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Worrying Wednesday – Can We Hold Support?

Wheeee - I told you this was going to be fun! 

What a day we had yesterday with the down and the up and the down and the up and now, this morning – down again!  We cashed our directionals on the morning dips yesterday but now our disaster hedges are putting us in a great mood this morning (I mentioned our QID play in yesterday’s post and that was a very easy fill on yesterday’s run-up).  This morning’s action should push QID over goal ($17) and we’ll see what sticks as we test our first line of (hopefully) defense at Dow 10,450 and S&P 1,100.  

If we lose the S&P then the Dow has a quick ride back to 10,200 so we’ll be looking at DXD again for a add-on hedge.  We already have DXD plays and we were just adjusting them on Monday, as some Members were worried that the market was going too far the other way, which led me to comment in Member Chat:

When all you guys start capitulating on your short positions I usually figure that’s a great time to get aggressively short because the end is probably near.  Keep in mind we are trading a range and right now we are at the top of that range so hedges like DXD are going to get stressed.  If you do not need the protection, of course take it off the table but if you do need downside hedges, then a simple roll on the call side can give you a much bigger upside

Range trading is great but you have to BELIEVE in your range.  The bottom of our range, as I posted in yesterday’s Morning Alert to Members, is Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635 and until we fail 3 of those 5, we will continue to make bullish plays when we get near those levels, just as we make our bearish bets as we test our breakout levels.  Even these levels are just 2.5% off our midpoints so we don’t get gung-ho bullish until we hit the full 5% bottom – which is now the rising 50 dmas (red lines) - but we’re kind of losing faith in getting back there so we’re a little more aggressive with our buys now than we were last month. 

What I love about our 5% rule is that, eventually, the charts finally catch up and confirm the levels we’ve been using as targets all year.  As I said on Monday, July 26th (with the S&P at 1,102) we are finally at the "right" place in the indexes to reflect what we consider to be the true value of the equity indexes based on our fundamental analysis.  That means, hopefully, we can just kick back and enjoy the trading range until something real comes along to change the game again

Sadly, the global small charts are do not include today’s trading but we have the same very good visual representation of our watch levels:

The Nikkei had an UGLY day today and is a big concern as they fell 2.5% to 9,292 so right back to that mid-July low but that can be expected with the Yen up at 85 to the dollar as Uncle Bens QE2 (or, as Barry accurately calls it – QE 1.5) may not have been enough to make the markets happy (see my Fed notes and this neat side by side comparison) but it was plenty generous enough to devalue the dollar – AGAIN. 

The Hang Seng fell to 21,294 (-0.8%) but the Shanghai made it’s 0.5% bounce (off yesterday’s 2.5% drop) back to 324.  Bombay made a bombing run to the critical 18,000 line (down 149) but held it at 18,070 thanks to that 20 dma providing a bit of support.  As of 8:30, the FTSE (5,297), DAX (6,176) and CAC (3,666) are all down about 1.5% and we REALLY want those lines to hold as they complete a 2.5% drop over 2 days and are also right on those 20 dmas which need to at least put up a fight if we expect our 50 dmas to provide proper support

China has been ordering their banks to reclaim loans from trust companies and clean up their books.  Industrial Output slowed substantially (still up 13.4% for the year) but inflation did not, rising 3.3% and curving up on the Russian wheat crisis.  Minimum wages in China are up 20% since July 1st and so far, so good but we could run into trouble if the global economy does pick this month to slow down considerably so let’s keep an eye on corporate cash-flow in China!

Congress just does not get it as the House voted yesterday to CUT renewable-energy subsidies buy $1.5Bn, which is the second reduction this year, dropping the program to $25Bn from it’s original $50Bn.  The boys at PimpCo couldn’t be more pleased as Tony Crescenzi says "The Federal Reserve’s decision to buy Treasuries and keep interest rates low will support “risk assets” without bringing down unemployment…  “Low volatility tends to be good for the interest-rate climate,” said Crescenzi, who is based in Newport Beach, California at Pimco, manager of the world’s biggest bond fund. “It does push investors out the risk spectrum generally. That tends to be good for risk assets."

It’s going to be a good day for a little bottom fishing – providing we hold our watch levels, of course but be careful out there…


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  1.  Phil: I enjoyed reading some of your philosophical views this morning.  Some weekend I’d like to learn more about you background.  I assume you had enlightened parents.

  2. Rollin, rollin, rollin.. rolled over.  That was an impressive headfake by the market.  All that hype and circumstance about the Fed and QE.. only to jack the market back up long enough for them to sell into.  They took it about as far as it could go.  Only the RUT maintained it’s sanity.  Well, no more. Welcome back reality!

  3. Luck is the confluence of the rivers of opportunity and preparation.

  4. Matt1966 – that was a nice call on monday afternoon on the fake rally.  do you think we hit S&P 950 and how quickly? 

  5. Good Morning Phil,
    I bought DXD, SPXU, and TWM over the past few trading days without selling calls. I was hoping to let them run a bit and then sell covered calls for some nice premium. Any thoughts on how to time this and which strike prices appear most attractive?
    Also, not sure you saw my last post. I’m holding TBT 2012 $35 and $40 calls. Down on both. I’d like to sell shorter dated calls to potentially collect multiple premiums than if I sold a 2012 call, but not sure what the right move is here. Thanks.

  6. Pivot Points for Aug 11

  7. joy!

  8. Pharm, do you have any information on the following article I read. Thanks.

    But a Pentagon-funded research team at the University of Massachusetts Amherst, along with small biotech firm PolyMedix, are making rapid strides toward a new line of Iraqibacter treatments — and the medications could spur the development of antibiotics that can fend off other drug-resistant ailments.
    “We didn’t set out to create a mechanism that could be applied to other illnesses,” Dr. Gregory Tew, the UMass scientist behind the project, told Danger Room. “But it’s an impressive and exciting bonus that’s come of our work.”
    The scientists have already used the new type of antibiotics to effectively treat staph infections, which kill thousands of Americans each year.
    Common antibiotics work by attaching to a specific molecule (like an enzyme) inside bacterial cells. With some minor adaptive changes, bacteria can alter their cell structure to prevent antibiotic binding, thereby becoming resistant to the drugs. Some infections even develop “persister cells,” which stop growing when the antibioticsare administered, and then turn back on once a round of meds is completed.
    But Tew and his team have developed antibiotics that work from the outside to quickly destroy bacterial cells. The drugs work by poking holes in bacterial membranes, killing the cells instantly. Within a few hours, theantibiotics are able to kill off entire colonies of bacterial pathogens. And resistance is futile: Because the meds don’t enter the actual cell, it’s impossible for the bacteria to fight back through structural adaptation.

    The method has already proven effective in clinical trials for treating staph infections, and the Pentagon is betting it’ll be effective in combating Iraqibacter too. In 2009 alone, they doled out nearly $8 million to UMass and PolyMedix, to “study its antibiotic compounds for other biodefense applications and bacterial infections.” 

  9. Phil:
    A little confused about your post on levels this morning. Takes SPX, for example. I think you’re saying 1,070 is 2.5% off of the midpoint, while the full 5% off is the red 50 DMA on the chart. But that red line is currently between 1,075 and 1,100.

  10. Pharmboy, I have been using
    for pivots.  So far I am happy with the numbers, any thoughts?  Anyone else looked at this?

  11. yip, you might want to cover some today.. I would be on the lookout for an up day today.  I’m thinking even like May 21st..  We shall see shortly!
    terrapin, thanks-  wish I’d profited more from it!  Sometimes I think I"m better at giving advice then taking it!  950?  That’s a long way from here and it will not be straight down.  At some point, ‘they’ will decide QE is going to save us again and take us back up inexplicably.  I can’t forecast that far out.. just that I think we will get there eventually.  I would say before the elections in November.  But today, I’ll be looking for a bounce.

  12. loopy
    JRW’s are more accurate.

  13.  Phil/Redlog: I’m also in line for the autobiography. Would make an interesting weekend read =)
    Drop: Is a day like today a good one to add to a few longterm plays in the morning or is it better to wait and watch the drop? Should we be watching to hold 10200 as a signal to load up? I’m still learning to be "rangeish" but loving it so far.

  14. really Matt?  i think we go lower….either way it’s a great thing especially when you put so much belief in it happening.

  15. hoss18/luck — nice quote. Thanks.

  16. Up tick right on cue with the DJI 200 pt range. Hmmmm….    that’s a very shiny train.

  17. Antibiotics/stj – I will look into it.  Never heard of the program.


    Loopy – they look fine.  JRWs are also very good.  They all are within a few pennies of one another.  I just post this one as most use TOS.

  18. Buying some ARNA here (7:15 range).  Looking for a 30c gain (5%).

  19. loopy; cheatsheet is fine but not live updated, its always behind. you need to refresh it.

  20. Highest 5 min volume in FAS since 8/2 which was the end of the blow off top.  Look out for a blow off bottom!

  21. Shadow, I agree.  I don’t want to impose on JRW for his numbers all the time.  Pharmboy looks like he is using another service and I am sure other people are too.

  22. Good morning,


    IWM 61.87, 62.38, 62.97, 63.48, 64.11, 64.86, 65.14and 65.92


    I will not be available today, good hunting !!

  23. loopy
    The TOS numbers look better but months wtching JRW lines, he hits the points at least 75% of the time.

  24. Matt,
    Blow off bottom?

  25. Hey all,

    If you are interested in a short sale, check out CFN. This one is up 8% currently on the day, but they only beat by a penny and cut 5% of their workforce. It is well above where I thought it would go, and I do not think these gains can last. 

    Check out my analysis here!

    Good Investing!

  26. loopy:
    JRW’s are LINES, cheatsheat are pivot and S and Rs.

  27. Good morning!

    Parents/Red – Well I was blessed with 4 of them from very different backgronds, made for an interesting childhood. 

    Jack up/Matt – Why is it you are quick to believe in a jack-up but not a "jack-down"? 

    M had super numbers and big guidance. 

    Hey Shadow – I had to restart my Mac Today.  First time in over 2 months.  Wasn’t giving me trouble, just a software update that required a restart.  Took 15 seconds and it remembered all my screens from when it closed down.   8-)

    Luck/Hoss – I like that. 

    Shorts/Mattl – You bought the actual ETFs?  Well good timing but I don’t like those things as covered plays, the ultras are good for directional runs and that’s it.  I’m fairly sure we hold our levels here and hopefully we get a nice panic spike below them on good volume and then sensibly retake them during the day as the last thing I want to see is a low-volume BS rally.   As to your TBTs – I’m suggesting that you can spend about $4 rolling your 2 sets of callers down to the $30s and pay for that by selling the $40 calls to some other sucker.  That leaves you in the $30/40 vertical at whatever you spent originally and you will be $5.40 in the money so you can then engage in a little selling of front-month calls (1/2 sales) to lower your basis.  If you can’t sell naked, you can add some Jan $44 calls for .64 to offset the sale of the Sept $36s, now $1.  The idea is just to pick up about net .50 per month to lower the basis of your long calls. 

    Let’s keep an eye on the bottom of our range: Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635 – I dont’ think we’re breaking these without some new bad news

    Our bullish goal is to retake the gaps at:  Dow 10,500, S&P 1,106, Nas 2,260, NYSE 7,020 and Russell 654  - all red at the moment.

    SOX have taken a tremendous hit so let’s watch that 2.5% line on the Nas at about 2,220 to hold and then it is fun to play USD (2x Semis) as a bounce play.  The Aug $27 puts can be sold for $1.15 and that can fund the Sept $27/30 bull call spread at about the same price so a free play (hopefully) with a $3 upside.  Worst case is a roll to the Nov $21 puts (now $1.50) which would be another 12.5% drop in the SOX from here (289) – which is pretty darned low

    I’m also liking the IWM $64 calls at .90 as a momentum play.

  28. exec, for the day at least.  A blowoff top or bottom is an extreme level which is manufactured by ‘them’ to create a sense of greed or fear and get people to buy or sell precisely at the wrong time.

  29. Phil, Not sure where you got the impression I don’t believe in jack-downs.. I do and think today might be one of them.

  30. Phil
    You are recommending BUYING 64 calls for August….correct?

  31. Phil what do you think about AOI ?

  32. Got it Matt,  thought that’s what you meant.

  33. Ok, I think we’ve bottomed for the day.  We’ll see shortly if I’m wrong!

  34. Phil,  What about th UUP Aug 23 calls ?

  35. I’m calling 10200 and the other stated support levels before we have a bottom that could see a substantial bounce.    I did cover 50% but I’m holding the other 50%.

  36. Shouldn’t there be more volume if we’re going to see a hard push down?

  37. Antibiotics/StJean – That sounds good!

    SPX/Chaps – Well our mid-point is 1,100 regardless of the chart and 1,072.50 is the exact 2.5% line but we’ve found 1,070 to be fairly reliable.  1,045 is the stop below that and is around where we get really motivated to buy.  

    Mattress plays – If you sold the Aug $106 puts (now $2.30) as a 1/2 cover for about $1.50, the move now is to sell the Aug $104 puts (1/2 cover) for $1.30 and put a stop on the $106 puts at $2.50.  That would be a $1.20 loss on 1/2 (.60) at 10,400 but the Dec $110s are up to $8.75 and if we head lower we add 1/2 Dec $102 puts (now $5) and stop out 1/2 the Dec $110 puts at $8.50 as that’s a very nice gain we want to protect.

  38. Pretty amazing flatline as the warmbloods leave the building and the bots start their typical trading of punchs. I suspect we start melting up here – DIA 106 calls .

  39. glad I stayed away from eing long TBT, but getting there soon enough, should be a buy soon, anyone?

  40. Volume at 10 is just 32M on the Dow so not much conviction to the selling – just a lack of buyers so far.

    Pivots/Loopy – I think that thing is great!

    AAPL Aug $260s at $2 are a pretty good deal with 8 days to trade.  Could be a quick $1 or more on a bounce and a stop at $1.50 limits the downside.

  41. SPY Iron Condor for 84c credit:  Sept buy 116/ sell 119 C paired with sell 102/ buy 99 P.  Risk is ~ 2100, make 840 for 10 contracts.

  42. sorry reverse the calls, sell 116, buy 119….

  43. I’d like to see one more push down before loading up long.

  44. Anyone monitoring the talking heads?   What’s their spin today?

  45. Hi Phil, I wanted to ask you about XRTX. I do not understand the contrast between stellar fundamentals AND analysts recommendations on one side and stock performance like XRTX is going to be BK tomorrow on the other. So, I do not understand if it is a good idea to take the loss on the stock I own and run from it or to double. Do you know anything about the company?:

  46. Thanks Pharm for taking a look at CYTR…..hope ur homework went well…if you get a chance…what about EXEL…I know ur busy..thanks again

  47. Phil…I guess there is another reason you are bias long.  Everyone disappears when the market goes down.  We’ve had a record number of NON posts. I would really be weary of any substantial bounce the news is just terrible and we haven’t retreated enough by Friday we are lower.

  48. Wrong-  Good call exec!

  49. s3 – THAT was my homework.  I will post something AH on the above as well as PolyMedix (which looks quite interesting…). 

  50. In a nutshell exec, The talking heads are trying to tie the action to fundamental, or economic events as usual, no connection to low volume pushes by a few large trading firms. They note a 9 to one down/up bias but cant seem to make the obvious conclusion that the markets are being bought and sold as a single unit by computers with no participation from real investors.
    I love it when CNBC states "Investors are selling this morning due to concerns about……."
    "Investors" have nothing to do with recent market action except for their complete absence.

