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Toppy Tuesday – What Would it Take to Get Over the Top?

Wheeee, what fun!

Check out yesterday’s action on the Russell, up 1% from the gap up open (rejected at 665), down 1% and then up 1% to finish up 1.7% for the day, pretty much right where they started  the mornining.  Our other indexes had more conviction than the small caps, who have been our leader all year so perhaps, just maybe, they are consolidating at the 5% line (666) waiting for the other indexes to catch up?  We had a similar situation in late February, where the Russell paused to wait (like a dog running ahead of it’s master) and again in later March while in April the Russell was slow to follow the other indexes as they trended lower

Yeah, remember April when the Russell was at 740?  Ah, good times…  It was easy to call a top then and we hedged for disaster on April 28th so it’s not like we can’t see these things coming.  It was easy to BUYBUYBUY as we tested our lows in June and July as that was the bottom of the same range (this is not rocket science, folks!) but now it is HARD to say which way we will go because we are in the middle of our range.   I see too many of our Members looking for trades every day but not every day is a good day to trade.  Some days are good for watching and waiting.  Some weeks are good for watching and waiting…

I reiterated our 1,000% SDS spread from the weekend post in the morning in our morning Alert to Members as it’s nice to be able to commit $500 to a $5,000 pay-off that protects $50,000 worth of bullish positions from a 10% drop.  That’s what insurance is supposed to do – it’s a "just in case thing."  Since the market is now on a 10% "limit down" system, we don’t need to go too crazy with our insurance as even another 9/11-type event should not, in theory, give us more than a 10% drop before the markets are halted, giving us a chance to reposition on the fly.  That’s why those Fed reports are such good practice for us – we get major market-moving information in the middle of the day and we react to it within moments and we’re good enough at it that we actually look forward to those violent Fed day moves!

Another bearish trade idea yesterday was the SPY weekly $110 puts at a .40 average, which fell to .30 at the days end so a rotten trade so far but we thought it was prudent to go contrarian as the S&P tested 1,120 and the Russell was rejected at 666 and the Nas couldn’t take back 2,300.  We are still waiting for Dow 10,700 to break the tie and, after that, we’ll be looking for S&P 1,155 and NYSE 7,350 and THEN we will be bullish about a breakout of our range.  We were strong enough looking yesterday that we were able to look at short-term bullish plays on AXP and UNG but that was balanced out with a so far, so bad, short play on USO so let’s call us neutral at the 5% line although we can only lose 100% (assuming we don’t stop out) on our long plays while our short plays can be 10-baggers!

Internationally, the markets are on pause – so it’s a great day to look at the charts, as they are a day behind.  The Nikkei was our best performer this morning, with a 1.3% gain (I did mention our EWJ trade in yesterday’s post) and the Shanghai balanced them out with a 1.7% loss against the Hang Seng’s 0.2% gain.  Other than that, the World is flat this morning, which is another theory I think should be given equal time in schools (inside joke):

The Nikkei is still very disturbing as it finished the day at 9,694, almost exactly 1,000 points behind the Dow, which is anomalous to say the least.  Copper has gone nuts but we’re still scared to short it and we will be watching that DAX test at 6,350 with great interest.  The BDI needs to break that 2,000 mark or copper is clearly on drugs but, on the whole, everything is coming up roses on the global markets as they, like the Russell, wait patiently for the US to catch up and join the Global party.     

Are we partying like it’s 1999 again or is this the start of something new?  We got a little data this morning with Personal Income flat vs. up 0.1% expected so YAY Capitalism for driving those labor costs down.  The lack of wage increases (and jobs, for that matter) didn’t stop American consumers from spending though as Personal Spending held flat vs down 0.1% expected.  PCE Core Prices were also flat vs. up 0.1% expected - a triple goose-egg for today’s data so party on markets, it’s business as usual in the American Worker’s Paradise

Speaking of Socialism, I am very surprised at the number of delusional Conservatives I speak to who seem to think they will somehow be taking control of Congress in the fall.  Aside from the fact that they just did a survey and found that the only thing people hate more than Democrats is Republicans, math is not really on the Republican’s side (not that math has ever been their strong suit - see deficits).  The Dems hold a 256-179 seat advantage in the house, that means the Republicans need to defeat 40 Democratic incumbents while holding 100% of their own seats.  A 40-seat swing has only happened twice – 1946 and 1994 (Newt’s revolution).  On the Senate side, Republican’ts need 10 seats.  Only 37 Senate seats are up for grabs this year  and only 11 of those are held by Democrats considered to be vulnerable (vs. 7 Republicans falling in the same category). 

Why is this important?  Well we have to consider to what degree there is irrational exuberance among Conservative investors who think the political agenda will drastically change in the Fall.  A reinstatement of the Bush tax cuts will require the House and the Senate to pass a bill and then Obama has to decide not to veto it – good freakin’ luck.  Yet you can tune into Fox and hear endless hours of idiocy discussing how "the tide is turning in Washington."  If money is flowing into the markets on this basis, then we may be setting ourselves up for one hell of a crash when reality hits on November 2nd. 

So, while I’d love to ignore politics, I’d say this is going to be a pretty damned critical investing event that’s going to affect our investment decisions for the rest of the year.  

Meanwhile, oil is running up to a test of $82.50 this morning, where we REALLY like them for a futures short, using the $82.50 line as our on/off switch (see yesterday’s Member chat for USO play too!).  A lot of this rally has been a weak dollar rally and the dollar has now fallen all the way to the 200 dma at 80.57, down 10% from 88.71 on June 7th so exactly 10% in exactly 2 months is good for a 2% bounce according to our 5% rule so we’ll be looking for a quick move back to 82 at least and possibly 83.5, which is about a Fibonacci retrace (speaking of Italian scientists) of the drop. 

That should keep copper off the $3.40 mark as should LOGIC because, as every reader of the China Economic Review is well aware, the China Iron & Steel Association said at a press conference yesterday that domestic prices of hot-rolled coil dropped for seven straight weeks prior to July 16, as government measures to curb property speculation hindered demand for steel. Sluggish steel demand in China, the world’s largest consumer of the metal, has caused 40% of the mills to cut output or go into  plant maintenance mode this year.  If no one is using steel – what the heck is all that copper for?

No increase in dry bulk shipping, declining volumes of steel – things that make you go hmmm…  The Wells Fargo/Gallup Small Business Survey is AWFUL, hitting a brand new ALL-TIME LOW in July as the bottom 99% of businesses are getting screwed over in America just as badly as the bottom 99% of its citizens.  Not only do small business owners detest their present situation but they also have never been more negative about the future.

Small-business owners are the embodiment of America’s entrepreneurial and optimistic spirit. As a result, their increasing concerns about their companies’ future operating environment do not bode well for the economy in the months ahead. Nor do small-business owners’ intentions to reduce capital spending and hiring: 17% of owners plan to increase capital spending in the next 12 months — down significantly from 23% in April — and 13% expect jobs at their companies to increase, while 15% expect them to decrease over the year ahead.

Big-firm earnings and global growth may drive profits on Wall Street, but small business is the major source of U.S. job creation. And most small-business owners are unlikely to hire as long as they are becoming increasingly uncertain about the revenues and cash flows of their companies in the months ahead.

While we are happy to invest in Big Business, small business, just like the bottom 99% of American Households, are in a downward spiral that isn’t going to end without some serious government intervention.  My bullish economic premise is based on what I consider an inevitable move towards QE2.  The Senate will be voting on a $27Bn Aid package for the states, which is being filibustered by the Republican’ts and about a Million jobs rest on the outcome of this one so we’ll see what happens. 

 


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  1. YRCW stopped trading.


  2. Jordan/Phil, 
    I appreciate again you running the analytics on my portfolio. I did open an account with TOS (haven’t transferred yet until I get acquainted with the platform). But I can’t find where I would go and import the positions to in order to analyze the portfolio? I was told by support I had to add all manually to the paper account?? I can’t believe that is the case right?
    Thanks  


  3. Phil/KM switch — I’d think you could as long as there are two wires coming from the switch (likely USB connections). You’d just leave the mice connected to their computers and only use the keyboard through the switch. I can’t guarantee it though.


  4.  Phil, thoughts on PG earnings?  Thinking about placing a long term bull put spread, a bit out of the money.


  5. ‘Will Someone Please Shut Greenspan Up’
    He’s now making weathermen look like good forecasters.
     


  6. Hey all,

    I have two new trades available this morning. I am looking to buy SKF and short sell CTSH.
     

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

    Good Investing!


  7. Phil, are you tempted to short oil today or pick up some USO puts today?


  8. Fighting on Israel Lebanon border http://www.debka.com/article/8947/  (initiated by Lebanon or Hezbollah, of course)


  9. YRCW earnings -0.01 vs -0.08 expected, so a 7 cent beat.


  10. Phil,
    With KM (or KVM) switches you can use it for the keyboard only and have individual mice for each computer.  They come in two types, one type (manual) has a switch you turn or press, the other (Auto) you switch from computer to computer with a key sequence like <scroll lock> <scroll lock> 1 (or 2, 3, 4) <Enter>.  They can also switch a single monitor to multiple computers, but that probably defeats the purpose :-)


  11. Apologize for the question earlier, I hadn’t refreshed my iPhone so I hadn’t read your whole morning post


  12. Apologize for the question earlier, I hadn’t refreshed my iPhone so I hadn’t read your whole morning post


  13. Hi Phil,
    What’s your take on this article potty-mouthing UNG. Something we should be concerned about?
    http://www.thestreet.com/story/10824550/1/ungs-days-are-numbered.html


  14. Good morning! 

    YRCW had earnings and they are not bankrupt so YAY!  That’s all we really wanted and there is no reason to get off the free ride on that one but a stop at .30 locks in a huge gain, just in case.   

    We are in that kind of mode in the markets where sentiment has been so bad that almost any news is being taken well.  We have Factory Orders (expected down 1%) and Pending Home Sales (expected down 5%) at 10 and Auto Sales throughout the day.  With low expectations on the first two and just 8.5M cars and trucks being sold (annualized) in June (half of a good year) – it’s going to be hard to disappoint this morning. 

    Our levels remain:  Dow 10,700, S&P 1,155, Nas 2,300, NYSE 7,350 and Russell 666 and that Small Business Survey (see post) makes it pretty unlikely the Russell is going anywhere today. 

    So, same old play as yesterday with the weekly SPY $110 puts now .32 and remember, if you DD’d, to get 1/2 out even as these are short-term gambles!

    USO still makes a good short into inventories but the idea was to take the Aug $37 puts, now $1.15, and hopefully sell the $36 puts for $1 on a nice move down to put you in the $1 spread for about .15.

    Sorry but not too creative this morning as it’s kind of a "watch and wait" day as we test our levels.


  15. Covered my SLG shorts from yesterday; decent gain; its still vastly overpriced IMO.


  16.  Holding DIA 107 puts from yesterday afternoon. Will cover if we break higher.


  17. Analytics/Amatta – Yes, I would think you would have to put them into the Paper Trading account manually.  They don’t set up the system to make it easy to use their stuff to make your other broker easier to work with.  8-)

    KM/Rain – You are right, that would work.  No solve the problem that I have a Dell tower, an AAPL IMac and a laptop and we’re good to go! 

    PG/Jo – I wouldn’t do it today.  We’re toppy and they missed, that’s not a buying combination.  If anything, I’d sell the long $60s before they lose more value and buy stock to cover if they get back over $60.  That’s a good way to enter an eventual buy/write. 

    LOL Diamond!  Well you can tell when Greenspan starts saying I’m saying that he’s totally lost it as I have been 100% opposed to that guy for 30 years.  What he said this weekend had me questioning whether I was wrong – THAT’s how much I disagree with this guy!

    Huge gap fill if we can’t hold yesterday’s opens.


  18. Oil/Jrom – See post, they hit our mark at $82.50 pre-market ($82.47) but that run is already stopped out.  You can get aggressive and try shorting at the $82 line, I’m pretty sure we get a sell-off at day’s end (ahead of inventory on fear of another big build) but be disciplined on stops as they could re-test $82.50 again before heading down

    Oh no, Facory Orders -1.2% but Pending Home Sales down 2.6%, which is not as bad as expected so let’s see if we can hold yesterday’s lows.


  19. Woops, RUT already filled yesterday’s gap so I’m thinking no on the others if we don’t get a huge RUT bounce.


  20. Phil, 

    Well I don’t know that Jordan would have put all those 50 positions… I am traveling to Europe for 2 weeks from tomorrow and I need your for help urgently to putting my portfolio in a completely neutral stance. Here is a link to the positions, if you don’t mind suggesting what I need to do to be as close as possible to fully hedged. 
    spreadsheets.google.com/ccc
    Thanks a lot.


