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Monday Morning – Basel Boosts Bourses

bankingregulations.jpg image by swiftianNice pop in the futures this morning!

The big news, which we already discussed in the "Weekend Reading" post, is the historic remake of the World’s banking regulations, which was finalized in Basel, Switzerland by the G20 Finance Ministers over the weekend.  You can click over there for the details, as well as discussions on gold, college costs and the jobs market – so I won’t get into all that here.  Suffice to say, the rules are good and, like FinReg, they will take a long time to go into effect and the markets are relieved that the uncertainty is over (well, that particular uncertainty, at least). 

Jean-Claude Trichet, President of the European Central Bank and Chairman of the Group of Governors and Heads of Supervision, said that "the agreements reached today are a fundamental strengthening of global capital standards." He added that "their contribution to long term financial stability and growth will be substantial. The transition arrangements will enable banks to meet the new standards while supporting the economic recovery."  Nout Wellink, Chairman of the Basel Committee on Banking Supervision and President of the Netherlands Bank, added that "the combination of a much stronger definition of capital, higher minimum requirements and the introduction of new capital buffers will ensure that banks are better able to withstand periods of economic and financial stress, therefore supporting economic growth."

TLTAll seems right with the World this morning as Oil touches our $77.50 goal in pre market trading and Gold stays below the $1,250 mark (no panics).  Copper is in the upper end of our expected $3.40-$3.50 range and is likely to break over -even our poor Natural Gas is catching bids at the $3.80 mark, now $3.85 and TLT continues to fall (TBT continues to climb – see Dave’s chart) .  This is all despite a strong dollar That held the 50 dma all last week – another week over the line and we begin to bend it up to match the rising 200 dma and then the fun can begin.  Fortunately, we have had less of a run in the commodity sectors this time so, hopefully, the rising dollar won’t be the market-killer it usually is but we will be watching out for that. 

Another chart we’ll be watching is the VIX, the volatility index, which is known as a "fear" indicator for the markets, hasn’t been below 20 since April and, before that, not since August of 2008, when everything fell apart.  I had warned Members last week not to bet on a VIX bounce as a move above our 2.5% lines will go a long way to easing investor worried further.  Last week was disappointgly low volume and we’re not going to take a pre-market move seriously but Asia had a strong morning, led by the Bombay Sensex, which gained 2.17% for the day.  The Hang Seng was not far behind at 1.89% and the Shanghai tagged along with a 0.94% gain.  The Nikkei, which I picked as a bottom last week, was our laggard, up just 0.89% as the Yen STILL can’t get over 85 – not good for exporters

We’re rooting for Ichiro Ozawa to get the nod as "Prime Miniister of the Month" in tomorrow’s election in Japan as he favors both stronger stimulus (and why not when you can borrow at 1%?) as well as stronger Yen intervention.  While Ozawa is not very popular with the people, the election isn’t up to them as the PM is picked by the ruling party.  "We just want this election to end. The strong yen will not be resolved while market players see an absence of government policy," said Toshikazu Horiuchi, equity strategist at Cosmo Securities. "At least this bizarre situation of having no leader will be resolved. Hopefully, that will be a positive for the markets."    

Meanwhile, China is still zooming along with Industrial Production up 13.9% in August, faster than the 13.4% growth in July but, thankfully, down from the 20.7% pace they were putting earlier this year.  Inflation is still on the march in China as CPI rose 3.5% and that’s up from 3.3% in July.  Food prices are the killer, up 7.5% for the year but, fortunately, our own government ignores food inflation as it’s not part of the "core."  Perhaps we could aid China by sending them our best Economic BS Artists to explain to their people that rising food costs are nothing to worry about – it’s worked so well over here.  But no – those crazy Chinese Central Bankers are thinking of (gasp!) raising rates to curb inflation – MADNESS!

Europe is up about a point at 8:30 as the European Commission DOUBLED it’s 2010 economic growth forecast for the European Union.  The commission said the 27-nation bloc’s economy will likely grow 1.8% in 2010, up from its forecast in May of a 0.9% expansion. Growth in the 16 countries that use the Euro is expected at 1.7%, up from the May forecast of 0.9%, the commission said

Government stimulus programs and spending by companies to replenish their inventories in the first half gave a surprisingly strong jolt to global demand for European exports, the commission, the EU’s executive branch, said. Those growth drivers are likely to weaken in the second half, it said, even though Europe is likely to avoid another recession after its economy contracted 4.2% last year.  "This gives reason for cautious optimism, despite a more uncertain global environment," said Olli Rehn, the EU’s economic and monetary affairs commissioner, at a news conference.

Wow, stimulus works – imagine that!   

As you can see from the Econoday calendar, we have a busy week ahead of us with our own Industrial Production Report on Wednesday, followed by PPI and CPI respectively on Thursday and Friday.  Our reading of last week’s Beige Book gave us a wishy-washy picture of Manufacturing in America but exports were ticking up and it’s mainly durable goods that were dragging us down so we’ll be dissecting that Retail Sales Report tomorrow morning to see if we can break the tie and pick a direction. 

Meanwhile, we’re watching the same old levels we were watching last week as we plow into options expiration on Friday.  We expired on August 20th at 10,213 and, as I said last week, anything that happens between the two expiration dates is just a side show as we closed between 10,200 and 10,450 since the May drop and we’re simply biding our time, waiting for the consolidation period to end.  Will today’s news be enough to take us to the top of the range again?  Well, it should be but we’re going to remain skeptical until we see our 2.5% levels hold before we even think about those 5% lines (same as last Tuesday’s post):

  • Up 2.5% (we hope): Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650
  • Middle Range (MUST hold): Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635.
  • Down 2.5%: Dow 9,945, S&P 1,043, Nas 2,145, NYSE 6,630 and Russell 619

We’d like to see the Dow, S&P and the NYSE hold their lines this week.  The RUT needs to hold 635, which is right where they are (and right where we predicted last Tuesday) – if they don’t, the S&P remains our best short candidate as they are well ahead of the Dow at 1,109 and facing more upside resistance than the Dow.  We are using SDS (now $31.44) as a cover play below S&P 1,000 as it gives you a lot of bang for the buck, especially in the October contracts.  To the upside, we still like USD (now $24.23) as the SOX have been a huge drag on the Nasdaq for what we believe are poor reasons.

Volume, volume, volume is what we’re going to be watching.  There was none last week or the week before – what will happen as we move to the end of the last month of Q3?  According to Uncle Rupert’s Journal: "Waning Economic Recovery Fuels Global Uncertainty," so we don’t expect the beautiful sheeple to be in a strong buying mood just yet (we did our shopping when everyone else was selling, so now we can just sit by and be amused) but even a drift into expirations around our 2.5% lines would be a nice improvement as we move into the final quarter

It’s going to be another interesting week – be careful out there!

 


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  1. Hi Phil,
    I am back after studying up on your option trading style.  I have learned a lot over the Summer so I thought I’d ‘give a go’ again.
    XOM – I am interested in selling the Oct 57.70 puts.  Do you think that XOM will hold it present price level through the Oct 16 expiration?  Interested in you thoughts on this sector.
    Thanks!
    DD


  2. Opps  I meant the Oct 57.50s puts.
     
    DD


  3. Its possible that we have another slow week ahead of us, which means a low volume move up, like we see in the futures.
    First 1115 area, possibly 1130 area.
    And then bye bye.


  4. CAP – Interesting observation.  What’s the time frame for the bye bye IYO?


  5. Cap,
     
    Why do you think it’s bye bye?  Top of range?


  6. Exec …. yeah; top of range and then some selling should kick in.


  7. doubled; well we haven’t seen any real volume yet in Sept, a bit of a surprise; so maybe by next week after expiration we see it kick in.  Or late this week.  


  8. For those who may have missed it, here is my Novartis write up. 


  9. Interesting chart on volume going back 5 yrs noting downward trend and so far, lack of Sept spike.
    http://stockcharts.com/h-sc/ui?s=NYTV&p=W&b=3&g=0&id=p42264863483&listNum=33&a=208287207
    And, this one showing high volume sell-offs and low volume runs.
    http://stockcharts.com/h-sc/ui?s=NYTV&p=D&b=9&g=0&id=p98647558538&listNum=33&a=208350806
    Nothing new here – just another look at what we already know. Could this be the new normal?


  10. And everybody loves cash:
    http://www.businessweek.com/investing/insights/blog/archives/2010/09/cash_stats_getting_extreme_it_cash_24x_income_18_of_mkt_val.html
    Especially IT/Cisco–
    Cisco Systems had the largest holdings of cash and equivalents, with $39.9 billion, which represents 33.8% of its market value, four times its 2011 street operating estimate (July,’11), five times it’s last four quarters of buybacks and infinity over its Nil dividend rate
    Historically, many companies have done some very dumb things when they have a lot of cash burning holes in pockets instead of returning the "excess’ to shareholders. Sure will be fun to see how this plays out over the next few years.


  11. Relief from uncertainty rally?  I don’t buy it.  Just more of the same.  Bad news comes out?  Let’s goose the sector to protect our market!  That’s all this is.  There was no uncertainty surrounding what came out of Basel except there is even more time allowed for them to meet the requirements.  I guess that’s a positive.. but big deal.  The negative far outweighs the positive which is that they will need to go from a Tier 1 reserve ratio of 2% to 7%.  That’s huge.  But not unexpected.  That will put a drain on profits for YEARS to come.  Banks are not a profit/growth industry anymore.  Furthermore, this only addresses cap requirements. It doesn’t stop them from making boneheaded moves with derivatives which is what causes the ‘crisis’.  Party on.