  51. JR’s .97 line is holding.  One more bounce and it might be time.

  52. Adding/Red – I love bottom fishing.  Just be aware that 1,100 is only our mid-point and it’s very easy to get to 1,070 or 1,045 so fish accordingly.  It’s a pretty tight range (just 5% each way) but it’s been good to us so far!

    Thanks for stopping by JRW – We’re starting to miss you…

    Down/Matt – Oh, I thought you were still bearish down here.  Glad you agree, I think this is "goal" for the bots.

    IWM/Jasu – Yes, BUYING the Aug $64s, still .90.

    AOI/Loopy – An under-the-radar tobacco play?   I don’t follow them but their earnings are erratic and they pay no dividends and their options are pretty useless as they are only $2.50s or $5s with the stock at $3.34.  MO, on the other hand, is at $22.57 and you can buy the Jan $20/22.50 bull call spread for $1.82 and sell the Dec $22 puts for .90, which is net .92 on the $2.50 spread that’s 100% in the money to start with a nice $1.58 upside (171%) and margin should be about $4.80 so hardly more expensive than AOI

    V looking weak, that’s a bad sign.  VNO and BXP both bouncing so I’m not very bearish until they fail to hold $82.50.

    UUP/Hia – Lucky on those, taking money and running is prudent.

    Oil at $78.76 keeing a lid on the bulls.  Copper still $3.27 and nat gas $4.32 ahead of inventory report.  They need a pretty stong draw in supplies (net 2M) to get oil back over $80 and a build will see us retest our $77.50 line.

  53. Done selling, but no buyers!

  54. I’m sure as soon as I say this I’ll be proven wrong again but so far we have a free money day to the downside.  Not what I expected.  It always amazes me the speed at which this market moves.

  55.  Wow. No demand at all for distillates.

  56. Euro broke 1.3 and is moving steadily down,  meanwhile yen going down, but markets also down.  Are we back to the Euro correlation again?

  57. Great, thanks again Pharm

  58. Thanks Phil.
    Yeah, I bought the actual ETFs. Looking to dump them if we get another leg down today. I also bought SDS Sept. $33 calls. Just about even now. Should I write some calls now. Maybe Sep $35 or 36s. I paid $1.73 and could sell Sep $35s for $1.16 or $36s for $.95 for net .57 or .78.

  59. Pharm, where do you find the Pivot Points in TOS? Thanks. 

  60. TBT/Dman – Let me know when you lose interest.  That will be the buy signal!  8-)

    Heads/Exec – I don’t think anyone has a clue at the moment.  This market makes everyone wrong or right if you wait a few days. 

    XTRX/Alik – I cannot stay far enough away from data storage.  Cloud computing is really killing them and competition is fierce.  Understand that the repercussions of Moore’s Law mean that, no matter what you can offer this year, you are at a disadvantage to anyone who starts a new company next year as they will have cheaper and faster equipment than you.  So, if a storage company does not have enough volume (and good management systems) to be on a constant, rolling upgrade path (I used to design these for companies) then they are always going to be out-bid and outgunned at various points in the cycle. 

    Oil inventories down 3M in crude but not enough as Distillates up 3.5M and Gasoline up 400K so net build and refinery utilization was even lower than the ridiculously low low 90.7% expected so essentially the tankers aren’t delivering the crude and the refiners are shut down AND STILL THE BARRELS ARE PILING UP – that’s BAD! 

     EIA Petroleum Inventories: Crude -2.99M vs. consensus of -2.0. Gasoline +0.41M vs. consensus of 0. Distillates +3.46M vs. consensus of +1.6. Futures -1.9% to $78.71.

    $77.50 here we come!

    Should give us lows of the day on the markets (hopefully).

  61. The USD spread (bullish play on SOX) is tempting but not very liquid. The bid/ask spread is $0.65!

  62. Looking for the dollar to find some resistance 81.19/20, if we get past that resistance the sell off will accelerate as its a sign of flight to safety

  63. There are definately sellers today.  They are being very deft at using the bounce lines to sell into.  Still FMD!

  64. make that 82.19/20

  65. Matt,
    I’m starting to think like you.  If it cracks and holds this level you might see the "Hot Bodies" heading for the door while the BOTs sit their scratching their circuit boards with a confused look on there screens.

  66. Phil: what crude oil related investment vehicles do you watch ?

  67. IWM feels weak compared to the DOW.

  68. Phil, I followed your advice to cover 1/2 of my Jan 2012 LDK $5 Calls with a sell of Dec $7 Calls @1.4… LDK announced spectacular numbers but because of the fall today in the markets LDK remains flat.. how would u suggest I play this? I am thinking of WAITING until LDK shoots up to around $8 or so to roll my 1/2 Dec $7 calls to full cover Jan 11 $9 calls at a zero net cost.. but the question is if I should wait, KNOWING that at one point this stock is going to shoot up significantly due to the great great quarter they had and the upside guidance. I want to learn how to manage this position time-wise..
    Also, I know you said about NFLX becoming into a different business model, but at this time it’s ridiculous how high they are bidding this stock, so I shorted it with a sale of Aug $130s @ $2.0 and after shooting to the sky it quickly reversed and now the premium is $1.3.. my intention is to hold until expiration as I believe it will be worthless.. however if it shoots up higher I’m WILLING to roll to a higher price because I know at least in september this stock will find a top ceiling..

  69. TRIN/NYSE is 4.71, total sell

  70. Who kept asking about VECO? Down big today…time to sell a put?

  71. Matt/sellers — they’re being stealthy and I think I underestimate their sneekyness.
    out of DIA on the breakdown for a 5% loss.

  72. Wow, NFLX quickly reversed from $128.5 all the way down to $124! My $2 premium sale is now worth $0.97! I think a bit lower and I will retire it.. 50% in a day is way too tempting even though the CAREFULLY THOUGHT plan was to hold until expiration since I am farily confident NFLX at $135 is just simply CRAZY.. no way..

  73. Posts/Yip – That’s a good meter I guess.  I think most of the members are getting the hang of the range and it’s more of a function of our own cycle of having lots of picks at the top and bottom of the range and far fewer in the middle.  The more hard-core traders like to play the middle of the range but I’m sure the daily up and down nonsense is not for everyone (and very wise of them to ignore it too!). 

    Not looking good with 10,450 blown.  RUT down 3%, NYSE down 2.85%, SOX off 4%, Transports down 3.8%, Nas down 2.6% (2,220 blown) and S&P off 2.3% (1,092.50 should be 2.5% line) and Dow down 2% (10,380 is 2.5% line) so they are our only hope of staying above 10,200 and 1,070 etc. 

    SDS/Mattl – Why not have a goal of selling the $34s for $1.73?  You can look for that but then, if your calls fall below $1.50, you can sell the $34s for (guessing) $1.25 and use that money to roll down to the $30s (now $3.35). 

    USD/Jvest – Just put in the offer and see if you get it.  I like to offer for the vertical first and, if that fills, then see what puts are good to cover.  Certainly no hurry since the market is heading the other way.

  74. half covered the IWM 64 calls by selling weekly 63 calls expiring this friday. Net delta still significantly positive; don’t feel like stopping out of the 64 calls after the 20% drop

  75. aclend/VECO — I’ve been watching that one for an entry but I’d like to see it bounce off that 32 support and the high volume on the down trend get back to normal.

  76. Pharm,
    I’m in the Iron Condor with you. Good call with nice leeway around the range. If we were to get into trouble are you more apt to cover on momentum with a buy or roll out the shorts to a longer date?

  77. rainman, lol!

  78. Phil / trading vs. fundamentals
    You’ve explained that the big trading houses, via their algorithms, now control mkt direction and volumes. Sounds like musical chairs. Looking at the bond mkts, looks like investors have run for the hills.
    You’re still ‘rangish’ and you’re guiding us accordingly. But, at what point do fundamentals compromise the game of musical chairs for the bots?
    In the last 2.5 yrs:
    Unemployment has risen to a real 25%
    Credit has been withdrawn, with credit card debt now below 2005 levels
    Savings have increased to 6.5% (from nil).
    Net worth has collapsed with housing and mkts.
    Wages and salaries down 3.5%
    Yet GPD figures claim consumers are spending more.
    The BEA reports that total personal income grew 1.6% How come, well the figures indicate a 27% increase in ‘Government Social Benefits to Persons’ (welfare & Gov’t subsidized employment). Paid for by the $3.5 B deficit spending!
    Since all (and more) of the meager growth has come from Gov’t deficits, which are surely unsustainable, the GNP will go massively negative if Gov’t largesse is cut back. This is the disaster that the Republicans (and now Europeans) now want. With gridlock in the Senate maybe ahead, surely we can’t count on sustained massive deficit spending, in which case we could get a negative 5% read on GNP next year. How do you factor that into your investment guidance? Aren’t you being too optimistic about Republicans going along with big new fiscal initiatives? They are obsessed with only tax cuts/extension for the rich.
    Corp profit guidance is not premised on a reduction in the current levels of Gov’t stimulus, which would be devastating for the (unemployed) consumers.

  79. Nice little dollar bounce led by some massive Yen dumping.  Only made it to 85.4 Yen before being rejected. 

    Looking at TRIN (4.27) if anything it looks like we’re read to fall a lot further so be very careful!  If you don’t have good disaster hedges, I like the DXD $26/28 bull call spread at .70, selling the $26 puts for .40 for net .30 on the $2 spread that’s .67 in the money now.  Stop above 10,450 makes for an easy out but the spreads will be painful.

  80. Fall a lot further?  someone else has beaten that dead horse, oh that’s me

  81. Phil
    Looking to sell puts on HPQ at 52 week low now….Jan 11, 35′s. Please advise..thanks

  82. Phil,  The QID aug 16 -17 call spread.  What now?

  83. Oil related/RMM – I like VLO down here of course and XOM when they are around $58 and OIH gets interesting at $90 and CHK is a good deal here but not much else as generally I don’t trust oil to hold $77.50 and $65 wouldn’t surprise me one bit. 

    Big EU dump into the close – maybe we get a bottom at 11:30 – let’s hope

  84. Sold September BHP puts for an income play

  85. Hi gel1, what strike price did you sell for BHP?

  86. LDK/Rav – I would say do nothing.  It’s a half cover so .70 per $3.60 long and you have 12 months to roll them if LDK goes up.  It’s not like they lost a lot of value yet (in fact, they are overpriced, I think at 15% premium in 4 months) and you can roll them to 2x the $9s, now .55 so unless you are THAT bullish, there’s no reason to do anything.   If you are dying to spend money on the position, spend .50 to roll your long calls down $1.  Since that’s in the money, you are buying a $1 asset for .50 – isn’t that better than spending .50 in premium to take out a caller who isn’t even in the money AND giving up your insurance?  Good logic on NFLX – as long as you are willing to stick with the short play and roll, those things usually work out (but suck when they don’t!).  

    IWM/RN – Good idea to 1/2 cover with weekly $63s, now .53 (stop at .55).

  87. Did anyone else get stopped out of the aaple trade?

  88. Phil: to see what crude oil price does, what symbol do you watch ? USO or what /

  89. Where’s Cap and his AMZN short?  Hope he didn’t cover yesterday!

  90. AAPL – Just read an article in Le Monde saying that the EU is considering getting together with the US on antitrust issues. That cannot be good! 

  91. RMM: Crude oil futures (/CL on TOS)

  92. Lots of support / congestion IWM 62.00 – 62.32.  If we break below 62 on IWM I bet we lose another 1% from there.

  93. Phil, don`t you think the dollar strengh is a bit overdone at this point? Any play on that?

  94.  Matt / AMZN – i’m still short! :)

  95. AAPL/Z4 – Yep bad already.  Sorry.  What the heck did AAPL do to be down 3.5% today?

    Fundamentals/Tusca – The fundamentals are what define the range.  Righ now, I’d say 1,100 is the fair price for the S&P, it’s still 30% off the highs and around where it traded for most of last decade on average (after .com crash and after 9/11 crash).  Your figures generally support that and the BEA numbers show a 27% increase in Social Benefits because the bottom 90% are being killed but that isn’t stopping the top 10% from scooping up all the cash (only 2.4% unemployment in that group). 

    11:30 – time to DD on the IWM $64s at .68 for the brave

  96. Condor/ace – I roll the side that is way OTM down.  In this case the 116/119 would be rolled down for a credit to further offset any downside move.  102 is 1020 on the SPX, and we have resistance at 104 or so.  Should be OK, but if our credit spread widens, I start taking off 1/4 or 1/3 etc..  The 102s are ~7% further from here. 

  97. Yay – Free money!  $2Bn for unemployed homeowners and $1Bn home loan programs for the unemployed.  Do your employees a favor and fire them fast!  8-)

  98. PHIL
    no worries, still very impressed w/ ur 5% rule :)

  99. AAPL 250 weekly puts are at 2.50 with 2 days till expiration.

  100. Phil, in regards to your question about what APPL did to be down so much today.. I don’t know if you read this article from Andy Zaky (great analyst btw).. his statement below is RIGHT TO THE POINT of the insanity of the markets.. very accurate statement:
    The lesson here is not that so many got it wrong ahead of and during the financial crisis, however. Rather, what investors should take from this history lesson is that price targets are often good in theory but fatal in fact. Attempting to put intermediate or short-term price targets on any stock based exclusively on fundamental analysis is really an exercise in futility.
    And before you dismiss the financial crisis as merely an outlier, think again. Apple’s stock has collapsed by over 30% on at least four separate occasions over the past few years. See here.
    Secondly, and more importantly, it’s very hazardous to rely on a stock’s fundamentals to put a floor underneath its price. All stocks are risky assets, and have the potential to trade at very distressed levels. To unequivocally deny the possibility that Apple could see a short or intermediate term collapse just because it has strong fundamentals is one of the most dangerous viewpoints that anyone could entertain. While it’s very unlikely that Apple will see such distressed levels anytime soon, the point here is that strong fundamentals don’t make certain stock immune from torture."

  101. With the Fed buying toxic assets by the boat load and banks getting more free money, playing BAC and JPM for a bouncy

  102. Matt,
    You long or short?

  103. Deficits/Tusca – Japan is 200% of GDP in debt.  We are barely at 120% at $15Tn so that means we have another $10Tn AT LEAST to go before you can say it’s unsustainable.  I’m not saying it’s right, I’m just saying that you need to be very careful throwing out absolutes like "unsustainable" when the World’s 2nd largest economy has been sustaining it just fine for a whole decade and their currency is MUCH stronger than ours.  Their rates are lower than ours, their population is much older than ours (and shrinking), the people save more and spend less and they are locked in deflation for 20 years now.  It’s all attitude – with fiat currency the numbers on the paper are just numbers.  The Treasury can print up a few $1Tn bills tomorrow and pay off all our debts - the only question is what happens the next day when our creditors go around trying to use those $1Tn bills to buy Lakers tickets?  If they are the only ones buying – prices will probably stay the same.  If they all try to spend the money the next day – we’ll get some inflation but we don’t NEED to borrow a penny to balance our books, Timmy just needs to sign any piece of paper with a denomination on it and it’s officially money. 

    HPQ and INTC – NOW I like selling the puts!   INTC Jan $19 puts can be sold for $1.52 and HPQ Jan $41 puts can be sold for $3.30.

    HPQ/Jasu – You can sell the $35 puts but I like the bang for the buck on the $41 puts better. 

