50 as an opportunity to buy some calls.  I’ll sell some calls when it heads back to $4.

  140. Phil/106.  Okay, I was referring to the DIA level, and my faith has been rewarded. :)

  141. Phil: keep the full DIA cover ?

  142. LZB making new highs (old Buy List pick).  I think the aging population trumps all with that one. 

    IMAX June $10s at $3.50, selling March $12.50 puts for .90.

  143. Judah – should be good. That stock took a bashing over the last couple of days and the recent downgrade didn’t help. Also picked up a small amount of C for $3.48.

  144. DIA/RMM – I don’t know which way we’ll go tomorrow as we are overall weak yet we still fear the stick.  1/2 cover with the Feb $106 puts is best at the moment and we’re done with our DIA day trades of course.

  145. 20 minutes before end of trading, seems to me our levels are again in danger of being compromised.
    DOW    10,585.85  (holding)

    S&P500    1,135.82 (holding barely)

    NASDAQ    2,286.50 (broken down)

    NYSE    7,320.15 (broken down)

    R2000    638.74 (holding barely)

  146. Phil – Do you feel now is a good time to scale into solar or do you anticipate solar companies falling much further?

  147. Phil,
    How do you feel about China now……more weakness or do we level out………how about metals, copper, platinum…..are we still dropping……should we get thru 1-2 more earnings days before we add to these?

  148. Stick is Love!

    Solar/Jrom – I’d give oil a chance to crack and see how they hold up.  I just had a CC with some consultants on a solar project and it’s still like pulling teeth to justify a project with the current governement funding rules.  It doesn’t matter if they feed money into the existiing programs – they need to fix the programs themselves and that won’t happen too soon.  If oil slips back down to the $65-70 range, that sector is going to have big trouble. 

    Ranking Republican Darrell Issa says the New York Fed’s 250K-page document dump in response to a House oversight committee subpoena is "incomplete" – that it doesn’t contain key documents on AIG CDS – and he urges Chairman Edolphus Towns to clarify the scope "and hold FRBNY officials in contempt if they do not fully comply."

  149. judah/JRW – one of the longest train rides I have seen.  Congrats.  Wish I would have punched my ticket.

  150. ughh – I did not hold on long enough for the mighty stick – still nice trading phil

  151. China/Ocelli – I think the numbers we hear out of China are highly suspect and I also think that, without stimulus, their economy would be a train wreck (and maybe is anyway) and that they’ve bought up a year’s supply of copper and other materials anticipating global demand that isn’t returning.  So I’m short China through FXP, looking for the Hang Seng to test 20,000 (now 21,286) – possibly tomorrow if their GDP either misses big or is over too much (as it would force Beijing to attempt to cool it off).  More likely tomorrow, we’ll get a GDP figure of 9.5% because that’s the Goldilocks number and the data is a farce anyway. 

    DIA $107s hit goal at $1.20 – Don’t be greedy!!!

  152. judah,
    Out at IWM 64.03

  153. Strange – SLM released alreay and numbers were pretty good. 

  154. SIRI had a nice move today. Almost up +10%

  155. JRW/SS.  Out at 64.02.  A nice smooth ride.  That’s my best day trading these channels.  Time to start scaling up.  I love the Stick.  It is so mindlessly dependable.

  156. SIRI/Trad – I will be very interested in their earnings report.

    OK, it looks like down 1.5% today on the whole, which is a nice correction. It would be nice to retest 2.5% tomorrow but at least we’re learning something from all these earnings.

    I flip right over to Dylan on MSNBC at the close now – much nicer than more CNBC…

  157. SBUX flying on earnings!  Starbucks (SBUX): Q4 EPS of $0.32 beats by $0.04. Revenue of $2.7B vs. $2.6B. Shares +5.9% AH.

    FFIV going the other way. 

    PNRA guiding up (good top 10% lunch stop).  That means CAKE should do very well but they are already way up. 

  158. (SBUX): Q4 EPS of $0.32 beats by $0.04. Revenue of $2.7B (+4%) vs. $2.6B. Raises 2010 EPS outlook to $1.05-1.08 vs. $1.17. “Solid comparable-store sales growth, combined with our continuing focus on controlling operating costs, drove significant operating margin improvement in both our U.S. and International business segments.” Shares +5.9% AH. (PR)

    Total System Services (TSS): Q4 EPS of $0.31 beats by $0.01. Revenue of $431M (flat) vs. $435.5M. Sees FY10 EPS of $0.95-0.97 vs. $1.21, on revenues of $1.61B-1.65B vs. $1.76B. Shares -4.1% AH. (PR)