  21. ammata
    My plan is to leave soon, no date but I am going 90+% cash!


  22. So much for BYD, LVS a better "trade"


  23. I’m out, I think we melt up for a bit here.


  24. Phil: is PFE too high now and maybe I should sell HALF ?


  25. Thanks Lotter.

    UNG/Kururi – All these ETFs suck as long-term holds because of the massive cost of rolling over contacts.  The only reason I like UNG is because nat gas is way too low so the gains will outweigh the crappy investment vehicle.  Notice I used to like UYG when they were crazy low but totally lost interest when they recovered.  Same for the ultras – they are only useful at certain levels at certain times and rarely as a long-term investment (except as a short, where you have an advantage).

    5:00 PM ABC Consumer Confidence Index

    Notable earnings after Tuesday’s close: ACAS, ACF, APC, AVB, BEXP, BRE, CBL, CBS, CHK, ERTS, HRS, HTZ, LBTYA, MOLX, PBI, PCLN, UNM, WFMI, XCO, XL

    08:00 AM On the hour: S&P -0.18%. 10-yr +0.44%. Euro +0.39% vs. dollar. Crude +0.37% to $81.64. Gold +0.31% to $1189.10.

    09:00 AM On the hour: S&P -0.09%. 10-yr +0.3%. Euro +0.42% vs. dollar. Crude +1.25% to $82.36. Gold +0.24% to $1188.30.

    09:30 AM At the open: Dow -0.32% to 10641. S&P -0.2% to 1124. Nasdaq -0.22% to 2290.
    Treasurys: 30-year +0.44%. 10-yr +0.38%. 5-yr +0.26%.
    Commodities: Crude +0.64% to $81.86. Gold +0.11% to $1186.70.
    Currencies: Euro +0.28% vs. dollar. Yen +0.6%. Pound +0.23%

    10:00 AM On the hour: Dow -0.55%. 10-yr +0.46%. Euro +0.14% vs. dollar. Crude +0.28% to $81.57. Gold +0.35% to $1189.50.

    ICSC Retail Store Sales: -0.1% W/W, vs. +0.6% last week. +3.9% Y/Y, vs. +3.8% last week. The hot weather is hurting the fall selling season and the beginning of the back-to-school season.

    Redbook Chain Store Sales: +3% Y/Y vs. +2.7% last week. Most retailers met their modest sales plans for the month, but Redbook sees a 0.6% decline in the key month-on-month comparison for July and June, which bodes ill for the Commerce Department’s ex-auto ex-gas category.

    June Personal Income and Outlays Income: Income 0% vs. +0.2% expected, +0.4% prior. Spending 0% vs. +0.1% expected, +0.2% prior. PCE core price index: 0% vs. +0.2% expected, +0.2% prior.

    June Pending Home Sales: -2.6% to 75.7 M/M, vs. 0% expected, and against -30% to 77.6 prior. Sales -18.6% Y/Y. “There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve,” says NAR chief economist Lawrence Yun.

    Jun. Factory Orders: -1.2% vs. consensus of -0.5%. Factory orders had increased -1.4% in May. Ex-transport, -1.1%. Shipments -1.1% vs. -1.4% prior.

    Timmy!  Acknowledging it’s still a "tough economy," Geithner says the unemployment rate could temporarily rise as Americans, seeing "a little hope that there may be jobs out there," start to look for employment again. But ultimately, "what we expect to see… is an economy that’s gradually healing."

    Ben! The Fed is considering a modest symbolic change in the management of its massive securities portfolio. The issue: Whether to use cash it receives when its mortgage-bond holdings mature to buy new mortgage or Treasury bonds, or allow the portfolio to shrink gradually.

    The Fed will continue to monetize… they will print and print and print until the final crisis wipes out the whole system," warns Marc Faber, saying investors who share his bearish views should shift their portfolios to stocks from bonds.

    Economist John Taylor is skeptical of a new paper claiming government stimulus measures helped avert a depression, finding there’s "a bit of implausibility to the whole case," especially given the repercussions of the country’s growing debt. (see also)

    Gold is getting a boost in China, as the PBOC says it will allow banks to import and export more of the metal as it tries to develop the country’s gold market. The central bank also says banks will be allowed to hedge their positions in gold in overseas markets, and will be encouraged to lend more to domestic gold firms looking to go abroad.  Sign of a top in gold or the beginning of the end for the dollar?

    Sanofi-Aventis (SNY) has reportedly sent a formal takeover proposal to Genzyme (GENZ) valuing the company at $18.4B, or $69/share. Sources say Genzyme is unlikely to accept a deal under $80/share and is keeping in mind other possible suitors, including GlaxoSmithKline (GSK), J&J (JNJ) and Pfizer (PFE). (but…)

    MetLife (MET -0.8%) prices a common stock offering of 75M shares at $42/share, which would raise $3.15B, around $1B more than the insurer said it would raise to fund its Alico (AIG) acquisition. Some analysts had expected the offering to go as high as $4B-5B, in an effort to avoid a possible ratings downgrade from S&P. (see also)

    Discovery Co (DISCA): Q2 EPS of $0.25 may not be comparable to consensus of $0.43. Revenue of $963M (+11.3%) vs. $945M. (PR)

    MasterCard (MA): Q2 EPS of $3.49 beats by $0.16. Revenue of $1.37B (+6.6%) vs. $1.38B. Shares -2.2% premarket. (PR)

    Vornado (VNO): Q2 EPS of $1.18 beats by $0.12. (PR)

    MGM Mirage (MGM): Q2 EPS of -$0.32 misses by $0.08. Revenue of $1.45B vs. $1.46B. Shares -3.5% premarket. (PR)  – No surprise there, we discussed this last week. 

    Solarfun (SOLF) is +18.4% premarket on its earnings beat, improved guidance and a strategic investment from Hanwha Chemical Corporation.

    At least it’s not $100BnThe Gulf oil spill is confirmed as the world’s largest accidental oil leak, with gov’t scientists estimating 4.9M barrels of oil, or 62,000 barrels/day, were released. This is higher than previous estimates, and could raise the size of the penalties BP will face to $5.4B. If gross negligence led to the spill, the penalties could jump as high as $21B.

    BP (BP) gas station owners in the U.S. are pushing to change the brand on their gas stations to "Amoco," hoping to avoid backlash from the spill and raising the question of whether the BP brand really matters.


  26. I think sell BYD dec7,5 puts for 0.8 is not bad idea


  27. OK, PHIL, ONE LAST TIME,  TBT,  how do i get exposure in this stock finally.  i am ready today, now, and good since it is down.  suggestions?


  28.  Phil,
    With PG miss, is UN a potential put candidate (despite a red day today?)


  29. Portfolio/Amatta – How much invested, how much cash, how much did you make or lose yesterday and how much this morning?

    BYD/B1 – They were fine for a long-term play.  LVS is very tough to get a good hedge on.  I’m still liking BYD at $8.37, selling 2012 $7.50 puts and calls for $5 for a net $3.37/4.18 entry, a 50% discount if put to you and over 100% if called away is a pretty good combination!

    PFE/RMM – Rule #1: ALWAYS sell into the intial excitement.  Rule #2:  When in doubt, sell half.  Rule #3: There is no rule #3 because if you have to ask me whether or not to sell half then you are incapable of following simple rules anyway so what is the point of asking as if I will tell you something different than THE ONLY TWO RULES we have…  8-)

    TBT/DMan – We have lost interest in it.  It does not perform well, the Fed seems determined to keep rates down indefinitely and if they lose control – THEN we will want to get in and there will be a very long run up (kind of like betting against Greece at the beginning of the crisis) so there is no reason to take up new positions now, especially with a lower VIX where you have less of a hedge. 


  30. commentry on a two week market span
    Sell everything as the world goes down in two weeks


  31. MGM % – wise down less than WYNN LVS BYD


  32. Phil, Are the PG earnings miss a small tell on the economy? They DO sell those products that we all (most of us anyway) use on a daily basis. Should I be leary to ride a NYC subway at rush hour when I bring my family to town next week?……. ;)


  33. Well, on the whole, we held the gap up from yesterday so 10,650 and 1,122 are our next tests.  Volume at 10:30 on the Dow is 40M so not a lot of conviction to the sell-off.  It would have been more bullish to have a volume spike on the turn but what we got was a decline in volume that let the bots put us back on track up on low volume.  Fake, fake, fake

    Speaking of fake – nice Washington Post article: ‘Five Myths About the Bush Tax Cuts."  Try to save discussion for later though as it’s a tricky trading day.  Thanks! 

    RIMM selling off a bit, I guess their new phone wasn’t all that impressive. 

    UN/Jdub – No, they had a good report.  I think a lot of PG was currency issues, I wouldn’t put much into it.

    MGM/B1 – Lower expectations.


  34. Hi Phill,
    I am still in the QID trade (Aug 15/17 bull spread and Sept 16 put short) b/c yesterday couldn’t sell the put, it seems to be working today and hopefully I will exit today…is it a good idea to sell? now that the markets seem to have reversed should I keep them as they are the only hedge I have? Thanx for your comms


  35. Phil/tax cuts  We see you working Phil…… ;)


  36. "Pimco’s Richard Clarida and Mohamed El-Erian describe the risks of a fatter-tailed world, saying the new normal is not normal at all." — WTF?


  37. BXP/Phil – what to do with naked AUG 80 calls currently down .80? When (and to what) do they have to be rolled given Aug 10 is a week away?


  38.  Phil, 
    Well it is a melange of naked stocks, a few hedges, 10 buy-writes and synthetics (which I am not worried about--I am transitioning the rest to be all in these, but haven’t gotten there). 
    The best I can tell you is there are a total of $200K longs, and net -$25,000 in bought and sold options (the hedges and the buy writes/synthetics). 
    Yesterday I made $5,000 today I am flat. 


  39. Phil,
    As a main hedge I have 30 OCT 23/27 DXD with the 23 Puts sold. Do you recommend switching this one to the new SDS posted?
    Thanks 


  40. Phil, I have VMC Jan 40/50 call spread. It’s been a total dog of a stock last few months, thinking about cutting losses and moving on (down 8% today on earnings). Total loss of the spread is about 25%.  However, if QE and/or more stimulus occur, or if construction does pick up between now and January, I could regret closing it out.  I am thinking of closing the 50 caller, and recovering at 55. Maybe sell a few Jan 40 puts. Advice?


  41. FWIW; I am in some TZA


  42. Rules/Phil  – LOL – what about
    1. Take the money
    2. Run


  43. Wow, if I was a bear I would be so pissed off right now!

    PG/1020 – Well, you should always be leary of the subways but I don’t think PG means much as they are a very complex multi-national.  Revenue was up 5% and 4% of it was organic growth (as opposed to acquisitions) with an 8% rise in unit volume so it’s an issue of poor exchange rates (strong dollar = lower translated foreign revenues) and short-term discount pressures – nothing at all wrong with their business.  They did forecast .97 for Q3 vs. $1.01 expected, so -4% and the stock is already off 5% with $4 for the year equalling 1/15th current share price.  Inflation hedging alone makes these guys a worthwhile long-term hold and they pay a 3.2% dividend while you wait.  I think selling the Jan $57.50 puts for $2.75 is a very nice net $54.75 entry if you are interested in this stock.

    QID/CMSosa – Well hopefully you just got a chance to learn why the rule is "ALWAYS sell into the initial excitement" and not "when you catch a break and get a good price, that’s a good time to get greedy and not take the money so you get screwed on a quick reversal."  The only hedge I like now is the 1,000% SDS play as I don’t really think we’re going down so just a small, high-reward spread is good coverage, plus the occasional day-trade puts like the ones we hit this morning

    BXP/Brook – I assume you sold the $80 calls, now $5?  Well, it seems real estate is not collapsing this month but I think the move up is overdone and you will probably get your .80 and get out even, especially considering BXP is only at $83.80 so still $1.20 of premium to work off – no reason you should pay it unless the whole market starts breaking up and things look hopeless. If you are really worried you can sell the Sept $80 puts for $2.10 to offset a roll to the $85 calls (now $3) but I wouldn’t want to bet on $80 holding that long.