    QID/Hia – The $16/17 bull call spread is $1.46 in the money and fetching .74 and the $16 puts can be bought back for .07 so net .64 up from net .13 is a nice 392% out of a potential 669% is time to take it off the table.  You can leave the puts as a risk but I’m all for taking the bull call spread down now.

  104. WTF on home loans?  For exactly how long do they propose propping up the unemployed?  Where are the jobs coming from to end this nonsense?
    Heard yesterday there is more debt in student loans now then in consumer credit cards.  And of the student loans, the govt holds a lot of that debt.  So we now have the govt lending money for housing and student loans in greater amounts then the private sector.  When are we going to stop calling ourselves a market driven economy? 

  105. exec, short.  Precisely when the market starts to stabilize!  Will cover FAS short over 21.

  106. Gel – what is the most you usually see currencies falling on days like today (down days with no announcements on rate changes by countries’ central banks) I scaled into a big fat losing position on Aussie $ futures from about 1% to 1.7% playing for a bounce . Just was curious how much further you see the NZD and AUD diving today (Im just speaking about today, not going to hold the contracts overnight)? BTW I bet you’re making bank on that USD/NZD trade!

  107. Phil: deficits: what is debt to GDP of California and other states: you will be surprised.

  108. matt/loans — anyone smell free education coming down the road? Educate our way to higher employment? I might get a better return on my money if I get a mortgage on my house claim myself unemployed and start going to college than playing the market! I think I’ll become a school teacher, or maybe a cop. B-)

  109. Phil, from yesterday I’m holding DIA Sept $108 call minus DIA Aug $107 call. I haven’t tried many calendar spreads before so I’m wondering if you still like this one. It seems like with downward movement the Aug call will expire worthless, then we hope the Dow picks up leading into elections or with QE2.1. Is that the idea?

  110. Matt,
    I’m back to cash……love to go short but have to run out to a meeting.   I wouldn’t panic yet on your position…….these guys are sneaky…..

  111. FWIW:  The 10-year Treasury yield hit a fresh 16-month low and the 2-year yield has actually dipped below 0.5% for the first time ever. Sushi, anyone? 

  112. Phill,
    good evening
    AA Jan 9/10 call for 0.66
    INTC Jan 17.5 / 19 Call for 0.94
    I am waiting for those spreads for about a week, maybe it is time now? 

  113. That was weird.. just then, IWM and FAS were both exactly .25 above their lows for the day at exactly the same time.  Do the bots have this market locked down or what!

  114.  VECO/ Aceland, rainman       I was the guy who was asking Phil  about VECO.  I know the guys at Kleinheinz Capital who own 1.3 million shares (same town as me, Fort Worth) . They run a very sucessful Hedge Fund and are very bullish on this stock.  Phil has not said why he doesn’t like it.   Veeco has $10 cash per share, makes tons of money and has a forward P/E at these levels of  6.6.

  115. Phil / Defecits   Japan?  But Phil, they’ve always been selfish mercantalists and inspite of importing all of their energy they balance their trade.  And, they’ve never had 25% unemployment, which we are stuck with now, so poor analogy.  Our private sector has no way nor interest in creating those jobs in America.  Federal handouts are all we have for the next few years as the whole construction sector is dead for years, with the foreclosue tsunami still ahead.  You may be too optimistic about maintaining the status quo and maintaining the spending of the 25% unemployed courtesy ‘handouts’.  Frugality and savings psychology will spread like the flu, tanking GNP.

  116. Matt,
    What kind of system are you using that tells you how much a ETF is off it’s lows???  How do you use this information.

  117. So what’s the bet today……lunch crowd takes it up or down???
    My guess……down

  118. DD on the IWM aug 64 calls

  119. My ol’ friend DCTH…..Selling Sept 7.5 P for 78c and buying the stock.  When the bounce happens, sell the Sept $9 C for 55c or better (were 60c yesterday).  Playing these for income for a few months until they get going again.

  120. I don’t know AAPL is down but I bought back Sep 280 Calls.  Now I am long the Sep 200P /310 C waiting for another move to put back on half a condor.
    Also I feel sort of 1/2 right about what i said about Fed…market seems to think yesterday wasn’t QE2; maybe QE1.1.
    Personally I think Hoenig’s argument is correct, except where its dead wrong.  The big difference between the 2003 recession and the current recession is that rising housing prices (which have been taken away now) seem to have a much a higher "multiplier" than rising stock pricing.  That is, lots real jobs were created when the housing bubble epxanded and real jobs were killed when the housing bubble collapsed.  And the effect is probably worse than they report because I’m sure a high percentage of people doing residential construction were ‘not documented’ then and so aren’t counted now.
    Causation aside; I still don’t see what effect lower long term rates will have as long as there are no bids for existing houses.  As Phil as pointed out the velocity of money is slowing.
    But I continue to believe they will do some QE2 and have now reversed my reversal of my reversal in TBT and am short some calls.  And I am hanging on to my short GILD call spread.   If there really is deflation … and there you can certainly see it if you try and get more home equity line (to fund Phils conservative buy write portfolio, say) then who wants all that gold?

  121. exec, I just meant the low for the day (LOD).  FAS and IWM were both 25 cents above their LODs at the same time.  Falling in unison, too.  I dunno about the lunchtime crowd.  Clearly, momentum to the downside has subsided.  So, that gives root for a push to the upside.  There is no way we get a doji today but we could claw back some.  One thing is for sure, the trend is down again!  I’m still short.. but not overly confident.

  122. Phil: CA and AK: 7.5 % and 40 % is Debt to GDP,
    the Palin state is much worse in this regard despite excellent fishing, CA is much better than USA as a whole or is it hole.

  123. Rexx – really is deflation…ummm, it is already here.  Wages are pressed, hours worked are down, etc etc etc.  Deflation does not care about the printing of money in the short run, and the yields are falling.  P&G are slashing prices to stay in line with store brands.   As A. Rivlin (former Fed Vice Chairman):  People aren’t thinking very clearly about that (inflation). They learned somewhere back in some economics course that inflation is caused by too much money chasing too few goods. But right now, we’re not in that situation at all. We could have people spending a lot more before there was any upward pressure on the price level. So fear of inflation is just a silly thing to be afraid of right now.

  124. Nice boring strangle for 12c credit (if you do not owning YHOO under 12.50, sell the jan11 12.5 P for 69c, buy Jan11 16 C for 57c.  There is a ton of activity in the call option side of YHOO in Jan….is MSFT gearing up for rolling them into BING?

  125. bobhu/BHP
    I sold the September 60 puts…. I think this dive in the stock is overblwn – should recover

  126. Phil: if ratio debt to GDP is really low, like CA at 7.5%, what can be reasons that there is such a big budget deficit ? Mostly because the collection of taxes is a problem, tax delinquencies in CA is huge :Nearly 90 percent of taxpayers pay the taxes they owe. Those who don’t pay contribute to California’s tax gap—the difference between taxes owed to the state and taxes actually paid.
    As of 08/10/2010 , the amount of taxes due on this list totals $182,070,868.65.
    Top of list starts with: the bottom of list is still 300 000$ tax delinquency.

    Halsey M. and Shannon Minor
    San Francisco, CA 94105
    Personal income tax

    Asset Liquidation Group, Inc.
    La Puente, CA 91746
    $ 8,349,084.20
    Corporate income tax

    Mark C. Yurgelevic
    Orinda, CA 94563
    $ 7,404,749.68
    Personal income tax

    Michael A. Vrab
    Corona, CA 92883
    $ 5,665,831.47
    Personal income tax

    Jeffry C. Howard
    San Diego, CA 92130
    $ 5,392,256.97
    Personal income tax

    Van Rex Gourmet Foods, Inc.
    Thousand Oaks, CA 91360
    $ 4,300,112.66
    Corporate income tax

    Michael J. Fanghella
    San Diego, CA 92663
    $ 4,108,016.03
    Personal income tax

    Andy H. Duong aka An Hong Doung
    Corona, CA 92879
    $ 3,638,619.17
    Personal income tax

    Vito J. Caruso, M.D. Inc., A Professional Corporation
    Tustin, CA 92780
    $ 2,730,561.68
    Corporate income tax

  127. Pharm – how did you decide to get into ARNA today for a 5% increase (ie, why 5% from the 7.15 range)? I am trying to understand better how you decide your almost perfect entry points.

  128. jromeha… Yes, I cleaned up on the NZD/USD…. I have set a tight limit stop on this one to lock in profit. I’m playing this market very carefully, as it is behaving a little irrational.

  129. Buy and bail….now they can count on the Fed and HUD to finance the scheme

    Harvey Collier, a mortgage broker in Fort Lauderdale, Florida, says he gets as many as 10 calls a month from people planning to default on their loans. The twist: They first want financing to buy another home.
    Real estate professionals call it “buy and bail,” acquiring a new house before the buyer’s credit rating is ruined by walking away from the old one because it’s “underwater,” or worth less than the mortgage. It’s an attempt to escape payments on a home whose value may never recover while securing a new property, often at a lower price with a more affordable loan.

    U.S. Department of the Treasury will make $2 billion of additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment. Additionally, the U.S. Department of Housing and Urban Development (HUD) will soon launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance – for up to 24 months – to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.

  130. For those that trade FAS/FAZ and are curious about the time decay but don’t wish to go though the mathematics, I went through a simple exercise with Excel where I graphed FAS and FAZ against the RIFIN (index which both track). The picture is very telling of the decay within these ETFs. I’d be happy to pass along the Excel file for anyone that is interested. I also went through the same exercise with TNA/TZA and the RUT.

  131. Hey all,

    I have a new overnight trade in EnerSys set up. We are looking for a nice morning tomorrow after earnings are released.

    Check out my analysis, entry, exit, etc.

    Good Investing!

  132. Currency again:  Let’s say we print "just" $2Tn and quietly use it to retire China’s TBills.  That knocks our debt down $2Tn (13%) and China can turn around and contract to buy a year’s worth of oil and coppper and some gold and silver and platinum and coal, etc, and do another $500Bn in stimulus spending and still have $500Bn of cash in the bank for a rainy day.  How much would that impact the global economy if China did the spending carefully?  If they spend the money on consumables the only losers are the people who sell the oil for the worth less dollars and the people who speculate in commodities based on China’s demand (and long-term, China would love to stick it to speculators anyway as they spend a lot on commodities).  People think of money as a real thing but it’s not at all – it’s just an idea that’s written on a piece of paper but has no more realistic value than if I gave you a coupon that was worth 10 dragon rides that you take to the store and trade for a bag of beans…

    Le Monde/StJean – I wonder if that’s true or a hyena attack?

    Dollar/Cmsosa – Oh totally being jacked up by Japan but don’t bet against the BOJ – they are really good at this.  The dollar has been falling since Japan had yet another government turnover.  They should just about be getting back in the swing of things now that it’s "crisis" time at 85 Yen to the dollar again. 

    AAPL/Kinki – Watch out for anti-trust rumor, that’s why they blew the 2.5% rule today.

    AAPL/Rav – I couldn’t agree more.  That’s true of any stock but AAPL is particularly succeptable to manipulation because it’s highly owned by retail traders who are "fans" and will bail on "bad news" which can drastically distort the price both up and down.  Knowing that we have an anti-trust rumor makes me feel better about AAPL and the Nas so I no longer care that the Nas blew 2.5% and if the S&P and Dow hold the line then I am loving the bullish play on the RUT – who are the most behind.

    I didn’t know our economy was market-driven, Matt – when did we adopt that system?  8-)

    Debt to GDP/RMM – It’s nowhere near as bad in the states as it is at the Federal level.  The problem is they can’t issue currency (though Cali tries with IOU’s) and most of them are required to balance the budget, which puts them in crisis mode every year. 

    Good plan Rain!  If they start offering sweet deals like that, I’ll be pushing my girls for early admission. 

    DIA/Jvest – Sure, the idea is, of course, to let the Aug $107s expire worthless and hope you hold onto some value on the Sept $108s.  Could be great if we do get a bounce in the near future but the QE was really a 1.5 and not a 2 so we need another catalyst if we expect to see 10,700 again.  Bear spreads like that are all about retaining the net value, don’t confuse them with seriously bullish long-term plays.

    AA/Slaimonas – I’d go $7.50/10 for $1.90 and sell the 2012 $10 puts for $1.65 so net .25 on the $2.50 spread and if AA finishes at $9 (now $10.80) you pocket $1.50 which means your b/e on AA in 2012 is $8.75 – not bad for a worst case with a $2.25 potential net upside.

    INTC/Slaim – I like that straight bull call spread as well as my spread above.    If you can’t get your fill, try buying the Jan $17.50s for $2.82 first and offer to sell the $19s for $2 and just set a stop like $1.60 that you MUST sell at so worst case is you have the spread for net $1.22, which is still a 20% upside if they hold $19.

    Locked AND loaded Matt.

    VECO/Stock – I haven’t?   Well, it’s not that I specifically don’t like them, I just wasn’t bullish on them (see my comments on storage above and having an LED component doesn’t excite me either as it’s just another commodity with tightening margins – see CREE earnings).  You guys were asking about VECO at $45 and I thought $45 was too high to chase.  NOW they are getting a little more attactive at $32 but I don’t think there is a big hurry as sentiment has clearly shifted negative on the sector thanks to the generally gloomy SOX reports.  Per the conversation we just had about valuations – VECO’s "value" doesn’t matter if sentiment goes negative on them, they can go much lower and that will make them a stronger buy than they are now.  You can take advantage of today’s crazy drop by buying the Jan $30/35 bull call spread for $2.30, which is $2.37 in the money and makes 100% if VECO heads higher.  If they go lower, you simply sell some puts (the $22.50 puts are already $1.70) and use the cash to roll out to 2012 calls and wait patiently for the markets to catch up to you.

    Japan/Tusca – They don’t have 25% unemployment because the Japanese corporations would rather keep their workers than make more money – so very poor analogy comparing them to US corporations, who would fire their mothers to make an extra penny earnings.   Even so, their current 5% unemployment is an all-tiime high.   The big difference is that the rest of the civilized world views Corporations and Government as having a mutual goal of doing what’s best for the country while the US system has our Corporations usuing the government as a tool for Corporate Wellfare, Transfers of Wealth from the Bottom to the Top and as a dumping ground for any excess capital, both human and asset, that they should happen to accumulate.  If attitudes in the US change as radically as you think they will, it will show up in the data long in advance.  Frugality – LOL!!!

    Volume at 12:30 on Dow is 86M, normal Bot schedule so far and that means we stick to 10,550ish later if all goes well

    I like the new Fast Money girl – quite sensible for a CNBC person.   The others are still sickening with their "Buy gold, buy oil, buy commodities…" constant BS. 

    AK/RMM – I’m surprised by that one but I guess I shouldn’t be if they are electing Palin to Govern as clearly they cannot be very interested in balancing books.  How can a state that produces $55Bn a year in oil be running a deficit?  Do they not collect anything from the oil companies other than what they pay to the citizens?  They used to run a surplus when oil was $40…

    Here comes 10,380 finally along with S&P at 1,090 and Nas 2,200 – If we can’t hold these then look out below!

  133. I’m sure glad I’m mostly in cash… my longs ain’t so tall anymore…. I did see this coming though.

  134. ARNA/rn – I look at the trend lines and 7.10-15 area is a lower trend on the daily chart and 7.50 is a top the past few days). Today’s low is 7.08, high is 7.27.  For the month, ARNA has been bouncing around (as has DCTH) in a pattern from ~ 7 to 7.60.  Thus I think 5% in the next few days is a good possibilty.  I am expecting (as is Opt), another wave of buying b’f Sept.  Hedgies may drive the price down a bit to get a better price, and I will play along with them and buy more.  I expect ARNA to be at the $9 range in Sept.

