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Thrill-Ride Thursday – Wednesday Never Happened, Now What?

Poor CNBC!  They are never going to get those chocolates

I joked with Members during yesterday's rally, after Fast Money's bullish "Half-Time Report": "Uh oh – All the Fast Money people said buy - make sure you have your disaster hedges in place!"  Indeed the market fell off a cliff almost the second they said it but we got out of our TZA calls (a little early) and did a little bottom fishing yesterday with our own buys on LYG ($3.13), Short EUO ($25.30), VZ ($27), FRO ($30.50), RIG ($58.50) and PFE ($15.10).  Maybe I'm just a paranoid conspiracy theorist but I said to Members at the close:

That was a sad little show at the end wasn’t it?   Nas was beaten with a stick into the close.  AAPL $243, BIDU $67.46, AMZN $123… Ugly stuff.   Not at all sure what they were trying to accomplish if not a flush…

Gap/RMM – Yes (we will gap) up.  I just didn’t see why we would sell off like that.  It seems that someone wanted to paint un ugly picture, maybe they didn’t get a good fill on Tuesday morning?  Maybe not gap up tomorrow, maybe another drop and THEN we take off but I’m thinking a fund that wants to make numbers on Friday would want to flush us today and buy the SPX overnight and pump us up for a big finish so they can get back to cash on Friday and book it.

Isn't it funny how that's pretty much exactly what's happening this morning?  A huge gap up into the open that's erasing the previous day's losses when no one is trading – just like yesterday (when I get on my knees and pray - we won't get fooled again).  Fast Money got fooled out of their bullish 1:50 positions by 5pm as suddenly they relized the market is controlled by evil computer programs – not exactly news to us and no reason to shake us out of our well-hedged positions.  We ignored rumors on China (and we always ignore Steve Ballmer) in chat and those seemed to be the major rumors moving the market lower yesterday. 

Cramer kept the rumor mill grinding, saying: "The Chinese reportedly are debating whether or not to sell their European bonds, and that’s what killed our upward momentum."  CNBC seems to have pulled the video so it's hard to tell the tone but Cramer put up a list of a dozen stocks to buy but said to wait for a 5% correction and concluded: "The next time you’re looking for stocks to buy after we get hammered off the euro, after the banking crisis in Spain or potential country defaults,” Cramer said, “take a look” at these stocks." 

It's too bad Cramer doesn't understand how to use options or people could buy those stocks for a 20% discount right now.  For example, with FDO ($40.87) we could simply sell the dreaded NAKED PUT, like the July $38 put for $1.25 and that puts us in the stock at net $36.75, a 10% discount right there but, of course, that's just a simple way to play, you can do much better by buying FDO as Cramer suggests AND selling the 2012 $40 calls for $7.50 and the 2012 $32.50 puts for $4 and that puts you in the stock for net $29.37 and you will either get called away at $40, with a 36% gain or you will have another round put to you at $32.50 for an average entry of $30.94, a nice 24% discount off today's price.  If you are a long-term investor, wouldn't it be nice to take all your initial entries at a 20% discount? 

Speaking of discounts – Kudos to David Ristau from the Oxen Group for putting Members into PAY in yesterday's "Overnight Trade of the Day."   David's analysis of PAY was like getting the earnings report in advance!  Keep in mind we ALWAYS sell into the initial excitement on these but what a great one-day ride!  "Long-Term Investment of the Week", BIG also had good earnings this morning and hopefully we get a nice pop there as well – who says we don't trade straight stocks at PSW???

After taking a day off the fundamentals yesterday (since they weren't going to matter in a panic-driven market), we now get a BIG one with the Q1 GDP, which is expected to be revised up from 3.2% to 3.4%.  Another 450,000 people probably lost their jobs last week (yawn) and we have the KC (11 am) and Chicago (Noon) Manufacturing Reports just ahead of the 1pm attempt by our government to find $31Bn worth of suckers to buy 7-year notes in exchange for just 2.8%, about 1/3 of what it was 10 years ago

A good portion of this money is still going to bailing out banks, who apparently return the favor by lying to investors.  According to the WSJ: "Bank of America Corp. and Citigroup Inc. incorrectly hid from investors billions of dollars of their debt, similar to what Lehman Brothers Holdings Inc. did to obscure its level of risk…  In recent filings with regulators, the two big banks disclosed that over the past three years, they at times erroneously classified some short-term repurchase agreements, or "repos," as sales when they should have been classified as borrowings." 

While the amounts concerned are "only" Billions (the two banks have over $4Tn on deposit), what I find disturbing is that, almost 2 full years into the banking crisis, STILL NO ONE IS AUDITING THEIR BOOKS?!?  Come on Government, we are spending $1,500,000,000,000 more money than we take in – surely we can afford $100,000 for a guy to give the books a once-over!  A bankruptcy-court examiner said Lehman had been doing the same thing to make its balance sheet look better before it filed for bankruptcy in September 2008, using a strategy dubbed "Repo 105" that helped the Wall Street firm move $50 billion in assets off its balance sheet.

[REPOBANKSPROMO]Bank of America and Citigroup were among the banks cited in a page-one Wall Street Journal article on Wednesday detailing how financial firms temporarily shed repo debt at the ends of quarters, when they report their finances to investors. Since the financial crisis began, both banks often have reduced their quarter-end repo debt from their average borrowings for the same quarter.  Repos are short-term loans that allow banks to take bigger risks on securities trades; classifying the transactions as sales instead of borrowings allows a firm to take assets off its balance sheet and thus reduces its reported leverage, or assets as a multiple of equity capital.

8:30 Update:  It turns out BAC and C are not the only ones inflating their figures.  Q1 GDP was, in fact, revised DOWN 0.2% to 3%, not the up 0.2% expected.  As we had originally expected (before the GDP "proved" us wrong), consumer spending was the weak spot and our high-commodity trade deficit was another big drag on the economy.  3% GDP is not going to be putting anyone to work -  After the last severe recession in the early 1980s, GDP grew at rates of 7 to 9 percent for five straight quarters and the unemployment rate dropped from 10.8 to 7.2 percent in 18 months.  Housing and commercial real-estate are major weak spots for the economy. Builders cut spending in each by double digits in the first quarter.  One bright spot – Corporate profits were revised UP, from 8.2% to 9.7%

Of course we all know what this means….  MORE FREE MONEY!!!  That's right, bad news is good news as slow news like this sends Benny and Timmy running right for the printing presses and I'm sure that Blanfein is on the phone to Obama now telling him he can "fix" this if Obama just gives him another $50Bn.  Speaking of Blankfein - The tens of Millions of dollars the Banksters are spending to lobby Senators to ensure serious financial reform never sees the light of day are chump change considering what's at stake, Simon Johnson of the IMF says.   

Not unexpectedly, China denies a report that it's reviewing its foreign exchange holdings of euro assets, calling the speculation groundless. "Europe has been, and will be one of the major markets for investing China's exchange reserves," said the State Administration of Foreign Exchange.  The euro is not in danger, and a breakup of the eurozone is out of the question, former Bundesbank president Helmut Schlesinger says. The euro's (ETFs: FXE, EUO) 6-month, 20% plunge against the dollar is cause for concern, but its level "is by no means catastrophically low," he added.

Europe is trading up around 2% just ahead of the US open and Asia was right around our 1.25% rule so technical bounces all around so far, which is pretty good considering the rotten signal sent out by that very fake US close.  Maybe all of our international PSW readers are helping their fellow countrymen wise up to the shenanigans being pulled in the US markets – that would be nice! 

They are lining up in Japan to get their hands on IPads, due to be released today while AAPL (among others) investigates a rash of suicides at one of their Chinese manufacturing plants.  Japanese exports continue to hum along at a pace that's 40% over last year's indicating that fears of a global slowdown are probably a tad overdone.  At home, oil is back at $73 (go USO!) as Obama suspends Arctic drilling until 2011.   

We already have our buys in so today is more about whether we re-hedge to the downside or not.  We've gotten so many great entries below Dow 10,000 now, it's going to be hard to buy more over 10,200 but let's not get ahead of ourselves – we aren't there yet! 

 


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  1. Phil,
    Good Morning! New member with 150k in cash, no positions. I want to start building long term stock positions. With the current market levels and volatility levels, what % of $$ do you recomend allocating to the 2012 buy/writes now. Thanks!


  2. Phil / MON : OK, i know you’ve fielded a couple of these questions in the previous days….but….I entered MON at about 63. As of premarket this morning, its down near $50. I dont want to be shaken out of a position, but this stock has been going down on up days, and going down more on down days….2011 55 calls (oops!), and sold 2011 60 puts (which were then rolled to 2012 for about $14). Advice?


  3. Phil / Gap-up:  Yeah, nice call on that, Phil. Normally, this sort of move, coupled with the long weekend would be a no-brainer to push above the 200 dma. But if we were really off to the races again, I would’ve expected bigger accompanying moves from the EUR and HG (copper).  We’ll see… 


  4. Never,
    Why is it that the market typically pushes higher going into a long weekend?


  5. where do you think fcx is going today? thanks,


  6. Exec / long weekend:  I don’t know. I’ve seen that in a number of studies generally, and particularly for the May long weekend (in the US). For me, a long weekend just means another day in which something can go wrong in the world, and I would be more likely to sell ahead of it. But history suggests otherwise. 


  7. Phil,
    Something that you may have addressed before but: When doing a Buy/Write – do you sell same dollar amount ( $1000 of each)of puts and calls or same # (5 of each) of them? I have been doing both depending on how bullish I am on the stock. Thanks


  8. These premarket moves are starting to annoy me.
     
    A while ago, someone mentioned DSCO (Discovery Labs).  I have done some reading and I am starting to like the chances of them having an approval for Surfaxin.  It is a very risky trade, as it is a penny stock, so this should not be for the faint of heart nor with essential money.  I am going to buy 2K worth of shares (1/5 entry) and see how things play out. FDA decision is not until early 2011.


  9.  Hanna, i have 65 & 70 puts on MON that i have sold.  There is virtually no premium left on the 70′s – so, with the bad news of the earnings revision + still high implied volitility, i’m going to roll the 70′s to 2012 55 or 50 puts.  They have restated earnings and have a June 2 investor conference (i think).  So, i think today should be a pretty good capitulation day.  We were early or i like to say, wrong but the long term premis is still there as phil reiterated yesterday.


  10. An analyst believes Balmer is scheduled to appear onstage for 7 minutes at Apple’s WWDC conference next month to introduce a tool that will allow windows developers to write iPhone apps. (It’s Visual Studio 2010 for people that actually means something to.)


  11. Phil / RIG – do you prefer the Jan (2011?) 60/75 bull call spread with $50 put sale or the 2012 50/65 bull call spread with $35 put sale?  Those are latest two I’ve seen.  Maybe you have better one now.  Thx. 


  12.  My brother lives in Osaka, he said ipads sold out, The reception in Asia will be even better than the US, APPL may take us higher


  13. Good morning! 

    Same bottom levels as yesterday but now the Nas is green with the RUT:

    • Dow 10,200 to 10,650
    • S&P 1,100 to 1,155
    • Nasdaq 2,225 to 2,350
    • NYSE 7,000 to 7,250
    • Russell 620 to 660

    We don’t want to lose either one of them and let’s watch the Nas at the 2.5% Rule at 2,250.  SOX need to hold 350 (now 352) to keep the Nas strong and RUT failing 650 will be a reason to worry. 

    Same TZA hedge as yesterday is still good ((Buy the Jan $4 call for $4.10 and sell the Jan $12 call for $2.10 and you are in a $8 spread for $2 that’s $3.61 in the money already) and our downside momentum play is the June TZA $6 calls, now $1.30 – they topped out at $1.80 yesterday and should be a fun play on any pullback.  I feel good about them now as long as the Dow is under 10,150 and S&P is under 1,088.