  12. More cash on hand to buy more ‘secure’ gov’t debt….



  13. Did the PSW site go down for a while?


  14. exec
    seems like it


  15. Good Morning Phil!
    I have the following SDS hedge: OCT 35/39 CALL vertical and sold OCT 30 PUTS. I set it up for a net debit of $0.85. Over the weekend I looked at some ways to spend money and roll the vertical (e.g., 32/35 or 31/33) and roll the puts down. My other thought was to close the vertical and roll the puts along until they expire. Since I’m reasonably new to managing the verticals, if patience is best at this point because of the OCT expiration, then I’m comfortable with that. Thoughts?


  16. Good morning, did something happen to the site just then ? This didn’t post the first time.

     

    IWM 61.89, 63.01, 63.37, 63.74, 64.01, 64.37,  65.40, 65,83 and 66.39

     

    This will either be a giant SQUEEZE or a good shorting opportunity; I’m betting Lloyd takes us up through the technicals just because He can !!  In TNA at $40.86


  17. Shaping up to be a free money day.


  18. KHV/aug – well, not much there yet.  Nothing proven, but they want to use the technology to ‘carry’ drugs for disease.  Let me dig, but not real exciting on the surface.


  19. Good bet JRW. Actually I believe you are double right, a nice squeeze and then a good shorting opportunity. Because they can!


  20. Good morning! 

    Yes, we did go down this morning, something went wrong with whatever they are trying to do to fix those comment posting issues.  Should be good now.

    It is very important that everyone sign up on SeekingAlpha to follow me as that’s our back-up if PSW goes down:  http://seekingalpha.com/author/philip-davis

    If PSW is down, you can go to the most recent article on SAlpha (usually the previous day’s post) and we can comment over there until the system is up.  You need to do this now, while our system is up because, when it goes down – you won’t have this link to refer to!   Thanks.

    Meanwhile, as I said in the morning post:

    We’re watching the same old levels we were watching last week as we plow into options expiration on Friday.  We expired on August 20th at 10,213 and, as I said last week, anything that happens between the two expiration dates is just a side show as we closed between 10,200 and 10,450 since the May drop and we’re simply biding our time, waiting for the consolidation period to end.  Will today’s news be enough to take us to the top of the range again?  Well, it should be but we’re going to remain skeptical until we see our 2.5% levels hold before we even think about those 5% lines (same as last Tuesday’s post):

    • Up 2.5% (we hope): Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650
    • Middle Range (MUST hold): Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635.
    • Down 2.5%: Dow 9,945, S&P 1,043, Nas 2,145, NYSE 6,630 and Russell 619

    We’d like to see the Dow, S&P and the NYSE hold their lines this week.  The RUT needs to hold 635, which is right where they are (and right where we predicted last Tuesday) – if they don’t, the S&P remains our best short candidate as they are well ahead of the Dow at 1,109 and facing more upside resistance than the Dow.  We are using SDS (now $31.44) as a cover play below S&P 1,000 as it gives you a lot of bang for the buck, especially in the October contracts.  To the upside, we still like USD (now $24.23) as the SOX have been a huge drag on the Nasdaq for what we believe are poor reasons.

    We’ve got the Nas already and everyone is just waiting on the Russell to confirm.  SOX are up a nice 2.75% already – thank you very much – and it does look like there are still a few shorts left to be squeezed this week.  Oil hit $78 and we really don’t want it to get too high ($77.50 is "just right") and nat gas spiked near $4 already on hurricane news (finally!) with copper testing $3.50 again.  Let’s keep a close eye on copper as they let us know how real the rally is, as will XLF getting over $15.

    That’s it for now, we have the big S&P test at 1,123, which is our 5% rule off 1,070 and the S&P is still ahead of the Dow, which needs 10,700 to confirm the move so, like last week – we watch the S&P to break higher and then the Dow and then the pokey old Russell but that’s a lot to expect for the week and we should be thrilled just to stay over the 2.5% lines.


  21.  HOLX – any opinions on this company?


  22. Just to get my thinking streight I am called away MO today EX div day 9/13. No problem made my money. To buy them back and set up my new play wait till tomorrow right.
    Anyone thanks


  23. revtodd64
     
    Hi , Good article last week thanks. Do you have people on your mailing list if so pls put me on as well yodiet@live.com
    The CMI play is really going up You think it is still worth entering the OCT play or wait till a dip possible this week thks


  24. Welcome back DoubleD!  Yes to XOM, I like selling the puts as net $57 is a good long-term entry.  Just keep in mind the rule of thumb and never sell puts against a stock you don’t REALLY want to own at the net strike.  I think the big scare in the sector in the next 5 weeks is most likely to be a spike in the dollar that gets oil back to the low $70s but XOM collects a lot of dollars so not a bad thing for them.

    Meanwhile, don’t forget VLO, who get paid entirely in dollars and then turn around and buy oil with it.   VLO is right at $17.05 and you can sell 2012 $17.50 calls for $2.75 and $15 puts for $2.05 for net $12.25/13.63 so worst case is they are assigned to you at a 20% discount and the upside is a nice 42% if VLO can get over $17.50 in 17 months

    Mayo/JG – Thanks!

    Charts/Pstas – Sound good but not coming up. 

    Banks/Matt – Good!  They are not supposed to be a profit/growth industry.  Their profits suck the capital away from companies that actually produce things that lead to jobs.  It’s a huge global positive to getting banks back into the banking business, where they make money from lending money to entrepreneurs – who hire people, and buy equipment to make profits for their investors, as well as the bank’s investors, who once upon a time were thrilled to clip their coupons and make 5% annual returns. 

    SDS/HHF – Yes to closing the vertical and rolling the puts along.  You can get back .25 at least (better than nothing) and we can used the 1,100 line on the S&P as our new cover point to add more downside protection.  The $30 puts are just $1 and can be rolled to Jan $26 puts about even so no hurry there unless the relationship changes.  If SDS does start to move back up, you can always roll to Jan $30 puts for + $2 and play that for momentum. 

    Squeeze/JRW – I’m not sure how high they want to bring it into expirations.  We expired at 10,213 last month so 10,468 is the 2.5% line for expiration day – it would be a big change of pace if they jam us closer to 10,700 as it’s been a long time since we bumped 5% up in a period but we did get that super sell-off with 80% negative sentiment, which I guess, short of a collapse, is as good as it’s going to get for shaking out the weak hands and trapping the bears.  Also, let’s not forget how terrible funds have been doing this year so maybe it’s simply a matter of needing a big finish to Q3 in order to get some of that money off the sidelines

    V is STILL going down!

    MO/Yodi – If you want to by them back, you should get the dividend if you do it today but be aware the stock will likely adjust down once they go ex.  For some reason the Oct $22.50 caller is willing to pay $1.66, which I like as nice short-term protection of new shares at $23.54.  I assume you already have a putter but, if not, that’s one you can wait to pick up on the dividend dip too. 


  25. That death cross everyone was positioning short for will shortly become a bullish golden cross, bravo maestro Ben


  26. Phil/Squeeze:  Funny how your analysis always has to take in to consideration "they".  Was it always this bad?


  27. Good morning Phil,     What do you think SCCO at current price?  Thanks.


  28. FYI


  29. Phil, any thoughts on playing rimm for this week’s earnings or too risky?


  30. Phil
    thks for your thoughts on MO closed the deal. I think it will drop tomorrow as well but the short caller at 1.65 is some good protection. I hold MO on Jan 12 as well. Keep on smoking it pays Ha Ha


  31. Pharmboy--thanks for your write-up on Novartis--what are you looking at for an entry?
    thanks


  32. For members playing MAIL div payments coming up 16 Sept. So fare not much of a show. No opts on this stk.


  33. @Phil
    MO- long the 2012 /  $20 Calls.  Have done well so far with them.  Do you have any recommdations as to what to do with them. Sell or hold? Other?


  34. Phil – I have DXD Jan 27/32 & 28/33 spread. Is it time to unwind that?


  35. Out of TNA at $42.28; TBT failing !!


  36. Good morning revtodd64
     
    A very nice article over the weekend.   Please add my email address bobhu@yahoo.com in our mailing list.   Thanks.


  37.  Hi Phil,
    I wanted to ask you if you knew anything about ocean power (waves) as a form of alternative energy.  I think it’s a great idea but do not know much about it.  I’m looking at OPTT as a possible play.
    Thanks in advance.


  38. flipspiceland
    Hold same calls 20 Jan 12.  Sell the 22.5 jan 12 for 2.12 today and wait for the dip after tomorrow sell 22.5 put now 2.56 but should possible be better tomorrow


  39.  Phil/Yodi,
    I don’t think you get the dividend if you buy today as today is ex div date.


  40. OK, so I got out too early; I’m just a little rusty, but still 3 1/2%; here is a good illustration of the Bull tech case !!


  41. Sorry revtodd64,  add to your mailing list.


  42. Good Morning!
    Speaking of "doubles" – I plan one on a trade I made this morning – Executed a Buy/Write on ARUN ( Aruba Networks), buying the stock and selling the January 21 short straddle. Their profit will be over 250% for the year, on an increase in revenue of over 45%.


  43. jgwilson929
    Good question MO still why did they call the stk away today ???


  44.  Phil, 
    On your recommendation to switch over to the SDS from last week (which I took):
    Long-term hedge/Amatta – That’s where you can really have fund because you can go for the March $24/29 bull call spread at $2.80 and sell the $27 puts for $2.10 and that’s net .70 on the $4 spread that’s so deep in the money that the S&P has to go up 5% for you to NOT make 470%.  Break-even is way down at $25.85, which is a neat 20% lower on SDS so assume a 10% bump on the S&P to 1,200 before you are in real trouble.  As long as your longs will give you a nice return on a 10% gain in the S&P, then putting 2% into this and stopping out with a 50% loss if you have to is a good way to protect against a 10% drop for 1% or less. 
    We have already, gone beyond the 50% stop loss (on the cost of the position--which I am not sure is what you are talking about…) so this is where it is confusing to me-- is this the moment to take it off the table? The costs of doing this on an off would be way too much no?
    Thanks 


  45. yodi / MAIL
    Good advice… The dividend will be $.45 per share… I expect the stock to drop when it goes x-div. I wish they had options!