    Portfolio/Amatta – OK, so assuming you are mainly in Jan – 2012 positions (and you shouldn’t be leaving anything short-term in there if you are going away for a long time other than covered calls that can’t hurt you), then you seem pretty balanced as you make $5K on a 2% up day and are flat on a flat day so let’s assume your risk is about $25K if the market drops 10% so $2,500 worth of the 1,000% SDS hedge will cover 1/2 of a 20% market melt-down and all of a 10% drop and, other than going to cash, that’s about as neutral as you are likely to get (and if you think the market will drop 30% while you are away then you should be in cash or bearish anyway).   Also, keep in mind that simply covering your naked stocks while you are away is a great hedge.  Let’s say you have KO at $56.34 and you are leaving for a month, just sell the Jan $52.50 calls for $5 and you have FREE 10% downside protection and the worst thing that can happen to you is you get paid net $57.50 for your KO if it’s called away.  If you come back and KO is at $60, you can roll the Jan $52.20s, probaly at $8 (price between $47.50s and $50s) to the 2012 $60s, now $3.20 and probably $4.50 and the $52.50 puts, now $4.90, probably $4.  So a coservative cover now can be flipped into an in-the-money buy/write with 20% upside down the road – this is not hard stuff – just don’t think of your moves as static or FINAL – we can always adjust over time. 

    DXD/Amatta – No, I wouldn’t change that one as it’s not worth unwinding but it’s already in your mix and you still seem to bullish but that one is a big payoff as the current "value" is about net $1 but if they expire tomorrow it’s really $2.75 so that’s $5,250 in unrealized protection with an upside potential of $12,000 if we head lower so probably you just need about $1,000-$1,500 worth of SDS to flatten yourself out. 


  44. What’s the symbol for oil in TOS and how would I have searched for it?
    Thanks.


  45. dman/TBT
    I must say "ditto" to Phil’s comments. I am contemplatong an exit on my TBT plays, until we get a definitive direction from the Fed on QE. When the Fed decides the rates are too low, then we will see some action that will give us the signal to get back in for the ‘ride of our life" The Fed, I believe" is still sucking up the Kool Aid, and is following a path that reflects a contemp for deflation.


  46. rainman: Oil futures are /CL


  47. Diamond, I’m not sure if your question was rhetorical, but I’ll jump in and mention that saying the world is fatter-tailed is the same as saying the world is more volatile and thus more risky. As the bell-curve-esque probability distribution of "economic outcomes" spreads out (and grows fat tails), any particular possible outcome becomes less and less predictable.  As I understand Phil’s past comments, these guys at "Pumpco" MUST promote fear and unpredictability in the markets because they are sitting on a mountain of bonds.  They will talk about deflation risk, sovereign debt risk, etc. until they are blue in the face while lobbying governments to improve their balance sheets.  But they walk a fine line because they are 180 degrees opposite of Marc Farber who is also screaming about economic risk…but as Phil’s post above shows, he is advising a move from bonds to equities.   That’s too soon for PUMPCO…they need to keep global investors in bonds until, I suppose, they can get short bonds just ahead of any panicking out of bonds in fear of impending inflation, or fear of being left behind on the next bull market.


  48. Bought 3 dec 60 of CTXS @2.60  and sold 5 aug 55 @ 1.85--should I roll the aug 55′s  now and if so will appreciate input
    Tx


  49. Phil,
    I represent the interest of a 12 year old minor whose credit card trust account has been charged on the 21st of each month starting in April of this year in the amount of $249 per month from this web site which is obviously a legitimate and sophisticated group of investors and which the aforementioned minor is not.

    Who can I contact to get help in resolving these charges and to request refund of the amounts?

    Sincerely yours,

    C. L. Ray


  50. Phil, BYD.  It seems to me BYD popped about 13 cents right after you posted your buy/write play. Volume on the stock is a little higher than usual so I assume it had nothing to do with PSWs going after the trade (??)    Nevertheless, I put in a limit buy for today at a price close to your recommended net $3.37 entry. I didn’t want to chase it up.  Is there an upper limit above $3.37 net that you would nevertheless recommend the BYD play?


  51. VMC/Kururi – In a losing position, I always think it’s best to buy time.  For one thing, it lowers you delta if you are wrong and the stock heads lower.  The Jan $40s are $5.60 and you can roll those about even to the 2012 $45s, now $6.30.  You can leave the $50s ($1.40) on for now with a stop at $1.80, which is about $44 since they have a .27 delta.   That way, if VMC goes lower, you can roll your long calls down cheaply and if VMC goes higer, you stop out the caller and you have naked longs with only a slightly lower delta than your Jan $50s and you can always turn around and sell $55 calls (now $3.10) to lower the basis or you can sell $30 puts (now $2.75) if you want to get more aggressive and that sale would pay for you to roll down to the $40s.

    Take the money and run/Snow – I think that’s more of a process than a rule.  8-)

    Oil/Rainman – "/CL" is the continuous contract.  You need to be aware of your rollover dates to play it (usually around the 20th on a Tuesday but rollover action begins the Thurs/Friday before).  If you click on the down arrow next to the symbol box on the "Futures Trader" charts (under the Trade Tab) you get a full list of all trackable contracts. 

    Son of a bitch – look at the Russell fly! 

    Right on Pimpco Poindexter.  It’s a really sick thing that they are held up as experts but so few people understand that they have the biggest bet ever taken against the stock market ($1Tn in bonds at sub 5% returns) so to say they are biased is a ridiculous understatement but I challenge you to find me any clip where they are introduced on TV as being short the markets. 

    Nailed $52.50 on oil again!


  52. C. L. Ray.  I’m just a member here, but what I want do know is, "Did the kid make any money?"


  53. That was an impressive recovery.


  54. IWM $66 Weekly puts at .59 are a good way to play a rejection at 666.


  55. Power in my area just went out …
    Fortunately, I have a battery back-up (UPS) and a Verizon MiFi so I switched my trading platform to my MacBook Pro and turned on the MiFi and back in biz in less than 3 minutes! :-)
     
    Reminder to EVERYONE … get a back-up plan in place now before summer power outages cost you major trading $$$.
     


  56. phil, i have $150K in C stock at an average cost basis of 4.49 (made $1.2 per share on the way up to it’s april highs, sold at the top, and thought i could repeat the trade so i bought it all the way back down……didn’t quite work out…).  now i’m looking for an appropriate hedge.  the trade is in my IRA account and i’m perfectly willing to let the trade ride for a while if necessary, but want to make some money when the market turns south.  i’m looking for something that is relatively easy to manage, as i am a relative new options trader and am just learning the tools of your trade.  thanks.


  57. Phil / SKX   Trading at 7.9x fwd p/e, no debt cash machine, with new Shape Up’s hot globally supported by great web based advertising, great order backlog and guidance.  Why the price decline?  Looks like a recession proof stock right now.  Should we buy at this price?


  58. Phil – Can you pull up the IWM weekly on your ETpro?


  59. 11:00 AM On the hour: Dow -0.23%. 10-yr +0.49%. Euro +0.35% vs. dollar. Crude +0.73% to $81.93. Gold +0.28% to $1188.70.

    12:00 PM On the hour: Dow -0.11%. 10-yr +0.51%. Euro +0.45% vs. dollar. Crude +1.19% to $82.31. Gold +0.42% to $1190.40.

    Remember TSLA?  $21.75! 

    The Fed says tomorrow it will start small-scale tests of reverse repurchases of mortgage-backed securities, to ensure "this tool will be ready" to drain liquidity, and that it’s not a change in policy. In November, the central bank began similar transactions for Treasurys and agency debt.

    Inflation watchUpdate on your morning joe: J.M. Smucker (SJM -0.4%) is raising most of its coffee prices (including brands like Folgers, Dunkin’ Donuts and Millstone) by 9% due to higher long-term costs coming on green coffee beans, including Port of New Orleans issues related to the Gulf spill. Meanwhile, ships are clogging Brazilian ports on a sugar rally that many expect to run to a 28% gain by year-end.

    The FCC over the weekend met again with Google (GOOG), AT&T (T) and Verizon (VZ) to work toward a compromise on net neutrality. No one’s commenting on what’s discussed, spurring concerns from activists that a "secret deal" could favor the communications companies over content providers. (previously: I, II)

    Three patients with a rare genetic disease are asking the federal government to break Genzyme’s exclusive patent on Fabrazyme, the only drug currently approved to treat their illness. Because of manufacturing problems, Genzyme (GENZ) hasn’t been able to produce enough of the drug and the patients have been receiving only about one-third of their usual doses.

    Research In Motion (RIMM +0.9%) unveils its new Torch smartphone based on the BlackBerry 6 OS, with a touchscreen and sliding keyboard. The device is an AT&T (T) exclusive. Is the love really gone on RIMM?

    GM July U.S. sales: +5.4% to 199,692, vs. Edmunds expectations of +9.9%. Core brands (Chevy, Cadillac, Buick, GMC) up 25%, the seventh month that surviving marques posted gains of at least 20%. Buick and Cadillac sales up more than 100% from year ago.


  60. Phil – such language !!  lol.
    That RUT move was ridiculous ….
     
     
    F sales #s disappointing.  Who cares about auto sales anyway; such a silly thing to watch IMO.  Broken industry.


  61. Looks like a false breakout in AAPL, they can take the markets lower from here if they sell it off (AAPL)


  62. Good morning…and good to be back after a sweltering week in the mid-west.  Gel, UR room is ready in the bunker…tunes included.
     
    Now, roll over, roll over, so that we can play again.


  63. Gold is making a very nice move upward today…. not really a suprise. With all of this talk of deflation and the fear of deflation the Fed is fomenting in the mind of the gullible, I have a contrarian view, that contradicts there theory. In the last ten years, our monitary base has grown from $600 billion to $2 trillion. This massive expansion has accompanied a rise in the price pf gold from below $300/oz at the beginning of the decade to over $1200/oz. today. In my opinion, as well as many others, the price of gold is the best arbiter for a currency’s purchasing power. Therefore, gold is still telling us that inflation is eroding the value of the dollar.
    I am solidly invested in gold stocks and the ETF (GLD), and am adding a new one this morning ( SGOL ). This is a Zurich based fund that is backed by physical gold.  It follows the price of gold and I like the security of the Swiss connection. I will do a December spread.  We have inflation, and will see far more in the future, and I like this play, as I see no downside risk.


  64. Phil, 
    OK thanks.
    I have 300 TBT naked (bought at 45 last year) you already commented it is risky to hold like that. What would you do instead with it? Do a synthetic with it for 2012? 
    EXC I am also harboring a $3K loss for 8 months. I don’t know if you think its worth selling some forward calls against it or just killing it and taking the loss..seems it is on a 
    Lastly I have 15 Sept QID short puts and 20 Oct short QID puts that are basically flat. These are short term plays that I don’t know you are sill in or not? 
    Thanks


  65.  Bots are going wild on some names here.  Means it’s time to grab lunch.


  66. Pharm… thanks!  I like the idea of that underground air conditioning  – no electrity needed


  67. Phil: i might be interested in RTN, what is your take ?


  68. Out of IWM weekly puts at 0.74 – thanks, Phil!


  69. Phil, what do you think of CACC as a short?


  70. Phil, 
    On UNG now better entry it seems, is this one still on? It is not a very short term play right? So I can enter and follow up when I return in 15 days… 


  71. Hey all,

    Great new overnight trade for you in Climarex Inc. (XEC).

    Check it out here!

    Good Investing!


  72. Phil, question on a buy/write.  What’s the best strategy when the stock surges very quickly through the call you/’ve written?  Example, I shorted MON Jan 50 Call, and now its trading up around 58.  I am happy with the numbers on the initial trade, so I understand that I should just let it call me away.  But at the same time I feel kinda silly leaving that much on the table.  Could I roll the 50 up to the 55? or do something else to uncover that position?
    Or am I best off just saying, nice trade and walking away to find another.
    I want to get a better understanding of my options for the buy/writes when they really go up in price, as opposed to staying flat or down.
    Thanks.


  73. I think XEC releases 8/6 in the am…per Bespoke.


    Enter Ticker


    xec

     

     

     

     

     

     

     

     

    Date

    8/6

    Time

    AM

    Estimate

    1.61

    4-Wk Chg

    -0.014


  74. darn it, sorry all.


  75. amatta, sorry just seeing your question from earlier this morning.  Yes you have to do this in TOS one by one.  It is tedious but not impossible  This is what I did. :)   It should take about 20 minutes.  And, one more incentive for you to have fewer positions ;)


  76. Hi Phil,
    I have 5 jan 12 UNH 30s @ 6.00--should I do a buy write--help please
    Tx


  77. phil,
    IWM $66 weekly puts at $0.59,
    Buy them, correct? assuming you believe we are not going to hold 666 on the RUT.