    I wish I could be more bullish but this is a BS pre-market pump and we have plenty of longs so better to be careful!


  14.  PHIL /TBT
    Covered my sept short calls the other day (thanks for the advice on covering ALL of my short ETFs by the way!) – so I only have long sept 43 calls with entry at 4.90 BUT i got 1.50 net from the short calls I covered so I was thinking of selling some DEC 48′s for 1.80 – or is going out further than my long calls not good because theta decay will be less?  thanks!


  15. Phil – Pre-market is "BS"…it’s magical…=)  Now can someone explain again why only the "chosen ones" can trade 24/7?


  16. You’re completely right Phil that the rumor-driven drop and pop yesterday and this morning is very suspicious.
     
    We woke up this morning exactly where we were mid-day yesterday, except that someone had been chased out on the rumor (likely retail) and someone else was now in (likely funds).
     
    Hmmm.


  17. Hey all,

    I am involved in QDEL at 11.33 on the day. This was our first Buy Pick of the Day.

    We are out of PAY at 18.65 for a gain of 8.5%. It is still rising, but I exited based on my recommended exit last night. 

    We are still in BIG, and it is not getting any better. I am going to sell if it can get back to about even or slightly better, which would be 36.50.

    Our other Buy Pick of the Day just missed our entry for Moody’s Corp., but if you got involved it is working very well.

    Good Investing!


  18. Where is BUY LIST located please?


  19.  kwan – do you think ballmer appearing in person at an Apple event is a sign of Armageddon is nigh?


  20. Phil: how much (%) of the buy list have you bought or suggest we buy at this point?   Also, although they are long-term plays, you do sell them after a short period of time when you think it’s the right time, like in early April, correct?


  21. Costco profits climbed 46%…on a 4% rise on sales of stores open for 1 year or longer. 
    Per article:  finance.yahoo.com/news/Costco-3Q-profit-rises-46-apf-2758266487.html
    Costco Wholesale Corp.’s profit climbed 46 percent in the fiscal third quarter as sales and membership revenue both rose.
    Costco said revenue from sales at stores open at least a year grew 10 percent. Excluding higher gas prices and changes in currency exchange rates, those sales rose 4 percent. Those sales are considered a key indicator of retailer health because they exclude results from stores that have opened or closed over the past year.


  22. Looks like I’ve finally got Pivots working.  I’ve got RUT… Pivot of 646 and the S1 636 at and the R1 at 653
     
    Can someone confirm for me please?


  23. IWM 64.06, 64.74, 65,84, and 66.63


  24. Out of gold swing longs for the moment. Will look to re-enter, possibly on a touch of 1200, which is also where the 5 sma is.


  25. Comparison chart of a few Pharma companies.  Sector rotation at its best.


  26. yipcarl:
    i use IWM and $SPX for the pivot, and R1,R2,S1,S2.
    what is ticker for RUT ?


  27. RUT on TOS and $RUT.X on my tradestation.  Of course it’s teh Russell 2000 index


  28. i did a no-no and held the long calls overnight. didn’t sleep too good but SITIE (sell into the initial excitement) payed off well.
    And thanks David for  PAY


  29. ERIC…how do you trade gold what medium?


  30. yipcarl
    Pivot IWM 54.76, R1 65.54


  31. RMM
    IWM Pivot 64.51, 63.07 and 65.42…
    correct?


  32. yipcarl,
     
    I’m trading current-month call verticals on GLD, buying deep ITM and selling a couple strikes OTM. I also have some leaps and sometimes trade the stock, but I like the verticals best because when I get it wrong I have an ‘out’, and when I get it right it usually is accompanied by a volatility decline, so the short calls don’t hurt me as much (and sometimes actually work in my favor, like this morning where they are down but my longs are up).
     
    I don’t like to trade futures since I get too nervous and I don’t want to monitor it all the time.


  33. JRW thanks… You meant 64.76 no 54 right?
     
    I was using a 5 minute chart but I guess I need to use a daily chart for the correct Pivots….
     
    Correct?


  34. Sorry, IWM pivot 64.76


  35. Welcome RJ!  Please go through the New Member’s Guide and do your homework.  We are about 20% in on the bull side right now but hedged for at least a 30% drop.  Keep in mind that, in a catastrophe, that 20% can be put to you for another 20% and you’d be 40% invested with the Dow down 30% (7,000) from here so that’s what you are committing to with "just" a 20% entry on buy/writes.  Yes we can adjust and yes our disaster hedges offset the drop nicely but this is a true long-term strategy, so a real commitment is required in an uncertain market. 

    MON/Hanna – Well they just dropped guidance 20% on the issues we’ve been discusssing.  Fertilizer sales are in the crapper and there is a lot of margin pressure as suppliers are dropping their prices to keep the farmers buying.  Even with the drop they should be hitting $2.20 a share for 2010 so I wouldn’t worry about the 2012 puts but probably no way on the calls.  What are the actual positions you have now and basis?

    Accompanyments/Never – You are right, that’s why I put up the short play, we’re getting mixed signals for such an "amazing" gap up.  Euro selling off hard again ($1.220) and Pound is down to $1.442 while the Yen is at 90.55 so still not too good.   The Nikkei is only at 9,639 and it’s very unusual for the Dow to be 500 points away from the Nikkei.  Copper is 3.12 but rejected hard off 3.14 and oil did not hold $73 ($72.84) so done with unhedged USO longs.  Gold is still at $1,215 so somebody is still worried about something

    Long weekends/Exec – "They" usually want positive party conversations regarding the market. 

    FCX/Iprosp – I like them for holding $65 but I’m not hugely excited about them.   At $80 I’ll be looking for the exits longer term.  Today I don’t see much reason for them to do anything unless the market falls back again – then they will follow it.

    Buy/Write/Jomp – Oh same number of contracts (5 contracts per 500 shares).  Dollars would give you crazy/danagerous naked puts and calls.  It’s fine to do some extra as long as you are good at managing the risk but, in general, we’re picking the 2012 buy/writes as conservative anchor plays for the bulk of our portfolio.

    MON/Jo – It is a good capitulation day but maybe not the last as they should get a visit from the downgrade police tomorrow. 

    And Wheeeee!

    Ballmer/Kwan – Really?  That would be very strange and I would think it would be Gates as Jobs, like most sentient beings, does not seem to be a Ballmer fan.

    RIG/Terra – With the leak looking plugged you can be more aggressive (Jan) but the 2012 spread is miles safer. 

    TBT/Salvum – So you paid net $3.40 for the Sept $43 calls and they are now $1.95?   Call me crazy but, when I’m behind, I shift my focus to getting even.  You can sell the $40 puts for $3.10 and sell the Jan $29 puts for $1 (margin $3K) and that will pay for you to roll down to the $35s ($6.15) where you still have 50% upside if TBT manages to hold $40 and, if things look bad in July, you can still roll along to the Jan $31/36 bull call spread (now $3.50).


  36. Eric,..got you thanks..


  37. JRW III and yip: IWM pivot is 64.76, not 54.76


  38. Morning everyone!
    I have a TOS technical question. I am new to TOS and was going to do a buy/write yesterday buying stock and selling 2012 puts and calls. I tried to do this in one trade, but couldn’t. I called tech support and they said I had to do it in two transactions: buy the stock, sell the straddle. Has this been your experience? Can it be done in one trade? Thanks all.


  39. JRW III: TNA is above R1, yesterday also and then returned to pivot by end of day.
    For  IWM: do you look at 5 min chart ? or 2 min ?  and for entry: when momemtom goes over 100 ?


  40. In TNA at $47.34 (1/2)


  41. RMM I understand they use a 3m chart with a 8EMA.. Not sure about you JRW I understand you do it a little differently


  42. RMM
    1 min chart for trading


  43. David…. You gave me a nice payday with your PAY recomendation yesterday. I sold naked puts and am out this morning with a 70% gain. Thanks!!!!


  44. JRW not sure what you based that entry on…


  45. Phil – "Mixed Signals" indeed.  Consumer spending went up only 1.6% 1st quarter…but savings dropped almost 1% from 4th quarter.  GDP is .4% below revised, unemployment benefits fell 14k but they revised previous up 28k…and we still can’t break 460k.  Good thing the HFT machines don’t have feelings.  So where is the spike coming from today???


  46. Executed a terrific Buy/Write on HUN ( Huntsman Corp), buying stock and selling Jan 10 p&c. Should be a double in 12 months. The discount using this strategy is 33% on the entry


  47. Contra Indicator Alert – CNBC pumping up hurricane season – more active, much earlier etc. Means their puppetiers want to ensure that the Oil/Gas prices keep going up (or not fall from the nice recent rise)


  48. 24/7/Gold – You can trade futures and you can also open up offices in Tokyo and London and trade those markets too.  That’s what’s great about Capitalism, as long as you have millions of dollars, you can do anything you want!  8-)

    Hmmm/Eric – I’m wonering about the implications of this.  The game is always rigged but when they start doing blatant stuff like this it reminds me of the pre-dip in 2007 and the pre-crash in 2008 when we’d have these wild, ridiculous gap ups and rumor selling and rumor buying all day and, at that time, I was of the opinion that it was the funds just working the retail crowd to dump as many shares as possible near the top before they hit the big SELL button on last time.  I think it’s amazing how little perspective people have as we’re not 10% off the top, we’re still 66% off the bottom! 

    Woo-hoo on Nat Gas – HUGE Hurricane forecast.  14-23 named storms predicted, 4-5 full-blown hurricanes.  That’s going to boost oil and nat gas so UNG is still fun at $7.29, selling Jan $8 puts and calls for $2.50 for net $4.79/6.39.  I also like the Jan $6/8 bull call spread for .95, selling $6 puts for .53 for net .42 on the $2 spread.


  49. New currency play for today. Sell USD/MXN. The Peso has been beat badly the last few days, and with the likely rise in oil over the near term, will drive the Peso. Buy at today’s price (12.90), Stop at 13.39, take profit at 12.41


  50. yip: agree on entry question, yet he was successful.


  51. where is buy list, please?


  52. JRR another great entry…if only I knew the method to your madness….  I’ve been looking and re-looking and I can’t see what triggered that TNA entry at 47.34, it was almost a perfect entry if you look over the last 10 minutes that was the low??!!


  53. UNG dropped to 7.09 as soon as you wrote that.


  54. yipcarl
    It was set to break through 65.84; I posted those level earlier !!


  55. We’ve nosed through that 1093 resistance on SPX from last week. Nice.


  56. Soooooo… all you guys doing long term buy/writes at TOS…. can it be done in one transaction??


  57. JRW III: momentum indicator: when this goes up over 100, is that your trigger for entry ?


  58. The market is exploding upwards on disappoint GDP and Jobless numbers.  Yeah, thats normal.


  59. Out of TNA at $48.18; looks weak


  60. Long weekends/Exec – "They" usually want positive party conversations regarding the market.
    It wouldn’t surprise me if it was as simple as that.


  61. Morx and Gel -

    Your welcome. How much you make Morx?


  62. Pharmboy,
    I noticed some big volume at the close and AH with HGSI yesterday. Any thoughts on that?
    Thanks,
    Robo


  63. If gold futures break above 1220 today I’ll get back in. Still suspect it won’t happen though.


  64. RMM
    It’s about the levels, and the strength of the move; look at the RSI, that’s why I sold.


  65. RMM/JRW
    I think he bought it as soon as the IWM was flirting with breaking the pivot?  It seems that’s what JRW said.  He saw IWM ready to break through the pivot and he bought TNA…


  66. Gel 1 – HUN looks interesting with the dividend - what is your logic trail?


  67. Phil/Matress
    Phil, are we doing any adjustments on our DIA mattress?
    Sorry Yodi but I couldn’t wait for the end of the day for you to ask :)


  68. yipcarl,
    MY lines, NOT pivot; see my 10:05 post, but you have the stratagy !!


