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Flashback Friday – Pattern Recognition 101

We often talk about how the markets are controlled by machines.

Josh Brown has a post on our site this morning noting the 3pm activity in the markets is for non-human trading only.  At PSW, we love the TradeBot, who we affectionately call "Mr. Stick" as he shows up a lot more often than Santa Clause to shower us with presents in the form of last minute market moves that are an option trader's dream

Even non-option players can make out great following the late-day action.  JRW leads our day traders with plays on TNA, which is a 3x Ultra-Long on the Russell and we often catch 2 and 3% moves on that ETF in the afternoons.  Just yesterday, JRW was out and I had to fill in but, since we know the game is rigged and we know how to play along, I was able to call the trade for Members at 2:13 saying:

Day Traders:  I would say possible entry point for TNA is going to be $40.30.  Like a futures contract, you can play TNA over the $40.70 line with a nickel stop and then reload at $40.30 with a dime stop so risking .15 in catching one of the two moves up.  Of course, I’d rather man up and sell the $38 puts for $1.80 agains the the $38/40 bull call spread for $2.20 and be in the $2 spread for net .40 but that’s just me

I had a couple of follow up comments but most of us were happy to take $1 on at least 1/2 of and run as we were rejected at $42 just 40 minutes later.  The second half ran all the way up to a $1.90 gain into the close.  That's how you use the stick to make a nice, quick 2.5%+ on a stock trade in a day.  Of course the option play did a little better with the $38 puts dropping to $1.60 and the $38/40 bull call spread still at $2.20 for a net .60 off the net .40 entry so a nice, quick 50% there but we have no reason to quit that trade as it returns the full $2 (400% profit) if TNA simply finishes above $40 next Friday. Unlike the stock trade, we don't really fear the quick reversal as much as we can roll out of the position or just exit with a small loss. 

At 3:53 we took our upside money and ran as I said to Members: "Looks like we’ll be close enough to sell into the excitement on this move.  There’s a reason Rule #2 is "When in doubt, sell half."  Even if you are dying to be long tomorrow, so much better to take a little off the table into the close – just in case!"  Remember, we are not so much bullish as we are bottomish!  Nonetheless, I did put up a post for Members this morning called "Turning $10,000 into $50,000 by January 21st" in which we select a series of trades that should make 500-1,000% each if the market recovers off this week's lows.  The idea is to take a chance with a small portion of a larger virtual portfolio – not to go all in with $10,000

Of course, we have are following much more interesting patterns than a simple intra-day stick trade.   Take a look at the current 1-month chart of the S&P 500:

Now compare it to our last big sell-off in February:

And look what happens next:  A sharp spike down to retest the lows that is reversed intra-day, leading to a strong move up the following week over the 1,100 line and then some consolidation on the way back over 1,130:

Is it possible that when computers do almost all of the trading that the market begins to fall into highly repetitive patterns or is is just some huge coincidence?  As you may know, I'm not a big fan of TA but it is fun to watch the patterns and see what shapes up.  Today we have poor retail sales numbers but we expected that, especially with falling fuel prices knocking down gas station sales 3.3%, and it will be kind of funny if we get that big gap down at the open and then recover to even to end the week right back in the middle of the low end of our range.  I think I would have to go a bit bullish into the weekend if that's the case!

February 6th happened to be the day I put out our Q1 Buy List, which made stunning returns before we finally retired it in late April.  Members should review that list, both for trade ideas as well as our logic at the time of buying at what we thought was a bottom with well-hedged entries that could either ride out a larger drop or make a very nice return if the market went higher.  We got the latter, of course and there's no reason not to go for it again in the last month of Q2!

Asia had a nice morning and Europe was having one too until they saw our Retail Data, now they have turned red, led by the DAX, who are off 1% on auto sales fears.  Our futures are down about 0.7% and we'll be looking to do a little buying on the dips but nothing too crazy into the weekend – just some more of those fun day-trades if we see some nice patterns forming up.

Have a great weekend,

- Phil

 


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  1. That is too weird – I was just reading this article last night before I fell asleep. First tab open in my browser this morning.


  2. i guess we do not need to concerned about retail sales . who needs a consumer ,right? this market should be 3% lower off that number .


  3. Good Article,
    I see they are once again increasing the number of barrels of oil per day that is spewing into the gulf.  The gulf coast and potentially the east cost of Florida are F**ked. 
    Phil, we need to determine who will capitalize from this disaster.  You can bet that the government will over react to this situation and therefore some industry or business is going to make a tanker ship full of money due to the politicians insatiable desire to appear to be doing something and careless spending habits.  What industry do you think it will be?


  4.  Foxconn considering relocating some of its production facilities back to Taiwan. Gotta keep costs down!


  5. Whoa!!!!!  what’s pulling down the futures?  When I left the house this morning they were up. 


  6. Exec – Bad retail sales numbers… 


  7.  Retail sales in May lowest in 8 months.  Wheeeeeee!    Look out below.  


  8. Nice!!!………..I was worried about the DXD that I bought last night at the close.  Thought for sure I was going to take a hair cut on it.


  9. Thats why GS and Stick were pumping hard yesterday, in anticipation of the Friday bad news dump (which is actually becoming a regularly scheduled event).


  10. Phil -
    What is up with crude tanking all the way down to 73.65


  11. Kink,
    I don’t get it.  You believe they were spinning to suck in the suckers, and they were selling?


  12. According to Judah, we seem to be following the May 26-28 computer program.  So pull up the May 28 intraday and follow the bouncing ball! B)


  13. Phil….Great read so far, LOVE IT.  
    IWM Levels..
    6071 – 6137 – 6170 – 6292 – 63.41 -6412 – 6466 – 6557 -6601

     


  14.  I am seeing a 1077 to 1072 max pullback any lower all bull bets are off, either way we are overbought on the 60min 


  15. Did anyone hear Kevin Costner pitch his oil centrifuge to congress yesterday?  Congress/Actors are cut from the same mold so they’ll probably spend a few billion on the devises for the simple reason that he’s one of theirs rather than an evil business.
    http://www.theatlantic.com/business/archive/2010/06/how-does-kevin-costners-oil-cleaning-machine-work-exactly/57983/


  16. exec:  I am not sure.  same pattern last couple of weeks. run the markets up (low volume, no news) only to dump bad news on friday.


  17. Good morning!

    Sorry but I’m sick and the drugs aren’t working yet.  I’m going to lay down for a while.

    Selling my USO puts on this dip and, if I could stay and watch I’d go for the short put side of our $10K-$50K list as it’s either a great entry opportunity or we take a quick loss and wait to see what happens next week.

    DIA July $105s for $1 would be the upside play of choice and we can sell June $104s to cover for .50 when/if we bounce back, otherwise, they are not too bad of a risk naked on the weekend.

    Good night….


  18. I don’t trust this market today.  I’m dumping DXD early and see where it goes.


  19. Oh no.  The chief is out.  I feel lost already!  Hope you feel better Phil!


  20. Good morning,
     
    IWM 61.98, 62.47, 62.87, 63.47, 64.14, and 65.98


  21. Kink, If you look back from 5/17 until yesterday, you will see that this pattern has now been running for two full weeks, every day of the past two weeks being a close replica of these past two weeks.  I keep expecting that real world events will disrupt the pattern, but so far it is holding true to form.  As Phil points out, this is also the pattern that ran in February.
     
    Phil, Thank you.  I see my question prompted a whole morning post.  Excellent read.  I am honored.


  22. Feel better Phil..
     
    JRW that leaves it open to YOU to post all your trades!!! PLEASE I’m trying HARD to get better and your trades help!


  23. Judah – so what is the pattern? up or down?


  24. Does anyone see what’s wrong with the following idea? Suppose we know a stock is going to go ex-div and drop, and suppose we see the market’s guess of the dividend in the put prices (e.g., AGNC puts have about a 1.30 added premium on them, roughly in line with the expected div.).
     
    So buying the put naked makes little sense, since the move is already priced in. But what’s wrong with buying a put vertical where you’re selling the same 1.30 extrinisic premium on the short leg? Should that be free-money after the ex-div date passes?
     
    I know there is no free money in the stock market, so I know I must be missing something here. But what?


  25. Dilbert, I’m looking at 5/28 on IWM, which started down, retraced to just above the previous day’s close, went back down again, was choppy for the day and had a late day sell-off into the close.  Of course, that was a Friday before a 3-day weekend, and I can’t really believe every day would be the same.


  26. there are business inventories at 9:00 then no other  "outside " news.  A  bot program would work perfectly today


  27. retail sales/trice:  China’s awesome export numbers seem even more whacked out.  With the Euro at a lowpoint and US retail sales down, where are those increasing exports coming from?


  28. Yip,
    In TNA at $41.44 looking for IWM 64.14 if we hold 63.78


  29. Phil
    YRCW has announced a reverse stock split – does that affect your recomendation?


  30. Well I hope it sells off by at least 300 points on DOW. Then I am going to have a virtual party and provide you all with virtual drinks


  31. JRW…How did you get that entry?  Just guessed it would pop at the open?


  32. In TNA at 43.00


  33. gel’
     
    If you are around, can you keep us up to date on the euro while Phil’s out ? Thanks


  34. yip
    out at $43.04


  35.  edro—  can’t find the YRCW release online….do you know the exchange ratio?  


  36. Well, I’m trying it with a couple of Sept. 32.5/27/5 AGNC put verticals at 4.15. I’ll let you all know if it’s a free $85, lol.


  37. http://www.rttnews.com/ArticleView.aspx
    Recent update from YRCW (expecting positive Q2, planning reverse stock split ranging from 1:25 to 1:5).


  38. Yip,
    I bought at 9:36 after IWM broke through 63.47; sold on SS’s candle, guess I should have waited, damn !! Still, 4%.


  39. lvmoda
    YRCW – Neither the date nor the ratio has been determined yet – but they have announced that they WILL split


  40. O.k., I think I figured it out (now that I’ve bought them). It will be a ‘free’ $85, but it’s effectively impossible to get a more lucrative spread since all strikes in all the post-ex-div put series have the same premium on them. So the free $85 is what I get for risking $415 until Sept, which is o.k. given that I’m long the stock, but perhaps not worth it otherwise.
     
    All put options will drop 1.30 extrinsic after the date, and then gain a roughly comparable instrinsic, so no real advantage to the vertical, I guess.


  41. JRW…That trade proves your human….Out 43.89


  42. Bought July DIA 105 calls for 1.1
    Sold June 30 104 calls for 1.05
    As long as we don’t collapse before June 30 (making the July calls also worthless), this should be a good trade!


  43. Euro is right around S/R at 1.211 -
    it had a nice run for a few days but the trend line has broken and it seems to be consolidating around 1.21
    It broke bellow that in pre-market and helped take down futures and oil – or they are all highly correlated – depending on your view


  44. yip / human
    Totally, as I misread the candle; SS has a great system and I should have stayed in and still be in but I looked at the candle incorrectly !!


