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Thursday: Through the Roof or Smashed into a Thousand Pieces?

 

GRANDPA JOE: But this roof is made of glass. It’ll shatter into a thousand pieces. We’ll be cut to ribbons!

WILLY WONKA: Probably

Is today going to be the day?  After pressing against our breakout levels all week, today do we should finally have the gas to get over the top or will our 7.5% levels keep acting like a solid barrier?  Oddly enough, I was asking the same question (with the same title post) on August 5th, when we were trying to break out over our 5% lines of Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666.   At the time I concluded that the only way we were going to do that was if the Fed gave us more Quantitative Easing.

We were, at the time, at the top of a very bogus-looking, low-volume rally that had taken us up 10% from 9,700 in early July to 10,680 on August 4th.  The Dow and the Nasdaq were our leaders but the Russell kept flashing warning signs as it failed to hold it’s satanic 666 target and, on Aug 2nd, just like on October 5th, we had a big, silly jump up to what we were pretty sure was a blow-off top.  Despite being dead right to call a top at the time – it took the market another week to drop but we fell off a cliff on Wednesday, August 10th and we were back at 10,200 on the 11th so better a week early than a week late with these calls.

Willy Wonka understood stock market physics, there had to be enough power to getthrough that overhead resistance or it was going to be a very painful test of the top (like the one we had in August).  Since our last dip, we’ve come back for another try but the volume has been substantially lower than it was in Aug, leading us to believe it is only TradeBots, and not Oompa Loompas, who are buying this market.  Can TradeBots alone give us enough "thrust" to break through this time?  It shouldn’t be THAT hard, in April we had highs of Dow 11,258 (5.6% higher than 10,680), S&P 1,219 (7.5% higher), Nas 2,535 (9.2%), NYSE 7,743 (7.2%) and Russell 745 (11.1%) so it’s not like we’re asking for a lot with our little breakouts, are we?

SOX were 404, now 345 (down 14.6%), Transports were 2,279, now 2,291 (up 0.5%) and have been our leader so we’re watching them closely but what an odd discrepancy with the SOX, who have generally been reporting good earnings (although Samsung’s guidance today was disturbing).  Internationally, the Hang Seng is off 4.6% (from 24,000), 12.3% on the Shanghai (3,026), 15.1% on the Nikkei (11,408) but the BSE is UP 11.7% - leading all global markets (except Mexico) at 18,172!  Not far behind India is Germany’s DAX, are down just 1% this morning at 6,275 vs April’s high of 6,341.  The FTSE is more in line with other indices, down 2.5% from 5,833 and the CAC is also down 7.6% from 4,086.  As I mentioned yesterday, the Dollar is down 13% (and still falling) since June while Copper is up 32% (and way over the early April high of $3.68 at $3.76), gold is 22.7% above April’s close (and we shorted it now) at $1,360 and oil went wild yesterday (another short – see post, Member Chat) and finished the day $1 over our $82.50 upside target, but still 4.5% below April’s ridiculous close.  Mixed signals to say the least!.

Today we have Jobless claims and tomorrow we get the Non-Farm Payroll Report.  Less than 450,000 jobs lost and more than 100.000 net jobs gained can give us the push we need to break up and out as QE2 now seems to be in the bag, regardless of any short-term improvements in the economy.  India is through the roof and breaking the bounds of market gravity and the Nikkei, the World’s lagging index, made the biggest gain this week (up 4.5%) but STILL 47% off the Feb 2007 high of 18,215.  We expected this run on Yentervention and I suggested playing the EWJ Apr $10 calls at .40 in my Sept 10th post.  Those have now hit goal at .60 (up 50%) so be very careful here! 

I’ve already sent out a Morning Alert to Members with a chart that indicates a very disturbing divergence between the S&P and interest rates.  The last time we had this much of a gap between the 10-year rates and the SPY was 2008 – and that was not a year that ended very well!  From the "Phil’s Favorites" section of our web site, Graham Summers points out that the ONLY reason stocks have rallied this month is courtesy of BILLIONS of dollars of cash the Fed has been pumping into Wall Street – TIMED SPECIFICALLY TO COINCIDE WITH OPTIONS EXPIRATIONS WEEKS.  How much?  Well try $31Bn on April 15th, $10Bn on May 13th, $12Bn on June 17th and $8.6Bn on July 15th (we don’t have the Aug numbers yet).  April held us up until the flash crash (as you would think $31Bn would) and we got a little pop from May and June was enough to keep us going until that Friday but, by July, it was getting expensive to maintain 10,400 and $8.6Bn was just not enough and that failed with a huge expiration day sell-off.  August expirations were also weak as the Fed was winding down QE1 so it’s no wonder that they announced QE2 in September and even less wonder that that rallied the markets, right?  

Mike Snyder points out why you will never hear this stuff from the MSM, as pretty much everything you see, hear or read is controlled by 6 corporations – down from 50 in 1983, before Reagan deregulated the media to "foster competition."  What you will hear today is BUYBUYBUY with Jim Cramer coming on the Today Show to spread the madness and an 8:30 drop in jobless claims to "just" 445,000 jobs lost last week, which was 10,000 (2%) less than expected and that was enough to pop the Dow futures 60 points, with the S&P futures back at the 1,160 mark.  

We are not going to fight the tape, or the Fed, here.  We went to cash so we could play either way.  We already have our bearish bets and there are lots of nice, upside trades we can take (we looked at several in yesterday’s Member Chat).  Retail Sales have been coming in generally well but TGT missed by a lot (up 1.3% vs 2.2% expected) and GPS was down 2% vs up 0.2% expected.  M was strong at +4.8% and we already knew COST was going to beat (up 5% vs. 4.5% expected) and ZUMZ is the most impressive specialty retailer, up 17% this Q with LTD getting honorable mention, up 12%.  PEP earnings came in on target at $1.22 for Q3 and it’s the same old success story with International Sales driving growth and US sales forcing a cut to guidance.  They fell to $66 pre-market and I like them there for a long-term play.  

Normally, strong retail sales would give us a stronger dollar (more demand for dollars makes them more valuable) but this market is not normal and expectations are being ratcheted up daily for how much Global Quantitative Easing we will get.  That is driving the dollar to new lows and we have to guard against the possibility of this causing an inflation shock.  It does look like we went short too early but we’re not going to whine about it – we just need to find some upside covers to take advantage of the move up.

We expect at least a pop back to Nas 2,400 this morning – anything less than that and we stay bearish.  A very simple way to play for additional upside is something like the XLF Nov $14/15 bull call spread at .60, selling the $15 puts for .65 so that’s a nickel credit on the $1 spread that’s currently .80 in the money.  That’s why we don’t fear a break up, we can make a 2,000% profit in a month if this rally is real – all they have to do is sustain this BS through earnings!  

Let’s take a look at the big picture on our multi-charts.  As I mentioned, the BSE is off to the races and the Nikkei is clearly lagging.  Why?  Well, India’s economy is tiny and Asia is booming so they are getting a lot of benefit from that, as well as the continued outsourcing of US jobs (how do you think all these corporations are growing without hiring?).  Interestingly, no one is actually shipping anything and the Baltic Dry Index is floundering at the breakdown line of 2,500.  The Shangai finishes their vacation today and if we have a green day, then FXI ($44.23) should get a nice pop tomorrow as China’s junior index plays catch-up.  

We can’t be comfortable if SOME of our global indexes look good.  We need to see France get over the 3,800 mark on the CAC and the FTSE and DAX need to break their April highs as well.  We’re close – but let’s not break out the cigars just yet!  Turning to our US set, it’s obvious we have a lot of work to do.  The SOX are especially weak and Samsung didn’t help today so we’ll have to see what earnings season brings us.  The transports are leading the Dow higher, which is strange with the BDI still struggling but I guess everyone is using PCLN to book their next trip so expectations are high, high, high:

 

It’s going to be a lot of work for the markets to catch up to gold.  A nice 4,000% upside play on the markets doing well for another month is similar to the XLF play, using SSO (ultra-long S&P) with a Nov $39/43 bull call spread at $2.10, selling the $40 puts for $2 so it’s net .10 to make up to $4 if SSO rises to $43 by November expirations.  SSO is currently at $40.68 so this trade starts out over 1,500% in the money – again, we do not fear the upside – we just don’t trust it yet!  

So we continue to walk the difficult, bearish path for the moment and we’ll likely find some nice downside plays on the weeklies today but there’s no way to be sure until after the bell so stay tuned in Member Chat!  

And  - be careful out there!  

 


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  1. Good morning Phil
    So, another meaningless jobless claims number?
    11k down….neither here nor where…but not worsening.
    Aside from TA, earnings and multiples also have to determine current market valuation.
    What is your FUNDAMENTAL, analysis of the market’s worth today? Or for the next 3-6 months?



  2.  Regarding Pharmboy’s link to http://www.philstockworld.com/2010/10/06/the-only-reason-stocks-have-rallied-this-month-2/
    "The only reason stocks have rallied this month". Could someone explain this in greater detail? I don’t understand the math. Primary dealers acquire treasury bonds from the treasury at an auction, right? They don’t get the bonds for free, do they? If not, what difference does it make when the fed buys them back? Aren’t they just "injecting" capital back into the system that was already spent at the bond auction? Why would the primary dealers necessarily funnel that cash right into stocks? 


  3. Good news = Good. Bad news = Good:  Historically, whenever the market gets in one of these ridiculous trend moves, particularly driven by a weak dollar, you know that a reversal is near. In the last 10 days, we’ve had the USD punished for bad economic data (and hence the market rallying on USD weakness and the promise of QE2) and the USD punished for better than expected economic data (and hence ‘Risk on’ trade, so better for EUR and commodities). It is silly, the market knows it’s silly, but they want to get as many bagholders in and bears out as they can. Escalator up, elevator down.


  4. Smashed into a thousand pieces.  I’ll be going short in a large kind of way at the open.  This is exactly what I was looking for this am.  If I’m wrong.  I’ll go even larger the next time.  Wrong again?  EVEN LARGER.  Get it? 
     
    They will not trot out QEII without tanking the market first.  We can’t possibly continue up until November’s meeting.  See there is a little thing called options expiration between now and then.. not to mention earnings.


  5. They got their DOW 11,000 it looks like. 
    Lots of commodity related stocks pumping pre-market.
    I got off a quickie short on FCX.
     
    I agree w/ Matt (don’t I always ?)


  6. Kind of imagining all the books and Rolling stone articles that will be written about this QE2.0 fueled rally, that in hindsight seemed so preposterous, but that everyone "failed to recognize" at the time.


  7. Matt,
     
    I’m holding some TZA.  Was going to dump at the open because I have to be away all morning in meetings.  What do you suggest.  Hold…..stop loss….or dump.  If SL….what level.


  8. Matt, be careful, this looks very much like Feb-April run and they can jam another 4% higher before reversing.  Your logic is sound, but fighting the tape is expensive.  But I surely hope you are right.  Good luck!


  9. Wow, FCX back to UNCH.  I covered too soon !


  10. Matt exec
    Now there is three, I’m hopeing IWM puts don’t tank this morning.


  11. Hi, Phil, I had a question last night.  I’d appreciate your suggestion when you have the time:
     
    Phil, I have the following for WFR (based on your recommendation many months ago.  Thank you!):
    bought WFR 2012 $7.5/$15 bull call spreads cost basis $3.05
    sold WFR 2012 $10 puts for $2.10
    What do you think of rolling the $15 callers down to $12.5 callers for about $0.9 credit?
    Or, better yet, rolling the $15 calls down to $10 callers for about $2.10 credit?!
     