  135. Phil, kustomz / Buy and bail    That’s a great story kustomz.  Phil, this could start the foreclosure tsunami.  Should we buy SKF?

  136. Phil…. What is wrong with gold?… it is outperforming the market by a longshot over the past year, I believe.

  137. Woohooo!  IWM 61.87 here we come!
    Kustomz, interesting.  That is a powerful incentive for someone if they have the ability to buy a second property and are underwater big time with their first one.  I wondered how folks were walking away from all these homes.. not everyone is comfortable renting.
    HHFIV, yes, I’d be interested in that spreadsheet.  Please send it to my email at  It’s an email account I use for spam filtering but I’ll check it the next day or so to see if you sent it.  Thanks!  What I’d really like to see is the decay in SRS.  I’ve got a bunch of that in an IRA that is just rotting away.

  138. Pharm – Thanks

  139. Pharm- CELG: I had sold some august $55 calls for .68c sometime back. They are now $1.27. I bought Jan 11 $60 leaps a few months back for $6.64, now $2.84. How should i adjust this trade? Thank you.

  140. Long 5 Aug $64 IWM calls @ .60 for my first entry.  Added 2 contracts to my Jan 12 $15 INTC short puts @ 1.48.  Would be happy to own more INTC around $13.50.

  141. Taxes/RMM – Interesting but a link would suffice.  I’m sure that’s true anywhere you look and, as I’ve mentioned before, GE has $37Bn in sales and declared an operating income of $8.5Bn last Q and paid $885M in taxes (10%, 20% after taking interest expense deduction even though their profits were net of interest expenses, of course).  HPQ is in Cali and had $30Bn in sales last Q and had a $2.8Bn operating profit and paid $567M in taxes (20%) – THAT’s where our deficit comes from.  A VAT of just 5% would collect $1.5Bn, 3x what the company actually pays and 10x your entire list from just one company. 

    USD should be filling now!  I see $2 for the Sept $27 calls and .85 for the $30 calls (sold) and the Sept $27 puts are now fetching $2.20 so a 1/2 sale will cover the spread.

  142. Speaking of ARNA – the Jan11 5/10 bull call spread can be had for 1.75.  I am using some of my profits to buy a few of these (jomama’s was also a good spread, but out to Jan12s (7.5/15 spread for 1.20 I think).  Note, I will be out of all stock b’f Sept 15, only holding the spreads to limit my upside, but also save the downside.  I did this with ITMN and it was a nice return, could have been a ton more 13 – 45, but when they tanked back to 10, I was happy with the spread.

  143.  HHFIV – can you send the spreadsheet to me as well?


  144. Good thing Cramer told us to buy yesterday!

  145. Pharmboy
    Yes I agree there is some deflation in non-housing part of economy; but I think housing is main source.  So  I just don’t know how much lowering long term rates can really do to help work off the backlog. And I don’t think the Fed knows either.  But it seems to be all the ammo they have left.  Though they don’t yet have the consensus of will to do it.  But they will.  The vote will be 11-1.  But they obviously didn’t have the votes yesterday.
    So that’s why I’m buying bonds (selling Calls on TBT).  I just agree with Hoenig’s skepticism about the potential effectiveness.  Of course if it works and it causes a little bubble well that’s a risk they ought to take now.  Its a better way to get the economy started than going to war.

  146. CRIS – order is in for $1.35. 

  147. HHFIV
    me 2 pls

  148. IWM
    Matt 62 to 62.30 has a lot of support/congestion

  149. Matt1996: I haven’t traded SRS. However, I’ll look into it. Some of the 2x/3x leveraged ETFs decay better than others. FAS/FAZ and TNA/TZA are two that work especially well. You’ll see it in the pictures.
    I’ve also gone through the same exercise with UCO/SCO and the $DJUBSCL index.

  150. HHFIV: And me as well, please.

  151. Phil/USD – check your months on the put. Earlier you said to sell Aug $27 puts and buy the Sept $27/30 call spread. Now you’re talking about selling 1/2x Sept $27 puts. I just want to confirm whether you meant to change months or whether you’re watching too many screens all at once.  :)

  152. Buy and bail/Kustomz – Good plan!  Of course if GS were doing it, they would be called Strategic Mortgage Reduction Swaps…

    Cool idea HHFiv! 

    SKF/Tusca – No thanks.  I really think it would be prudent to see if the world is still ending tomorrow before we start shorting the financials. 

    Gold/Gel – It’s outperforming by about 10% over the past year but I’d say it’s more than 10% more risky than the market.  As of April 28th, gold and the markets were neck and neck. 

    LOL Dbar!

    Housing/Rexx – I don’t know why people think housing will "come back."  Housing was a speculative BS bubble that has run its course and the best people can hope for it to burn off the inventory and keep people in their homes without too much more damage.  You are not going to get people to scrimp and save for 5 years to come up with a 20% deposit (2-3 year’s rent) on something that may end up randomly costing them another 20% if the price goes down.  The general population is very "story driven" and there are far too many stories of people they know who have lost everything in housing investments.  That’s all a home is, it’s an investment and that’s what they were sold as for 20 years.  No one belives that now and a realtor or bank who advertise a home as a sound investment would be subject to a class-action lawsuit at this point. 

    I mentioned on the weekend that the death of the homeowner economy may be explaining the irrationa-looking spending we’re seeing by the consumer as they are saving the money they would have been dumping into home loans and bank fees and moving expenses and that’s making them feel flush with cash.  Normally there are 15M home sales a year in the US and if you figure $20,000 per sale of consumer money is tied up in the new home – that’s $300Bn of cash sloshing around in the hands of consumers that wasn’t there 2 years ago.  So they use it to pay off debts and do a little shopping and jack up the savings rate – all without damaging the economy past the point at which the housing collapse already damaged it. 

    USD/Jvest – I didn’t realize I switched.  I still like the original sale plan as it expires in just 7 more sessions and can, of course be rolled to the 1/2 Sept puts – it is a better play selling a full short of the Aug $27 puts, now $1.10.

  153. Phil
    What spread would you recommend on BP or MEE, if there is any trade ?

  154. QQQQ Aug $45s at .96 were $2 on Monday so I like playing them for a hopeful $1.20 with a stop at .80.

  155. Phil  was it the Aug 27 puts or Sept 27 puts--I sold the Aug 27 ,I thought that was the morning call--please clarify
    Tx much

  156. HHFIV, one more for the spreadsheet please!

  157. Aaple – Le Monde / Phil – They are quoting an article from NY Post:

    European regulators have teamed with the Federal Trade Commission in probing Apple’s policies for mobile software developers, The Post has learned.
    In June, the FTC opened an investigation into Apple’s decision to ban developers from using other companies’ tools to develop software for its mobile devices. Apple also shut out Adobe’s Flash video technology from its iPhone and iPad.
    According to a source, the European Commission recently joined the FTC probe into whether Apple’s business practices harm competition.
    The investigation could last another four to six months, the source said.
    The European Union recently adopted a new Digital Agenda aimed at encouraging the interoperability of technology.
    Apple has maintained that its policies, including its ban on Adobe’s Flash technology, is within its rights and is necessary to maintain the quality of its applications.
    Apple, the European Commission and the FTC declined comment.

  158. Phil:
    Median home prices up in 2Q in most US cities
    In the Realtors report, the largest price gain was in Akron, Ohio. Prices there were up 36 percent from a year ago. The San Francisco and San Jose areas, which have mounted a strong rebound from the housing bust, also saw prices rebound by about 25 percent. Prices in the Riverside, Calif. metro area were up 18 percent from a year ago.
    The biggest price drops were in Cumberland, Md., Tucson, Ariz., Ocala, Fla. and Beaumont-Port Arthur, Texas. Prices in all of those cities were down at least 13 percent from last year.

  159. Pharmboy: I have Arna AT 7.19$, how far can I ride this one today /

  160. This is just a textbook day to the downside.  I’m really disappointed in myself for not recognizing it earlier.  Bad bear!

  161. CELG/nicha – yeahowzza….well, the short calls can be rolled up to the Sept 57.50 for almost even, but the chart says CELG may head lower (daily and weekly.  I would most likely roll straight across to the Sept 55s for 2.48 ($1 credit) and roll your Jan11s out to jan 12s 55s.  UR problem is the delta will bury you on the short calls.  Also, make sure it is a 1/2 sale of your caller (sold calls).  Phil may have a better play, but that seems like a good one to me.

  162. matt
    The bear is ok, just a hangover!

  163. ARNA/RMM – I will ride ‘this’ one for the next few days.

  164. 08:00 AM On the hour: S&P -1.38%. 10-yr +0.34%. Euro -1.23% vs. dollar. Crude -1.15% to $79.33. Gold +0.36% to $1202.30.

    09:00 AM On the hour: S&P -1.61%. 10-yr +0.34%. Euro -1.38% vs. dollar. Crude -1.53% to $79.02. Gold +0.8% to $1207.60.

    At the open: Dow -0.93% to 10545. S&P -0.76% to 1113. Nasdaq -1.82% to 2236.
    Treasurys: 30-year +0.58%. 10-yr +0.34%. 5-yr +0.19%.
    Commodities: Crude -1.45% to $79.09. Gold +0.68% to $1206.10.
    Currencies: Euro -1.57% vs. dollar. Yen +0.41%. Pound -1.04%.

    10:00 AM On the hour: Dow -1.84%. 10-yr +0.55%. Euro -1.59% vs. dollar. Crude -1.69% to $78.89. Gold +0.83% to $1208.00.

    11:00 AM On the hour: Dow -2.04%. 10-yr +0.41%. Euro -2.1% vs. dollar. Crude -2.04% to $78.61. Gold +0.63% to $1205.50.

    12:00 PM On the hour: Dow -2.08%. 10-yr +0.33%. Euro -2.14% vs. dollar. Crude -2.55% to $78.20. Gold -0.02% to $1197.80.

    01:00 PM On the hour: Dow -2.3%. 10-yr +0.39%. Euro -2.23% vs. dollar. Crude -2.64% to $78.13. Gold +0.06% to $1198.70.

    Notable earnings after Wednesday’s close: AAP, CSCO, SLW

    June Job Openings and Labor Turnover: Job openings at 2.9M, unchanged from May; hires at 4.25M, down from 4.5M in May. Turnover remains low at 3.3%.

    MBA Mortgage Applications: +0.6% vs. +1.3% last week. Thirty-year fixed mortgage rate decreased to 4.57% from 4.60%.

    Mortgage purchase and refinancing applications rose by less than 1% in the first week of August even as 30-year loan rates fell to 4.57%, the lowest in 20 years of record keeping by the Mortgage Bankers Association.

    Owners cut prices on 25% of the U.S. homes listed for sale in July, hoping to spur interest in a sluggish market. But "if buyers are unqualified to buy, it doesn’t matter how low interest rates are or how discounted a home is," and the housing market is likely to bounce around the bottom for months.

    The Treasury adds $2 billion to an existing $2B foreclosure-prevention program for jobless homeowners in 17 states and D.C. The "Hardest Hit Fund" has been geographically targeted to areas with either high unemployment or big home-price declines.

    Jun. Trade Balance: -$49.9B vs. -$42.7B expected and -$42.27B prior. Exports -1.3% to $150.45B. Imports +3.1% to $200.35B.

    Shaky economies and trade imbalances have prompted an unfortunate obsession with exports, writes Alan Beattie in the FT. There’s no doubt the global economy needs rebalancing, but export-mania will just drag up the same old problems we’ve fought before. Besides, "by definition, every country cannot simultaneously export its way out of recession."

    The Fed’s move to reinvest maturing bonds rather than absorbing the cash reminds Macquarie’s Richard Jerram of the “incremental policy shifts” the Bank of Japan made over the last decade that failed to convince markets of the bank’s intentions. "There is a worryingly similar lack of clarity from the Fed,” Jerram says.

    After declining again on strong corporate earnings, VIX is back up (more than 13% to over 26) after the Fed’s pronouncement of modest recovery expectations.

    Stocks are hanging around intraday lows, but post-Fed history suggests the worst today may be over – as investors tend to spend early trading digesting losses and then spurring stocks from there.

    The Treasury sells $24B in 10-year notes at 2.730% (.pdf), the lowest yield since Jan. 2009. Bid-to-cover ratio of 3.04, vs. a recent 2.73; indirect bidders take 45.8%, vs. a recent 42.5%. Direct bidders take 10.6%, vs. a recent 13.2%. Treasurys held gains after the show of strength, especially on the longer end: 30-year yield -0.05 to 3.96%; 10-year -0.06 to 2.71%.

    Obama signs off on $26B of aid to states after the measure passed the House yesterday. States will have to choose their spending wisely, as the aid covers less than a third of an $84B budget shortfall.

    The U.K.’s economic recovery is likely to continue at a slower pace than previously expected, says the Bank of England in its quarterly Inflation Report. Inflation will be somewhat higher than previously forecast, and will likely remain above the 2% target through 2011.

    Signs of slowing growth out of Asia: In China, industrial output rose the least in 11 months, retail sales growth eased and new loans climbed less than estimated. Japan saw a recovery in machinery orders but growth was far weaker than expected.

    "The short-term global economic outlook is highly uncertain, presenting significant downside risks to future oil demand growth," warns the IEA in its monthly report. If the global economy grows 3% this year vs. the 4.5% expected, oil demand will fall 300K barrels/day. A similar sized drop in 2011 growth will cut oil demand by a hefty 1.2M barrels/day. Oil futures -1.2% to $79.31.

    Hedge funds have poured back into fixed income this year, to the tune of 20% of trading volume of government bonds – from 3% last year, but below the 30% in 2007. About two-thirds of structured credit and some 90% of distressed debt is in the hands of hedgies, Greenwich Associates reports.

    Macy’s (M): Q2 EPS of $0.35 beats by $0.06. Revenue of $5.54B (+7.2%) vs. $5.50B. Shares +1% premarket. (PR)

    LDK Solar (LDK) +4.6% premarket after posting a Q2 profit beat yesterday after the close and raising its full-year revenue guidance to $1.95B-2B from $1.6B-1.7B. Consensus had been for revenue of $1.59B.   Back to $7.33 and buyable.

    Whole Foods (WFMI) bulls should double up with call options, UBS says, as analysts think its rally will continue without near-term catalysts. Analyst Neil Currie upgraded the stock to Buy from Neutral on increased growth prospects due to reduced costs, smaller store openings, lower prices and increasing store productivity.

    Not surprising since their buddies wrote it:  Contrary to first impressions, financial reform could help rather than hinder Goldman Sachs (GS). Senior Goldman execs are said to be advising analysts privately that the bank does not expect the new law to cost it any revenue. “The statement was perhaps surprising in its level of conviction,” one analyst writes, “but we’ve learned to take such judgments from GS very seriously.”

    Three lunchtime reads:
    1) Fed rollover is no big trick
    2) Firms spend more – carefully
    3) For-profit schools: Short sellers, liberal reformers unite

  165. Bad Bear/matt1966 
    Shouldn’t that be BooBoo Bear?

  166. There is but one possible solution to turn around the economy, unemployment and the equity markets – Obama needs to scuttle all talk of raising tax rates for two years,, and assure business there will be a moratorium on the union card check legislation for at least two years. All of his problems would evaporate with a 5 minute speach confirming this direction, and the country could heal the serious economic wounds. A very simple solution to a very serious idealogical problem.