  46. jgwilson929
    You correct on MO ex div is the first day you are not entitled to collect the next div due!!! thks for bringing up this point.


  47. JRW
    Have you been following Kimble Charting Solutions for any time? Would they be good to add to favorites?  Thanks!


  48. Gel – How was Tahoe?


  49. gel1
    MAIL will you sell the stk on the 16th or do you plan holding????


  50. Pharm, do you know what time the docs on ARNA come out tomorrow? I know you said you were planning on selling tomorrow, but was that before or after the documents came out?


  51. NVS/da – I think we should wait for an indicator in the market.  If the market cannot hold, then we can sell some puts when the VIX spikes for our initial entry.

     

    Another thing I want to point out in the write up is that NVS has an mTOR inhibitor.  Now, I do not expect all to remember the inhibitor pathway here, but I do expect the docs on the board to remember that one of our earlier plays from the same pathway, and one we have initiated (again) is ARIA which is licensed with MRK.  I am long ARIA, and will be buying more below 3.70 FWIW.


  52. 1020 / Kimble

    I visit from time to time, they are NOT close quarter technical, but have good swing trade and mid-term info !!


  53.  is it just me or there aren’t any other basic members aside from revtodd64?
    ARNA followers--is there any chance that the FDA decision will be announce early?


  54. ARNA/jr – not selling tomorrow. I expect a spike tomorrow.  I will sell on Wednesday.  By all means, if one does not want to hold through the docs then I would get out today.  ARNA is holidng this level like a champ, and I am sure the shorts are building, but any move up and BOOM, it will be violent move in the up direction. 


  55. AMD 6% move on big volume very bullish but cant be too greedy….Sold half position..Acer buys lots O chips from AMD

    Acer has reported unaudited non-consolidated revenues of NT$52.758 billion (US$1.65 billion) for August, the highest monthly level so far in 2010.
    Acer’s shipments of notebooks rebounded from a bottom level of 1.2-1.3 million units in July to 3.2 million units in August and is expected to exceed 3.5 million units in September, according to industry sources in Taiwan.
    http://www.digitimes.com/news/a20100913PD200.html


  56. Greetings, Phil
    I have an AAPL question – I have just one position in this stock – I am holding 30 contracts of January 12 180′s  naked puts with a lot of profit. I was thinking of just buying them back, and structuring a new position. What would you do with this scenario?


  57. pharmboy
    ARENA worth buying for the anticipated violent move up?


  58. Hi Phil,
    I bought brcm sept 32 calls for 1.43 and set a stop at 1.00 which I later changed to 1.50 when it hit 2.20. I got closed out friday which was unfortunate since it jumped to 3.50 today. Any advice for the future on plays like this?


  59. ARNA decision is a panel discussion, so no chance on an early announcement.


  60. Criss-crosses/Kustomz – Remember these charts from July 2nd?:

    It’s been an interesting ride so far since then:

    They/Exec – I always wonder what "they" are going to do.  I always have since I used to consult for some of them so their ATTEMPT to control the markets was a given but, in the past 10 years, they have pretty much pulled it off thanks to the deregulation of the industry and the dumbing down of the CFTC and SEC, who used to actually regulate these things.  Also, the partnership between the Gang of 12 and the Government (the PPT) went from "uneasy" in the 90′s to "too cozy" in the 00′s and the Banksters did what they always do when no one is looking – they steal all the money.  Things were this bad in the 20′s but there was sweeping reform in the 30′s and the country prospered for many years with banks that lent money and gave you toasters for opening a savings account.  That’s what banks are supposed to do!  The real problem is they let banks pretend they were hedge funds and hedge funds pretend they were banks and they cross polinated and created something that was completely deadly to the economy.  Have we  learned our lesson?  Not yet, so I still worry about what "they" are going to do…

    SCCO/Bob – Nice dividend (4.6%) but I still like RTP better (picked them 2 weeks ago).  RTP has a lower dividend (1.6%) but their p/e is almost half of SCCO’s and, over time, I prefer the guy that makes money to the guy that pays a dividend.  Don’t forget, it’s very likely that tax law changes and those dividends lose some of their edge.  RTP is a little chasey but we can take advantage of that by selling 5 Oct $55 calls for $3 and buying 4 Apr $57.50s for $6.30 for net $1,020 or $2.55 per long and the plan would be to add 2 more calls if they break over $57.50 (in anticipation of a roll) or to sell some $50 puts if they fall below $52.50 to get back around our original entry. 

    Good chart JRW!

    RIMM/Aug – I think they are unfairly beaten down at $44.40 but a tough call as we need to worry about guidance.  I certainly don’t think it’s a bad idea to go for the Oct $42.50/45 bull call spread at $1.35, selling the $40 puts for $1.22 for net .13 on the $2.50 spread with a nice 1,823% upside if RIMM can finish the Oct period .50 higher than it is now.  Of course, you have to REALLY want to hold RIMM long-term at net $40.17 although a conservative fellow could hedge with some or all covers of the Jan $35 puts at $1.50 – even if they get wiped out (they won’t) it’s still $1.63 to get $2.50 back (50% in 5 weeks if all goes well)

    MO/Flips – Yeah, you caught a nice run.  Those calls are $4 with .50 premium and the $22.50s are $2.10 with $1.10 in premium but you can sell the Dec $23s for $1.17 and wipe out that premium, which puts you in the 2012 $22.50s for net .93 with the same .50 premium you have now and 3/4 of your money off the table.  If MO takes off, even if you DD at $3 on the long side you would still be in 2x at avg $2, which is up 50% as soon as you make the commitment and you’d be just 1/2 covered at the money so not much worries on this one.

    DXD/Nicha – Yes, we said if we hold our levels this week we need to scale back on the disaster hedges as, hopefully, 10,200 and 1,070 become natural supports that give us plenty of time (with a higher VIX) to make new covers.  Until the RUT is over the 650 line, we are still not safe and the volume today certainly isn’t strong enough to confirm a break higher.  DXD is still $25 and was $29 just 3 weeks ago and 3 weeks before that it was $25 too so, as long as you are not over-protected, waiting is not the worst idea.  Just put a stop in your mind that you can live with, maybe .75 or you could also consider spending about $1 and rolling the $27/28 calls down to the $24s (now $3.40), which puts them $1.80 in the money and you can use 5/5 over our 2.5% lines as a stop to roll the $32s and $33s down $1 to cover (probably to the $27s).

    Wow, Yen jumped to 83.5, that’s a full point move since Sunday’s lows


  61. JRWII
    Your doing better than me I got out even earlier than you, what’s your take for the rest of the day?


  62. 42laurel – RISKY, as I am not advocating anything but verticals on them at the moment.  I think they at least hold the levels.  IF they WANT  to get in, the will force others to sell.  The game is rigged on the stock, the science is another story.  Short interest is almost 1/4 of the stock (as of last month).


  63. 1020 / Tahoe
    Was a terrific ‘get-a-way". The weather was cool but the beauty of the place is just "jaw-dropping". My wife and I have a home there in Incline Village. We have been there only twice in the past year, so we made the decision to put it up for sale, as the mainenance is very expensive .I will be taking a  big loss on the sale ( if I get an offer ), as the real estate market has fallen 50% over the last 18 months. I will take the proceeds and follow PSW to recover my losses through option investing.


  64. Pharm,
    Thank you and nice work, first of all. I sold all my ARNA…still holding one Jan’12 5c which is also a double and I’d like to throw a little more at it in case of a flier. What do you recommend right here?
    Also, when you have a chance, can you re-visit KV.A for me? They recently popped and that is also a doubler. I’m trying to decide what to do (already sold more than half) because it used to be a $30 stock and it is under $3. I only bought recently around 1.60. I know I wasn’t premature in taking profit but have a little regret about not holding on to a bit more. Do you think I just got lucky or could this one keep going? Thanks.


  65. ARNA/Pharm – Getting into a $6-$4 bear put spread and a $8-$10 bull call spread (both October) seems a pretty guaranteed 30% return if the stock moves either way- thoughts? Is it possible to have a decision that prevents a violent move?
    Also, why would there be any new short positions now? Too risky for anyone, right?


  66. thanks pharmboy--i am new to this and would like to follow your lead--appreciate the help


  67. CREE / Phil – what do you think of a Dec. bull call spread at 40/47.5 with the sale of a Dec. 40 put for a net debit of around $2.8? CREE is currently at 49.29, up from 47.4 on Friday, and 48.15 this morning.


  68. gel1
    Same situation on APPL Jan 11 175p rolled so fare 1/2 to jan 11 220p. Hold as well jan 12 185 I feel it is still a long way of (planting Trees!!!)


  69. shadow

    I think "they" make one more attempt this morning, but if it fails we fade untill 2:00, then who knows.


  70. Phil,
    BBY reports earnings tomorrow. Expected to disappoint or at least not exceed thir numbers.
    Thinking of the following play:
    Sell 5  Sept 35C @ .80
    Buy 3 Oct 35C @1.35
    Net 0
    Exit is to close position after expiration if stock remains below 35.


  71. RIMM..AAPL sold 1.7M in 3 days…RIMM sold 150k Torch phones in a week…but im sure RIMM will try and spin some bullish story to keep shares from dropping further.. very interested to find out what RIMM’s cash position looks like
    http://www.dailyfinance.com/story/blackberry-torch-research-in-motion/19621129/


  72. Phil/"they"
     
    How do "they" move the market around if there are not buyers/sellers to move the market. 


