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Wednesday, June 7, 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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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!

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?

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… 

Why is it that the market typically pushes higher going into a long weekend?

where do you think fcx is going today? thanks,

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. 

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

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.

 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.

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.)

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. 

 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

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!

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

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).

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!

Where is BUY LIST located please?

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

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?

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.

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?

IWM 64.06, 64.74, 65,84, and 66.63

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.

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

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

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

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

ERIC…how do you trade gold what medium?

Pivot IWM 54.76, R1 65.54

IWM Pivot 64.51, 63.07 and 65.42…

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.

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….

Sorry, IWM pivot 64.76

Eric,..got you thanks..

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

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.

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 ?

In TNA at $47.34 (1/2)

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

1 min chart for trading

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!!!!

JRW not sure what you based that entry on…

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???

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

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)

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

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

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