    Oh, no!  I just saw jgwilson’s 6:20pm comment.  Crammer recommended WFR!  Maybe I should cash out all together! 8)


  12. ex-dividend / hoss, Phil, et al — There’s a good post on the Optionshouse blog about how calls on dividend stocks are traded around ex-dividend dates.
    https://www.optionshouse.com/blog/early-exercise-of-calls-dividend-plays-and-what%E2%80%99s-all-that-volume-56/
     
    Apparently it’s not unusual for your short calls to get exercised on you right before ex-dividend. When you run this play, you basically hope that not all of them will get exercised.


  13. yodi
    October 7th, 2010 at 8:52 am | Permalink  
    revtodd64
     
    Good morning On your buy/write I believe you holding VE now at 27.60 are you rolling the caller OCT 25 to Nov 30 or do you let it called away div date 11/5 Thanks


  14. Now I’m bummed; look at that sucker sell off (FCX).   Copper double topped last night ?


  15. Thanks Jvest, that’s great to know….I’ll have to watch out for those kinds of shenannigans in the future.  Appreciate the link, love getting to learn new tricks…although I won’t be play that one, I’ll be on the look out for it going against me.


  16. exec, I’m in this until a day after the Fed meeting in November.  I don’t know what your time line is… If you an afford the time/money while you’re underwater, I think you should hold on.


  17. Perhaps a sign to buy TBT?!
    JPMorgan Chase has brought to the market two exchange-traded notes that offer inverse leveraged exposure to U.S. Treasurys. The Double Short U.S. Long Bond Treasury Futures ETN is designed to deliver 200% of the inverse performance of the NYSE U.S. Long Bond Treasury Futures Index. The Double Short U.S. 10 Year Treasury Futures ETN seeks to yield 200% of the inverse performance of the NYSE U.S. 10 Year Treasury Futures Index. The ETNs trade on NYSE Arca


  18.  Phil,
    Cramer recommended a fave of yours WFR.  What do we do now?


  19. Friggin bots!  I had a big purchase of FAZ that is conditional on FAS having an ask of 23.18 or higher.  What did the FAS ask peak at?  You guessed it.  23.17.  Pu$$ies!  C’mon and get it~


  20. terrapin, why would you even consider buying something that the Fed has DIRECT power over influencing?  There is no better way to take the fight directly to the FED then to buy TBT.  I rue the day Phil even mentioned.  Fortunately, time is on my side as my TBT is in an IRA.  But I should have simply bought GLD like I originally thought was the way to go at the time. 


  21. Good morning!  

    Internals too weak to chase this pop.  Maybe the blow-off we’ve been looking for.  

    Copper is diving!!  Good for the FCX play.  I think they are following through with the script and Cramer did, in fact, herd the last of the sheeple into the markets on the Today Show this morning and now they are yanking the rug but we can’t read too much into the morning action as it could just be one or two funds heading for the exits into the excitement (like we did yesterday).  

    On the short end I like the DIA Oct $108 puts at .40 this morning.  Those are good to hold over the weekend. The Jan $110 puts in the Mattress play can be rolled to the Jan $112 put for .90 and that’s worth doing.  The Jan $110s are the same price ($4.90) as when we rolled to them – the $112 puts just got cheaper!  

    Levels remain the same, this is only the first day we’re 100% green at the open – we have to hold it for 2 days before I’ll add 10% lines.  As I said in the earlier Alert, the critical test levels above 7.5% are Dow 10,950 (I know, it’s lower), S&P 1,160, Nasdaq 2,400, NYSE 7,450 and Russell 690.  Wake me up when we hit THOSE 5 numbers!  

    • Up 7.5%: Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672
    • Up 5%: Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 
    • Up 4%: Dow 10,608, S&P 1,112, Nas 2,288, NYSE 7,072 and Russell 660
    • Up 2.5% (MUST hold): Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650

    Dow volume in first 15 mins about 15M so no one is actually buying stocks up here, just the normal Bot-driven nonsense but, as I said in the post – we may have to go, very reluctantly, technically bullish if we break over that last set of levels and then those 2,000% and 4,000% upside plays (XLF and SSO in the morning post) come into play!


  22. My MOMO tech leader basket is still in the red and getting redder.  These are the leaders who lead us up here and I take them seriously.  I do notice however, that garbage like AIG is doing nicely.


  23. matt1966
    All red, did you win at chicken?


  24.  Matt, we missed you!


  25. Phil – Referring back to the QQQQ Put position I was in a few days ago. I had the Nov 49 Puts, which I rolled to the Nov 50 Puts for a net price of $2.23 each (20 contracts). Since then, I managed to shave off a little (by covering with the weeklies yesterday and getting out of them this morning), and reduced the position to 17 contracts, still at the same net price of $2.23. My aim right now is to get even – would you recommend holding these naked over the weekend; or partially covering? (Perhaps with the weekly $49s for 0.2 or so)?


  26. Phil
    Have you ever noticed that thursday before option expiration is quite often a counter trend day?
    Since counter trend would be short, could be a good day for the bears to make some money today?
    I’m playing a lot of rut puts, short calls on cmg, long puts oih, short fcx
    what do you think?


  27. Matt:  haha, yeah Dow 11K was my signal to accumulate shorts in the face of celebration.  But it just barely missed.  You’d think they’d have the decency to at least follow through if they are going to pump us up this high anyway.  Ironic.


  28. Good morning,

     

    IWM  65.52 (13), 66.32, 66.66, 67.09 (8), 67.34, 67.95, 68.33, 69.11, 70.55 and 71.62


  29. Phil,  What do you think about a CRM ITM call spread  Jan 80/85 for 3.50; selling 80 puts fo 3.25; net .25


  30. DCTH up 15%


  31. DCTH uo 13% ….unconfirmed buyout rumor


  32. rwvjx5,
    Thursday before OpEx is still a week away but it may be your day anyhoo!  :-)


  33. Phil,
    I’d like to roll some Oct SDS 29 calls that I bought a while ago.. Part of a B/C spread.  Does it make sense to do this now are should I wait until Monday?
    DD


  34. Corporate insiders are getting out of the U.S. stock market at an absolutely blinding pace.  It is being reported that the ratio of corporate insider selling to corporate insider buying last week was 1,411 to 1, and this week the ratio has soared even higher and is at 2,341 to 1.
    Source: Bloomberg
    Just picked this up off Clusterstock blog…any validity to it?  If so, those are big numbers



  35. aclend
    I meant to say thursday the week before option expiration
    bulls not wanting to countertrend right here lol


  36. I’m thinking 687  might contain this bounce on the rut


  37. Jobs/Maya – It’s tomorrow’s NFP that mean something, even though they mean nothing really.  FUNDAMENTALLY, I am comfortable with 80% of the highs for non-financials, non real estate companies so maybe 25% off the highs for the overall market.  From S&P 1,500, that’s 1,125 and from Dow 15,000, that’s 11,250 so a little wriggle room between the two, which makes this right about the top of our range.  

    Fed/DrC – It’s not just buying TBills, the Fed is aggressively buying toxic assets from the banks and giving out short-term "discount window" loans.  They don’t differentiate spending (hence Ron Paul’s issues with them) so you never know what they are actually doing but it doesn’t take much when buying a $1Bn toxic asset from a bank leaves them free to re-leverage and lend out $5Bn or buy Billions of dollars of gold, oil, copper, stocks, TBills – whatever….  

    Elevator/Never – More like this.  

    Going large/Matt – Good luck, I’m with you for a change!  

    FCX/Cap – That’s why I look for 2 days over a line.  We expected copper to top out at $3.75 and, so far, they can’t hold it.  FCX got rejected right at $95 but I don’t see any reason for them to hold $90 if copper can’t hold $3.70.  

    This QE2/Inflation thing is just that – inflation.  They have to keep pumping this balloon up every single day because it can’t sustain itself without more hot air.  Only REALLY good earnings can give us a good base at these levels.  

    WFR/Cwan – You are in the artificial buy/write at net .95 and it’s now $2.80 and the max payout is $7.50.  The trade is right on target so why mess around with something that can make ANOTHER 200% in 15 months?  Do you REALLY have such better trades to make with your cash?  If you want to take money off the table and reduce margin, just take the $2.80 down and go for the 2012 $12.50/17.50 spread at $1.60 and sell the 2013 $10 puts for $1.90 and that’s another .30 in your pocket and less than $1 per spread in net margin. 

    Dividend plays/JVest – thanks, that’s a good thing for us to look at.

    Nat gas built up 85Bcf, about 10 more than expected.

    TBT/Terra – Poor JPM, they are in for such stress now.  8-)

    WFR/JGW – ALWAYS sell into the initial excitement, especially when the excitement is the result of that idiot.  See note to Cwan above.  


  38. Good morning Phil,
    Have a question on rolling Holding IBM Jan sold 115p for 4.20 now 1,24 120 c long bought for 14.02 now up 19.37 sold 130 c for 8.12 now 11.10
    I like to keep on playing IBM but the 120c will run shortly out so I am thinking of rolling the same to Jan 12 at 120 I will pay extra 5.33 however at 130 Jan 12 I am already running in to a net cash credit of 1.07. Holding the long caller only as the back bone to sell the monthly callers it really does not pay to still hold a 120 Jan12 caller at a delta of nearly 100. What would you do thks


  39. rwvjx5,
    That’s interesting because that is right on the crux of where time value decay really starts to kick in. I have often looked for plays on Thursday or Friday just to hold over the weekend and make an easy 5-10% on decay.


  40. aclend
    Not a sure thing, but it seems to me it happens more often than not, I think it has to do with squaring of positions, but I’m just guessing
    also note that it appears there is no pomo money coming in today, I would think the bulls would have a hard time holding it up, but I don’t understand how they got it this high to begin with
    don’t think earnings will be a net positive this quarter


  41. TOS just went down. Says it’s trying to reconnect.
    Anybody else experience this?


  42. Djank1 had TOS crash on me too. Did it yesterday to me also.


  43. I have been looking at TM for a play. With the BOJ working to weaken the Yen, if successful, this could be nice for TM. Anybody have sentiments for this stock? or a play that is desirable?


  44. My Tradestation just tanked too….hrmmmm….


  45.  I was saying something yesterday about having a backup broker….


  46. djank1- everything green here on TOS


  47. Whole lotta shakin’ going on! 

    Good point Kinki, big boys still selling off after quick pops – this is just what we expect if funds are stealth dumping.  

    QQQQ/RN – There’s a reason we went longer, we had no way of knowing how long the nonsense would last.  I would hold but that’s because I firmly believe we are heading down and it’s just a matter of time.  It’s very dangerous, of course and, if it makes you nervous – don’t stay in, these short-term, unhedged trades are very risky.  If you can get at least .20 for the $49 puts, you can sell them as they roll to the Oct $48 puts and that’s $2 in the money to your longs but .20 is not a cover for $2.20, it’s more of a trap so the bottom line is you either have conviction to stay in it or you don’t.  If it’s not a hedge against successful long positions – then you are really playing with fire! 