  73. Rimm -
    Tourch is awful. I cannot see any hard core bb user wanting it. The keyboard is way to cramped.

    I am on tmobile and was waiting all summer for the new phones and all tmobile got was an updated curve. Fine phone but only real difference from old model is 3G.

    I ended up with a bold which is fine for me but what a limited selection. Bold vs curve – no real difference.


  74. JR,
     
    Have you ever noticed when watching TNA/TZA that the bids/Asks will jump all over the place without any trades being executed? 
     
    I saw them jump around a 7 cent range this morning without a single trade being executed.  That has to be the HF trading.  No normal buyer would put an ask in then change it a second later.


  75. exec "they" are the buyers and sellers..the financial world and the Fed (pension hedge mutual funds democrats) are betting the farm on a strong equity market and the recovery


  76. Phil:
    I missed the XLF trade. Is there another banking play you would suggest or should I look for further opportunity with XLF?
    Thanks
    dclark41


  77. Exec,  TNA/TZA get arbed against each other and against IWM and even against baskets of stocks by machines all day long.  There is nothing unusual in orders coming in and out at all times.  It is more visible when the market is thin.


  78. In TZA at $29.84; I don’t know if we close the gap, but I think we at least fade for a while !!


  79. Phil,
    I’m in 4 DBA Jan’12 25c which are up about $1 each and short 4 Sept. 26c which are down about .55 each but that were rolled from Aug 25 which were about .40 loss each (if recall correctly). So, I’m close to break even overall. I will probably wait a couple days to see where things shake out b/c of OpEx but I’m having trouble seeing a good roll. It looks like there should be significant resistance at 28 as that was the high since the crash. I’m just not sure what is over-valued on this thing. Could it continue to surge because of the data we just got from China? Help a brutha out!


  80. PharmBoyBVTI is really busting a move, any opinion why?


  81. ARNA – Considering adding at $6.81 (the S2 level) or so. Will look to opinions here on when to get out – especially Pharmboy.
     http://www.barchart.com/cheatsheet.php?sym=ARNA


  82. JRW/
    Have you switched to TNA, bouncing off sma 200 (1 hour, 1 min chart)


  83. Phil,
    correction…actually better than breakeven b/c I was selling calls for a few months before that too but same question. (just didn’t want to skew any calculations since the goal is not to get even).


  84. Buffet… the best is yet to come for America…its official no need for a  Dr’s diagnosis…the man is senile..the blow off top in the US economy 2003/2008 came and went


  85. lionel

    I was in TNA earlier, now in TZA hopefully until at least 2:00.  I’m mid term bullish, but short term agnostic; just trying to ride the trend, whatever Lloyd and Ben decide   8-)


  86. Just picking up some 10c bounces.
    In TZA now


  87. yodi / MAIL
    I was anticipating a better run-up, considering the large dividend. I might sell if we get a last minute push, otherwise I believe I will keep it for another quarter. The company has a lot of cash, and no debt. They are distributing their earnings through dividends without compromising their growth, so I am not concerned.  I expect the market to have a strong finish this year, as the markets will be given a boost from election expectations.


  88. Pharm/ONTY,
    I sold the Nov. 2.50 puts awhile back, have a nice gain and want to close but with the stock at 3.68 now wondering why they are so high? Any suggestions? Thanks


  89. Oops, meant to bold the RTP play:  RTP is a little chasey but we can take advantage of that by selling 5 Oct $55 calls for $3 and buying 4 Apr $57.50s for $6.30 for net $1,020 or $2.55 per long and the plan would be to add 2 more calls if they break over $57.50 (in anticipation of a roll) or to sell some $50 puts if they fall below $52.50 to get back around our original entry

    Waves/JG – Know about it – I worked very hard to promote it with the NJ Venture Capital Association in the 90s.  OPTT are local boys who made good(ish)!   They are finally starting to see some revenues and they just picked up some DOE money but they are still very small and probably a long way away from real returns although wave power is far less capital intenstive than solar or wind.  I think, on the whole, you are still paying for all potential with little chance of real returns in the near future so treat them as speculative.  The DOE contract should get them some attention and you can sell March $5 puts and calls for $2.15 for a $3/4 buy/write with the stock at $5.12. 

    Ex-Div/JG – Thanks.

    50%/Amatta – Well that’s a matter of what the positions you are covering are making on the move.  SDS dove to $30.65 this mornning but is back over $31 now.  It rarely makes sense to remove a hedge when there is no confirmation of the breakout as you pay a lot of premium to NOT have your protection anymore.  the March $24/29 spread is now $2.60 and the $27 puts are $2.15 and that’s net .45 so not quite 50% although I guess it was for a while this morning (and may be if your broker shows you poor spreads to calculate your numbers).  It really comes down to how firmaly you feel that you don’t need the hedge anymore (nor do you think you need to worry abou the S&P going below 1,100 through March) and, of course, keeping in mind that the spread is 100% ($5) in the money and you are considering cashing it out for .45 because you are worried that SDS will fall another 20% to $24 and wipe out your .70 paid and cost you $3 on the put side (assuming you don’t roll it).  Of course, the S&P has to RISE 10% for that to happen so the question is – what do you make if the S&P goes up 10% vs what do you lose on this spread.  If this spread is 1% of your portfolio and ends up costing you 3% but you make 10% on the other 99%, then it’s a good aggressive hedge.  If it’s 2% of your portfolio and ends up costing you 6% but you make 10% on the other 98%, then it’s a good neutral hedge but I think I kind of said that when setting up the idea, right?

    AAPL/Gel – I’m showing net $22K in margin tied up to make $35K so its a matter of whether you have something better to do with the money.  On the taking off side, the VIX is low and 2012 is a long way away and those puts were $20 just two weeks ago so figure you want to put a stop at $15 and then think about the chance of them getting to $15 and triggering your stop, which is pretty high so unless you are determined to ride this out to the bitter end and unless you would be THRILLED to buy AAPL at net $170, even if Jobs is dead or something else terrible happens to get that price - then you may as well follow the 2-step program and take the money and run and just sell puts next time AAPL has a silly dip. 

    BRCM/Kjb – Yes, next time you are a week from expiration and you are up 50% on your position.  TAKE IT OFF THE TABLE!  Forget the $3.50, you could have gone back to .28 just as easily, it’s the greed of not taking the 50% profit that killed you.  You never know what the next day will bring and the closer you get to expiration, the less chance you have to recover from a move against you and the faster your premium begins to wind down.  In general, the way to avoid this is to be a SELLER, not a buyer of option premium.  Another rule of thumb is that, if you don’t like an option you are holding enough to roll it to the next month on the Wednesday before expiration week – cash it out! 

    Think about this.  If you have $100 and you make 20% and cash it in 2 days and then have $120 and make 20% and cash it in 3 days and then have $144 and make 20% and cash it in 2 days, you have $172.  If you have $100 and you don’t cash at 20% and it goes to 40% in 5 days and then to 50% in 7 days and then back to 10% on a dip – who’s coming out ahead in the game?   I have pointed out in the past that there are 300 players in the hall of fame and only about 1/4 of them were considered home run hitters – the rest worked for a living, putting in small gains every single day to get to the top and even the best home run hitters, like Babe Ruth, were also lifetime average guys (.343 for Ruth).  There’s a reason Dave Kingman isn’t in the Hall – you are not beneffitting your team or your portfolio if you swing for the fences all the time. 


  90. yodi / AAPL
    Yes, that play is a Giant Sequoia Redwood seedling.  It is also as "safe as a church", but I thought it would be a good time to fold it into a bull spread, or some other play that takes advantage of the momentum this company is experiencing.


  91. Out of TZA at $30.01; TBT comming back


  92. Phil / AAPL
    Thanks… I think I’ll pocket the profit, and structure a new spreadon the next downturn.


  93. BVTI/mrm – coming out of bankruptcy?  Not real excited about that since they need to raise more capital….

     

    KV/A – nice pop b’c they can manufacture again, and you have done what is required, sell 1/2.  I would see if they pull back to the 5d MA and buy 1/2 back, being able to DD if they cannot hold. 


  94. Thanks Pharm. My chart program can’t do 5dma though. Whereabouts?


  95. yodi / MAIL
    The stock is starting to move upward – is at $6.05. I will wait until tomorrow to make a decision…. big run-up, then I’ll get out.


  96. Phil, now that we had the pop in USO, do you think tomorrow we’ll keep going or reverse? Target of 77.5 reached but now what?  Seems to be holing so I can’t decide if tomorrow we see another leg up.


  97. Phil
    Gs – sold Jan 130 puts for 7.40
    Take them off the table at 3.40?

    I don’t need the margin but this is always where taking the money and running conflicts with buying back something that is all premium. Never know what to do.


  98. Phil – what about SPLS  JAN12 17.50/22.50 bc spread with  $15p’s for net $1 on the $5 spread $2 in the money or put to you at $16 in 2012?


  99. CSCO – Phil, do you think Cisco is a good buy at these levels.  Also,  do you expect good news from their conference this tuesday?


  100. Phil……Is WEN a takeover candidate?  Is there a play there?  


  101. Phil--If one needs to park some cash would you go to VLO and / or HOV again?--or are their better plays
    Tx


  102. 1.83 acle


  103. Pharm (and Phil) – edit to my previous ARNA post, a $6-$3 bear put spread combined with a $8-$11 bull call spread (both October) seems to work better – net cost is $2.2 with a return of $3.
    Phil – what does the price of a stock before a binary event like the FDA signify? Is the market pricing an approval or a rejection? Or is it just a balance of a set of funds pricing an approval and others pricing a rejection?