  45. judah,, looking for that 5/28 pattern, not happening yet.  


  46. Boy my 64.66 line was it..  So obvious how I got that level.  Look back 3 weeks


  47. JRW: wow, it exceeded your 64.14, even yip’s 64.66  but man, what a great run, too bad I was not participating, I would have entered at 41.3 to 41.6 because that is where the move UP became strong,
    I was watching how the market recovered from the drop and of course TNA went up big.


  48. We’re close to near-term resistance on the SPY, and have expended a fair bit of buying power to get here. My hunch is we stall out here today, so I’m shorting SPY condors, selling the June 109 line and buying six strikes away.


  49. I’m legging-into those by the way, selling the call side now.


  50. JRW are you talking about the 3min 8MA average entry exit system?  Or is there more?  I’m wondering if I’m missing any parts…


  51. Eric…You think fade?  I don’t I think higher AND I am a total bear!!
    i like Phil’s TASR play I took that this morning.


  52. yip,
     
    These are delta neutral into the weekend. If I can leg-in successfully, and we flatline, they’re good for about .40 each on the day, times the number I sell, which isn’t bad for a neutral trade (once I’m in).


  53. yip / ss
    No, not missing anything; that’s a great trigger


  54. Pharm-
    Just got assigned PARD – looked at the ASCO presentation but not sure what it means.  Can you interpret, thanks.


  55. Stockbern, If you consider that we had a pre-market sell-off and that corresponds to the 5/28 opening sell-off, it was followed by a steep rise until 10:10 (same as today), holding with some small ups and downs until it rose at 10:30 and started selling off at 10:36.  I’m not saying it can correspond that closely, but so far, it has held to the same pattern.  We now see the rise and if it sells off in the next 10 minutes, I think it would be a pretty good pattern to watch, just for fun. 


  56. Feels like it wants to break down.


  57.  Yipcarl, i think that you are right about the market going up – there really are few alternatives besides the market – cash (not earning jack in moneymarket), treasuries (they keep on issuing em’), gold (maybe but not without risk).  I think that people will invest in solid dividend payers like KFT and VZ because the unemployed/low wage earners still eat mac and cheese and have  data plan.  My best play right now is C.  I think the government selling will stop soon and then this will go back to 5.   


  58. judah,  just for fun,  I might put a little money on it.


  59. ss,
    If you’re around, please confirm an enguling red on your screen.


  60. JO…I’m a huge bear but I see a summer rally before a fall crash.  Call me crazy but I think we get a lot worse employment, sales, and job numbers on the way and Europe has just begin..that bailout will only hold them for so long…
     
    JRW and SS…thanks..


  61. Legging into TZA at $7.15


  62. Unbelievable.  There are the high frequency trading markets, and then there is reality.  Someday, reality will have to catch up with the computers.  Retail sales (70% of GDP) are abhorrent today, yet the reason we spike up…"Preliminary" consumer confidence???  Along as consumers have hope and a big smile on their face, then income and spending really doesn’t matter?  Who do we trust…Ben telling us this week that "The Consumer Is Strong"…or faltering local tax receipts and federal income tax shortfalls?  I’m having a difficult time with the hope story…America is starting to feel like the "Matrix", America has become experts at redesigning reality…to the point where problems can be tackled, because according to the hope theory, problems don’t exist and if you bring one up, you are labeled a "Doom and Gloomer" by Cramer (who by the way thinks we should sell $2 Trillion 30 year bonds immediately to "solve" our economy).  Sure we shouldn’t go jump out the window, but how about we at the very least perceive our problems, and perhaps even talk about them instead of completely ignoring?
    Today could be a monumental head fake…as the programmers input better reality data.  Sorry for the vent but this game is so rigged, it is getting scary…


  63. JRW
    The Euro is still showing follow-through strength from yesterday’s pump from China. They must have a lot of them. It is trading at 1.21 this morning. My personal feeling is this strength (relative) is short-lived. Last week the Swiss CB was buying Euros in order to keep their currency cheaper vis a vis, as most all of their exports are in the Eurozone. I am still a firm believer in the projection of the Euro seeing 1.10 to the USD by year end. The serious currency traders domiciled in Europe are very bearish on the EUR, because they are fully aware of the problems in some of the weaker countries – financial houses built from straw.  Opinions are everywhere, but I follow closely the opinions of those that are on the ground floor. I look for more strength in the CAD and further weakness in the USD/MXN. Nothing compelling, however this morning.


  64. Not going to do that after all; lost a penny on TZA


  65. Hi there!

    Doesn’t look like I missed anything important..

    8-)


  66. Thanks gel !!


  67. JRW, SS has gone to the beach for the weekend to fight off the tar balls.


  68. David…. I closed out my NSM position this morning for a nice gain – I am still batting 1000 on your terrific picks!


  69. Somethings going to give soon


  70. I hope ss is not walking the beach picking tar balls from the sand in front of his Destin condo


  71. Stock/fun and money.  Well, even if they are rerunning the 5/28 program (and it is still holding true to form IMO), that was a choppy day and awfully tough to trade.  Good luck.


  72. euro/gel:  "short-lived" as in, at least until the end of the World Cup? ;)


  73. Euro / Gel
    I am with you – but everyone is so bearish on the Euro that it seems possible we get a little reversal here


  74. Sold part of the put side of those condors, basically since I don’t want to babysit them. Kept a slightly bearish delta, but hopefully that’s it for the day for me.


  75. judah,
    Thanks, tar balls ouch !!
    Well I wish he were here; in TZA at $7.15……. and looking better this time. 5/28 ?


  76. JRW you are HUMAN!  YES!   For a second I thought you were a BOT! 
    I’m still in TZA


  77. TBT – Anyone playing the TBT game…might have another re-entry in the 38′s today.  Usually when TBT is decaying it is not a great indicator for the markets…but like the GS super index, when it fails, just like Guy at Fast Money said yesterday…"you get your faced ripped off"…


  78. JRW, SS told me he was heading to the beach this weekend — I don’t think the oil has hit yet, but he is concerned.
     
    5/28, if you look side by side with today (including the premarket drop), it is a very close fit.  I didn’t want to sound like a crazy person or I would have told you to hold your TNA until 10:10.  That’s when I got into TZA.  Maybe another leg down, but I’m getting out just before 11:30.


  79. Jo
    I share your frustration trying to find a secure place to make some bread. – this market has been a real yoyo. I found a nice one yesterday that has a terrific yield (9.25%) and has great fundamental going forward. It is ERF ( Enerplus Resources ), a Calgary AB based company that has 68,000 acres in the Bakkan shale oil fields. They are big players in a sector that has nothing but growth looking forward.Keep in mind, the dividends are partially taxed in Canada (not much) and that tax is a credit on your return as "foreign taxes paid" I think it is good timing on this one.


  80. It is kind of creepy that we are forming the same exact candle we made on Feb 13th, isn’t it?

    Not only that but, as noted by Judah (nice job!) it’s the drop and then recover (and then drift down to a weak close) pattern that we had on Friday, the 28th, just like yesterday mirrored that Thursday…  If we get a big drop at 12:30, this will start looking like the twilight zone

    Europe totally flew back up already and are up at day’s highs (up 1%) with an hour to go.

    Dividend/Eric – I know that sometimes with dividend stocks I have ended up being assessed the dividend through the options and, frankly, I was so confused by the rules that I just stay away from them now.  Perhaps someone here plays that game but it’s something I tried many years ago and got burned with, notably on MOT where they split and I had to pay a cash dividend and BUY shares of the split off company to cover a short sale I had made.

    Chinese Exports/Kinki – I think it’s a switching to lower-cost items thing for consumers.  That’s why Germany (expensive exports) had the worst reaction to our Retail numbers – no Brauns, Bosch or Beamers for consumers looking to cut back…

    YRCW/Edro – No, should be better for option selling!  Damn, you guys went nuts at the open, up to .237 already! 

    Great DIA trading RN!

    This is very possibly profit taking into EU close at 11:30, they had a nice run and nothing is really solved over there and our open should tip a lot of people to cash/neutral over the weekend.


  81.  thanks gel – i dont know how you find these hidden gems but thanks.


  82. goldman/TBT
    I am still accumulating at this level.


  83. Out of TZA…at 7.30… Probably too early just the trigger fingers again, up 4% today so far….Feeling like JRW for even a moment is good!  I’ve got Trade Envy!!


  84. Out of TZA at $7.33 off an R/S at IWM 63.96


  85. JRW…Where did you get 63,96 as a level you didn’t list it?  Is it the Fib from 6/4 LOW to 6.8 HIGH?


  86. For those of you that like to invest in foreign equities that pay dividends, the following is a list of countries that do not do any withholding of dividend income: Argentina, Brazil, HK, Hungary, India, Ireland (some of us have FLY), Mexico, Singapore, S. Africa, UK and Venezuela (no thanks to that one) Some of us have RDS (Royal Dutch Shell) and they are based in the Netherlands, and withholding applies on the dividend income.


  87. JRW, I’m holding for the Europe dump into their close.  Getting out at 11:25, and then maybe into TNA at 11:30


  88. Judah…I’m on that train I believe…….


  89. 9 mins early in TNA at 42.55


  90. yip / 63.96
    Monday


  91. Hi all, just wondering if any ideas as to EURO turned down, oil down and the past. Are these in line with the old dates or is there something different this time?


  92. JRW got it its also a Fibonacci level..


  93.  Trin is 1.64, recent big run, going into a weekend, most Fridays of late have ended up in the toilet, Birinyi’s pre-market model predicts a negative close (and they’re right about 73% of the time lately)- bought QQQQ $44 puts for $0.45, planning to hold to the close. 


  94. JRW, Yip, Out of TZA at 11:25.  Consistent as a fine swiss watch.  25 cents on TZA.


  95. Nice Juda…. Will TNA and the market hold!!!


  96. Judah, anyone – Do you guys know a charting system that let’s us look at historical one and 5-day moves?  Yahoo only let’s you move back on the monthlies…  I was thinking we could make a little library of charts and start identifying "A4 Days" or whatever

    Alternatives/Yip, Jo – That’s a good portion of my bullish premise – what the hell else are you going to do with your money?  TBT is pulling back already, the US is not going to voluntarily do anything that drives the interest rate on the $15,000,000,000,000 they owe from 2.5% ($375,000,000,000 a year) to 3.5% (+ $150Bn) – that’s like you doing something to shove your monthly mortgage from $3,750 a month to $5,250 a month – you’ll do anything you can to put it off or avoid it or whatever and, if push ever comes to shove and you have to pony it up – you may end up having to default.  That’s the situation we’re all in (US, Europe, Japan) but the worst thing is that, unlike a semi-sensible consumer, they DON’T STOP SPENDING MONEY THEY DON’T HAVE!   Like a totally irresponsible consumer, they keep playing tricks and juggling their books and opening up new lines of credit and lying to the people they owe money to and tapping out all their friends and relatives…  That’s my economic summary for Friday!