  78. "And most small-business owners are unlikely to hire as long as they are becoming increasingly uncertain about the revenues and cash flows of their companies in the months ahead."

    I would add that small business owners are unlikely to hire because they are ALSO uncertain about this President’s anti-growth, anti-business economic policies, ie the new health care bill, record deficit spending, possible "cap & trade" legislation, card-check, letting the tax cuts expire on the middle class, etc.

    Let me be clear, I am NOT a Republican (or a Democrat). But, if you think this President’s current economic policies are helping small business and are good for the economy….you are living in the land of Oz.
    Failing to admit that Obama’s anti-growth, anti-small business economic (political) policies
    are as much to blame (or more) for the pathetic state of the economy and high unemployment shows  me that you just might be a "little" disingenuous.
    I don’t like Republicans or Democrats so you can bash either or both…I don’t care. But, you also need to recognize and admit that this administration’s policies are contributing to the problems in the economy and have created more uncertainty with small business owners…..not less!

     


  79. Phil - Can the weekly options be traded at ETrade?  Can you pull up the weekly DIA and IWMs in ETPro…how? 


  80. i backtracked and cannot find the SDS insurance spread. can you please give it to me again?  Sorry-thanks


  81. XEC – Phil
    How would you play David’s XEC with options?  Selling puts is very margin intensive.


  82. Loopy -

    Yahoo Finance says tomorrow morning and so does Briefing…


  83.  From the XEC website:

    Cimarex Energy Co. (NYSE: XEC) today announced that it plans to report second-quarter 2010 financial results before the market opens on Wednesday, August 4, 2010. Cimarex will also host a conference call that day at 11:00 a.m. Mountain Time (1:00 p.m. Eastern Time).


  84. Check out the DOW chart, its a virtual repeat of yesterday with exception of the morning sell off


  85. Phil/, I am starting to layer in some protection spreads from this point although I think this is not the end of the rally but not far to go, I am buying/selling Sept 32/36 1.60/0.8 for 80cents good for up to 1050 -40 level, which I think is a good bet where the next down leg will go if the trend is still bullish, What do you think?


  86. Pharmboy & gel1 / "Underground Bunkers" - Found this bunker ad in a car magazine, between the "buy a wife" ad and the "I’m 70 yet look 21" steroid ad.  There are even underground bunker garages with elevators so you can store a vehicle fleet.  I’m guessing the vehicles could either be traded for cans of beans during the aftermath, or for that long drive to the fallout parties at the other underground bunkers?
    greeneyetech.com/products.html


  87. David….Greetings!
    Very nice write-up on XEC.  I like that one as I do not see any downside risk. I entered by selling the August 70 puts naked.  If they fly up tomorrow, then I will exit.  If they go down, then I will wait for assignment, and then wait for the first hurricane and sell the shares for a profit at that time.  How is that for a weather based hedge?  I’m dtill batting1000 on your plays, and it appears this will be another winner!


  88. CTXS/Savi – I don’t like them at all so bearish bias for me.  I would not roll them yet as they have almost $1 in premium.  Better you put $3.10 into another Dec $60 in case they keep going up and you have to roll the callers to Sept but the Sept $55s are $3.60 so you can roll 5 at $2.50 to 4 at $3.60 if you have to and then you still have Oct and Nov to roll to.  If they stay up in Sept, you add another long and you roll 4 Sept callers to 3 Oct callers and if they stay up in Oct, you are ready to roll the 3 Oct callers to 6 Nov $60s so that’s the plan.   Obviously, anything that wipes out the callers along the way is just fine for you. 

    Speaking of bearish bias – Woo-hoo on oil already! 

    Minor/RDR - That’s a new one!  Contact Greg.  admin at philstockworld dot com.   Are you saying the person who has been posting comments as RDR006 for months is 12 years old?  I want to meet that kid as he’s pretty damned sophisticated in his commentary!  Also – shouldn’t he be in school during market hours instead of commenting on our board?

    BYD/Poind – Just a normal bounce off the 10% drop I think.  I would try to sell the put first for a good price (since worst case is the cheap net entry) and work into the trade from there.  They haven’t even seen the downgrade police yet and the markets are toppy so no rush on the long side, I think.  As to adjusting the net.  Sure, you are out at $7.50 so $3.75 gives you a double – you have to decide how badly you want it but I really don’t like chasing if neither leg can fill at a good price.  After all, you’ve only had the bids out for 2 hours, right?

    Kid/Poind – I know he said he had the AAPL Jan $240s at $30.60, sold Oct $260s for $14.92 – nice win if he stuck with it!  (I am looking at his file out of curiosity, we don’t track everyone this closely).  Actually, it’s a good example of why you should let these things play out.  Here’s our Apr 26th chat, when AAPL was about $270:

    phil,
    I’m in an aapl spread; long the jan ‘11 $240’s @ $30.60 and short the oct ‘10 $260’s @ $14.92. is there a better way to re-position this? aapl . no mattter which way aapl moves this spread seems to lose!!

    AAPL/RDR -  Keep in mind your losses are illusional as the FACT is you have a net $16 entry on a $20 spread that is $10 in the money.  It doesn’t matter what the option chain TELLS you the value of the position is worth, the FACT is that position is worth $20 + 3 months.  If you are satisfied with a 25% gain, then patience is your friend here.  Your $240 calls are $49 (up $18) and the $260 callers are $30 (up $15) so it’s a question of – What did you expect from a spread?  Rule of thumb with a spread is that 20% is GREAT!  You can spend $10 to roll your caller up $20, to the $280 calls but don’t you want the protection?  Of course you can consider rolling 1/2…

    I’m always happy to help the kids out…   8-)

    Power/Daimond – Good advice.  I have a 60-minute UPS and 5 Starbucks near me so that’s my backup plan!

    C/Mtan – You’re in at $4.49 but damn, that’s a lot of C.  If that’s more than 5% of your portfolio then I will have trouble sleeping at night!  We aren’t into owning C as they are too crazy and I’m not sure if you can sell puts in the IRA but our preferred play is the 2012 $2.50/4 bull calll spread at .94, selling the $4 puts for .82 which is net .14 cash and we can assume your IRA will margin $4 per share so not much difference to ownership there but the big difference is your worst case is C is put to you at net $4.14 (the current price) but, at $4, you make a $1.36 profit.  There is no combination on C that pays better and all C has to do is stay flat for 18 months.  The simple alternative is to sell the 2012 $4 calls for $1.02 and that drops you net to $3.49 but the upside there is just .51 so a huge difference.  On the whole, I simply do not like that much C in a portfolio as no individual bank is safe in the current global environment and they just don’t pay you enough to take the risk. 

    SKX/Tusca – I haven’t looked at this space in ages.  Over the winter I decided I liked CROX and DECK better than the rest and they have certainly outperformed SKX by a mile but I don’t think there’s anything particularly WRONG with SKX and they are now cheap in the space so selling the Jan $30 puts for $3.30 is a very nice net $26.70 entry and you can leave it at that or go for the stock now at $33.71 and sell the Jan $33 calls at $5.40 too for a net $25.01/27.51 entry.

    IWM/Goldman – No, that’s yet another example of why ETrade sucks!

    AAPL/Kustomz – Yes but why would it sell off?  It’s an interesting dynamic since they seem very rightly priced around $250 so that’s 20% of the Nas that’s probably not going anywhere, which mutes any move the other 80% makes. 

    Inflation/Gel – Yep, see the price of coffee and sugar in above news item – nasty!  Still if money supply up 250% then I like gold at $1,000 but not so much at $1,200 – that’s why I had $1,150 target for a pullback.  Now that we got it and it held, I’m a little more bullish but I’d like to see a proper test still. 

    TBT/Amatta – Unless you are protecting an incredibly large sum of cash from a dollar crash, I’d just get out.  It’s $11K, down from $13.7K so you lost about 20% so you stop out and find a better place to invest your $11K that’s likely to pay you 25%.  It’s just a position, you didn’t have to promise for better or worse, for richer or POORER, till death do you part – did you???  If you want to make $2,500 with $11K, go for net $2,500 on the BYD play above and keep the other $7,500 for something that looks more like a sure thing than TBT.   EXC, on the other hand, is a very nice long-term hold that has real value and pays a real dividend of 5%.  See, right there is a good use of your extra TBT cash as you can turn $42.50 EXC into a buy/write by selling the 2012 $40 puts and calls for $9.80 to drop the net to $32.70/36.35 so your worst case on that spread is you DD and end up owning 2x at net $36.35, which is a damn site better than where you are now.  QID is also already part of the portfolio and in the money so probably best not to mess with it.  Like the DXDs, they are worth a lot more than they seem if the market goes down so again, you don’t need to add a lot of SDS to balance out on a big downturn. 

    RTN/RMM – I know it sound like an insane liberal fantasy but I really do believe they are going to cut military spending.  Even if we don’t, the rest of the planet is cutting military (except China, where it’s a jobs program to keep boys off the streets) and, since our arms dealers sell to everybody, then they will be hurt by global cutbacks so I’d say stay away as the outlook is murky.

    IWM/RN – Good job!  That is absolutely the way to do it, at least 1/2 out with a 20% gain.

    Oil testing $82 from the top now. 

    CACC/Loopy – Wow, they are zooming, aren’t they?  I have to assume auto loans are WAY up over last year and dealer lending collapsed last year so it’s very possible these guys are doing gangbuster business, especially with a very low borrowing cost so, temping though it may look, I don’t think I’d short it.  If they had options, they might make a fun backspread but they don’t. 

    UNG/Amatta – That’s a bet that between now and November we get a hurricane or two that shuts down production and sends nat gas over $5 (up 10%) so still on unless we get no storms at all for the next 45 days. 

    MON/Hoss – Well, I could write a whole article about this..  Jan $50 calls are $10.60 and the $50 puts (assuming you sold those) are $2.20 so that’s $12.80.  If you are confident that MON will hold up here and move higher, then you can either spend $2 to roll them up to the $55 combo ($10.80) buying $3 for $2 over the same time period, or you can just roll them along to the 2012 $55 puts and calls at $20.25 and put another $8 in your pocket and THEN just let it call you away.  As always, you have to decide how confident you are with the gains (I thought $55 was a fair price in the first place but I am still concerned about a market correction taking everything down) and whether or not you have something better to do with the money over 12 months.  Another thing you can do with $2, rather than shifting your caller and putter and adding risk, is to pick up the 2012 $52.50/57.50 bull call spread at $2.40 and then you make another $2.60 next year if MON holds up AFTER you cash out your winning spread.  Keep in mind, even with the current spread as is, you still have $4 left to gain by Jan and that’s about 10% of your net entry in 6 months if you do nothing and stay conservatve - everyone should have your "problems."  8-)

    UNH/Savi – It is so much easier to "fix" a position if you take action when you are down 20%, rather than 40%!  This falls under the "don’t get mad, get even" category and you just want o make $2.10 back now.  The $28/32 bull call spread is $2.60 and pays $5 if UNH says flat so you can roll out to that and take $1.25 off the table and IF UNH falls further, then you can consider taking 2012 short puts for $2.50 (maybe the $28 puts if they fall below $30) and then you can try again with another bull call spread as you’d still be in for net $2.50 looking to get even and your worst case becomes owning the stock for net $30ish, which is where you liked them in the first place. 

    IWM/Maya – Now we are getting into stick territory so a lot more dangerous, especially with just 3 days to go.  At this point, I’d watch that 660 line along with 1,120 on the S&P and if both of those break, then it’s a good play using those lines as upside stops but more likely we get a push up into the close, which may be shortable at better prices

    SDS/Drum – Yesterday’s moring alert around 9:40 or the first comment of mine under yesterday’s post. 

    XEC/Edro – They are 90% gas and 10% oil and I THINK they are big shale guys, which is a non-positive as the EPA is now looking into the whole process.  I prefer the old-line nat gas producers like CHK, who have a healthier mix of sources for their product.  They peaked out at $73 when nat gas was at $14 and now it’s $4.65 and the company is trading at a p/e of 15, which is high for a commodity play in sane markets (not that we have one, but I’m just saying).  So, assuming you want to be bullish, you can simply take advantage of earnings and sell 5 Sept $75 calls for $2.05 ($1,025) and buy 4 Jan $80 calls for $3.60 ($1,440) for net $415 or about $1 per long.  That’s all you have to retain to the downside to make a profit and if XEC zooms up, you can simply add 6 more Jan $85 calls (now $2.20) as perhaps a DD and roll the callers to 2x the Dec $90s, which are now .90 and then you’d be in a $5 bull call spread where you are $10 and $5 better off than your callers

    Dow/Kustomz – Yep, same program was run as soon as the selling stopped.  We took off right around 2 yesterday. 