    Counter-trends/RWV – I wouldn’t put too much faith in that.  What happens into expiration depends on what’s been happening all month.  We just got data that money continues to flow out of the markets yet the markets keep going higher and higher.  Doesn’t that tell you something is wrong?  I don’t care what the charts say or what day it is – if something doesn’t seem to make sense then we don’t go with it.  I think your puts are valid but we do expect the Fed to pony up some cash at the November meeting and, meanwhile, the market is driven insane by rumors so just don’t overdo it – Scale in and keep plenty of cash on the sidelines as things could still go either way.  Take a look at the upside hedges.  The SSO play has 4,000% upside so it doesn’t take a big commitment to prevent a lot of damage from coming to your short side ($100 pays $4,000 if S&P goes up).  

    CRM/Trad – I think if the jobs aren’t panning out they will go down.  Their current p/e is insane and their forward p/e (70) is irrational and that’s IF they hit their numbers. If you do the call spread, I’d be happy to make $1.50 and save the put selling for in case they drop like a rock on some bad news.  

    SDS/DD – I’d say roll them to the Nov $30s ($1.17) and sell some other sucker the $29s for .48 and that makes a net .21 roll for you and, if SDS goes up, you can roll them into a vertical if you have to or just buy some more calls and roll them to 1.5x whatever…

    Insiders/Patshan – Absolutely, see the "Insider Zone" on our main page.  Keep in mind that many people may be cashing out now to take advantage of what might be the last of the super-cheap cap gains rates so it’s not necessarily a bearish indicator (but it sure does look like one).  

    IBM/Yodi – If you just want to stick with it, I’d roll to 1.5x the 2013 $150s ($12.80) which is $19.20 so about even and then you can roll the caller up to 1.5x the Apr $140s (now $7.20) for $10.80 so all about even ($10 margin though) and you have 20 months to roll the callers and you are nicely protected as they have a bigger delta and way bigger theta than you.  Once your putter expires, you can sell more of those or not and save margin on that side.  If you want to be more aggressive, you can first roll the callers up to 2x the Jan $140s ($4.80) and then sell 1 or 1.5x Apr whatevers, once that premium dies.  

    TOS/Dj – Yes but it recovered pretty quickly.  As usual I am saved by my laptop – which I run Paper Money on so I can always get a quote, even when the main screen is locked up.  It is my theory that when you see system outages like that on active days, that it’s usually caused by a lot of sell orders jamming up the systems.  I remember on flash crash day, almost everyone was locked up (another good reason to always have a disaster hedge). 

    TM/Gel – Good logic but that’s IF the BOJ has success, which is questionable but it’s a very good trade for you as it’s pro-dollar to balance our your piles and piles of bullion!  TM can be played like you mean it with the 2013 $55s at $20, selling the Apr $70 puts and calls for $10.20 for net $9.80 on the $15 spread where you have 18 more months to roll and sell puts.  If they go up, you don’t care and if they go down, you’re in the $55s for net $9.80 and you can roll down.  


  48. Good morning Phil.  I have MON Jan11 42.50 Calls bought for 14.15 and got caught by surprise on that drop.  what’s best strategy at this point; patience, roll out, or sell calls, if so, which (is there  a good rule of thumb?)


  49. phil – CRM – thanks!


  50. Yesterday, you liked the DIA 109 puts for .88, today it’s the 108s for .40, what’s the difference?  I see the 109s are now .83 and the 108s are .52.


  51. Phil--I have 500 of CPKI @ 21.30—how to make up loss b/c spread ??
     I have many losing positions that were bought before joining PSW-never would have done it after-- :)
    Tx


  52. Thanks, Phil… Fantastic play!  Time is on my side with that one, and it is nice to get paid for the wait.


  53. Thursday’s economic calendar:
    1:30 PM Fed’s Fisher: ‘Current Economic Conditions’
    1:30 PM Fed’s Hoenig: Economic Outlook
    3:00 PM Consumer Credit
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet

    At the open: Dow +0.22% to 10991. S&P +0.26% to 1163. Nasdaq +0.48% to 2392.
    Treasurys: 30-year -0.14%. 10-yr +0.09%. 5-yr +0.09%.
    Commodities: Crude +0.82% to $83.91. Gold +0.76% to $1358.00.
    Currencies: Euro +0.43% vs. dollar. Yen +0.75%. Pound +0.55%.

    10:00 AM On the hour: Dow -0.12%. 10-yr +0.14%. Euro +0.07% vs. dollar. Crude -0.31% to $82.97. Gold +0.09% to $1348.90.

    11:00 AM On the hour: Dow -0.11%. 10-yr +0.09%. Euro +0.06% vs. dollar. Crude -0.56% to $82.76. Gold -0.82% to $1336.60.

    Retail stocks (ETF: XRT) outperform the broader market following better-than-expected September same-store sales. BKE +9.5%, ANF +8.9%, AEO +8.6%, LTD +4%, DDS +0.8%, M +0.1%. (chart)

    Initial Jobless Claims: -11K to 445K vs. 455K consensus. Continuing claims -48K to 4,462,000.

    Sept. Monster Employment Index: +2 to 138, with growth +16% Y/Y, marking its eighth consecutive month of annual positive growth. The continued Y/Y growth "bodes well for steady, but continued improvement in the U.S. labor market."

    EIA Natural Gas Inventory: +85 bcf vs. consensus of +78 bcf. Futures tumble, -3.6% to $3.72.

    No QE2 here: The ECB leaves its interest rate peg at 1%, as expected. Markets will now look to Trichet’s 8:30am ET press conference for comments on the dramatic drop in money market liquidity after banks slashed their use of ECB loans, and the debt market woes of Ireland and Portugal.

    Trichet weighs in on currency wars, saying "excess volatility" in foreign exchange rates is "adverse" for economic stability, and forex rates should "reflect economic fundamentals." Trichet reiterates that he shares the view of U.S. officials that a strong dollar is in the interest of the U.S. – ROFL, that Trichet, what a kidder!   

     

    Or here: As expected, BoE leaves its key lending rate unchanged at 0.5% and maintains its £200B ($297.1B) asset purchase program. GBP +0.6% vs. USD. (statement)

    Or here"Do not work to pressurize us on the renminbi rate," said China’s Wen, departing from prepared remarks while speaking in Brussels. If forced to revalue its currency, "many of our exporting companies would have to close down, migrant workers would have to return to their villages. If China saw social and economic turbulence, then it would be a disaster for the world.”

    China’s growing car economy isn’t just good news for automakers. It means more drive-throughs for companies like McDonald’s (MCD), more consumers staying in hotels like InterContinental’s (IHG), more purchases at suburban stores like Home Depot (HD)…

    The Fed spent the last three decades batting inflation down and getting it to stay there, but some officials are starting to publicly discuss lifting inflation above the Fed’s informal target. The controversial move could potentially spur spending at the expense of the Fed’s anti-inflation credibility.

    Speaking of those toxic assets the Fed’s been buyingThe NY Fed has agreed to a lossmaking sale of about $320M of its Hilton debt to Blackstone (BX), the hotel group’s owner. Though sources say the NY Fed’s ~$180M loss might be recouped, it’s indicative of the broader problems faced by U.S. authorities saddled with crisis-era assets.

    Lots more on the way too:  The U.S. vacancy rate for large regional malls fell to 8.8% in Q3 from 9% in Q2, according to a Reis survey. Asking rents were unchanged after declining for seven straight quarters. But many retailers have long-term leases that expire soon, and the weak economy may prompt tenants not to renew, Reis says, pushing up vacancy again.

    IMF still bailingGathering for its annual summit, the IMF plans to extend its cooperation with Europe’s bailout fund into a plan for a global framework of regional safety nets, to improve crisis liquidity worldwide. Asian and Latin American countries have repeatedly pressed for alternatives to the IMF’s tough loan conditions, but countries like the U.S. and Germany have objected on moral hazard grounds.

    Californian lawmakers have seemingly found a way to close the state’s record $19B deficit, thanks to some creative accounting. It might get the state up and running again, but almost certainly pushes the budget mess onto the desk of the next governor.

    Look, one thing they can agree on – PROTECT THE BANKERSA bill, passed by both the House and Senate and awaiting Obama’s signature, would require courts to accept the validity of out-of-state document notarizations, making it harder to challenge the authenticity of foreclosures and other legal documents. The bill could get banks involved in the robo-signing scandal off the hook. (HR 3808)

    Marriott’s (MAR) return to profit is indicative of a larger pickup in business and pleasure travel demand. Hotel occupancies in top markets have climbed to 65% for the first eight months compared to a year-ago 61%. Still, Marriott missed expectations on EPS and outlook; shares down 6.2%.

    Apple (AAPL) is gearing up to sell 45M iPads next year, says Ticonderoga analyst Brian White. That’s some $30B of revenue, almost as much revenue as the entire company generated in 2008. "Not bad for a product that didn’t exist six months ago," Henry Blodget writes. Analysts at JPMorgan and elsewhere lift EPS estimates.


  54. Phil
    Which of your "overbought eight" do you still like at this point? How do you determine when to go short or  long in this market? Everything points to a breakdown;yet, you are still non-committal. I know you have your lines that you look at, but what happens if the market breaks all of your lines to the upside? Would you really go long in this market with all of the "fake" activity you speak of?
    dclark41


  55. Phil / Apple
    The iPad projections are rather aggressive by Ticonderoga. I doubt they have factored  in the coming competition… HP with the OS they bought with Palm.


  56. GE gamble – buying Nov $14 call and selling Oct $14 call for a net debit of 5 cents – max loss is 5 cents; roll forward to weeklies if needed


  57. Trading in a range bordered by a descending trend line of yesterday’s highs and an ascending trend line from last Friday’s lows;  the two should meet about 2:30 !!


  58. QQQQ/Phil – thanks. I am not bailing out because I do expect a fall; I am more concerned that I would lose the time premium if the fall is late. Right now, I have half covered with the Oct monthly 48s; if those get into the money, I will certainly be in a profit here.


  59. Dear Market,
    In the words of the immortal punk rock icons, The Misfits, I say, "Die, die, die, my darling…!"


  60. JRW
    Where on IWM do you expect them to meet at 2:30?


  61. as a newbie, i might be speaking out of turn but i read that the "Master Yoda" (i.e. Phil) is short gold, short oil, long uup and sure seems to be bearish on the spx (but won’t rule out another blow off kinda final pop).  if uup rallies, surely equities won’t hold up. if any of this is wrong, i wish someone would straighten me out  p l e a s e


  62. shadow /  2:30

    IWM 68.64


  63. JRW
    Thanks, haven’t figured out how to plot that!


  64. JRW- trend line from Friday or Monday? Monday was lower than Friday. IF so, why Friday?
    Thx


  65. So Blackstone is snatching up part of Hilton from Fed for a sweetheart deal of $180M off?  I guess its payback time for all those nice things Blackrock’s Doll has been saying about the economy since March 2009.  Actually, I don’t know if $180M is a sweetheart deal or not.  But I’m about 99% sure it is.  Anyway, my point is that by the time we are through this the FED will have bailed out half the financial system and given huge under priced assets to the other half.  The opportunity for well connected, deep pocketed financial firms to pick up assets at fire sale prices from the Fed will be commonplace.  Yet another transfer of this nation’s wealth to the bank/financial industry.  I predict this crisis, from end to end, will go down as the biggest heist of citizens’ money in the history of the world.  Shoot, I think it already is… and we’re just getting started. 


  66. DCTH – IF you are up, sell the Oct $8 Cs for cover.  If not, I would sell the Nov $8s.  This happened last month also.  The Jan12 $5/10 C spread can be had for ~1.50, selling Ps along the way at the $6/7 range to pay for most of it.  This one really eats at me…….