  104. gel
    Mail thanks I am as well keeping an eye on it keep in contact


  105. Pharm, I have several questions : 1) Are you bullish on NVS (as your post seems to suggest)? 2) I own ARNA stock and planned to sell it on Tuesday or Wednesday. But it is going down, so do not you think that it is better to sell now? Or do you recommend betting on the positive outcome of the panel hearing? 3) What do you think about ALKS, TSRX and ARIA? Thanks!


  106. Tahoe/Gel – I know, I looked into selling at the Grand and the comps are a joke.  Better off renting and waiting for the market to turn up, long wait though it may be.

    CREE/Tenger – Well they finally had a nice dip to buy into but I have to say every time someone asks that I think the LED story is way overblown as it’s just another basic product that can be cranked out in China for 1/3 the price if we ever have enough demand to fill a cargo container.  Blue LED capactiy is set to double up by next year (CREE’s competition) and Samsung is a big player so the whole thing will likely be commoditized before CREE ever gets to a reasonable p/e.  There’s a reason those spreads pay you well – you are taking a big risk! 

    That was a very good pullback as the Russell went down THE LEAST, which indicates they are getting back in synch with the other indexe near the 2.5% lines, which is what we expect prior to a real breakout.  Volume at 1pm on the Dow is less than 90M so a "normal" program trading day so far. 

    BBY/Oncmed – I don’t know, I think electronics are selling so I’d go for the Dec $35s at $2.30 to give yourself a little room in case they do take off.  You stand to make $1.20-$3 if all goes very well and you risk a $2 move up that costs you about the same.  I like the idea better if they have a big run up (200 dma is $38.50) and there’s excitement to sell into but not so much as it is now.  

    RIMM/Kustomz –   Only annual data from Feb but Yahoo shows them with $1.5Bn in cash and a disturbing $3Bn in Receivables.  They also have $2.4Bn in payables but no debt at all.  They dropped $700M to the bottom line last year (a bad year for most) and bought back $840M of their own stock at an average of $60 so they might be really dumb or really smart.  It’s not like they never heard of the IPhone when they did it..

    Moving the market/Exec – It only takes 2 to make a market.   There’s a reason you can’t join Fisher’s Island or Pine Valley – guys like to know they can go out in twos and fours and make deals where no one else is listening.  There’s also that Cramer video where he explains how with $10M to play with, you can make AAPL or RIMM roll over and play dead for you pretty much any time you want so imagine what guys with $100M can do – and there’s plenty of them, the average net worth of the top 0.01% is $350M and there’s 3,000 of them – good thing they are all so honest or I’d be worried! 

    XLF/Dclark – I was very surprised how low they went on that last dip.  I think the discount isn’t good enogh on them at the moment at $14.82.  C, on the other hand, looks nice at $4 and I like the 2012 $2.50/5 bull call spread at $1.25, selling 1/2 the $5 calls at $1.40 for net .55 on the $2.50 spread and a break-even on the 1/2 assignment at $5 way down at $3.62 as your 2 $2.50 calls would be about $3.50 as that would return $2 on 2 calls to offset the loss of the $5s ($1.50) and pay back the .55 you put in!  To the upside, it’s got almost 400% upside with worst case owning 1/2x C at net $3.50

    DBA/AC – So you have gained $1 on the calls and lost .95 on the callers so far?  Keep in mind that it’s costing you .50 per month to roll the callers up $1 so if you end up spending $6 to roll them up every month, you’ll end up in a 2012 $25/38 spread that’s well in the money for net $8 with $5 of upside.  That’s fine…  Meanwhile, you have good protection for your longs and, if there is ever a dip, then you can take out the caller or make a longer roll when he’s down in value more than the longer calls you want to roll him to.  The key to those long spreads is working them – especially if you don’t sell the put side. 


  107. In TZA at $29.91


  108. RIMM, i would say stupid but not willing to put my money where my mouth is…all it takes is a rumor of MSFT sweeping in…either YHOO is very cheap or Steve Ballmer is stupid, you decide ;-)


  109. Phil / Tahoe
    The realtor I worked a deal with, suggested I lease the place. It may be a good idea, but I do not see recovery in the market for years. I think it is better to take the loss, and invest the money in options, as the recovery there ( with leverage ) will be far more realistic. I have never seen a market drop like this in a asset that has such value. I am selling for a price that is way below replacement, in an area that is 100% developed. Anecdotally, Larry Ellison is building a $200 Mil. estate three blocks away. It will have five or six structures ( guest houses ) on the property when completed.  Michael Milkin has the place next door to Ellison’s..


  110. If you are short IWM, be careful of a bounce and then a launch at 64.85; remember, Lloyd is 85% of this market !!


  111. gel1- You got it rough don’t you buddy- LOL!


  112. alik – I like NVS, but the market is in a state of flux.  I hate to jump in on a position with the VIX being low, and uncertainty going forward.  I am sure Phiil can put a play in motion, but I am not buying any thing up here until break out or breakdown.

     

    ARNA – well, that is a big dilemma and one I cannot make for you.  As per our rules here at PSW, when in doubt, sell 1/2.  I think ‘they’ are shaking people out to get better entries.  I am holding steady until Wednesday.  I may even hold on through, buying a few protective puts.  I would not advocate it though.  I have had them since 2.90, and added, subtracted, etc.  I am not being shaken by a few cents. I like our vertical plays at the Jan 5/10 or 7.5/9 where you can triple UR money, but also know what you can lose.  Even a few options in October for a few hundred is ok, but realize it is gambling.  We try to focus on investment.  ARIA, love em, ALKS, not real excited, TSRX, Thx. as I had forgotten about them going IPO.  Interesting little company here in SD, and might be worth starting an accumulation on.  Popped b’c they have positive data out of Citi, PJ, and others, so a bit dangerous, as these houses probably want to sell their shares…..antibiotics are going to continue to garner attention, so a space I like.


  113. Phil or Pharm
    Would you consider buying ARNA Sept Calls (now down 3% or so) for an quick round trip this week?
    DD


  114. gel,

    I thought you said your place was in Incline Village, Mike Milken’s place is on the water.


  115. gel1
    looked at MAIL big dividend, good bal. sheet, what is your take on it? buy or sell


  116. Out of TZA again at $30.01; all hail the LLoyd !!


  117.  

    Hello all,
     
    I have a new Play of the Week available for you in Savient Pharmacueticals (SVNT). The company is awaiting an FDA approval tomorrow, and things look good for them to get that approval. The stock should expect a big jump tomorrow or Wednesday on the news.
     

  118. ARNA/dd – the volatility keeps going up, so not sure if one will make any money…675% WOW.


  119.  Phil—am in the SDS OCT 30 call uncovered for $3 and am looking to dble down today. Same expiration? Same strike?


  120. Hi Phil,
    TBT – Entered Dec 38/42 bull call spread @$2.4   Closed Dec 42C (0.25) short leg earlier last week. 
    Wondering best adjustment possible, considering the recent pop in TBT and the fact that overall, trade is still underwater by about $1.75.


  121. " which is what we expect prior to a real breakout " . . . Phil, do you think there can be a real one after so many up days?


  122. Pharm – why are you going for Jan spreads rather than Oct spreads (like the ones I listed above – now Oct 7-10 bull call spread for $1).
    Just got into it and also combined $6-$3 bear put Oct spread for 1.3 for 2.3 entry


  123. JRW / Tahoe
    Incline Village is on the water.. has the two best beaches on the lake. Milkin’s place is on the water four properties south of the Hyatt.  My property ( hopefully soon to be someone else’s ) is on the 4th green of the Championship golf course – two blocks from the Hyatt, and 3 minute drive to Diamond Peak ski area.


  124. October options are b’f the final FDA decision….FDA does not need to follow the panel!!!!


  125. Pharm- any spreads suggestion for David’s pick, SVNT? Thanks.


  126. Pharm – I know the FDA does not need to follow the panel but I was curious if you knew how often do they not follow the panel’s recommendation?


  127. Pharm – so is it possible to not get a price movement after the panel?


  128. 42Laurel / MAIL
    This company definitely has a propensity to pay good dividends. They are based in Isreal, and are small, but they are successful at what they are doing. I have been in a few of these big dividend plays in the past, and many investors are in them for just the dividend, and then bail as soon as it goes x-div. If I see a run-up tomorrow, I’ll get out with a profit on the stock, and forgo the dividend. If no further runup, then I stick it out. This is a situation that is perfect for option hedging, but unfortunately – no options offered.


  129. gel / Incline

    Sorry, I was thinking of Squaw Valley 8-)


  130. SNDK/BCSI – I took October covered call positions on these today.  It should be a busy week since I have some cash on the sidelines and a bunch rolling over next week and all my September positions expire in-the-money.  Click on my user id if you are interested in the rational for each trade.


  131. SVNT/nich – no, sorry.  If the FDA misses (and they have done it b’f), SVNT goes down.  Not their fault, but investors will flee. 


  132. Ha; what a joke this market is …… fake, fake, fake, fake, fake !


  133. jthoma
    LOL… yep… this ghetto living is starting to wear on me.


  134. Phil, on Friday you recommended SQQQ for weekend covers.  Historically you have used QID to bet anti-tech, I’m curious why the switch to SQQQ.


  135. Buffett/Kustomz – Yeah, he’s 80 years old and travels the World talking to top business and government officials and he owns a major company in almost every sector of industry and he’s got a staff of financial geniuses working for him who report on everything that’s going on – what does he know?  I’d be hesitant to say the best is yet to come but if he thinks we’re coming out of it (and he thought that when he opened his check-book last year) then I don’t think I’d dismiss it too easily. 

    AAPL/Gel – I agree, if not them, then something else. 