  69. JRW you use the RSI on the IWM or TNA or?  What time frame RSI?  1 minute?


  70. Jbur/TOS
    No, it can’t.  You can do covered calls in one transaction, but can’t add an additional leg.  If you’re only trading options (no stock) you can make whatever spreads you want, up to 4 legs.


  71. wassellc: Thanks much for the help.


  72. Nice job David!

    Buy List/Dman – Click on my name on the Tab bar and go down 3 articles.  I’ll move it to the Portfolio Tab later. 

    Buy List/Sean -  I’m for being 20% invested in buy/writes with about 2% devoted to 5x downside hedges and 78% cash and short-term plays at the moment.  We have no real evidence that the market won’t collapse again and it will be weeks before we do so I’d rather miss a huge move back to 10,700 with "only" 20% that will make 20-30% than get caught with my pants down with no cash on a huge sell-off.  Last time we had a massive sell-off (March ’09) I found 13 plays that AVERAGED 469% in 6 months.  I’d rather take my chance and wait for that than overcommit at this wishy-washy level.  We know 100 ways to make 20% and the market is too crazy to make risky trades here so patience is a very key virtue at the moment.

    Cost/Gold – They are a kick-ass operation.

    Pivots/Yip – My TOS Chart looks like this, maybe someone can tell me how to adjust settings after hours to match what you guys are using:

    We’re still getting rejected below our breakouts (which is only a breakout to our breakdown levels anyway).

    Futures/Eric – Yeah, you have to make sure you went to the bathroom and have food and drink within reach before intiating a trade because you can’t walk away!

    TOS/JBur – Yes, someone asked me about that entry yesterday and I bolded the comment for the strategy.


  73. yipcarl
    IWM


  74. Back in TNA at $47.50 (1/2)


  75. Because it bounced off 65.84


  76. Phil, whats the current play on GOOG and GS? Thanks
    Phil


  77. judah – you around?  See anything interesting?


  78. occam – exactly :) actually if there’s any weight behind that rumor at all I find myself thinking "of course – that’s completely logical"
    Phil/Balmer/Gates – I remember a time when Google had a member on Apple’s advisory board, but now look at the two of them… I reckon the opposite could happen as well. Gates is too busy funding ways to create artificial clouds anyway.


  79. yip & rmm thanks for asking all the questions i m too shy to ask


  80. I hadn’t looked at AZO recently. Holy cow! Last year I tried to short them a couple of times between 140 and 160. Glad I gave up.


  81. I see they had a huge beat a few days ago; almost doubled estimates.


  82. JRW – FWIW, I have an IWM descending line starting at the top of 5/13 touching the top of 5/18 that IWM is having a hard time getting over.  I sold at that line on my one round of TNA so far.  At the moment it looks trapped between this line and your 65.84 line.  Above my line is smooth sailing to your next R line.


  83. brooklyn/HUN
    There are some very interesting drivers behind this stock. In 2007 HUN was a takeover target at $28/share, but was left at the alter without a closed deal. HUN sued the financial backers of the deal and collected $2.7 bil for the broken heart.
    HUN has a very strong balance sheet, and has been severely beaten down because of the economy. The company is perfectly poised to benefit from an expanding economy as a manufacturer of plastics (polyurethane). The demand for their products is on the rise, and their p/e is far below their competitor (Dow). The company should post a 40% jump in cash flow this year. The analysts are projecting a very nice rise in margins over the next few years. The company has more plants operating in China, and is considered to be the low cost producer in most of the niches where it operates.
    My target before profit taking is 15 – 17 per share.


  84. Out of TNA at $47.66, still loos weak; maybe it will be a TZA day after all.


  85. morx – fire away.  Everyone wishes each other well here and usually eager to help.


  86. lionel
    May 27th, 2010 at 10:44 am | Permalink  
    Phil/Matress
    Phil, are we doing any adjustments on our DIA mattress?
    Sorry Yodi but I couldn’t wait for the end of the day for you to ask

    That is OK  I am buying all Jun and Jul puts for a profit of 1.5 to 2.00 which I rolled yesterday for a 1.00 profit
    rolling as well sep 100 longs to 102 longs for .80  Lets see Phils comments


  87. EIA Natural Gas Inventory: +104 bcf vs. consensus of +100 bcf. Futures trim gains, +0.12% to $4.184.

    May KC Fed Manufacturing: 5, sharply down from previous 24.  May KC Fed Manufacturing: 5, sharply down from previous 24 – though still a net 5% of firms reporting M/M production growth. Shipments, new orders and order backlog indexes all go negative. Future production index rises to 32 from 22. Chicago Fed at noon!

    Stocks are "very, very" oversold and are set to "pop" in the coming days, Barton Biggs says, perhaps to a new recovery high. "The European concerns are serious, and I take them seriously. I just don’t think that the worst is going to happen."

    Roger Nusbaum: S&P +20 points at the open "is panic buying and not a sign of health, even if it continues for a while."

    The flight to safety is driving down mortgage rates for the fifth straight week, to an average 4.78% for a 30-year fixed-rate loan, Freddie Mac reports. Refinancing is jumping again, with the MBA’s refi index jumping 17% last week, and purchase applications fell to the lowest level since 1997 in a post-tax credit hangover.  Here’s my number one economic concern – if, for some crazy reason, rates ever do get real – both residential and commercial real estate are likely to go down in flames.

    St. Louis Fed President James Bullard says he does not expect the fiscal crisis in Europe to create problems for the U.S. economy but warns that the Fed’s pledge to maintain low rates for an extended period could, if misread, perpetuate the boom and bust cycle that plunged the world into recession.

    Geithner, wrapping up a series of talks in Europe, claims broad agreement between the U.S. and Europe on the need for an overhaul of global financial regulations, but there is considerable disagreement over the details. Europeans are dismayed by parts of the U.S. Senate bill, and the U.S. is upset by Germany’s move to crack down on naked short selling

    China’s rare denial of a report on its eurozone bond holdings illustrates the dilemma posed by its massive reserves pileup. Although it would be understandable if China has some concerns about its eurozone debt holdings, the massive size means it has few options other than to hang on to debt whose value is already under pressure.

    China’s rare denial of a report on its eurozone bond holdings illustrates the dilemma posed by its massive reserves pileup. Although it would be understandable if China has some concerns about its eurozone debt holdings, the massive size means it has few options other than to hang on to debt whose value is already under pressure.

    Clueless:  Microsoft (MSFT) CEO Steve Ballmer says he is unconcernedthat his company has dropped behind Apple (AAPL) in market cap and that he is focused only on new products and enhancing profitability. Apple also is nipping at its heels in revenue – this fiscal year, Microsoft is expected to generate $61.6B, Apple $59B.

    Jones Soda (JSDA) up a whopping 62% premarket after inking a deal with Wal-Mart (WMT) to sell its products in WMT’s 3,800 U.S. stores. Jones says customers’ biggest complaint had been "that people can’t find Jones Soda near them."


  88. Jones soda is so goooood…


  89. JRW III: the variation is TOO narrow, its dangerous,the channel is too narrow.


  90. morx
    Feel free to ask !!


  91. Out of MON with a tax loss… Will look for a faster pony to ride.


  92. Hey all,

    Just a quick update. If you are interested, I just posted what I have changed to the Daily Discourse (formerly Musing). What you think, eh? Today, I am doing a crash course look at solar energy and its benefits. It is part of a three part series I am doing about fossil fuel failures and the market for solar energy.

    Check it out if you have any interest in alt energy.

    Thanks and Good Investing!


  93. ss,
    At what level is your line currently ?


  94. JRW!  Thanks I see YOUR points… I guess without you it’s impossible to get those lines however you calculate them.  I may have missed the answer to my question about RSI, I think you said you look at IWM – RSI but didn’t qualify whether that is 1 minute RSI or?


  95. Phil…
     
    that is what my pivot chart looks like on TOS, I’m not sure what what it looks like on a different setting and what a different setting will provide?


  96. JRW – at 11:15 it will be 66.10


  97. JRW III;
    there is a RSI and a Stochastics RSI, the latter is quite sensitive, which one do you prefer ?
    the scale is from 0 to 100,


  98. Yodi/Mattress
    Thanks Yodi.
    I did the same on my front shorts but havent rolled up my longs yet.


  99. JRW – the descending pennant.  Which way does she break?  TBT is telling me down.  Hmmmm.


  100. yip
    1 min


  101. RSI at bottom for IWM, its TZA time.


  102. JRW…thanks.


  103. RMM / RSI
    I use 14, but it’s whatever works for you.


  104. ss,
    Thanks


  105. Lionel
    I think it is a good time to roll some longs as tomorrow might be aDIA selling day again
    MON they pulling the rug under MON -4.12 wooo


  106. JRW…WOW, I see the RSI on IWM was way overbought right at the time you sold…. Now I’m picking it up.  Do you also incorporate the 8EMA or is that someone else who trades this ETF?
    1 min IWM was certainly way over the 8EMA when the RSI was also overbought…
    Do you use the 3 minute chart for anything or it is all your lines and 1 minute charts?


  107. David…Nice call on PAY.  I played it with options for a double, now out of course.  Tx. 


  108. yip
    You’re thinking of SS and judah, I use up to 6 month charts to set up, then trade on 1 min.


  109. JRW – bounced off of it again.


  110. Sorry, had to take some time out to buy TNA at $47.44


  111. New Govt Gulf Oil Spill Estimate = 25,000 barrels/day
    http://www.cnbc.com/id/37372610


  112. Pharm,
    What’s up w/ ARRY? Do they have data release coming up soon? Spreads got huge.


  113. HK players, we’re up 30% since our entry on the 15 calls so you should cover at least 1/2 with the 19s today, I’ve got an open order in at $1.


  114. GOOG and GS/Phlit – I have no interest in either at the moment.   We did a combo play that left us with free 2012 $70 puts on GS, just in case they go BK and we can make $700,000 on it but both of those stocks are too crazy to call right now. 

    Gates/Kwan – I think the idea of playing God really appeals to him.

    Mattress/Yodi -  Our stance from Tuesday hasn’t changed but a stop should be put on 1/2 the June $103 puts, now $4.15 if we fail 10,150 again, using that line as the on/off switch.  

    As mentioned earlier, we are net bullish on mattress plays with full cover of Sept $100 puts ($6.25) with the June $103 puts ($4.80) as we didn’t have enough to protect since last week.  If you don’t have disaster hedges and this is your only hedge, then perhaps a 1/2 cover

    TOS/Yip – Oh I have no clue, I never play with those things but I see some people have different numbers so I assume there is a "right" setting for them or maybe whatever formulat TOS uses is slightly off someone elses…

    These levels should not be such a hard slog, we were just here last Thursday and MUCH higher (10,700) earlier that week and way up at 10,900 two weeks ago.  On the bright side, we are over 2.5% on the Nas, the NYSE (who has a long way to catch up) RUT and the SOX – we can’t really ask for more than that in a day.  The Dow (2.2%) and the Transports (2%) and the S&P (2.48%) need to confirm the move up by popping and holding 2.5% and it would be very bad if we don’t as XOM and CVX are up 2.5% and 3% repsecively, good for 32 Dow points alone.  AAPL is up 2.8% and that adds .042% to the Nas by itself so, like yesterday, there is NO EXCUSE for NOT breaking 10,200 and 1,100 and not doing that is a sign of weakness. 

    Don’t forget, below those bottoms is nothing more than a weak bounce!

    Oh man, 8-14 Hurricanes they are saying!  That’s CRAZY!  HD and LOW are BUYBUYBUYs in that case! 