  67.  re NFLX, I’m SO TEMPTED to TAKE THE MONEY AND RUN with my Oct $170 calls.. I sold 4x @ $5.5 in premium, and now they are worth $0.55! One week to expiration I doubt they will exceed 170, but this is as good as it gets! CMG I’m almost ready to roll them up from Oct $170 to Nov $180 .. that stock is a REAL FIGHTER!


  68.  Gel/ SLB deal with Eurasia
    I made couple of phone calls and what I found:
    SLB bot some small drilling contractors in Russia (it was part of their expantion strategy in Russia last 10 years) now they didn’t know what to do with these junk, it was pretty hard to sell them and finely they found Eurasia who agreed to get them (vertually for free) but gave to SLB some own service departments (also junk – 50 years old technology) plus Eurasia promised them to help to get some additional work, but I don’t think too much because around 70% of wells which Eurasia is drilling are simple wells where advanced (expensive) services aren’t needed, plus final desigion which service company to use usually make Oil company , not drilling contractor. 
    So I think it is good deal for SLB but not as good as it sounds


  69. AAPL
    Amid strong sales of iPad, Apple suppliers Wintek and TPK Touch Solutions are expected to see continued revenue growth in the fourth quarter of 2010, while fellow touch panel makers for smartphones such as Young Fast Optoelectronics and J Touch’s revenues are expected to start dropping due to seasonality.
    With Apple currently dominating the touch screen tablet PC market, almost every touch panel maker with mass production ability has received orders from Apple. Major touch module suppliers Wintek and TPK Touch and touch sensor suppliers Sintek Photronics and Cando will each have new capacity come online in the fourth quarter of 2010. Hence, Apple’s suppliers are expected to not be affected by the traditional weak season and maintain growth in the fourth quarter.
    As for other tablet PC products, shipment volumes remain small despite strong discussion in the market. Many touch panel makers have indicated they have received development or design-in orders for tablet PCs, but actual shipments will not happen in the short term. Hence, touch panel makers estimate that volume shipments for tablet PCs will start in 2011, and table PCs, besides iPad, will not play a significant contribution to touch panel performance in the fourth quarter.
    For small-size touch panels, smartphone market demand has grown fast in 2010 with strong shipments. Suppliers such as Young Fast and J Touch both set new revenue records in the third quarter, and the surging demand is expected to last to October. However, the fourth quarter is the traditional weak season for upstream component suppliers, and performance of suppliers such as Young Fast and J Touch is expected to drop compared to the third quarter.


  70. matt
    Your right about the rip off!


  71.  CROX making new highs!  SKX looking good too.  

    The bad thing about watching CNBC on TOS is that they are in a commercial break about 50% of the time and the screen goes off and then it’s too quiet and it’s too annoying to keep flipping back and forth to Bloomberg this way.  

    MON/Bryan – No hedging into earnings off that pop?  Tsk, tsk…  There is no rule of thumb on this because they fell to $7.30 and you only have 3 months to gain 100% just to get even.  If that were some simple adjustment, we’d all be very, very rich!  If you want to stick with MON for a recovery, then take advantage of the drop and roll out to the 2013 $40s at $13.60 (+$6.30) and sell the Jan $47.50s for $4.20 as they can be rolled to the 2012 $57.50s which are, ta-da, $17.50 in the money to your longs so not a bad upside case and a very good chance over time you can turn this into a winner.  So much so that I like it as a new trade for anyone

    Gold down $20 today but still $1,332. Need another 10 days like this to get rational at $1,150.  

    DIA/Hoss – At any given moment it’s a function of time remaining, expected move and the delta on the position.  In the spike, I was liking those $108 puts as they fell and they made a quick 50% this morning.  The $109 puts had only fallen to .60 and, I thought, had less chance of making a quick 50% AND would cause more damage if we kept going up so the risk/reward of the $108s seemed a little better this morning.  As it turns out, they both made their 50% for the day.  Once again, a great example of how critical scaling is as buying the $109 puts for .88 yesterday and adding more at .60 averages .74 and now up 20% at .88 again means you can take 1/2 back off and be left with a lower net cost on 1x again so, if they fly up to .60 again, you can DD again and end up in 2x at net .69 or just calmly hold 1x for the weekend.  

    CPKI/Savi – Man, I’m glad I didn’t pick that one!  Well, you have $8,725 of CPKI and you are down $1,925 in an overpriced restaurant company.  I’d say take your $8,725 out of CPKI and buy 1,000 shares of SONC for $8.41 and sell the March $7.50 puts and calls for $2 ($2,000) where you make $1,100 if they hold $7.50 and by then you can roll them out to a longer play for another $2,000 so that’s a path to get even by March.  JACK is another good deal but, at $21.63, I like flipping to SONC better


  72. Phil,
    What is the Plan B on the SSO upside hedge? Puts are basically ATM and will be deep ITM if we get a strong sell-off. I’m not sure what position size. Here are my bearish plays: Naked short 20 SPY Oct 113 calls (down $4k but locked in $5k on the other side of the Iron Condor), Naked short 10 TZA Oct 26 puts (down $1k), Naked short 5 DXD Jan 26 puts (down $2k), 4 DIA Dec 105 puts (down $800).
     
    Also, I’m holding a GOOG Jan 520 call and 2 Jan 540 call from way back with short 3 Oct 500 calls (sold before the huge run, of course, so way down on these…about $8k). What should I do for a roll on this set.  Thanks.


  73. Yo homies,

    If you ain’t shorting WFR. You should be!


  74. pstas / line

    The lows of last Friday and yesterday and today all connect !! (Ignore Monday)


  75. Miners getting rocked this morning by dollar strength and gold selling off hard.  Need to watch this closely as and broad sell off will hit the miners harder and THEN it would be good to start an accumulation.  GG & ABX are the leaders and will buy puts in here, sell some Ps at after the sell off.  For GG, looking at the 42 range, ABX in the 45ish area.


  76. LOL David!!!


  77. David if the dollar gains traction safe to say one can short anything at this point


  78. Thanks Phil….great lesson.


  79. David – i posted a MAR question earlier on the site, any thoughts on where it bottoms?


  80.  50 cents of premium left in iwm 68 calls


  81. WH reviewing bill w/ foreclosure language that may protect banks.
    Will announce if he will veto.
    Will he have the cojones to stand up to Pelosi Reid Rangel Dodd Frank and the banksters ?


  82. Pharm- will u pls post the gold trades when the time is right. Thank you


  83. Poor UNG…


  84. Tx Phil--


  85. Tchay / SLB
    Many thanks for the clarification…. sounds like the guy that traded in a million dollar cat on a two million dollar dog. The way I see it, SLB will get some exposure they did not have prior to the deal… so it is a positive, but not a bonanza.


  86. Buying a 1/2 entry on GG 43 Nov10 P for 1.80.  That is a big fat red candle.  Can cover with the Oct 42/43s if necessary.


  87. Pharm -

    Was just getting some of my youngin lingo in…

    Morx - 

    I would say much lower than 35 would be surprising. This area is probably a nice buying area. However, I am worried market is about to take a dip. Alcoa is super overvalued, and if it doesn’t hit it out of the part…be afraid.


  88. Gold down hard today –  could be the "lull before the storm" that might materialize when the Fed makes its move soon. Thank goodness I hedged my pile of gold with some currency plays. The USD is "smashing" the Peso today.


  89. Phil,
    CMG hanging tough here.


  90. Pharm…. good strategy on the miners!


  91.  Phil    
    Do you still advocate a play on OIH Nov $111 Puts?
    Thanks


  92.  DECK is plummeting.. I had done the full cover yesterday on 6x Mar 2011 $50s by selling 6x Oct $50s @ $1.90 in premium.. with the fall today, the premium is just $0.75.. I’m going to take half off the table and re-sell more if Deck spikes up again.. I hope I’m doing this the correct way and not being greedy!


  93. Phil
     
    On VZ dropping today
    What do you think a good price, way to enter for long term?
    Thanks


  94. JR,
     
    Where you long or short?


  95. Niiiiiicce.  Made back my losses from Tuesday.  Now flat. Which ok.  Not as good as profiting from two very obvious trades.. but better then losing from two!


  96. Phil- re economic announcements today, could you clue me in on the difference on positions of Fisher and Hoenig (hawkish, dovish, pro-QE2, etc)? Also, do you expect money supply and fed balance sheet to influence things one way or another? Txs


  97. For those in ITMN (if anyone is left) – they are putting it all on the line with perfenidone….3 yrs for that to pan out.  Not worth the wait.  I would exit stage left.

    Brisbane, CA-based InterMune has sold all rights to its promising hepatitis C drug danoprevir to Roche for $175 million in cash and dissolved the collaboration agreement they signed in 2006. In April, InterMune announced encouraging results rom the drug.

    Essentially, Adam Feuerstein of TheStreet notes, InterMune is betting the farm on receiving EMA and FDA approval of its idiopathic pulmonary fibrosis treatment Esbriet (pirfenidone). IPF is a rare and fatal lung disease that affects approximately 200,000 people in the U.S. and Europe. Earlier this year, an expert panel voted 9-3 in favor or approving the drug. While not all the panelists were convinced of the drug’s efficacy, most though the potential benefits of the drug outweighed their concerns. The FDA, however, didn’t see it that way. The agency rejected the drug, requesting a new trial before it would consider approving the treatment. InterMune cut costs, laying off 60 people as it hunkered down for the lean times to come.

    With the Roche deal, InterMune says it now expects to have a cash balance of approximately $290 million at the end of 2010. The money will be used to keep the company afloat while it awaits a European decision on the drug. That news is expected in the first quarter of 2011. If European regulators reject the drug, InterMune will be faced with the daunting task of having to launch a new $40 million trial of pirfenidone that could take up to three years to complete.

    "After conducting a careful review of our strategy and financial position, we have decided to divest our rights to danoprevir to Roche. This transaction provides a very substantial non-dilutive cash infusion that allows us to continue to independently and aggressively pursue the registration and commercialization of pirfenidone in the US and EU, and eliminates our obligation to make significant ongoing investments related to the further development and commercialization of danoprevir," says InterMune CEO Dan Welch, in a statement. He adds that Roche and InterMune are exploring ways to continue their ongoing work together on other HCV research programs.


  98. Phil,
    Do you think EQIX was over-done or is it still stay away??
     
    thanks


  99. Phil,
    Also, ung at these levels
     
    thanks


  100. exec,

    Cash, I was short but bailed when we bounced off my 67.95 line. I may go long if 68.24 holds !!


  101. Phil--the TM trade above--is it ok to get in as a new trade?


  102. Phil / BP  – I’m up about 50% after 3 months in the Jan 2012 27.5/35 bull call spread.  Got in at 8.75/5.72 and now 14.90/9.325.  Thinking of taking profits.  or should I roll?  Thx. 
    do you like SVU for a buy-write at $11?  it once was a rumored buyout target at $17 about a year ago.  nice dividend. 