  167. Thanks. gel1.

  168. Matt I’m always the bad/booboo bear until this week.  finally!

  169. BP, MEE/QC – BP is too uncertain but I do like MEE at $30.94.  You can go artificial with the Jan $27/31 bull call spread at $2.25, selling $27 puts for $2.70 and that’s a net .45 credit on the $4 spread and the worst case is you own MEE for net $26.55 in Jan if they finish more than 10% down from where they are now.  You can pair that with a 2012 $30/40 spread at $3.50 and if MEE holds $31 through Jan, you pull net $1 profit off the table and you own a free $10 spread through the next year

    AAPL/StJean – Thanks.  I think the operative phrase in that whole thing is "4-6 months" – certainly nothing to tank them over now but worth keeping an eye on.

    Home Prices/RMM – That’s pretty bullish but mixed on the 2nd half so I doubt we’re out of the woods (but you wouldn’t know it from the CRE boys). 

    ROFL Gel!  You are too funny!

  170.  HHFIV, one more for the spreadsheet please.  Thanks.

  171. BAC down 8 straight days….near 52 week low.

  172. Dow volume at 1:50pm is 107 million. Stickable.

  173. Technically we breached the 200 on the Dow next test 50… SP below 200 and testing the 50 …Naz below both 200 and 50… thinking the Dow needs to play ketchup :-)

  174. Gel1, here’s a real way to help the country.. not just now but for eternity:
    1)  Ban corporate contributions to elections
    2) Ban lobbyists
    3) Abolish the Administrative Act so govt employees can be fired more easily

  175. kustomz, we say ‘catsup’!

  176. TAXES       How many invest based on long term capital gains?      Buy and Hold?    How many invest short term and don’t mind paying taxes on the profit?      The problem is not taxes are too high or will get to high.      Consumption is the problem and the rich people don’t ever buy what the masses want so they are not holding up the economy. How many buy portable music? How many buy $80,000 speakers? The rich are afraid of loosing status but the churn was at the bottom!

  177. Matt we may share a brain.

  178. A friend of mine asked me if I knew about the ‘Fade the Fed’ trade. I didn’t . He explained it and I’ve since read more about it. Now I’m wondering if there’s a ‘Fade the Cramer’ trade?

  179. Matt… ya, I agree. Those three suggestions should be added for sure. I would also suggest term limits, and an IQ test for political candidates.

  180. matt- I am with you on all of them even though I am a govt employee.

  181. Matt1966
    WOW!! 3 simple effective solutions, are you running for a seat? You have my vote.

  182. sorry Phil--you did clarify--did not see the post--Tx

  183. > 1)  Ban corporate contributions to elections
    They sort of tried that already, but then "conservative" supreme court justices decided that Corporations are people too.

  184. Matt… maybe an IQ test for the right to vote, as well.

  185. HHFIV
    did you send that spreadsheet out?

  186. Pharm/CELG- thank you. Unfortunately I can’t roll from the TOS mobile app so had to sell but now have to wait till tomorrow for settlement. I am also losing interest. Do u suggest ARNA or DCTH or CRIS as an alternative?

  187. IQ is good, the really hard test is common sense!

  188. With 8 days left b’f OPEX, GENZ Aug 65 P can be sold for 1.37…..that is IF they are still ON with SNY.  Oh, and SNY is at 29.40, only 5% away from their 52wk low.  Some say that the deal is not going through. 

  189. Nicha – well, none of those are alternatives of CELG.  Selling now was a bit premature, so I would just hold out until a direction is set in the market. 

  190. Come on stick!!!! I know Matt & Yip rooting for one… Come on Lloyd, don’t let them down!

  191. USD - the volume charts on USD Aug puts and Sept calls read just like PSW. Basically the only volume anywhere is the Aug $27 put, with 62 contracts, and about 120 each on the Sept $27 and $30 calls. Where are the GS scalpers, er, liquidity bots when you need them….   :)

  192. Best day I have seen in a long time for some bull call spreads – market is down plus the Vix is up.

  193. JR….Anti Stick baby! 

  194. IWM/Phil – assuming there is no stick and the market closes where it is now (or lower(), do we hold the 64 calls overnight?

  195. jromeha: make that stick appear, its boring to be now for hours down at 228.

  196. Phil…. I’m happy I was able to give you a laugh….just reciprocating!

  197. AAPL experts: what is good to buy or sell now ?

  198. Gel
    with an IQ test you wouls not be as lucky to have such a nice President

  199. yipcarl
    Watch out made a double bottom and looking sticky.

  200. yipcarl: I’ll send it out later this afternoon.

  201. Dow/Kustomz – That’s why I liked the DXD’s before – if we are breaking down, they have the farthest to fall but we did hold 10,380 so far..

    Clearly the best reason ever to own an IPhone – especially for us older guys! 

    Possibly the real data-point is people who are prone to chase the next new thing also end up trying the IPhone or, of course, if you just said that AAPL people have more sex than PC people I don’t think you’d really need to bother doing a study as it’s so obvious…  8-)

    Catsup/Matt – Unless you are a Conservative, in which case you say "vegetable."

    Fade the Cramer/HHFiv – I wish I had time to set up a portfolio that just does the opposite of whatever he says.  Would be a fun study. 

    IQ/Gel – I’m with you on that one!  I am embarrassed to watch our Congress and then watch Parliament, where intelligent people hold spirited debates.  

    Oops and here we go – Stick time – Hope it’s a good one!

  202. We’re busting through walls like the Kool Aid man. Oh yeah!

  203. Phil /  Tone deaf    Phil, why is the Administration tone deaf to the screaming need for structural fiscal initiatives as the only meaningful way to begin employment growth (as opposed to more monetary bs).  You’ve covered many of them on your site, including the energy self sufficiency options.  Is anyone in Washington listening?  If they don’t wake up in the next month we are probably headed into a Depression as confidence erodes.  My fear of this apparent incompetance is increasing my bearishness.

  204. Yip – Jim Rogers and Peter Schiff have been right all along, in fact Rogers’s talked about all the nonsense that is happening now in Schwager’s book in ’87.
    But as long as Greenspan, Bernanke etc. kept borrowing high, interest rates too low and spending our children’s and now our children’s children’s money blowing bubbles and painting lipstick on the pig of an economy they were creating, everyone was able to laugh at the hawks and claim they were wrong.
    So it’s easy to be ‘wrong’ most of the time and be right just the once.
    If ‘they’ roll out the bots you’ll be ‘wrong’ again tomorrow.
    But to be able to trade this manipulated market you can not think like a hawk.  Which is why I am here and not following my own inclination which is to short it all the way back to 666.

  205. Pharm when you have time, please reply
    August 11th, 2010 at 10:33 am | Permalink  
    Pharm, where do you find the Pivot Points in TOS? Thanks. 

  206. Phil
    I have 10K shares of C and am frankly tired of just watching this snail…. would I be better off to trade in these shares for BAC, or do you have a pocket trade that is more exciting?

  207. RDY – A long to consider on this pullback. A tough day to go bottom-fishing, but I own this now, have traded it many years and added some here…
    My stop is about 5% below, which also happens to be the 200 dMA

  208. Gel, can you sell weekly calls against C? that snail could be $$$

  209. Phil,
    I apologize but I have to ask some lame questions. I’m new to option spreads, etc. If I establish a bull call spread, how do I exit the trade? Do I have to wait until the short call expires to sell the long call? If I sell the long call at a profit, them I’m naked on the short call. Do I even have discretion to do sell the long call if my broker doesn’t permit me to write naked calls?
    And on the TBT play, my understanding is that I should sell my current holdings which include both Jan 2012 $35 and $40 calls; then buy Jan 2012 $30 calls; then sell additional Jan 2012 $40 calls to cover cost of buying $30s and also establish vertical $30/$40 spread. If I can write naked, then write shorter term calls to collect premium. Do I have it right?

  210. Pharm- thank god I stopped the sale of my leaps. I will rollover to Jan 2012 tomorrow and sell the sept $55 calls against them. Thank you.

  211. Phil: please comment and recommend for this one:
    have C 2012 calls 5, base 1.16, now .54, 2012 callers 7.5 , 0.47, now 0.2$, 2012 putters 4, 0.7 now 0.93$.
    Lots of time but is thea caseforchange ?

  212. Jo… you are right, and I will reconsider. A snail is the PERFECT candidate for selling short calls against.

  213. mattlev32 – If both legs of the bull call spread expire on the same day and both are in the money, then your broker should handle the swap, though you might want to confirm that with them. If your long call is in the money and the short call is not, then you definitely don’t want to wait for it to expire. You should either sell it or instruct the broker to exercise it. Some brokers will automatically exercise in-the-money options.
    I like to close out just before expiration to avoid surprises.

  214. ic, gamble that ABK not going to zero, buy jan11 1/1,5 bull call spread 0.1 and sell jan11 1 put 0.62

  215. Great Requirements but Add:  Age or "competancy test" and Occupation should be a bar to voting.  No more lawyers or people with law degrees AND Seniors who are too advanced age……. Remember, last year during confrontational meetings  with Congress people during the health care debate…. The saying….. : "Don’t scare the seniors".  Where have you heard that before……. When you are a child… "Don’t scare the children"……….. 

  216. TRIN 5.59, very ugly

  217. Phil… loved the videos!  I still prefer the system in some countries where they toss chairs and enter into fistfights to settle matters.

  218. Peter Schiff.. now that’s a humble guy……… didn’t Peter get a "take down" by the wrestling lady" last night … 

  219. Trades going through at the bid, sellers taking whatever they can get, TRV only hold out in the DOW is dropping fast

  220. mattlev
    If the profit is there, Phils rule is take the money and run!

  221. senninha I’ve read their books, PS is a quack.  I totally disagree with him on Gold and the his inflation belief printing nonsense.  Rodgers in another quack who I don’t disagree on many issues either.
    I’m wrong a lot I’ve being doing this for 15 years. If you want to talk at someone whose always right talk at JRW who makes a 100k on a good day.  (hard to believe)  HOWEVER this particular top was crystal clear to me.  It wasn’t like I was hiding it.  Go back and read my posts I gave the data and reasoning, I’m sorry you’re losing and didn’t agree with it.
    Shadow I’ve been concerned about the same thing but as you can see we broke down further we just need the IWM to break below 62.  Furthermore I don’t have Aug options so I’m in no rush, this is a position trade. not a day trade cash at close position. Plus I closed 50%.  I’m up over 14% on the remaining 50%. 

  222. Msquare/RDY
    I like that company. I see good things in the future for them.  I just executed a March bull call spread on them – 25/35 selling the 30 puts for $.65 entry

  223.  We’re getting hit with the stick!

  224. yip
    TBT weak also but we are holding those breaking points now over 62.97.

  225. Pharm/ JAZZ
    Are you still holding them?
    If yes what is your targert on this stock?

  226. Bought back the $63 weeklys that were used to cover the $64 IWM calls at half price, recovered partially with $62 IWMs (they have about 0.8 in premium and expire Friday. Net delta is now very close to 0 – almost a neutral position now).

  227. Pharm – What is your target on NBWO?

  228. iPhones – Venereal diseases – there is an app for that! 

  229. Term limits/Gel – I propose single terms – 5 years in Congress and 10 in the Senate.  There are roughly 4 congressmen for each senator so the best of 4 retiring Congressmen move on to the Senate and they all have to run on their 5-year record in Congress leading up to the Senate election – totally even.  If they want to continue to serve after that they can go back to the states with their National experience and actually help the people who elected them, rather than treat them like annoyances on the way to higher office.

    Oil finishing up at about $78, sold off from $78.50.  Gold hugging $1,202 but copper weaker at $3.25 but a lot of this is thanks to BOJ goosing the dollar

    Common sense/Shadow – I would just be thrilled if half of these people could answer Jay Leno’s questions

    USD/Jvest – It’s tough to make a market…  We used to be the only people playing QID, now it’s nice and liquid so it just takes some time.

    Bull spreads/Gel – Yep, good day for good deals. 

    IWM/Rn – I’m not happy but I’d say yes as this sell-off is a bit ovedone but only if you also have disaster hedges that do well if we head lower

    AAPL/RMM – Nothing compelling at the moment other than those Aug $260s ($1.35) as a gamble that we improve tomorrow.

    LOL Kinki!

    Structural relief/Tusca – They couldn’t even get the Reps on board to approve saving 144,000 teacher jobs how the hell do you think they can pass anything else.  It’s all about stopping the filibusters or we are doomed because nothing will pass other than tax breaks and bailouts for the banks as they accidentally trip over each other foreclosing on properties. 

    Inclinations/Senninha – Yes, they can be very dangerous things.  My attitude is, if we are going to 666, we can make tons of money on beaish spreads so it’s prudent to wait until we really see technical damage – which we will if we have another day like this one. 

    Pivots/Ed35 – Under the Trade Tab, on the Active Trader Charts – Pivot Points is one of the studies you can select. 

    C/Gel – I don’t see BAC as "safer" than C.  Better than C stock I like the March $3/4 bull call spread at .52, selling the $4 puts for .58 as that’s a .06 credit and you make $1.06 over $4 or you own it again at $3.94.   XLF has gotten good again and you can go for the Jan $12/14 bull call spread for $1.40 and sell the 2012 $12 puts for $1.42 so a .02 credit there and worst case is owning XLF in 2012 at net $11.98 vs a $2 gain if they hold $14 through Jan (plus the short put, of course)

    Tomorrow is CPI, Retail Sales for July at 8:30.   Michigan Sentiment for Aug and Business Inventories for June are at about 10.  Retail sales should be encouraging based on earnings reports and CPI should be right in line at 0.2% so it’s all up to Asia not to implode overnight. 

    Spreads/Mattl – If you can’t enter and exit the spread at one price, I do not recommend verticals.  It is also a huge advantage to be able to leave a naked caller, even if temporary and if you can’t do those things, you are at a big disadvantage.   If you can’t change brokers or up your trading level to short naked calls, then best to stick with the in-the-money plays that are essentially directional, targeted bets.   On TBT, yes, the idea is to reposition into the $30/40 vertical (which you will be effectively stuck in) and then, if possible, doing a 1/2 sale of front-month puts to work the basis down.

    C/RMM – Well you can take out the callers and hope for a bounce but not much else to do.  The $5 calls can be rolled to $2.50s for $1.17 if you feel like spending that to go $1.37 in the money but that’s about it. 

    ABK/Pahurik – I like that as you are paying for the spread with premium and you still have a little room for profit if they hold .60.

    Such ugliness and the worst part is they certainly tried to spark a rally and were soundly rejected. Still the volume is low (130M at 3pm) so they ain’t dead yet.

  230. Fun with the constitution:

    In related news, Rep. Bill Posey (R-Fla.), often known as "Birther Bill," is still sponsoring legislation requiring presidential candidates to produce copies of their birth certificates. Matt Finkelstein noted today that Posey’s bill cites "section 5 of article II of the Constitution," which is interesting because there is no Article II, Section 5. Article II only has 4 sections.

    And yet, Rep. Bill Posey will probably win re-election anyway. 

  231. For those of you playing for Mr Stick, note that on Gap Down days with no mid-day recovery, we usually close at or near the LOD !!

  232. JRW, you mean praying for Mr Stick?

  233. Shadow… I don’t count on a stick I would say we break that level..
    AH and I see JRW is around and agrees…. That doesn’t hurt!