    Thoughts/Chyer – Is that SDS?  perfectly good play as a short-term hedge.  The trick is just to take the loss and get out if we pop our levels.  We can always go back in if we begin to fail them from the other side. 

    Bunkers/Goldman – I love that stuff!   It’s like being a super-villain with an undergroud lair, plotting the downfall of the World!


  89. Goldman…. LOL. See, Pharm and I are not nuts, we see many benefits that others overlook!


  90. Phil:  200 and 50 EMA: in looking at those and the position of a stock relative to these, what will you and NOT do ????


  91. Phil / SKX  Thanks.  I used to be exec in this industry and have great industry contacts.  Just talked to one who ran a bigger co than SKX before retiring (I was on his board).  He confirms my research (and David’s) that this story has legs.  He compares the postioning to Reebok in the 80′s when they stole the  ladies aroebics business from Nike.  I just bought 2500 shares at todays price expecting a great back to school based on their order backlog.  I read that the stock is very much manipulated by the mkt makers however, so hard to comprehend sht term price movements.


  92. Phil: what do you think of an investment in JNJ, T, VZ ???


  93. Gel -

    I hope so…I don’t want to lose 1.000



  94. Oops, no 2pm stick so far

    PGP and IPGP both popping – that’s interesting.  Someone is confused! 

    1:00 PM On the hour: Dow -0.29%. 10-yr +0.58%. Euro +0.42% vs. dollar. Crude +0.87% to $82.05. Gold +0.28% to $1188.70.

    2:00 PM On the hour: Dow -0.24%. 10-yr +0.51%. Euro +0.36% vs. dollar. Crude +1.22% to $82.33. Gold +0.21% to $1187.90.

    "Don’t panic," JPMorgan Chase (JPM) commodities chief Blythe Masters told her team in an internal call, amid turmoil in the unit with some results 20% below expectations. The bank had started layoffs on July 21 to address overlaps from its purchase of RBS Sempra Commodities. Hmm, sounds like time to panic to me….

    The wall of worry is a bit weaker, Mark Hulbert says – which has contrarians worried that sentiment headwinds aren’t blowing quite as hard into bulls’ sails as before. The key to the strength of the rally may be whether a several-day correction is in the offing.

    Goldman Sachs (GS) is thinking about spinning off all or part of its massive private-equity arm, concerned that the Volcker Rule will create enormous uncertainty that sends investors fleeing. Goldman isn’t the only one worried either.

    The Genzyme (GENZ) play is about more than Sanofi-Aventis (SNY) looking for growth. It reflects Big Pharma’s push into treating rare illnesses, with the assumption that niche diseases can be a good way to fatten margins, and product pipelines, that are under pressure elsewhere.

    Chrysler (FIATY.PK) July U.S. sales: +5% to 93,313 vehicles, vs. Edmunds expectations of +3.9%; fourth straight month of Y/Y increase. Chrysler brand -11%; Jeep brand up 19%; Dodge brand flat; Ram brand +11%. Ram Pickup +14% to 20,138.(PR)

    Daimler (DAI) July U.S. sales: +5.5% to 18,608 vehicles. Mercedes-Benz passenger vehicles up 7% to 17,367; Smart -60.5% to 560. (PR)

    Ford (F) July U.S. sales: +3.1% to 170,411 vehicles, vs. Edmunds expectations of +13.2%. Discounting Volvo (now sold to China’s Geely), +4.6% to 166,092 vehicles. Market share up for 21st time in 22 months. Cars -5.6%, utilities -8.4%, trucks +27.4%. Taurus +187%. Shares sharply off, -1.9%. (PR)

    Honda (HMC) July U.S. sales: -5.6% to 112,437 vehicles (all percentages based on daily selling rate). Honda Division -9.7% to 99,420; Acura Division up 44.7% to 13,017. Overall: Car sales slipped 23.3%, while truck sales rose 30.1%. (PR)

    Hyundai (HYMLF.PK) July U.S. sales: +18.8% to 54,106 vehicles, its second-best month ever. Top-selling Sonata up 33% to 17,836. Tucson SUV +234% to 3,698. (PRCheap cars rule!

    Kia July U.S. sales: +20.7% to 35,419 vehicles. U.S.-built Sorento, launched in January, tops sales again at 9,003. Soul model up 65.3% to 8,020. (PRCheap cars rule!

    Nissan (NSANY.PK) July U.S. Sales: +14.6% to 82,337 vehicles. Nissan Division sales +12.1% for the month. Infiniti vehicles +37.6% from the year before.

    Toyota (TM) July U.S. sales: -6.8% to 169,224 vehicles (all percentages based on daily selling rate; sales down 3.2% on raw volume). Toyota Division down 7.2% to 150,629; Lexus down 3.3% to 18,595. (PR)

    If you’re thinking about investing in housing stocks, you’ve got to distinguish between a valuation trade and a fundamental one, veteran housing analyst Ivy Zelman tells Barron’s. KB Home (KBH) and Lennar (LEN) are Buys as valuation trades, while home-improvement companies like Home Depot (HD) and Lowe’s (LOW) are Buys on the fundamentals. Stay away from USG (USG) and Armstrong World Industries (AWI), Zelman says.

    Three lunchtime reads:
    1) The next sovereign debt crisis: here, and short-term
    2) China is too big to fail
    3) Three cheap stocks the bosses are buying


  95. PHIL……..your opinion of     PAYX   and how would you play it…..tks…..GABBY


  96. Phil / Gold
    I do believe the price of gold is tied to the money supply, however we are now seeing an upward pressure on the price because of additional factors – sovereign central bank buying. China is buying 100 % of all gold mined in China, for example.  Iran is is still rattling the sabers, and recently promissed it has the capability to drop warheads directly in the center of Tel Aviv, and is not backing off of their nuclear aspirations.  I see the momentum building for additional support for holding gold – for multiple reasons.
     
    There’s definitely an argument for deflation ( Pharm has some solid arguments in this regard ). Deflation is actually a normal consequence of an economic contraction. There are fewer buyers for existing inventory ( houses, etc ) and prices go south.  Additionally many folks are sellers of assets in order to pay down debt,  However, since our year over year growth in the M2 money supply is over 2%, and since the money is still growing, we are experiencing inflation overall, instead of deflation. Other commodities are telling the same story…. crude oil was trading at $25 ten years ago, and now it is $80 + -  Additionally, since 2008 when our employment was at the peak, we have lost 8% of the people in the workforce, and consumer prices should be falling in sinq, but not so.  We need the banks to start lending, and if we can solve that problem, then deflation fears will be in our past.


  97. EMAs/RMM – Don’t go long ahead of a death cross and don’t go short ahead of a life cross and try to go short on death crosses and long on life crosses PROVIDING you wanted to do so based on fundamentals anyway.  That’s about it.  I guess I wouldn’t long or short crosses of the 200 dma unless they are confirmed either – that’s often where you want to take some off the table as it has a very high probability of a bounce – like the Dollar today. 

    SKX/Tusca – Thanks, that adds great color to the play.  The buy/write has a great cushion and is a great place to start a position, insulating you from the daily shenanigans. 

    JNJ, T, & VZ/RMM – I like the telcos but not JNJ because I have discovered they have all the risk of MDT but with less upside since they are dragged down by consumer products.  MDT is down a lot this year but I think they have more upside potential and they pay a 2.5% dividend so I like them at $37.47, selling Jan $37 calls for $2.80 and Jan $35 puts for $1.85 for a net $32.82/33.91 entry – abou 10% off over 6 months

    Overbought/Kustomz – 53% overbought.  Around 60% it makes it very hard to make progress.

    PAYX/Gabby – I don’t see the growth as less jobs is less revenues for them, even if firms aren’t chosing to have their bookkeepers deal with payroll to save money.  I think they’ll make a good play when jobs come back but when’s that? 

    2:30 Dow volume is 95M – very low and very stickable.  The concern should be if they can’t get us green on this BS – why they Hell not? 


  98. Oil $82.50 yet again into the NYMEX close, strict stops but gotta love the hat-trick!


  99. Back in the library, same lines as yesterday plus trend lines from the tops of 7/27 and yesterday, and the bottoms of 7/20 and 7/30.  Got into TNA at 2:00 (off the 65.98 line), we’ll see at IWM 66.52 then 66.83 !! Then again TBT failing, be careful.


  100. Goldman interesting site…


  101. Gold/Gel – All I have to say is that we had a massive financial melt-down in 2008 and what happened to the price of gold?  It dropped 30%.  In March of last year, we had another market melt-down and what did gold do – it dropped 15%.  This year it went down 10% on our Feb sell-off so you can say that gold is possibly gaining fans with each round of global turmoil or you can say there are just millions more suckers now than there were 2 years ago who are potentially holding gold that is still closer to $900 in value in a pinch and that means we could have an epic panic out of positions if buying sentiment changes.  Meanwhile, I could name 1,000 stocks that outperformed gold over the same period and have real values to fall back on so I simply do not have a lot of interest in it since ALL of the upside is based on nothing more than speculative scenarios that essentially rely on the "greater fool" theory because no one actually NEEDS gold for anything. 

    It doesn’t mattter if you double or triple the money supply if you take away its velocity.  That’s the situation we’re in now and until lending and borrowing and leverage are back in vogue, you’re going to have a very hard time sustaining commodity moves.  Like oil at $82.50 – do Americans suddenly have an extra $200M a day to spend on oil ($10 a barrel over $72) or $6Bn a month or $72Bn a year?  What is that’s accompanied by refining mark-ups and the higher price of oil leads to other commodities heading higher?  Did Americans suddenly find $200Bn a year more to spend?  Talk about stopping a recovery dead in it’s tracks – we just taxed 100M taxpayers $2,000 each whether they can afford it or not because we continue to give tax breaks to rich jackasses who are back to buying trucks (I noted this last month) that use twice as much fuel as cars.  Then there’s the surge in travel and BC reported boats are being used again by the top 1% and once again the people who invest in XOM swipe $200Bn from the people who have to buy their gas – happy days are here again in America! 

    Sombody put up a link to a pivot point list yesterday that was excellent – would be nice to repost while more people are on.

    3:00 PM On the hour: Dow -0.22%. 10-yr +0.44%. Euro +0.41% vs. dollar. Crude +1.4% to $82.48. Gold +0.31% to $1189.10.

    Speaking of rocketing commodity pricesWheat prices have seen the biggest one-month jump since 1973, as the worst heat wave and drought in more than a century continues to devastate grain crops in Russia, Ukraine and Kazakhstan. The food industry is already warning price hikes will be passed through to flour-related products like bread and biscuits.

    Stocks continue to rally, Econoclast notes, despite evidence that the U.S. economy is slowing – including today’s personal spending and income figures which suggest consumer spending growth has slowed to just 1.5%. Markets seem to believe other countries will make up for the slowdown in the U.S., and if not, then Beijing and/or the Fed will come to the rescue. "Surely they’re not just whistling in the dark – are they?"

    BP (BP +1.2%) says it has begun a critical test at its blown-out oil well in advance of a "static kill" which it hopes will permanently kill the leak. The test will will gauge ability to pump heavy drilling mud and cement into the ruptured well. Based on results, the static kill could start later on Tuesday.

    A lawsuit filed yesterday against Toyota (TM), which is seeking class-action status, claims the automaker knew its vehicles had electronics problems long before it was forced to initiate a series of embarrassing and costly recalls. Since the class could be as large as 40M people, billions of dollars are potentially at stake if the plaintiffs succeed.