    Engulfing/JRW – I’m not sure how you can trust those kind of patterns when the whole thing is so clearly manipulated.  They make a bearish engulfing pattern to trigger sales and then they buy into the selling and form an "anomylous" reversal which "everyone" misses until they do the opposite at the top of the next cycle.  Simple facts are GS is 46% of all trading, GS has high-frequency trading programs that they themselves (when one was compromised) said could be used to manipulate the markets  and GS has had just 6 losing trading days in the last 6 months (none at all last Q). 

    Speaking of BS moves, quick push down into EU close took oil down nicely again so if they cross $74 it’s game on on the futures (nickel stops that expand by .05 per .10 gained so $73.95 at $70, $73.69 at 70.05, $74.05 at $74.10, $74.10 at $74.15 AND at $74.20, $74.15 at $74.25 AND $74.30, $74.20 at $74.45, $74.25 at $74.50 and then a .25 trailing stop that goes up .25 per additional dollar


  97. In TNA at $42.66


  98.  Great Juda. I am new to this. How and where can I see the old charts for any particular day?
    Thanks


  99.  Charting/Phil – Google finance lets you enter start and end dates for charting – they are very basic charts, but useful to just see the shape of the curve.


  100. Phil…you got it…


  101. If Monday follows the pattern, we start up high, and go down in middle, and back up, right??  So do we buy at the end of today?


  102. Gel - I was just looking at RSD/A
    Phil – what do you think of RSD/A at $51.98 selling Jan 11  $50 p&c for  (9.60) and selling 45 puts for a $40/45 entry and 25% profit (7% of which from the dividend) if above $50 in 7 months?


  103. Phil/JRW —->IWM – Fib set at June 3rd high to June 8th low gave the exact reversal points for today…63.20 (38.2%), 63.95 (50%), 64.70 (61.8%).  Exact match!


  104. Goldman!  Exactly….I had my levels…then I drew fibs and boom there was 2 levels of support!  Worked great!


  105. In TNA 42.82


  106.  Phil – Stockcharts.com let’s me do a specific date or dates. I do not know if you have to be a subscriber (I am).


  107. Phil/charts – we can talk. I still need your browser info from for that other thing though in the meantime. 



  108. gel1     ERF   div pay date is 6-19   , same as opex.   How would that effect option pricing on the 22.5′s


  109. yipcarl… looking forward, my prognosis is somewhat different than yours. I believe we will have a very strong last quarter, mostly a result of the continuing recovery boosted by better than expected earnings. With the well published anticipated rising tax rates coming January 1st, my guess is most all companies will shove alll the income they are able to scrape up, and report it into 2010, thus avoiding the higher rates of 2011, With dividend income taxes projected to more than double in 2011, you might also see some increased declared income from many of the dividend payers. The tax increases are huge across the board. Even capital gains taxes are going from 15% to 20%, so you will see a very active market in December. The first quarter in 2011 will be a " bears dream "


  110. I so like what you guys do!!


  111. Phil/charts.  I’m not a very good chartist, but SS is, and I will ask him.  All I do is pull up a 20- or 30-day 1-min chart on TOS’s Prophet to look for patterns, like a prior day when there was a big gap up or down.  I then blow up the time period I want and compare it with the past couple of day’s charts on another screen.  Today and yesterday have tracked the moves of 5/27-5/28 almost to the minute.  (I traded by time rather than levels yesterday and today.)  More freaky deaky, look at an IWM chart from 5/19-5/28 and compare that with the past 10 days (not an exact overlap in number of days, but eerily similar in the market moves).  I can certainly understand patterns like a sell-off into the European close on a Friday.  But, as you said, if we sell-off at 12:30, we will truly be in the twilight zone.  I would love to work on a system for identifying pattern days.


  112. Rigged/Goldman – LOL.  That’s one of the danges of joining this group.   We all took the red pill and we don’t live in that world anymore and it is very scary when you pull back the curtain and look at what’s really going on out there.  BUT, as I said in the weekend post, the woman who is in Soweto carrying a jug of fresh water back home to prepare the family dinner doesn’t really give a damn about how much Cramer thinks a 30-year note should be worth and that woman is 66% of the global GDP and makes up 80% of the population.  Within the top 20% (1.2Bn people), 80% of them are guys who wash your car and work at McDonalds and clean your teeth and they don’t really have any money to invest in bonds either and if there were no banks tomorrow, most of them would think that was cool because no one will be asking them for money and they will wake up and go outside and do whatever work they can get to put food on the table.  The only people who worry about "they system failing" is those of us in the top 20% of the top 20% because it’s our system and we benefit greatly from it and our lifestyles would be deeply impacted if tomorrow we had to go to work on a farm so we could bring back some produce so our wives could boil water for dinner soup.  For the other 96% of the people on this planet – that’s pretty much called Friday.

    Euro/Gel – Way too bearish here.  Breakup of the EU is priced in like 30 years of work will be undone overnight.  Not just the leaders of the EU but the people of the EU have made tremendous sacrifices to get to where they are today – they voted to and worked towards giving up their national identies to form a union – something I doubt you could get modern Americans to do (heck, we can barely keep ours together).   The EU states are not more screwed up than our own and everyone thinks Germany will cut and run but Germany already took on the East Germans and pulled together as a nation and overcame huge odds and they are PROUD of what they have accomplished – don’t think they aren’t willing to do the same with Hungary etc, which are countries that used to be in their empire anyway…

    And here goes oil!  I think I want to see $74.50 before I start getting very nervous (ie. I ignore quick spikes below stop lines)


  113. gel1   I am hearing about the tax increases from everyone.   All of my real estate friends are looking at deals that must be done by the end of year.  All ready got tax planning newsletters from both by accountant and attorney .


  114. D’oh – so much for that, stopped out now on oil.  Man it does not pay to be greedy


  115. Need advice--wanting to get a cell phone that I can get stock quotes with-(I am so addicted!!)  Currently have a T-Mobile plan, but 2-yr is up--probably will want to stay with T-Mobile since on family plan. Also, is it ok to make trades on the cell??, or not secure?


  116. How are the short strangler folks?  Have you survived?  I haven’t checked in for many days and good to read PSW again.  Remember that VIX in the 30s is where the short stranglers are most successful.  We just need to hedge against a 10% drop in case of any bad news.  Other than that, I’ve just taken advantage of the low interest rate by buying a house at 3.875% with a 5 year ARM.  After the tax refund, it’s almost like free money.


  117. stockbern/ERF
    The .18 per unit  dividend went ex-div on June 10, which is the date when you are either in or out on the current dividend.  I do not see any correlation between the dates, as there will not be any unusual selling on opex. Energy sector strength or weakness, from this date forward will be the driver, as the dividend pay date is no longer relevant to the option pricing for the upcoming opex.


  118. taxes/gel:  capital gains tax is also going up, so one would think there’d be significant profit-taking by the end of the year as well, especially if we do get a good summer rally going…


  119. yip, judah, JRW ,RMM    (Phil, you too , SPX, DIA )  what’s the best guess now for IWM for the rest of the day. 


  120. fizz
    The issue with anything that goes through the air is anyone can listen anytime if they know how. Wifi isn’t really safe but at least the spys have to be close.  The safe thing with cells is SOOO much traffic to me, others will have opps., everyone has one!


  121. Phil: darn good comment about " breakup" of EU,
    there is some wishful thinking in the USA that that should happen, no chance, those who speculate on breakup do not know enough about EU and Europe. Also keep in mind, Germany is a huge exporter and the EU is their huge market.


  122. Ignoring the broader context of this song’s lyrics, I think this might need to be my new theme song:
    http://www.youtube.com/watch


  123. Bhaskar, I trade on TOS and Fidelity platforms and they both allow you to look back at specific days and manipulate the charts, but there are undoubtedly other better chart programs, like stockcharts.com.


  124. Fizz get an unlocked IPhone, you can continue to use t mobile


  125. Gel…. I never answered your post the other day.  It is my thinking that items that are still expensive or more expensive it is my opinion that is going to change.  If things get worse like I think these prices have no where to go but down, supply and demand.  As things slow down more building costs will decrease and so will the materials.  Hey just my Opinion..
    I don’t see any strong quarters based on shrinking employment, very little credit if any, a RASH of homes coming to market(foreclosures) continued strategic defaults, Europe etc. No Doubt balance sheet nonsense will continue and I’m not sure all this will last to Q1 2011 but who knows! 


  126. stockbern
    IWM 64.59 or better but just because we’re trading in the Twilight Zone, watch out at 12:25 !!


  127. breaking out the popcorn for the 12:30 confirm.  god the suspense is killing me.


  128. Phil/RMM
    Great  EURO info and Germany, who buys those expensive toys? Biggest Oil Boys! Last I heard they have a well on that.


  129. JRW….What am I missing about 1225?


  130. TOS charts / judah
    I haven’t found a way in TOS to show intraday charts farther than four weeks back.  Can it be done?


  131. Stockbern, I’m watching for a sell-off just after 12:30, a strong recovery just after 2:00, and a final sell-off into the close starting at about 3:30.  That said, I just can’t imagine it could possibly be that repetitive.


  132. Out of TNA at $43.06, 40 cents 1 more %; 6% on the day !!


  133. Boobear, I go to Prophet, set the time frame (e.g., 30 or 60 days) at 1 minute.  When that chart loads, I use the cursor to zero in on the few days I want and click and up pops a 1-min chart from that time period.


  134.  Hello all,

    From my BUS!!!! I had to leave earlier than I had originally planned due to a million important events going on in Chicago today (2010 STANLEY CUP CHAMP BLACKHAWKS PARADE, CUBS TAKING DOWN DEM SOCKS IN THE CHICAGO SERIES, and some huge BP protest). The traffic was insurmountable getting into the city. I apologize I missed this morning’s post.

    I am glad to see we could do well with NSM. I sold out my positions to start the day, getting out at 13.72. My exit on Overnight Trades in the first five minutes was not good to me today, but I will take a 3% gain when I can get it. 

    Since I have this free WiFi on the Megabus, I will go ahead and do my emerging markets story on Chile.

    I am also working on a Long Term story on China Automotive Systems (CAAS). This will be released hopefully by the end of today, at the latest tomorrow. 

    Three weeks of very successful trading…

    Good Investing!


  135. 12:23 on the dot,   judah,  I hope the programmers are not on to you


  136. re-$10000into$50000—very clever to sell XLF to buy FAS spread. Do you mean 21.67-28.33 FAS 2011?


  137. I just made an error and bought TNA instead of sold and found out after it went down 20cents and lost my profit. . Man this sucks.


  138. judahbenhur What do you mean by big?


  139. In TZA at $7.24


  140. yipcarl
    Sorry about that, thought I was the only one capable of that along with my RIG Whuck 60 putters instead of 40s!


