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Which Way Wednesday – Pattern Recognition Special

Head and shoulders, knees and toes.

Sorry, I can’t think head and shoulders without adding the second part thanks to the darned Wiggles, which my kids were raised on – better than Barney, at least…   The head and shoulders investors care about is the chart pattern (from the Chart Store) and, frankly, I could make a knees and toes case by extrapolating the left side of this disaster (which was actually a great bull run but would not be as much fun if we flip it). 

TA is all about symmetry and pattern recognition, two things that are hard-wired into the pleasure center of the animal brain to help us develop cognitive skills early in life.  Humans love finding patterns – it makes us happy.  In this particular case, the fact that stocks go up and down and then get overbought and then get oversold as they correct to the mean has been cleverly identified by one primate (and I hope he gets a copyright fee) as a "head and shoulders" pattern and all the other media primates gather around the great obelisk and they howl and shriek at you every day and they cast their bones and make proclamatiotion as to what it foretells

Unfortunately, Technical Analysis has so many devout followers that it often becomes a self-fulfilling prophesy.  Even worse (and certainly more significant) than the head and shoulders pattern is the coincident "death cross" or "dark cross" that is being formed on our indexes (see yesterday’s post) as the 50-day moving average falls below the 200-day moving average, as indicated on this chart from Barry Ritholtz:

Mary Ann Bartels, Chief Bone-Caster at BAC, made the follwing prediction about the pattern she was seeing:

June 23, 2010 marked the 1-year anniversary of last June’s bullish Golden Cross of the 50-day moving average above the 200-day moving average. This Golden Cross signal preceded a 12-month return of 22.4% on the S&P 500. The average 12-month return for the 42 Golden Crosses that have occurred since 1928 is 9.6%. More importantly, the June 23, 2009 signal occurred during the NBER recession that began in December 2007 and Golden Crosses associated with recessions show a much stronger average 12-month return of 19.5%. The average 12-month return for the S&P 500 over the same period is 7.2%…

The bearish counterpart of the Golden Cross is called a Dark Cross. This signal occurs when the 50-day moving average crosses below the 200-day moving average. For the S&P 500, Dark Crosses are not all that bearish. The 42 Dark Cross signals that have occurred since 1928 have generated an average 12-month return of 2.4% for the S&P 500 vs. the average S&P 12-month return of 7.2%….  The current trading range on the S&P 500, which began in 2000, has seen two of these more bearish signals – one in 2000 and the other in 2007.

So, not really that bad is it?  Yet you will hear the talking heads on the media tell you this is DOOMSDAY and all of the lower primates (yes, you Cramer!), who make their bananas by jumping up and down and acting like monkeys on television, are screeching to their followers that things are much worse than they seem.  Ignore that positive, scientific "data" that shows slow, steady improvement, they say, better we should follow the old ways and react out of frear and ignorance

In fact monkey-boy Cramer was so over the top with his doom and gloom yesterday that CNBC removed the clips of him saying (with the Dow Down 238 points already yesterday afternoon) that the market is "still overvalued" and "deserves to go down."  Cramer even went so far as to say (at 5:15 on this MSN video, which you can watch until it’s removed as well) at 2:50 yesterday that: "I don’t want to be there until 3:40, because we know the double X and triple X programs come in - they have to rebalance.  The SEC said they wouldn’t affect the market.  The SEC never saw a thin market like this.  All the research was done during the Bush years, when anything went.  So you know you have to keep your powder dry until 3:40, when they come in and jam the market down 200 to 300 points.  That’s what happens when we’re down 250 now, we’ll be down 500 at the end of the day.  I mean that’s the way these programs work… This market is too high."

That’s the message investors are getting on the #1 Financial Network.  Kind of hard for the market to get traction when the top monkey comes on TV an hour before the close and tells viewers that the day’s horrific drop will double up into the close because of forces only he (and not the blundering SEC) understands.  You can call it fear mongering, you can call it blatant market manipulation by a many who has said the market is heading lower for a month now and is anxious to make himself correct or you can just call it criminal but I call it just another day at CNBC, which has taken the art of market control to a high art form. 

The great manipulators know when to apply the pressure.  If you know there is about to be an earthquake or an eclipse, you can really impress the natives by banging your staff on the ground or making some gesture along with your prediction and, if it works out – you can then proclaim "behold my power" and the masses will worship you or, if your prediction doesn’t pan out, you can have GE/CNBC redact your statement from their web site and move on as if it never happened (and I challenge you to find this clip or mention of it anywhere on CNBC.com).  Better luck next time, I guess.  

You can get more on my own take on predictions here, from my 2007 outlook.  My 2010 outlook is still in play but, so far, so accurate as we close out the first half of the year with the rich getting richer and the poor still getting poorer. 

Today we got a very disappointing ADP report, the kind that should make Cramer seem like a genius but we’re already down at what I expect to be a firm bottom and this week’s weak data will surely test it.  We have Unemployment tomorrow with the usual 450,000 jobs lost and some terrible Construction Spending numbers (-1%) and a weak ISM Index (59) and awful Pending Home Sales (-12%) and probably weak Auto Sales too (barely 9M units) as gas prices shot up and trucks still outsell cars 5:4 in this insane country. 

Friday is the Big Kahuna – Non-Farm Payrolls and those are now whispered to be off by 145,000 at a 9.8% unemployment week with flat hourly earnings and a flat workweek - all rotten signs and then we get Factory Orders at 10am tomorrow and those are probably off a point!  So our goal for the week is to survive – if we can pull that off, then the tale will be told by earnings, right after the holdiday weekend but, meanwhile, we’re buying what the Cramerites are selling

 


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  1. Good Morning!


  2. Think this bounce will stick today?
    I do


  3. hope we get a quick dip at the open that gets bought


  4.  I think wait for Chicago pmi will be prudent, may get a capitulation sell off today, another break under 1040 and close over it will be bullish


  5.  Phil / MON : (ADP jobs number was not super good at 13k private sector growth.)
    MON earnings were 0.81, slightly above expectations for the quarter, but the year over year and quarter over quarter comps were terrible with the declining RoundUp business. Was down a little pre market, but seems to have recovered to down fractionally. What do you think at this point Phil?


  6. somebody’s getting a little sugar this morning – CZZ


  7. Be careful today.
    Normally we would be looking for End of Qtr markup.
    Today we have bad ADP.
    Also, a good source is reporting a rumor of a large fund in liquidation that must be completed today.  Rumors are rumors, so don’t shoot the messenger, but its worth mentioning.
    Expect continued selling pressure today is the message.
    But trade what you see.


  8. Good Morning, 
    Phil, yesterday you mentioned that if we failed the levels I should put in additional protection, but I wasn;t able to get to my computer and put in place the protection. But before this I did sell several of the puts you recommended and DD on the DIA 105′s and RIMM puts (ouch!) however and did a couple synthetic buy writes.  What would you recommend using now to protect for further dip or you think we’ll have a strong bounce and I should leave it alone?
    Thank you,


  9. Phil -
    You were correctly bearish at the recent top – and I think calling the top of the rally fake.
    However – things seem pretty damn bad -
    I am wondering if your contrarian nature is pushing you to get off the bear bandwagon – I know mine is – but I have to keep reminding myself that I thought things sucked at 1200 on the S&P and I don’t really think they are any better – it just seems to be that people finally noticed.
    Shouldn’t we see this as fulfilling our predictions – so what if the MSM is late to the game – it does not mean the bears have it wrong.
     
    Did we like the S&P at 1050 on the way up – I don’t think so – I  seem to remember thinking it was overextended B.S.
    I don’t think things are any better – you don’t seem to think things are any better – if we look at the economic indicators you mention -
    We should not let our contrarian natures turn more bullish because of our dislike for the MSM -
    You  were right – congrats on that –  but things don’t seem better – please correct me if I am wrong and tell us how things have improved.


  10. How bout that story on Dell?  And I thought TM had problems.. I think Dell could be done fer if they don’t come out really strong and handle that thing..


  11. Samz, well said. I have felt the same way, unfortunately I am not so contrarian by nature so I have been a little too complacent when things are going the right way… but I have felt very bearish since that flash crash and felt I should have taken a bearish stance (which I didn’t and now I am down significantly). 
    Now it seems things are not getting any better (Europe instability, faltering recovery at home, China, and even other emerging markets woes) so I really dont see what will drive the market higher? Earnings will keep surprising? but how long can they keep squeezing out employees for productivity?
    Thanks for your comments


  12. I am not answering for Phil just me.  Things are not better economically.  The reason to be bullish now is because the more negativity that is popularly reported in the media, the more the masses sell their holdings, temporarly depressing prices, or keeping prices stagnant.  Then when everyone has sold, stocks move up because  there are fewer sellers and more buyers, despite the poor economic outlook.  I think that this is a partial definition of scaling the "wall of worry’.   However, here the masses have not participated in the rally that started a year ago and it has been ‘machines’ doing the buying and selling.  So I’m not sure that we can say that "the masses have sold".  We know that there has been no volume out there.  Does this make it different?  I don’t know.
    Did we like the S&P at 1050 on the way up – I don’t think so – I  seem to remember thinking it was overextended B.S.
    I don’t think things are any better – you don’t seem to think things are any better – if we look at the economic indicators you mention -
    We should not let our contrarian natures turn more bullish because of our dislike for the MSM -
    You  were right – congrats on that –  but things don’t seem better – please correct me if I am wrong and tell us how things have improved.


  13. Good morning,
     
    IWM 60.85, 61.90, 62.28, 62.52, 62.90, 63.32, 64.31


  14. Look at a 1 minute chart of FAZ since yesterday at 3:47pm.  It’s a thing of beauty.  Those tradebots run a tight ship!


  15.  TSLA is flying


  16. Good morning!

    Great call RWV!

    I think the lack of collapse off ADP says it all.  No jobs, so what?  We’ve gone up on no jobs all year.  Clearly from the debates we have on this site, the top 10%, who run this economy and the markets, don’t give a crap how many people in the bottom 80% are unemployed and, as I said in the 2010 Outlook, they are right (from an investing standpoint).  The bottom 80% don’t have enough money to affect most of the stocks we buy and their loss of jobs is more than made up for by the BRICs, who are still doing pretty good.  If this country goes to hell in a handbasket then GE will move to a better one – don’t forget that.  It’s the threat of corporate relocation that keeps global corporate taxes so low – companies are so rich and powerful that they have effectively told our governments to look to the people, not to them, to shoulder the vast majority of the tax burden but – don’t get me started!

    Same levels and same shopping list as yesterday for as long as this charade lasts but I firmly believe we are heading back up so I’m sticking my neck out and calling it.  I’m not even going to bother printing our low watches – we pretty much held up yesterday, keeping my buy premise in place so today we’ll be looking at how close we can get to the upside goal:  Dow 10,250, S&P 1,100, Nas 2,260, NYSE 7,000 and Russell 666Oil below $76.50 is bad (now $76.35 and our "sweet spot" is $77.50) and copper below $3 is bad (now $2.91) so we’ll be watching copper and looking for the Dow to get back over 10,000 and hold it today.  As I said last week, commodities going down is only a short-term rotation issue, not really a long-term problem for the market. 


  17. samz:  As long as the govt is backstopping the market, you can’t be too bearish.


  18.  XOM AAPL CSCO going in the wrong direction


  19. Taxes/Phil (very short politics post) Phil said " It’s the threat of corporate relocation that keeps global corporate taxes so low"
    We hear the same threat constantly here in California (that businesses will move to another state), and often capitulate,  but when we don’t give in, most often it seems the companies stay around anyway. Don’t know if that would happen on a national level.


  20. Sony is recalling over half a million laptops because the temp sensor isn’t working, resulting in hot laps.


  21. XOM/chyer:  XOM and BP might be moving in an M&A arbitrage pattern based on rumors.


  22. bought some more rut calls on little dip
    all in on a tradeable bounce for today
    although I think you got to take your profits when you have them
    bears still in control


  23. snow
    The real game isn’t corps moving, but where the new shops are setting up.


  24. In TNA at $38.00


  25. Hi, gel1,
    TSLA is now available to trade on TOS.  But it says "HTB" Hard to Borrow.  No options yet.
    So, you gotta be patient if you want to short it.


  26. Buying FAS for the day at 19.91 with a stop at 19.29.  I don”t want to baby sit this thing all day and after yesterday, I can afford a little more breathing room on my stop.  But I think, worst case, they’ll thread the needle between yesterday’s low and the one on June 8th.  But if we bust that, take down the model airplanes and rent the room.  But seriously, after the Democrats GIVEAWAY to the banks yesterday, BECAUSE OF ONE BAUGHT AND PAID FOR REPUBLICAN SENATOR IN MA,  of remaining TARP funds what the hell could they be upset at today?


  27. Snow/Phil/Corp Taxes:  My company (which shall remain nameless) is planning on moving our headquarters from San Francisco  to the Netherlands.  I guess the Dutch let you negotiate your taxes based on how many people you employ, where your office is, etc.


  28.  NDX rejected off of 1772 three times so far. 


  29. Out of TNA at $38.44


  30.  One is the loneliest number, especially when it’s a one hour morning candle on a wished for bullish reversal that doesn’t arrive.  


  31. TESLA MOTORS – TSLA
     
    I thinking I’m going to buy here!


  32. Chicago PMI came out at 9:45 it looks like.  Was 59.1 vs. 58.5 officially expected but down from 59.7 prior so nothing to get excited about:

    Chicago PMI: 59.1 vs. 58.5 expected, 59.7 prior. Employment 54.2 vs. 49.2 prior. New orders 59.1 vs. 62.7 prior. Prices paid 61.9 vs. 64 prior.

    MON/Hanna – I like them long-term.  They are just in a bad cycle but a good, solid company overall.  If you are REALLY long-term, it’s a great buy and hold. 

    Liquidation/Cap – I continue to feel that they hyenas are pulling out all the stops to get the S&P under 1,040 and the more negative news I hear without the S&P failing, the more bullish I am getting. 

    Protection/Amatta – At this point, I wouldn’t add protection (assuming you have some) unless we do break below 1,040 on S&P and 9,800 on the Dow or at least 9,850.  620 on the RUT is a good line to watch as well and 6,500 on NYSE.  For quck protection, meanwhile, the TZA July $7 calls at $1.15 are very fast movers and you can use them as a momentum play with the Russell under 620.

    Contrarian/Samz – I am trying to stay as objective as I can.  Generally, what you call contrarian is that I think that if the market was weak and the sentiment was this negative and the media is this dire – then why aren’t we lower?  That’s the question you need to ask.  Have you heard a positive word on the markets in the past two weeks?  It’s amazing we’re not at 8,000 on the Dow.  Since all this is coming into the EOQ and timed with FinReg, I have to suspect that GS et al are doing their best to wreck the performance of smaller hedge funds so that when they spin off mega funds out of their operations in response to FinReg – they can wave their 100 days of perfect performance in investors faces and pull a mass exodus of capital into their funds.  As to being over-extended, I think the economy is a trauma pateint that has been stablized.  It may be in a coma for a while but prospects for recovery are good and, right now, the doctors are debating what medicine to administer next but it’s still a bit early to hold a wake.

    Flash crash/Amatta – The thing I took away from the flash crash was that there were A LOT of buyers at 9,800 and, the next day, there was a lot of buying at 10,200 as well.  We had a spike down on May 25th as well and that found many buyers at about 9,800 and on June 7th and 8th we found a lot of buyers at 9,800.  Now perhaps we’re bouncing along a bottom that will break like 10,500 broke to the upside in 2009 (but it took a month of trying very hard) or maybe we’re at a bottom that will hold and reject, like the top at 11,200 did just 2 months ago.  Much the same way I was not impressed by many failed attempts to break over the top of the range at 11,200 although most people wanted to get more bullish for the breakout that never came, I am now not impressed by attempts to break the bottom of the range at 9,800 althogh I’ll be happy to flip beaish if we ACTUALLY do for the ride down.


  33.  EURO 4 hour chart looks ok, might have a bit of a rally if can boost it after Europe closes and bots lose input from humans and just push things higher.  11:30 or 12.


  34. JRW/
    In your latest trade, I understand your decision to enter off the 61.90 line. But could you explain why you sold at $38.44.
    I did a similar trade and sold at the top just because I was in for a quick gain :)


  35. any trade on TBT today Phil?  what do you think? i gotta own this somehow and it’s very low, how low will the 10 year yield go?  2.75 ?


  36. lionel,
    It should have gone at least to 62.28, it was failing that so I bailed.


  37. XOM is now just .50 above its ’08 crash low. I keep being tempted but then it goes lower; it’s just in an incredible downtrend.
     
    The Aug 40 calls have almost no extrinsic while the July 57.5s have a lot, so I’m selling them against the 40s for  diagonals. That gives decent cover in case XOM is stuck at these levels or lower. The upside is limited, but the 40s will go to 100 delta pretty quickly an a price rise.