  102. Phil--i have cash sitting around--i sold some aug 16 VLO puts and aug UNG 8 puts--i read it in one of your posts--was that ok  or should I look at other areas
    Tx



  103. Support/Resistance Levels Price Key Turning Points
    14 Day RSI at 80%
    78.73  
    52 Week High
    74.42  
    13 Week High
    71.87  
    14 Day RSI at 70%
    70.65  
    Pivot Point 2nd Level Resistance
    67.40  
    4 Week High
    67.27  
    Pivot Point 1st Level Resistance
    66.82
    38.2% Retracement from 13 Week High
      66.79
    3-10 Day MACD Oscillator Stalls
      66.63
    38.2% Retracement from 52 Week High
    Current Price  66.09 Current Price 
      65.96
    Pivot Point
      65.85
    14-3 Day Raw Stochastic at 80%
      65.65
    Price Crosses 9 Day Moving Average
    Pivot Point 1st Level Support
    65.38  
      65.26
    50% Retracement from 13 Week High/Low
      65.22
    14 Day %d Stochastic Stalls
      65.13
    14-3 Day Raw Stochastic at 70%
      64.98
    14 Day %k Stochastic Stalls
      64.74
    3-10-16 Day MACD Moving Average Stalls
    Pivot Point 2nd Level Support
    64.52  
      64.22
    50% Retracement from 52 Week High/Low
      64.19
    14 Day RSI at 50%
      64.11
    38.2% Retracement from 4 Week High
      64.02
    Price Crosses 18 Day Moving Average
      63.71
    Price Crosses 40 Day Moving Average
    14-3 Day Raw Stochastic at 50%
      63.70
    38.2% Retracement from 13 Week Low
      63.42
    Price Crosses 18 Day Moving Average Stalls
      63.13
    50% Retracement from 4 Week High/Low
      62.94
    Price Crosses 9 Day Moving Average Stalls
      62.29
    14-3 Day Raw Stochastic at 30%
      62.15
    38.2% Retracement from 4 Week Low
      61.81
    38.2% Retracement from 52 Week Low
      61.69
    Price Crosses 40 Day Moving Average Stalls
      61.57
    14-3 Day Raw Stochastic at 20%
    4 Week Low
    58.99  

  104. Phil Agreed, gold is a joke.  Gold is another ‘story’ another asset to expand and then shrink.  A trade great but holding gold because it’s part of a bigger obvious picture.  no chance.
     
    JRW…. That sites pretty cool eh?


  105. Ah ha…now I know where you guys get your lines!  I’ve been calculating mine creating a gazzilion charts, what a waste of time…  Thanks for the site!!!


  106. David, thank you for clearing that up


  107. yip/site — did you post that site? I couldn’t remember who it was but I bookmarked it! Thumbs up.


  108. Gold…just saw this site for the first time…. I’d still calculate your lines but damn this helps.


  109. yip,

    If it only had Confluence levels, I could sleep in an extra hour !!

     

    YEEHAAAAAAH !!


  110. ?Phil, what you think, WYNN is owerprized, or have more upside with market?


  111. Phil, shouldn’t oil be falling with the market? It’s at 82.55 should we go short?


  112. JRW – Thanks for the work!



  113. IWM 65.74, 65.61 then 65.38 then 65.08


  114. It’s amazing how similar all the index charts are today. I’m sure it’s due to humans and their "group think", of course everyone gets timely news now too so they all move intandum. And it’s also nice to see that it doesn’t matter if you like small cap, mid cap or large cap, they’re all the same. Anyone got a dart board?


  115. Phil, 
    I had posted this yesterday, but you had to run… 
    Phil, 
    on TNA I experienced a situation akin to SLAB above. Where I got stuck with 500 shares from a day trade (bought at 37.88 and it went down the next day to 34.7 so I was facing a $1,500 loss) you suggested I sell 5 calls forward month which at the time were $1.5 out of the money… So far so good obviously with now TNA sitting at 45. So if they expire above 35 I keep $1,000 for my troubles. 
    This got me thinking why not buy equal proportions of TNA and TZA and sell respective calls for each to benefit with the premium decay? What am I missing there because it seems too simple. (TZA and TNA decay wouldn’t matter as the calls are reflecting this…)
    Thanks


  116. Phil / Gold
    The markets are forward looking…. most of the serious currency traders are looking at a declining valuation in the USD as we enter the last half of the year. Since there is a correlation between the USD and gold, I’m sure we will have support for gold down the road.  I do not play gold on a day to day basis, and have it in my portfolio as a disaster hedge, I look at the fundamentals almost exclusively. Channel trading in gold positions is not my strategy.


  117. Retiredguy – Change is like waves in the ocean, some large some small, sometimes many sometimes few, but if you are not paying more attention to your competition who surfs the same waves as you, you WILL NOT have a small business to run…….


  118. Thanks Yip!


  119. 1020,

    Thanks, that last post is someone else’s website, but I hope my confluence lines help as well !!


  120. I posted barchart.com last night.  I troll for information (like the rest of us) and thought it could be helpful.


  121. The lines are first but the website is an interesting tool, I wish it was customizable.


  122. S1 support on the IWM is it right now.


  123. I am very tempted to short oil right here, but I worry that the dollar will either hold here or fall in the next few months.  This will support oil.


  124. Rain…No i didn’t post it.  Someone OH!  LOOPY posted it last night….


  125. Thanks JRW  :)


  126. Phil, as I recall, you said that gold mining companies were undervalued.  Is that correct?  If you are not bullish on gold, then why did you think gold miners were undervalued?  Or, maybe you’ve changed your mind on gold miners?


  127. Cash/Savi – Those are both good plays (VLO up 3% today) but keep in mind they are both energy so you want to diversify a bit if you are going to add.  I think I mentioned something else yesterday.  HOV is a fun one at $4.45 as you can sell Sept $4 puts for .25, which is 6.25% in 6 weeks.

    Pivot Points/Rainman – Thanks!  All should check out this link, which creates the data JRW just posted on any stock.  Very useful if you are into those kinds of studies:   http://www.barchart.com/cheatsheet.php?sym=IWM.  This is good enough to add to the dashboard at the bottom of the page – if you have any other link suggestions, let me know and I’ll see if we can put 5-10 useful links down there.

    Pivots/JRW – It’s great that that formats in like that!  Are those numbers you agree with?

    See, I knew you guys would like that! 

    WYNN/Pahurik – Well they have  p/e of 102 so yes, they are overpriced!  That doesn’t mean we should bet against them as they have a nice story and could rise with the markets but no way could I like them here as a bullish play.  If you want to short, watch for $100 to be tested, that will be a good spot to sell calls, either straight or as a ratio spread because their earnings growth will begin slowing on their next report, even if the economy is recovering and that should send them at least back to $85 at some point.

    Oil/Ocelli – The NYMEX is closed and oil generally flatlines into our close and then adjusts in overnight trading but I do like shorting them under the $82.50 line, looking for a nice move down but I consider $82 a nice move, of course. 

    Dart board/Rainman:

    TNA/TZA/Amatta – Nothing is wrong with that but it’s safer with 2x funds like SDS and SSO as they aren’t as likely to break your range. We did try shorting FAS and FAZ when they both crossed $45 and selling puts against each, which worked out long-term but there was a period where they burned us as FAZ shot up to about $120 and FAS fell to $15 or vs. vs, I can’t remember but it just sucked until they normalized.  

    Gold/Gel - Oh it’s fine as a hedge but I just wouldn’t make it a big bet.  I was very surprised by the way people panicked out of gold when our banks were failing – that was a real eye-opener for me and I decided that gold had to be just total and utter BS at the time.  There was a situation, finally, in which we really did think that the global banking system was crashing and gold went down – sharply – not up.  Doesn’t that kind of make you wonder if everything the gold bugs believe to be true may be nonsense?  

    Thanks Loopy then, great find!


  128. barchart.com data is 15 minutes delay…wonder if one could pay for real time charting?


  129. Phil, 
    UNG, is the play still the OCT  9/11 spread selling 8 puts?  or do you think entering in the 8/10 is now better?


  130. Thanks Loopy  :)


  131. Gold I had that thought then realized those lines won’t change if it was real time.  Once those points are set they are set irregardless of the price delay.  perhaps your asking just because you would like to see it real time.  I signed up for free and they don’t offer much and I didn’t see anything about a pay service.


  132. TNA/TZA/Amatta/Phil – pardon me for putting in my 2 cents, but I thought we did an experiment a few months back and found those two do not move in opposition consistently, to wit, we saw them both lose value. Further, they have wide spreads, fast decay, and low liquidity compared to IWM.


  133. Hey Phil whaddya think about MON? I’m finally up on some Oct 52.50 puts. I can roll into buy write or just cash out and let wifey roll it into lobstah.


  134. about time someone bumped the jukebox, that oil record had been skipping ffor over an hour.


  135. New LOD on FAS


  136. I did notice that barchart’s pivot points are about 10 cents off from mine…


  137. Sold BEXP Aug 19 calls at .35


  138. Out of TZA for another 92 cents !!


  139. The Oct 52.50 MON Puts were a DD from July 60 Puts so it’s a small liobster.


  140. Miners/Cwan – Ah now there’s a business!  Sell shiny bits of metal to dummies who want to pay $1,200 an ounce for something that costs $300 to produce!  That’s another funny thing about gold bugs – if gold goes to $5,000 an ounce, the richest man in the world is the guy who owns ABX, followed closely by 100 other mine holders who displace the top 100 of the Forbes 400 as the richest people on earth.  Yeah, I’m sure that’s what "they" want to happen…  Meanwhile, the miners are not cheap anymore and my favrorites remain ABX, HMY and NAK but I’d rather play them on the next test of $1,050 (if they pass).

    Weak-looking finsh.  Volume just 123M with 10 mins to go and no stick (or stick sold into as volume did pick up a bit).

    Trading at a P/E multiple of about 20, stocks look expensive when compared to previous economic rebounds. "The current subpar recovery should probably warrant a below-average level of valuation," Bill Hester of Hussman funds writes. "Unfortunately, the opposite is true."

    Pending home sales fell to record lows today, but don’t blame high mortgage rates. 30-year mortgages fell another 10 points last week to 4.28%, according to Zillow.com, as government debt yields dropped to record lows. 15-year rates fell two points to 3.85%.

    Mark Thoma wonders what flavor kool-aid Ben Bernanke has been drinking if he thinks "rising wages would probably spur household spending in the next few quarters." With personal income lower on wage declines, "there’s nothing in the current data to give me confidence that is going to happen – and I don’t think policy should be based upon this expectation."

    The bidding war between Avis Budget Group (CAR -1%) and Hertz (HTZ -2.6%) for Dollar Thrifty Automotive Group (DTG -0.8%) is unlikely to go above $55/share, MKM Partners says. With shares above $50, the safe bet is to exit, firm says. "You have these investors who are late to the party, playing for massive upside…. They’re buying a lottery ticket. Maybe they’re right, but I’d rather walk away now."


  141. Phil/dartboard — Perfect, exactly what I was thinking. How do you find those images so fast?


  142. PCLN flying


  143. Phil / Website #’s

     

    I’ll check them out manually this afternoon; the pivots are off, but there are 3 schools of Pivot so I’ll check.

     

    Confluence lines are a different matter entirely, so I guess I can’t re-retire just yet !!

     

    BTW, 7 1/2% using my lines today !!


  144. Phil: what is the 1x and the 2x equivalent of TNA and TZA ?
    as they will not move as fast they should be easier to trade. True or False ?


  145. fjd… be careful of the dollar weakness.  I have been trading the dollar as a short for two weeks and doing very well. Everything I see on my radar is a growing trend for weakness in the USD.  This means more strength for commodities that are traded in dollars.


  146. Fjd- trading oil is crazy and very addictive. If you are scared of getting burned instead of /cl try trading /qm which is half of a regular contract ie it increases/decreases 5$ a cent instead of the 10$ that cl does.


  147. JRW… 95% of the day traders lose money ( according to barchart.com )  The remaining 5% are profitable – my guess is you are in the upper 5% of that percentile of successful traders…. nice work!


  148. TNA / TZA / Amatta / Phil:  Since both TZA and TNA erode / decay over time could you do a bear credit spred on both (selling ATM calls and buying ATM + 2 higher strike calls)?  Would this allow you to take advantage of this inherent decay?  Phil, do the 3x decay faster than the 2x?  Didn’t someone on the board comment that the decay of TNA / TZA was due to "rebalancing?"


  149. I am ending the day with a negative delta but a positive theta, and a few speculative shorts on OIH and longs on UNG.


  150.  Phil
     
    An number of my buy/writes are now up, with the putters being +30, +40, +50%, with 2-6 months to go. Given that we look a bit toppy, do you recommend cashing out the putters that are less than 3 months, and just staying with the callers until they must be rolled? Same question for those with 6 months to go?
    Sorry for the general question – but I’d rather not waste your time with all the details – just the main principle.
     
    Thx


  151. Hi Phil : A few days ago ,u referred a subscriber to poweropt.com . I looked at their site and one of their option strategies they advocate  is selling "married  in the money" puts when the stock is purchased to limit risk to the downside and later sell call options if the stock increases.It’s an interesting concept since the buyer of the stock predetermines the max.% loss he would accept when he  opens the position & assuming the stock rises, then calls can be sold to offset the put cost & lock in a profit.It would appear the strategy would be very effective on dividend paying stocks.
    What  is your opinion of this strategy ?