  141. "our lifestyles would be deeply impacted if tomorrow we had to go to work on a farm so we could bring back some produce so our wives could boil water for dinner soup. "
     
    Hey, I resemble that remark. I’m actually building a cold-frame on my land so that I have enough year-round vegetables to feed us, lol.


  142. Out of TZA with a penny.


  143. Choppy nonsense again!!!


  144. The choppy days have usually finished lower recently, fwiw.


  145. Shadow,  Big?  Not sure what I said that you are referring to.  Sorry.


  146. Phil/Euro
    I am not projecting a break-up of the Eurozone, when forcasting the future value of the currency. My projections are focussed on the economic weakness that is projected, coupled with the debt and austerity measures that will surely impact the currency value. The weakening Euro will help somewhat with their exports, but that alone will not be enough to significantly change the direction of their economy. I believe many of the Euroland countries will have diminished growth, as they de-leverage their debt, as they are not able to inflate their way out of the debt. ( they are likes our states, and cannot print currency ) The cost of interest on the debt increases as the likelyhood of repayment diminshes. It is the same old story – a strong economy that is not burdened with excessive debt results in a strong currency – example Canada, Norway, Brazil etc. The Eurozone is the inverse – excessive debt, poor GDP, and governments that are weak and following Socialist principals that dis-incentivise efficiency and entrepreneurship, tthus precluding economic growth. I see nothing in the Eurozone that is positive looking forward, that could change the macro direction. Further –  the "Big Mac" ratio is still out of sinq – (cost of a Big Mac here in the US is $3.25, and in Europe is $5.40, converted from Euros to Dollars ). This ratio means the Euro has further to drop.


  147. judahbenhur
    The 12:30 selloff,  2:00 recovery, and closing selloff.


  148. JRW: feel like you teased us with your remark: 12.25 but what is significance of that .


  149. Phil,
    By looking at the volume of YRCW some of your members are listening to you.


  150. Phil/"Back to the farm" - I’ll be set if I have to go back to the farm…actually I grew up on a large farm, and most of my net worth has been used to purchase farms to cash rent out to farmers…as that is what I know best.  And having started out at the absolute bottom from less than nothing…it isn’t as bad as you might think, there is an unsung freedom from the simplicity of being poor versus the complexity of trying to protect net worth and build it constantly…the hedonic treadmill is a bitch…LOL!  I should write a book on the topic because simplicity and ignorance "were" bliss…


  151. Judah..Thanks you and JRW are just referring too the pre lunch sell off at 930


  152. Phil,
    You are so right. At least for me, finding a spot where one wants to own something and has conviction to buy based on value and sit through the swings is so much more appealing than stressing out on the minutiae of every gyration. I only wish I would have played this drop better and had more free cash. Even so, when this market comes back, I’m going to be bankin’! What levels are you anticipating for EOY? Isn’t there an article with your macroeconomic outlook? I need to keep that big picture stuff on my desktop and refresh my memory occasionally.


  153.  YRCW  was upgraded from sell to hold by stifel nicolaus this morning.   I guess you can call that progress…probably explains the buying today (along with short covering), but I really wonder why there is no news, blogs or other information available publicly that explains the 30% drop over the last two days on huge volume.   


  154. yip: now they go to lunch in NY so probably not much to happen until they are back from lunch.


  155. yipcarl - I think they were actually referring to the 12:25 selloff on 5/28/10.


  156. Shadow. Ah, what I said earlier was that if we repeat the pattern from 5/28 it would be very choppy and difficult to trade.  First a rise, then a fall, then a further fall with the sell-off into the European close at 11:30, then I expected a rise, then choppy, and after 12:30, a fall or drift down until just after 2:00 or so, after which it would rise again, but sell off into the close.  So, it hasn’t sold off after 12:30 today, and if I recall correctly there was some exogenous event on 5/28 that caused a quick sell-off at 12:30 that isn’t happening today.  Instead we are just drifting.
     
    I don’t really believe there are duplicates, just patterns that occur during certain times of the day, like the European sell-off or the Stick.  We don’t always know if Europe will sell off or Mr. Stick will appear, so I am trying to identify the pattern days when those things are more likely to occur.


  157. diamond: TXS for helping out on the 12:25


  158. Anyone who trades oil futures
    take a look at the daily chart – it was such a great short opportunity -
    Nice uptrend in the morning to just over 75 – (75.15??) or so – breaks trend line – down to 74.75 – then pops back up to the trend line (now resistance) but never makes a new high and then trades steadily down
    that pull back to the trend line (now resistance at 75.08) would have been a great short b/c you know you can put your stop at the old high – oh well -
    All you Rut traders – if you like rut – seems like oil makes nice trades for those looking at S/R lines


  159. Withholding/Gel – Note that a lot of those tax havens require bailouts.

    Euro/Shadow – Just the EU closing and people not wanting to risk holding over the weekend in case someone else blows up.  That drive the Euro down and the Dollar and Yen up (mostly the dollar as we are holding our market gains and Japan is closed) and that is pushing commodities down, especially oil, which is currently freaking out about decline in spending but demand was actually higher as only a 3.3% decline in gasoline sales when gasoline was down 15% but don’t expect to get that kind of analysis from the MSM – that’s the stuff that the traders keep to themselves (although it’s kind of obvious if you pay attention). 

    GOOG/RN – thanks, I’ll check them out.

    Monday/Fizz – We have to factor in the holiday weekend thing but if we finish the day in a spinning top or whatever they call this candle then I would say it’s worth a bullish gamble into the week ahead.  Of course 2/15 was expiration day and that’s a factor too so we could flatline next week and THEN take off after expirations

    RDS.A/Brooklyn – I think XOM.  Then I think about it some more and I think XOM.  I look at a 3% dividend, $20Bn in stock buybacks, $310Bn in sales, $5Bn a quarter in profits (at least) and $30Bn in cash (10% of the cap) and I think XOM.  Not only that but they have a proven track record of being able to destroy the environment and get away with it!

    XOM at $61.46 can be played by selling the 2012 $60 calls for $9.90 and the $57.50 puts for $7.40 for a net $44.16/50.83 entry so a nice 20% discount if put to you plus a nice $1.76 annual dividend.  Upside on that play is about $18 over 18 months if XOM holds $60.  You can also go for the 2012 $52.50/60 bull call spread at $4.30 and sell July $57.50 puts for .82 with the intention of getting at least 5 sales like that and having a free ride.  It’s a nice way to go if you don’t want to tie up money with the sale of something like the 2012 $47.50 puts at $3.90 but even that makes this a nice .40 net cost on the $7.50 spread and your margin is WAY less than the buy/write (about $9 per share) with only the commitment of 1x so you could buy twice as many of these and have a $15 upside with the commitment to own 2x XOM at $47.80 in 2012 for less margin than the buy/write.

    Stockcharts/Diamond – Worth subscribing for if so as I like them best anyway. 

    Oil down past 2.5% line now.  CNBC gets nervous and brings on a round of oil bullls.

    Browser/Kwan – Oh did I miss something?  Sorry, I was buried this week and now have the flu or something..

    Freecharts/Yshen – Ouch, too ugly for me!  Maybe you can adjust but I think stockcharts will make me happy as I don’t have to add another tab. 

    Patterns/Judah – It would be nice if people could put things up on http://chart.ly/, which seems simple enough to load things into.  That way we can all have a common frame of reference and maybe there’s a way we can group our charts, like they do on some of their pages (I don’t have time to figure it out but I’m sure someone can).  If that goes well, then maybe Kwan can add it to the Wiki project he’s working on

    Speaking of patterns – I’m very excited about this "circuit breaker" thing because it’s going to give us great opportunities to catch things, evaluate them and then grab positions when it re-opens.  It’s like a pause button on the initial excitement!

    Cell trades/Fizz – I wouldn’t even log into my account on a cell phone!  I don’t even do it on a Wi-Fi if I can avoid it but mabe I’m just paranoid…

    Peter!!!!  Welcome back! 

    Good point on exports RMM!  So we have economic motivations as well as emotional.

    Broader context/Boobs – Yeah, those basketball references are so confusing..  8-)

    12:30/Kinki – Right on time!

    Timing/Judah – I look at the pattern but not the exact times because you don’t really know how the news and volume played that day (today is just 80M on Dow at 12:50 so super-light).  The way I look at it, the computer is running a program that isn’t based on time, it’s based on hitting targets and filling volumes so that leads to generally recognizable patterns that get distorted by outside influences (those pesky retail traders) but then the TradeBot, like a good little adaptive program, uses the new data and works to get back on track to execute the plan it started out with. 

    Working on the move/David - I love it!  You are a true 21st century guy and a fine example of how we are able to be infinitely more productive than we were in the last recession and will probably be able to work our way out of this one eventually…

    Damn, YipCarl’s fat finger stopped the rally!

    Farming/Eric – Good for you!  We’ll all be heading to your place when it hits the fan…

    Hopeful consolidation of oil under $73.50, worth a toss if you are brave if we get back over the line.

    Euro/Gel – I’m not saying YOU are projecting a break-up.  I’m saying a projected break-up is priced into the drop from $1.50 to $1.20 (20%) already as the EU, on the whole, is in far better shape than the US.  Here’s the chart of EU debt by nation.  If you put the US on that chart, we’re over 10% down on budget and close to 100% on total to GDP.  There is no single member of the EU that even touches the disaster of this country.  Then you have Japan, whose debt is over 200% of GDP and rising fast.  Currency is a relativity game and that big mac is expensive in Europe because even the guy who cleans the grease pit has health insurance and a retirement plan and, if he loses his job, he’ll still have somewhere to live…

    Woops, there goes oil.  Sorry, got caught up….


  160. judah
    Thanks I am also trying to get a hold on things again to day trade. I don’t compare older patterns just too much and then I do nothing, like too much information, seems the BOTS have a ramdon system but like incription patterns the problem is catching the right point at exactly the right time, follow, and project.


  161. phil, hope you feel better-- do you see a sell of this afternoon, or a stick? thanks


  162. yip:your 64.66 held twice , nice job.


  163. PHil…Beware of those FAT fingers!
     
    RMM thanks..