    USO/Jordan – they may get to $80 on oil but $77.50 was our target to get out and at $80, we’re likely to flip short again.  No point in having targets if you ignore them, is there?

    GS/Samz – It’s all about do you or do you not have something better to do with the money during that time-frame as well as do you REALLY want to own GS for net $126.40 and, in Gel’s case above, the tipping point was the caller was just $20 so it’s very easy to see getting killed on that position.  In GS’s case, the $130 puts were $9.60 on 8/13, just 2 weeks ago and there are about 10 weeks left that you are gambling on so think of it as 5 coin flips where your are risking a $6 loss to make 3.40 but none of the flips can lead in you winning more than $3.40 – you can only lose the $6 but you must flip 6 times over the next 10 weeks to stay in the position.  Now, the question is – how comfortable do you feel playing that game?  You also need to think about what you will do if they go back to Friday’s $4.40.  Will you stop out there?  How about last Monday’s $6 – will you stop there?  clearly you can lose $1 in a day very easily so your daily flip is to lose $1 to make $3.40 and it all goes back to – how sure are you?  

    SPLS/Brook – I like that play a lot, just be sure to keep an eye on the business environment as sentiment drives the stock. 

    CSCO/Ash – I do like them long-term and $21.16 is a good price.  They just came out with 2013 calls and you can buy the $17.50 calls for $6.50 and sell the $17.50 puts for $2.60 for net $3.90 or $21.40 effective entry.  You can then Jan $21 calls for $1.66 to drop your basis to $19.74.  TOS says $1 in net margin on the put side and you have 2.5 years to sell $1 worth of calls each quarter against them and you can only be assigned 1x at net $19.74 so, if they are below $17.50, say $17, you could still DD and drop the avg on 2x to $18.37 or, roll them out

    WEN/Iflan – Not a takeover because they have a high p/e (25 optimistic forward vs 12 for SONC, 15 for MCD and 16 for BKC, who did get an offer.  I don’t play takeover rumors, I look for stocks I would buy if I had $10Bn to spend like SKX, who make $50M on $140M in sales (35% drops to the bottom line) which would be an instant win for NKE, who made 2Bn on 19Bn (10%) so buying SKX for even a premium would be immediately accretive to them, even without implementing cost savings.  If you can’t see at least one big-name example like that, the buyout angle isn’t worth pursuing. 

    Cash/Savi – Both of those are risky if you are trying to have a proxy bank.  Forget HOV, VLO is nice but a bank substitute should be XLF, DBC, etc.  Take DBC, for example, they are up but not as much as DBA because they are held down by gas and oil for now.  Still, they make a great inflation hedge and they are rangy but volatilie so you can buy the stock for $23.35 and sell the Jan $22.50 puts and calls for $2.35 for net $21/21.75, which is a nice, 6.8% discount over 4 months with a 13.6% upside if called and lots of room to roll.  You can go safer over longer periods if you really don’t mind tying up the cash, of course. 

    ARNA/RN – The market doen’t know crap when it comes to FDA decisions.  That has been proven over and over again!  Clearly someone is excited about ARNA and to me this is a stay away.  Last week we looked at the Apr $7/11 bull call spread at $1.15 as a straight gamble – at least you limit your losses that way and hopefully you can get out with .50 intact.  The 2012 $2.50/7.50 bull call spread is $1.90 and you can sell the $4 puts for $1.80 so net .10 on the $5 spread with 4,900% of upside if they go well and it’s $2.77 (2,670%) in the money already.  If you don’t like ARNA enought to buy them for net $4.10 in 2012, why would you even consider the bullish side of any play?  


  136. ITMN/jro – panel recommended ITMN to 45.  FDA shot down, ITMN at 10.  Fewer the other way, but more often than not in the past they follow the panel.  FDA is getting more conservative though, so my radar is higher than normal, hence so is everyone’s. 

     

    Yes, rn, the price will move so Oct is fine, I am already in the Jan, so rather than confuse everyone with more, I chose to stick with my originals.  There we go, ARNA now on the move.


  137. Cap,
     
    Fake?  So how do you play it?


  138.  it’s annoying both TLT and SPY are going up. These usually move against each other. 




  139. JR
     
    What do you think,  Stick a hair short of your .40 line?


  140. Cap, i get what your saying (data) but getting caught short can skew ones perspective, and would a sell off this afternoon deem the move more real, or just profit taking? Looks like a dead cat bounce in the SOX, but very close to breaking out

    Record arms deal, there’s no question why they allowed Iran to build a NP in the middle of Israel and US troops in Afghanistan, its all about money my friends and what better way than to destabilize an area of the world that’s a powder keg just waiting for that one little spark..LMT getting attractive with a 3.6 divi..


  141. Hey, the street dog com (sorry, meant dot) is not excited about ARNA, so to me it is a GO GO GO!!!!  LOL. Yes, as it has been said many times, this is a gamble…but I like the odds!!!!


  142.  I found Phil Davis’ political mirror image:
     
    Behold, Phil Davis(on)
     
    If you think it’s starting slowly, at least watch the section starting around 1:20. Pardon the internet axim, but holy ROFLMAO!


  143. GS / aapl
    Phil -
    The “problem” I am having is that I am such a contrarian that when I sell those aapl or gs puts it seems like a good idea bc the market is tanking or the stock is off.

    But now I think if aapl hits $200 or $185 – got both Jan 2011 and 2012 puts – something is seriously wrong and I don’t want to own it so I better take the money.

    Guess it’s a good problem to have.

    Bought back both aapl and gs. Thanks Phil.


  144. CREE / Phil – thanks


  145. SPX Oct10 Iron Condor for 2.10 credit.  1150/1155 C, 1045/1040 P.


  146. Phil… that is good advice regarding AAPL. I think I will join Iflan and play the channel. Also, I will put a portion of the proceeds into my play this AM (ARUN) , as they are on a rip. They just cuut some nice deals in China, by buying out a company there for $40 mil. The acquisition provides technology that allows communication in rugged locations like oil fields and coal mines etc. They also structured a nice partnership with Shanghai Bell, a major Chinese telecom. Aruba is engaged primarily in the wireless business and has a concentration in offering products to enterprise entities. Look for profits and revenue to jump significantly over the next few quarters


  147. In TNA at $42.48 for the run to IWM 65.40 or better


  148. Bio -

    Thank you…that was unbelievable. I like the one part where he just squeals.


  149. Phil, I have RIG Jan 2012 40/65 Bull Call spread and financed it selling the Jan 2012 35 Puts.  The puts now have 60% gain on them, and I’m wondering, would I be better off to take those gains off the table by buying the 35 back and then selling the Jan 2012 $47.50 for 6.30?  Basically, it puts $3.00 in my pocket and still gives me a put to of $41.20, which I would be happy with…….
    Or is there a better way to manage this trade?


  150. Pharm, check out the ride I’m taking on QCOR, I call the one month chart pattern a ‘sawblade’!


  151. Tahoe/Gel – I know, it’s totally beautiful but that’s not enough these days although I do have faith that it will make a comeback plus we love to ski there, which is why I prefer the hotel property – much easier to attract tourists for rentals.   The big problem is the casinos are giving rooms away for free and that’s the competition for short-term guests.  

    SDS/Fortep – No way.  SDS is right at $30.88 and your call is $1.88 with a .62 delta so if you DD, you get a $1.24 delta but you also double your premium.  If you want to spend $1.88 looking to make money, why not roll to the Jan $25s at $6.50 and sell the Jan $35s for $2.50 so you are adding $2.12 to your calls but dropping them $6 in the money with virtually no premium and you make $7 at your effective break-even at $32 so +7 on that roll up to $32 and BE at $30 (about) with $5 total upside at the same $35 you need the DD to hit to make $2.75 x 2. 

    TBT/Drm – Well for $1.10 you can roll down to the $34s and then sell the $37s for $1 and hope for the best.  If you have more patience, you can go for the March $34/37 bull call spread, which is just $1 on the $3  spread.  Of course you can also sell $27 puts for $1 to offset all or part too.

    Real/B1 – Well that’s what a real breakout it, you go up, consolidate near resistance and then move higher.  It’s been so long since we saw real moves in stock, I think we all forgot how they look….

    SQQQ/Mr M – They give more bang for the buck on the right move.  Got killed today though…  Remember, the idea  was to be in the vertical so not a good play to hold naked!

    Davison/BDC – I saw that one, what a nutball!  It’s like a dramatic reading of his resume at first, then he gets strange!  

     AAPL/Samz – People don’t go broke taking profits!

    Good plan Gel. 

    RIG/Hoss – What you don’t want to do is pay premium for no reason.  If you are confident that RIG will hold, say $50 now, you can roll up your own calls and collect $6.70 to give up $10 in gains and you can roll the caller up to the $45 puts for $2.50 to take on $10 more risk and you can spend another $2 to roll the $65 caller up to the $70s so you give up $2 of protection to make $5 more if RIG goes up 20%.  I chose the way I said it carefully becasue none of those ideas sound so great, do they?  You are in a $25 spread for about zero and stand to make all $25 if you do nothing at all.  If you want to get $3, why not sell the Jan $65s for $3, you don’t pay him a penny of profit until RIG is at $68 and, by then, you’ll be pretty happy about your long position. 


  152. QCOR/mrm – remind you of something????  Although QCOR makes money.  I have been in them and out many times.  Another good money maker for me.  Now, ARIA, ARRY and CRIS, come on’ baby, light my fire!


  153. Pharm… I really like CERS and have been waiting for a drop in order to jump in. I would like to eter at $3.50 and the stock today is $3.75. How are you playing this one? Thanks!