  103. Pharm,
    ITMN thanks for the tip lost a lot on them when they dropped Phil set up a play with Jan 11 12.5 putters made up very well took my money and ran. Closed all short putters thanks


  104. BIDU had a fun ride today.  

    Overboughts/DClark – Well you could have done BIDU earlier.  TLT is still $105, MOS is holding up, CMG hanging in there.  As to when to go short – when I can’t find anything to buy.  The reverse on going long.  Our goal is to be balanced, we should always have long and short plays.  Even now, we liked T for a bounce and we like SKX and GMCR and VLO etc.  - there are always bargains and there are always things to short but when it gets to the point where people are asking me "how about this" and "how about that" and I find myself saying no, no, no to long ideas – that’s when I start thinking the market is overbought.  The lines are guidelines but they can be broken for the wrong reasons – TA only takes you so far and really tends to betray you at tops and bottoms.   Most of our great plays come from ignoring the charts and the movement of the crowd but, sometimes, you do have to go with the flow too…

    IPads/Gel – Yeah it does seem a bit much but, on the other hand, I was just looking at laptops and decided I’d rather have 2 IPads!  It actually occurred to me that for the same $2K it costs for one really good, light laptop with a big screen, that I can toss 4 IPads that way a total of 6lbs into a carry-on bag and I’ve got 4 processors, 32Gig or Ram and more than double the screen space with better multi-tasking than if I try to run streaming aps in windows.  Notice all the Fast Money people now use IPads – maybe a paid spot but they get all their work done on them.  I’m sure the new pads will make some competition but AAPL will eat into all laptop sales and end up with 50% of a much bigger market.  You could have said the IPhone or IPod would die out from competition too, right?    

    Speaking of AAPL – I got their track pad, which is like the thing on laptops for your desktop that goes on my desk with no wires and it’s a kick-ass mouse.  It’s like a functional piece of art….

    5 cents/RN – That’s cool, I assume you have flat commissions?  I used to have an account with MER and they charged a flat 1% for all trading for the year and, within about 3 months they were begging for mercy as I did trades like that!  8-)

    Qs/RN – Yep, you have to be right IN TIME – that’s the tricky part.  

    LOL AC.

    UUP/Geo – Confused you are.  Natural that is.  Flight to dollar I see.  Much panic.  A trader fears not these things.  Gold, oil, treasuries – the dollar’s strength flows through these things.  Judge the FOREX market by its size, do you?  Always in motion are the exchange rates, difficult to see.  

    Actually it’s pretty simple – things are priced in dollars, all those things (SPY, gold, oil) must be exchanged for currency but have values that are determined on the international marketplace so if the dollar is down, they go up and vs. vs.  So being bullish on UUP means I think the dollar bounces and being bullish on the dollar means I’m bearish on the others.  Now, if oil and gold go down, then those sectors create an additional drag on the S&P so the S&P is primed for a pretty sharp fall if the dollar goes up and crashed commodities.  Hope that helps…

    Hilton/Matt – Sure it’s a good deal.   Real estate is always a good deal if you are patient and you know Hilton properties are all about "location, location, location" and that’s irreplaceable.  This whole thing is just a massive land grab using the government and the Fed as intermediaries so the bankers don’t get their homes burned down like they did in the 30s.  There’s an old book called "None Dare Call It Conspiracy" with a chapter about how bankers engineered the Great Depression to loot this country – you know Bernanke’s a crook because he spent his whole life studying the Great Depression and never once mentions who benefited or discusses the mechanisms by which ordinary people get screwed in times of crisis.  

    On October 24, the feathers hit the fan. Writing in The United States’ Unresolved

    Monetary and Political Problems, William Bryan describes what happened:

    "When everything was ready, the New York financiers started calling 24 hour broker call

    loans. This meant that the stockbrokers and the customers had to dump their stock on the

    market in order to pay the loans. This naturally collapsed the stock market and brought a

    banking collapse all over the country because the banks not owned by the oligarchy were

    heavily involved in broker call claims at this time, and bank runs soon exhausted their

    coin and currency and they had to close. The Federal Reserve System would not come to

    their aid, although they were instructed under the law to maintain an elastic currency."

    To think that the scientifically engineered Crash of ’29 was an accident or the result of

    stupidity defies all logic. The international bankers who promoted the inflationary

    policies and pushed the propaganda which pumped up the stock market represented too

    many generations of accumulated expertise to have blundered into "the great depression."

    NFLX/Rav – You have unlimited downside and only 10% upside – to me that’s not worth it or you may as well make those bets on every stock, every month.  I agree it’s extremely unlikely but that’s why I hope they blast off so we can short them again.  Plenty of fish in the sea.  CMG, on the other hand, as you say is fighting but as long as the broad market is weak, it might be premature to bail.

    I don’t know if you guys have weekly intra-day volume charts but if you look back at last Thurs, when we droped from 10,900 to 10,750 and today, when we dropped from 11,000 to 10,900 – you’ll see that we are not even doing 1/3 of the volume or, in other words – you ain’t seen nothin’ yet

    Woo hoo on oil – $81.35 and that is plenty on the futures shorts ahead of possible pump into 2:30 close.


  105.  someone flipped the buy switch


  106. JRW   Think we get to IWM 69??


  107. wilsons / IWM 69

    If we can get over 68.82, then 69.11, we can go all the way to 69.74


  108. Phil
    I have a question that I feel you are the only one that could give me the answer that I could feel comfortable with.  I recognize you are not a "weather forcaster", but you do have the expertise to analyze the anticipated directional movement in UNG. I have some VERY large UNG positions that I believe will deteriorate further over the near term. I am considering the liquidation of these positions and deploy the cash into AAPL… as I feel the chances for profit look much better in AAPL in comparison – Your sentiments?


  109.  JRW   Thanks a bunch!!


  110. Wow, wish I had the stones to hold onto my short oil contracts yesterday! On that same topic just got out of an interesting briefing by a former Defense official (who shall remain nameless)  fairly high up on the chain stating off the record "WHEN" not "if" we bomb Iran’s nuclear facilities and stating part of the reason for getting our troops out of Iraq is to give Iran less targets to shoot missiles at when we do  …. If it happens it’s definitely not the change I voted for and I believe Obama is more intelligent than that… But who knows with politicians these days!? Granted, you should take it with a grain of salt since he did work for the past admin.. Obviously he leans more to what Cap would call the ‘Independent side’ than the left. But it is something to consider as Iran’s ’peaceful’ nuclear program progresses (or if it looks like a Republicant will beat Obama) when considering shorting oil.


  111. Phil / AAPL
    I have chosen AAPL for the deploymernt, as the analysts are obviously behind the company, but also … Verizon will be the carrier (additionally) for the iPhone in EARLY 2011… This will be a boost for iPhone sales in many areas.


  112. JRW
    Very good 68.64 at 2:30. Its turning down now, any idea how low we might go if not up?


  113. Hey all,

    I have a new Longterm Rating story on Paychex Inc. (PAYX). The stock is FV estimated at $34 with a Buy rating below $27, which is close to where the stock is now.

    Check out my thesis, valuation, and risk assessment here!

    Good Investing!


  114. jrohema … meanwhile, someone (US, Israel, Russia or who knows) unleashed a computer virus into Iran’s defense establishment (Google "Stuxnet") that apparently has done significant damage to their nuke facilities.
     
    1st known cyberwar attack ….


  115. jromeha…. I believe your comments have a significant "level of probability", but I am also one who believes the Isreali insiders are even more adamant about the need for defensive action, that would neutralize this threat… Me – I’m just a handicapper, that believes it will take place sooner than later. I’m hanging on to all of my oil positions, for other reasons as well – seems safe to me…. We can add that prognostication to our other bet as well, if you choose. ( ha )


  116. shadow

    As I posted this morning, 65.52 and 67.09 are the strongest lines.


  117. ok JR, I am putting those lines on my chart !


  118.  ADBE suddenly moving upward.


  119. JRW
    Thanks forgot about your (13 and (8). On my screen lines don’t keep up only from when drawn back. Does SS PRO allow them to keep real time. Today has been online hell, out 3 times, worst was around the low at 10AM, not to even mention power went out 5 min. ago. I need to move to for better on line speed and open a new account. Does TOS do the right stuff?


  120. Hi Peter if you are around — Please give some advice regarding SS-- SPX for november— VIX is low at point,  you recommended before not good to sell put, when should I scale in for November expiration, still 15% below let said 1165 range?…. I still have Nov call fromm rolling from previous severals month — afraid to start selling put and get a whip saw with sell off. TIA THX


  121. Cap,

    That said, I’m in TNA; I think the lunchtime action was a flush for a late push !!


  122. Good notes Kustomz! 

    Plan B/Ac – There is no plan b to that one.  It’s good for a very small hedge against bearish bets as it pays 40:1 you can offset a $20,000 loss on the put side with $500 committed and if you go down $1,000 then you just get out and wait for the next time you feel the urge to hedge.  If you have a condor offsetting SPY puts then they don’t need to be hedged at all.  TZA is a total gamble over the weekend but it’s pretty much a gamble every day you own it.  At least DXD and DIA have some time.  You cannot "hedge" to offset out of the money decaying positions – that is money you are GAMBLING with and you are flushing that money down the toilet if you are wrong.  You don’t bet $100 on 36 on roulette and then bet $3 on the other 35 number to "hedge" – you are betting against yourself too much.  We take aggressive anti-positions to offset SENSIBLE positions on the other side.  Taking aggressive plays that are opposite each other greatly increases the possibility you lose both.  

    GOOG/AC – Stops would do you the world of good!  Just roll the caller up to 2x the Nov $540s ($16.90) and hope for the best.  If you don’t have the margin for that, you can push yourself into 6 Jan $560s ($20.30) and at least you know you have a theta advantage and a close delta so you should be able to stay out of trouble.  I’ll tell you what you did wrong here – you lost your nerve when GOOG fell and ended up betting against yourself.  If you are going to stick with the position and sell calls, you have to use the money the caller gives you to roll yourself down in strike and possibly out in time to allow the position to work.  If you do not want to do that – then why stick with the position at all?  

    UNG/BPS – So pathetic…

    Dow volume at 2pm is just 88M so we may as well be closed.  Monday is a holiday so tomorrow volume will be low too which means we can easily see two more days of shenanigans, even with expiration day around the corner.  Can’t take anything for granted, unfortunately.

    OIH/Jasu – Yes, nat gas affects them too and that’s already off.   If oil fails to maintain, that’s two legs out of a 3-legged stool.

    DECK/Rav – Perfect!  

    VZ/QC – That’s a tough one as they have that great 6% dividend but, with current prices I prefer owning the 2013 $30 calls at $5.10 and selling the Apr $29 puts for $1.02 and the Jan $34 calls for .95 so net $3.13 on the $4 spread and worst case is you own them for net $33 less the remainder of the 2013 calls.  I’m pretty sure you can work that play to make more than $2 a year you’d get in dividends with a much lower commitment and you can always double up the Leaps if they pop higher. 

    Flat is very good Matt.  Just a false start – we’ll get ‘em next time.  

    Essay question/SNS – Good for a weekend discussion but hell yes, those things matter.  The hawks (and it would be good to get a roster going on the Fed) are in my camp as they see a huge pile of money that just happens to have no velocity.  Not only that, but the reason for the lack of velocity is actually the QE itself, which is making it more attractive for banks to buy TBills and commodities than it is for them to lend it out to people who might not pay them.  Remove the QE and suddenly the banks have to MOVE their money and commodities become less attractive and banks pull out of there and they dump their TBills back on the market in competition with Treasury’s monthly $150Bn auctions and that sends their value flying down forcing rates up which makes the banks want to lend again and then the rates are rising and the money is moving and suddenly you have out of control inflation and good luck stopping that with a government that needs $150Bn a month just to keep the lights on….