  164. Phil/May 28. Now, I remember, news about the Spain downgrade came out at 12:30 on 5/28, which sent the markets sharply down before they recovered.  Otherwise, who knows, that day the market might have drifted upwards throughout the day.  That’s why you can’t rely too much on the programming — news gets in the way.  Thanks for your explanation about timing and hitting targets.  :)


  165. Phil: enormously good comment about Europe (I have most of my relatives living in Germany):
     
     Europe because even the guy who cleans the grease pit has health insurance and a retirement plan and, if he loses his job, he’ll still have somewhere to live…
    Most Europeans do not want to eat the BicMac as there are better meals available (though low-income people go to MCD as it is cheap to buy)


  166. Anyway Gel, where was I?  Oh yes, so what you see as "weak governments following socialist principles that precludes economic growth" I see as human beings being paid realistic wages and actually being guaranteed the rights to life, liberty and the pursuit of happiness that is only paid lip service in this country.  A healthy economy is not necessarily measured by healthy corporate profits.  Stiglitz et al are working with the EU to redefine how GDP should be measured, taking into account the happiness of the people.  I’m sure the very idea of that makes you sick but that’s what’s going to happen and that’s an idea that may spread over to this country as people realize that it does make sense to redistribute wealth if it only makes 10% of the people a little less happy while making 90% of the people much happier.  The Big Mac index is based on the idea that paying less for something is better.  This is the basis of us paying Chines factory workers $1 an hour to work 14 hours a day so we can pretend we don’t employ slaves or do business with communists – it’s just capitalism right?  It’s BS, is what it is – it’s the rich of this world gaming a system and dressing it up in "free-market" rhetoric so we can have our toys made by slave labor and we can pay less than they would cost to assemble (or eat) if the workers we were paying collected a living wage.  The entire planet is being run like a southern plantation and if you are betting that’s going to last another generation – I think you will be sadly mistaken. 

    YRCW/RJ – Yeah, I’m pissed now because I didn’t buy at the open…  Now I’m wiating but it might get away from me.

    Farming/Goldman – Kudos to you too (and send me your address so I know where to escape to!).  Having backpacked around the globe I do (kind of) know about starting from the bottom.  I’ve worked the farms and done day labor to get train fare to get me somewhere else and it was some of the best times of my life.  It’s a little different when you have to worry about family and retirement and such but yeah, wealth is a burden comparatively and many people in Europe get that but not so much in America, where everything is measured in dollars. 

    Macro/Ac – I have a 2010 Outlook called "A Tale of Two Economies" that should come up on Google.  Pretty much the same stuff I’m saying today.  There is a rich world and a poor world and there are people like Gel (no offense) that have a world view that is so divorced from the people in the bottom 80% that they can’t imagine anything else and if affects our investing decisions and how the government makes decisions and looks at statistics etc.  I think in that outlook, I made a similar case that the top 10% would have a pretty good year and would ignore the plight of the bottom 90% until they actually rise up and revolt but that’s been neatly diffused with the Republican-sponsored Tea Party revolt that fools people into thinking there is an outlet for their rage.   Anyway, so the top 10% of this country have 70% of the money and our unemployment is like 3% or less.  I don’t know if I made a target but 10% (S&P 1,250, Dow 11,500) is about right.

    Stick/Iprosp – I think we finish about flat and make that patten we’re looking to replicate on the 3-month charts.  Makes sense with the degree of uncertaintly going into the weekend and then, if we survive another weekend without the world ending, we may get some rocket fuel but launch may be on hold until after options expirations. 

    Big Mac/RMM – True, I can’t even believe they get away with selling that crap over there. 


  167. goldman/Farms
    Very good business model. Probably the best hedge against inflation. If we get hyperinflation, your asset cost, if financed, could very well be one of the best out there. I used to invest in "flat black" and it was fun. Commodity pricing is the one thing that could temporarily derail the whole profit picture, however. Long term, nothing could be safer. Farmers are usually good credit risks, but are subject to the risks of weather and health issues that could impact their ability to keep the rent payments current. Most of the good ones are hedging their crops, so pricing volaltility is not much of a risk.


  168. Phil: at 2 its fun to watch France play Uruguay, that’s what I will be doing.
    South Africa surprising tied with Mexico although they should have won as they hit the post.


  169. Hi Phil, looking at the 10k-50k XLF/FAS trade. Sell the XLF Jan 15P, buy the FAS Jan 21/29C spread.  Why are you selling the 29C? Usually when you buy a BCS you sell the higher call to lower your overall cost of the spread. In this case its only going for 3 cents, so not really defraying the cost of the spread and limiting you upside??? Not getting the logic?


  170. Phil Mac: Europeans like FRIES and those of Mac are not bad,


  171. judah:  Even if we don’t move in lockstep with the official "program", I think that allowing us to understand what the officially decided "theme" of the day will be (i.e. up, down, flat), is a powerful advantage.


  172. Peter D.  Congrats and welcome back!  When you have time, could you give some insite to how you played the "flash crash".  My SPX short strangles were 10% away from the market but became very difficult to manage during that crisis.  I also heard of some people’s accounts at IB getting liquidated because of a margin call.  It would be great to hear how the you managed that situation.  Thanks!


  173. In TNA at 42.67


  174. yip,
    That’s interesting, I too bought TNA at $42.67


  175. Kinki, I agree. At the risk of sounding like I’m trying to make a Procrustean bed, I should have ignored the May 28 news event and the market’s reaction (unless Friday downgrades become a pattern).  That event aside, the theme of 5/28 is still strikingly similar to today.  Or, in a broader sense, the theme of the past two weeks has been strikingly similar to the two weeks that ended on 5/28, and it is worth looking at what occurred during the following week, or, as Phil has laid out, at the similar weeks in February.


  176. Out at 42.90… I guess I’m a scalper by nature although I’d never admit it.


  177. JRW…I’m on to you!!!!  YEA!  I love it…THANK YOU!!
    That line held BEAUTIFULLY… Now I’d like to know how you scale out.  Are you holding?  It’s stalled here at .90


  178. Thanks Phil. Bns and bns PLUS a proven ability to bolt the check on an environmental clean up is a hard to beat combo at the moment…


  179. Happiness as GDP:   I’m just going to pay my bills with happy faces from now on.    Since conservatives are happier than liberals and religious more happy than secularists, the EU has its work cut out for it.    Besides we can put the rest of the US not on prozac on it and it can be paid for by the happiness it creates.


  180. Phil/Socialism
    I have always equated freedom, liberty and opportunity as virtues that are worth pursuing. One must have the ability to receive, in the form of payment, their fair value of their contribution, and the fair valuation is best determined by market forces, not some beaurocratic system that determines fairness based upon their philisophical beliefs. These beaurocratic edicts are usually derived from selfish motives that play into the many emotional needs of those that are placed into positions of power, through intimidation and quite often the lack of knowlege of their supporters. ( end of editorial )


  181. Gonna knock and go play baseball with my boys.  Thanks for another great education, Phil.  Rest up and recover.  Hope everyone has a wonderful weekend.


  182. Judah…Fondest memories of my dad was baseball with dad…Have a blast..


  183. Phil – like JNJ down here or wait for the investigation to play out.?  Regulators seem to be unusually peevish about slight discrepencies in the testimony of officers of large corporations this week.


  184. Phil / Next week data points?  What’s likley key mkt drivers next week for sht term trading strategy. 
    By year end I see no way we side step the deflationary GDP impact of Europe and US State/Municipal austerity programs.  Fed is running 11% deficit to buy 3% growth rebound (from disasterous base).  But country can’t grow with housing/commerical RE effectively shut down for another 3 years (7mm foreclosures ahead).  Don’t see how we avoid nasty double dip.  I’m struggling to go more than 10% net long (and mainly integrated oil majors since we need cars in China and India and oil is getting harder to find, plus FRX etc) vs your 25% guidance. S&P  P/E’s still seem high when faced with negligible growth prospects through 2011.   I’m thinking of doubling my position in the oil majors, but this goes against the grain of your diversification advice?


  185. Phil,
    You think the longs will be bailing for the weekend?


  186. out of TNA at $42.96; interesting day.
    Setting up for TZA entry.


  187. robert,  thanks.  The only good play in the flash crash was Judah’s where he bought the $5 verticals for $0.1 or so.  My portfolio positioning actually happened a few days prior to the flash crash.  TOS increased the margin on the shorts, so I bought back some to increase the reserved margin.  That helped a lot.  On the flash crash day, I was flipping from putters to callers in the morning, and after a 2 hours customer meeting, the /ES was down 2.5%, which was about 0.5 hours prior to the spike down.  Again more flipping of putters to callers.  As we know, /ES went down 5 points at a time and TOS froze.  The mentality at that time is to preserve the capital, so I continued to flip from short put to short calls until the days ended.
     
    What happened in the following few days was critical.  There was a big bounce, and then SPX failed at the 50 days moving average, signaling more downside to come, and it did drop 11% from there.  But the second drop is much easier to manage.  If the market gap down at the open, VIX would jump, so getting the Position Delta to a negative number would guard against a gap down open.  A gap up means VIX decreases and we have plenty of time to move positions around. 
     
    Overall, the position sizing and the put verticals in the hedge were the key to survive that big drop.  We knew that VIX was much higher than it should be, so if we stick it out, the account balance would climb back up, and it did.  So 4 weeks later, most of my accounts are back to where it was before.  Needless to say that I’m very glad that the short strangle scheme that we have talked about did survive the big test.  We are now very serious about position sizing and always have the put verticals in place for downside protection.


  188. Phil,
    Thanks for the story. I over slep and missed the world start. Closed out of many yesterday and tried to get DIA 105s a 1 but missed. Any late stick idea and what about that 104 caller for the weekend?


  189. Watching options activity on QCOR which has their FDA date TODAY.  I am going to gamble and buy the Jun 12.5 C for 15c.  IF they announce during trading hours.  ( wrote this a while ago now that I am coming back from a meeting.  Stock is down from the high, but still worth a flier for me).
     
    PARD – looks like their compound works in lung cancer, but I would not go riding on it yet.  Whatever your cost basis is, I would sell some Sept 1.5 C against it to recoup.


  190. Hi, Peter D,
    Welcome back!
    I guess some of us are cutting down on strangles.  With the new PM rules, I found it harder to play strangle.  In the last month or so, the markets went up and down too wildly that I found myself worrying about the call side one day and the put side the very next day.  Meanwhile, my Buying Power was held hostage by the new PM rules.
    During the frenzy around mid-May, I had to roll SPX puts all the way down and out to August in order to get some breathing room on my BP.  Those puts had already been rolled 1x several times (not enough margins to go 2x anymore).  It’s been relative quiet lately, my BP is back but I still have to wait for those August putters to decay.
     
    How are your strangles?  How do you manage under the new PM rules?
     
    BTW, Congrats on your new house!  Where did you end up with?  I recall you asked for opinions on locations.


  191.  hellooo everyone…
    mr phil quick question..
    considering scaling in…when a stock moves your way, do you usually just take the profit (if called away) and find a new play…or are there certain conditions where you wouldnt mind averaging up and going along with the trend.
    Thanks…


  192. In TZA at 7.26


  193. Hi, Peter,
    Just saw your answer to robert.  So, can you elaborate your position sizing?  I think our old $20K reserve per strangle is too low now for the new PM rules.


  194. Yipcarl, what’s your trigger to sell your tza?


  195. Crammer just called for a sideways market!!
    Straddle anyone?? LOL.


  196. Pretty boring day right now.   Let’s see if support holds into the close.  I have no feel – we could break either way; although one should prob be biased to downside.


  197. Hey all,

    New post on Chile’s emerging market with tons of investment ideas in it.

    Working on a long term story that will go up this evening or at the latest tomorrow on China Automotive Systems (CAAS).

    Thanks and Good Investing!