  152. WFMI reported earnings that met expectations.. but the shares are falling. However they seem to have found a floor at $37.5 AH, and after seeing the top range of the FY11 guidance ($1.64) with projected sales growth in the 10-12% range and 16-20% EPS growth, one wonders why is this stock still valued ABOVE $30 is beyond me..  I shorted it with Aug $44 Calls but I should’ve shorted it around the $40 line!


  153. TBT- Phil- I have 20 Jan 11 45 and 46 calls (10 each) left over from earlier spreads. I took out the callers and was looking to unload these on a pop and take my losses. Any merit to turning this into a bear call spread – say selling the Aug, Sept, etc 37′s or 38′s or should I just fold this hand?


  154. Great Absract titled "Why Do Red Stats Vote Republican While Blue States Pay the Bills."  We talked about this before but this guy goes into great detail, wrapping it up in the political decision-making process and election strategies. 

    Every year more states receive more in federal spending than they pay in taxes to the federal government. Since the early 1980s, when data on tax burdens per state are first available, the states that receive more in federal spending than taxes paid have been increasingly Republican in presidential elections. This pattern persisted in the 2008 presidential election. The impact of federal spending on a state’s Electoral Vote is increasing over the period 1984 to 2008 and remains statistically significant as a predictor of the vote when controlling for differences in ideology and opinions on issues across state populations and when controlling for per capita or median state income.

    This is really good stuff as it’s too complex for the MSM to discuss but very important to understand the relationship between the State and Federal budgets as the red state Senators are now filibustering aid to the blue states and the blue states are going to finally wake up (as this stuff is being discussed behind the scenes now) and cut off the spigot to the red states as this really is the final insult to a system that has gotten more and more unfair for years

    UNG/Amatta – Absolutely take advantage of the pullback and go for the lower spread. 

    TNA etc/Snow – Yes, they both LOSE value over time so our experiment was to SHORT FAS and FAZ and they did both eventually get down to about $10 but there was a lot of heartache in between as the 3x funds still can bit you pretty hard once they get going.  No way should you go long on both sides – that’s bound to fail.

    Lobstah/Rexx – A stock is just a stock but a good meal is a memory!  $60 is going to be tough to pop for them but they are a very nice long-term hold.  You can pick up $4.60 for the Jan $60 calls – that’s very good money on $52.50-$4.60 = net $47.90 so you are picking up almost 10% every 6 months hanging on to this one and that’s a lot of lobstah! 

    PCLN does it again!  Amazing…

    Put/Rexx – Oh you have the puts and not the stock.  Oops, well those are still $1.25 and mostly beat so maybe not worth waiting out for the amount of margin it takes to maintain them and also, you should be thrilled with even a claw after having to deal with a DD! 

    Dartboar/Rain – That’s one I use every once in a while when discussing easy markets (hasn’t come up lately!). 

    7.5%/JRW – I’d stick with yours then!  8-)

    1x/RMM – IWM is 1x and RWM is the short fund but why use the RUT if you are trying to beat callers as it’s the least flat.  S&P is best with SSO and SDS (2x) or SPY and SH.  Still, keep in mind, from a risk perspective, if you are going to go long on both ends and sell calls, you are effecively just doing a short strangle and there’s not much point buying the stock.  You can run the numbers but I don’t think it’s worth the bother and you would probaly be better off running a double diagonal (long butterfly) on a more volatile set.

    Decay/Robert – The 3x do decay faster but it’s just math.  Start with 100 and have an index go up 5% then down 5% then up 5% and down 5% and you get $105, $99.75, $104.74 and $99.50 so a series of "even" moves actually costs you 0.5%.  In any ETF there are also fees and rollover costs so any ETF pretty much sucks as an investment but check out the math when you have a 2x ETF and the up and down 5% moves become 10% moves – then you get:  $110, $99, $108.90, $98.01.  On a 3x ETF it goes like this:  $115, $97.75, $112.41 and $95.55 so a 3x ETF turns a flat market into a 5% loss very quickly.  There is nothing worse for these ETFs than they kind of up and down churn that is now built into the Bots and they do that so they can rape these ETFs, who are forced to buy and sell to settle every day at whatever price and GS et al play them like a violin. 


  155. cwan
    gold miners… I’m bullish on them. My EGO (Eldorado Gold) position is tracking nicely with a 60% increase in earnings. The have a nice position in China… and the government is a buyer of all their production.
     
    Currencies… I am looking at long positions now on JPY – I think the USD short will be a nice play as it develops – it sure looks like the dollar is facing some head winds. I’ll post when I jump in.


  156. Phil…. Blue states paying the bills (taxes) – now we know why they are all BROKE.


  157. Putters/Deano – Don’t be sorry, I appreciate that!  I think it really depends on how "safe" you feel about the puts.  That remaining 50% or so is your money and you are leaving it on the table by shutting it down early.  Like any position, the question is – do you have something better to do with the money (the released margin) over that time period than sit quietly and collect a pretty on-track return? 

    Let’s say I sold GE Jan $15 puts for $1.60 and they are now .95 with GE at $16.40.  They are tying up $185 in net margin to make $95, which is still 50% in 6 months.  It alll comes down to whether or not I have something better/safer to do with $185 than let GE hold $15 and make me 50%.  The other factor is how much do I wish I had twice as much GE at net $14.05?  If the answer is "a lot," then it’s a naked put play like any other on a stock I’d REALLY like to own at the net strike.  Of course, when you are up 50% already, you should certainly set a stop at 40% – that’s just our normal strategies kicking in. 

    Married puts/Dfalm – That sounds like a collar but you said selling the puts.  I’m not clear how selling a put limits anything.  Buying a put with your stock is a collar and those are fine but boring.  I’m sure Sage addresses it in his book (link above page).  Looking at NLY, for example, who pay a 15% dividend, you can buy the stock for $17.44 and buy the Jan $22.50 puts for $6.40, which puts you in the position for net $23.84 and you will absolutely get at least $22.50 for your stock in Jan.  You can bring your net down to $22.50 by selling something for $1.50 but there’s where it falls apart because you would have to sell the Jan $16 calls for $1.65 so if the stock goes over $16 (it’s $17.44 now) you begin to lose out.   PFE is a little calmer but it’s the same problem:  You buy the stock for $16.34 and buy the 2012 $17.50 puts for $3.40 (net $19.74) and sell the $17.50 calls for $1.35, which is net $18.39 so you need to be able to sell the calls for about .80 more to flatten out the trade and that takes a $2 move up in PFE.  If that’s what you need in the trade (and that move up will knock $1.50 off the value of the puts) why not just buy the $15 calls for $2.50 and not bother with the other BS as they’ll be worth $4 on a $2 move up and you can just take the money and run rather than lock yourself into this BS for 18 months to guarantee you make a 6% dividend and not one penny of profit on a move in the stock?

    WFMI/Rav – Oh no, it’s a supermarket! 8-)

    TBT/Pstas – No way would I bear call.  If we blow a treasury auction or if a country bigger than Greece defaults on a loan then rates can fly.  As Gel says, it will happen, it’s just a matter of patience.   Check out TBT’s move from late ’08 – you do NOT want to be on the short side of that move ($35-49) and then they pulled back a bit and did it again in March of ’09. 

    Blue states/Gel – Yes, that’s the point.  This is getting a lot of DC talk because they are running the numbers for OMB and making a case that the "bailout" for the states is little more than a loan repayment for years of imbalance and that the lesson the blue states are taking away from this is that they will jump right on the austerity bandwagon next time someone wants to fund some BS project in Iowa and they’ll start fighting for every dollar because there has always been the assumption that the money they "invested" would come back to them if it was ever really needed – kind of like the way Bush promised New York money after 9/11 that never came…


  158. Phil – Great explanation thanks. 


  159. Phil / cynicism    Boy have you turned into a mkt cynic!  I think your pump team comments are probably correct. 
    Conversation I heard today. " Tim, if we keep the equity mkt propped up then optimism will return and people will start spending again.  We just can’t afford to let this mkt collapse again, that would be the last straw and it will be difficult to avoid a collapse of confidence.  Just keep building that Treasury equity portfolio Tim and let’s target 1250 by year end.  Lloyd must be enjoying his trading knowing that you’ve put a floor under prices!"  
    "OK Ben, and you keep buying my Treasuries. If we can get the 30 year mortgage rates down to 3.25% maybe we can delay or at least camaflouge this housing disaster.  And, get Jamie to hold off on those foreclosures for another year, we sure don’t need another 10 million homes on the mkt or prices will be back to 1980 levels and the banks will be toast!"


  160. tusca,

    I didn’t know you were in that meeting, small world !!


  161. damn i was at that meeting as well, lolol.


  162. Wow this Sharon Angle is a real winner!  And they said they couldn’t top Palin…  This is classic – she tells interviewer that the press needs to report the news the way she wants it to be reported so she can just plug for contributions.  I though Republicans wanted to win Nevada:

    During the segment, Fox’s Carl Cameron lays out for their viewers just what Angle’s positions are that she’s been criticized for.

    Cameron: What precisely she’s advocated; phasing out Social Security and Medicare, withdrawing from the United Nations, abolishing the EPA and much of the tax code and banning all abortions. But it’s not just the positions that Angle has taken, it’s how she’s defended them. She suggested that entitlement programs “spoiled our citizenry”, that it may be part of God’s plan that rape victims get pregnant and to some she even seems to sanction armed insurrection, a “Second Amendment remedy” is what she called it, if Harry Reid isn’t beaten at the ballot box

    And then later in the segment we get treated to Sharron Angle defending why she’s been running from most of the press in Nevada

    Angle: We needed to have the press be our friend.

    Cameron: Wait a minute! Hold on a second… to be your friend?

    Angle: Well truly…

    Cameron: It sounds lame…

    Angle: Well, no, no, we wanted them to ask the questions we want to answer so that they report the news the way we want it to be reported and when I get on a show and I say send me money to SharronAngle.com, so that your listeners will know that if they want to support me they need to go to SharronAngle.com

    Meanwhile, Whitman REALLY wants to be Governor of CA for some reason (probably to do with oil leases), she spend $99.7M already ($91.1 was her own money) and I bet the Republicans wish she was getting them a Senate Seat instead.  Gerry Brown has spent $633,000 fighting her so far.  Whitman has $10.3M left and Brown still has $23.2M.  The spin in California is to make Brown seem "wealthy" to diffuse Billionaire Whitman’s distasteful splashing around of cash.  It’s pretty funny – I watch KNBC on satellite and see all sorts of strange things out there. 

    This is classic, she just keeps writing bigger and bigger checks


  163. Phil/Treasury Monetization article - Link below is from Kitco.com.  Even though they have an agenda to push precious metals and the article bleeds of conspiracy (emailed from a gold bug friend of mine who buys physical gold constantly), there are some interesting points to the long rambling article titled "Smoking guns of US Treasury Monetization", excerpt and chart shown below:
    http://www.kitco.com/ind/Willie/images/jul222010_1.jpg
    Under Goldman Sachs rule, the USDept Treasury is running some bold kind of racket game, whose purpose is unclear, except it lacks legitimacy. The USGovt borrowing through debt issuance was $142 billion more than the June USGovt federal deficit, which means they are doing more than financing the deficit. The extra proceed funds are not accounted for. In chronic fashion, excess issuance has been the pattern, as the USGovt has issued $1.5 trillion more in debt securities than its budget deficit in the past four years. During the past 45 months, the USGovt has accumulated an incremental $4.7 trillion in new debt, but the federal budget deficit has grown by $3.2 trillion, much less but still a mammoth amount. Nobody asked why so, and nobody asks where the resulting funds from the bond sales go. One is left to speculate that a vast bold new syndicate technique is simply selling bonds beyond newly formed debt, seizing the funds in foreign locations for syndicate usage. The June USGovt official budget deficit was logged at $68.4 billion. During the same month, the USGovt borrowed a staggering total of $210.9 billion. These are not refinances of USTreasury debt in rollover. On a consistent basis, the USGovt has borrowed much more in each deficit month than was required to close the deficit and finance the debt accrued. The differential of excess debt issuance for the first six months of 2010 comes to a hefty $290 billion, a pattern in continuance.
    Perhaps the Wall Street firms in control figure that with large numbers, nobody will notice, or given the hidden monetization, they might as well put the bond presses in hyper-drive. The cumulative data, as well as the mindboggling differential (dotted line) between the two series is shown on the attached chart. Perhaps it is for war funding far in excess of the stated costs, to save embarrassment and questions. Perhaps it is for enormous vertically integrated business investment in Afghanistan of clandestine type. Perhaps it is for the heavily rumored underground cities under construction for elite resident purposes. Perhaps it is extra costs for additional new military bases scattered across the globe. Perhaps the answer is simpler, in that it is just being counterfeited and stolen by the financial syndicate with impunity. This is a smoking gun.
     