    EQIX/Harip – Stay away.  Why would you want to own anything that can drop 25% in a day unless it’s already at least 50% off?  As to UNG – I like them long-term, just like I like oil long-term below $50.  If you can afford to be patient, it’s a good play. 

    TM/Savi – Yes, that was for a new trade.  

    BP//Terra – Well they will still go to court at some point and you only make $1.80 more against the $5.70 you can cash and you KNOW we can do better than 30% on $5.70 between now and 2012 so I’d at least ask for $6 and get out if I get it.  

    SVU/Terra -  is a great long-term hold.  They are worth buying out for the real estate alone (3,000 locations, 120-year old chain, do the math) but they also make $1.70 per $11 share AFTER paying a 3% dividend!   I like the stock at $11.05, selling the 2013 $12.50 calls for $1.80 and the 2012 $10 puts for $1.70 for net $7.55/8.77 with a 65% upside if called away at $12.50 and a 20% discount if put to you under $10 (and, of course, you’d be 1/2 covered so you can sell puts and calls again!).  

    UNG/Gel – Sure, if you think you will be kicking yourself, you can always leave .85 on the table on the 2013 6/10 bull call spread and you can make that .85 back by selling something like 1/2 the Jan $7s (.18) each quarter.  Obviously, if they fly up, you have one 2x roll for free and then you can double up your leaps and do it again so unless nat gas goes to $15 VERY fast, it’s a nice little trade.  That releases $4.90 to do something else with.

    Generals/Jrom – Sometimes the explanation is as simple as a visit to the General from HAL from a guy who leaves and "forgets" his briefcase full of cash.  That’s how we get crazy statements from oil countries all the time – $100K dropped off with a guy willing to make a statement and an energy trader can make $100M in a day.

    Consumer credit down another $3.3Bn.  This would matter if people were actually shopping. 

    ADBE/Jvest – I forgot about them.  Another one we like down here.  See, there are always bargains.  


  123. ADBE – the NY Times is reporting rumors that the CEOs of  MSFT and ADBE met and discussed, among other things, an acquisition of ADBE by MSFT.
    http://bits.blogs.nytimes.com/2010/10/07/microsoft-and-adobe-chiefs-meet-to-discuss-partnerships/
     
    I’m really glad I kept my long call naked.


  124. shadow,

    Streetsmart Pro is not bad software; TOS has some issues IMO.


  125.  anybody thinking lottery ticket on AA earning tonight? Oct 13c @ .15 or Oct 12p @.26?


  126. jromeha…. Regarding Iran…. I believe the other attack on the "mess by the mullahs" could come from within, or in conjunction with the outside sources. I spent a week in Tehran, some time ago, and I can tell you the population is well educated, and the "black shawls and beards" are not in the mainstream of the educated. We need to energize the ‘Iranian Underground" much like we did in the 40′s… made a big difference in the outcome of the defeat of the Nazi’s.in France.


  127. Cap -Yes, I read about that. Not to argue semantics with you but viruses, hacking, straight up attacks have been around for awhile. Russia ‘attacked’ Estonian Gov’t systems a few years back after Estonia removed a WW2 monument/tomb dedicated to Soviet soldiers. China has been in a cyber war with us (and vice versa) for years. 2 years ago they stopped allowing us to use data sticks on our computers b/c a member’s data stick was the method of transmission which enabled a Chinese virus to infect many DOD systems and gain access to some sensitive material.  You might not hear about these things from the news everyday (like the Iran article) but these attacks happen very frequently…
    Gel – By ‘we’ I meant US/Israel since their very existence can be attributed to us and we give them about a gazillion $s in military aid/equipment every year. While I support their right to remain a nation, I would like us to attach some stipulations to our aid like removing the settlers,making peace with Palestine ,etc…


  128. Whoa! ADBE broke a circuit breaker.


  129. ADBE halted


  130. Started with my TM long term play by placing a buy order on the 2013 50 calls @ 23.00. When that fills, I will execute the shorter term spread. The Yen will eventually adjust downward, and TM will be a primary beneficiary.


  131. JRW
    Thanks a million I will try to get the free service you have mentioned tomorrow, have to blast at close to Idaho Falls.


  132. MSFT Ballmer showed up in San Fran to "secretly" meet with ADBE CEO


  133. Tune in to CNBC "a lot of companies are battling back against the health care law" coming up next …
     
    Why would they need to do that since the wildly popular 2300 page new law is so wonderful….. ?


  134. ADBE circuit breaker —  Too funny. Looks like the breaker expired and now it’s running back up again.  +7%


  135. 12:00 PM On the hour: Dow -0.22%. 10-yr +0.05%. Euro -0.03% vs. dollar. Crude -0.88% to $82.50. Gold -1.05% to $1333.60.

    01:00 PM On the hour: Dow -0.5%. 10-yr +0.1%. Euro -0.41% vs. dollar. Crude -2.13% to $81.46. Gold -0.89% to $1335.70.

    02:00 PM On the hour: Dow -0.29%. 10-yr +0.05%. Euro -0.21% vs. dollar. Crude -2.13% to $81.46. Gold -0.87% to $1336.00.

    The number and growth rate of U.S. households receiving food stamps has increased dramatically in the past year: 19.4M families, up 19.5% Y/Y. Some big states have suffered huge increases: Florida +31%, Texas +25%, California +21%.  This is like 20% of US households folks! 

    Mortgage rates plumb new record lows in Freddie Mac’s latest survey – with 30-year fixed-rates averaging 4.27%, down from 4.32%, and 15-year fixed-rates averaging 3.72%, down from 3.75%. Growth in core prices suggests inflation is "running at a tepid pace at best," says Freddie’s chief economist.

    For the first time since the financial crisis, the total amount of securities and loans on the books of U.S. banks has begun to expand again. A turnaround in bank credit could bode well for the economy in 2011 and beyond.

    Dallas Fed President Richard Fisher: Don’t assume the QE2 debate is over. He’s not convinced it’s a good idea, but his FOMC vote comes next year. Yesterday’s WSJ article raises the specter of countries in competitive QE, "a beggar-thy-neighbor phenomenon that always ends in tears." Recession risks are receding but recovery is "obviously subpar."

    The Fed needs to pump at least $6T-$7T more into the U.S. economy to have any meaningful impact on sluggish growth, Marc Sumerlin tells CNBC, adding to earlier remarks from Pimco’s Mohamed El-Erian. Sumerlin also believes the U.S. will slip back into recession if the Bush tax cuts aren’t extended beyond this year.

    As foreclosures keep grinding to a halt around the country (and a bill headed for the president’s desk threatens to start greasing the wheels again), Daniel Indiviglio lays out three outcomes from the slowdown – and two of them are bad for the broader economy.

    Sources say Obama will veto the bill that slid through Congress which could have seriously eased foreclosure proceedings without human signatures.  Come on Cap, I want to now here you say how brave he is to stand up to Congress.

    In a trade war with China, Eric Weiner picks a winner, and it’s not the U.S. Simulations show America would be distracted by side conflicts, while China’s capable of inflicting real pain without feeling it at home, simply by shortening the maturities of its Treasury holdings.

    France backs away from opposition to proposed EU rules for hedge funds and private equity funds, making a Europe-wide set of laws for the institutions more likely, FT reports. The move comes after a Geithner letter to the French finance minister took issue with the country’s resistance to giving marketing rights to non-EU fund managers.

    Speaking of JACK:  Thirty companies and groups, including McDonald’s (MCD) and Jack in the Box (JACK), receive waivers from raising the minimum annual benefit included in low-cost health plans for part-time or low-wage employees. The new health care law would have required the firms to provide a minimum of $750,000 in coverage in 2011, $1.25M in 2012, $2M in 2013, unlimited in 2014.

    BX buying everything!  Warehousing REIT ProLogis (PLD +4.2%) is near a deal to sell more than 20M square feet of property to Blackstone Group (BX +0.9%) for $1B. ProLogis lost its investment-grade rating from Fitch this summer over concerns about how it would raise money to pay down substantial debt.

    Immucor (BLUD) has made up some ground but is still down 18.7% on a sharply lowered forecast that "could be the first of a number" of negative reports in the area of in vitro diagnostics. The company said the FDA has advised it hasn’t regained compliance status for its manufacturing facilities.

    Petrobras (PBR) down 4.2% to its lowest point since the rally’s beginning in March 2009, amid concern that share demand is wheezing after a $70B offering. An exchange for crude development rights means the government boosted its stake in the energy giant to 48% from 40%.

    Three lunchtime reads:
    1) Fed is banking on phony wealth effect
    2) Merrill Lynch: The blundering herd
    3) AIG’s real numbers still shrouded in secrecy


  136. Jromeha… I agree – long term peace is in everybody’s best interes. We have to learn how to play hardball with both sides., if we ever want to get this done…. money does help. but most of it is squandered. ( sitting in French banks for instance )


  137. Cap / Health Care Bill
    Is that bulge in your cheek normal?


  138. Basically a flat line for the past 90 minutes


  139.  This idea comes via a member (Jthoma…shout out). Something that he and I have noticed is that when stocks get above $5, they tend to have a lot of success if they have good fundamentals. Remember all the banks when they broke $5 last year and took off. The reason is because mutual funds and institutions tend to have a $5 limit. They won’t buy stocks below that, so when they break $5…they load up.

    What I want to do is create a watchlist of basically all $5 stocks that have strong fundamentals. If you know of any companies that are below $5, can you pass them onto me. I am going to start researching these and put together a watchlist of all these. Then we can have them all ready, and when one breaks through, we can load up on it as well.

    Just send them to me via email david.ristau@theoxengroup.com or post them on one of my stories.

    Thanks!

    Good Investing!


  140. Took half of my gold positions off the table, awaiting tomorrow’s jobs report… also lots of central bank decisions coming in the next few days. If jobs report is weak, will get back in 100%.


  141. Phil, I think Obama is very brave. I think it takes a lot of bravery to force an agenda that most of america doesnt want. :)


  142.  gel1 
    FYI, the French resistance had very little impact on the war. It is primarily a French propaganda effort to hide the fact that they capitulated without a fight and co-operated with the German occupation. The reality is that the Resistance was an internal struggle between French communists and the followers of de Gaulle for control of the post occupation government. The Resistance only erupted in a significant manner when American troops were VERY close for back-up.


  143. jvest… Do you really think Ballmer can get anything done?… If it runs up – I’m out, as this could fail.


  144. Phil:
    Any thoughts on how to play Adbe given the Microsoft takeover rumors? I’ve got a lot of stock (average cost 28.35) and short Jan 2011 26 puts.  It might be prudent to lock in some of the rise in case this is a flash in the pan, or should I wait it out a bit?  I’m considering selling calls to lower my basis.  Any ideas?


  145. gel – they can manipulate the jobs numbers by the number of temp/part timers they hire.

     

    The shopping season was better than expected b’c the extension of the unemployment checks came in right around beginning of Aug. 


  146. WOW…TS crashed again…twice in one day, and there’s no patch or anything….it hasn’t done that since after Lehman Bros….
    Grrrr


  147. ben… thanks – history is not my strongest suit. I do believe, however, there is a lot of resentment in the barbaric treatment of the discenters in Iran. Problem is… they are not armed.


  148. AA/Newbie – I think run-up was overdone.  They are right on the 200 dma off a 25% move since late Aug.  I wouldn’t bet against them because, long-term, they are still a good buy at this price but we were taking them at $5 so $12.50 seems like a lot now.   