  115. ss,
    Nice line, out at $47.75


  116. Hi Phil/ I have a theory
    I think we have another dip in early to mid Jun which will be more brutal as investors worry about EU impact on earnings. Rally back on if earnings come in better than expected, Another traditional dip on the oct period where the first real difficult comps will start to appear, maybe ending with a santa claus rally


  117. JRW…thanks… So SS and Judah use the 8EMA.  You just use RSI and your lines on IWM to trigger a trade on TZA or TNA


  118. JRW – this is like a good ol’ fashion game of pong.


  119. Columbine Capital Services Inc. (i)
    74
    02/20/10
    Upgrade
    Favorable
    05/21/10

    Channel Trend Inc. (i)
    72
    04/02/10
    Upgrade
    Most Favorable
    05/14/10

     
    Gel 1 – thanks.
     
    Phil – Any thoughts on HUN? Also looking at XOM  ($60.70) purchase the underlying and sell JAN 12 $60 puts and calls for $16.80 for $44/$52. Seems like it would be good to sell a $40 put for another $2.39 for $41.51/50.76 or if XOM is below $40 in 2012, triple down at $47.17. If called away at $60 in 2012 return (with dividend) 50%


  120. Gel -1 the gibberish at the top of the last post is analyst recommendations on HUN from Fidelity


  121. Lflan -

    Great job. Thanks.


  122. yip
    My lines, 14,3,3 Stoch, RSI at 14, volume,Momentum also at 14, and pivots,with an overview from DeMark analysis.


  123. Back in at $47.48


  124. JRW…Wow lots of analysis on 1 chart for 1 minute!! 
     
    Stoch fast or slow?


  125. Phil – If the BP "top kill" odds are really 60-70%…why was this not performed 30 days ago? Any options "lotto" plays for BP on Friday?
    —————————--
    The embattled CEO stood by BP’s 60-70 percent odds of success. But top kill, a routine procedure on the surface, has never been attempted at such depths, prompting one industry expert to put the odds of success at less than 50 percent
     
    http://www.reuters.com/article/idUSTRE6430AR20100526


  126. Shoot, I accidently I deleted my tab with all the exchanges on Streetsmart.  Does anyone have a complete list of the exchange symbols handy?


  127. brooklyn/HUN
    The analysis looks pretty damn good. – I did not previously see this. I did note however, the ex-div date is 6/15. Thanks!


  128.  SPWRA – WOW.


  129. And out at $47.87


  130. ss,
    That’s $7K from your line; I owe you a bottle of Scotch !!


  131. JRW – send the money :)   Kinda hard to play TNA higher with the indexes up 2-3%.


  132. ssdirk; what is your interpretation of 66.1 at 11:15 ?


  133. Hi Phil I still have FAZ hedge July 13 call and July 14 Short call — should I roll to October mos like Oct 11/14 spread- now for .89 or wait till next week . thx


  134. ss-My thoughts exactly…either 1095/1100 or back doooown….can’t see this staying static much longer…


  135. RMM – that was an IWM descending line starting at the top of 5/13 touching the top of 5/18.  It is currently at 66.02 and obviously has been taken over.  It may provide some support now.


  136. exec – etrade has them as one of their stock watch lists. I could send a jpeg if i knew how to get it to paste.


  137. I’ve been long SPG from last week with June 75/85 call verticals. Just bought an equal amount of 95/85 put verticals, leaving me short the 85 straddle. There is a lot of congestion in the 85 area for this stock, so I’m looking for SPG to stall and drift around here.


  138. TNA: now they want to suck you in. Careful.


  139. Phil- I’m looking at BP Jan 60 2012 Calls as a speculative play on the basis that they will fix the problem. The calls are at 2.25, but what I cannot estimate is assuming the stock goes to 50 but overall market volatility comes down sub 20 VIX, where would the calls be priced? Also, if you think there is a better play, let me know. Txs


  140. JRW – I said is was clear sailing above my line.  Wish I would have played it that way.


  141. Eric- did we just double bottom at 1090 on S&P? Isnt that bullish? How do charts look to you? Txs


  142. ss
    Yeah, I would have owed you a case of Scotch !!


  143.  TBT front month calls cheap enough to buy again (for a gamble). Stock up 3.8% and 45 calls are flat!!!
     
    4.78% fixed rate for SFH?? Wow, any gamble to the upside on interest rates for local minima sucha s this is a smart gamble, IMHO
     
    DD on 44 calls for 0.22 (original entry 0.84).  
     
    David, congrats on the PAY call. I got out at 19.76 (too bad only 200 shares, but $450 is $450 right???). Didn’t take any plays today (market up too much already). Looking forward to next week though.


  144. Phil:
    I am long TBT Sept 44 C, and short TBT 45 P. Originally had Sept 44/50 bull call spread at 3.20, sold puts for 1.59. I recently took out the 50 caller(sold for 2.39) for .63.  Would you make any additional changes at this time? Thanks.


  145. ssdirk; in drawing lines – how far back – your theory seems to be that certain levels will be targeted by the big players?
    clear sailing: how can it go up more when we have already a substantial move ?


  146. The Mon spread is up 20% if downgraded and lower tomorrow will the spread go up or down? 20% is good for a couple days.


  147. Phil,
    Russell at the top of the range, 3 of the other 4 not even in the range, thoughts on equilibrium ?


  148. Bio -

    Congrats buddy.


  149. GOOG pulling away from the rest of the market, telegraphing something?


  150. Phil – SPWRA:  long $10 Jan 12 C and short $17.5 Jun P.  I’ve been waiting to sell the Jun C, is now a good time with the pop, or do you think there’s more to come?  Also, thinking of rolling the puts.  Thanks.


  151. sns,
     
    I think it generally looks good, especially if we can close above 1088. May get some shake-out tomorrow, but I’m staying bullish.


  152. PHIL…….I’m l/t bullish on LOW…..how would u play it…….tks.  GABBY, now 87 and still playing with the kids’ money and loving every minute of it !!!!!!!!!


  153. GOOG anchors   Sept 500s.   Order placed to sell June 500s for 10, 1/2 cover.


  154. ssdirk: what is ratio of TZA/TNA in order to get the same impact ? I never know how many TZA I need,
    looks like 8 times as many.


  155. Phil:  What are your thoughts on the volume activity today?  I feel like I know the answer, but do you get the feeling today is turning out to be more pumping of helium in the balloon?


  156. RMM – In addition to pivot points and JRW’s lines I draw my own lines in 2 ways.  First, I look back at a 15min chart going back for 1 month and draw previous support and resistance lines that have held several times in the past.  Secondly, I look for diagonal lines, both ascending and descending, that have tops and bottoms in common.  It really is amazing how well these lines hold up.
     
    As to clear sailing, I just didn’t see any other diagonal lines in the way of JRW’s next line.  I didn’t play it above my diagonal line because I thought we were a tad high already also.


  157. RMM – TZA I am playing for dimes and TNA dollars are nice.  8/1 is about right.


  158. Phil – Do you recommend buying some June BP puts today…in case the top kill doesn’t work and bad news is announced on Friday?  If the top kill doesn’t work, then the "junk shot", then another "smaller cap"…yet unfortunately, the only 100% solution is a second well, which would take "a couple of months".  At 1 million gallons leaking a day from the more updated estimates, we are looking at 100 million gallons of oil…10x Exxon Valdez…
    finance.yahoo.com/news/Scientists-Gulf-oil-spill-apf-3985971610.html
    ——————-
    BP spokesman Tom Mueller also discounted news reports that the top kill had worked.
    "We appreciate the optimism, but the top kill operation is continuing through the day today — that hasn’t changed," he said Thursday morning. "We don’t anticipate being able to say anything definitive on that until later today."


  159. ssdirk: thanks a lot, you give good and clear comments, your jargon is not confusing. Merci.


  160. RMM\ Diagonal Lines – For instance, on a RUT 3 min chart, draw a line connecting the highs of 5/13 and 5/18 extrapolated to today.  Look at the last six 3min candles.  They have followed the line down perfectly.


  161. Been busy so havent had the time to follow your trades JRW but looking forward to making some cash tomorrow!


  162. Phil,
    I have 400 shares of EIX at 32.04…Would you suggest a "Selling Puts and Calls Jan 11, 30′s
    Also, sitting with a June 61 QLD at 3.40. Please suggest what needs to done.
    Thank you.


  163. When the market crashes, flight to safety raises tbills (lowers yields). TBT in inverse –  When mkt rises, people Dump treasuries, so tbills fall + tbt rises. Therefore, TBT is a semi bullish call on the market as well.


  164. EXEC  – U got SSPro?


  165. ssdirk: how do you then go from RUT to IWM ?


  166. Bought a couple of BIDU puts as it flatlined, which should ensure a run up to 75 today for your longs!


  167. mrmocha- GooG is up 2.7% on 1.3M volume…avg volume 3.7M…perhaps not only is China long the Euro, but long GooG stock too…=D


  168. goldman….Your suggestion about buying puts on BP today piques my interest.  Any fool knows you can’t stop this huge oil flow a mile down by pumping  mud and cement.  Picture yourself trying to stop a geyser under continuous high pressure by …"Hey Mack, back that truck up here and pump that there cement down into this hole, eh?""  It won’t work.  Question is, will BP tank more after the news.  What will Phil say?  


  169. Phil
    what the lastest on BP  ?
    I was looking at buy stock at 45.46 sell the june call 45  at 2.23.
    Thanks


  170. RMM – Using the same procedure I draw lines for IWM, RUT, DOW and SPX.  I watch all of them. 


  171. GOOG running higher on vapors, no volume in this market…


  172. RMM – guess what line is holding as support on IWM at the moment.


  173. With coastal drilling permits now in cancellation mode, I have just  DD my long positions in SU. . Also looking at a short position in OIH. (of the 16 components of this etf, two of them are HAL and RIG – not good.) If support at $96 does not hold, then it could very easily drop to $86.


  174. JRW… Why wouldn’t TZA have been a buy at 10:07-10:10.. 
    IWM>>>>
    The Stoch was way down and was turning up
    The RSI was way over sold
    The momentum wasn’t great but it was turning up
    IWM was way below the 8EMA,,,bound to pop….
    Your line is 65,84 and it got down to 65.93 which is close..
    Why wouldn’t this trigger a buy of TZA?


  175. Correction! I mean TNA not TZA….
    Of course I’m referring too the 1 min chart on IWM when I mention the specifics of the analysis tech…


  176. RMM – One more input.  I watch all of them because one of the charts sometimes hits its next line before the others.  This can have the effect of causing the others to stop advancing.


  177. Well I’m back after a couple years absence. I still recognize some of you guys LOL.  I’m in entirely equities at this point, ( and 60% cash) but trying to get my hedges back together. Just Got filled on TZA  Jan ’11 3.00 calls at 4.10 (same price as the 4′s were yesterday) I’m thinking about waiting for a bounce in the TZA price before selling the short leg of the spread. Any advice on covering now vs. later, and optimal sell strike for the spread?
     
    It’s nice to be back, fells really good to be reconnected with the smartest guys in the room.
     
    Gordo


  178. My sold TBT puts are finally smiling again. :)


  179. yip,
    It did, I ignored it as now I’m watching a break of 66.30 for TNA or a failure of 65.70 for TZA; I’m hoping for a day trend as opposed to a shallow channel !!


  180. ssdirk; you are a busy man, your 66.1/66.2 line is holding ? we will have to see,
    I see a channel from R1 at 65.5 and  66.3 today, chances  are low it breaks UP further but chances are much better it will break lower. what do you think ?


  181. GOOG  1/2 covers June 500 sold for 10.


  182. ssdirk: all we need to hear is bad news about the fixing of the oil leak.


  183. Phil, I’m looking for SPY @ 8.50 in a few months. Is there a way to go short with a Hedge? Thanks


  184. RMM – my line held perfectly at 1:06 65.95.  It is a descending diagnol so it is always sloping down in time.   I am watching all my indicators to get an edge on direction, but my gut feel is down.
     
