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Thursday, March 30, 2023


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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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.

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

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

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

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

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.

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

How did you lose $ on TNA ?

judah – screen play. 6 points bulls.

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!

Sorry just a typo, I meant TZA. I would have asked the same question 🙂

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!

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 !!

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

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

AAPL over its 20 sma resistance.

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

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.

4.35% on the Russell; just nuts !!

 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.

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.

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!

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

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

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.

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.  🙂

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

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.

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

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.

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.

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

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!

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

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

Does anybody have any experience with Lightspeed as their broker?

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

 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.  

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. 

 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

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

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!)

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


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

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

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?

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