  38. The thing about MON (in case everyone doesn’t already know) is that the Roundup issue also impacts their GM crops, so the total loss if Roundup stops working would be huge. But, they are nearly 1/2 off their highs, so maybe it’s priced in?


  39. Pardon me kind Sir, would you mind holding this bag


  40. AUD/USD,
    Trying to sell 82 puts vs buying 85/86 calls for a no cost entry


  41. Phil / Fed, Treasury mkt impact. Can you help me understand two issues which skew the fundamentals of S&P pricing. To what extent are share prices being supported by Fed and Treasury lending to the big banks, who buy shares and bonds and lend to hedge funds which mainly buy shares (and gold)? And, is intervention on a scale which can prevent any serious mkt collapse at this time, regardless of what the retail investor does?
    We read that the Fed and FannyFred has bought huge quantity of ‘toxic’ assets from the big banks. Have they in fact bought all of the toxic RE loans, leaving the banks fundamentally profitable on their remaining loan book given current spreads. How do we drill down to understand the extent to which the Fed has truly bailed out the banks from the subprime lending. Or, do the Fed Fany deals have recourse terms such that much of this toxic stuff can be put back to the banks in a collapse? I still own C, BAC, JPM.


  42. Phil,
    I’m starting to think dman is a mole who is here to get your take TBT on a regular basis so some other players can keep playing us for the suckers a la the SRS dwindle.  :-)


  43. And what FJD said! 

    JRW;s 62.52 line is going to be make or break today on IWM and that’s right about 624 on the RUT.  Once we get though that, we’ll be in better shape.

    Oil inventories are a 2Mb draw in oil, gasoline up 500Kb and distillates are up 2.5Mb so a net build of 1Mb is about in-line and should keep us in our range around $75-$77.50.

    Taxes/Snow – Hey, I said don’t get me started!  8-)

    SNE/Kwan – What no one is talking about is that quality is going to hell because even the Japanese are now outsourcing to China and not to put down the Chinese but there is a concept of "skilled labor" and not everyone is cut out to work all day in a quality control environment, especially when you only pay them $2 per day and after 12 hour shifts you send them to a room with a cot and a bowl of rice with no TV until it’s time for the morning wake up song.   Nobody gives a crap about quality anymore if there’s a dollar to be saved.  WMT and BBY squeeze every manufacturer to make things cheaper and cheaper and cheaper and no one even bothers to try to convince you to buy quality anymore, as if it’s not a feature people should care about.   That’s what makes it possible to ship all these jobs overseas in the first place – you can make crap anywhere – making good stuff is hard but we (US consumers) are being trained not to care about it. 

    XOM/Kinki – Very doubtful until there’s something like a settlement from the spill.  Merging with BP just gives the government a deeper pocket to chase unless it’s XOM that’s doing the arb and is thinking they can lawyer up and not pay more than $20Bn, which makes buying BP at this price a great deal.  They beat the Valdez thing and their legal team has all the precidents ready and who these days can afford to prosecute a $1Bn lawsuit in the first place?  Hmmm, I’m warming up to it!

    Shops/Shadow – That’s the thing.  Since coporations outsource everything anyway, they no longer care where they HQ.  If you find a friendly country that will give passports to all your people, most companies could pull up stakes and be back in business in another country over a long weekend. 

    Moving/Daveo – Yep, my point exactly.

    VZ rumor seems to have epired.

    BA got a good ruling.  $65 puts can be sold for $2.50 and I like the $60/62.50 bull call spread for $1.90 paired with the sale of the $60 puts at .75 as well for net $1.15 on the $2.50 spread that’s 100% in the money and you own BA at net $61.15 worst case.


  44. JRW/
    Is that an entry signal :)
    Thanks for your previous explanation


  45. Phil, when you have time, where is the mattress?  Thanks


  46. JRW - LOL…"Pardon Me Kind Sir, Do You Have Any Grey Poupon?"


  47. XOM – Phil, how low can it get? Would you consider Aug or Sep calls?


  48. aclend, no mole here, just trying to get my head around the bond movement,
    and phil has such a great feel of how to trade these moves, TBT is now at extreme low of this move, and I think there can be great opportunities to own it smartly with options.   Phil? kindly sir?


  49. dman, 
    Think how happy you will be when TBT is at 60 a year from now and you bought below 40… just f—ing buy it, man!  haha. Seriously though, have you considered what Phil said regarding your obsession with this thing? You have a serious approach-avoidance conflict going on and we can all sense the internal conflict that you are under regarding this trade. That is not psycho-babble, even though I am a counselor. You might want to reflect on your motivations and hesitations if, after all this time and good entry opportunities, you still have not pulled the trigger!!!
     
    GO READ: The Disciplined Trader by Mark Douglas. Amazing book. Underline helpful bits, apply it, then re-read it.


  50. Phil should I just buy some 100 TBT here for a longer term play?


  51. Phil,  Looking for a good bull cal spread on FCX.  Thanks


  52. lionel
     
    To your question why JRW bailed out at 38.44  if you have TOS trading platform I have set it up on active trader and I could show you how to set it up to see why


  53. Phil, what is your opinion of CAT right now? At this moment, you can sell a Jan 50 P for $3.90 and buy a Jan 50/55 C vertical for $3.38. You get a $5.00 vertical for free (on $500 of margin) and worst case you own CAT at around $49.50.


  54.  Apple antenna saga continues.  It is now furiously recruiting antenna engineers.  Coincidence perhaps, but if there is an Iphone 4 recall, there will be rending of garments, wailing, and gnashing of teeth by investors.  Would be a nice time to buy.


  55.  VZ/T/AAPL Phil, IF the VZ rumor turns out to be fact, what is a good play on that ? I think that T and AAPL would be affected the most since buyers will choose VZ over T (assuming cost etc the same). AAPL will benefit from greater rev’s and earnings. Could you advise on a good play on this rumor?


  56. In the won’t let the TBT go camp. 
    Rolled some July 40 puts to Jan 37 puts. Pick up theta, lose delta.
    I’m wavering but…


  57.  Bots have begun EURO pump!  All systems go!


  58. "rending of garments, wailing, and gnashing of teeth by investors."
    Glorious use of the language, Bravo
    Gordo


  59. We want to see the DAX punch back to 6,000 at the close, now 5,979.  FTSE at 4,917 is way below that 5,000 line and even that is below their 2.5% mark at 5,118.  4,987 is the 5% rule for the FTSE so let’s shoot for that on a nice run.   CAC’s 2.5% line is 3,412 and they are over at 3,436 already and that’s impressive because France is the current scary story the bears are trying to sell.  

    MON testing $45!

    TBT/Dman – Same as yesterday.  Unless you are prepared to roll this trade through 2015, you should walk away!

    XOM/Eric – I wonder if part of what’s keeping XOM down (aside from just swallowing XTO right when nat gas drops 10%) is this rumor that they will take on BP’s debt?   On MON, I think they are pricing in that Roundup cannot be replaced, which I find hard to believe. 

    GOOG $450!  AAPL red.  AMZN bouncing 2.5% though and RIMM is green (barely).   BIDU held $67.50 and bounced.

    Intervention/Tusca – Look at it this way.  On any given trading day, perhaps 1Bn shares are traded on the S&P at an average of $50Bn.  That seems like a lot but 75% of it is HFT trading, where the computers are in and out of the trade in a millisecond.  Either way, obviously, the majority of the trading is fairly balanced and it’s the IMbalance that causes the stocks to move one way or the other.  So it doesn’t take $50Bn to move the S&P.  If we throw out just 1/2 of the trades as HFT and call it $25Bn of real trading, then $2.5Bn applied to one side or the other can drastically affect the market.  The Fed controls TRILLIONS of dollars and just GS has $219Bn in cash plus the ability to borrow $50Bn any time they want from the Fed for a week at an annualized 0.25% interest and no fees.  Since it’s legal for them to use that money to feed into computers that front-run trades, it would be irresponsible of them not to do it, wouldn’t it. 

    So the wildcard is not to figure out IF the markets can be moved around but to figure out who has control of the switches (I believe Gang of 12) and, more importantly, who can tell them what to do (sometimes the Fed or Administration can, sometimes they can’t).  Figuring out that game is a lot more valuable for short-term trends than whether or not some country is defaulting or whether or not our economy will recover.   All rallies are relative to where you start and, even in a depression, you can get a big move up.  It’s all about the timing. 

    No, the Fed hasn’t bought all of the toxic loans and barely enough to be called "some" at just $2.5Bn but they did buy the WORST toxic loans and the rest is stuff like your home, which lost 30% of it’s value but as long as you keep paying and as long as the bank doesn’t have to mark it to market – what’s the difference?  That’s the key though, in strict accounting terms, all banks are insolvent and should be shut down immediately but we can’t do that so we play the farce and we’ll keep playing it until the day before all the lights go out in this country and cities are burning to the ground and we all head over to Gel’s house to get some of his gold…

    TBT/Ac – That works short-term but long-term they always break.  That’s why scaling in is the most important thing you can do with trades.  If you can’t follow a strategy to lower your basis and buy more time then you are just a day trader anyway. 

    Mattress/Robert – I think you can Google "Stock Market Parachute" for the main article.

    XOM/Fab – If they buy BP they can go to $40 but I’m happy to own them for $57 or even $60, even if they do buy BP.  With XOM, if you sell the 2012 $57.50 puts for $9.20, you have a 1x net $48.30 entry.  If they head lower, you can buy stock at $45 and sell 2012 $45 calls for $7.50 (guessing) and that would put you in at net $28.30/42.90 with the stock at $45.  So, if you plan your moves in advance, it’s much easier to decide if you have a good entry, right? 


  60. Yodi/
    Thanks for the offer Yodi, but unfortunately I use IB.
    I have been following JRW’s trades lately and most of the time (all the time?) he uses very well defined entry/exit levels.
    This time I was just surprised that we both exited at about the same level. Just that my motivation was to protect a quick gain. And I just wanted to know his.


  61. lionel
    Just wanted to mention it shows up very well on TOS


  62. XOM/Phil/Kinki – " XOM that’s doing the arb and is thinking they can lawyer up"
    I know the lawyer who wrote the briefs for the Exxon Valdez (on the side of Exxon). She was asked to come help BP as well, but about 6 months ago she joined my Quaker Meeting, has recently finished training as a nurse, and about a month ago took off to, I think Mynnmar (scary!) or some such with Project Hope.


  63. JRW,  I’m sure you’ve got it, but the upper trendline from the highs of 6/18, 6/23, 6/24 has been solid resistance both yesterday and today so far.


  64. VZ / Phil – VZ and AAPL are back where they were before the "rumor" (is it a rumor or a reaction to a news release?) but poor RIMM has been abandoned and shows no confirmation. Just goes to show the fickleness (aka ignorance) of investors in the tech sector (IMHO), but I’m not saying I follow either of them. It does strike me that the RIMM investors are just throwing a hissy fit. It’s not like this should be such an unanticpated development. I’m bullish on RIMM for the short term.


  65. Phil
    got news, you can buy now Greek Island just for 1.5 mln euro (probably small one)


  66. Phil/ toxic loans    Thanks, one last thought, I understood that JPM got a Treasury guarantee for the huge mortgage loan book of Wamu during the Treasury arranged acquisition?  So, isn’t JPM relatively clean and therefore maybe the best buy?


  67. Yodi, what settings are you using on TOS Active Trader?


  68. judah / trend line
    Thanks, I think it’s about to break though !!
     
    In TNA at $38.55


  69. "Breaking up is hard to do"…. I just closed out my large cache of long AAPL positions for fantastic profits. With the S&P flirting with 1040, and a shaky economic environment, I believe we could see a correction in AAPL over the next few months, notwithstanding the ultra strong fundamental strength in this company.  AAPL is not immune to overall market weakness. After the anticipated correction, I’ll be back in for next ride up.


  70.  BP, Phil I read this morning where the Govt images of the inside of the blowout preventer shows two pipes which BP says was impossible but which means that the pipes from the well were blown out of the bore with the explosion. I believe this has implications for the relief well since mud pumped into the well will leak into the formation if there is no pipe.


  71.  Phil—I’m in a MON OCT 50/55 call spread with an overall net of 2.33 after twice DD. Position is still down about 40%. Do you think those strikes within that timeframe are still reasonable or should I be thinking of rolling further out and maybe down a bit? Thnaks


  72. Europe looks like the DAX lost ground into the close, I see 5,958 near the close.  FTSE 4,914 and CAC 3,438.  Overall, it’s a flat day for them into the close after being up and down half a point during the day.  We have to assume that they have the same funds and the same Gang of 12 running the game over there so, for whatever reason – it seems like this is the goal for the end of Q2.  Of course, if we were looking to sucker them, then we let then flatline, rally our asses off into the close and by the time they wake up on Monday, Asia is popping and we’re not even open so they BUYBUYBUY in thin trading and we are gapped way up by the time we get back on Tuesday and, once again, retail investors miss the bus.  Yep, that sounds about right.

    TBT/DMan – I laid out a fantastic way to play TBT with low risk, building a long-term bullish position funded with front-month put selling, in yesterday’s post.  I don’t have a better one, that one is BRILLIANT!

    Trade Phsychology/AC – Good point and, as I often forget to say, all new members should take some time to check out our friend, Dr. Brett’s fantastic articles on trading psychology

    TBT/Lori – Yes, I like it down here, even as a straight ETF play.

    FCX/Hai – Jan $60/65 bull call is $2.20 for a $5 payout.  If you are willing to own them, you can sell a Jan $55 put for $6.60 and buy 3 of the calls with the money and you clear $15 per sold contract at $65 and your worst case is you own FCX at $55.

    CAT/Stjean – Great company, bad envorionment.  I wouldn’t count on them coming back that fast as they are very dependent on commodity demand and BRIC expansion.  I’d just sell the 2012 $60 puts for $12.30 and be happy or you can also use $3 of it to buy the $62.50/70 bull call spread so you don’t feel like you’re missing out on the upside as that still puts you in for about $51, worst case

    AAPL/Occam – That would be a great opportunity, especially with all those units out the door already. 


  73. Out at $38.97; now we pull back for the run through 66.52


  74.  crap.
     
    92k!
     
    Off my high of 105k in the end of May. Off 13k or 12.4%.


  75.  JOE having a massive move up.  Resistance has been at 20 dma; but looks crazy enough to break that and fail at 25 or so, or at the upper Bollinger Band on the daily chart.   The oil slick should hit Joe’s shores within 2 weeks (forecasts are posted almost every day here.), unless something unusual happens, such as the slick starts contracting instead of expanding.  Very thinly traded options, so dangerous.  


  76. JRW – 62.52…your subconscious is thinking 66.52! =D


  77. JRW, Right you were. Broke that trendline finally and ran. 


  78. Back in TNA at $38.85; next stop 62.88


  79. JRW – Your 62.62 line from Tues is holding…


  80. JRW – everything on my screen says 62.29 next….I’m lost at this moment…


  81. thanks, aclend, i did read it actuallyh, great book
    ok, i’ll buy that TBT right now.  or at least sell some puts on it.


  82. bidding on HOV calls. This is called chasing. 


  83. Phil eric
    MON is opening a new dig near Blackfoot Idaho to get the roundup stuff cheap. Their are better products but one way or another to kill everything you need 2 better products, 2 applications of roundup, or a not so leagal way. This latest scare is to avoid research and get a return on their new mine fially approved last year.


  84.  1051-1054 max before we sell off again. Fri is the day to buy IMO. Sell the rumor buy the news. market working off oversold conditions, overbought in 2 hrs


  85.  Jesus H. …. I just realized I have 90 calls on TBT


  86. doro165
     
    I work on two screens one I have set up on paper trade the other on real depending you play with real $ or paper say you work on paper to start set to active trader use one large screen set to 3m intraday with candles add studies stoch fast 80 20 10 3 k and D are you time periods when the fast crosses the slow you compare this with your second screen set up with IWM and JRW mornings guidelines. I here have a 2 minute intraday with stoch fast RSI EMA 8 70 30 close and Momentum. In the upper studies I have PP RSI wilder crossover and momentum cross over.
    Here you can compare with your TNA chart at active trader to see when to buy or sell
     
    Good luck paper trade first !!!!!


  87. goldman / 62.52
    You are right of course,and we are not going to 62.88 just yet.
    Out of TNA at $38.92


  88. TASR up over 8%


  89. Hi FX traders.
    Looking for a good platform to trade forex and have been using TOS demo account. GFT seems to have good charting. Any views or negative comments would be appreciated or recommendation of a good flatform. Thanks


  90.  Hi Phil,
     
    Trying to understand your EU statement in last post.  "By the time they wake up on Monday…" It’s only Wed. today.  Did you mean when they wake up on Thurs? Or did you mean we flatline until late Friday then a great stick into the close?
    Thanks!


  91. JRW – I’m really starting to understand your method…it is so much more powerful than my old methods.  I’m getting extremely comfortable with it now…ramping up my order sizes every day.  I’m still curious what you think about ETPro vs SSPro.