  154. JR,
    Odd…..IWM moving away from TBT


  155. Tx Phil


  156. gel,

    Market strong while TBT collapses, is this a currency play in progress? (Money from outside the country moving into $ denominated assets)


  157. ARNA!!!! Go go go….


  158. Kustomz – Speaking from the perspective lowly acquisition guy in the DOD, I really think LMT is still pretty risky (even down here).  Gates is slashing lots of manpower to pay for planes now but he can only slash so much. The cost/benefit ratio of having a high tech fighters/planes is fairly low. The Cold War is over and the importance of having planes and expensive toys like the F-35 is being heavily debated….


  159. Gel – yeah, been in them since the 2.90 area.  Their blood ‘cleanser’ is going to be a winner. How a 1/4 entry here?  MDT, JNJ, even (gulp) BSX may pick them up.


  160. Anyone see any news on MSFT? Just popped 2%+ in the last vew minutes.


  161. Nevermind. CNBC say’s they’re selling debt.


  162. I’m out at IWM 65.47, I have a line there; TNA $42.92 (probably too early again !!)


  163. rainman/MSFT…..Good observation.  Why IS Microsoft up 6% today on fairly good volume? 


  164. Thanks Phil, my instinct was just to leave it alone.  I’ve got the $25 spread for very little, you’re right.  Just wanted your thoughts, thanks.
    Would love to find another one of those…..


  165. Why does MSFT need to sell debt, they have tons of cash…???


  166. VNDA – Ouch, Pharmboy you had to remind me, I’m still in that one and holding (luckily sold half right at the top).  Did a DD of sorts by buying some TTNP down here, their partner.


  167. LMT/Kustomz – I would be carefule with defese, it’s the only thing we really have room to cut.

    And what Jrom said!

    Well, that turned out to be a fun day after all – nice down up action to keep everyone’s blood flowing! 

    Retail sales tomorrow. They were week last month and we already kow Business Inventories are building so we need a decent data-point not to be bothered by that but Inventories are 10 so we’ll be open when it happens.  Wednesday is Empire Manufacturing, which better be moving up and Industrial Production, which was weak last time too so a lot of things that can either improve or confirm a downturn….

    Biggest deal of the day though is RUT getting over 650 – as I said earlier, the fact that they held up when the others dipped was a nice, bullish sign.  There are certainly sellers at the 2.5% line but that’s what consolidation is all about, haphazard buying keeps going until it runs into a line at which another group is looking to exit – the rest is a matter of waiting to see who gets exhausted first….


  168. jromeha, great points but as hostility builds and resources become more scarce ..I dont see peace breaking out anytime soon, besides what else are they going to spend their money on?

    IBM MSFT AA CAT JPM are the largest contributors in the Dow


  169. I hear ya Phil!! Promise not to overpay :-)


  170. The premarket futures moves (up ) are even more concerning to me b’c ‘they’ can take their short money and run.  No wonder weekly options are going to be all the rage!


  171. Another One/Hoss – How about SKX 2012 $20/25 bull call spread at $2.50, selling Jan $20 puts for $2 for net .50 on the $5 spread and, if all goes well, you can be in just a .50 bull call by Jan (10% down from here) or possibly have to roll out to the 2012 $17.50 puts (now $1.80)

    MSFT/Bob – I’m sure they are going to buy someone or maybe just their own stock at these prices.  Their forward p/e is under 10 so they may see themselves as a bargain. 


  172. MSFT – My speculation on why they are issuing debt to do stock buy-back.
    Could be they are planning a ‘special dividend’ – a really big one like they had few years back. Such a dividend would be taxed at the better 15% rate in 2010 rather than more next eyar and later. Especially so for high-earner owners of MSFT and MSFT employees themselves.


  173. HUGE orders in ES its been a while, these guys are hell bent on protecting the levels but there’s a big seller


  174. Well, not pretty, but 4% on the day !! 

    Have a good afternoon !!


  175. Kustomz – We cannot fight anymore wars right now due to finances and our military being stretched thin in Iraq & Afghanistan. However, if/when we get involved in conflicts in the next 20 years it will be with smaller nations (think any in Africa, and various countries in SE Asia). We wont be going to war with China (even if they did invade Taiwan) or Russia (even if they keep messing with Georgia or any of the former Soviet Republics)…. I guess you could buy  LMT with the hope  republicans take both the House and Senate or we have a Republican president 2 years from now counting on them to block a reduction in defense spending but that is a stretch….


  176. jromeha, O no my time frame is 1 year 11 months and 29 days shorter…I would play the pop and my reference to dividends simply makes light of possible value investors (chuckle) looking to get in (bag holder)


  177. JRW
    The market is strong because of the positicw Chinese economic data just released, which has fueled a rally in risk. – The data beat estimates across the board – industrial production up 13.9%, and retail sales up 18.4%. This really boosts the high beta currencies and the risk trade. This is giving the boost to our equities today.
    The bond market is still waiting for the data here in the US, as the US is the weakest link in the G-20. So this will keep our TBT plays static until we see growth evolving, as we are still experiencing "gloom and doom"  Any sign of growth ( maybe this week as we get the US data on retail sales later this week, or possibly the industrial production report), then if positive, we will see a tempering of risk aversion and therefore a weakening of the bond market and a spark under TBT to get it out of the "deep sleep" it has been experiencing. My currency plays are on hold at the moment, until this gets a directional bias. Next week should be fun!


  178. Gel & others re: Bonds/TBT/TLT- here is an comment from Rosengerg’s daily blurb- lots of bond jargon here that I don’t follow- anyone able to decipher this and or comment?
    The good news for us bond bulls is that it looks like the net speculative long position in the Chicago Board of Trade (CBOT) has been wiped out. The non-commercial accounts, who were betting against the downtrend in yields all year long, went net long 888,858 on 10-year T-note contracts as August drew to a close (just as yields were bottoming) and have since closed out their positions and are now flat — this should help eliminate one recent source of selling pressure. The commercial banks, however, are still net buyers and acting as sustained sources of support — buying a net $14 billion in the week leading up to the Labour Day weekend.


  179. Interesting take on bonds and gold.


  180. Pstas… this is my take on the commentary – It appears those that were taking short positions in the bonds have now been neutered, ie closed out  and their positions are now flat ( neither long nor short ). This news is good for those that are holding the bonds, as the selling pressure is no longer there.  Additionally, the commercial banks ( not to ention our own Fed ) are buying the bonds big time. It seems the banks will follow this trend as long as the Fed allows this practice of buying bonds in lieu of making commercial loans, as the risk is zero for the bonds and the risk associated with the commercial loans is much higher. The differential on the yield is not commensurate with the risk quotient, therefore buying the bonds is a "no brainer"  This scenario is negative for TBT. My personal feeling is the whole dynamic will reverse, just as soon as we see the equity market get some affection, or the Fed re-aligns their bank policy, which will surely develop over the next few months. 


  181. Phil ..Buffet, overpaying for a RR was brilliant in a recession…wonder if those same geniuses that he surrounds himself with advised him to get out of his bank holdings at the top and before the obvious crash….let me see…nope. They were actually bailed out with billions in tax payer money and the FDIC. Lets be serious the best days for this country are behind her. If piling on debt in the trillions year after year by our Gov constitutes "our best days are ahead" then maybe I’m senile at the ripe old age of 40. He’d be more believable if he had gotten out before the crash and not just pandering to Obama. He did back Obama and the reality of the situation clearly makes his statements obvious. Its about the coming elections and favours.

    No im not trying to make it political, I despise both parties and don’t believe we need to settle for the lesser of 2 evils.


  182. Gel: been running around today to vets re saving my dogs life today.  Settled dn. now. Are u trying to sell property in Lake Tahoe ?  If so contact me at dflamos @ verizon.net
    thanks


  183. Ge;- Thanks- I have heard that term "flat" before. Makes sense. Would that mean the traders have no position i.e., neither long nor short and are sitting on the sidelines?


  184. Dividend/M2 – Good thought!  They totally trashed their stock price last time they did that though.

    Bonds/Pstas – Basically saying that fuel for squeeze to the upside (on rates) has been wiped out and that the net buyers of cheap paper (pressuring rates constantly down) are still there so he thinks the move down was a blip and now back to the relentless move up in TLT.  It’s always confusing with bonds because strong demand lowers rates, which makes TLT go up. 

    These were interesting from Pharm’s gold link:

    SF Fed/Cap – Interesting but a lot of the charts are strangely old (that’s government work for you…):

    But businesses still see really bad sales

    Consumer spending remains weak.

    DISMAL

    And don't look for a recovery

    And lower interest rates.At best, a modest recovery


  185. At the close: Dow +0.78% to 10544. S&P +1.11% to 1122. Nasdaq +1.93% to 2286.
    Treasurys: 30-year +0.46%. 10-yr +0.42%. 5-yr +0.33%.
    Commodities: Crude +0.94% to $77.17. Gold -0.06% to $1245.80.
    Currencies: Euro +1.51% vs. dollar. Yen +0.58%. Pound +0.48%. Comment!

    Market recap: Stocks finished broadly higher, led by a relief rally in bank stocks and strength in semiconductors. China’s strong industrial production data and U.S. M&A activity (I, II, III) supported Wall Street’s upbeat mood. "[The bears] were unable to move the market down last week when they had every opportunity to do so," a trader said. NYSE advancers outnumbered decliners four to one.

    Last month’s budget deficit came in at $90.5B, the U.S. Treasury says, less than expected and smaller than the year-ago gap. But Zero Hedge points out that the comparable increase in debt was $212B, vs. $143.6B a year ago, and that the U.S. continues to issue 50% more debt than needed to merely fund its deficit.

    Three in five economists surveyed by WSJ expect the Fed to resume large-scale asset purchases to stimulate growth in a weakening recovery – and the same proportion says that would be a mistake.