    Full article at  http://www.kitco.com/ind/willie/jul222010.html


  164. Phil :Sorry about that. You have me so preconditioned about SELL,SELL,SELL premium I mistakenly said selling puts instead of BUYING puts.They call it a " married put"
    To reiterate, I would buy the stock ,sell an in "the money" put to limit my downside at a predetermined loss ( say8 %) .If I made the right decision and the stock goes up ,I sell a call to cover my put costs and lock in a profit.
    Looking forward to your response.  


  165. BTW, I expect us to open tomorrow gap up, test the upper resistant trend and go from there; so much from the crystal ball !!


  166. JR.
     
    Ok…..I’m all in triple long double margin on your call


  167. JR,
     
    What’s your number for the upper resistant trend?


  168. Phil/Tyler Article on PSW - > 287.4 Billion  (62%) of  Q1′s public debt is not accounted for…confirms the $290B from the other article I posted.  Wonder how long this can go on…without unintended consequences…
    Per http://www.philstockworld.com/author/zerohedge/
    From the data actually present, we can determine that Treasury issued 461.7 Billion in new debt Q1.  That’s not surprising, we’ve been running at the $500 per person per month clip for almost two years now.  What is surprising is that the Fed  &  Intragovernment holdings went down $17B.  Foreigners, God bless ‘em, scooped up an additional $192.5 B, while  US saving bond  holdings were basically flat (-$1.1 B).
    Um, we’re out of data now, but not debt.  287.4 Billion  (62%) of  Q1′s public debt is not accounted for on the report.   Fortunately when discussing who could digest that much debt in three months, we can quickly eliminate 6 of the 7 “not available” data points (depository institutions, pension funds, mutual funds, insurance companies, and State & local governments).  The only logical conclusion is at least a quarter trillion  in debt was purchased by “Other Investors” in Q1.
    Aren’t you glad we cleared that up?
    What’s that?  “Who the hell are Other Investors,” you say?  Good question.  It does seem rather nebulous, especially considering that they are now clearly our best customer(s).   Not very bright though.  They stepped in and bought like crazy as interest rates went to record lows.  Still I think we should send a basket of fruit and a nice thank you note, because without them we would surely have had a failed auction (read Keynesian apocalypse).
    The Treasury defines Other Investors as: 

     

     

    Individuals, Government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors.

    Thanks Turbo, for narrowing  it down to just about everyone under the sun


  169. Its funny how the libs forget all about their own spending insane amounts of money like Whitman.  Think….Corzine (or was that Goldman).


  170. exec

    66.44, but this is why I’m in CASH every night; we’ll see what tomorrow brings !!


  171. Ravalos; WFMI … I agree 100%;  currently short Aug 41 calls and Jan 44 calls.


  172. Phil, 
    TZA/TNA, No but I am missing something, because even if lets say the Russell moves 10% either way in one month, one of the callers will be way in the money, the other will be worthless and the respective position (either TZA or TNA) will have a 30% loss while the other end will have a 30% profit (leaving aside decay) so you be perfectly hedged yet the premium on the calls sold would have decayed and thus be profit?-- Where I think I am missing something is that the decay in the losing position (TNA or TZA) might not be offset by the profit in the opposite… but would that matter as I would imagine that unless moves in the indices are extremely volatile, the premium gained from both sold calls would offset the decay in one of the positions?


  173. Goldman — you think this is conspiracy ramblings ?
     
     Perhaps it is for war funding far in excess of the stated costs, to save embarrassment and questions. Perhaps it is for enormous vertically integrated business investment in Afghanistan of clandestine type. Perhaps it is for the heavily rumored underground cities under construction for elite resident purposes. Perhaps it is extra costs for additional new military bases scattered across the globe. Perhaps the answer is simpler, in that it is just being counterfeited and stolen by the financial syndicate with impunity.
     
    Pshawww…. sounds like Ron Paul to me.
     
    I am writing this from my elite underground bunker…..


  174. The truth is, most of those other investors buying the debt are aliens from another galaxy, but this cannot be admitted for the stability of the financial markets.
     
    Their system is our next big market …
     
    You heard it here first !  Even Zero Hedge doesn’t have this scoop yet.
     
    :wink:


  175. RCT770 … or was it that Democrat, no Republican, no Independent, no Independent Republicrat   Mike Bloomberg.


  176. Cap/"Perhaps it is for the heavily rumored underground cities under construction for elite resident purposes"  – Yes, I’m a open minded and a very creative individual who has made very good money thinking "outside the box"…yet "underground cities", in my view, seems like a tall tale that would be extremely difficult to hide during construction.  Sure there are underground bunkers such as "Greenbrier", exposed in 1992 (http://www.thegreenbrier.com/site/bunker.aspx), yet hardly a city…more like an underground mouse maze for humans.  That said, not impossible…hey who knows, that trillion of missing bond debt could have been put to good use carving out an underground frozen city somewhere in Antarctica…code named "Stargate SG1"…=)
    As far as "aliens" buying our debt…would that be the "illegal aliens" or the "alien aliens"…=D


  177. Steve Liesman thinks QE2 will be limited initially to plowing proceeds from maturing MBSs, $200B a year, back into either new MBS purchases or Treasuries.  Therefore keeping the Fed’s balance sheet stable at its current inflated state.  I love how they interpret anything other then putting the maturing proceeds back into more crap purchases as a form of monetary tightening.  Some people can rationalize anything.
     
    http://www.cnbc.com/id/38543220


  178. That would be the alien aliens !
     
    I luv Stargate SG-1 … put me in the chair !


  179. rumor is the Azgard likes Treasuries.


  180. Phil, the reason sparsely populated states get more money is because of the Senate, pure and simple. The Senate controls the purse, and rural states control it disproportionately per capita. When will Democrats learn that they should be slashing the federal tax rate and raising their state tax rates? That would keep the money inside the state. Imagine how rich New Jersey would be if every resident paid 10% in federal taxes and 30% in state taxes.


  181. jvest:  righton and that’s much closer to what our founding fathers had in mind when they formed this federalist country; strong states and weak federal government; it got perverted along the way. 


  182. Married puts/Dflam,
    I think you erred again, "married put" is buying stock and buying a put…not selling, selling would not assure anything but the premium received.


  183. Looking at the 5 min data for FAS since Monday, it would appear it was all just a set up to get the mutual funds buying in at the highest price possible.  Over 3 million shares were traded from 3:55pm to close on Monday.  By far the highest volume in the last 3 days.  Could that of been the funds’ by on close orders triggering?  If so, and we continue down, they were slaughtered like lambs.  I believe in dollar cost averaging but geeze maybe they should switch it up.. they are too predictable and can easily be raped. 


  184. Good morning!

    Futures sort of weak this morning.  Nikkei fell 2%, China and India up 0.5%, FTSE -1%, DAX and CAC – 0.5% so we are holding up well at 7am, considering. 

    BKS finally giving up and going up for sale (something I predicted 1 years ago).  EBooks have just destroyed the big box model.  From 8/20 last year:

    BKS/Spider – I think I saw way too many people with Kindles recently and probably 25% of the books are sold to 5% of the readers and those are the people that are rapidly being lost to Kindle.  Next year there will be a Sony reader and an Apple reader and there will be a push for awareness too.  BKS is such a big box retailer I’d be very concerned about what the hell would happen to them if they had to cut back on stores (800 of them) if they had to cut down in a pinch.   Excluding an insurance settlement, the profit was just .14 per $20 share and no matter how much you think they may bounce back, you are still paying almost 20 times earnings for a low-margin retailer in a declining market. 

    BKS went crazy for the past 5 years building MASSIVE bookstores all around the country.  They are fantastic places with multi-levels and every book ever written and couches to read them on and coffee shops inside (mostly SBUX) and they do very well but you need to sell A LOT of books to pay for staff and air conditioning and lights and any fall in sales is just not at all good for them.  The issue is they’ve raised their operating costs to a level that may be unsustainable and they’ve done it in an environment where all that real estate they purchased can act like a lead weight on the company.   Lindsay made a comment about the 4 Seasons Hotel that was abandoned in Exuma.  No buyers and not even any bidders for the stuff inside – they just burned it!  You don’t want to be on the wrong side of a failed expansion in this economy…. 

    Long-term, hard-copy books make about as little sense as Newspapers – they are things that will be clung to by our generation but will fade over time.  Look at encyclopedias – my kids only know what one is because they were shown it in school wheras, when I was a kid, you’d be considered a bad parent not to buy some for your kids.  I’ll tell you an even stranger one – the video arcade in our busy, middle class mall closed down – they just don’t have enough kids who want to keep pumping quarters into games they can totally replicate at home. 

    Monetization/Goldman – All these things are only a problem if other governments call us out on it.  It doesn’t matter if people point to our accounting and say "It’s all BS" – of course it is!   We’re running a fiat money system – the very concept of money is a total joke and you can pick it apart 100 ways because, when push comes to shove – you have a piece of paper signed by Timmy that says "$20" on it but it’s no different at all as if he had signed a Pokeman card and you have a Pickachu, which you go to 7-11 and buy some stuff and they give you back three of those grass monster cards as change – it is TOTAL AND COMPLETE BS and all the numbers backing up the money are also BS (and I’ve been hearing some disturbing rumors about Santa too) – so you can run down that rabbit hole and you’ll find nothing but madness or you can ignore it the way the entire World has since the 70s.  

    Response/Dflam – That was my assumption in the earlier response. 

    Ah, now we have a big move up to flat in the futures – very exciting!!!

    Debt/Goldman – If there is anything to it, I’d say they are building up some reserves in order to guarantee they can either pay for some stimulus (maybe the money becomes discretionary to O and can’t be stopped by Congress) or make some last-minute great budget news or maybe it’s a rainy day fund in case they have a bad auction.  "Other Investors" I thought was the Fed. 

    Corzine/RCT – Who the GS fat-cat?  Who even knew he was a Democrat until he announced?  Other than working for Clinton’s Treasury commission, I would challenge you to find any activity in which the word Democrat is associated with his name prior to 1999, when he spent $62M of his own money to buy a Senate seat (the most expensive Senate campaign ever at the time).  Of course, not many people realize Corzine saved America because he spearheaded the effort to stop Bush from gambling Social Security on the stock market (and his reputation gave the Dems teeth to stop it) so thank God he won that election or we’d be totally screwed right now.  

    TNA/Amatta – What you are missing is that if you sell callers at 10% and they move 30% then you make 10% on one side and get called away and lose 30% on the other.  All I can say is try it with a very small amount and track it – you are not the first person to "discover" this gold mine. 

    Bunkers/Cap, Goldman – Very suspicious that they have removed the video which showed the underground bunkers that are being constructed for the elite by FEMA (which explains why they are always too busy to fix actual catastrophes).   8-)

    Aliens/Cap – That’s funny, I heard interdimensional beings were sucking money through a wormhole that has formed over at Treasury (the fabric of space-time was ripped open when the 20th consecutive Treasury Secretary said "strong dollar policy" for the 100th time as the cosmic joke of that statement became too funny to be contained in one Universe). 

    You are right about Bloomberg Cap, what NY needs is another strong Republican like Ed Kotch! 

    States/Jvest – Good point about the Senate but no to shoving burden on the states where corruption runs rampant (yes, even more so than DC, if you can imagine). 

    FAS/Matt – Yes, I should right a post on that.  All these ETFs (and mutual funds) are nothing more than a way to funnel money every day from people to Hedge funds.  ETFs and mutual funds MUST buy X allocation of stock every day.  The rules are written so their purchases vary little from day to day so GS, for example, identifies that every day at 3:55, $50M worth of INTC is purchased so all they have to do whenever they need some cash is tank INTC, buy it up at the bottom (when you are the one starting the rumor, you know it’s BS and you can set the bottom) and then sell it at 3:55 – they can rotate the stocks and do this day after day after day and effectively they are forcing the working people of America to buy high and sell low at their whim.  It’s a massive scam…