  92.  Quaker/Snow – Great story!  I went to Quaker meeting for a year when I wasn’t preaching.  Great folks, if they would only sing more.  They also do a lot of socially responsible investing work I think.


  93.  BUCY rocketing today!


  94.  Phil,
    With HOV at $3.80 do you still see this as a survivor when Jan 2012 comes around?  What do you think of writing the 2012 $2.50 strike Calls & Puts for $2.70 leaving a net of $1.10/$1.80?  Called out at $2.50 gives a 127% upside and risk is mostly BK
    Thanks


  95.  JRW, Do you have two screens running with IWM and TNA simultaneously or is there a way to condense the two so you can act when a pattern is detected? I use Schwab streetsmart.com
    thanks much


  96. where is asia popping?  what am i missing? the dow is up 29 points? what are we getting excited about here?


  97. RIMM / anyone who cares – I spy with my little eye: RIMM ascending to where it dropped off yesterday, in a lagging confirmation of the dissipation of yesterday’s news/rumor of Verizon Wireless’s impending contract with AAPL to offer its customers the iPhone. Unfortunately, RIMM’s ascending volume is anemic compared to yesterdays 5% drop, so it probably won’t fully regain yesterday’s level. Leaving me with the question: If a stock rises and nobody cares, does it make a difference?


  98. G’day all, and have a happy 4th.  I will be spotty the rest of the week and early next!  Pharma is buying on the cheap (SNY bought a crappy little SD biotech, CELG bought Ambrix (interesting buy FWIW), GILD buys a suspect biotech in Boston, etc etc etc)….and I hope we are on the list with ARNA!!!


  99. Damn, hitting a wall at the RUT 624/IWM $62.52 mark..

    VZ/Options – I sure wouldn’t bet against T and, of course, it would be good for AAPL but they are too high so the only way to play is to be bullish on VZ, which is easy because they are a good company anyway.  I said yesterday it was probably just a rumor and I’ve laid out in the past why I think AAPL sticks with T exclusivity (makes sense for both of them) but that doesn’t mean I don’t like buying VZ with their lovely 6.6% dividend for $28.31 and selling the 2012 $25 calls for $4.30 and the 2012 $22.50 puts for $2.35 for a net $21.66/22.08 entry with a 15% profit if called away plus the dividend and a 20% discount if put to you at $22.08 so a nice IRA-type "safe" play

    Lawyer/Snow – Sounds like she’s trying to do her pennance.  Did she say anything like "Out damned spot"?

    RIMM/Tenger – I like them down here at $50 for sure.

    Island/Tchay – I’m actually seriously considering Jersey, which is a very good location and a per captia GDP of $60,000, as well as the Isle of Wight as both are good for raising kids and have nice travel availability (better with a private plane to get to major airports).  If I trade on UK time, I can get up at 10 am and still have hours before the market opens and we’re still done at 9pm so time to go to the pub after work - not bad…

    JPM/Tusca – I like them but they do still have whatever mess Chase made for themselves and who says the government has the money to back up that promise?  

    BP/Options – I don’t know enough about the physics of it but it’s a freakin’ hole in a rock, surely we have the technology in the 21st centrury to plug a hole?   I think 90% of the delay is that they are trying to preserve the well, not destroy it and that’s simply a math problem for BP if they believe they can make more money from the well than they’ll have to pay in damages.  Unfortunately, once they make that decision, they become trapped by it.  So, if they thought damages would be $20Bn but they would make $50Bn from the well, then that’s a no brainer but as damages creep up, the value of the oil doesn’t but it then becomes more and more important for them to preserve the well because they can’t end up with $40Bn in damage AND no well!  So they will lie and cheat and fake reports and do whatever it takes to recover from what may have been a severe miscalculation at the outset, when they could have quickly sealed the well and been done with it. 

    MON/Fortep – You shouldn’t really DD twice, once you DD and something doesn’t work, your next move should be to roll to a better position and THEN DD if you are forced to.  Oct is going to be tough to get MON back to $52.33 but you can take out the $55 caller for $1.03 and sell the Jan $47.50 calls for $4.75 and roll to the Jan $45s for $3.70 and that puts you in the $2.50 spread at about the same $2.33 with a much better chance of getting your money back (and you can sell some $37.50 puts for $2 if you want more upside but getting 40% back should be upside enough for you). 

    Third time better be a charm on the RUT run or we probably are flatlining for the day (or at least until stick). 

    JOY/Occam – I thought that was strange yesterday.  They were moving up with BP so I thought maybe some good news was comming about the spill but nothing I’ve heard yet. 

    HOV/BDC – A real patience play judging by Case-Shiller report.

    MON/Shadow – Thanks!

    Go TASR!   Now if only YRCW would wake up.

    EU/Jdub – Damn, you are right.  I was confusing EOQ with the weekend.  Well, so much for that premise.  I guess that means they need to stick save us to get the same effect so they have bears covering and retail investors chasing tomorrow or, we may actually have to wait for the weekend for this to play out.

    HOV/CSlan – Yes, I like them best of all builders because they are very Northeast and sitting on land that actually has value (we have no land).  So, yes to that play.


  100.  C-up big vs. other financials…Timmy and Benny making sure gov’t don’t lose as much?


  101. Oh, one other note to be on top of with respect to GSK….I am buying a few Ps in August to protect our position, cause if they are forced to W/D the drug, they will fall hard (remember MRK).  Also, might want to cover out to August giving us the ability to roll forward if everything is OK.  Buying a 1/4 cover of my # shares here of 32.5 Aug P for 85c, and if GSK goes up, then we can make it a bit more.  If not, it is money well spent for insurance JIC.
     
    Obviously, the fate of GlaxoSmithKline’s (NYSE: GSK) diabetes drug Avandia is vital to the company. But it also will mark a defining moment for the Obama administration’s FDA, as well as the entire pharma industry.

    Avandia has been under scrutiny since 2007, when a study linked the drug to increased cardiovascular risks. Since then, research has been piling up, but it’s not only contradictory, it’s not all top-quality data. GSK argues that true clinical trials haven’t pinpointed the same cardiac risks as some independent analyses have, including those published this week. At this point, there’s been no full-on clinical outcomes trial, so the data available has to be weighted and compared.

    As Reuters notes, the world is watching the FDA to see just how it weighs that data. It’s the first big safety controversy faced by Obama’s FDA. And even within the agency, Avandia has its detractors and supporters. Some in Congress are pushing for withdrawal. We have yet to hear from the agency’s expert advisors, who meet in mid-July on Avandia, but ultimately it’s the agency that has to sift through all the data--and all the recommendations--and make a decision.

    If the FDA were to pull Avandia, there could be problems for future drugs with inconclusive safety data. "The ability to get through FDA might be questioned a little bit more if they were to do something pretty dramatic here," Morningstar analyst Damien Conover tells Reuters, adding that he doesn’t think Avandia will be banned.


  102. goldman,
    Sorry, I haven’t had a chance to study your chart yet.


  103. EricL, You around?  What does your SPYdey sense tell you about the market direction today?


  104.  Speaking of Asia not popping, and this megar giveback, BIDU is bouncing fairly well.  However, a bounce back down in the next few days seems probable.  With the 10:1 split, there’s probably even bots who are nervous about all the BIDU shares they have.  
    But the whole move back up hinges on GOOG not getting their license.  This should be decided in a few days, or hours.  
    I would think that because Schmitt & GOOG is sooo close to the Obama administration, that China just says, "ok, you can have your license, but abide by our rules."  And the story is not over tomorrow.  In that case, BIDU would drop.  


  105. Goldman,
    Where did you post your chart?  I’d like to check it out if you don’t mind.


  106. Hey all,

    I have a new post/position in an Overnight Trade with Christopher & Banks Corp. (CBK). Its a lovely women’s apparel store. I am hoping for big things here.

    Check out my analysis, entry, exit, etc. here.

    Good Investing!


  107.  MON made nice comeback from 45.  If it gets retested and holds, I’d take a look at a long position.


  108. amatta,
    I have 5 screens; if you are using Steet Smart on line, set it to 1 minute, 2 day, add fast stoch, RSI, Momentum and volume. You will be trading primarily off the stoch. You should ask about getting SS Pro for free, it’s not bad. My primary trade screen is propriatary.


  109. Since we like to look for patterns, I might as well see one here--an inverse h&S possibly forming for MON with a neckline on the 47.5 level.  =)


  110. Phil: What just happened to /CL? Why the sudden move down?


  111.  I just glanced at /CL and it just tanked 20 mins. ago.  Any news?


  112. Notice how all the doomsayers are featured on CNBC at lunch time? 

    MBA Mortgage Applications: +8.8% vs. -5.9% last week. Thirty-year fixed mortgage rate decreased to 4.67% from 4.75%.

    Today’s sad real estate statistic: Foreclosed properties accounted for 31% of U.S. home sales in Q1, according to a new report by RealtyTrac, and sold for 27% less on average than regular properties. "In a normal market, only 1-2% of home sales are foreclosures, so this is certainly a significant level."

    More people staying in homesWith prime house-painting season arriving around the northern hemisphere, paint makers are hiking prices amid a shortage of raw materials, squeezing profits. "There won’t be enough house paint to go around" from Akzo (AKZOY.PK), PPG Industries (PPG) and Sherwin-Williams (SHW), and ingredient supplier Dow Chemical (DOW) can’t fill all its orders.

    June ADP Jobs Report: +13K vs. +60K expected and +57K prior (revised from +55K). It’s the fifth consecutive monthly gain, though increases have been modest and private employment may have decelerated heading into the summer.  Peter Boockvar’s summary of the ADP private-sector jobs report: "lame." Bottom line, "We are in the midst of a 3rd straight jobless recovery," and does not bode well for Friday’s payrolls report.

    June ISM New York Business Index: 69.3 vs. 89.9 in May. The 20.6-point drop was to be expected because the May level of expansion wasn’t sustainable, but future optimism was less broad based than in prior months.

    Chicago PMI: 59.1 vs. 58.5 expected, 59.7 prior. Employment 54.2 vs. 49.2 prior. New orders 59.1 vs. 62.7 prior. Prices paid 61.9 vs. 64 prior.

    EIA Petroleum Inventories: Crude -2.01M vs. consensus of -900K. Gasoline +0.54M vs. consensus of -400K. Distillate +2.46M vs. consensus of +900K. Crude futures trim gains despite the heavy draw; +0.3% to $76.16.

    China’s market is poised for a rebound, say analysts at Morgan Stanley, BNP Paribas and Nomura Holdings. Down more than 27% this year, the Shanghai Composite Index could climb 65% by next year; "We like valuations and inflation will peak. All we need[ed] is a catalyst such as a change in yuan policy.”

    The new China leading indicators index got some blame for yesterday’s drop in stocks, but did it move markets – or should it?

    The ECB’s tender was met with low demand today, a positive reflection on banks’ abilities to raise money from capital markets, with a total of €131.93B ($160.92B) allotted. Forecasts had run as high as €250B. The news is lifting European banks, and the euro. Premarket: UBS +2%, STD +4.5%, LYG +1.5%, CS +1.9%, BCS +4.6%, DB +3.25%.

    Bank of America (BAC) moves to the top of the world rankings for tier-1 capital, surpassing JPMorgan Chase (JPM). Industrial and Commercial Bank of China was no. 1 for profit taking. The biggest loss was posted by Anglo Irish Bank (AIB), with an $18.5B hit, followed by GMAC and Citi (C).

    Congressional Democrats abandoned a controversial proposal in the financial reform bill that would have levied a $19B tax on the country’s largest banks. Instead, lawmakers will offset the bill’s costs by winding down TARP early and assessing a $5.7B fee on banks through the FDIC. Premarket: C +2.4%, GS +0.4%, BAC +1.2%, JPM +0.9%.

    Key Democratic senators say after a White House meeting that they would scale back their energy and climate legislation, but say there is support for a modified cap on greenhouse-gas emissions from electric power utilities only.

    Outlook for the restaurant industry "softened" in May (chart), but since spending there both leads and lags recessions, it’s tough to tell if the pullback is a hangover from before, or an indicator of upcoming weakness.

    The EU’s export subsidies to Airbus (EADSF.PK) are prohibited and must be withdrawn, the WTO rules. It didn’t uphold all U.S. complaints but said the EU had to mitigate adverse effects of other subsidies as well; while the order is immediate, resolution could be tied up for years.

    Ford (F) says it is reducing its debt by more than $4B, primarily by retiring debt owed to the UAW Retiree Medical Benefits Trust ahead of schedule. Citi upgrades shares to Hold from Sell. F +2.4% premarket. (PR)

    Shares of BP jump 8% in London trading, helped by bid talk sparked by spill-over interest from yesterday’s "Fantasy M&A" note from JPMorgan. BP +3.9% premarket

    Some damning news for Anadarko (APC +1.85%), as the FT reports the company, a minority partner on the leaking Gulf well, approved several key aspects of BP’s (BP +5.3%) well designs and signed off on key operational decisions that may have contributed to the well explosion. Anadarko has been trying to limit its liability by pointing fingers at BP.

    After the Fed’s closed-door meeting last week, Chicago Fed’s Charles Evans is "wary" of new calls for asset purchases by the central bank: "There are limits to what policy can do." He thinks GDP growth will continue around a moderate 3.5% rate.

    Three lunchtime reads:
    1) Crazy Treasury bulls get it right
    2) Evans-Pritchard: Time to shut down the Fed?
    3) Cleveland Fed on expected inflation: not looking good


  113. Raffy/Currency trading
    There are three "biggies" when it comes to firms that have good trading platforms. I prefer GFT, and I have their Dealbook 360 platform, and I love it.  GFT probably offers the best research, compared to the others Depending on your account level ($$$$) they are in a position to be additionally helpfull.  $50,000 in your account gives you the "Gold" level of benefits. If you are really serious,  go for the ‘Platinum" level which gives you unbelievable benefits – everything you can imagine to make currency trading very profitable. The research is first class.They connect you directly with some of the best currency traders in the world, that are acessable 24-7. You won’t be trading alone, as you can mirror their trades, or scope out your own, and get their input….. kinda like PSW, as everybody is there to help. Big iniation fee though!  When I initially opened an account with them, they asked me how much money I wanted to make ( they want to have a profile on your objectives) – I answered their question with a question – "How much has been printed"… they laughed and said, Ok we will put you in the "aggressive classification"


  114. RIMM / anybody who cares – There’s a nice piece on them at: http://seekingalpha.com/article/212509-research-in-motion-the-blackberry-s-death-spiral, that makes 3 good points and misses a 4th.
    Good point #1: AAPL spends less on iPhone R&D because they only have one device and it’s customized in software via app downloads, not in hardware. That’s really an intensely important point, and even though RIMM’s handsets might all be built on the same chassis and OS, they do have to keep retooling and then supporting all this legacy junk, whereas AAPL just has to send any whinny customer a new iPhone for whatever pennies it costs them to produce it.
    Good point #2: referring to their ever decreasing profit margin per unit he says, "who in their right mind would want to buy a company that can only grow by cutting prices?." Hmm, wasn’t that the rational behind events in the market over the last year? That pretty well sums up the law of supply and demand for Blackberries
    Good point #3: he says "Consumers love Blackberries and so do the phone networks. Unlike the iPhone (AAPL), Research In Motion’s devices are not data hogs." And this is really true: text is compact compared to almost any other data, and it’s easily compressed. Bandwidth IS an issue, and it’s becoming more of an issue, and those browser smart phones are data hogs because the web vendors (the store fronts, not the service providers) don’t care about bandwidth. The BB should be a winner in the "lean and mean" category.
    The Missing Point #4: Bandwidth vendors are ignoring point #3; RIMM is not being rewarded for being "bandwidth green" and users are not being offered a "green" data plan. The price of BB service is THE SAME as the price of iPhone service. THAT IS NUTS from RIMM’s point of view, and if there is ONE THING that RIMM should do it’s convince the cell carriers that they’ll sell a lot more contracts, and a lot more BB’s, if they offer a low band width data plan.
    I’m not sure, but I think the folks at RIMM are stupid for not to be doing this. I’ve been in the tech sector for a few decades and the only thing that’s as glaring as the ignorance of most tech users is the arrogance of tech vendors. I suspect those at RIMM’s HQ feel themselves above worrying about their stock’s price. Maybe this crash in the stock price will get their attention because I think they could lift their share price a lot with little more than a press release and a photo op.


  115. tenger
    Excellent points! Bandwidth is going to be a huge point, ipad also.