  198. Because of the talk about locations, I plan on moving by Sept and have no idea where. My motives are concentrated in low real estate costs, medical care esp. spinal care, and fast cheap internet connection. I hope someone has an idea or they live there now especially spinal care, the best, no waiting, and uninfected hospitals. I need cervical help now and have been rejected by all as too dangerous here. Thanks for any help or ideas.


  199. South Africa/RMM – Yeah, I was rooting for them.  Too bad on tie.

    FAS/Doro - Actually I made a mistake and was looking at the non-standard FAS contracts.  That play should be adjusted to buying 10 regular FAS Jan $21.67s at $6, selling  10 FAS $27 calls for $4 (net $2) and selling the XLF Jan $15 puts for $2 so net $0 with $5,330 upside

    Fries/RMM – Not compared to English chips.

    Scalping/Yip – It’s the way to go in this mess of a market!

    XOM/Brooklyn – The main difference between BP and XOM is XOM buys better government (in this country anyway).

    Prozac Nation/Humvee – Now that’s a plan

    Baseball/Judah – Yeah, have fun with that.  If I’m lucky my girls will want to paint my nails later!  8-)

    Next week/Tusca – Always looking to the future you are.   Never your mind on where you are now.  Adventure, excitement - a Jedi craves not these things….    Our big data next week is Import/Export prices for May (cheap oil month), June Empire Mfg and April TIC Flows on Tues, Housing Starts, Building Permits, PPI, Industrial Production and Cap Utilization on Weds, Regular Unemployment, CPI, Current Account Balance, Leading Indicators and the Philly Fed on Thursday.  Most likely, our low import number spooks Europe and Asia Tuesday morning until the figure out it was just oil and NY MFG should be up unless the Beige Book was wrong.  Housing starts could be an upside surprise and May Producer Prices should catch a break so Wednesday is our best chance for a good day.  As to heavy on oil – don’t forget, if things are as bad as you think to keep you 90% in cash, then oil could go back to $40 and tank the majors.  Putting more money into oil producers because you think the rest of the economy isn’t going to recover isn’t all that logical. 

    Bailing/Exec – I think the dumb funds are bailing now.  I’ve come to realize lately that we can no longer assume that people with Billions or hundreds of Billions of Dollars under management have a clue as to what they are doing.  It’s improved my targeting lately so I’m starting to really think its true.  There have always been some idiots in the fund game but (and maybe this is just the last networking event I went to) now it seems to be almost all idiots.  I think anyone with half a brain has been snapped up by the Gang of 12 and that is brilliant of them because it means that even the top 1% are suckered into giving their money to fund managers that don’t control the trade-bots so GS et al can yank their chains too.  So, given the choice between following the herd or bieving that bot pattern omega-1 will rule the day – I’ll back Omega 1 all the way and say we finish flat.

    $104 caller/Shadow – I’m thinking $104/105 would be max for next week and if you have to give $104 caller his $1 back, that’s not going to be a problem.

    Averaging up/Bambi – Depends on the stock and long-term outlook.  Generally, with anything less than a 10% move up, we can roll and sell more and, rather than scale in by doubling down, I’d rather sell a more aggressive put.  Take RIG, which is up nicely from our entry but still attractive at $46.54.  If today were expiration day and I had $40 callers at $6.54, I’d roll out to Jan $45 puts and calls at $20.  That would drop my basis another $13.50 and if I get assigned at $45 I’m still in great shape and, if not, it’s a huge return on my basis. 

    Hey – Speaking of "A Tale of Two Economies" – WSJ has a post today: "Wealthy Are the Only Ones Spending."


  200. Hi Cwan – thanks again.  I’m so use to the new PM rules that I don’t notice it now!  Since it’s a rule rather than some random margin number, it’s much better.  With the high VIX, the short strangles are easier to manage as we can have huge cushions on both sides, making the rolling and flipping easier to execute.  I recalled that we rode the VIX from 50 to 16 last year and make a huge profit for 2009.  My guess is VIX won’t go down to 20 any time soon, so the short stranglers are back in business for the remaining of this year.
     
    As for the house, the location is not where I want it to be (in San Diego, Irvine or San Jose), it’s near Seattle.  Our plan is still to move within 3-5 years now.  After selling our old house in 2008, we were preparing for the move south by renting.  But then our landlord is a builder, who needs to sell to get capital to buy all the cheap land from foreclosures, so we were forced to move prematurely.  While looking for a rental place, we found that buying is cheaper than renting, even if we take into account the cost of the buy/sell transactions.  So we negotiate hard for a price that is 35% below the peak, then went to the bank and said we don’t need a loan, but would like to give them future business, so what can they do for us.  Well, after looking at our assets, they slashed the fees, interest rates and gave us a great deal.  Now we have a 2,900 sf home and pay less than we would have rented.  All of this moving while my project went live and the market crashed.  No wonder I had no time for PSW for a while.


  201. In TNA at $42.63


  202. Phil, loved the clip, "what a wonderful world"


  203. Cwan, the reserve now is 24k-30k.  The old PM rule is -8%/+6% versus -12%/+8% now, so we need to increase the margin accordingly.


  204. JRW…Nice Entry


  205. One of these days I’ll have to learn about the Omega 1 bot pattern


  206. Out at $42.89


  207. Phil,  I hope you feeling better after drinking all that Tequila
    I closed the deal below with the non standard 21/29 FAS 1.38 and .46 do you think it will be much of a different ????
    FAS/Doro - Actually I made a mistake and was looking at the non-standard FAS contracts.  That play should be adjusted to buying 10 regular FAS Jan $21.67s at $6, selling  10 FAS $27 calls for $4 (net $2) and selling the XLF Jan $15 puts for $2 so net $0 with $5,330 upside


  208. To all still in TRMA closed my play with a good loss the are going belly up !!!!


  209. Phil you were talking about a long week end again as a foreigner when is this coming up? thks


  210. Cap,
    NOT boring, but I agree with the rest of your assessment !!


  211. U and me both yodi….


  212. Peter/Cwan:
     
    Welcome back Peter.
     
    I think the new TOS rules are fine. I’m not sure, but perhaps they worked out the margin issue as part of the agreement (announced by TOS) to continue using Penson.
     
    With -12%/+8%, I’m always looking for strikes generally outside of that range, potentially in multiple months, that seem to give the best current theta decay while using the least amount of buying power. With the new TOS rules, it is finally really clear to me how they’re computing BP under PM.
     
    The other thing I learned during/around the flash crash time is the huge decrease in PM BP used per $ premium (something like three to one) obtained by moving things to outer months when the VIX spikes way up. You get the BP relief, and the new positions are quite vega sensitive – so you get a nice decrease in the premium when things settle down. Then you can move things back into more current months. Moreover, the strikes you can roll to are ridiculous. For instance, I was rolling to SPX 600/700 in December – kind of "end of the world" stuff. Then these prices tanked when the VIX came back down to the low 30s. This shows how option pricing can get out of kilter with fundamentals during a scare.


  213. Peter D,
    Welcome back, where in Seattle, I’ve got a home up there as well !!


  214. yodi --
    Some of those non-standard Direxion contracts get really, really complicated.  Sometimes you have to go to their site and download the press releases, which they issue at the time of the adjustment.


  215. Phil
     My thinking now is sell June DIA calls over the weekend to collect premium which should make up for any up next week. I expect going nowhere?


  216. Phil; FRIES: English chips are too fatty but at least you notice the potato, best fries you get in BELGIUM.


  217. JRW, you have homes everywhere it seems.  I’m actually 1 hour south of Seattle.


  218. May Retail Sales: -1.2% vs. +0.2% expected, +0.6% (revised from +0.4%) in April. Ex-auto -1.1% vs. -0.1% expected, +0.4% prior.

    May’s weaker than expected retail sales were largely due to a sharp decline in sales of building materials – after two straight months where sales rose by more than 8%, May’s receipts showed a record decline of 9.3%.

    The decline in retail sales was the biggest, and the first, since Sept. 2009 when sales fell 2.2%. Sales remain +7.4% from a year ago – but much of that is due to the jump in gasoline prices.

    Apr. Business Inventories: +0.4% to $1,354.3B vs. +0.5% expected and +0.7% (revised from +0.4%) in March. Sales +0.6% to $1,100.9B. Inventory/sales ratio falls to 1.23 vs. 1.43 a year ago.

    Steadily declining inventory-to-sales shows that the inventory adjustment is over, Calculated Risk says, ensuring that any future boost to GDP from inventory growth will be minor at best. Further growth will depend on increases in underlying demand, so the second-half forecast is for a slower economy.

    June Reuters/UofM Consumer Sentiment, preliminary: 75.5 (highest since Jan. 2008) vs. 74.5 expected, 73.6 in May. Expectations 70.7 vs. 68.8 previous. "Heightened and persistent concerns among consumers with the outlook for their personal finances is the most distinctive aspect of the current recovery."

    Barry Ritholtz’s extensive collection of charts shows the historical severity of the current recession.

    The ECRI’s Leading Index turns negative for the first time since early 2009, falling to an annualized -3.5% – though the business-cycle watchers say that just means growth is going to slow noticeably. The steep decline in the index suggests GDP growth has peaked for this cycle, not that growth won’t continue, chief Lakshman Achuthan says.

    Minneapolis Fed President Narayana Kocherlakota: "Essentially, I am optimistic" about recovery, but there’s continued weakness in labor. U.S. exposure to European problems is only through "small" channels. Expects inflation to remain at current low rates through the rest of the year.

    "I believe the economic recovery is on a sustainable path," Fed’s Plosser, speaking this morning in Altoona, PA, says. In tune with this morning’s retail numbers, he says recent data on household spending "reinforce my view that growth in this sector will be modest relative to previous recoveries, because the labor market weakness will likely restrain income growth and thus consumer purchases."  Are these two guys at the same meetings?

    Counter to the increasing rumbling of bear talk, Ben Herzon says based on the yield curve, stock prices, payroll employment, personal income and industrial production, there’s no chance of a double-dip recession.

    Spain’s economy ministry denies a media report that the EU was preparing an aid package in case Madrid asked for it: "This is lie. There’s no rescue. There’s nothing asked for, nor will there be, nothing, but nothing. I don’t know where they got this from."

    Euro Bear #1: Europe’s black hole of debt is felt far and wide, sucking credit availability out of the Brazilian market. Yield premiums for Brazilian companies have surged, so Brazilian companies have postponed international bond issues for the the sixth straight week.

    Euro Bear #2: Greece will eventually default on its debt, High Frequency Economics’ chief economist Carl Weinberg says. "We are advising people to take their cell phones on their August vacation. You can’t take a country that’s over-borrowed and make it more creditworthy by lending it more money."

    Euro Bear #3: The Euro’s going to slip to just $1.10 within 12 months, analysts at RBC Capital say, as austerity reigns, putting a damper on growth and delaying the next turn in the ECB rate cycle. Its "diminishing status as a reserve currency may have only just begun to play out." Euro currently -0.35% to $1.2063.