    The Fed buys $3.4B in securities in its latest Treasury buyback, slightly less than expected, of $17.2B offered by dealers. Treasurys are holding gains: the 30-year yield flat, 10-year -0.01 to 2.79%, 5-year -0.04 to 1.56%, 2-year -0.02 to 0.55%.

    Senate Democrats and Republicans harden their positions over extending the Bush tax cuts, even as the GOP House leader hints at compromise. Senate Republicans say they have enough votes to block Obama’s plan to end across-the-board extension of current tax levels for all earners, while Democrats say the GOP is holding middle-class tax cuts "hostage."

    Allowing the Bush tax cuts for all income levels to expire at year-end would cut U.S. economic growth by "well over a percentage point," Goldman Sachs’ (GS) Jan Hatzius tells CNBC. Although Goldman expects Obama to get the plan he wants, Hatzius says the impact would be "major… if everything was allowed to expire."

    Yes, this has been the worst job-loss recession since the Depression, but not the "job-less" recovery many believe, Barry Ritholtz asserts – demonstrably better than the past two recessions as measured from the trough. Given that the depth of the ditch, the labor market is climbing out fairly well, but still not good enough to recover all the jobs lost.

    "I am a huge bull on this country," Warren Buffett says in ruling out a second recession. Businesses owned by Berkshire Hathaway (BRK.A) are growing and "coming back almost across the board."

    Now that the new Basel rules have provided clarity, U.S. banks may feel ready to start paying dividends again or increase payouts. Payout ratios are low compared with historical levels, and those ratios could rise to 30%-35% over the next three years, some analysts say, leading to dividend increases beginning in 2011.

    A "perfect storm" for the housing market is coming, again, as supply rises, demand falls, government aid measures wear off and banks get anxious to offload a glut of foreclosed homes. Neither prolonged intervention nor "letting the market take its medicine" are particularly attractive options, leaving lawmakers with little to do but hope for a rebound.

    Far from a disruptive force, high-frequency trading helped the market recover relatively quickly during the May 6 flash crash by restoring trading volume quickly after traders had pulled back, hedge fund pro Jim Simons says. Seven minutes of chaos was a lot better than a market "flat on its back," which was the case after the 1987 crash. (also)

    "We [Heart] Logistics," or so says UPS (UPS) as it rolls out its largest marketing campaign ever to target small and medium-sized businesses that want to sell their products globally. CEO Scott Davis says the only way to grow over the next 10-20 years is to look at a customer base outside the U.S.

    Apple (AAPL +1.4%) says it will make the iPad available in China, starting with a Wi-Fi-capable version, beginning Friday. The product will be available to customers through its two Apple stores in China and through authorized resellers; the company plans to open 25 new Apple stores in China by the end of next year.

    Microsoft (MSFT +5.3%) jumped near the close on a report that the company is planning a debt sale to pay dividends and share repurchases. The company would try to raise as much as it can without jeopardizing its debt rating, according to the source; the amount raised could total at least $5B.

    MasterCard (MC -3%) and Visa (V -4%) shares tumble after Bernstein’s Rod Bourgeois downgrades the credit card giants to Market Perform from Outperform, citing federal caps on fees and pending litigation that may limit their ability to raise prices. “We see a higher probability that Visa’s and MasterCard’s stocks will be dead money."

    It could be a blessing in disguise if Howard Stern leaves Sirius XM Radio (SIRI) soon, since the company should keep attracting listeners without the burden of Stern’s $500M contract. "They can grow without him," one analyst believes, adding that Stern no longer brings in significant numbers of new listeners.

    Get ready for the end of the coffee rally as big harvests look to bring in a surplus of 6.67M 60-kg bags in the coming year – the biggest in nine years, and more than six times this year’s surplus. Arabica beans reached a 13-year high of $1.9865/pound last week.


  186. pstas… to me "flat" means there is no bias at the moment… ie the shorts have covered their positions. I believe we may see a strong upward move in the markets late October into the end of the year, solely because of the euphoria surrounding a belief the Republicans will be successful in their electorial efforts. This outcome, I believe will give new life to the equity markets, and will inversely put a wet blanket on the bond market – ( new birth for TBT ). Going into the early part of 2011, this should have some legs, but the second quarter will be a repeat of the current level of fear and risk aversion.  My reasoning for this is because, I believe the situation in Europe is more serious than what is known. The European bankers, I believe, are hiding far more toxic assets than what has been exposed, and the "stress tests" were a joke. Secondly, the second round of stimulus proposed by Obama is more of the same, and targeted to the unions and those he is depending upon for votes in November for his surrogates.. The stimulus does not work, when it is confined to givaways. Unless the economy is growing, there will be no jobs growth and we will exceed 10% early next year. I do not see either party ( politicially ) providing the right solutions of the problems affecting our markets. No concrete ideas for Medicare, Social Security, Health Care and the massive ($200 trillion) debt we are stuck with. Until these issues are properly addressed, then we are cooked in the markets. This is the "big" picture and will affect the markets until the market feels comfortable with a plan to solve this mess.  I see nothing on the horizon that has potential for change. These negatives will have a profound impact on our markets after the year end euphoria subsides, IMO.


  187. Bonds:  I subscribe to "sentiment trader" which weekly lists bond positions within 3 groups of holders;  Commercial net positions, large speculators net positions and small speculator net positions.  As of 9/10 the results were respectively:  nearly zero (after being strongly positive a couple months ago); nearly zero (after being strongly negative a couple months ago); strongly positive (after being flat a couple months ago), respectively.
      If one assumes that commercial holders represent the "smart money", they have bailed out of bonds in the last few months, while the small speculators were doing the converse.   I would post the graphs, but they are copyrighted and its a purchased site. 


  188. Gotta Love Mr. Donald Charles Unworth !
     
    http://www.nationalreview.com/corner/246401/going-down-fighting-jonah-goldberg
     
    R.I.P.


  189. CAP:  made me laugh out loud !


  190. Cap… Ha, Ha - You sure do know how to hit them out of the park!


  191. Cap- now that is what I call estate planning.


  192. Gel- here is another point from the aforementioned Rosenberg report which relates to your end of year/ early next year outlook:
    It’s fascinating that as everyone else is tripping over themselves to cut their U.S. GDP forecasts, we are raising ours. But don’t get too excited, this is only an acknowledgment that the risks of a contraction in the current quarter have faded significantly with the latest data on net exports and inventories. So, it seems as though we could end up getting something close to 1.5% real GDP growth for Q3 with real final sales somewhere around 1%. That is still extremely weak and soft enough to kick the unemployment rate higher in the near-term, but the bulls will still spin this as positive since anything that does not suggest “contraction” will be seen as encouraging.
    One can call it a “growth recession”, but if Mr. Market wants to focus on the word “growth” and ignore the word “recession”, then one may well see ebullience take hold for a time. But a word of caution is still required because with the consensus view on corporate earnings at +11% growth for the next 12 months, even a “recession” that has “growth” is not going to be able to generate a profit trend that is robust. So that is our major concern, it’s not about the politics, it’s not about the Fed, it’s not about another flashy set of fiscal proposals, it’s about the prospect of seeing some significant downward revisions to earnings estimates in the next several months and quarters. When we feel the market has come to grips with that or even overreacts, then that is where the next great buying opportunity will be. Therefore, patience over the near-term will be extremely important; now is not the time for impulsive buying behaviour.

    He has been consistently bearish but makes a fair case:
    Indeed, prior to a client meeting last week, one of our senior officers posed the question to me as to what I would look at as a tried, tested and true indicator of when to turn more optimistic on equities.
    There actually is a good one — revisions to analyst earnings projections (data out monthly).
    The 12-month forward S&P 500 earnings estimates, for example, peaked at $103.61 per share right when the market peaked in October 2007. It bottomed, believe it or not, in March 2009 (right at the market lows), at $60.08.
    The consensus analyst earnings estimates on a 12-month forward basis peaked this year in April — again, right when the S&P 500 did — at $94.79. It has since declined for five months in a row and so far in September is down 1.3%, to $86.74.
    From the April peak, bottom-up earnings estimates have come down 8.5%. We have data back to the mid-1980s and while earnings downgrades can happen in the context of a bull market, when they are down as much 8.5% in an eight-month span it is always in the context of an overall bear market. Let’s respect what the historical record tells us on this score; that we will have to be patient before calling an interim bottom

    That is about a 13 P/E so not overly optimistic but hardly positive in light of the continuing less than thrilling data prints. So, I guess I am getting more bearish as regards the market generally and TBT specifically – assuming I am reading the tea leaves correctly that unless earnings estimates stabilize or revise upward there is no fundamental catalyst for a TBT turn?


  193. Humvee-Bonds- good info. If you are able and are so inclined , would be nice to hear occasional updates on this indicator.


  194. Gel:
    I do not see either party ( politicially ) providing the right solutions of the problems
    Agree on this score and not likely to get anything in the midst of this election season. The Republicans are going to ride the wave of discontent without having to show their cards.Just following the Obama strategy used in 08.
    I am coming to the conclusion that we need to seriously look at a complete dismantling of the "Nanny State" along with it’s bastard stepchild – Crony Capitalism. We have had multi-generations of eroding individual freedoms along with serious degradation of personal responsibility. Hell, even Fidel has admitted to chinks in the Marxist armor which has been the leftist model. I don’t know how many failed "statist" examples we need to get the message.


  195. Kan beat Ozawa in the Japanese PM election in a massive 50% landslide…  But there was no way in hell they were going to vote for the very personification of old-boy political corruption and scandal.   So much for aggressive stimulation and depreciation of the yen.
     
    Not that it really matters to the people though — the best comment I read so far was that this election was like "Alien vs. Predator" — but the yen is driving up relentlessly.  I feel poorer everyday.