    Treasurys held onto gains, especially on longer-term notes: the 30-year yield -0.05 to 4.54%; 10-year -0.04 to 3.66%; 5-year -0.03 to 2.42%; 2-year just under flat at 0.88%. The dollar +1.4% against euro, +0.5% against pound, +1.1% against Swiss franc, +0.1% against yen, +1.7% against Aussie dollar, +1.5% against loonie.

    eBay (EBAY): Q4 EPS of $0.44 beats by $0.04. Revenue of $2.4B (+16%) vs. $2.3B. Shares +0.9% AH. (PR)

    Wow!   Seagate Technology (STX): FQ2 EPS of $1.03 beats by $0.38. Revenue of $3B (+33%) vs. $2.85B. (PR)

  159. Phil
    what do you think about
    SPWRA jan11 15/20 and sell Jan11 15s puts?

  160. judah/strangles – Sure, those Feb long PUT verticals do provide protection for another 2 weeks or so.  After that RUT/SPX needs to get close to the money for the vertical to worth any money, then you can start the March’s, and decide whether to close out Feb’s, or just selling off the long PUT. 
    ss, those are nice strikes for the Short Strangles.  I have very similar strikes, and they are doing well today with a net gain, even with spiking VIX.  The delta is getting closer to zero though, meaning a 5% drop would hurt, and we’d need to double down or take other remedies.

  161. Hey Pharm, where exactly are you located in San Diego (if I remember correctly that you are from there)?  I’m looking for some place warmer to migrate to.  Is Del Mar a good location?

  162. SBUX.  It doesn’t surprise me that SBUX is upping guidance and improving margins.  In 2009, they introduced a loyalty card that provided a 10% discount on all purchases.  I imagine SBUX has the kind of business where their frequent users make up the majority of their revenue, and their frequent users would have been using the 10% discount card.  In the beginning of Jan. 2010, SBUX ended the 10% discount on all purchases with a "one free drink for every 15 drinks" program.  IMO, that change alone is going to provide SBUX with improved margins that will show up in the first quarter 2010.

  163. SPWRA/Tcha – I wouldn’t commit to so much downside delta until they settle down.  You can do the $17.50/22.50 spread for $2 and offer to roll down to the $15s for $1, which knocks about .70 off the cost, widens your spread and keeps it a free play so your net put-to price is still $15.  

    Cool Bespoke chart:

    Charts from 1/19:








    Google (GOOG) is rolling out a new search function allowing consumers to shop and compare mortgage offerings from several lenders. The service, AdWords Comparison Ads, will be fully deployed over the next few days.

    YouTube (GOOG) rolls out an online-movie rental model today, but it’s not yet a Netflix (NFLX); it’s more dipping part of a toe: YouTube starts with just five indie movies available, in conjunction with the Sundance Film Festival.

  164. I just heard a rumor (from trader friend) that refinery runs were down 2.5% last week.  That is incredible if true as we’d be at about 77% capacity.  2.5% of 133Mb a week of production is 3.3M barrels they are shorting us into the inventory report and it was a holiday weekend so we may get a "surprise" draw in inventories tomorrow. 

    Expectations are for a big build of 1.9Mb crude and 1.3Mb distillates (gas down 200K) - which is stupid because it was freezing for the week leading up to MLK AND it’s a bigger than usual travel weekend and jet fuel is a distillate. 

    Oh well, at least it’s good to know you are going to be robbed well in advance!

    Oil held $77.50 today (and now we know why) so that’s not a bad speculative long on the futures, now $77.55, using $77.45 as a stop.  With a futures trade like this, you want to to start with maybe 2x and sell 1x when you make .25 and then set a .10 trailing stop on the rest, which you can widen by .05 with every .10 gain until it’s .25, which is a reasonable trail on oil futures

  165. I usually don’t find anything associated w/ Hitler to be funny; but this video is hilarious.

  166. Cap,  Thx,       (   Obama shouid not have made  fun of that guy’s truck.)

  167. Cap…Funny…  I just read that there is a draft Kudlow to run against Schumer movement.   I’m not fond of Kudlow but I would take him over Schumer any day.   Many of us here in Mass now want to get Barney.  I just met with an attorney who is helping the guy that will be running against him.  I say lets throw ‘em all out…at least the progressive democrats and progressive republicans. 

  168. BTW; another BS sell-off / recovery today.  Unfortunately I saw the beginning of the recovery developing then got stuck on a 2-hr phone call and missed it.

  169. TmDecay;  I’m not particularly fond of Kudlow either and he would get crushed by Schumer.  Previously, there had been talk of Kudlow running in CT.
    As for MA, yes, go get Barney; and then John Kerry.  I’m with you man !
    Reid is toast.  Boxer may be toast.  Even Pelosi could be toast.