  234. I betcha there’s a rumor going round that MSFT (anybody) wants to buy RIMM

  235. Phil/Congressional terms
    Long single terms are scary, just like the life time appointments to the Fed courts… too much danger in getting a "loonie" that is impossible to purge.  A limit of two, two year terms is safer, IMO.

  236. kustomz/MSFT/RIMM
    It makes sense strategicially, but Ballmer does not think on that wavelength, so unlikely.

  237. yipcarl/Rodgers
    Roger’s a quack ??? In my opinion, I would say as an investor in currencies and commodities… he does alright…. He never claimed to be a trader (like JRW). Am I missing something???  Peter Schiff is another story…….

  238. gel1
    Tow year terms for all with 10 year max in all offices.

  239. Term Limits – Would that apply to your Consulship? 
    Seriously I agree with most of your politics.  In fact I  worry that both of us might be required to show our original Birth Certificates.
    But I think term limits for Congress would be a mistake.
    I just worry about term limits from a process point of view.  If you take away senior Senators and Congress Reps, you would, in practice, really just be helping the Cheney "unitary executive" camp and their associated special interests.
    Who was the only guy really standing up to Bush before operation Iraqi bungle?  Harry Byrd, Senator from the MIddle Ages, and maybe Teddy Kennedy, dead with his boots on.
    They don’t have term limits for all the civil service guys – like the EPA people who didn’t challenge BPs so called risk management plans. 
    They don’t have term limits for the now 900,000 people with "Top Secret Clearances". Who will know where to even begin to ask questions.
    Compare say, Chris Dodd  (on his way out, true) with Chuck Schumer on the Finance Bill.  Yes its a mess, etc.  But I didn’t see too much help from the Teddy Roosevelt wing of the Republicans on that.
    I think term limits would just weaken Congress and make it even more subject to corporate influence, if that’s possible.
    Government functions best when each side is strong enough to keep the other in check, but the executive is winning, and has been winning since the Manhattan project.
    Look at New York City – they passed term limits and as soon as one Billionaire said it shouldn’t apply to His Mayoralty the Legislature (City Council)  flip-flopped faster than John Kerry tap-dancing in sandals.

  240. Good info JR…….what about the following day after Gap Down?

  241. Term limits/Gel1 – Gel, don’t you live in California? Term limits here certainly did not work out as people intended and thought. Mostly it’s lobbyists writing the legislation, since they help the perpetual newbie legislators with all their ‘research’ and ‘white papers’.  Term limits should be the voting booth along with fairly drawn district boundaries. Given that, experience in a legislator can be useful and lead to somewhat longer vision.

  242. acobra…. Schiff was "shafted"  Her money won, not her.

  243. Acobra…We’ll it’s just my opinion but yes I find him to be and odd person.  The fact he wears a bowtie 100% of the time has nothing to do with it.  Perhaps quack is the wrong word.  I agree with him about the problems of America but disagree on several other issues.  Further I didn’t mean any correlation between Rodgers and being a trader I’m not sure what you mean.  He brought up these two and I responded? 

  244. Voting is pointless.  The only good group of politicians are the ones that Ted Stevens just joined.

  245. snow… yes, the conventional wisdom points to the failure of term limits here in California, for the reasons you have cited. The solution lies in a modification of the entire electorial system, and limitations on lobbying influences and monitary excesses in the campaigns.

  246. Phil / Structural Relief.  Since you share my scepticism that the GOP will end filibusters to permit meaningful fiscal initiatives to create jobs, arn’t you implicitly accepting my premise that we slide into Depression?

  247. stick/pow! Whoa, look at that rejection!

  248. First Matt’s 3 rules. Then limites would work. If someone serves our country for 20 30 40 years give them the watch. Politicians, no pay, no watch, and long term means screwed up toooooooo many things!!!!!!!!!!!!!!!!!!

  249. Shadow…. I think we get a pop tomorrow morning which sets up for another good short.. selling another 20% to play a bounce short tomorrow.

  250. gel, Im sure the other Steve as i like to call him is busy trying to figure out how to take away market share from Sony’s Walkman

    Down grades tomorrow?? Seeing how the street believed in a robust recovery…just yesterday seems logical

  251. yipcarl
    Sounds god to me esp. the RUT down 4% today is way out of line.

  252. exec,

    In recent history, if it opens gap down, it recovers higher; if it opens evenish it closes lower:; if it opens gap up it’s a DOJI.

  253. shadow… no,  give them a watch AS they arrive, then they will know when to show up for work.

  254. yip: your hunch of a pop tomorrow : is this just a counter-reaction to todays 260 drop ?
    What does this 20 % relate to ?

  255. RIMM bucking the trend.

    Posey/StJean – Yep, lucky for him knowledge of the Constitution is not a job requirement.  Meanwhile, here is scan of Obama’s birth certificate that any idiot can request from Honolulu under the freedom of information act.  I am simply amazed that they continue to waste time with this nonsense – it’s not even worth of calling a smear campaign because who really cares where he was born other than the technicality that there’s a rule against it for the Presidency.  I thought Republicans were going to go the other way and repeal the citizenship requirements so Arnold could lead them back to glory…

    Terms/Gel – I think the real danger is the constant need to campaign and raise money.  I think electing congressmen for 5 years would lead to taking them more seriously and making Senators pay their dues as Congressmen first is a vetting process on its own.  Maybe we should reset the whole political process to be more like American Idol where you just keep eliminating candidates until you end up with a  President… 

    Depression/Tusca – As I said the other day, I think the most important bit of legislation pending is the one to reduce a cloture vote to a simple majority of the Senate.  That will terminate the filibusters and return Congress to majority rule and, if that is accomplished, you will see a LOT of things getting done very quickly.  I think a lot of the reason that things petered out into recess is that Dem strategy shifted and they decided to circle the wagons on this issue as getting this done solves most of their other problems. 

    Selling the rally/Yip – I may be with you on that one.  Someone is dumping into the close. 

    CSCO reports later and is down nicely.  The Sept $23/24 bull call spread is .56 and nice on it’s own or you can sell Oct $21 puts for .46 to make a .10 net spread and wost case is you own CSCO at net $21.10.

  256. Birthers, blatherers, demagogues. They had 102 opportunities to challenge Obama and they didn’t. Counting DC.
    Each candidate for a primary election and a general election must submit their candidacy to the secretary of state (for that state) to be certified for inclusion in the party primary or general election ballots.
    Each secretary of state (remember Katherine Harris , DOC?)  has the right to reject that person’s application for a defect – such as not being old enough, etc.
    None of them did.

  257. gel
    Agree the watch is total compensation, also only 2 weeks vacation, no travel benifits, must move to washington, if broke give them a cot and rations!

  258. Close…seems selling into it…  Pop because the news maybe fair to ok, csco has been murdered so maybe it’s sell the rumor buy the news, and because we are down SO MUCH..  Who knows it’s just a hunch we get a bounce tomorrow but it fails.
    RMM I was 100% invested.  I sold 50% this AM.  I was going to hold the other 50%, I decided to sell 20% more.  Now I am 70% cash 30% short.  Tomorrow I hope to add the 20% I sold here or more on a bounce. Who knows. 

  259. Gel, Phil, you might get term limits for Supreme Cout Justice soon. The way this is going, it will be impossible to confirm anyone anymore. Unless a party has over 60 senators (very unlikely anytime soon), recess appointments might the only way to keep 9 supreme court justice in place. This way, each new president will get to appoint his own Supreme Court. What could go wrong with that?

  260. Phil / Cloture rule change.  I read there arn’t enough votes to make the change.  Result, structural logjam, negative GNP ahead.

  261. JRW / DOJI…. whats dat?

  262. And speaking of not knowing the rules of government.
    Former Rep. Pat Toomey (R-PA) who is running for Senate against Rep. Joe Sestak (D-PA) made yesterday on CNN’s "John King USA" that caught our ear: he claimed that he once led a filibuster… on the House floor. Of course, the filibuster is a product of only the Senate’s rules. 
    The idiots who want to rule us…

  263. Out of TZA at $36.13 for $1.73, or 5% on the day; now I have to go to the beach for lunch.  See you all tomorrow !!

  264.  Phil
    How about CSCO January puts?

  265. stjean… I like the idea we followed in the fraturnity house… you were a "pledge" for one year, and had no vote, but you were there to learn.  If you could "cut the mustard" then you moved to active status. Too many suprises in our current system.

  266. JRW III: when and with what order did you get into TZA when it shot up immediately upon opening of the market ?
    I never understand how one can enter a trade when this type of thing happens. Please enlighten me. TXS

  267. JRW
    Your lines rule stopped at 61.97, that is why I have posted yours are best over time. Hope your haveing fun where ever you are.

  268. gel1/Schiff
    Well. in today’s politics money does help.. But, there have been many instances where money didn’t make the difference.  In my opinion…. Peter Schiff comes off as a "know it all" and is a little abrasive.  His personality might have had something to do with it.  IT will be interesting to see if money "buys" some of the up coming elections..

  269. Weakness in the transports is VERY bad. The transports usually lead us out of a recession, and is a leading indicator.

  270. RMM I’m wondering the same thing??

  271. acobra / Schiff
    He is abrasive for sure, but I thought he would be a nice choice because of his background in finance, which is absent for the most part in the Senate. He also speaks with veracity, which few Senators embrace.

  272. JRW III
    August 11th, 2010 at 3:42 pm | Permalink  
    In recent history, if it opens gap down, it recovers higher; if it opens evenish it closes lower:; if it opens gap up it’s a DOJI.

    I agree with this assessment.. and what it means is if you’re short overnight, at worst you’ll get an opportunity to cover close to your entry point.  At best… booyah!  Keep in mind we’ve got a big gap down today.. but I don’t think gap downs are filled as regularly as gap ups.

  273. CSCO down a dollar after beating estimates by 1 cent.

  274. CSCO, -7%

  275. RMM


  276. RMM I just looked.  It was possible for JRW to do this if he bought virtually this AM at the bottom and sold at the very tippy top high of the day…. I dunno man,.

  277. American Idol/Phil – lol, that’s about where our mentality is right now. How about the old Korean Confucian exam system? Anyone could sign up to take the exams for civil service. The examiners would announce a theme, often a quote from one of the 5 Chinese classics. The examinees would compose a poem, using their best brush calligraphic technique – reference to the classics gets extra points. They would follow that with a painting, using the same brush, on the announced theme. Again, reference to classical paintings scores extra. Confucians value education so highly that it was available even way out in the boonies, and one could rise from a humble peasant background to become adviser to the king. But, painting & poetry – not a bad way to chose bureaucrats, eh…

  278. yip

    I entered TZA at $34.40 off a DOJI on TBT, and sold at 36.13; that’s $1.73 unless my math (and Schwab) are off !!


    Now, back to the beach !!

  279. Oil still heading lower, coming up on $77.50 now.  That’s just killing the energy sector.

    Well that was a really crappy finish – I may have to join the bear camp if we can’t show more spine than this tomorrow….

    New court/StJean – Oh that would be nice!

    Cloture/Tusca – Did you hear that from the same people who said Health Care would never pass?  The Senate determines procedural rules by a majority vote.  There is a contrary requirement of a 2/3 majority in a "continuing body doctrine" that has muddied the waters but in the period between Congress’, if need be, there is no question that a majority vote will suffice.  What they have to do (assuming the Dems hold a simple majority in the next session) is to object to the adoption of the old rules, which require a super-majority.  Once they object to the old rules, the overiding requiement reverts back to the simple majority that is required to determine procedural rules under the constitution – at which point they can pass rules saying all Republicans must drink a full gallon of milk before speaking or whatever else suits their fancy.   Of course, it’s a dangerous precedent…

    Meanwhile, CSCO beat by a penny but missed on Revenues ($10.8Bn to $10.9Bn expected) and are getting knocked down $1, which is very annoying but hopefully not too damaging on the spread.

    CSCO/Deano – I’ll be liking them tomorrow unless the whole market is falling.  Beating by a penny, which is 2.5% while missing by 1% on revenues is nothing to dump the stock over long-term. 

    Confucains/Snow – Very civilized. 

  280. JRW you really are something else!!!!  I did actually beat you by holding over night!  :) 70% sold at average of 13%.
    Damn after cisco maybe I should have held it all… That bounce tomorrow looks harder to achieve after that reaction!?

  281. RMM /JRW – More risk than most would take getting in at 10:15 when we already had a 2% gap down, don’t feel bad you missed it, I did too!  My theory is that when you have so much cash you don’t know what to do with it…then you can easily be down $2,000 like JRW was at 10:21, and still hold without letting fear take over.  My unfortunate situation is I have 12 times the assets (debt free!)  to cash ratio, therefore I play much more cautious than someone like JRW as I can’t afford to loose big learning the methods.  Plus, I’m using a larger percentage of my cash than JRW, so again I’m forced to play more cautious.  That said, I did make money today…and watching the bots get rejected and studying the charts during those moments made it a great learning day.  It was so obvious the bots were spooling, I can see it instantly now after staring at 19 charts for 3 straight months…about time! =D
    Glad to see you back JRW…only wish you had posted the entry as that would nudged me to take the second entry, which is very common I’m noticing, as TNA/TZA seem to retest often before taking off.  I’m still working on my mental game, at least I’m not making expensive $$$ mistakes anymore…

  282. Pivot Points – sorry missed the post.  TOS tools tab, under dashboard search for Shadowtraderpro Swing Trader.  He posts it every day with other analysis.

  283.  "off a DOJI on TBT"  uh oh, now I’m starting to get confused, better stick with the practicing I guess

  284. 02:00 PM On the hour: Dow -2.18%. 10-yr +0.39%. Euro -2.32% vs. dollar. Crude -2.38% to $78.34. Gold +0.47% to $1203.60.

    03:00 PM On the hour: Dow -2.48%. 10-yr +0.48%. Euro -2.24% vs. dollar. Crude -3.03% to $77.82. Gold +0.18% to $1200.10.

    04:00 PM At the close: Dow -2.49% to 10379. S&P -2.82% to 1089. Nasdaq -3.01% to 2209.
    Treasurys: 30-year +1.11%. 10-yr +0.45%. 5-yr +0.18%.
    Commodities: Crude -3.45% to $77.48. Gold +0.31% to $1201.70.
    Currencies: Euro -2.34% vs. dollar. Yen -0.11%. Pound -1.14%.

    Market recap: Each of the major stock indexes plunged through their respective 200-day moving averages, as confidence was crushed by the Fed’s dimmer outlook and a decline in China’s domestic economy. Defensive-oriented telecom, consumer staples and utilities were the only major sectors limiting losses to less than 2%. NYSE decliners routed advancers eight to one; volume remained light.

    Treasury Budget: July deficit was $165B vs. $169B expected and $180.7B Y/Y. – the 22nd straight monthly shortfall. Receipts: $156B, outlays: $321B.

    The widening of the trade deficit indicates that Q2 GDP growth was more anemic than the originally reported 2.4% annual rate. Combined with the latest inventory report, the data suggest GDP will be revised sharply lower – closer to 1%, even as low as 0.3%.

    This is not good:  The EU tells Germany to count the holdings of WestLB and Hypo Real Estate (which failed last month’s stress test) as government debt, which could raise Germany’s debt to 90% of GDP, much higher than the EU’s 60% threshold.

    The financial system is riskier than it was before 2008, Nassim Taleb says, betting on the "collapse" of government bonds. “By staying in cash or hedging against inflation, you won’t regret it in two years.” Treasuries have rallied sharply since Taleb’s earlier declaration that “every single human being” should bet on their decline.