    Health care/Cap – It’s not very popular with GE, who doesn’t want to negotiate a bulk rate on their incredibly expensive medical machines, or do you actually not get that?  

    Gosh I don’t like these circuit breakers, could have had a nice call-selling opportunity and they stopped it!  

    $5 list/David – Good idea!  

    ADBE/John – I would sell calls into the excitement but not close ones at $27.50 unless you are happy to be even.  You can sell 2012 $30s for $3.55 because, if the rumor is true, you have room for gains and the premium will die off early.  If not, you can always roll them back to something closer.  


  149. Unemployment rate.…ZeroHedge


  150. My gut says, everyone expects us to falter on jobs # tomorrow, so they’ll sandbag it and we explode to the upside.  And that’s how we pop the 7.5% lines for good.


  151.  gel1

    I`m with you on that.


  152. Jo… Bravery and prudence are mutually exclusive, IMO. Good luck to the man, but results trump bravery in all situations.


  153. Phil,  Thanks for the quick answer.   Regarding the adbe question, why not sell the 2013 30s for around $5? 


  154. gel1
    Thank our constitution, we or some of us have guns, more than the political idiots think, they sould think again!


  155. Out of TNA at Average $49.18; it apears the goal now is to hold IWM 68.50


  156.  Phil: It seems that Monday (Columbus Day) only banks and Bond Markets are closed. I believe the Stock Markets are open though.


  157. Unemployment/Pharm – That’s not good!  

    ADBE/John – Because my screen didn’t show them.  Good catch – it’s the same logic but as for $5.50 at least.  Keep in mind that you need to think of that $5.50 as not your money because, if ADBE goes down again, you’ll be giving him back $4 of it and selling something else for $1.50.  


  158. adbe running up – Oct 30 calls are 0.93, inclined to cover some positions as this cannot be sorted out before next friday?


  159. Shadow,
     
    I use SS  pro and it’s good, but the 1 minute charts don’t work the way JR uses them.  If you use the web based version at Schwab, the chart is better, but I still don’t think it is great.  I’ve yet to be able to get the Sig that JR talks about…..I take that back…….I get it…..only after the move has happened.


  160.  Monday/Novice – Oh I know the markets are open but it should be a dead slow day.  Great day to pump up or take down the markets – not sure which…


  161. I’ve had enough of TZA and this crazy market…….I’m cashed out and heading for SD.  Good trading…..see ya all in about a week.


  162. gel/can Balmer get it done? can a monkey eat a banana? He certainly has the cash to buy Adobe at an inflated price.


  163. I wish I had more confidence in Ballmer…. sold half of my ADBE stuff at a profit.


  164.  Nat gas at $3.60 is at a price where drilling doesn’t make much sense.  Do you have any suggestions on a UNG cold winter play?


  165. jvest… It depends if the monkey can identify the right oriface to stuff it in. Not sure in this case!


  166. Phil
    What would you recommend doing with following call spread:  ADBE ($24 April’11 Calls long (in at 4.07 ) , $28 April’11 Calls short (in at 2.01), Jan Puts short (in at 2.10). Thank you
    dclark41


  167. Buying SPY Weekly 114 P 13cand 115 Cs 51c.  They gotta take it one way or another.  I am already short this market….probably too much.


  168. gel1
    I get the sig with etrade pro but have to use 5 or 10 EMA and can’t get the lines right. I also need much faster internet service, have to move for that. Thanks


  169. 6% on the day, way better than yesterday.

     

    jvest,

    His incompetence knows no bounds !!


  170.  Phil
    Waiting till after hours to ask about this one – I did the trade  and thought I understood it at the time – now looking back tha logic (on the caller) escapes me – did you mean 2011′s? can you help/explain? (my question & your response repeated). Thx

    Deano said – Given where we’re at I’m looking to lighten up or get out of the AAPL spread you suggested some months ago - 
     
    Long AAPL Jan12 200 Call
    Sold AAPL Jan12 250 Call
    Sold AAPL Jan12 145 Put

    I’ve already taken out the putters, replaced them with the 165’s, and recently took those out as well. Any opinion on how to adjust or am I better off just getting out?
     
    Phil said- AAPL/Deano - I’d roll the $200s out to the 2012 $280s at $52 so you take $38 off the table and have a year to roll the caller (but you are well-covered into earnings).   The putter is a waste of margin at .25 and you can sell Apr $240 puts for $10.50 since you know you are going to eventually roll the $250s anyway and they have $45 of buffer against a drop.  That means you need to watch a $35 roll and that would be, at the moment, the Apr $280s, now $33.50 so as long as the cost of your roll is less than $5 to bump the caller up $30, no pressure to rush it.


  171. Anybody else have Schwab SS.com freeze up at 3:59???


  172. Phil,  Thanks again for the ADBE answers.  Regarding this point: "Keep in mind that you need to think of that $5.50 as not your money because, if ADBE goes down again, you’ll be giving him back $4 of it and selling something else for $1.50."  I, of course, understand why the $5.50 is not my money if ADBE goes back down, but what did you mean "selling something else for $1.50?"  By the way, I got your second answer too late, so I had already sold the Jan 2012 30s, but  I’ll roll them tomorrow to the Jan 2013 30s.  The logic being that should there actually be a takeover, the more premium I’ve gotten for my 30s the better.


  173. Good list – Note to us HERO followers – reports 10/28 and beats estimates 93% of the time.
     
    http://www.bespokeinvest.com/thinkbig/2010/10/7/top-earnings-beat-rates.html


  174.  Guns/Shadow – And you wonder why they are watching you? 

    UNG/Manta – We’re all recovering from our terrible hurricane plays at the moment, I don’t know if I can stomach a "cold winter" play but $3.50 is about the level where electrical generators who can convert would rather use nat gas than coal.  I think at this point you can play UNG like a biotech and buy the 2013 $2.50/5 bull call spread for $1.70 and sell the $5 puts for $1 so that’s .70 on the $2.50 spread with 250% upside at $5, which is more than 10% lower than where it is now.  Since you have the $2.50 calls, your break/even is between $2.50 and $5.70 (net price if put to you) or $4.10, 28% below the current price so not a bad way to ride it out.  Shorter-term, I’m not too wild about UNG but you could play CHK and sell the Apr $21 puts for $1.60 for a net $19.40 entry (now $22.50).  

    AA did very well!   But, of course, very well means income was only off 21% from last year but, hey, it was better than .05 expected!  That’s why I didn’t like betting against them – too dangerous.  They made 0.6 a share vs. 0.8 last year and revenues were UP 14.6% to make that happen.  

    Alcoa (AA): FQ3 EPS of $0.09 beats by $0.04. Revenue of $5.3B (+14.6%) vs. $5B. (PR)

    Micron Technology (MU): FQ4 EPS of $0.32 misses by $0.06. Revenue of $2.5B (+91.5%) vs. $2.7B. Shares +1.3% AH. (PR)

    ADBE/Dclark – Nothing, you are right on target.  You can speculate and add some calls but that’s just greed as this net $0 trade has a very good chance of paying you $4 if you just leave it alone.  You could add the 2012 $30/40 bull call spread for $2.70 and sell the $22.50 puts for $1.80 for net .90 on the $10 spread – that way you risk 25% of your fairly certain gains for another $9.10 of potential upside movement.  If that doesn’t make you happy – you are hopelessly greedy!  8-)

    AAPL/Deano – I think I thought you had Jans, not the 2012s but  we can take the 2012 $200 call you are long ($104) and roll it to the 2013 $280s ($70).  That puts $34 in your pocket.  The 2012 $165 puts are $6.80 and you can roll them to the Jan $250 puts ($6.70) for and, if it’s a margin problem, you can buy the Jan $180 puts for .65.  They either expire worthless much sooner or you can roll them back down to 2012 puts.  On the long leg, same deal, you’ll roll them eventually but there’s no hurry as they have $30 of premium.  You can spend $30 and roll them up to the 2012 $310s and that makes a $60 spread right there.  Depending on where AAPL is in Jan, you sell more puts and use that money to either roll yourself lower or the caller higher.  

    ADBE/John – Yeah, you get it, that’s good!  Right now, since it’s a vague rumor, some sucker is still willing to pay a huge time premium for 2013 calls.  If a deal gets done that premium goes away (and into your pocket).  Meanwhile, it’s still $5.50 worth of good protection.  What I mean by selling something else for $1.50 is that, if ADBE heads lower, those Leap calls will only drop about .60 per $1 so let’s say the rumor is fake and they go back to $26.50 – then the caller loses $1.50, you pay him back $4 and sell Jan $28s for about $1.50 (guessing) – a nice deal for you as you get a bonus $1.50 and maintain a sensible cover. 


  175.  XLK - Technology Select Sector SPDR ETF – A massive debit put spread utilizing a total of 224,000 contracts on the Technology fund went through electronically this afternoon just after 2:00 pm in New York trading. The spread is perhaps the work of one big options market participant positioning for the price of the underlying shares to slide lower ahead of December expiration. Shares of the XLK, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the Technology Select Sector of the S&P 500 Index, edged 0.17% lower to $23.14 by 2:50 pm ET. Companies represented in the Technology Select Sector Index are engaged in industries such as information technology, consulting, semiconductor equipment and products, as well as telecommunications services. The enormous transaction involved the purchase of 112,000 puts at the December $23 strike for a premium of $0.87 apiece, and the sale of 112,000 puts at the lower December $20 strike at a premium of $0.19 each. The net cost of the transaction amounts to $0.68 per contract or $7.616 million. The party responsible for the transaction is prepared to make money should shares of the fund fall 3.54% from the current price of $23.14 to breach the effective breakeven point at $22.32 by December expiration. Maximum potential profits of $2.32 per contract, or $25.984 million, are available if the XLK’s shares drop 13.57% to trade below $20.00 by expiration day. The current 52-week low on the tech-sector fund is $20.01, attained back on July 1, 2010.


  176.  Nice chart if it prints (use link otherwise):


  177.  


  178.  everything I’ve read over the last two days says 10-yr interest rates are going to 2% (or lower). Selling calls on TBT may be a profitable short terms strategy even after the drubbing they’ve taken since April. 


  179. This should make Gel happy

    From Barry (who has a state by state chart of the carnage):

    I came across a piece of research today that referenced the growing number of households (currently a whopping 19.4 million) participating in the nation’s food stamps program (the official name changed two years ago from food stamps to Supplemental Nutrition Assistance Program (SNAP)), and was a bit taken aback by what I read, so I went to check out the numbers for myself.  The year-over-year (YoY) percent gains in the number of households participating in this program are staggering and, like the recent report on poverty in our country, saddening.

    Wesley Allen on bank failures, making an excellent point:

     Bank failures ARE NOT NORMAL. To those who say bank closures aren’t as bad as they were in ’09, we’re still closing banks left and right. The fact that we’re still asking “How many banks are they going to close this week?” instead of saying, “Woah! They closed a bank this week!” means we’re still in troubled waters.


  180. gucci/short strangles for Nov,
    You are correct that the risk is high with lower VIX.  As November is a 5 weeks expiration month and has lots of earning premium, a 3-5% dip in the market would hurt the short puts.  Let’s ask ourselves what strikes would we sell if SPX is 4% lower to 1,100.  I’d say SPX 1,000 putters or so.  We can start scaling in by selling the SPX 1,000 put for $3.25.  On the other side, 1250 callers at $2.22 can also be sold.  That’s roughly $5.4 credit.
     