  170. COF and ZION.
    Both seem to be pumping prior to earnings, which to me means they will be dumping after. 
    I have been short COF and still am; so I saw the morning pump job.  It then dropped $1 from the morning highs (where I covered some shorts) and then re-pumped into the close, closing about flat.
    Haven’t really looked at ZION before, but I may now.  up almost 5% today ?  Crazy.

  171. Couple of interesting picks to watch:  UA – treading on support, but the RSI and MACD have crossed over.  Gonna watch for them to turn up a bit.  Football season is over for them, but they are gaining in baseball and soccer.  JACK has not moved much on all the hype of MCD, CAKE, etc.  Could be good for a follower as they are not covered as much.

  172. Would someone tell me what "DIA mattress" position is. There’s references to it everyday but I can’t quite piece it together and read nothing about it in the newbie handbooks. Thanks.

  173. Peter – interesting comments regarding delta.  So it seems that we want a slow selloff and not a quick one.  When do the wild plays pay off?  It would seem they would have to be in that part of the curve towards the end of the strangles expiration.

  174. jburgess,  for starters, read this post:

  175. Juda, thanks much for the direction.  Enjoy reading all of your posts.

  176. Oncmed… BIDU; I think you are spot on.   But boy do you have balls.  That is one huge exposure to BIDU, both on the margin requirement and the risk.
    Since its going your way, and should continue to do so, I might let the premium erode a bit more.  Or you could cover the 460′s and sell more 490′s or 500′s.  And you could buy the 520s 530′s or 540′s for protection.    You could also sell some puts, maybe at the 340-350 strike.
    But congrats; great play so far.

  177. test

  178.  Phil
    I have Jan 11 GLD 105′s, covered 3/4 with Feb 103 calls only, given the sell off, I am up nicely on the calls sold. Any suggestions for an adjustment from here? Thanks,

  179. Im beginning to believe the Mayans, world will truly come to an end in 2012…..or go broke

    Democrats seek to up debt ceiling by $1.9 trillion

  180. Another shot across the bow. This is happening faster than even I thought it would.

  181. ss/SPX, those wild plays act like insurance that works on either a sharp or shallow dip.  If the dip is 3-4 weeks to expiration, the PUT vertical would worth $5 ATM, increasing to $7-8 for a few percent ITM.  For instance, at the end of October 2009, we cashed them out as they got to $7-8 (out of the possible $10).  If the dip is in the expiration week, then a small movement means either $10 payout for just ITM, or nothing when it’s OTM.   The wild play is very useful if the market drops 5% overnight, or a 5% drop in a few weeks.   For a more gradual drop, the PUT vertical would retain its value well, while the short strangle would quickly decline, so we cash out both. 
    Note that when we get to the maximum payout range for the PUT vertical, delta would go positive as the underlying would be closer to the short PUT strike than short CALL, while Theta goes through the roof.   The short CALL is way OTM and its value would be almost zero, meaning it doesn’t provide much downside protection.   This means a further drop in the market, moving into the maximum profit range would result in additional paper loss, so we would need to have the nerves to wait it out.  I would usually roll down the short CALL in those situations to have more downside cushion.

  182. Peter – Thanks again for the comments.  I learn something more every time you post.

  183. Good morning!

    A couple of very nice runs in oil futures last night and now we’re back to $77.44, which is worth a reload if we cross $77.50 again following the same rules as we should get a push into the inventory report

    Hitler/Cap – That clip is always funny – they use it for all sorts of things with diff text… 

    COF/Cap – That one is a wild ride.   ZION is a dangerous short because expectations are low.

    Good picks pharm, if we hold levels this week then maybe we take a poke at some tomorrow.

    DIA/Jb – Google "Stock Market Parachute" – that’s the lead article to the strategy and June $106-$108 puts (depending on if you rolled or not) 1/2 covered with Feb $106 puts at $2.12 is our current position.  Oops, thanks for the link Judah!

    GLD/Deano – Had you asked me earlier, I would have said cash out and let the short calls hang naked.  I’m not liking gold right now, waiting to see if they hold $975. 

    Debt/Kustomz – I wonder if they thought they had to jam that one through before it became a possible fight?

    Buffett/Pstas – Well he owns banks so working his book.

    Dollar getting hammered down in last hour, coordinated with pushing up the futures. Bad craziness. 

  184. Phil; what do you think about selling GOOG puts (small amounts) today.  For ex. the 530 or 520 puts.
    What is the risk of more than $50 downside in GOOG post-earnings ? 
    Let’s say GOOG disappoints (not likely), and then post earnings market corrects (toss up), GOOG could lead market lower.
    I’m thinking the put sale might be a good play.

  185. Buffet- Phil, you missed the point.

  186. Phil, saw your comment re: EDZ. I also have EDZ Apr 3s at 2.20. We’ve had these almost 8 weeks…do we need to roll them out or adjust/cover?