    The stock market is misinterpreting and overreacting to the Fed’s policy statement, Strategas’ Jason Trennert tells CNBC. “I view [the statement] as quite positive because the size of the balance sheet is at least going to remain unchanged. I don’t think you’re going to have more quantitative easing any time soon.”

    Some economists say the Fed’s latest statement contributes to deflationary expectations, even with little evidence of actual deflation in the economy, potentially causing the very situation it is trying to avoid. The Fed is "obviously preparing more and more for it," Gary Schilling says, "[so] people say, ‘Maybe I ought to prepare for it.’"

    This recession isn’t so bad – if you’ve managed to hold on to your job, David Leonhardt writes. Since December 2007, real average hourly pay has risen nearly 5% and inflation has been almost non-existent. But the downturn has exacted a harsh toll on the less-educated, and their prospects are bleaker than ever.

    Losses on its residential mortgage-backed securities are dropping – but MBIA (MBI) says it expects to pay out $230M on commercial MBS, a portfolio the company used to call "nearly bulletproof"; could this admission by a usually circumspect company mean history’s repeating itself on the commercial side?

    Heyena attackIs the cancer coming back? It’s an open secret that Steve Jobs’ (AAPL) health is getting worse, Newser’s Michael Wolff writes. "Many, many, many people who pride themselves on a hard and shrewd level of realism believe that Steve Jobs is a goner."

    Wrath of GodIn a claim titled "The Sisters of Jesus and Mary v. Morgan Stanley," a group of Irish investors, including hundreds of nuns, file a class-action suit alleging Morgan Stanley (MS) failed to satisfy its contractual obligations related to bonds they purchased.

  285. JAZZ/lionel – not much to do there and we will take our 20% in a few monthsf rom our initial entry of Aug 7.5 strangle w/ the stock. .  I would buy back the P for small change (10c if on can) and let the stock/call run until Thurs b’f OPEX (AUG 19) if on does not want to play the FDA game Aug 20 (OPEX day).  Nice ‘lil gain on that one.  Data are still gonna be played by OPEX, so if you can get the Ps for small change and flip to a buy (see below).  Rumblings are the side effects of the drug ("date rape"  drug)…so may be worth a flier on the Sept 7.5 P for 50c or better (I am considering).


    NWBO/Jro – our initial entry was 95c or so (1/4 entry) so I am waiting for them to fall a bit more for another 1/4 entry (75c or so). 

  286. The federal deficit is growing at alarming speed as the gap between GDP and debt becomes a chasm, former Reagan budget director David Stockman says. Consider this, he says: Nominal GDP is only $100B higher than in Q3 2008, growing at only $4B/month while new federal debt has been growing at $100B/month.

  287. TZA flying, 16% up today. Very interesting, what happend in Asia and tomorrow  in Europe.

  288. >  But the downturn has exacted a harsh toll on the less-educated, and their prospects are bleaker than ever.
    A year or two ago I helped a discouraged friend look into how to receive unemployment benefits. One thing about it that really annoyed me is that the rules stated that attending college disqualifies you for unemployment benefits. Apparently someone decided that if you enroll in the local community college, you won’t be ready to accept a job tomorrow morning, therefore you aren’t actually actively seeking work. Something about this strikes me as inefficient, especially with 45% of the unemployed out of work long enough that they could’ve gotten some kind of useful vocational degree or in some cases even an associate’s degree.

  289. goldman: good comment and agree with what you said,
    you express things well, wish others would too, JRW just answers me with a short 10:15, he could learn from you and PHIL about effective expressions, sure: he ha no obligation what-so-ever to say anything, but we can be nice to each other, I never got a good answer from him. Like today he did not comment on his entry but surely enjoys to point out how much he made.

  290. OMG… for any of you who know my sentiment on the market it would be fair to say John Chambers the CEO of CISCO shares it with me after hearing what he said on the conference call.  Double Dip here we come.  SP500 900 coming…sorry Phil.

  291. yipcarl/matt/AH
    You gotta be loving the AH… CSCO on guidance by the "up beat John Chambers"… is concerned moving forward… My Short trades should be "far in the pink" for tomorrow…..

  292. Acobra…is he serious?  Can’t be fake a little better?  My gosh.

  293. From seekingalpha: 60,000 SPY Oct 104-94 Put Spread traded for 1.71 debit today

  294. To all concerned with JRW
    First I lost 40% of gains today. Second it is not JRW’s fault. Third he has wisely said he is taching how to hunt or fish, not serve seafood. Maybe he likes to brag, so what I hear very few reporting loses like I just did. I made money for 3 weeks and lost today, I am still working with profits and tomorrow I will trade smaller lots, 60/40 is great and until you admit you loose some of the time you are full of s—!

  295.  PHIL/ Dow plays    
    Phil, a while back you listed AA as a dow play by selling the 2012 puts and calls.  Today you mentioned in a response to Slaimona a new AA play.   So if you already have the 2012 play, how do you / can you play the shorter term play.
    Also, when you list a synthetic covered call, if you are unable to write puts in an IRA (I know, switch brokers) – can a guideline be that you can go long the stock in lieu of the short puts?

  296. Yes, heavy AH action.  Looks like a gap down tomorrow with possibly a clawback throughout the day.  Will have to monitor closely.  I can’t believe they’d let to big red candles form but maybe that’s it and we claw back from there.. the scary thing is how they can just put on the brakes without any obvious support and just reverse course.  It’s hard to tell what’s real and what isn’t.  Yip, good for you for sticking to your guns and keeping some iron in the fire all day. 

  297.  Wow….CSCO…Getting crushed AH. Now 10% down from this morning, erasing all the July gains…..all big tech stocks being punished with it. There’s such a high correlation lately, that we should keep our eyes open for good value entries for long term plays. I’m still short AMZN, DELL, NFLX, and DIA (naked), but I will be adding longs in HPQ, MSFT, INTC tomorrow and maybe some dividend plays like T…
    Btw, re JRW / RMM…he is a member just like the rest of us, who has developed a GREAT trading system. Anything he says which help the rest of us is much appreciated, but he has NO obligation at all to post anything. Keep in mind, he has a life outside of trading, and if he puts on a position and runs, he may not even check the board before hand, and may not even see your post.

  298. Shadow, you can believe what I say.  I’ve lost plenty!

  299. matt1966
    Thanks buddy I know others did also.

  300. shadow and hanna: how many times have I said that no one here has an obligation to comment, except Phil as we pay him,
    most of you comment WELL and sufficiently, take today: JRW tells you – I was not trading TZA today – how much he made, fine, that is one piece but he did not help you with a comment when he entered, so it did not help you, particularly today when it takes all of JRW’s  expertise to do it right,
    most of you would comment both sides: when to enter which is always more difficult than when to close.
    Again: I did not loose as I never was in TZA: reason, it was very difficult to enter.

  301. RMM
    I made the mistake of holding overnight. I got up early and tried to close, order not accepted, then after open order rejected because of protecting me from losses while they mounted. makes me want to puke but I learned 2 lessions, don’t hold overnight and don’t expect to correct on open, at least with options that JRW doesn’t do, if I bought the stock I could have gotten out.

  302. I remember distinctly the last cc by Chambers – he was as optomistic as pick-pocket in Picadilly on New Years eve. This commentary today by him is in direct contrast. The economy must be in worse shape than we thought.! This guy is a "strait-shooter" and usually is on target, so I am concerned.

  303. shadow: absolutely, TNA and TZA and a few others, do not hold overnight,
    limit loses by getting out with a stop.

  304. Ben’s depressing remarks yesterday were in my opinion very irresponsible, as building fear in the economy just exacerbates an already weak outlook. Don’t call a whore a slut…. better to call her a entrepreneurial example of a woman that likes to work at night.  Words have consequences, and he should realize confidence is the best antidote for market destructive fear.. Oh well, we just have to deal with what we get.

  305. Rmm- trying to say this as nice as possible- quit your complaining about jrw! He can say whatever he wants. His lines/comments are a big help and if he peppers in with gaims/losseswho cares!?

  306.  PHIL / part Deux    
    My screen gave me the following dividend payers, high ROI and ROE and modest debt/equitys:
    My thinking is that if the mkt goes to heck and a handbasket, I want stocks that pay me to hold AND stocks that I can increase the yield by writing calls against.
    What do you think sir?

  307. RMM
    In TNA/TZA I only trade stock IMW options have small spreads and the only problem I have found is tradeing 100 contracts or more. Hope all are listening 80 works 100 problems today 50 was rediculus on a limit even over the bid took 5 minutes. So rule #3 only trade IWM options on reasonable days or the BOTS are onto me! It worked for 3 weeks until it didn’t!

  308. salvum
    I support your premise, and I think your focus on strong dividend players with good financial fundamentals is the way to go in this market. Also, now is a good time to accumulate. I would add as well – put an emphasis on companies that have a broad international exposure, as the US will be lagging in the recovery and growth area. Good strategy to pay for these by writing OTM calls in order to lower basis.

  309. Phil / Economy vs Mkt      I’ve been forecasting Ddip for some time and absent massive structural initiatives it’s inevitable. But, you’ve taught me that the mkt is manipulated, so here is my cynical fct: Timmy will employ his plunge protection team (ppt) tomorrow to halt a mkt collapse. Timmy and Ben cannot afford a financial mkt collapse over-laid on the real economy stalling, as this would be Depression time.
    I don’t understand how the Treasury keeps these actions secret as they must use the big investment banks as intermediaries, so Goldman also knows when to start buying again?
    Is this how our system really works Phil?
    If my characterization of the (ppt) is correct, then Matt may be both right then wrong tomorrow, as the bots turn it around with Fed $.

  310.  GEL / dividend players
    Pretty simple screen on Finviz actually.  Entry from a technical basis is key but really, if they have less than .60 debt to equity and they have a healthy current ratio, then they will not have a problem paying their bills.  UN is also in an excellent industry, consumer non-durables.
    As to being internationals, SKM, UN, AZN fit the bill.  ARCC being a rollup firm I think would do very well in a recession part deux – buying assets on the cheap.

  311. Thanks yea it’s nice it’s nice to have a big winner and finally see what you think should happen happen.  I’ve been sure all along we have NO RECOVERY and we were going WAY down and we still are. No the world IS NOT ending this is a necessary multi-year flush. 

  312. From the ever good read of David Rosenberg:


    It was just over a week ago that Ben Bernanke told us that “rising demand from households and businesses should help sustain growth … growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions.”

    Meanwhile, yesterday’s FOMC press statement read like a retraction: “Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit……the pace of economic recovery is likely to be more modest in the near term than had been anticipated.”

    What changed Bernanke’s view?

    Was it Bullard’s (St. Louis FRB President) comment that “the United States is closer to a Japanese-style outcome today than at any time in recent history”?

    Was it the 159,000 slide in Household employment in July, the third decline in a row? Ninety-eight percent of the time, we are either in recession or about to head into one when this happens.

    Was it yesterday’s news that labour compensation per hour deflated at a 0.7% annual rate? Only the third time this has happened in the past six years.

    Was it the fact that chain store sales came in below plan for four straight months in July and that two-thirds of the retailing community missed their targets?

    Or could it be that the plethora of small businesses who don’t share the Fed Chairman’s recovery view inundated him with angry phone calls asking him what planet he was from?

    Indeed, that NFIB survey for July even tingled our bearish spine. Not just that the index slipped to a five-month low. The net share expecting the economy to improve deteriorated from -6 in June to -15 in July — the worst showing since the economy was knee deep in recession back in March 2009. Capex plans have gone from 20 in May, to 19 in June, to 18 in July. The index measuring intentions to boost inventories have gone from +2 to -3 to -4 in the past three months. Pricing plans slipped from +14, to +11, to +10 in a vivid sign of diminished inflation pressure.

    The NFIB asks its members to cite their top concerns each month. In July, a mere 3% said inflation, down from 4% in June and 5% in May. This is the point that has to be made. The yield on the 10-year T-note has rallied all the way to 2.76% but when it hit the cycle low of 2% in December 2008, inflation was cited as a prime worry by 7% of respondents. That share has since been more than cut in half and in the face of the greatest monetary and fiscal reflation experiment in U.S. history.

    Look, it’s hard to believe that $150-200 billion of incremental bond buying by the Fed is going to exert a massive influence in the economy. After all, this amount is far less than the $600 billion in Treasury securities the Fed purchased in 2009. And, if the credit-sensitive sectors couldn’t respond to mortgage rates going from 5.5% to 4.5%, what will the incremental impact be from a move to 3.5%? Did the cut in the funds rate from 5.5% to zero prevent the recession from taking place, and then deepening? This is what happens when credit collapses; interest rates lose their allure as a source of stimulus. The Fed is clearly running out of policy bullets.

    Yesterday’s statement may well be a precursor to something more dramatic later on — a further expansion of the Fed’s balance sheet. And denials aside, the polls are looking so bad for the Democrats right now that the White House may very well move on that “rumour” of a bailout for upside-down mortgage borrowers and allow for an extension of the Bush tax cuts. Desperation is setting in, and Mr. Bullard is right, this is looking more like Japan with each and every passing day.

  313. salvum… I like UN, SKM and AZN, and all three are solid players for the ride back up.  Not much risk to the downside, IMO. I have traded them all in the past, and now might be an excellent opportunity to re-enter.

  314. gel1/Chambers  Right On… HE is a straight shooter…. "He is concerned"…

  315. RMM -  a few months ago, I (along with some other day traders) asked JRW to post his results EOD …motivational for setting personal goals and fully realizing what is possible with a mastery of the technique. JRW is a man of very few words, very precise, focused, and organized via online correspondence.  I myself type very fast and typically over-welm people with data…not necessarily a good trait…LOL!

  316. gel1/Ben  Yes.. Absolutely.  After yesterday’s comment my reaction was,,,, how luke warm a response, no support for the market…. but what do you expect… He’s an educator/econmist… not in the real world.  The ONLY thing more telling would have been watching him say it!!! After watching him in front of Congress the last two times, his face said it all.

  317. This morning at DFW Airport, George and Laura Bush greeted 150 (very surprised) troops as they arrived home from Iraq and Afghanistan!/photo.php?pid=6894887&id=361997510504&comments&fbid=475492595504
    Looks tanned, rested and ready? Hmmmmm?

  318. Maybe ready to choke on another potato chip, but nothing else.

  319. Our country is broke and can no longer afford no- pain, all-gain “solutions.”
    I couldn’t have said it better myself..  because I said the same thing over a year ago!

  320. Matt…. well said!  You are a "wordsmith extraordinaire"and broke means busted for sure. When you see a country that is nothing more than an economic basket case (Japan), and their currency is far more valuable than our – then you know things are really bad.. – terrfic link!…. now we need to have a strategy to profit from this mess.

  321. pstas… now that is the real McCoy! He is not running for anything – just a sincere guy that has a heart.  I don’t see Clinton or Obama in the background of the photo. -  Busy campaigning in Chicago, I guess

  322. Did U know that the 5-yr TIPS has reached a yield of 0.0?? This means that there are investors willing to stash their cash for 5 years with no REAL return! That’s quite scary and indicative of something terrifying..

  323. College/Jvest – That is a very stupid rule.   Of course the problem is people can work 6 months before starting college and collect checks while at school otherwise.  Many of our dumb rules are there simply because some people abuse good systems and ruin it for everyone else.