  116. Hello Phil please help;
    I setup a small account for a friend with 3k a while back and now TOS is saying i have to cover or close the puts i have sold because new policy says no sold puts for accounts under 5k. here is the positions. how do i adjust them or should i have the friend add more cash and just let things ride out ? this is the worst time to buy back the puts, i want to avoid that.  thanks a lot phil
    TASR bought 100 stock for  4.95, stock is at 4.07
    TASR sold 1 sep10 5 put for .65 is 1.05 now
    C bought 4 sep10 4 call .63 is .26
    C sold 4 sep10 4 put .37 is .42
    WFR sold 1 oct10 10 put .73 is 1.23
    WFR bought 1 oct10 11 call 2.61 is .91
    WFR sold 1 oct10 13 call 1.61 is .38
    ////////
    i had sold calls on C and TASR that i bough back at a profit now


  117. All in all the 3k account above is down about $350


  118. 12.42 and 13.05 : Two large dumps on no volume…


  119. Asia popping/Trice – Asia will pop if we pop.  Don’t worry, we are far from a pop, need to gap fill back to Monday’s close at least (10,200, 1,070). 

    FXP July $37 puts for $1 are a good way to play for a China bounce this week.

    Fast money crew final call says (4 people):  1) Stay Out, 2) Dead Cat Bounce, 3) Get Out and 4) Don’t Buy until Jobs report is good – Finally the ALL BAD NEWS luch hour special on CNBC comes to an end with all the retail traders sent back to work with no reason at all to buy anything.

    RIMM/Tenger – LOL?  Overall volume is pretty lame today, we’ll have to see but keep in mind that retailers are selling and selling and selling so the funds can just scoop up everything they sold at higher prices now – no need to hurry.

    BXP $75 puts at $1.50 were $2 yesterday and $3 on Friday so fair to expect $2 by this Friday and out if they can’t hold $72.50 (now $72.92)

    CL/HHFiv – I have no idea what brought that on.  They fell through $75 but looks like they’ll be taking it back.  Somebody just dumped out for some reason – doesn’t take much to shove NYMEX down if a big guy heads for the exits. 


  120. JRW,
    I posted my 1 minute chart here:  chart.ly/37se2s
    Can you take a look at it when you have some time and let me know if you see why my Stoch isn’t showing the pattern?
    Thanks


  121. Phil: what Cramer said on CNBC yesterday when the market was already down 250 was outrageous; we could have gone down another 250 because of what he said.  Is it even legal to do that on national TV when we were already in panic mode?  Shouldn’t SEC or whatever regulatory body put a stop to it?  I don’t know if you saw it; but in Mad Money in the afternoon, Cramer pointed out the positives and said all those growth stocks that he recommened earlier should be bought here.
    Fast Money is equally ridiculous.  In Monday’s show, Jon Najarian "Dr. J" said he was bullish because everyone on that desk was bearish; then on yesterday’s Half time show, he said he was almost all in cash and very negative on the markets. 
    I think Bloomberg has much higher quality guests and analysis; unfortunately most people watch CNBC…


  122. The fast money crew are unbelievable.  Next week they’ll tell you to go all in after the market goes up 1000 points.


  123. The smart money folks and some of the best money managers have recently stated "long term treasuries are probably the WORST investment one could make" I happen to agree with their assessment, and Phil probably does as well. If that is the case, then why would TBT not be the BEST investment?    I guess it is just a matter of timing.


  124. Phil/ BXP
    I think it should read BXP calls


  125. Phil… Oh No…you could not be looking for a tax haven, are you.  I am not sure about the Isle of Wight, but the nearby Isle of Man is one of the most popular tax havens in Europe, next to Swiss banks.


  126. exec – did you say the market is going up 1000 pts next week? that’s great news! :)


  127. exec
    I coud no see enough but your stochastic is not set up correctly.


  128. Phil,
    Wouldn’t there be an  advantage to the US Treasury and FED to scare other people out of equities and into the treasuries for "safety", especially if China is getting a bit weary of "playing the game" with us? 


  129. Moves upward today in TSLA makes my eventual short that much more attractive. Have to get all the "greenies" invested first. and then they will discover the fact profits on not on the horizon…


  130. exec,
    You’ve got the one at 9:35 this morning, and we haven’t had a lot (buy programs) lately, as in the days shown on your chart. I f you have another screen available you can go to Street Smart on line and use theirs (fast stoch), I think it’s better. I use SSPro only for conformation on the 3 minute.


  131.  JRW, thanks. Yes I was offered the Pro but I am running a Mac. Will need to install parallels and get another screen at least if I am to attempt this because it has been rough going attempting by just follow the resistance and support levels posted on the IWM-- Also is there a fixed relationship between the two or it gets whacked because of the daily rebalancing of the ultra? 
    Last question of the day… I promise, you say you use the stoch primarily, is this combined with bouncing one of the support levels?
    Thanks


  132. BDI / Good news for shipping? The BDI has undergone another of it’s mini-crashes but that puts it back down at a support level (http://www.dryships.com/pages/report.asp, and http://investmenttools.com/futures/bdi_baltic_dry_index.htm). Fearnley’s says it’s consolidation in most sectors and that shippers (most, some, many?) are optimistic (http://www.fearnresearch.com, subscription is free), and with China’s "bad news" out of the way, that might be true. DRYS is still swirling down the crapper, but EXM is bubbling back. Nice metaphor, huh?


  133.     Phil and all: thanks to all for the great lessons of the day, finally I am geting into two trades at good entry points I hope XOM and TBT.


  134. amatta
    Parallels has major problems, Apple doesn’t support it. I tried for a week to just get it working never mind doing what you want. You also will need to get windows. Seiously consider buying a windows computer for a couple more bucks you also get another screen, $500 will get all you need just don’t shop Wall Mart or Best Buy, they have computers built to meet their cost demands. I use 3 computers at once.


  135.  Phil/XOM — Interesting ideas on trading XOM today Before I even opened up today’s post, I was just wondering about a XOM bull call Jan 2012 spread, selling puts to offset the cost. What do you think?


  136. JRW,
    It’s odd that the on line version would be better than the pro.  I’m wondering if a different Stoch would be better.  They have 3 others.
    I’m looking at the 9:35 line and I don’t see anything.  Perhaps the problem I don’t understand what I"m supposed to be seeing.  What exactly is it that you see at 9:35?


  137. I used SSPro for over a year on parallels and then VMWare and it worked fine on a Mac. But six months ago I went to TOS, which I think is far superior and cheaper to trade……not trying to change your mind, just wanted to throw that out……


  138. Gel, thanks for the useful information. Will start off with a demo account with GFT and see how it goes


  139. SeanC, I agree about Bloomberg TV, plus Maryam Nemazee and Linzie Janis are mighty easy on the eyes….;)


  140. Am I delusional to believe that if we can fall from DIA 105.96 in 8 days (that was the high when China announced idea of partially floating Yuan) we can just as quickly get back to those levels in 8 days? In hindsite I should have been bearish for this entire ride down, but now I’m trying to convince myself that things can bounce back quickly.
    I’m really deep underwater with the July DIA 105′s (average cost $1) and it was/is 50% of my portfolio. Sadly did not follow any of the rules and now just living on hope that we bounce back.


  141. amatta
    Don’t take this as negative on Apples, I have been trying to buy a good used one 1 to 2 years old.


  142. amatta
    I said YOU would be using the Stoch primarilly with Street Smart; my system is different than anything I’ve seen for the public. I use the Stock, check RSI, and ensure the momentum is pointing up; (for an up move); when those 3 fields are green and we are at a line I’ll buy.


  143. amatta
    Don’t take this as negative on Apples, I have been trying to buy a good used one 1 to 2 years old.


  144. exec,
    A Sig rune on the Stoch piercing 80%


  145. JRW - IWM 200sma was toxic…wow…what a day…


  146. On CNBS – It’s MR. SUNSHINE……. :)


  147. Currency/Gel – LOL, sounds like fun. 

    RIMM/Tenger – Excellent points.  On the bandwidth issue, I’m pretty sure that bandwitdth is a commoditiy to the big boys and that they WANT to sell a lot of it for a lot of money.  You are assuming T is going to say they would rather pay $99 to subsidize 3 BBrys and charge $19 a month for data than pay $199 to subsidize one IPhone and charge $49/month for data.  It all comes down to how much profit they make on the data, of course but I’m pretty sure they should be viewed as a commodity producer that intends to make and supply as much data as possible and that they love things that get people to buy more data.

    1pm volume was very lame 85M.

    Puts/Micro – Wow that is BS!  None of those are off track so it needs to be up to your friend whether to take a hit of about $350 or to tie up another $3,000 to get in compliance.  You can’t really "adjust" out of it because you would be simply buying back the puts at a loss and locking it in.  You could flip the puts to calls like buy back the TASR $5 put for $1.05 and take the .40 loss and then sell the $5 call for .40 so you are b/e at $5 and similar with C (but you arleady sold the WFR so nothing to do there but take the loss if you do).  I’d sure take out the WFR caller in any event…

    Dumps/Lionel – Looks like much effort being made to shake out weak hands.

    Cramer/Sen – I can’t believe anything CNBC does is legal and Cramer crossed the line behind the line that was supposed to be the line that can’t be crossed but – what are you going to do?  I pointed it out last month when CNBC incited a panic and tanked the markets on false rumors and ridiculous statements by several guests and their own anchors but nobody cares – they get to do it over and over again.  I did catch his flip-flop on Mad Money and I would have respected him if he had said "I thought we were going to break down and we didn’t so that makes me bullish" but instead he pretended it never happened and no caller asked him about it and there is no evidence of the crime on CNBC so I guess it didn’t happen, right?  In fact, one of the Members was essentially arguing that it didn’t happen in yesterday’s chat.  That’s the magic of the "Messiah in a Box" television that has people following these idiots off cliffs.  Yes, Bloomberg is way better and I always watch them late nights until 6am, when I am forced to flip over to CNBC to see which way the sheep are being herded for the day. 

    Treasuries/Gel – I think people who tie up money for 10 years at 3% should just have their money taken away from them now to save time and then we could put it into the economy somewhere where it will do some good.  3% notes are a HUGE bet on deflation and stagnation.  It has to be stagnation though because a depression is going to lead to default or stimulus, either of which will send notes back up so you have to walk a 10-year tightrope to get a payoff on long-term notes at these rates.  Of course, if you are a bank with a secret guarantee from the Fed that you can keep borrowing at 1% or less for 10 years then there’s no reason not to buy a Trillion Dollars worth of TBills for the 2% spread….

    BXP/Lionel – Yes, thanks, that was BXP $75 calls at $1.50 as a BULLISH play.  I was thinking of selling puts and then thought better of it

    Tax haven/Gel – Not as a tax haven but as a real place to live where I think life will be sustainable even if the low tax + austerity crowd takes control of this country and sends us into a Great Depression.   The people of this country are not going to deal well with interruptions in the food supply caused by siezures in the credit market and watching LA "enjoy" themselves after the Lakers game made me realize how close to the edge things are getting so, I am looking…

    Scaring people/Bps – The certainly have no incentive to calm us down.  That’s why they lie about inflation all the time.  They get to trick people into accepting low rates for their money (even though their disposable income drops every year but that’s the benefit of having an education system that leaves pretty much everyone behind international standards) and even attract foriegn dollars and, as a bonus, they get to screw people who are supposed to get COLA adustments.  As to China though, they have no choice but to play the game.  We owe them $1.5Tn and China’s GDP is just $6Tn – they can’t afford to lose that kind of money, not to mention their biggest "trading partner" (is it really a partnership where we buy 10x more than we sell?). 

    Shipping/Tenger – Yes, great metaphore.  Last I looked, BDI was still going down every single day so I wouldn’t go rushing into shippers just yet. With all the excess capacity coming on-line and the possibility of 300 ships that are filled with oil getting dumped at some point – it’s hard to get bullish and there’s no reason too until BDI proves it can hold 2,500, or at least 2,0000 (now 2,447). 

    You are welcome Arbolito.  Good luck!

    XOM/Ajay – How about the 2012 $52.50/62.50 bull call spread at $4.80 and selling the $40 puts, now $2.60 only if XOM falls and they pop to $3.50 or better.  Otherwise, you won’t be crying if XOM stays up and you end up with "just" a double, right? 

    Hindsight/Jimmy – Ah yes, things are always easy to see AFTER they happen, arent’ they?  Getting all the way back to $105 is going to be very tough but if you entered at $1 there’s pretty much no way so you are much better off taking the .15 you have left on the calls and selling the $101 calls for $1.10 and rolling to the $100 calls at $1.55 which is + .30 to get into the $100/101 spread for net $1.30.  Better to lose .30 than lose $1 and a lot more chance of winning on that trade (although you still could lose, of course. 

    Pushing the markets down as hard as he can (and now on CNBC too!)If we could smoothly transition debt-maxed consumer nations into producers and light-debt developing nations into consumers, things would be better – but it’s "every nation for itself," Pimco’s Bill Gross writes. Stay ready for slow growth, low consumption and low returns on debt and equity.

    Policy makers note Brazil’s economy may expand at the fastest pace in more than 20 years – at 7.3% – which should drive inflation (and significantly higher interest rates) there, to 5.4%.

    Atlanta Fed’s Dennis Lockhart talks to the Rotary Club in Baton Rouge, La., about the oil spill: It’s not having a measurable effect on the nation’s economy but hurts confidence; it "disheartens us all and, I believe, makes the public a little more reticent to assume a smooth recovery path."

    The Interior Department fines the U.S. unit of BP $5.2M for submitting "false, inaccurate, or misleading" reports for energy production on Indian tribal lands in southwestern Colorado.


  148. Kururi: Bloomberg TV also lets you watch it on line for free; but it used to be real bad quality; now they upgraded to HD so it’s really nice.  Unlike CNBC which charges you $10/month to watch…  But I am surprised you don’t like the women on CNBC (their looks, I mean :-) )


  149. Raffy… good idea. They will offer you a paper trading account. After you master the platform and see your paper trades performing for you, then go to cash.  After the cash (profit) builds, then you can build your account up to qualify for all the benefits of a larger account. It is a good plan as you are playing with profits, and not hard cash. As I see good plays, I’ll post, and you can trade along with me.


  150. Bought someTNA at $38.03


  151.   Phil:  I’m sure you’ve had it with TBT questions, but I have been traveling and unable to read you regularly.  I’ve been selling vertical TBT put spreads since it was at about 47.  This has been an attempt to earn premium not protect cash.  I’ve rolled down along the way when I’ve had to.  As TBT has dropped relentlessly back to near its all time low, the positions have grown and begun to eat too much margin, creating an opportunity cost in terms of other trades I’ve had to forgo.  I should be fine on the July 35 and 36 putters.  I also have July 37 putters, September 40, 41, 42 and 43 putters, December 43 putters, and January 38, 39 and 40 putters.  Most are in $4-7 vertical put spreads. I will be transferring my account soon to TOS where I should have Portfolio Margin so I’ll be less constrained, but I’d appreciate any suggestions you have.


  152. I don’t want to sound paranoid, but I think Lloyd is out to get me, personally !!
     
    Out Of TNA at $37.92


  153. Bill Gross is gone and buyer come back slowly but we have a Cramer warning around 2:35 – let’s see what nonsense he has for us today

    APOL still selling off.    GS very cheap at $132 but I have 2012 $75 puts that have given us no reason to stop out since we bought them for $2 (althogh getting boring and we did take 1/2 off with a double).   

    Copper at $2.95 after bouncing off $2.87 this morning.  Don’t forget copper futures are $12.50 per 0.0005 – I wish I would have had the nerve to pull the trigger this morning but FCX seemed safer…

    Pound is down to $1.496, Euro at $1.225 and 88.5 Yen to the dollar so the Nikkei is still unhappy.  Oil is $75.90 again and gold is rock-steady at $1,243.  

    DIA $100 calls for .01 have virtually no chance of paying off from the looks of things but you can buy  50 contracts for $50 and, if by some miracle we get a 150-point pop into the close, you may have a 10-bagger.  Plays like this are pure gambles and it’s best to take a double off the table on 1/2 if we pop up but keep in mind the fees because if you are paying more than a $1 per contract, this is a very silly play as you’re at .02 before you start ($100) and then it will cost you another $50 just to sell so even getting out with .05 is hardly worth it


  154. Market drops on Moody’s saying they are going to REVIEW Spain’s credit rating. Unbelivable. Weren’t they keeping an eye on it before? Warning shot across the bow…


  155. Phil: for my TNA spread jan2012 35/55, the 55caller sold at 13.3 can now be closed for 4$, a big change, maybe should close 30 % of the callers, all depends if I can cover again at  10$ or more and that depends on market to go up again.
    What do you think ?


  156. JRW - Etrade is out to get me…just made a TNA trade and it took…..drum roll…..30.29 seconds to complete according to the alert THEY sent me…not cool!  Sold in 0.4 seconds for a small loss….now you see why I’m looking at Schwab…this doesnt’ occur often but when it does…grrrr….


  157. goldman / ET
    Too bad, their chart looks like something I could get used to !!