    Not to be outdone:  Japanese PM Naoto Kan warns his country could face a debt crisis similar to Greece’s unless it urgently deals with its growing national debt. "Our finances could collapse if trust in national bonds is lost and growing national debt is left alone."

    At record-high prices, gold may no longer be a bargain – but a few other commodities might be a steal, Myra Saefong writes. "Problems in Greece have created a new environment of fiscal austerity, which implies a deflationary environment and eventually rising interest rates" which would be "the kiss of death for gold," one analyst says. Rhodium, anyone?

    China’s consumer price index rose 3.1% Y/Y in May, up from April’s rise of 2.8% and surpassing the government’s 3% annual inflation target. Producer prices jumped 7.1% Y/Y, up from April’s 6.8%. Yet analysts say a confluence of factors including falling food and commodity prices will lead to reduced inflation later in the year.

    Baltic Dry Index drops another 135 points (-3.9%) to 3,288, extending an 11-session losing streak in which it’s dropped 21.9% – and a huge 14.5% on the week. The index, which measures demand for base commodities aboard bulk carriers, is considered a barometer of economic demand.

    More than 1,400 former members of Congress, Capitol Hill staffers or federal employees registered as lobbyists on behalf of the financial services industry since the start of 2009, a new study says. For every sitting member of Congress, three former colleagues or government staffers are lobbying for banks.  How sick is that? 

    With more scrutiny over derivatives – and in particular, collateralized debt obligations – evidence is mounting showing how big banks used the "sophisticated buyer" status to take advantage of customers whom they treated more like counterparties.

    Thank goodness for the wealthy, because it looks like they’re the only ones spending any money. Higher-income consumers had been holding back, but this seemed to change in May, according to Gallup’s chief economist. “It could be that many upper-income consumers are experiencing ‘frugality fatigue.’”

    JPMorgan Securities (JPM) gets solid demand for its $716M CMBS conduit sale – the largest in the commercial mortgage-backed market in two years – though investors demanded larger spreads for longer maturities and lower-rated tranches.

    BP (BP +3.2%) is preparing to defer payment of its next dividend to shareholders by placing the money in an escrow account until the full scale of its liabilities from the Gulf spill can be determined, Times of London says. Further quarterly payments also could be treated in the same way until the company is on a firmer footing.


  219. escohen5
     
    Thanks re FAS well we see what will happen I trust TOS will ajust the matter.


  220. Waiting for the last minute Friday sell of to sell my DIA puts (mattress)


  221. Peter D
    Olympia ? Great Sound front property, cheap !!


  222. Phil, JRW, Judah – reporting in from an oil free beach.  Looks like i missed a fun day.  I must say that the economy sure looks a little better after a few margaritas. 


  223. Data- next week – I am looking for the LEI on Thursday as the one to watch. IMO, it is the most important general measure of a recovery.


  224. Sounds like some productive time off Peter – Congrats!

    Simpsons/Humvee – That episode cracked me up.  I’m anti-drugging kids into submission and the social commentary was great.

    Tequilla!/Yodi – Actually I find that Wild Turkey 101 kills just about anything that’s trying to bother you…  Non-standard, I THINK, will just be converted based on the split but they will be more thinly traded and you should verify that with your broker.

    TRMA/Yodi – Ah the joy of Biotech.

    Long weekend/Yodi – Damn, how foreign can you be?  July 4th is next and we have the 2nd off.

    DIA/Shadow – Are you talking about selling them as part of the July/June spread from before or as mattress covers? 

    Belgium/RMM – Bruges is one of my favoirte places on the planet but it would never occur to me to order fries there.

    Oh dear, I wa not expecting a big finish…


  225. " The entire planet is being run like a southern plantation and if you are betting that’s going to last another generation – I think you will be sadly mistaken."
    This is why I’m a member!  I can make money, follow the market and not get a bunch of selfish, libertarian Ayn Rand stuff about how overtaxed we are.  Thanks Phil.  I run an emergency homeless shelter and a transitional housing program that is a clean and sober house for people who are homeless.  The only relationship they have with the stock market is that two of them used to be "financial planners" who did too much coke with their profits.  My typical client is a roofer, carpenter, mason or construction guy who has a serious injury and got addicted to Vicodin, or his drinking got out of control when he was laid off.  Some of them are lazy and piss me off on a regular basis, but most of them are broken men crushed under the avalanche of the housing crisis, who would work if there were jobs or if they could pick up a hammer without severe pain.  AIG execs and GS traders walk away with bonuses and these guys are left with back surgeries and AA meetings.  (AA is not the symbol for Alcoa either, in this case.)   Just adding my rant.  Thanks for the social commentary Phil.  Now help me make some money in case my funding gets cut!


  226. Got my 4% back!!! Finally caught a move!

    TNA
    SOLD @ $44.0401 

    03:41:34

    TNA
    BOUGHT @ $43.6199 


  227. On the day I mean…whoo hoo! 


  228. Clearly should have held on to my TNA, not chasing. May get a 10 min shot at TZA !!


  229. TRMA is actually oil services….


  230. Phil,  Wild Turkey, now you’re singing my tune; fondly referred to "the gobbler".  A friend gave me, knowing my affliction, a wooden mallet that was used at the factory to tamp in the corks filling the "bung holes", as well as a 1/2 gallon glass container that was heated to the melting point and compressed.  Very cool stuff that is currently adorning my pool room. 
    Forget the market go for the gobbler!


  231. Phil ,  I be dammed 4th July is still a way to go OK forgive me but besides the wild Turkey it looks like you found that good old stick as well. Not that I am complaining. Have a nice week end and take it easy with the TURKEYS!!


  232. Oh, and this pump on bad retail is great….so frickin’ rigged.  Another 200 point swing on a day.  that makes it 28 of 30 days.


  233. SS, Glad to hear about the beach.  I’ll shoot you an email over the weekend.  Wow. That’s a stick.  Trying for 10 minutes on TZA.


  234. In TZA at $6.99


  235.  Phil – no worries, I just wanted to know what browser you were looking at the charts on the other day so I can try to track down that problem you were seeing. (Or not seeing, literally.)


  236. Bruges:  Next time order mussels (a local favorite) it will come with a huge pile of fries; they eat the fries with MAYO.


  237. I was thinking the same thing JRW but held off!


  238. And out at $7.01, still a 6% day.


  239. JRW, Peter - if you guys ever want to have a cocktail hour for the Seattle chapter of PSW, let me know, that’s my domicile.


  240. Phil,
      Pre membership I took one of your freebie buy/write picks and bought  Arch Coal@23.35, sold $25 calls and $21 puts. Does rolling to Jan 2011 $22.50 calls/$21 puts or to Jan 2011 $22.50 puts/calls make sense to you, or would you recommend a different strategy? Since I didn’t know about scaling at the time, would you see Arch as a candidate for any further action at this time?


  241. Pretty apropos that Mr Stick shows up in force on the day that Phil headlines him!


  242. Phil fantastic call on the markets….i owe you BIG…thanks and have a great weekend! ;-)


  243. Where are you SS?

    LOL Rev – that’s the spirit!   I saw America’s Got Talent the other day and there was a group from New Directions that formed a choir and the stories they told were heartbreaking.  I hope they do well because people need to see what kind of people are really ending up in shelters and bless you for what you do…

    Go Yip! 

    Nice gap-filling day today. 

    TRMA/Pharm – Oh, I thought they were Bio!  28 of 30 – really, that many 200-point days?

    Gobbler/Humvee – I’m a wimp there, I mix it with coke.

    Browser/Kwan – IE 8.06

    Fries w/Mayo/RMM – No thank you!  That I’ve had before and I do not get it…  I only use salt anyway, not even ketchup. 

    ACI/Kevin – It doesn’t make sens if you have Jan $25 calls and $21 puts.  Your net must be under $20 so what do you gain by tightening up the range.  Give the stock room to run unless you feel they are going bad somehow (I don’t).

    Well that was a totally unnecessary stick at the end but still more or less flat for the day and we erased ALL of the damage since last friday – yet another Fugheddaboudit week!

    Have a great weekend everyone!

    - Phi


  244. Wow, so many peeps on here living in my great state! What I don’t get(and I think we may have discussed this 6 months ago or something with you mentioning the rain) is why you would want to move from Washington Peter D!? Ya’ll decide to have that cocktail hour meeting in the next couple weeks let me know- I’ll be out there on leave.


  245. Phil
    Plan was start short term spread counting on collecting premium, limited caller 104′s @ .45, can’t believe it didn’t fill. Maybe god is on my side and saving me from weelend bets on lower opening Mondays, if so I win anyway or not if I was right. I starting to hate being right!


  246. Any good ideas on a location for good or maybe great cervical help? I am ready to go anywhere that works?


  247. Sorry, I neglected to mention the ACI $21p/$25c I have expire in  July (bought in Mar)


  248. etrade exicutions suck the big one and I have not figured out etrade pro seems like there are issues with all on lines being unable to match the high priced brokers. No disagreeeing is the plus. Anyone how do you account for delays and down when you need them most?????????


  249. Phil: wrong on fries,
    fries with mayo is American,
    Belgium fries are very famous with MOULES (Mussels), usually you know things, not this one.
    Have a good weekend.


  250. FDA delays QCOR info b’c they need more time to review…..nice….


  251. From the New York Times:
    In 17 months in office, President Obama has already outdone every previous president in pursuing leak prosecutions. His administration has taken actions that might have provoked sharp political criticism for his predecessor, George W. Bush, who was often in public fights with the press.
     
    Transparency ??


  252. RMM a few years ago, we spent 4 days in Bruges, followed by a 10 days bike/barge trip through the Netherlands terminating in Amsterdam for another 4 days.  One of the best trips of my life; amazing biking territory; fantastic food aboard the barge, and eating lots of local food often with fries.  Catsup definitely plays second fiddle to mayo with the locals as a fry condiment.  If you’re into biking check out VBT, would definitely repeat the trip; considering a trip down the Mosel next year.


  253. shadowfax
    Does your etrade pro freeze up from time to time?


  254. Phil – I $h1t you not.  "daily swings of 200 points or more fully 80% of the time. The Dow has actually swung at least 100 points for 24 sessions in a row."  Make that 25…..


  255. Another thing to consider, if the oil spill costs jobs in tourism, etc., that could send the jobs report in the wrong direction….thus a ‘correction’ in the market again.  Just a thought.


  256. hia5
    Etrade pro has frozen lowered the bottom into the task bar and more. It seems like I will eventually like and use it but I am dealing with etrade now and it seem my problems are Windows 7 64 bit related. I complained about exicutions and I don’t expect pro to improve that but TOS is problemmatic and all others have isues. I was hoping to hear a, The XXX is almost perfect not doing this and that and they are really cheap trades. Problem is no answer, the answer is no! Thanks for responding.