    As to BP, please please please hope that the top kill holds.  I have a HUGE vested interest in it working that goes way beyond the stock market.


  185. Phil would you please give me a BULL play on the DIA and a BEAR play on the DIA………TY
    Phil


  186. Phil BTW just include using DIAs and no other stox. TH
    Phil


  187. The ironic driver of today’s upward trend is "China Denial".  Logically, as a country run by a group of engineers… of course they are going to deny any and all "leaked" news concerning their "lack of faith" in the hundreds of millions of Euro on their books…as what kind of calculated communist would do otherwise, or capitalist for that matter? 


  188. Phil,
    Good time for disaster hedges? I need another one. What would be a good one now? – I have the TZA play you outlined yesterday and sold the July 11 calls also. Thanks


  189. ssdirk… Are you still trading currencies?


  190. gel – sadly, I never turned the paper account into real money.  Would have been the best trades of the year for me.  What do you see as good pairs?


  191. In TNA (1/2) at $48.44


  192. SSDirk, I think we all hope it works – you’d have to be a sick person not to want it to work…


  193. Theory/Chyeer – Interesting but I’m sticking with my consolidation between 10,200 and 10,700 theory (if we can first get back there!)

    HUN/Brooklyn – Good choice but they are flying today, as shame to chase them.  If they hold $10 next week, then maybe set something up for hihger.  XOM of course I like but not as much as I was loving them below $60!

    BP/Gold – They already popped.  We went with RIG yestereday and I like them better than BP, who could end up BK if all this stuff fails (not likely but why risk?).

    SPWRA – I don’t often pound the table on things but $11 for them was just stupid!  (almost as stupid as TBT below $40).

    FAZ/Gucci – It depends on your insurance needs, nothing at all wrong with that roll to shift to more, longer-term insurance. 

    Oil topped out at $74.50, temping short here.

    BP/SNS – They make about $2Bn a month and this mess will cost them minumum $5Bn and that makes $65 a fair long-term price but factor in the spill and factor in the possibility of new laws, and possibly much more costs of lawsuits and clean-up and you’re just one of those suckers we sell calls to.  If you are so gung-ho bullish on BP, why not just sell the $35 puts for $4.30?  Net margin on that is about $3,500 for 10 and you make a nice $4,300 if BP manages to hold $35, let alone get back to $60. 

    TBT/Jbur – I wouldn’t change yet but at $45 I think I’d consider a re-cover. 

    MON/Shadow – Which spread?  Sorry I lose track sometimes…

    Equilibrium/JRW – Getting 3 of 5 is key.   We’re used to RUT and Nas leadership and it may be a sign that all is well, especially with the NYSE playing catch-up like it is but we need proof, not just "good effort" from the indexes.

    GOOG/Mr. M – Their move is right in-line with the Nas so far (2.8%).

    SPWRA/Wayne – I’d go to 2x the Sept $14 puts ($2.60) but there’s no hurry.

    LOW/Gabby – "Playing with the kid’s money" – I love it!  LOW is a good one coming off the 200 dma and I like an aggressive play of the Oct $25/28 bull call spread at $1.20, selling the Oct $21 puts for .85 so you are in the $3 spread for .35 with a nice upside and worst case is you are assigned LOW at $21.35.  If you are willing to commit to owning 1,000 shares of Low, you can do that with 10 contracts for about $3K in net margin and $350 in cash and you get $3,000 back if Low is up 10% by Oct, which is more than you would make if you bought $25,000 worth of the stock now

    Volume/Kinki – It’s about normal today.  All the action was in pre-market and now we’re churning so it’s a "suspect" day but you have a lot of suspect days when you are consolidating and I think if people are waiting for some V-shaped move back to 10,700 they are going to be very disappointed.  Hence the nature of our trades – we get paid if the market flat-lines OR goes up and we don’t even care if it drops. 

    BP/Gold – If you want to do it for a gamble, the jackpot value is there but BP makes $2Bn a month, which means they can take a $50Bn hit on this thing and recover and I know we don’t think a Billion is a lot of money any more but it really is and they can clean up a lot and  settle a lot of lawsuits and rebuild their reputation for $5-10Bn unless things get much worse and that’s just a blip for this company overall – especially if the net effect is higher oil prices overall. 

    EIX/Jsur – Yes, I like doing that on dividend-paying stocks to lock in the dividends and keep it as a "safe" trade.  On the QLDs, I would suggest praying that AAPL sells 5M IPads in Japan this weekend….   You still have $1.45 left and you can sell the $56 calls for $4.10 and buy the $53 calls for $6.10 and that’s $2 on the $3 spread that’s in the money.  You can buy 2 of those so a call away gets you lost $2 back or you can sell the $55 puts for $2 and take a chance of assignment (those can be rolled down to July $50 puts). 

    TBT/Dean – Yes it is a bullish call on the market and it also makes a good hedge against inflation and/or devaluing our sidelined cash. 

    BIDU/Thanks Mr. M. as I still have the Sep leg of that ratio backspread laying around (so I’m accidentally long on BIDU).

    BP/Iflan – I am no engineer but my understanding is the actual oil is 2 miles below the hole and gravity says that you can fill in a tube, even one under pressure, if you jam enough heavy crap in it. 

    BP/QC – See above.  Still uncertain but I do like the long sale of the puts with a stop out at a 50% loss. 


  194. JRW!!! Thanks for the confirmation budddy!  Now I see!!!! 
     
    Phil..  If I’m ok owning SSO at 37 bucks, which is at 36.61 currently.. If I sold a June put for 37 to take the premium of 2 bucks this would lower my entry to 35 bucks if it was put to me right?  I’m lowering my entry cost and if it never breaks I keep the premium does that make sense? Or should I do a backspread and fund a call with the premium? My feeling is that if we break 10200 and 1100 sp500 we go higher if not we don’t.
    Sorry I hope this isn’t  terribly rudimentary question I’m really starting to get it….I think… 


  195. ssdirk: the live cam shows a lot of flow, the good sign is that its not black anymore but brown which means a lot of the mud pumped in gets pushed out, I also hope the mud takes hold and this hole gets plugged with the cementmud.
    Have you ever noticed: a lot of people would want little government  but whenever a disaster happens they cry and blame government of not doing enough.
    So, let the banks/insurances, oilcompanies, realestate/mortgage companies do whatever they want to do, BUT, all these have caused massive problems which now, need to be fixed by the public.
    Makes me sick.


  196. jromeha – you are right.  Too early to tell, but at the moment it appears to be working.


  197. JRW confused why you went long there?  All your indicators seems to have been pointing short, which is what happened, not long?  Confused….


  198. ssdirk / ascending – descending lines

    re: Secondly, I look for diagonal lines, both ascending and descending, that have tops and bottoms in common.
     
    Daily tops/bottoms?


  199. Out of TNA at $48.13 for a $0.31 loss


  200. BP/plugging the hole.  Yeah, we all hope it works.  This continuous flow of oil into the Gulf is a world tragedy.  Death coming to animals, plants, and probably people eventually.  It’s just really sad to think about what’s going on on our southern coastline.  And on top of it all the coming hurricanes may make matters worse.     


  201. One of my favorite guys, Hugh Hendry, says we’re not panicking enough! 

    hugh hendry

    The European banking system is in crisis, says Hendry.

    "I would recommend you panic."

    The hedge fund manager of Eclectica Management went on BBC Newsnight last night to play pessimist against Jeffrey Sachs, an economist from Columbia University.

    Of course the two get into a fight. It’s awesome.

    At first Hendry is talking quietly and his manner is worryingly subdued but wait just a minute. He starts going after Sachs at 2:38.

    "When you bring on a professor and when you bring on a politician, they are unaccountable. Jeffrey’s wrong, you know what? He’ll survive and tenure. I’m wrong, I go bankrupt."

    Then Jeffrey defends himself a little bit, says no one should jump to the conclusion that all is lost, and Hendry literally jumps on him. (4:50)

    "I don’t know," says Hendry, "because, was Jeffrey skiing two months ago? I was working, Gillian (Tett, who was also on the show) was working. So we can tell you about the real world."

    Of course remember that Hendry is shorting the crap out of Greece and the European banking crisis. He’s a big proponent of speculation and shorting, so he hates bailouts and would love massive failure.

    Speaking of facing reality!  The FASB proposes that banks use market values for loans on their books, a controversial move that could cause steep declines in some banks’ overall book value. If the panel approves the change, U.S. banks would have to adjust the value of their loan portfolios to the ups and downs of the market, instead of the longstanding practice of using adjusted original cost.

    In their bearish take on big banks, Nouriel Roubini and Meredith Whitney are overlooking the fact that bank stocks are still undervalued, Thomas Brown says. The stocks trade for 1.3 times book vs. a post-1993 average of 2; "If I’m right and earnings are continuing a recovery, then the valuations of these companies will continue to recover." (ETF: KBE)

    What a fast flip!  For the first time since Nov. 5, the majority goes bearish in the American Association of Individual Investors survey. Bearish sentiment rose to 50.9%, up 17.2 points, while bullish investors fell to 29.8%, and those neutral to 19.3%.

    The Treasury sells $31B in seven-year notes at 2.815% (.pdf). Bid-to-cover ratio of 2.88 vs. a recent 2.82; indirect bidders take 51.1% vs. a recent 48.2%. Direct bidders take 11.4% vs. a recent 12.3%. Treasurys stayed broadly lower; 30-year futures -1.08%; 10-year -0.64%; 5-year -0.29%.

    Chicago Fed Midwest Mfg. Index: +1.2% in April (up 7.5% Y/Y) to a seasonally adjusted 85.2 (baseline is 100, in 2002). Steel output +2.9% M/M; machinery output +1.8%.

    Google (GOOG) hires away the head of user interface from Palm (PALM), recently nabbed by Hewlett-Packard (HPQ), to work on its Android system – and Palm’s WebOS mobile operating system is considered a key driver for H-P’s acquisition.

    SunPower (SPWRA) now up 19.1% as it says it’s launching a $700M 50-50 venture with AU Optronics (AUO +4.9%) to operate a solar cell fab in Malaysia, enabling production of "more megawatts faster, at lower cost, with substantially less cash contribution from SunPower."

    Three lunchtime reads:
    1) Eleven top hedge fund managers give investment ideas
    2) U.S. money supply plunges at 1930s pace
    3) Arends: Why I don’t trust gold


  202. ssdirk/currencies
    Actually, I have backed off currency trading recently and concentrated on my equity trades, given the market dynamics and volatility. My profits in currency trades have been far superior to my equity trades so far this year. At the moment I am short the USD vs the Mexican peso. The Brazillian Real is about to jump upwards, as the Central Bank there will no doubt raise rates in June. As soon as oil reverses direction and tracks upward, I will jump on the CAD loonie vs the USD. I did well earlier on shorting the GBP and EUR, but the game is always in a state of change….. that’s good for us!


  203. chaps – best to show by example.  On a Dow 15 min chart draw a line from the open on 5/18, touching the close on 5/19 and extroplate till today.  Look how on 5/24 the tops of all of the candles from 12:00 on all touched, but did not break the line.
     
    On a Dow 15 min chart draw a line starting at the highest candle on 5/11, touching several candle bottoms on 5/14, 5/20, 5/21 and the low on 5/25.  In both instances, these lines held like a fortress.  BTW, These 2 lines are nearly parallel.


  204. yip,
    A break over 66.30, but you are right it was weak. I would much rather play TZA if it would just give me a signal; the Russell is too high IMO.


  205. Unfortunately ( for a day-trader ) sometimes the market direction is East !!


  206. MON was Jan 42.50/50 bull call spread. I also own IPXL and sold Dec 17.50 calls and puts, now at 21.45. Roll up callers? Putters?