  158. Trying to find an entry on TNA …. need to see if we go lower first


  159. Sunshine/1020 – LOL.

    DIA – Those were June 30th $100 calls, of course.  They expire at 4

    TBT/John - I don’t mind, it’s an itneresting thing to follow, just very annoying performance for all of us so far.  I’m for simplification in cases like that.  You say veritcals but all I hear is putters.  I would consolidate short puts somewhere, like Jan $36 puts, now $3.75.  You can cover those with 2012 $25 puts at $2 or go for the margin-cutting 2012 $30 puts at $3.75 and assume you will keep $1.50 or so after wiping out those putters (or rolling them into a vertical worst case). 

    Lloyd/JRW – With volume at 110M, you probably are attracting the bots when you buy in because it’s slim pickings for good action to get in front of for them. 

    Review/Rain – It’s possible that it will be a positive review.  They are under huge EU pressure to rethink their outllook on Sov debt.

    TBT/RMM – I’d kill them all at this level.  I’m seeing $2.45 for the $55 caller and it’s not worth keeping them at this price.  Your next move would be to sell the $40s (now $5.70) and roll down to the $25s for $6 if TBT can’t hold $35 or you can do the roll now and buy out the caller and just make sure you make that sale for at least $5 if you have to

    Meanwhile, Bill Gross scared another $100Bn into TBills and Bonds.  Cramer didn’t say much that I heard. 

    QQQQ June 30th $43 calls at .35 have .07 premium, fun for a stick play, out at .25.


  160. in at 37.70 a bit early …


  161. Phil: the TBT comment is not for me, I asked about the TNA jan 2011 (not 2012) spread at 2:32.


  162. out 37.82; not liking what I see …


  163. Cap,
    No, you nailed it. Either 61.70 or 61.40, but I think you’ve got it !!


  164. haven’t bought TBT  yet, but getting close.  i like the levels it’s reaching


  165. I don’t know JRW … that’s why you are the master !
     
    we’ll see what 3 pm brings … I suspect they still have some sell programs to hit us with.


  166. Cap,
    Well, NOW I hope you’re wrong, as I’m still in TNA at $37.60


  167. The upcoming jobs report has me worried – the last report was horrible, and it was described by Biden/Obama as blowout positive prior to its release. No word this time from them, so could it be worse. I know for sure 100K census workers have been laid off… and who is hiring? This could be very negative for the indexes, unless it is already assumed and priced in.


  168. Phil / Ddip     How can there be any meaningful growth when we don’t need to build any houses or commercial for years? Every second pick up truck was construction related 3 years ago. That’s why we’ve got 20% real unemployment now the bubble has popped. Since our CEO’s outsourced 12 million manufacturing jobs to other countries while Clinton and Bush pushed NAFTA and WTO, we have no manufacturing or export escape valve. Our structural problem has existed for a decade but we concealed it with the RE bubble, borrowing/stealing from future employment activity. Parts of Europe have similar problems, like Spain.
    We’ve borrowed / printed a quarter of our annual GNP to achieve temporary 2.5% growth, following a collapse, an unsustainable strategy. There is now a significant political headwind to more stimulus, so that leaves only Fed printing – if even that is politically acceptable now. But even massive printing might be offset by 80’s style interest rate spiking and therefore ineffective.
    I’m increasingly of the view that we are going to fall into a severe Ddip with a serious downward adjustment in GNP, sort of giving back the growth and employment we borrowed from the future with our dishonest financial engineering and greed.
    I’ve tried to adopt your optimistic constructivism, but I just can’t see how we can avoid the pain of this structural adjustment process. I suspect that the crisis will start to unfold with the coming wave of foreclosures, triggering a further 20%+ house price decline, then more defaults, paralleled by sovereign defaults in Europe. That Europe is busy adopting austerity plans, negative GNP adjustments and people essentially being forced to live within their means at an international level seem to be now ordained.
    I’m concerned that only Matt seems to be as worried as me. Now I appreciate your daily guidance and the mkt may well go up again short term with the final wave of decent earnings next month, but the fundamentals just look awful beyond July if we are really going to have to live within our means as a society, which others may demand.  Or, as you’ve written, maybe I’m just being naive in questioning our Gov’ts ability to create hyperinflation as a solution?  But, none of this bodes well for the mkts.


  169. Cap,
    Looks like you were right on both counts, out at $37.78


  170. JRW, It is back in that same channel from 6/23-6/24 that it was in this morning.  Bounced off the lower line, hit resistance at the upper.


  171. TNA/RMM – Sorry, I have TBT on the brain!  Same deal though, may as well take out the caller with that kind of profit and take advantage to roll down to the $30s for $3 and now you can sell the $50s for $4.75 if TBT breaks lower (now $5.25) but hopefully you can sell them for $7+ on a good run.

    On those Qs – Don’t be greedy!  If you had the DIA play and the Qs pay for it, that’s all we need!  Keep in mind that they WILL lose .07 of premium between now and 4 so that’s your handicap right there so selling them for .45 is great.

    Volume at 2:56 on Dow is very thin 117M, very stickable….   "Oh Lloyd, please favor us with your mighty stick – that ye may take it out and smite the bears, despite the fact that they are grilling one of your boys down in Congress (Congregation: Forgive them Oh Lloyd their trespasses, they can touch you not)."

    That’s the problem, unfortunately.  Lloyd won’t release the bots unless his boy gets a pass. 


  172. Judah - if you ignore the 2:00 spike, it is a perfect top on the downward channel since 11:48 today


  173. JRW, you know what they say about the blind squirrel ….


  174.  VIX negative and no sign of it going flat so unless someone opens their mouths, I think we flatline or go slightly green into the close.


  175. Thanks and yes it is total BS. well me call my friend and get this sorted out. i promised him ill cover the losses lol :) im such a ….


  176. a lot can happen in an hour …. even in 5 minutes.


  177. judah
    The next time you see a day like this, let’s just go play golf !!


  178. Cap – Which saying would that be….perhaps "Blind squirres  get their nuts stolen by rabid, greedy, monster squirrels wearing GS tee shirts"???


  179. JRW - a day like today calls for shooting sporting clays…


  180. This is a perfect example of what I was saying this morning … You don’t have to trade.  Nothing wrong with sitting and watching the last 50 minutes here …


  181. JRW – the problem with today is that we are trying to play a flat or downmarket up because we only have TNA as a viable vehicle.  When TZA splits we will have better balance.


  182. goldman; something like that …


  183. The rotation into one of the worst long term investments (US Treasuries) might very sonn see some additional activity. The muni market has to be even worse as an investment, and as this is soon to be realized, the rotation will be out of them and into the safety of the US treasury bond. …. my oh my … my TBT stuff keeps getting mauled.  What do you think, Phil, as a possibility?


  184. JRW, My shoulder is almost better. I should be able to play by the end of summer. My family is going to take vacation in your neck of the woods this summer.  I may take you up on that. :)


  185. ssdirk
    NEEEEED Balance!!!!!!!!!!!!!!!!!!!!!!!!


  186. Gel, thanks – will certainly follow your currency posts


  187. If you think about it, there is no reason to buy anything into the close unless its for portfolio markup reasons.


  188.  I’ll tell you the difference between CNBC and Bloomberg:  
    Bloomberg’s women are all sophisticated looking; CNBC with the exception of Erin B., are all Slutty-looking.  Slutty-looking women win over sophisticated looking women all the time.  The danger for CNBC and the stability of the markets is that
    FOX goes even more slutty with its women.  Right now, Erin B. is a respite from the slutty-looking women.  She is specifically designed to calm the markets in the morning and afternoon.  Now what if she didn’t exist?  The types of messages that FOX could give to markets with even more slutty women could destabilize the whole jerry-rigged structure.  Let’s hope it doesn’t come to that.   


  189. Phil:  in your3:1 you mention TBT again, I am talking about TNA,
    let me restate what I have:
    TNA jan35 calls, base 26$,
    jan55 callers   base 13.3$, now  can be closed  at 4$.
    jan 35 putters   base 8.3$,
    Have previously recouped $$ by closing callers and putters and then covering again as the market turned.


  190. JRW, touched that bottom channel and stopped its descent. 


  191. Wow, what an underwhelming day in the markets.  Really sad considering the miniscule volume.  Thought they could muster better after a day like yesterday.  Clearly, no ones heart is in it..  Just some of their $.


  192. matt: its the last day of the 1/2 year.


  193. looks like i spoke too soon.  financials finally giving way


  194. SS,
     
    Welcome back, TZA, yes it is difficult to swing 150,000 shares at a whack !! BTW, the G-mail thing probably won’t work, but Phil is working on something for my charts.


  195. Action right now looks a lot like yesterdays close. Are the big boys using the SPY to try to wreck SP 1040?


  196. JRW – why don’t you just short tna – ?


  197. Jobs/Gel – That’s right, I forgot what a total F-up they had last time.  Surely they can’t be that dumb twice? 

    How/Tuca – Does the grain supplier make money feeding cattle?  Sure they do.  That’s all the US consumer is, they have the dwindling spending capactiy of 300M Americans to sell into (still an impressive amount) plus 2Bn emerging market consumers who may earn 1/10th what we do (for now, we are heading down to meet them fast) but there are 10x more of them to sell to.  Unless you knocked the US consumer market down to zero, any sales overseas are going to improve things for many companies.  The people who are getting killed by this economy are small business owners who depend on the local populations to support them but not big business, who benefit from overseas sales as well as the bankruptcies of their small business competitors.  If we assume small businesses (who employ 70% of all workers) are 1/3 of the GDP and big business is 2/3, then if the economy contracts 20% and wipes out 50% of the small businesses, the big businesses take over 17% of the business and, through greater operating efficiency and lower labor costs (outsourcing) they come out ahead with 83% of the 80% (66.4%) GDP with remaining small business at 16.5% and on their way to extinction.  Once you have the labor force that cowered, then big business can break down unions and wage laws and begin to open factories in the US again and we will kiss their asses for paying minimum wage to auto workers who ship cars over to rich folks in Asia.  How’s that for a bullish premise?  8-)

    Hey a bull on CNBC but the announcer is scoffing at him.

    Munis/Gel – There’s another place people are crazy to invest in.  That may be driving TBilld down to but, eventually, all the money is out of everything else becasue their scale is finite while the needs of our government are not ($150Bn a month and growing).

    LOL Occam!  You should teach broadcasting at NYU.   Or maybe, behavioral phych….

    TNA/RMM – Told you I have TBT on the brain (I have a chart watching to see if they can hold $35 on my main screen all morning).  I meant TNA.

    Uh oh, this is NOT the move we were hoping for!   TZA July $7s up .15 and that’s good enough for a day trade (10%).


  198. Phil or anyone here: the article you posted above says that China (the Shangai Composite) is down 27% YTD; but FXI is only down 5%.  What’s the best way to play the beaten down China market if Morgan Stanley is right?


  199. Bought more FAS at 19.36.  Will dump if we break 19.24-  We’re so close to the point of no return what the hell..


  200. India is the world’s largest consumer of gold. ( traditionally over 20% ) Imports have recently have dropped to a trickle as price has discouraged the consumption.  Many in India are selling jewelery etc.  Fear and instability throughout the world is encouraging gold purchases in all forms, and thus the appreciation. I do not see fear and flight to safety abating any time soon, because too many negative issues are still brewing, and appear  to be worsening.  I am continuing to build my gold positions I think the fundamentals on this commodity (currency) trump the technical analysis.( also a good hedge against the long TBT plays I have ).


  201. TSLA dropping hard! 

    XLF below $14 again with GS down 1.5%. 

    VIX is still down 2.3% for the day though so I’m still not buying the sell-off. 

    Volume/Matt – Low volume and no stick indicates they simply are not trying.  For whatever reason, those that like to push the market up are letting it find it’s natural level now, which I still believe is right around here.  

    China/Sean – I don’t know if there is a good Shanghai index.   I just shorted FXP on the premise they will head down as China recovers.


  202. Somebody STOP me; IWM 61.40, in TNA at $36.98


  203. samz
    Can’t short TNA !!


  204. 2 buy signals 2 conferms market down 3:45 stick it to us?


  205. I had a hard stop stop at 19.28 on half of my FAS and wouldn’t you know that, so farrrrrrrrr, is the low.  The other half I have a mental stop at 19.24.  Oh shoot…. here they come for my head!


  206. JRW – back away from the keyboard.


  207. Oh no!


  208. First, get out of TNA and then back away from the keyboard.


  209. In anticipation of a correction in AAPL, I sold all long positions today… too scared to short them, but tempted!


  210. AAPL falling. Any news.


  211.  Phil what will it take to convince you to turn bearish?


  212. It looks like the dreaded support 1040 has been broken and will remain so?


  213.  NDX aiming for 1731. Too bad I set tight stops on my short futures today!


  214. Phil: ok, you say:
    close the jan55 callers, today,
    roll the jan35 calls from 35 to 30, today,
    cover again with callers, now strike 50 for 4.75$ or better. maybe next week.


  215.  JRW,Damn! my order wasn’t entered to stop at TNA 37.3 I went in at 38.03 now what???


  216. And nobody stoped me; out at $36.77


  217. phil is this real going furhter down????


  218.  Copper still 2.92, is this all BS?


  219.  now is time for another hedge not this morning?? 


  220. Wow, this is a sick market-  And the financials are the sickest part it would appear.



  221. Broke ALL kinds of levels on the way down.


  222. THE PINK WINS, sorry Phil the only thing left is ? the blowout?


  223.  This is just as ridiculous now as when the market was up up up in the spring. Does no one pay any attention to anything but technicals anymore?? The good companies get sold off right with the bad ones. There’s basically no discrimination. The only way something does really well is with ridiculous media hype……time to retire to a money market fund.


  224. Life lesson, trying to explain to my 3 year old why I can’t take her for a ride right now, because I’m too busy losing money !!



  225. nicha/AAPL
    I must have started something today… I am chart watching… In May of 2008 the stock was trading at a "hot" $190.00… the next five months the stock fell over 50% to $90… This is a strong company, but not invincable in price/share


  226.  In 5 NDU10 1738.50, stop 1737. 


  227. Ah yes panic breaking out on the comment board…must be time to go bullish! :)


  228. SS
    Thanks for the attempt, golf anyone? Or Scotch?


  229.  My FAZ day trade making me watch this slide comfortably.  Selling some calls against it now to guard against any gaps into tomorrow.


  230. scotch!


  231. Please someone close the markets .. please .. pretty please


  232. JRW   scotch with a corona chaser and a lime


  233. Someone forgot to turn the bots on. 


  234.  Stopped out. Was hoping this pizza was done, guess not yet. 


  235. TNA shorts/JRW – You can buy puts that are in the money or sell calls that are in the money. 

    Well that was an nice bonus on TZA, $1.44 now at stop out. 

    Volume up to just 158M on Dow after all that.  Such nonsense…

    Bearish/Bgb – I’d want to see volume capitulation where the S&P can’t hold 1,040 for more than a day so a follow-through to the downside tomorrow will have me more bearish but right now I think this is EOQ BS that will reverse unless we get some really terrible jobs data (which ADP seems to indicate). 

    TNA/RMM – Yes although hard to pull trigger into this mess but maybe the best time. 

    Copper/Dr C – Yes, that is really strange and oil is holding $75 too (and gold doesn’t budge).

    Now CNBC says unemployment may be falling "but not for the right reasons" so even if Jobs look good, they are laying the groundwork to tell you it’s bad. 


  236. JRW
    I already have the scotch out, going for the big glass!


  237. JRW – as Judah and I have found, let TBT be your guide.


  238. Pink/Shadow – Yep, this is bad.  Still not Cramer’s down 250 bad but but for a finish. 

    Bikes/JRW – Bikes are more important.

    Interestingly, TBT is NOT failing $35.50 in all this carnage. 


  239. OMG what bullshit on CNBC


  240. No way we gap up ahead of Friday.


  241. Hanna…. the hedge fund traders watch the indexes very closely to see which companies are not following the channel, and then trade them for a correction. Probably not fair for the super performers (fundamentally), but the markets are driven by trading practices, and not always logic.


  242. Good news, Weclosed above the LOW.


  243. Well, my gut said we’d be up today.  But my head said they’d take us down when everyone was expecting a bounce.  Shoulda listened to my head!  Tomorrow could be capilulation day for a lot of bulls..  so by Tuesday we should get that bounce!  Moral:  The trend is down.  Don’t play the bounce.  Use it to cover and build your position.


  244. I can’t believe I finished green by <<<<<<<<<<1/2%; sure felt worse!!
     
    Have a good evening all, see you tomrrow.


  245. matt,
     
    Yeah. Unfortunately I think everyone thinks that now which will make doing it harder than it looks. But longer term we’re almost certainly going lower. A last-gasp shot at SPX 1100 this summer wouldn’t surprise me, though.


  246. I guess they call that end of quarter "window un-dressing"


  247. JRW - take your kid out for ice cream…I have them that age too, and that is where we are headed…=D


  248. Volume finishing at about 220M on the Dow, certainly no last minure buying as the futures are at the day’s lows.

    Cap – you may have nailed it on that fund liquidating because that was one hell of a sell-off into the close. 