    CSCO/Yip – Boy, you are really getting to be a "glass half-empty" kind of guy…  I say they are still a buy on the dip:

    The San Jose, Calif., maker of networking gear Wednesday reported a 79% surge in profit in its fiscal fourth quarter, while revenue rose 27%. It was the fifth straight quarter of sales gains after a sharp slump in late 2008 and early 2009.  Cisco predicted revenue would increase between 18% and 20% from the year-ago period.

    John Chambers, Cisco’s chief executive officer, called the fourth quarter a strong one, particularly in terms of the company’s competitive position. But he also pointed to considerable economic uncertainty.

    "We feel very good about those areas that we can control or influence," said Mr. Chambers, but "there are some challenges that are contributing to an unusual amount of conservatism and even caution," including soft gross domestic product projections, slow job creation and concerns about Europe.

    Mr. Chamber said most of Cisco’s large customers would agree with the Federal Reserve’s comments Tuesday that the economic recovery has been "more modest" than anticipated, and that Cisco customers expect "a very gradual return to more normal economic conditions."

    AA/Salv – There is certainly no need to switch your position.  If you have a full commitment in 2012 than that’s fine.  If you were going to add to your AA allocation, then sure you can have the Jan play too.  If you are asking me "if you already have the 2012 play" it is much more helpful if you indicate what strikes and basis so I have an idea what it is.  If you can’t write puts, then the way to play AA would be the 2012 $5/10 bull call spread for $3.40, which makes $1.60 at $10 or almost 50%.  It’s not as sexy but if you are limited, you just want to eliminate the premium costs and buy yourself a little protection (break-even is, of course $8.40, which is down almost 20%.  Making 50% in 18 months with no margin is not the worst outcome. 

    Nice balancing Hanna!

    Ben/Gel – What is the primary function of the Fed?  To maintain the stability of the banks.  How do we maintain the stability of the banks?  FREE MONEY!  Without free money, the banks will begin to fail so anything and everything the Fed does is geared towards making sure that banks continue to get free money for as long as possible.  One way to insure a supply of free money is to keep money flowing into TBills so they can play the money shuffle with the Treasury (also the Fed is the World’s largest holder of US debt by a wide margin).  Keeping investors scared and accepting 0.5% interest on their money and keeping corporations scared so they don’t ask for money (raising rates) nor do they try to raise it themselves (competing with Tbills) is very much in the interest of the Fed.  As long as he can keep up the QE without causing inflation (very bad fro the lending class) then Bernanke is, for the bankers, the greatest Fed chief EVER!

    Dividends/Salvum – A wise strategy but AFTER we crash.  Note those stocks fell just about as hard as the rest when the market went down so they aren’t really affording you much protection.  A lot of them have already had huge recoveries, possibly because you are not the first person to discover a dividend screeen…  Take AZN and LLY, both very high in the range but you can buy PFE at $16 and sell the 2012 $15 puts and calls for $4.65 and that drops your net to $11.35/13.18, which makes their .72 dividend 6.3% plus you make another $3.65 (32%) if called away at $15, which is 6.3% lower than the stock is now.  So make sure you look at the big picture as to what combos make you the most money (and with the most protection) and don’t get too hung up on the dividends. 

    IWM/Shadow – Today was nasty all around – except for the very bearish. 

    System/Tusca – Sadly, this is sort of how our system works.  You can read Zero Hedge for all the gory details but the bottom line is GS makes 40% of all the trades in the market so it doesn’t take a very large conspiracy to make the market do whatever one or two guys want it to do.  Of course, ultimately, GS does answer to the government and they just got a little wrist-slap to remind them of that fact – probably because the current Administration needs to be sure that when they say jump (start the markets) GS says "how high?"  The trick is to figure out when they are going to pull the trigger.   I thought they’d want to hold up at the 50 dmas but they are probably taking out all the callers early ahead of a nice run-up into expiration day although last expiration day we were down at 10,200 so maybe that is the right level for this one too. 

    Rosenberg/Pharm - It’s kind of tedious having these discussions over and over again every time the market dips.  On Tuesday at 12:25 I said that between 10,200 and 10,500 would be the right place for the Dow to hold and that 10,450 and 1,100 would hold for the day and I put up this chart showing what happened after the last Fed day (June 23rd):

    If you go back to the posts of late June/early July, we are having the exact same conversations about the debt this and the housing that and the unemployment this and the sentiment that…  and then the market rallies 1,000 points.  We finsihed today right back where we bounced back to last options expiration day yet you would think we’re back at 9,800 already. 

    Maybe I’m the crazy one because I don’t feel the need to go totally bearish when we have a dip or totally bullish when we have a bounce becasue everyone else seems to swing wildly from one extreme to the other as if the trading of the day is the only thing that matters in the market and not one person here seems to look at a chart that includes any activity older than 5 days.  If we finish next week at 10,200 then all we have accomplished since July 16th is to run from 10,200 to 10,700 and back to 10,200 – effectively the exact mirror of the above chart with the exact same nonsense in between the the two expiration dates.

    Tuesday the 29th, the morning post was "Testy Tuesday – Bottom Busting or Big Bounce?"  Cramer had come on TV at 2:30 and told people to sell everything that afternoon and we were all short anyway so it wasn’t a big deal other than he was a real ass…  That day we were selling IWM July $58 puts for .97, MT Jan $27.50 puts for $4.45, BTU Jan $35 puts for $4 and SHLD Jan $55 puts for $6 among others but the VIX was higher so it was like shooting fish in a barrel. 

    We kept going down but I got more and more bullish each day and Wednesday I pointed out the BS of pattern recognition as every "expert" on the planet was explaining how we were forming the "classic head and shoulders" that meant certain doom and a return to 666 that was INEVITABLE.  Thursday I asked "Can We Be Saved" and we had that very cool video on "The Crisis of Capitalism" and on Friday, I was so fed up with the bearish BS that I wrote "Thank Jobs It’s Friday" ahead of the NFP report becuase my logic was that there was NOTHING they could say at that point that could take us lower as sentiment was RIDICULOUSLY bearish.  

    The next week was the Tuesday that I asked "Will CNBC Apologize to America" for chasing everyone out at the dead bottom of the market - we’re still waiting…. 

    So, in short – we’re not there yet but you guys are getting there at super-speed, almost 1,000 points faster than last time – so congratulations on setting a new speed record for pessimism – it’s very impressive

  324. Phil/Federal Reserve
    I’m in agreement with you – the Fed was created by the banking industry and is there primarily to serve the best interests of the banks. They serve to keep our monitary models in balance, and to keep us imune from undue inflation or deflation. My bitch with Ben was his negligent wordage that gave the inference of negativity with regard to the progress being made to cure our economic ills. He has generated a higher level of "fear" in the business community, which, is very negative to business expansion or creation. This results in a further decay in our employment health, and this new "fear " of adding risk will reflect accordingly. The business community is "hunkered down" and we need some positive encouragement to change this mind set.
    On another note, I agree with you – this is a great time to buy into this market, and I am doing just that. Buffett said "Get greedy ( Buy) when the market is buried in fear" . The time is now, I think!

  325. Phil – First, I post them afterhours to not interfere with the daily chat.


    Rangish sure….for now.  I am looking at a picture that is bigger than just the range, I am looking at what is happening everywhere, reading as much as I can, as I know you are as well, and  I do want to post a viewpoint from a respected economist (unless U would rather I not – then I can respect that).  I do think that we need to think outside the box, and most of all take advantage of the hedges for a fall seriously.  Rosenberg is a macro thinker, and I use his big picture analysis in my trading.  He has advocated for a fall in treasury yields for many months, and TBT (as I pointed out many months ago and he helped my convictions) may want to be avoided for a while (I got out).  I bought in my 401K in the Q2 the PIMCO offering, and moved all my money to there….and I am up for the year as I would guess most are even or even down (bonds have outperformed the market hands down).  Yeah, I pat myself on the back for that one, b’c after the run for the year, I do believe we are in for a world of hurt.  It won’t happen tomorrow, or next week, but I do think we go back and test the 8600 mark in the next year.  If I am wrong, then I will be happy to eat my words (print it out).  In addition, Rosenberg backs his work up with stats and figures, as do you.  It is not all doom and gloom (and he states some of it), but it is gloomy out here in CA and other areas, and the true fundamentals do not back up the current S&P valuation (we are 20% overvalued).  Rosenberg is not the only one that has said this, and if one looks at the future earnings growth to $95 or so on the S&P in 2011, then they are smoking something…and it ain’t the good stuff!


    Yes, I believe in the 5% rule, trends and analysis (fundamental), but I also think things are not as rosy as we want them to be.  G’night.

  326. Phil, maybe getting checks while you go to college should be our new unemployment policy--better than getting checks for sitting around, emailing one resume per week… which is what a lot of unemployed are doing right now. Reminds me of an NPR where they talked about how the GI bill sent millions of people to school after WWII who wouldn’t have otherwise gone; it gave pretty good evidence that the boost in college educated workers was the power that grew the evening for the next 3 decades.

  327. Whoops, meant “grew the economy” not “grew the evening” … iphone autocorrect is lovely, isn’t it? Artificial “intelligence”….

  328.  Sorry Yip – that was meant to be a pop the pumpers who day after day unjustly claim glory for cheerleading a rigged market, and worse mocking everyone who sees through their crap, not you.
    I am grateful to you, Matt et el. as I kept my nerve and stayed short Tue. night even though I feared they’d use that BS post FOMC rally as an excuse to gap it up again.
    Without a doubt the best part of this environment is the exposure to diverse opinion and ideas.  It has gotten me right away to trading the market that is there, rather than the one it I think it should be.  I wish I could make more of it but I am in Europe and commitments mean I can usually only snatch a look now and much later.

  329.  Phil & Pharm
    Thanks for the healthy dialogue between the two of you, it has definatley helped my investment perspective over the last year. As I lend $$ for a living, I know that the economy in the SMB space has not improved to any great degree, however the gloom and doom was overdone for most of the last year also. Businesses are very cautious, however they are still borrowing, spending and investing, and I think will continue to do so when they see an opportunity. The panic has left the economy (honestly I think this is something that Bernanke did well), but malaise has set in (something he has no clue how to address).
    If however the amount of debt and public expenditures is not brought under control, and some rationality is not brought to bear on the public servant pension liability issue & mentality, I see pain over the long haul. Sadly, I think this is where presidential and political leadership is extremely lacking, and in the case of more of the same, best case scenario is Japan, worst case, deflation.
    Phil’s at don’t panic & 35% cash, with hedges, and I think that’s about right for now.

  330. Rangish/Pharm – Oh sorry, that wasn’t really directed against you.  The Rosenberg article was excellent and a good post, it was just the last straw as I see everyone (in my opinion) leaning way too bearish so that triggered my rant on perspecitve.  My job (as I see it) is to be the captain of the ship and to steer us clear of the icebergs as we navigate choppy market waters – whenever we tilt the ship too far in either direction, I do my best to get everyone rowing on a better path.  What I don’t like to see is panic and hysteria – that doesn’t do anyone any good. 

    If I thought the global GDP or even the US GDP was going to grow at 3.5%, then I would be way more bullish.  "Discovering" that the economy is rough and that having 25M people out of work is not a good thing really doesn’t shock my Socialist ass and it shouldn’t surprise you either.  As I pointed out in the last jobs report, ALL of the layoffs were in the government sector as the Conservative strategy of "starving the beast" is paying off in spades so why aren’t they partying in the streets.  This is what I mean when I call Republican policies insane – they are not well thought out.  Cut 4M people off unemployment?  What happens next to the economy?  Cut 144,000 teachers?  Won’t that make unemployment go up and freak out investors yet again?  Let the states go bankrupt?  Won’t that cause a melt-down in the bond markets and freeze up credit again?  

    Busting the unions and pulling benefits leads to lower labor compensation, unemployed people (shockingly) can’t afford to shop, especially in a July when oil prices shot back over $80 because oil is an instant tax on the poor.  Small business people have no access to credit because banks don’t lend.  Banks don’t lend because the Fed lends them money at 0.25% and they can put it in TBills and get 3% rather than risk lending it to small businesses or homeowners who might not pay them back.  Of course the NFIB survey reflects this – how many times have I said that small business is getting totally screwed over by Big Business, who are the same top 0.01% as the rest of the crooks that are destroying this country so they can add to their money piles? 

    None of this is news.  I knew this was going to be a disaster the day Bush got re-elected for pretty much all of the same reason.  The only shock I had was how long it took this house of cards to collapse BUT – just because a house of cards collapses doesn’t mean I then extrapolate that the table it was built on is going to collapse or the building the table is resting on or the planet the building is on or the Universe that planet is in.   The World will keep spinning and this too shall pass and the fact that a new bunch of prognosticators suddenly realize the economy is in bad shape every time we dip negative in the market (where was this insightful stuff for the last 4 weeks?) us to get stampeded in and out of positions like a bunch of clueless sheep. 

    On June 17th I wrote "Productivity and Prices are Peaking" and it took a month but now we got the Productivity report that confirms that.  Should I be FREAKING OUT because something I said was happening at 10,400, which made me bet against 10,700 being broken, was finally, officially reported.  Maybe my frustration is that no one seems to read my articles!  Or maybe they, like everything else, are simply forgotten the next day as this market environment turns everyone into day traders.

    I will close this by urging new members, and maybe current members who forgot, to read my "Worst-Case Scenario:  Getting Real with Global GDP!"  I wrote that one 2 panics ago (June 6th), when we were bottoming out at 9,800 and (surprise) everyone was freaking out and calling for the end of the World, which made me decide it was a great time to start our Q2 Buy List (June 7th).

    Maybe I’m wrong, maybe the World is ending and it’s good to get everyone’s diverse opinions on the subject but the problem is I sometimes just get tired of making the same points over and over again but, if I don’t – then the tone of the site gets ridiculously bearish – perhaps at the worst possible time. 

    We are still in the middle of our trading range (9,700-10,700) so we could easily go in either direction and a real market panic could take us down to 9,000, which is why we are still 65% cash but my overview is that we’re at the point where the government (whether for election purposes or for some crazy notion of actually wanting to help people) needs to do something and that something is not going to be giving tax breaks to 13M people.  So the Conservative pundits are having a little hissy-fit and you will continue to get bombarded with negative news for the duration but, in the end, the people with money and researchers see the same thing as I do – putting money into equities is safer than bonds and there is plenty of money sloshing around out there.   The World is not ending and, while the economy may not be snapping back quickly – we certainly aren’t going back to the stone age — unless Palin gets elected. 

  331. Phil,
    Thanks for the perspective realigmnment.
    I am always amazed at the emotoional responses I see with the normal swings; from from euphoria to despair; and of course the MSM plays the background music for the drama… Right now my 85% cash has been comforting;only selling a few put here and there for cash till some longer term (2 months?) stability returns.
    Steer the course.

  332. Phil, I totally agree with your point of view!!

  333. “Range trading is great but you have to BELIEVE in your range.”

    That was brilliant, by the way. I kept my DXD hedge because you pointed out that the put level was based on breaking 10,700 resistance, which of course the bots didn’t dare to do. It got back to break-even yesterday and should pay off nicely now

  334. It’s another great day to be alive! I smell a bargin,  let thegames begin !!!

  335. An imminent death cross tomorrow on $DWMI (baring some significant bounce from here). Also of note is the concidence of the 20 day ema, the 50 and 200 day ma slicing thru the red candle yesterday. The first two declining and the last one flat.

  336. Sox broke the years low this morning.  That can’t be a good sign for bulls.

  337. no posts in 40 minutes??