  207. Phil/HUN
    I had been watching that one for weeks, and mentioned it only this morning. The big jump today must have come from PSW members, and hedge funds that track our stuff.


  208. JRW – FWIW, on a DOW 3min chart I have a hard line at 10196 that may be limiting IWM from advancing further.  The Dow can’t get over it.  It has tried with 13 candles today.


  209. JRW – I am in TZA at 6.93.  Seems like least resistance.


  210. gel1  I  still have FXC on my watch list.  Do you still think their currency is that closely tied to oil.  It has had a big run the past 2 days. How would you play it?


  211. Phil, I’m trying to establish the TZA hedge . I got filled on the Jan 3 calls at 4.10 as they were down from yesterdays levels. . should I cover now on the short side of the spread? or hold for a bounce in tza before selling the higher call? optimal strike?
     
    Thanks, Gordo


  212. ss & JRW   It just seems IWM could go either way .  ss  Do you think the TBT indicator works?


  213. ss
    I hope I can join you; BTW yesterday was a DeMark 9 day !


  214. JRW – it’s good to know you are not a machine.


  215. UGHHH! Out with 6 cent loss.  Candle 14 was the charm. 


  216. JRW III: which deMark book is worth getting and reading ?


  217. JRR
    Wow! I’m getting this, you taught me your rules and your didn’t follow them!  You sound like me… haha.  thx again for all the confirmation.


  218. SS, Out all day.  Thought I’d check in for the end of day play.  Looks like you are giving a line drawing class.  Sign me up.  I tend to look at DIA and SPY instead of the Dow and SPX — 102 DIA and 110 SPY, which coincides with JRW’s 66.30 line.  Let’s chat sometime whether the ETFs or the underlying indexes are better indicators. 


  219. Phil is very inactive today ?????


  220. SS/Gulf  My heart goes out to you, your family and the others that live at or near the coast.
    Last night I watched the waters and the sunset on the Pacific, an awe inspiring site that I enjoy every day.
      I CANNOT IMAGINE what goes thru your mind when watching this tragedy unfold before your eyes. Hang in there.
    With fingers crossed…… Randy


  221. SS?  Why long there?
    All indicators pointing to buy TNA (short) not TZA(long)? 


  222. Phil – thoughts on JNJ while they are down? July 57.50 puts for $1.30.


  223. Long Live the Euro…now bow down to our new emperor in China…=)…data.cnbc.com/quotes/EUR%3dX


  224. morx
    Unfortunately not !!


  225. Sorry! 
    I meant TNA(long) not TZA(short)?
     
    Another words it looked like IWM was turning to upside and indicators were point long(TNA)


  226. LINES -this is crazy, on a IWM 3 min chart draw a line from the highest candle yesterday at 10:45 and connect all of the tops of today.  They line up perfectly don’t they. 


  227. What is the GOOD news that the market continues to go UP ? the leak-fixing must go well.


  228. yipcarl   You’re right, the masters have me confused last few…..


  229. SS, Have we forgotten so soon?  Screen play. 


  230. ssdirk:
     
    You mean held retrospectively, like on 5/24 for your first line. I don’t really get it. When you see something like the tops on 5/24 following a slope, there are potentially a large number of previous points that can be used to draw the corresponding line.
     
    You’re interested in how the market will move in the near future. And we can probably find a number or past points that seem to confirm what’s happened today up to now. If today’s movement changes dramatically in the next half hour, there are probably other past points that will probably confirm today’s movements better, etc.
     
    I don’t mean any disrespect; I’m trying to understand. But it seems to me kind of like "data mining", which mathematically is substituting correlation with causation -  and using such correlation to predict the near future.
     
    I would imagine in this case we’re trying to read the minds of "them" who are controlling the market. Is the premise that they’re taking a couple of previous points, extrapolating, and then driving the market towards the extrapolated line?


  231. yip – you are correct.  However, the Dow had tried many times to break the line and never could.  I just played it one too many times on the counter move.


  232. ss: yes, lineup good but where did we end yesterday ?


  233. TBT line just crossed the IWM


  234. ss: after 2:30, market went down yesterday.


  235. ok, phil, i’m still not in TBT and I know you’ll tell me too late,
    but i used to own it at 48 also.
    PLEASEEEEE suggest a new trade for TBT for me nnow, thanks
    David


  236. On the spill, if not part of the solution, you are part of the pproblem. I listened and the Pres did not give a single pos, in fact he confirmed BP knows best. Same old story, extremely sorry SS!


  237. Stock – glad I’m not alone!!! learning fast though
    SS thanks for the confirmation!  Now I’m pretty sure I understand the entry and exit on TNA/TZA… OF course I’ll need JRW’s lines… Once I learn to draw them I’m golden.  It’s mostly support and resistance lines from past sessions so I think I can figure that…


  238. Phil: thanks so much for FRO’s info. Very useful.


  239. It’s a DeMark 1 day, so UP; it’s an oversold market, so UP; it’s EOM, so UP. But the Russell is too high and I’m set up for a short at IWM 66.63


  240. stockbern/FXC
    As the gals in Alaska say – "you betcha"…. I am in The FXC (Canadian currency shares) as well as EWC (Canadian equity shares) and both are doing well. The bottom line is the economy in Canada is really cranking, and their debt is nominal ( comparitively), and the future looks really good. The price of oil is an issue in Canada as it is their largest commodity sale, however the overall long term lookout for oil pricing is UP, and the Loonie will jump, jump, jump when this plays out.


  241. chaps; great comment.


  242. Dir Movement Ind looks very similar to 2:30 on tues prior to the stick


  243. JRW, Right there with you.


  244. JRW III: this is hard the last few hours.
     
    which deMark book should I read ?


  245. Phil…. Your recent GOOG spread is doing VERY well…. as always – Thanks!


  246. chaps – you are correct that this is rearview mirror charting.  But, it provides predictions (reliable or not?) as to where the next support and resistance levels will exist.  Just trying to share what I see. 


  247. Feel like I’m super anti trend trading but I would agree this is over bought and indicators all show overbought.
    Long TZA at 6.80


  248. JRW, 66.63. Stopped on a dime. Beautiful.


  249. SS keep sharing rear view mirrors work fine for me, always have…


  250. BIDU $72/77 bull call spread at $2.20 is an interesting play.  You can sell July $60 puts for $1.60 to drop net basis down to .60 on the $5 spread.  This is a sideways play on GOOG going up as BIDU usually follows them.

    SU/Gel – Good idea!   Jan $25/32 bull call spread at $4, selling 2012 $25 puts for $3.60 is net .40 on the $7 spread that’s already $5.60 in the money and your worst case is you own SU in 2012 for net $25.40 (15% off).

    OIH/Gel – I was tempted to short at $105 this morning but there will be a lot of work for servicers bringing rigs up to new specs and, with oil heading back up, it’s a tough call here.  Back at $120, I’ll be more motivated to short them.

    10,200!  Lining up with S&P 1,095, Nas 2.263, NYSE 6,845 and RUT 662.  Also SOX 359 and DJT 4,343.  Good to keep tabs on these things.  

    Just dumped my XLFs at $14.86 – good enough run for me

    Welcome back GMarts!  Lots of new smart guys have joined us since…  I agree with your TZA premise but need to cover if S&P pops 1,100, maybe use 2,275 on Nas and 666 on RUT as 2nd and 3rd checks.  SOX up 4.74% right now so this train is leaving the station if they keep going.  Just waiting on Dow to pop 2.5% today (10,225) and we could have indexes hitting 4% for the day…

    Come on everybody, say it with me:  Dear Lloyd, lead us not into temptation.  We are weak and we fall for these low-volume pops every time.  Keep us on the path of the well-hedged and light our way with solid floors we can use as stops when thy will be done – Amen….

    Good point SS, we should all pray (and not to Lloyd) that they do shut the spill because real lives are affected here. 

    Bull/Bear DIA plays/Phlit:

    • DDM Jan $38/42 bull call spread at $2.20, pays $4 if Dow is flat to up
    • DXD Jan $26/33 bull call spread at $1.80, pays $4.50 if the Dow stays flat

    Those two spreads may both decau slightly but a big move up in the Dow gives you net even and a big move down gives you a nice profit and a flatline can pay you a double too so I like this combo!

    Oh damn, now you are putting conditions on it?  Using the DIA is too dull and I wouldn’t make a bear play on the DIA as I much prefer to use ultras but a bullish play could be the Jan $95/100 bull call spread for $3, selling the $65 puts for $1 is net $2 with a 150% upside in 7 months.  All the Dow has to do is hold 10,000 and you are up $3.

    Disaster/Jomp – I like the TZA best at the moment.  There’s a huge advantage to playing the already beaten-down ETFs as they tend to grind lower very slowly, which gives you lots of wriggle room.   The DXD leg above is also very good with no margin required and the 2 SSO plays work too – actually, a very small gamble on the $45 calls to cover you beyond your TZA coverage is a cheap additional hedge but a total throw-away if we don’t fall, of course. 


  251. In TZA at $6.79.5, still scaling in


  252. I’ve got a line at 66.45, be careful !


  253. JRW
    Wow you beat me by a half cent!  At what price will you double down you position? What is that based on?


  254. yip,
    If it fails, the more it’s failing, the more I short !!


  255. Chaps, That’s a great observation and question.  To my way of thinking, the premise is similar to the underlying premise of Phil’s 5% rule, that is, finding support and resistance points that are widely enough used so that they become self-fulfilling.  Of course, as Phil will say, his lines don’t move, but they are not used for daytrading either.  I’ve been following JRW’s lines, when SS first started asking JRW questions, for 6-8 months now.  All I can say is that I have observed again and again, as IWM will go right up or down to a resistance/support point or trend line (identified ahead of time by JRW) often to the penny and then reverse.  It has been uncanny.  Look at his 2:40 post today.  Doesn’t happen every time, of course, but it has sure made a believer out of me.


  256. Phil: Its 3pm and what will market do ? or what has the big money programmed ?


  257. Juda… It certainly is uncanny.  I’ve seen this many times before, I just got away from it glad I’m back on S&R Lines they are amazing.  I’ve had discussions for days about why or what or how….. I gave up, I don’t care, they ‘mostly’ work.


  258. Phil…. Today is busy – when you get a chance to respond – I concur with the projections for hurricanes this year in the Gulf ( Louisiana sure does not deserve this) but UNG will rise like the tide, should this materialize,  I thought I would sell some puts – your thoughts?


  259. JRW if it breaks 66.63… how much room do you give before blowing? 


  260. yip:
    if it breaks: breaks means going up or down ?
    blowing: you mean what?
    need ss for clearer terms.


  261. Hi Phil,
    Looking still at the DIA mattress I guess I should not sell any Jul puts if market stays as is Dow now 10200
    your thoughts thks


  262. yip
    Depends on the strength of the move; perhaps 66.74


  263. Anyone notice the two sixteen year olds posing as adults on the latest Lind- Waldock commercial?  I must be getting old…… ;)


  264. Phil: I want to own cree. if i get your strategy right. i buy 500 cree @ 68.61. I sell  10 jan 2012  70 call for 19.00 and 10 jan 55 put for 11.20. Is this a correct strategy to own cree, Are these the options you would recommend or are others better? Thanks


  265. Judah:
     
    I’m a mathematician by training, so I knew of Fibinacci before getting involved with markets. Of course, there’s an endless debate, unresolvable, about TA. And I know TA can be, and is, self-fulfilling, etc – until it gets too out of line with fundamentals, which ultimately rule, IMO. I know enough about systems analysis to understand why people apply wave theory/Fibinocci sequences to markets. So I accept the plausibility of support/resistance levels.


  266. sorry a mistake 500 shares and 5 calls and 5 puts instead of 10.