    Dow down 10% for the Quarter, S&P down 12% – that is some ugly stuff! 


  249.  kururi67—LOL!!
    watching to see if minis (/YM & /ES) close lower before they open for the asian markets


  250. Phil/DBA.  What do you think of a boring, but dependable DBA buy/write?  It never moves, yet you can still make over $3 in 6 months for Jan puts/calls and never look at it again.  Just looking for something productive to do with all the cash in my IRA.


  251. Phil: have closed callers55 and wait to sell jan50, also rolled jan calls 35 to 30. Spread is then 30/50.


  252. I’m thinking Cap needs to share his info with us more often :)


  253.  Phil,
    on /HG and /CL: reason why they didn’t close at the lows of the day was maybe ‘coz the dollar barely nudged? 


  254. TBT not breaking $35.50 - interest rates can go only so low..


  255. gel1 – EW was up 4% today in a  really awful market. Any news ? I couldn’t find any announcements.


  256. DBA/Judah - I like them a lot, especailly with some of the commodities down at the moment.  Very good IRA play.

    TNA/RMM – Great!  Now we just have to hope we don’t drop another 2% tomorrow! 

    Copper/Jdub – I found the lack of copper movement very strange.  FCX was falling back to where they were when copper was $2.72.  If there is high unemployment and other commodities go down but copper stays up, then there’s no reason for them to go down so either copper has suddenly begun lagging by a mile or the sell-off was BS.  

    At $2.925, it’s not a bad idea to short copper (/HG) for a cover.  At $12.50 per 0.0005 per contract, you lose $625 per contract if it stops out at $2.95 but, if we do crash and copper falls back to $2.72, that’s a $5,125 per contract gain.  I am not going to do it because I think copper is up because the market is wrong but, if you think otherwise, it’s a nice risk/reward on the cover.


  257. Phil,
    I’m hurting on a few artificial buy write spreads on TBT, along with a $47 September I sold a few months ago, that I have rolled down to 2x the Sept $43 puts.  I’m short a total of 5 put contracts.  The new margin requirements on triple ETF’s has drastically affected my available buying power, and I’m starting to think it may be better to just close my various TBT positions, at a significant losses, and just do a buy/write on BA or something similar that looks like it will pay close to 60% in 18 months (Assuming BA holds $60), making up for my loss in TBT, with less than half the margin requirement.
    I’m in 4 $34/40 Jan 2011 Bull spreads, and short 4 $34 2011 puts to to reduce the basis on the bull spread.  This along with the 2 September $43 puts, has a margin requirement of $10,000 on my $30,000 account.  My loss in TBT according to TOS is about $2,400.  I foolishly got way too aggressive with these positions, and TBT is way too big of a portion of my portfolio, and I’m eager to put this mistake behind me.
    Thoughts?


  258.  I rarely play the commodities other than for a day trade.  Too scared to hold without watching it closely.  And when I do play the commodities, I play the minis.  For those interested:
    /YG: Gold Minis
    /QC: Mini Copper
    /QM: Crude oil minis
    /QG: Nat Gas minis
    And for those just starting out, know when those inventory reports come out!!  I was lucky enough to have played /QG when the report was in my favor.  And I had 3 contracts too!  Almost had a heart attack seconds before reports were announce when those candlesticks just went crazy.


  259.   I don’t know who owns DNDN here.  Tanking in the AH.  anyone know why?


  260. JRW -
    No shorting TNA – guess you are pumping up your retirement account.
    IB will let any idiot (me) trade just about anything they want – no issue shortingTNA.


  261. TBT/Palotay – Well if it’s crimping your margin then that’s a totally different story as it makes no sense to tie up your account waiting for a trade like that.  Just realize you are being squeezed out of the position and it’s very likley they will take off and totally depress you soon after you capitulate because you are not the only person in this position.  You have 4 Jan $34/40 spreads, now $2.30 ($920) which pays $2,400 if all goes well.  Why not take the $2,400 loss you have, leaving the 4 spreads and just sell 4 BA Jan $45 puts for $2.25, which gives you the $900 back at just (according to TOS) $2,700 of margin so if BA finishes over $45 in Jan, your worst case is a $1,500 loss on the overall trade and, if TBT finishes over $40 and BA finishes over $45, you are up $900 so almost worth the hassle. 

    Guy on CNBC saying AAPL $155!

    Commodities/Jdub – Well, that’s what stops are for! 

    DNDN/Jdub – That’s just strange.  I see no news at all.  They are down from $40 a few weeks ago but lost half of it just now so I like them if they hit $25 for a bounce.


  262. Phil,
    Commodities: too volatile to put in stops that I can tolerate hence having to watch it.
    DNDN: Optrader site says rumor has has it Medicare not covering prostate cancer drug.  with the cost of treatment and medicare’s balance sheet, i can’t blame them.


  263.  Phil,
    Copper: Could possibly be lagging the market--massive h&s forming too.  don’t you just love those patterns=)


  264. Phil
     Unless the markets totally melt down I doubt $155 AAPL. I have been down on them as a warning based on my knowledge of their real problems. I still believe they ran into supply problems with the iphone and ipad as a way to avoid huge losses. This is not a dumb co. They also only produced what they knew would disappear. They are really in a safe position as how many owners will hire a lawyer at $3,000 to sue for a maybe $1,000 and they protect themself from all this by replaceing the units. They met deadline promisses more or less and sold every unit, BUY THAT GUY A CASE OF SCOTCH!


  265. samz / shorting TNA
     
    There are ussually no shares available. My accounts are not IRA’s.


  266.  on AAPL--if you think 155 is low--how bout this?
    http://www.macdailynews.com/index.php/weblog/comments/25637/
    if Elliot Wave peeps have their way with markets going to go below 09 lows, i can see this happening.  Full disclosure, I’ve been short AAPL(with Aug puts) since it was trading at 272.  I sold 1/2 at close of day and sold July P to reduce delta.
    Elliot Wave piece:
    http://www.graphicstart.com/images/Elliott_Wave_Cycle_Status_2010-2011_stock_market_direction_is_down.jpg


  267. I just want to point out that if the head and shoulders pattern REALLY IS TRUE, then we’re looking to head to 861 on the S&P 500 and 8206 on the Dow.  I calculated these levels by subtracting the difference between the "head" and "neckline" from the neckline level.  I don’t know if I really subscribe to all of these chart patterns 100%, but none the less, its still interesting to note.


  268. Why looking from oil firms only XOM, TOT testing 2 years lows and pay 6% dividends.  I thing for long time investors sounds good.


  269.  Hi Phil,
    DNDN now at 25. Buy here or wait for tomorrow morning for an options play instead?


  270.  DNDN, message boards are alive with some medicare news. I agree it’s a good bounce play.


  271.  i’m not going to rush. i think i’ll play this with options tomorrow morning


  272. Dendreon Corp Weakness attributed to CMS post describing the opening of a national coverage analysis on the Provenge autologous cellular immunotherapy
    - CMS received informal inquiries for a national coverage determination (NCD) for autologous cellular immunotherapy treatment of prostate cancer. This interest arose upon the recent FDA approval of the Sipuleucel T treatment regimen, marketed as Provenge.
    - CMS :"We are opening this national coverage analysis to determine whether or not autologous cellular immunotherapy is reasonable and necessary under sections 1862(a)(1)(A) and/or 1862(a)(1)(E) of the Social Security Act."
     


  273. Oh dear – Copper short working way too well already, jumped down to $2.90 so that’s a stop out at $2.905 now (0.005 trailing).  For every penny down, you can add .05 to the trail as the chance of a meaningless retrace increases with $2.89 being a likely stop out as it bounces a penny off $2.88. 

    AAPL/Shadow – I think at $155, I will want 10% AAPL.

    AAPL/Jdub – At $85, I think I will want 20% AAPL!

    TOT/Pahurik – I tend not to like the foreign oils becasue they are simply harder to follow the news on.  XOM is so cheap and so big and so well-placed politically that I don’t see any reason to gamble on anything else other then BP, which is just irresistably cheap so makes a fun gamble. 

    DNDN/Jdub – As far as I understand (and Pharmboy is way better than me at this), Medicare review is a standard procedure for new treatments, which Provenge is.  They are already covered by insurance companies so, at worst, it’s a percentage loss for them but I don’t even think it comes to that so possibly huge opportunity to profit off silliness or possibly more to it than I think but I think worth a stap at a small position down here (now $25.30).


  274. Phil, what you think, its stupid or not, I make little HERO play this week, buy stock at av. 2,5 and sell oct.2,5 calls 0.45 with 18% down protection, if hold 2.5 then 22% 3,5 month?


  275. DKGuy/EW
    I have not seen any news on this one… It looks even better, since the overall market is so damn weak.


  276. Phil – what do you think about doing a buy/write strategy on DO at this point.  I see they pay dividends ranging from $1.5 to $2, three times a year as an additional bonus…  I was thinking picking up the DO stock and selling at – or – slightly out of the money calls… rolling them monthly…


  277. Two bearish technical signals: the Dow Industrial and Transportation averages each finish below their previous correction lows of early June, and the Dow’s close below 9800 breaks the head-and-shoulders formation.

    Overconfident consumers seeking instant gratification share the blame for the economic mess, but a growing sense of "our fragility and our weaknesses" – call it gloom if you want – can help us develop the realistic expectations needed to save the economy, Rick Newman writes. "It might make us grumpy, but after that it will make us better off."

    Canada saw a housing boom and recession, but fundamental differences in Canada’s banking and borrowing saved its housing market from crashing. "There is an element of conservatism that runs right through the Canadian housing industry, from the banking, financing element, to the homebuilders and even in the resale of homes," says a real estate CEO.

    The world’s rich countries are conducting a "dangerous experiment," David Leonhardt writes, repeating 1930s economic policy – starting to cut spending and raise taxes before a recovery is assured – and hoping today’s situation is different enough to assure a different outcome. "In effect, policy makers are betting that the private sector can make up for the withdrawal of stimulus" – and the markets are skeptical.

    Only in a world that’s truly out of whack is Japanese debt a haven, William Pesek writes. Japan’s long-term demographics are scary, making its debt quandary arguably worse than Europe’s. "If confidence in markets unravels anew, Japan’s debt vulnerabilities will become too great to ignore and yields will rise markedly," Pesek says.

    Good news for stability in Germany, good news for the Euro – we’ll see how the markets reactChristian Wulff, a candidate backed by German Chancellor Merkel, is elected president of Germany, according to media reports. Euro at $1.2233, +0.4% vs. dollar.

    Moody’s (MCO) says it may downgrade its Aaa sovereign rating on Spain because of deteriorating economic conditions. Euro holds steady at $1.2259, +0.6% vs. dollar.

    Paul Volcker is said to be disappointed with the final compromises on the financial regulatory rule that bears his name and was supposed to cut down on risky activities at big banks. He didn’t expect his proposal to be diluted so much to help win votes, friends say.

    More than half of U.S. workers were either unemployed or experienced reductions in hours or wages since the recession began in Dec. 2007, according to a Pew Research report. The survey also cites a "new frugality" in spending and borrowing habits, and diminished expectations about the future.

    Fifteen of the 49 U.S. cities with populations over 1M saw year-over-year declines in their unemployment rates in May, but 22 posted unemployment rates in excess of 9.3%. The highest rate in the nation among large cities was 14.1% for Las Vegas; Washington, D.C., had the lowest rate at 6%.

    Doug Kass sees opportunity in the current climate of fear, as many individual stocks approach attractive entry points. "The market, in the aggregate, is currently discounting a double-dip and is pricing in 2011 S&P earnings at about 25% less than consensus."

    Airline stocks (ETF: XAL) soar ahead today despite swooning with the rest of the market yesterday, after IATA data showed a pickup in airline traffic and a Morningstar analyst says "the evidence doesn’t suggest a double-dip recession." DAL +7.7%, UAUA +6.2%, LCC +4.3%.

    If R&D costs were treated as an investment rather than as an expense, $300B would have been added to GDP between 1998 and 2007. GDP would have grown on average 3% during those years, up from 2.8% under the current methodology.

    Look, Yahoo finally found someone who wants their stock!  Yahoo (YHOO) authorizes a $3B stock repurchase program for the next three years; shares up 0.9% AH.

    APOL cannot catch a breakApollo Group (APOL): Q3 EPS of $1.74 beats by $0.19. Revenue of $1.3B (+27.7%) in-line. Shares -1.6% AH. (PR)

    Nor BPLawsuits against BP are pouring into courthouses nearly as fast as tar balls are washing ashore. If Exxon Valdez is any indication, the embattled oil giant is in for a grueling legal marathon that could cost up to $90BI find this comment interesting as, in fact, XOM paid about nothing.

    Stocks sunk in the final stretch of trading, after news that Moody’s had placed Spain’s credit rating on review for a possible downgrade. The S&P closed at 1030, a Q2 drop of nearly 12%, breaking a four-quarter winning streak. NYSE decliners outnumbered advancers by about four to three.

    At the close: Dow -0.98% to 9773. S&P -1.02% to 1031. Nasdaq -1.21% to 2109.
    Treasurys: 30-year +0.34%. 10-yr +0.08%. 5-yr -0.03%.
    Commodities: Crude -0.9% to $75.26. Gold +0.09% to $1243.50.
    Currencies: Euro +0.35% vs. dollar. Yen +0.13%. Pound -0.87%.


  278.   - OR – just selling the Jan 12 calls and sitting on them.  Add in the dividend (assuming $6/yr) and I’m coming up w/ a 20% annual return.


  279. Phil- At 11:19 you posted
    XOM/Fab – If they buy BP they can go to $40 but I’m happy to own them for $57 or even $60, even if they do buy BP.  With XOM, if you sell the 2012 $57.50 puts for $9.20, you have a 1x net $48.30 entry.  If they head lower, you can buy stock at $45 and sell 2012 $45 calls for $7.50 (guessing) and that would put you in at net $28.30/42.90 with the stock at $45.  So, if you plan your moves in advance, it’s much easier to decide if you have a good entry, right? 
    I can follow the logic of this trade pretty well, but if XOM heads lower, what about the short 2012 $57.50 put? At XOM $45.00 wouldn’t you have a debit of approximately  $12.50  to add into the calculation? I may be missing something here… Thanks.


  280. Phil
    What a turn around AAPL has problems and they have to address that, but what is this situation, I am thinking they will fix this and when the price falls to the bottom we will ride them up again. For investors this is only a change and opertunity.


  281. Gel1 – Thanks Gel. I agree and will wait for a little pullback here for a buy write.


  282. The amount of risk the stock market poses is not static. When you select a portfolio that represents a certain amount of risk which should be in line with your risk tolerance, you must be very careful. Why? Because the external forces that move the market are constantly changing, resulting in varying amounts of pressure on the market to move either up or down.

    Currently, the pressure that is mounting is putting great downward pressure on the U.S. stock market.

    One may say, "Well, I’m quite risk tolerant; and if the market goes down like it did in 2007, I can ride it out and I’ll be okay." This position would have to assume that the market would recover to the previous levels of today in a reasonable timeframe of, let’s say, a few years.

    Now, let me show you why I believe people in the market today are taking on a lot more risk than they realize.

    First, remember that back in October 2007, prior to the most recent market meltdown, the Dow was at 14,000 points. If today, during the summer of 2010, represents the near pinnacle of the current recovery, then you still would have nowhere near the amount of investable assets your accounts represented in 2007 for several reasons, the most obvious being that the Dow is not at 14,000 points but at 10,000.

    Second, when the market drops by 50 percent on your $100,000, taking it to $50,000, you need not a 50 percent gain but a 100 percent gain just to break even. For both of these reasons, you are not at your 2007 levels now. But let’s consider another phenomenon of which you may not have thought.

    When bubbles burst like the real estate market and stock markets did in 2007, they don’t re-inflate to their previous levels for a long period of time — typically 20 years or longer. Consider Japan, whose own stock index, the Nikkei, sat at 38,000 points in 1990 and today, 20 years later, is still at 10,000 points. Do you think risk-tolerant Japanese investors who said, "I can stand large corrections should they occur; and I can even wait a long time to recover" had in mind that 20 years later they may still be worth only one-third of their 1990 account values?

    Bill Gross, CEO of PIMCO, one of the world’s largest bond fund managers, has said history was made in October 2007 when the stock market fell, because we may never again in our lifetimes see a Dow of 14,000 points. Why? Bubbles burst for a reason and don’t re-inflate for a very long time. The stock market bubble burst in 1929, ushering in the Great Depression, and investors were not made whole as a result of the market’s losses until 1954, 25 years later. I’m sure that when risk tolerance was explained to investors in 1928, they had no idea of the level of risk they were exposing their life savings to at the time, which was also true in Japan in 1989.