  257. hia5
    Also I have been playing with them but haven’t even attemped a trade yet, it makes me feel stupid!


  258. Thanks, Phil.  We are now moved in, but still have many unopened boxes.  As long as my computers and internet are up, my portfolios are happy!
     
    JRW, yes, water front properties can be had for $700k or less!
     
    MrMocha & jromeha, sure, cocktail hour sounds good, but I haven’t taken the drive (and traffic) to Seattle for a while now.  I’m spoiled with only 2 miles away from work, kid’s school and everything else.   As for WA, we have 210+ cloudy day every year on average.  If that number is down to 100, I wouldn’t move to another state.  No state income tax is a good thing for growing the portfolios also.


  259. Peter, Chaps makes a great point about vega sesitivity. 925 SPX puts $12.50, vega .49 and Dec 925 SPX Puts $38.50, vega 2.27. An even roll would bec Dec 725 Puts $12.50, vega 1.04.  The theta of the options are -.27, -.20, -.12 respectively which are not that different.  Can we use that to our advantage during a crisis like the flash crash?  Maybe you do an inverse roll 2 to 1 to 840 SPX put at $24.80, vega 1.70, theta -0.17.  Then when vix goes down you can go back the other way.  What do you think Peter?  Which would be better?  Rolling 1 to 2 same month or rolling 2 to 1 six months out and really trying to work the vix.  When vix goes down you would roll back to the current month.  What does your experience tell you?


  260. Aaaaghhh, Phil, Wild Turkey & Coke??? At least go with soda, or branch. And for something with some flavor, trot down to Trader Joe’s (hope you have one there) & pick up a fifth of Finlagen – it’s an Islay single malt, I think it’s rebranded so you can’t tell for sure what it is, but, ahhh, the peat smoke and the sea salt……


  261. Robert & Chaps, totally agreed as I’ve been doing that when the margin got pinched.  Remember when we roll from March to May and June, it’s the same concept.  I have moved some to August and September in the drop 2-3 weeks ago.  I then moved the August back to June when VIX is lower.  Those shorts are now close to be expired worthless.  Today and early next week, I’d get out of June and into July as the rate of decay for 10% OTM is better with July now (June is still better At the money, but we don’t play them that close to the money).  I also sold additional SPY Dec’11 puts at strike 60 to 75 when VIX were higher and have closed most of them in the past 2 days.  The margin for SPY at those strikes are almost zero with PM, so it was just the calculated risk of losing on Delta.  Once again, we are in agreement with the Vega sensitivity, and holding shorts has its advantage of rolling further out without putting the money in.  Having sufficient margin and available cash is the key to the success.


  262. snow Filagan, What is the cost basis on that. I love single malts never even add an ice cube but din’t remember ever seeing that. My fav reasonably priced is Mccellan 12 year. What is the level of smokey, love trying new but will not buy overpriced as the difference is usually taste wise a penny. Anything with coke is a headache!


  263. Robert/strangles:
     
    As mentioned, the other advantage is the reduction in BP required if you have portfolio margin. If you have PM, look at the reduction in BP required to support an even roll when you roll out several months.
     
    However, that shouldn’t be a license to get yourself in trouble with BP. Even though you can roll out of your BP problem, time is money. So if you sell too much with a low VIX and high stock prices, you’ve potentially tied up your portfolio for a long time working off your low premium sales if the market doesn’t bounce back.
     
    Still, it’s good to know you can usually roll out of a crash if you have to, and not go under.


  264. Finlagen/Shadow – it’s from Trader Joe’s so if you don’t have one of those around you’re outta luck…price is somewhere around 20 bucks, IIRC


  265. Hi, Peter D, Chaps & robert,
    I have tons of SPX 875 & 850 August putters.  I was thinking along the same lines regarding rolling back to June/July.  But I got really busy and never got a chance to look into it.  Can you recommend some possible rolls to July?
    Another idea is that I have some June callers expiring next week.  If SPX does not go up too much and they expire worthless, I can do the following for my tons of Aug 875 and 850 putters: (a) roll some of them to July putters, and (b) flip a few to July CALLERs.
    What do you think?


  266. snow
    Don’t have Trader Joes around but $20 souds really good, does trader Joes have an online sales site? Love to try at that price.


  267. shadowfax/ Trader Joes’s Locations - http://www.traderjoes.com/stores/index.asp


  268. Peter, great comments.  On the drop last Friday with the Vix spike, i took advantage and rolled 2:3 from 955 to 915 in the same month.  From your comments, it appears that i should have rolled out in time to take advantage of vega also maybe to September.  Would you recommend keeping the strike the same (915) or would you roll it lower.  915 was still a good 12% out of the money.  Then when the Vix lowered again, my plan would be to move them back to the current month.  On the Spy play, would you verify you sold the Dec 60 or 70 strike puts, i am just trying to follow.  TIA.


  269. Cwan, Peter is the expert on these but if you need to de-leverage your portfolio when your Junes expire worthless if you flip some of the puts to calls it should have that effect.  You won’t get a 1:1 flip and it don’t be surprised if it is more like 1:5.  I am in the 915/1170 Julys ( i initiated the position when the SPX was at 1060).  To my knowledge Peter hasn’t suggested different parameters (-15%/10%) when it comes to choosing strikes and i try to stick to those pretty close.  I am typically looking to roll 1:2  about 6% away from the put side and 5% away from the call side.  It is also very important (in my limited experience) to take advantage of a Vix spike to roll your puts down even if your strikes aren’t very close.  I also buy the $1.50 put vertical to go along with my short strangles.  But as Phil would say, you need to have a plan on what you will do with the position when the market moves up or down.  That is one of the most important things i have learned from Phil - you must stay 3 steps ahead of your position.


  270. shadowfax--Not that you would be interested really, but just wanted to let you know about our part of the country.  we live in northwest Missouri, in a town of 10,000 with a university-that makes for good rental property, and two factories, that keep many people employed in the area.  (You would even have access to owning one of those farms, the guys were talking about--we have a small one.)  We have really pretty much been saved from the bad  effects of the economic downturn--temps layed off, but few full-timers.  We are smack in the middle (each are 2 hours away) of Omaha NE, and Kansas City, for health care--mostly interstate driving to get there.  We have the best of both worlds, live in a small town, but can easily access a big city.  One guy came to town, who had made money from the market (somehow or another-lots of stories), and owns (bought the best commercial lots, and had very nice buildings built to rent to goverment agencies, etc. to their specs) alot of the best commercial real estate.  Actually we are just getting ready to list a house for sale--3 bedroom, two bath,  ranch w/full basement,  & two car attached garage-even a "Mother-in-law’s quarters in one end of the baseement with a kitchen, living area, bed and bath, & its own door to the outside. (MIght rent to a college student since it is walking distance to the campus. )  It was my mother-in-law’s house and she is now with us due to poor health.  Probably will bring under $160,000.  Family houses like this rent for less than $1000 per month--we get better returns from the college rentals compared to the value of the houses--but this is zoned for a single family dwelling.  Hope this info helps if nothing else but just to compare, and also that you find a place you really like--wherever you decide to go.


  271. Roberthjrfl- strangles – curious about how you make adjustments to the put verticals as the market moves up or down?
    Some examples? I have been buying put verticles for each strangle – purchasing in the range of 1/2 way between the current index price and 15% down, or approx 8% down- $5 spread for the RUT and $3 for SPY. How about you?


  272. I have been away for most of the day, and did not have a chance to complete my thoughts regarding the Euro. My position as far as the Euro is concerned has been well stated, however there is one positive benefit to the weakening Euro, and it falls exclusively within the borders of Germany. The German economy is strengthening and their very strong export business has benefitted from the cheaper Euro. This will continue. I am playing this scenario by taking a large position in EWG ( Germany Index ). I sold the October 22 puts @3.50, which I believe is a very safe income play.


  273. What are the odds our Gov knew full well BP has been pumping 40k barrels of oil everyday since the spill began? Lots of investors money at stake and the risk of releasing this news would tank the stock too quickly to stomach and give those most important an exit. Sorry iPhone written


  274. robert: Thanks for your inputs.
    In fact, I did look a bit tonight.  With the markets closed, I can look with a cool mind!
    I’ve done 1:2 rolling, and 1:5 flipping in the last few months.  That’s partly why I now end up with tons of putters.
    To diversify my existing puts, I looked and found several possibilities.  One possibility, as you pointed out, is to flip putters 1:5 to July callers.  Another possibility I am looking at is: I can roll Aug putters 1:1 (or maybe 2:3) to July 875 or 900, and sell enough July 1175 or 1200 calls to make the transaction even.


  275. Chaps, we couldn’t agree more on NOT getting ourselves into trouble with too many positions with PM margin.
     
    Cwan, when moving August putters to July putters, it’s a good idea to flip some to callers.  As we can see, short calls are much safer than short puts when VIX does spike, and there are many opportunities for VIX to jump in the next few months.  A bad news from any country would send us down 5%, then another 5% the following day.  On the other hand, there are plenty of resistance to the upside for a while.  As we are trying to get an even or credit roll, you can move SPX Aug 850 putters to July 960 putters for even.  Of course, this would increase your margin requirement, so you may have to close out the June positions.  If you think 960 is too close and have the margin for it, you can roll 4 Aug 850 putters to 6 July 925 putters. 
     
    Robert, the rule of thumb is we roll to get out of trouble.  So if the June & July positions are not in trouble, we wouldn’t roll them to September.  Next, when VIX is higher, the further OTM options are more inflated, i.e. we’d get more when we roll 2X to a more OTM strike, or when we roll to further out months.  When I have to roll out a month or two, I would try to reduce the number of contracts to reduce my margin further.  Note that the flipping tactic has been working well in the past month.  When the margin is tight on one end (say the put end), there is usually lots of margin on the other end, and we can flip the shorts to the other end (the call side).  We should also close out the original callers, so that we effectively reducing the total shorts.  This works until roughly 2 weeks to expiration, when the options value is diminished, limiting our rolling and flipping scenarios.
     
    All, for the put verticals, don’t forget to cash them out when they get to $7-8, as at that point in time we are risking $7-8 to make $2-3.  In fact, I’ve been selling them off (1/5 of the positions at a time) when they reach $5.  When my June verticals got in the money, I waited too long to cash them out and a 2%-3% SPX jump in one day would bring them from $5 to $2.5.
     
    pstas, I don’t usually make adjustments to the put vertical.  I either cash them out, or selling the longs off if they are way OTM.  This is because time has usually run out by the time the vertical gets in the money.  I would then buy the vertical for the next month.


  276. Cwan, your post came in while I was writing mine.  With the VIX, we don’t usually have to roll 1:5.  I found that the ratio is 1:2 at most and I can usually get 1:1 rolls.
     
    My BP has jumped this week when I open additional July positions by rolling June to July with a 4:1 to 15:1 (4 June to 1 July contract at the same or more OTM strikes), especially when the June gets below $1.  The high VIX is great to allow these kind of rolls.