  267. JRW, judah -Can you believe 666 again on the RUT.  Man it feels like we have come across that number so many times.


  268. JRW…. I drew your S&R as horizontal lines on an IWM 60 minute chart…. now I’m smelling ya. 
    Interesting you picked 66.63 for the high when the last time IWM was this high was 5/19/10 and the candle wick low was 66.58. however you picked 66.63…unless your software has 66.63 for the low I find that interesting you chose just a few cents higher than the last low(resistance) because besides that low point there is nothing else to go by..


  269. R2 is really resistance at 66.72. Yes ??


  270. JRW III and ss: was there indication that they would run it up all the way to R2 ?


  271. SSO/Yip – Yes, it is terribly rudimentary but you are correct.  You sell the put for $2 and keep it no matter what so, if put to you at $37, your net cost is $35 on the SSO but, of course, keep in mind that a 10% move back up in the S&P (and they are up 2.5% today) will drop SSO 20% to about $30 and you will still be assigned at $37 so your net loss is $5.  I am not a big fan of short-term put selling unless it is TRULY a stock/ETF I REALLY want to own for the long haul.  I don’t mind being assinged TZA at net $6 in July because I know it can only get $6 lower if the Russell goes up 33% or more and I know that, even while it’s doing that, I’ll still find some sucker to pay me .50 a month for calls, probably all the way down to $3.  I’m not as confident getting stuck with SSO.  Since you can sell 4 TZA July $6 puts of TZA for .55 instead of one June SSO $37 put for $2 and since 80% of $6.80 is $5.44, I am covered to a 20% drop in TZA, which is a 7% rise in the RUT by mid-July (710).  Those can likely be rolled to 2x the Oct $4 puts (now .22) and that requires the RUT to go up 11% more to 788.  Seems a little more comfortable, right? 

    Not holding 10,200 is not good!!!

    MON/Shadow – Well those are right on track!  There’s a reason we went conservative on that round.  If you haven’t sold puts, you may want to sell the $40 puts if they get to $3+ (now $2.55) adnd you can use that money to Roll down to the $37.50 calls (+3.40).

    HUN/Gel – Yeah, that’s a big move for no particular news.  Naughty boy, moving the markets like that!  8-)

    TZA/GMarts – I’d go for it into tomorrow but I’m kind of aggressive that way.  Worst case (hopefully) is you pay $2.30 for the spread instead of $2 and best case is we drop 100 or so points and the VIX spikes up and you get the spread for $1 so it’s a .30/$1 risk/reward to gutting it out.

    Inactive/RMM – So is the market…

    JNJ/Morx – They did something bad with Tylenol Children’s.  I wasn’t paying much attention but I’d let the smoke clear first.  Tylenol (again) and Children is a very bad PR combo. 

    TBT/DMan – 10% too late!  I would just play $40 to hold with the Jan $35/40 bull call spread at $3, selling the $35 puts for $2.20 is net .80 on the $5 spread and net margin of about $5K but you really don’t need to sell the puts UNLESS TBT goes below $38 (your b/e on the spread) and then you would get a much better price so if you are patient and can accept the possibility of "only" making 66% by Jan if TBT never goes below $40, then it’s a nice trade to leg into.

    Volume a little warm to be stickable and Dow can’t crack 10,225 so far and S&P not 1,100 and RUT doesn’t like 666 but we’re past yesterday’s sell time so the close could go either way (or no way at all).


  272. Phil / double dip   Todays continued new claims disaster, poor GNP, housing signals, Euro fiscal belt tightening/liquidity squeeze signal double dip.  Summers knows, hence new stimulus overtures.  I thought the mkt was fwd looking!!!  My EDZ mattress is looking sick, should I bail on that now expecting further mkt upside?


  273. yip,
    3/5, 3/8-9


  274. Phil – june $103′s for mattress covers?


  275. Phil….makes perfect sense…  Thanks…


  276. I changed my mind – we’re up 5% from the lows in the futures (Dow 9,828, S&P 1,055, Nas 1,783 (now 1,853) and RUT 634 so I am thinking it’s more likely we get pullback of 1% here, either into the close or tomorrow morning.  Good test of the 5% rule.


  277. Phil: deMark indicator book: do you know whether one of his books are worth reading ? had asked JRW but no comment.


  278. RMM – remember that IWM line I asked you to draw from yesterday’s high, it is now acting as rock solid support for the last 32 minutes.  (of course until it doesn’t).   We are stuck in a wedge between this line and JRW’s line which is near R2.  Which way will she go?


  279. AH ha!  60 minutes was to short I needed 120 min chart to see back that far!!!
    Nice JRW I’m totally with you on these lines, so glad I …errrr you helped me RE – find them.  Thanks!
     
    Market doesn’t want to make a decision!  Were stuck here at 6.80


  280. judah – TBT says down.


  281. ss: it will dive some.


  282. RMM
    Sorry, thought I posted, Google it for starters,get the concept, try it ; then buy a book based on popularity. I can’t remember the one I read 2 decades ago !!


  283. ss: what di the LINES give which the R2 did give? the R2 served as resistance, your lines showed that it might move up to resistance.
    Is that good logic ?


  284. Chaps, A long time ago, I was training to be a mathematician, but the math got too hard.  :)  
     
    I’m not much of a believer in TA, per se, and JRW is successful more because of how he trades than just the lines he uses.  He posts his lines for everybody, but not everybody can make it work.


  285. Phil: Moving average: which time interval is important for daytrading ? 5 or more ?


  286. ARRY/ace – not sure why the spreads are so high.  They have data at the ASCO conference with all the other cancer companies…..


  287. RMM – not sure I understand the question.  The line I referenced acted as resistance until is was broken and went above it.  Now it is acting as support.  Since it is an upward diagonal it just happens to be approaching R2.  Currently it is at 66.54.


  288. Judah:
     
    The math gets too hard for all of us at some point. :)
     
    I totally agree about JRW and trading skills. I just read "The Big Short." One take away was the observation that Warren Buffett is Warren Buffett because he focused on something that he has an uncanny knack for doing. Most who try to copy WB don’t have his success.


  289. 3/4 cover here on the HK anchors, got .92 for the 19s, not quite my $1 target but close enough.


  290. ss: well. it followed pretty much your diagonal line until it got to R2.


  291. TIme to bounce out of TZA?  Looks like the market is going to do the opposite of yesterday….


  292. Dear BIDU, will you PLEASE DIE!


  293. Phil /  SSO vs. SDS:  Phil, I think I saw one of your spread suggestions above that was meant to be bearish, using SSO rather than SDS (which is the 2x bearish S&P ETF). Just bringing it up in case someone was going to make the trade without checking themselves. 


  294. RMM – still between R2(66.69) and my diagnol (now 66.55).  The wedge is narrowing.


  295. SS
    Narrowing and pushing up…


  296. Phil, how much tracking error have you noticed on the long term disaster trades when using the levered etfs?  There is a lot of talk out there that they perform poorly if used as a long term hedge (ie. Jan TZA 4.00-12.00 Call spread).


  297. SS/666.  There we go.


  298. Mr: M: why do you want BIDU to die?


  299. Phil, Don’t understand your comment about SSO at 3:20
    "… keep in mind that a 10% move back up in the S&P (and they are up 2.5% today) will drop SSO 20% to about $30 and you will still be assigned at $37 so your net loss is $5."
    Why would SSO drop 20% when S&P goes up 10%? Are you thinking of SDS, maybe?


  300. TNA/
    out with 6c loss


  301. ss: there are obviously economic reasons why it breaks UP from R2 ? I believe the oil leak fixing helps as it looks it is a success.


  302. Vix is falling, bots moving the tape towards the precious 1100…Go China!


  303. to the board: Hi everybody, does anyone know who are the top cleaning outfits for the gulf mess? Thanks


  304. $6.76.2, less than 1% on the day , damn !!


  305. Phil: the DOW is up more than 244 points and what is your hunch for tomorrow ?


  306. JRW – SS
    Out at 6.70… 10 cent loss.  Not sure of the out but it seems to be pushing higher and want to hold 10,200 and close to 1100 as possible.


  307. Sean, I shorted BIDU today expecting a pullback at the close.


  308. lionel’
    How did you lose $ on TNA ?


  309. judah – screen play. 6 points bulls.


  310. JRW didn’t you enter at 6.79.9 and exit below that?  You mean for the day as a whole your up?  2moro is another day!


  311. UNG/Gel – Well we sold puts ages ago and I just posted a play above.  Yes to all, I think UNG is a great play for a short-term (Oct) run and also a great long-term position and you can establish by just selling the Jan $7 puts for .95 for a $6.05 net entry (down 17%) so a simple enough way to play them or get greedy and combine it with an upside bull call spread.  It all goes to hell if the global economy collapses, of course…

    DIA Mattress/Yodi – Right now I like a 1/2 cover with the June $103 puts against the Sep $100 puts.

    CREE/Arbo – Right strategy, wrong stock.  They are crazy high valued right now and you are playing into a weak market.  Part of the idea of these trades, which are fairly inflexible by nature, is that you want to trade stocks that you can’t imagine would drop 40% but, if they did, you’d be happy to DD.  To me, CREE does not fit that bill and the crazy premium prices reflect that consesus risk.  Also, selling 10 puts and calls against 500 shares is dangerous unless you REALLY don’t mind being assigned another 1,000 shares at $55 or and you are prepared to pay for 1,000 x everything over $70 in Jan 2012.    At 5 contracts, your spread is good as you drop the net basis to $38.41/46.70 with a call away with a near double at $70 so fine and dandy if you are bullish on CREE and REALLY don’t mind owning 1,000 shares at $46.70.

    Fine music for raising the Russell to 666. Sometimes I wonder if the bot boys do this for fun because 666 does come up way too often for coincidence – the NYSE just finished at 6,666 the other day…

    EDZ/Tusca – If it’s not a hedge it should have been stopped out while up.  It’s still good insurance but no point if you are not making money to the upside against it. 

    DeMark/RMM – It’s an interesting thing that seems to hold up but lack of standard indicators (that I have access to anyway) makes it uninteresting to me.  I like following things I can flip to in 5 seconds, anything that detracts me from my reading I just find annoying for the most part. 

    Moving average/RMM – I flip from 1 to 3 to 5 to 10 but if a change in direction doesn’t give me at least a full candle on a 10-min chart I’m pretty much going to ignore it. 


  312. JRW/
    Sorry just a typo, I meant TZA. I would have asked the same question :)


  313. Chaps/Trading
    I agree with you… fundamentals usually prevail when all the chips are in. Trading is much like flying an airplane – the best pilots are those that have the "feel" in their butt. When everything hits the fan, it is too late to read the book!


  314. yip,
    Yes, for the day I’m up less than 1%; too much work, not enough fun. I should have quit after ss gave me $7K and played golf !!


  315. Phil: what drives this market now that high the last 30 min ?


  316. A stick after already up over 2.5% just seems silly.


  317. AAPL over its 20 sma resistance.


  318. …buyers based on closing above 10,200… for the next 5% up


  319. JRW – HAH I hear that!!! I lost 1,5% on a relatively small position, no biggie just happy to see it’s another 10 cents lower and not higher!!! BUT most importantly I see the strategy much more clearly… C U 2moro… I doubt your numbers will change much but I’ll do my own investigating and we’ll see 2moro.


  320. ss
    4.35% on the Russell; just nuts !!


  321. ss
     agree, it was up so much, all those lines did not predict this and R2 did not act as resistance, there are other factors  which did this,
    its also end of month and a holiday coming, oil well maybe ok, so lets be euphoric.


  322. JRW – yep.  Last 6 days never happened.  Being agnostic is one thing, but I hate to see them just ruin this market.  How can you trust any of it.  If someone sneezes at the wrong time we will just go right back down.  Silly, silly, silly.


  323. Two of the accounts I manage have very different positions but finished with gains within $1 of each other. $4554 v. $4555. I think that’s another satanic omen — call in Celine!