    Mr. Gross has gone on to say that we are now living in the beginnings of a "new normal" — an extended period where prices are falling in a process of deleveraging and will not recover to previous levels. Instead, they will find a new normal that is supportable by a slower aging economy.

    Remember that the Dow was at 14,000 points just over three years ago. Today, it’s at 10,000. As we continue to adjust to the new normal, there are additional bubbles that have not yet burst that, upon doing so, will cause the market to drop further. Not just drop lower, but also stay lower for many years to come. I believe that if you are in your 50s or older, you cannot afford to ride the market down this time, because it’s not coming back.

    The bubbles that have yet to burst are the following: bond bubble, dollar bubble, U.S. Government debt bubble and, eventually, a gold bubble.

    When these bubbles burst, the Dow will fall to a new normal. That new sustainable level may be between 5,000 and 7,000. When the market has greater downward pressure and our country’s financial woes and demographics work to keep it down, then the most critical strategy quickly becomes to protect what you already have while our nation and economy deleverages and adjusts to the new normal.

    We’ve been taught that over periods of 10 years or more, the market always goes up. Well, if that were ever true, it no longer is. Consider the Dow, which stood at 7,487 on November 13, 1997, and then was again at 7,486 on March 18, 2009, almost 12 years later.

    To discover one of the reasons the stock market bubble will not re-inflate to 14,000 is to consider what pushed it there to begin with. The 77-million-strong baby boomers were in their prime spending years in the 1990s, on a spending spree the likes our country had never before experienced. All that demand created a supply shortage in housing and allowed companies of all types to raise prices, thus, driving our markets higher. Seventy percent of our GDP is made up of consumer spending. Now, here we are in 2010, and the baby boomers are 20 years older. They are past their peak spending years. They are downsizing empty nesters that are fearful about their future and savings like never before.

    There isn’t another baby boom generation that’s waiting in the wings ready to buy, buy, buy to help re-inflate the bursting bubbles of real estate and the stock market by driving prices up. When you recognize we are now in the new normal — which is still adjusting to new lower pricing — then you will realize the next time the market declines, it’s not only not coming back to its current levels quickly, it may not come back in our lifetime. That adds up to risk that many do not realize they are taking.
     


  283. From this morning on corporate relocation overseas.  Here is a quote from Obama after the election "There is a building in Bermuda [don't remember if it was Bermuda or some other foreign country] that is  home to 10,000 American corporations.  It is either the biggest building in the world, or the biggest tax scam in the world, and we know which it is."   At least Obama talked about the issue.  Did you hear any of this from Bush 2?  No, we heard how strong the economy was every month or so.  At the time I said, "Really Mr. President.  We don’t make anything here anymore.  Instead, we buy cheap throw away stuff from China.  We have no savings. We are broke, a problem that you have added to greatly by doubling the deficit in a few years and you did this during a time that the economy was expanding." 
    It’s the threat of corporate relocation that keeps global corporate taxes so low – companies are so rich and powerful that they have effectively told our governments to look to the …


  284. JRW
    You are wise and that is why I am done with investing in even the short near turrm. I have restrained from all advice past Jan 2011 and regret some of that. The only way is cash at the end of the day. I am 100% with you and I do see your Zs enven toughI I have tooooo many loses to ever correct I may very soon go 100% cash every day.


  285. JRW, I’ve known of the aging boomers’ affect on housing prices for some time.  But I hadn’t heard the implication of the slow recovery on the boomers forcing them to ditch the stock market.  That’s what I need to remember about deflation.  Everything goes down.  Thanks- 


  286. Post 3 pm selloff … should’ve seen that coming …. definitely had the feel of a liquidation or forced sellout.


  287. Hey All
    I am the ageing boomer and I know what most of my fellows are doing, I can’t even convince my only sister to go another way. Because our parents are 90 she seems to think they will save her even though I could buy all out and I think I am going down the tubes!


  288. JRW, you don’t think as the bond/dollar gets flushed down the toilet the markets would rise?  All hard assets will go up, and stocks will go up with it, at least in new dollar terms.  All that said, looking a few months ahead, difficult to imagine dow below 11000 for the elections this fall.  Phil is 100% right IMO when he talks about relationship between ‘them’ and gov’t.  They are given freedom to manipulate, but at certain times that manipulation has to go in the direction needed for the ‘democracy’.  I think this is gigantic shake down starting from flush crash until now.  Before long we will be complaining that our short positions are manipulated higher like we were 2 short months ago.


  289. I forgot , the mind goes first, My parents who have out lived all their siblings agree with me and push me to SELL my sister and her stupid, dumb husband who has no idea why nobody will not pay him outragious wages to build unwanted  housing even though she has a masters degree and he never finished high school. This is our current problem, nobody thinks they need to change. It will go back to ??????? soon. To them it has to!


  290. Phil / Ddip    Loved your reply to my 2.58pm post, but it didn’t really address my current concern of Ddip.  Your answer addresses the long (maybe very long) term upside for multinationals.  But you side stepped my rationale for the dire growth prospects and the immediate and even medium term impact this will have on mkts.  I’m a greenhorn relative to you in forecasting short term mkt movements, but as I’ve indicated in previous posts I’ve only reluctantly stayed from my 90% net cash postion, while my head has been screaming at me to go heavily short.  I’ve been struggling to understand your bullishness with the 25% invested position, rather than more aggressive shorting.  Which part of my post, which fcts GNP shrinkage, do you disagree with?  You’ve always emphasized that you like to absorb contrarian views.  Also note the very sobering post from JRW which underpins my arguements.


  291. JRW,
      Good points, & well said.  Of course, a wave of inflation could present the illusion of getting back to 14,000 or wherever, but it’s time to pay the fiddler,  the partys over.
      One of the oldest newsletters Mark Hulbert tracks, can’t remember the name, is based on one simple principle :
    when the market’s below it’s 200 day MA, go to cash & wait for it to get back above.   It works.


  292. For those of you that think high inflation will result in Stock Market gains, yes………but
     

    November 14, 1923

    German mark worthless (4+ Trillion marks per dollar)
    Bank interest rate over 900%
    German stock market at 26,890,000 at the peak
    The value of the Daimler company was about $980 million and a car cost $3 million – the whole company was only worth 327 of its cars.


  293. JRW
    You have submitted a terrific piece that is a thesis for caution. The frustration of watching your investments arbitrarily be diminished in value as a result of unknown hazards or intentional manipulation, makes the risk element out of proportion to the potential rewards. My equity portfolio is flat for the year, to date, and it is for the reason there have been three events since January that I experienced 200K down days. These drops were caused by political misteps and foreign events that took down the broad market.  None of these events were of the nature anybody could see coming, and certainly had nothing to do with the basic fundamental well being of the investment choices. The "new normal", as you and  Bill Gross have stated, really must be acknowledged in our investment strategy, and for sure it negates the importance of historical norms that are no longer relevant.  Too often we assume everything reverts back to past values, but not so, as new parameters are in play that were not in existance previously  I have found conventional hedging strategies to be helpful, but not adequate for needed  protection, and therefore I have devised a balance in my portfolio that I refer to "sector hedging", wherein it offers balance to the downward moves brought on by unexpected events, with corresponding upward moves in other areas that act inversely.  My positions in gold are one of these hedges. Given the higher risk levels in equity trading today, as a result of, as you say, the many potential bubbles, I have been concentrating on currency investments, as the markets are far too large to be subject to manipulation, other than by sovereign governments, but their interests can be forcasted with some certainty. It is a market that serves world wide commerce as a purpose, but also is an investment opportunity for those that are better preparred and skilled in their trading expertise. It carries far less risk than the equity markets, and enjoys diversification  as it is spread across the entire world.. Thanks for your very informative post, and a reminder of the sometimes overlooked risks we live with day to day.


  294. Phil – does rolling the following positions make sense?:
    FCX JUL $60 ps (bought at $2.50) to AUG $57.5     WMT AUG47.5 ps (bought at $1.03)  1/2 to SEPT, 1/2  poss put to me and then buy write    RIMM SEPT55  (rolled once to $5.55) to JAN12 $37.5 calls and sell $45 p & c’s  WFR OCT12  (bought at $1.52) to JAN12 11 puts and XOM OCT57.5 (bought at $2.15) to NOV55s.


  295.   Hence my use of "illusion" of inflationary wealth.  If we can’t get the real economy on main street going again soon,
    I think more  money will be made on the short side of the market than the long.
      What upsets me is this whole mess is OF, BY, & FOR the bankers.  They want to play in this unregulated, 600 trillion dollar fantasy world of their creation, & we have to bail them out !  I say make them eat ALL their bad paper, even if it takes 50 years.  Bypass Wall Street & lend directly to the next tier of regional banks to get money out to the people.
    Fiat money is only good when it’s circulating.


  296. Good evening campers!

    Futures arre pretty much sucking with the  S&P hitting 1,016, Dow 9,633 and RUT 600.  They’ve all bounced a bit what a very rotten way for Japan to open. 

    Copper is back up to $2.935, which is why you have to take stops so seriously in the futures.   This is, of course strange because why would copper go back up with the indexes going down?  Oil is still around $75 and gold is still $1,241. 

    HERO/Pahurik – I like those guys, especially at $2.43!

    DO/SrF – Good pick down here but I’m only seeing a .50 dividend promised so the rest depends.  I prefer to play those with deep calls like the 2012 $55s for $16.50 so the call away is net $71.50 on the $62.19 stock and you have nice, free downside protection to $45.69.  You can be more aggressive by selling $50 puts for $7.60 and that drops you to net $38.09/44.05, which gives you a very nice 44% if called away and a nice 29% discount if put to you.

    XOM/Jbur – You are selling the $57.50 put for $9.20.  If the stock tanks to $45, then you buy 100 shares for $45 AND you sell $45 calls against them for $7.50 so your net cost on the shares you bought is $45-$9.20-7.50 or $28.30.  If XOM stays below $57.50, then you have another round of the stock put to you at that price and the average of ($57.50+$28.30)/2 = $42.90.  That becomes your break-even point. 

    Interesting JRW but who here is playing for a 14,000 market?  I think 10,200 is a fair price for the market, which is about where it was in 2004, when global GDP was 25% lower than it is today so I’m figuring that much of a pullback over time – something we’re not seeing anything close to at the moment and probably never will again thanks to the BRICS.  Of course 10,200 means we can go about 15% up or down very easily and I would consider either side of that line (8,650 or 11,700) to be stretched and, of course, we have our 5% and 10% ranges that are far more likely.   The Dow has been over 8,000 since 1997.  To me, it just doesn’t seem like we lost 13 years of growth just because a few people retired but, over time, things are not likely to go back to boom times. 

    The real problem with 14,000 as a benchmark is the false premise that we EVER should have been at 14,000 in the first place.  That’s where it all falls apart.  14,000 was treating multiple bubbles as real at the same time- housing, commodities and banking, which were all feeding off each other and all ran up to ridiculous sizes.  Again, that’s pretty easy to track as banking became 15% of the S&Ps valuation, commodities 10% and housing 5% vs their old levels of 5% banking 3% commodities and 3% housing.  Getting those sectors back to normal valuations (pe’s around 8) would knock off about 15% of the S&P right there.  Obviously we also had a decline in manufacturing but some other things have popped up to balance it out, especially with some web companies actually getting real. 

    So do I think that a 25% drop from S&P 1,500 (to 1,125) is real and sustainable?  Absolutely and we’re using 1,070 as the middle of our range, not the top and that too can go up and down 15% to as low as 909 and as high as 1,230 but lower than that, lower than 40% off the top and down to levels we were building off 15 years ago – I’m just not buying it. 

    Aging/Shadow – I know, that’s what sucks the most.  We need to plan to bail out our families in the future because the government sure as hell won’t be there. 

    Double dip/Tusca -  OK, let’s try it again.   I’m trying to say that, if you look at corporate earnings, you need to SHOW ME THE LOSSES.  I don’t give a crap about your recession or your unemployment or your debt.  I’m investing in WFR at a $2.5Bn market cap ($9.88) and I’m selling the 2012 $7.50 puts and calls for $5.10 so my net entry is $4.78/6.14.  That’s roughly a $1.7Bn market cap I’m putting money into WFR for.  In 2007, the company made a profit of $826M, that’s a 50% ROI – slightly better than TBills.  In 2008 then made $387Bn, which is just 25% back on my money but it was a rough year and 2009 was even rougher and the company lost $68M, which is why it’s so cheap now.  The bulk of that money was lost in Q3 ’09 and they have been back on track since then and are expected to make $250M this year and about $500M in 2011.  Whether the stock market is at 11,000 or 6,000, I would still rather have $10,000 tied up in WFR at net $6.14 than $10,000 tied up in TBills at $10,000 with a promise of $3,000 in interest by 2020

    No one is telling you to buy the S&P.   During the great depression you could have bought the Electric Boat and National Acme Co. (GD), which returned 55,000% over those 22 years you people are talking about sitting out of the markets.  International Paper (IP) was the internet of the day and they rerurned 30,500% from 1932 to 1954.  Zenith was the AAPL of the day and investors made 24,000% in those 22 years.  Douglas Aircraft changed their name to Boeing and made 23,000%, another fancy electronics firm was HON, good for 21,000% gains and other smart buys were GR (20,000%), NSC (18,000%), CVX (Skelly Fuel – 16,000%), UIS (Remington Rand – 12,000%), DHR (Acme Machines – 10,000%), BWA (BorgWarner – 10,000%) and CVS at 8,000%. 

    Now, you are a smart guy, I’m sure you could have figured out that the company that makes planes would probably outlast the depression.  I am not bullish, I am bottomish.  We are playing with 75% cash and our 25% invested was invested AT THIS LEVEL around June 8th with the ANTICIPATION of another 20% drop.  Our biggest concern in the month after that was that we should have bought more at the bottom, right?  Well here is the bottom again and another chance to buy some so we started with a TZA play that’s already up 300% and now we’re pulling another 10% off the sidelines to play for some upside.  If we don’t get it, then we’ll just have to roll down and buy some more stock but if you want to hide out and wait until the next time the market flies up before buying – no one is forcing you to buy.  Buying stocks is risky – that’s why you can make 10,000% in the same period your TBill will pay you 30% (assuming the don’t default). 

    When we buy a stock down here, we are doing buy/writes or selling puts that will give us another 20% cusion to S&P 880 or lower.  If you don’t think the S&P will hold 880, then of course it would be crazy to buy at 1,040 but if I can buy the best name brand stocks in the world for prices that are as good as I could get if the S&P is at 880 and I DON’T think we’re actually going to get that low again, then I’d be crazy not to.

    Different opinions are what make markets and thank goodness for the naysayers and the doomsayers because they get people to sell perfectly good shares of CitiGroup for $3.75 and sell WFR for $9.88 etc.  When EVERYONE is confident, then I’m going to be selling but I don’t need a great depression to buy stocks at great depression prices and, don’t forget – if deflation hits, then my stock may go down in price but the dollars they make me (dividends, appreciation, option sales) for the next 20 years will still buy me the same house and oil and happy meals while your cash might do a little better (as long as you don’t spend it because where will more come from?) but, if we get into an inflationary cycle and things shoot up again – you will not only get your ass kicked all up and down Wall Street but you’ll be lucky if your cash can buy 1/4 of what it could when you first sat on the sidelines. 

    As with everything else, it’s a risk/reward scenario.  If you don’t think that IBM, XOM, MON, AAPL, JPM, C, WFR, INTC, BA, PFE, T, VZ, KO, PEP, WMT, MCD have any real value and are just bits of paper (not that your cash isn’t but that’s another matter), then stay the hell away from them.  I, on the other hand, am pretty sure I will be very proud to turn those stocks over to my daughters when I die with decades of appreciation on thier books – even in your doomsday world…


  297. hi Peter are you around — please give me some recommendation on SPX and RUT short strangle that you was recomemnd to start — I have 10 positions of 875 August short put with 960/950 vertical put — is this the time to flip to short call now that SPX broke 1040 and not hold into close. same as RUT August short strangle 520 short put — I did not open any short caller yet. THX


  298. Many folks are wondering why the Fed has not started with a tightening policy related to Treasure rates. Our Fed chief is a member of the school that believes in times of contraction, we must continue to expand the money supply. They believe this new money will be injected into the economy, and will encourage commerce because the mind set of the typical American citizen, is to spend what you have, as you receive it.  Having just experienced the reality of a major economic contraction, coupled with unemployment and fear,  the same citizen is backing away from the edge, and stashing some of their resources for a rainy day. This "new norm" to paraphrase JRW, is not allowing the economy to recover at a pace that was anticipated, based upon previous recessions in the past.  I believe the Fed will over expand the money supply this time around, more than what is needed, and is intentional, as they believe inflation is the better of two evils -  one being deflation and economic contraction, the other hyperinflation.  The perceived benefits of hyperinflation, they believe, is the easiest way to pay down the debt that can never be repaid otherwise.  Asset values of every kind – real estate, equities, etc  will be revalued upward to coincide with the new dollar value, however the assets still have the same value, but denominated in cheaper dollars. This coming hyperinflation will result in a major dynamic relating to a massive shift in the ownership of wealth, from those that are invested in fixed income instruments,  to those that are invested in dollar denominated assets. Possibly the best position to be in today, in advance of this massive shift, is to carry debt with a long dated maturity. Hyperinflation is the only possible salvation for the debtors of today, and it will also solve the entire real estate problem, as prices will elevate, thus creating new found equity. Now that is a creative plan eh!