  324. 666 does come up way too often for coincidence
     
    Now we’re moving from TA to numerology….lol


  325. BIDU should die because a lot of us are short the June calls…..
    It already seemed to die, then came back to life today.


  326. ss: my rules did not work the last 1 hour, after market was so fgar up, and R2 was reached I bought TZA and guess its a loser. Very annoying.
    Just watched CNBC, they say its the financials and oil which drove the market up.


  327. SSO/Never – D’oh!  I keep mixing those up.  ATTN – Earlier I mentioned SSO spread (now deleted to avoid confusion) as a bear hedge and meant to do SDS as below:

    SPY $85 (I assume)/Zen – Well that is not very Zen at all is it?  SPY 85 is down about 22% from here which takes SDS ($33.70) up 44% to $48.50.  If we call "a few months" Sept, then $1,020 (5) of the SDS Sept $40 calls would hit $4,000 – that’s a pretty good return on investment if you are right?  My preference is to work that backwards and say I DON’T think the S&P will be over 1,300 by Sept (up 20%) so I don’t think SDS will fall below $20.  That means I can sell the Jan $24 puts for $1, either against the above calls or against a Jan $24/28 bull call spread at $1.90 which is net .90 on the $4 spread and that one pays if the S&P simply doesn’t go up.  If I spend my $1,020 on 10 of those instead, I risk $1,020 to get $4,000 back and it’s a lot more likely than getting a 4-bagger off the $45 calls.  Margin requirement on the much safer spread is about $3K but would increase as S&P goes up. 

    Meanwhile, I’ll take full credit for the SSO spread, which is up nicely on that super-stick into the close8-)

    Tracking/Hulk – Hard to say as they are so far out and fairly new still.  As long as you stick with hedged positions, they are not so bad but buying naked calls on the ultras, especially the 3x ones, is very dangerous as they can lose a lot of ground in a volatile market.   Keep in mind the key word "DISASTER" and if the market really starts to melt down, the math that takes over driving a bearish ultra higher on consecutive down days is severe.  Even the $7 TZA if hit with down days of 5%, 2.5%, 1.5%, .5% and .25% conscecutively would gain 15%, 7.5%, 4.5%, 1.5% and .75% to end up at $9.25 (up 32%) on 10% drop in the index.  Of course, similarly, they get ripped to shreds on consecutive up days too. 

    SSO/Pyern – Yeah, you guys need to watch me on that one!

    Hunch/RMM – I still say we are owed a pullback.  The Dow is up 400 points from last night’s low so I expect a retest of 10,150 before they head higher.  Maybe 1,095 on S&P and 650 on RUT.  As to what drives the market – clearly a stick save – there was no news, nothing.  They are painting a pretty picture so China and Europe can be happy going into their weekend.  

    Silly it is SS! 


  328. Chaps…..I was reading a book one night in bed when my wife asked "What are you reading?"  to which I replied, " A History of Mathematics, by Victor Katz."    She said, "You’ve got to be kidding."   She labelled me a nerd on that evening and I can’t get it rescinded.  :)


  329. Speaking of TA, it looks like we’re well on our way to making some right shoulders on all the indices.


  330. Obama Cites Economy as Crucial to Security Strategy (http://www.bloomberg.com/apps/news)
    May 27 (Bloomberg) — President Barack Obama stressed the need to “renew our economy” while strengthening diplomatic alliances and maintaining military power to keep the country safe in issuing his first national security doctrine.
    As the U.S. emerges from the worst recession since the 1930s, steps are being taken to ensure that “our recovery is broad and sustained,” according to the strategy.


  331. CNBC’s sure changed their tune.  Cheerleaders  in full RAH ! now.


  332. Iflan:
     
    There are actually some really interesting stories in math history. Fermat writing down his "last theorem" just before dying. A very simple proposition about numbers that Fermat claimed he could prove. It drove people nuts for centuries and was not proved until the last 10 years – requiring a huge arsenal of modern mathematics.
     
    Galois – who hung out with harlots and wrote down a lot of his important stuff the night before dying in a duel.


  333. Thanks JRW!
    Your posts today provided some great advice on short term trading. I have a clearer picture now what indicators to look for. It might not have been such a successful day moneywise but you sure helped some of your fellow PSW members today. That’s a another way to look at the day.


  334. Kink – You got that right… 2-3 month summer rally back to highs… then KABOOM biggest fastest collapse ever.  This is what is going to happen IMHO.  If we get back to 11200-11800 I’m going to be going ALL IN for the downside


  335. JRW… I will second todayokay’s post I honestly appreciate all your guidance.  If I can return the favor let me know!  A golf round I can provide however you would need to be in Southern Cal!


  336. todayokay,
    Thanks, I’ll try to keep that in mind; but in the future I’d like everyone to make a healthy profit as well !!


  337. yip,
    Not a problem, I’m on the Sonoma coast, but my in-laws are in Beverly Hills and we visit often.


  338. Does anybody have any experience with Lightspeed as their broker?


  339. yip,
    And BTW, the next time you see me ignore my own system, remind me of what happened today, thanks.


  340.  Speaking of mathematics, I think I’ve noticed a relationship between the DOW, VIX, and the number of posts on this site on a daily basis.   Number of posts rises with volatility and with DOW fluctuations.   Post numbers fall when the market calms.   I’ll let you know when I’ve figured out the exact formula.  


  341. @lflantheman
    very interesting observation – now, chart the daily post numbers against the VIX, calculate the running averages (5 and 50 day windows should suffice) – then against those plot JRW’s daily golf score……..could be very revealing. 


  342.  Chaps,  Its nice to see another mathematician out there (I cant think of another reason you would know about those 2 stories).
     
    Phil, what do you think about the following trade, a double calendar on BP for $4.97.
    +1     JAN11     49    CALL
    +1     JAN11     40    PUT

    -1     JUN     49    CALL
    -1     JUN     40    PUT

     
    The idea is to take advantage the difference in implied VOL.  The front month is at 54%, JUL is at 50%, the LEAPS are at 40%.  Ideally you should be able to let the front months expire every time and keep selling.   Looking at the P/L graph this trade is profitable from at least $38-$51.5 every month.
     
    My other feeling is that BP doesn’t go bankrupt for at least 6 months


  343. iflan – i hope you’re not letting us in on this b/c you must defend your honor tomorrow.


  344. JR ‘dub’ 
    Let me know when your headed down I’m in Brentwood.  I might be able to get us off at LACC or Sherwood. 
    Hey next time i see you ‘going against your own system’……I’ll just type…SI! (Stop It!)


  345. Phi-  I own INSP small, how should I play it with options. (they have good growth) Thank you.


  346.  Sorry…Phil


  347. Phil:
    Am new member, but following your non member posts for a couple months with paper trades.
    90% in cash since May1, had 20% return from January so far this year.(dealing with a $2.5M portfolio)
    What is wrong with:  buy 10 AAPL july 130 c for $103.50, sell the July 260 c’ for $10.65  and a stop at 230 after acquired? I want to own the stock and got out of it around $255-258 few weeks ago
    Thanks


  348. Head and shoulders (knees and toes)/Kinki – I think it very much depends on your chart time-frame.  You could look at the spike-down and recovery in early may and the failure in late May as completing the H&S pattern – just in a very compressed time-frame (which can happen when computers are doing the trading).   I’ll be talking about this this morning but notice the pattern on the two-month chart as well as how rapidly we’re re-taking those declining 20 dmas that I drew out earlier in the week.  Of course it’s fake and ridiculous but – what can you do? 

    Obama/Gold – Yes, having an economy is a good thing!  It’s especially helpful to security when you have a $1,100,000,000,000 annual military jones to feed…

    CNBC/Ekor – Hard to keep track at this point. 

    File:3dhomerandfermat.jpgMath/Chaps – Actually Homer (Simpson) disproved Fermat’s Last with 1,782(12) + 1,841(12) = 1,922(12).

    All in/Yip – I don’t know about being all anything in this crazy market but we can design upside disaster hedges as well when we get back to bearish.  Actually, I’m still not sure I’m bullish after yesterday’s nonsense proved that these markets are still a fantasy trading session and nothing more. 

    PSW Theorem/Iflan – That makes sense because volatlility breeds questions on adjustments. 

    BP/Craig – It’s fine in theory.  I also don’t see BP going BK in short order and the drag of lawsuits and the clean-up effort - even if they shut the well tomorrow – will drag on for quite some time and should keep them range-bound.  I think your real danger is to the upside as the actual shut-down of the leak will quickly draw in the arb crowd, who will likely discount the estimated cost of clean-up over 3 years, which will likely have them arriving at a $56 target (assuming a $10Bn cost) or maybe $52 if they factor in new regs but, like I said earlier, if oil is back over $80 then BP has big upside along with our beloved XOM. 

    INSP/Gulf – I think the multiples are rich given the declining growth potential.  They just spent $8M for Mecantilla’s ECommerce platform but that tanked the stock because a lot of investors realize that the margins there are going to bring down the average – even if it does succeed.  So I would have a cautious attitude and sell the Jan $7.50 puts and calls for $2.60, which drops the current $8.34 price down to net $5.74/6.62, which is a fine 30% upside if called away in Jan and a nice 20% discount if put to you in Jan but you have to REALLY want to own 2x at $6.62, which is not a terrible play as you can sell, for example, July $10s for .10 and if you sell .60 worth of calls a year that’s about a 10% return for a long-term hold. 

    Welcome Maya!  Interesting you should start off with "What is wrong with" as it’s not a bad, conservative trade.  Mainly my issue is with tying up $103.50 on the July $130 call.  Your premise is AAPL goes over $260 but you cap your gains at $260 in the vertical so your max payout is $130.  Oh wait, that would be good but that can’t be right…  It’s not possible for you to buy the July $130 call for $103.50 with AAPL at $253.  I see the $130 call at about $123.  $103.50 was the last sale price but just because that was the last sale, does not mean you’ll get it for that (sorry). 

    So let’s look at how we can get bullish on AAPL (and I’m not very bullish on AAPL here).  Last time we played AAPL I favored the ratio backspread, which went great as we were able to take out the front-month caller and now we can reload as they bounce back up.  The Oct $290 calls are $10 and our goal would be selling the June $270 calls for $6 on a $10 move up in AAPL but, if AAPL fails $250, then we sell the $260 calls for $5 (now $6) and we plan to use that $5 to roll the Oct $290s down to the Oct $270s.  This is how you can work your way into a nice spread.  Rather than laying out $100 for 10 contacts ($100K) and spinning the wheel on the July finish, you can spend $10 on 20 contracts ($20,000) and sell $20 $5 contracts, one way or the other ($10,000) and you have $90,000 on the sidelines ($40-60K used in margin on the initial spread) to adjust your position.  Oct is 5 months away and if you can roll your longs down $20 per month through the sale of front-month calls, you’ll be in the Oct $170s for $10.  That’s not likely to happen but that’s the goal and we don’t need to get all the way to that goal to have a  very nice AAPL position.  Given your account side, this is a very good live trade you can play with and I would be more than happy to follow up with adjustments along the way as this is a strategy many members can benefit from.


  349.  Phil- Thanks, 6.50 would work thats their net cash position, thanks for the help


  350. Hey Phil,
      As a fairly new member I’ve done a couple of your buy/writes with success (Thanks!). I’m not comfortable yet with the shorter term plays, and they require more time during the day to manage than I can usually alot. I’ve seen you make reference in Chat to exercising the Put sell leg of a buy/write as a mellow way to enter. I, like some other may find themselves, am in a situation looking for a relatively safe way to replace lost income on a monthly basis. I usually use Put selling on a shorter term basis (1-3 mo) rather than the longer intervals of the buy/writes. Do you recommend using the buy/write Puts in this fashion, or would you recommend a different strategy?