  299. Daimler/JRW – Gee, I didn’t think of you as a glass half empty kind of guy but you know I’d be buying Daimler for $980M and, 87 years later – I’d still be pretty pleased with myself for making that purchase as the company is now worth about 2M cars!

    Rolling/Brooklyn – If we persist below 1,040 tomorrow then yes but, otherwise, you might want to wait until next week.  I almost feel silly fighting this massive wave of negativity.  I don’t think even in the ’08 crash did I see so much total pessimism on this board.  These are the moments we live for in the markets – the opportunity to buy at great prices.  XOM just bought XTO, Buffett bought UNP…  M&A, on the whole, is up about 3% this year so far and that means that a lot of very large buyers are still thinking that companies are still a good place to put money.

    I totally agree Ekor – the whole problem we’re having now is that we WASTED TRILLION of dollars of stimulus filling in gaping holes in the banking system and virtually none of that money has found its way into the economy and certainly we have created no jobs. 

     

     


  300.   Thanks for the that  Phil. Your  understanding of the market, & world, is amazing.


  301.  Hi Phil,
    Starting to make my early Christmas stock shopping list here.  For the financial sector, I had C and BAC but decided to drop BAC today for reasons I feel they have too much in common with C.  So I wanted to go a different route and look at investment mgmt/IB firms.  Of course GS is the name off the top of my head.  BUT too much headline risk for now.  
    So I look at what’s been beaten down, has good fundamentals, great potential for growth and no additional headline or legislative risk vs. peers.  
    Here are my choices in order of preferred:
    -BLK: can’t go wrong with Bonds & ETFs right?  Plus I think Fink (along with Dimon) is one of the better CEOs out there. 
    -DB/CS: I think they have a foothold on Asia
    -UBS: Same reasoning as DB/CS but more headline risk
    -MS: Really beaten down here. But if I like MS, why just not go with GS?
    -I know you don’t like ADRs but I’ve got to include Nomura Holdings (NMR).
    Thoughts on these or any other name?


  302. Hi Phil sorry for late comment — I am not good with TA — but what is your feeling about head and shoulder S&P that most investor is talking about-- I was away all day not able to watch the market.  Just now have a chance to read your market recap.  Now that 1040 is broken…. what should I prepare this week — add much more disaster hedge and rolled my short put of my stock like GOOG and AAPL to next month, currently I have Goog August 470 short put and AAPL August 250 short put, not sure how to adjust Jan 11 TNA 40 Short put have 46 contract from 2.5x rolling — sell more short call at this point???? TIA — thx for your help


  303. Phil,
     
    My glass is definitely NOT 1/2 empty !! So far this year, it’s overflowing. I simply wanted to point out that the future will not likely look like the past, whichever course you think it will take. So I advocate making hay while the sun shines, doing my part for the society as a whole, and living in an easily defended home with a nice view,good neighbors, and adequate storage of food and ammunition.


  304. Phil/XOM- thanks, I got it. It’s basically another type of buy/write, just changing the order around. Very trickey.


  305. Hi Gucci,
    The strikes you have are fine for now.  Don’t forget to sell some short calls as that’s part of the strangle.  I bet it’s hard to see your margin and balance goes south in the past few days.  With SPX 875 short put, I would actually increase those shorts if SPX drops another 5%.  We can either sell more at 875 or rolling 2X to 850 for a reasonable size credit.  After it continues to drop, we can start flipping some to short calls.  Same for the RUT.  Good luck!


  306. Thanks Phil


  307.   gel1: I think for the near term, aside from the current money supply, what the Fed is watching is the velocity of money. P=MV where P =nominal GDP (non inflation adjusted), M=money supply and V=Velocity of Money
    It’s a known fact (researching the Fed and/or BEA or even googling "velocity of money data") will show the dramatic drop of V.  Now, the equation tells you that for every x% drop in V, an x% increase in M is needed just to keep P static. But all this doesn’t even assume any pop’n and/or productivity growth and target inflation of the Fed.  Hence, M must increase so much more.  By how much does it need to increase and for how long?  Well, it depends on which economist you ask.
    I tried to simplify my explanation but there are a lot more equations and crazy formulas that can help describe what I just typed above. 
    The Fed is not worried about inflation or hyperinflation….just yet esp when you have core CPI inching downwards.  They are currently worried about DEFLATION.  With unemployment this high and banks hoarding money, deflation is the problem at hand.  And the Fed has less tools to counter deflation problems vs. inflation problems
    The biggest problem is that when to know the exact moment that velocity has gotten to a point where money supply needs to be reduced to prevent the pendulum to swing too far on the opposite side. 


  308. Juda/DBA
    Catching up on the day’s posts and wondered what  the buy write on DBA that you have been doing? Thanks.


  309. Phil
    Re: yourearlier comment on AAPL
    Buy 10%AAPL at $155 and 20% AAPL at $85?
    10% and  20% of the company shares, I presume? and not 10%  and 20% of one’s portfolio? Correct?
    I am inclined to sell some Oct or Aug $240 0r $230 Puts. What do you advise?
    As a novice, reading all the posts on your site, I guess the close was not predicted by anyone, was it?
    So, your premise of 2012 puts and calls make more sense now.
    Another Q: Per you post of two or three days ago on RIMM, I sold the July 52.5 puts for $2.80. Now what?Roll them to lower?Hold on and wait to see what  happens?


  310. jdub…. I agree, as all studies I have been exposed to regarding the principal driver behind inflation, is for the most part velocity. Monitary reserves sitting in the banks, in order to keep their ratios healthy, will never be inflationary. as the velocity of money does not apply. I believe we are in need of some inflation, in order to encourage debt formation in the private sector. This can only be acomplished through the release of the funds the banks are hoarding by buying treasuries instead of making loans, that might carry greater risk. The banks are profitable without the traditional risk that is expected for loan creation. The Fed can change this situation by adjusting the rate at the discount window.  Until this takes place, the banks will take the line of least risk, and deploy their resources into risk-free treasuries. Banks have to make profits, and the banks will make loans at a rate that is profitable, to the private sector, if their free candy is taken away.


  311. gel1/velocity: now the real thinking begins…under my assumption (and some others i think), the banks are actually keeping yields on the treasuries low and manageable as they are the ones buying during the gov’t auctions. so they borrow "interest free" money, invest in risk-free treasuries which the gov’t needs to fund projects including providing interest free loans to banks. hmmmm….sounds to me like one big ponzi scheme….which if not unwound at the right time, will lead to Prechter’s predictions.  
    What I don’t know is if the powers that be are just trying to buy time, volunteering to be the cash cows of large financial institutions or just stupid. increasing rate on the discount window would theoretically decrease money supply.  if velocity stays low, P in the equation shrinks.  so Fed can’t do that and risk any growth momentum there is.  i take it they’re hoping real jobs start to pour in which help increase velocity so Fed can safely reduce M without adverse effects on P.  but if small and med. sized businesses aren’t lent to, they can’t expand and hire people if demand for their products/services are there.  so it’s a catch 22.
    Well maybe fiscal policy can help.  Real stimulus for small businesses--maybe. But there is a cloud of uncertainty with regards to future regulation and taxes.  So businesses can have access to funds but uncertainty breeds lack of commitment to invest in human capital not knowing the marginal cost brought about by hiring 1 person.  So like the stimulus checks of 2008, businesses might be inclined to find loopholes wherein they use the money to pay down their debt.  
    So kind of in a tight spot here.  It can be taken care of but those in charge will need very steady hands to maneuver around these obstacles.
    JMO


  312. Good morning! 

    The ECB loan emand turned out to be just $160Bn, less than 1/3 of what was lent last year, which indicates that out of the $540Bn that was lent out a year ago and less than 1/2 of what was expected to roll over.  The vast majority of the banks (86% of the ones that borrowed last year) filled in their capital gaps so the ECB was 100% right to move from 1-year to 3-month notes as this should allow them to wind down the emergency liquidity quickly and, PRESTO, QE drops by $380Bn overnight!  Of course this is good for the Euro and we’ll see if it’s enough to calm the EU markets, which were down about 2% at the open.

    The CAC is worst off, bouncing off the 2.5% rule at 3,364, mostly over the Moody’s warning on Spain.  S&P and Fitch already rate Spain at Aa, so Moody’s would simply be confirming it as they are the only ones who still have an Aaa rating – isn’t that worth freaking out about?  EU manufacturing slowed a little but German Retail sales picked up and Ireland is officially out of recession so a mixed bag over there. 

    The Hang Seng was closed but not the Shanghai,  which dropped 1% and the Nikkei fell 2% but who wouldn’t after seeing our close?  SNE fell 3.7% on currency concerns (Yen too strong) and that brought about a nice intervention on the Yen at 88 and they are up half a percent since then (up is down).  Japan’s Tankan Survey of business confidence was +1 (0 is neutral), much better than -14 last time and 5 BTE. 

    The reason behind the improvement in corporate confidence is that healthy demand for Japanese goods in emerging economies, including China, continues to benefit Japanese firms and is prompting them to increase capital spending. A recovery in corporate earnings, as well as government stimulus measures, has also helped income and employment conditions pick up, underpinning consumer spending at home.

    Japan’s economy looks likely to advance along a self-sustaining recovery path, analysts say.  "The tankan confirms that the economy keeps steadily recovering," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities. "We expect the country’s business sentiment to continue improving on the back of robust domestic and external demand."  The tankan also showed big manufacturers and non-manufacturers now plan to boost capital spending by 4.4% in the fiscal year that began in April, much better than the 0.4% slide projected in the March survey.

    We’ll see if any of this helps.  We have unemployment at 8:30 and Construction Sprending, ISM and Pending Home Sales at 10 and Auto Sales throughout the day but nothing matters until Friday’s Non-Farm Payroll (8:30), which is now whispered to be -145K after being + 431K last month.  Of course, at this point, even -100K would rally us and we now have the exact opposite situation from last time, when Obama said the Jobs Report would be good and that made 431,000 additions (mostly census) a disappointment.  Now we have expectations that are so low, that +1,000 will probably cause a crazy rally.

    We are in technical hell but I maintain that we are overreacting, although it’s getting very lonely on my side of the fence.  Unfortunately, we’ll probably have to wait and see for tomorrow’s Jobs data.

    If we are at all red today, we can layer our protection.  The TZA play is up 300% already and should be stopped out if we are not going lower and the other downside hedges are hugely in the money and may need to be stopped out.  A new cover (rolling 1/3 of the profits, which is 100% of the original bet) is DXD July $31/32 bull call spread at .25 and you can stop right there as it has another 300% upside built in (DXD is already $30.95) or you can pair it with the sale of the Aug $26 puts at .40 for a .15 credit on the $1 spread. 

    The logic to this is, if you put $5,000 into the TZA spread, it’s now $15,000 and it might make another $15,000 if we stay down but it also might get wiped out.  If you cash that and put $5,000 into the DXD play with a stop at $2,500, you are taking, effectively, $12,500 off the table (which you can use to roll and DD longs) and you still have another $15,000 of upside if we head lower.  If we DON’T head lower, then it’s good that you improved your longs! 

    More later, of course!


  313. I love these things! 


  314. Christmas/Jdub – Now that’s the spirit!   JPM is my favorite IBank because they have WaMu and the good parts of BSC and they already had Chase and Diamon is way better than Blankfien at keeping a low profile and I’d pick him the winner if the two ever had a celebrity death match.  I think if you are going to pick that many banks, why not just go XLF?  Although I do kind of like KRE at the moment as I think the regionals should come out well in the FinReg.  NMR is a good idea as the sentiment on Japan can’t be worse and they are a great regional/international lender anyway.  I’d avoid the EU banks because there will be many rumors still to come about debt exposure.

    Feelings/Gucci – I think it’s all nonsense.  I think that the last two weeks of movement were generally forced with the goal of forming this H&S pattern to trip as much technical selling as possible in order to give the big boys a chance to buy up the markets cheap.  The premise of any "pattern" is that, if the markets looked like this on the way up, then they must look like this on the way down.  In general, it’s about as logical as saying you will de-age at about 40 and turn back into a baby just because that’s the opposite of what happened in your first 40 years.  I mentioned an additional DXD cover above and we should use that if we head lower but we have 2 weeks to expiration next Tuesday so, unless things turn really ugly, it’s a little early to panic on positions.   As long as you REALLY want to own your short put stocks, there’s nothing to worry about but TNA Jan $40 puts are $12.60 and you can roll them to 2x the Aug $37 puts at $5.80 and those are pretty much all premium so I like that play and they can be rolled back to Jan $30 puts if things go wrong anyway but the possibilty of getting rid of them in Aug makes it a worthwhile risk, I think.

    LOL JRW!  I don’t disagree, I live on top of a mountain near a reservior myself (a pre-9/11 decision, my Father was a systems analyst and would always talk about all the things that could go wrong with society).   8-)

    Money supply/Jdub – You are right about V being the problem but the Fed, the EU etc. are right to pull in the reigns early on money because it’s already a massive amount and it’s sitting in banks that can lever it up 10x, which would likely come at the same time as V through the system picks up and you can go from 0 to hyperinflation a hell of a lot faster than policy can react.  The problem is (and the CB’s recognize this) that electronic banking can create a flood of money overnight, probably triggered with a flood of M&A (that can be triggered by a little coordination by the Gang of 12) that drops hundreds of Billions in cash into investors accounts at the same time as the markets are rising so that money will be flipped back into chasing stocks and give the markets a huge push, which will increase confidence and then, if we trigger some hiring, that puts money into consumer hands and then businesses start borrowing and more money hits the streets and we’re off to the races again. 

    Meanwhile, Pimpco’s Greenspan is on CNBC trying to stop the pre-market recovery by saying Europe is a mess and this recovery is all Big Business and Top 10%’ers (apparently he’s been reading my stuff) because, of course, an increase in the velocity of money before Gross and Co can cover their bets can be a massive disaster for Pimpco, who are sitting on over $1Tn in bonds, mostly fixed, and they can lose $100Bn very quickly if they can’t keep a lid on the global economy.  That’s why you have El-Arian, Gross and Greenspan running all over the place trying to "save us" from thinking the economy is improving – these are highly motivated people!

    AAPL/Maya – No, I meant of the company!  Just kidding, I was talking about allocating 10% and 20% of my portfolio at those prices.  As I mentioned earlier, AAPL is the Zenith of our time and I think they should be a good place to be invested in for the next 20 years BUT, I am not in them at all now because I think $270 is too high and I know that in less than 20 years, something is very likely to happen to Steve Jobs and the stock will drop 30-50% and give me a great entry so I’m in no hurry at all to own it.  $185 is where AAPL gets compelling to me.  That means, I don’t think it’s an awful idea to sell the 2012 $200 puts for $28.50 (net $171.50 entry) which (according to TOS) has a net margin requirement of $1,000 – not bad for making a $2,850 in 18 months.  As long as you REALLY want to, not just own AAPL for net $171.50, but are willing to DD should they fall to $100 and be in 2x at $135.75 average for a very long time while they recover from whatever disaster could have caused this – then it’s a very wise way to allocate some spare margin.

    RIMM/Maya – Let’s give it until tomorrow before we worry on that one. 


  315. TASR down 10% on lowered guidance, reversing yesterday’s bounce. Good time to double down? Or could it head lower? The 52 week range is $3.18 to $7.88.


  316. Forgot to say $3.50 currently, so 6% above 52 week low.


  317. FWIW--(JRW i’m using accronyms now!!) ARMS index went to 13 just days before the 9800 to 10200 ascent, went to 10 on 6/29 some type of rebound ahead??  let’s hope. 


  318. Phil--clarifying my understanding--on selling a put with stock price decending--if hold position, the value of put sale decreases, but if buyer of put exercises, then I must buy the stock at the put strike price, but my basis would be strike price less the premium I get.  The value of the put sale can lose more than 100%, which is reflected in the stock value once the put is exercised.  Or the put can expire in which case, I keep the premium money.  Is this correct?  Also, if "rolling" to another put sale position, (which in these case are put sales, I think means to actually buy-to-close, the put already sold, and then sell-to-open the next put to be sold. is this correct?) does this usually end up making a position cost more, kind of like DD a stock position?


  319. Phil, if you hold newly in-the-money puts you dont want to come home to roost, would you be rolling them out now, or waiting?


  320. Phil, 
    Couldn’t get the $6 TNA Calls, now down to 4.4 still worth it? or wait it out???