    Since we fear that there may be a drop and there are plenty of time to get burned, we should start with a lower number of contracts.  Two SPX contracts per $100,000 budgets is reasonable (our rule of thumb is 4 SPX contracts per $100,000 budget).  If SPX behaves and stays within the range, that’s 1.08% return for November.  If there is a drop, we’d double down to 4 contracts and increase the profit potential to 2.5+% for roughly 6 weeks (the new putters would likely be sold for more than $3.25).  As you can see, we love to see market dips.  Probably not huge crashes, but nice and orderly dips.
     
    The SPX 1080/1070 long put vertical is only $1.4.  To finance the hedge, we might want to sell 1020 puts for $4.45 instead of selling the 1000 putters.


  181. XLK- so JRW is doing put spreads also :)
    Phil- do you like following along on this play? Seems like everything is ripe for a short- RTH also.


  182. thx peter look like I have to roll my current Nov up now 1200 to 1250, as suggested, and sell the Nov 1020 put …is that right ? thx ahead


  183. Newt called the Dems ‘The Party of Food Stamps’ ?? Haha, he’d better hope people on food stamps either:
    1) Don’t vote, or
    2) Hate themselves so much they’d vote against their own self-interests at a most basic level of sustenance
    We’re a long ways away from the ‘Contract with America’ days. Maybe Dems play this derogatory remark branding it to all republicans in all 50 states for the next 4 weeks and they’ll keep control of both houses (and be able pass HR 2267 next year for Christ sakes).


  184. Pharm or anbody else follow Celsion (CLSN)? Up 11% today on old news of FDA guidance? After 4 months of hibernation.
    Don’t post often but love this site; thanks all!!


  185. Hi, Peter D,
    How have you been lately.  I was out of town and busy at work for a while, so, hadn’t been able to check in in the past month or so.
     
    Thank you so much for your guidance to gucci.  I was actually going to ask the same question.
     
    I have some more strategic questions:
    (1) Why do you suggest buying $10 put verticals?  What if I buy 2x as many contracts of $5 put verticals?  The reason I ask is because sometimes one of the legs is thinly traded, and it is hard to get the order filled, both on the way in (buying) and out (selling).  But we may get a better trade volume on a nearby $5 vertical.
    (2) I am wondering if it’s better to sell strangles 9-10 weeks or more away, as opposed to 1 month away?  I recall vaguely that you mentioned something about SPX options decaying the most when they are 6-7 weeks away from OpEx.  (I may be wrong on that.)  Of course, we sell strikes further away from market.  And buy back as soon as we make enough money.
    Thanks again!


  186. CLSN – interesting technology, but for liver, I like DCTH (and IMGN) better (for now).  Breast wall cancer they may have an angle. but it is just a NDA (meaning that they have enough preclinical data).  Enrollment is ongoing for its 600 patient trial, and it has a fast track status.  Drug is a commonly used one, the company has a technology that releases the drug into the tumor upon heat (someone else mentioned something about that a few weeks ago).  Anyway, a bit of time to watch, I think they will fall back, but could ease in with a SMALL entry to see if they continue to run.

     

    David – any stock in the biotech area under $5!  Bolds are ones I currently own.

     

    CRIS, INO, ARIA, ARRY, AVNR (FDA date Oct 30), ARNA, NNVC, NWBO, PDLI (Dividend payer), SPPI, ONTY


  187. Pharm- stocks under $5 that you bolded below. Which 2 are the better ones? I have burned my hand with ARNA so would like to buy a very small position. Thank you.


  188. Hey Phil – UR gonna blow a gasket on this one:  Tyler’s site is on a roll today!

     

    $100 Oil Could Sink The Fed’s QE2

    As the U.S. prepares to embark on a new round of Federal Reserve quantitative easing, there are plenty of reasons to doubt that it is the right course for the economy and job creation.

    Here’s another: The voyage might have to be aborted — or at least diverted — soon after QE2 leaves the dock because the Fed may be sailing into a political hurricane.

    Even before the anticipated launch of the next round of Treasury purchases — it’s expected to be made official on Nov. 3 — the Fed’s unmistakable signals have fueled commodity price gains as the dollar has sagged.

    Since the Fed’s Sept. 21 policy statement, crude oil had surged more than 9% to above $83 a barrel on Wednesday, approaching its highest levels since October 2008. (Oil prices did retreat on Thursday.)

    The risk for the Fed is that such price increases will be felt in the economy long before any modest positive impact from lower interest rates.

    To some extent, unconventional Fed monetary policy actions may be arcane enough to make them an unlikely target of populist politicians and grass-roots activists.

    Still, just last year, the Fed came under blistering criticism for its close-to-the-vest dealings. Legislation to audit the Fed, spearheaded by Tea Party favorite Ron Paul in the House and self-styled socialist Bernie Sanders in the Senate, was largely incorporated in the Dodd-Frank financial regulatory reform bill.

    If there’s one thing that may turn Fed policy from yawn-inducer to rallying cry, it’s oil prices rising above $100 a barrel, which would hit Americans in their wallets on a frequent basis.

    Now, triple-digit oil prices are no sure thing. If Friday’s jobs report is far weaker than expected, it could stop the commodities rally in its tracks. But $100 oil is clearly within the realm of possibility, and if it occurred even as the economy continued to struggle, there’s no telling how much hot air would fly the Fed’s way. Perhaps enough to erode Fed Chairman Ben Bernanke’s gung-ho consensus.

    Then pressure for doing something about the jobs crisis would fall squarely on the shoulders of Congress, exactly where it belongs.

    Much has been made of hedge fund manager David Tepper’s comments on CNBC that asset values can only go up for now, driven either by an economic rebound or — if growth continues to sputter — by quantitative easing.

    David Rosenberg, the influential former Merrill Lynch economist now at Gluskin Sheff, offered a third scenario: QE2 might not work. Yet another possibility is that the Fed has a lot less latitude to pursue quantitative easing than is now assumed.


  189. Nicha – burned….I lost a few fingers….

     

    CRIS, IMGN and ARIA.  Take your pick.  IMGN can be hedged and is the most expensive but their mAb works (drugs are attached to it for more bang for buck).  ARIA can be  Feb 3.5/5 bull call spread for 50c.  Widen for a bit more risk, but for a 200% gain on a compound that NVS has going for approval (should get it) and MRK has ‘bought’ from ARIA only puts more fuel in my fire for them.  CRIS, just sit, stash, and wait.  They are the biggest part of an account now as I have been accumulating under 1.30.


  190. Wow, things cranking today….Job losses in 2009 likely bigger than thought


  191. Many thanks Pharm; good to get some context!!


  192. Pharm… NWBO –  Are you sticking with this one?  Much like watching grass grow. Looks to me like a lot of potential, but very little action. I’m starting to get bored!


  193.  Good evening everyone……Just back from a great several day backcountry trip in the Maine woods.  Backpacking, canoeing, climbing,  sleeping under the stars, and just generally not thinking about anything except nature.  Very refreshing.  Now catching up with the financial news and comments on  the board.  Lots of bearish sentiment about.   Much more than 6 days ago it seems.  And I listen carefully to the humming of the members, as the overall sentiment is more often right than  wrong.  I’ll be back in the fray with you tomorrow.   Good trading!


  194.  Phil….A few weeks ago I purchased a bull call spread on ADBE………..30 Apr 24 calls covered with 30 Apr 28 calls @ 4.30/2.15 or about $6500.   As you know, ADBE spiked today on takeover rumors.  Presently the trade is worth about  $7500 (6.10/3.60) , but profits could be as much as $4,000 more if ADBE remains above $28 by Apr expiration.  I’m inclined to hold without any adjustments.  Sensible?  


  195. Here’s yet another reason why we need to pay more taxes to the gov’t:
    The Social Security Administration sent about 72,000 stimulus payments of $250 each to dead people http://on.wsj.com/b3gX5p
     
    (and yes, I know that is "only" $18 million, which is a drop in the ocean to the gov’t everyday waste, fraud, abuse and giveaways that go on everyday; bailouts and QE included)


  196. were they stimulated?


  197. Good one, morx. I actually laughed out loud.


  198. Cap…. Dead people receiving stimulus checks… thats right – they are the same ones that are on the voting roster in Chicago ( same folks that gave Kennedy a win )


  199. gel – yeah I am holding on to NWBO.  Gonna take a while.  Throw it away in the trunk and forget about it.


  200. Phil,
    Just to compare thoughts….
    How do you see the market in the morning if the jobs number comes in
    -75k?
    -100k?
    Curious to know your thoughts…just for fun


  201. XLK/Pstast – The time-frame’s a little long for me.  I’m looking for a slide into November, either before or after the elections but I do believe in the Santa Clause rally so I prefer our QID spread overall.  

    Newt/BDC – Foot in mouth disease gets them every time.  The best part is, he’s already being echoed as a rallying cry on Conservative sites as another great "zinger" they can use to insult Liberals with.  That’s what happens when you have a party of out-of-touch elitists, eventually their contempt for ordinary  people becomes obvious to the voters…  

    Here’s Fox’s marching orders – "Gingrich Brands Democrats ‘Party of Food Stamps‘":  

    MINNEAPOLIS — Former House Speaker Newt Gingrichis advising Republican candidates on November’s ballots to frame the choice for voters between Democrats as "the party of food stamps" while selling the GOP as "the party of paychecks."  With a month to go before the election, Gingrich brought his branding effort to Minnesota on Wednesday. 

    Gingrich this week distributed a memo to Republican hopefuls saying they should use the final month to stress tax and spending cuts as a way to spur job growth while attacking Democratic policies as detrimental that effort.

    "It’s perfectly fair to say they are earning the title of the party of food stamps," he said. "By contrast, we have historically sinceRonald Reagan of 1980 been the party of job creation."

    Oh really???

    And that’s not even updated to include the last two years of Bush, where he became the 2nd President since Roosevelt (with the first being his first term) to actually lose jobs over a 4-year period:

    Oh yeah, and the Republicans are, of course, the right party to control spending too! (choke, cough):

     


  202. It’s the economy, stupid:  



     



     

    I don’t know how many ways this has to be shown to people, I vote Democrat BECAUSE I like to make money and I want this country and its people to have a secure future.  What good are low tax rates if there is no opportunity?  What good are low tax rates if the country goes bankrupt and the dollars you "save" become worthless?  

    And who was in control of Congress when this happened?

    And who was in office when Federal Spending went up 66% between 2001 and 2007?  



     

    I mean really, folks – this is real stuff, not the empty rhetoric of the con men who talk a good game to get elected and then do the exact opposite once they get in power

     



     


  203.  $100 Oil/Pharm – Well I already blew a gasket from Newt’s BS but, of course, this is the insane aftermath of QE, the rich property owners get richer and the poor renters can only pray they get raises fast enough to keep up with runaway inflation (not likely with 20% real unemployment).  We use 19Mb of gas per day so every $10 increase in oil costs the people $190M per day or $5.7Bn a month and about double that after refining mark-ups.  That’s per $10.  Oil should be below $60 so about $40Bn a month sucked out of people’s wallets at $100 and that’s $40Bn taken away from businesses but it’s worse than that because most of that money goes right out of the country and devalues our currency and increases our trade deficit.  Had the money been spent on local products, it would have created jobs and circulated and multiplied through the system.   That’s why I was freaking out in ’08, when went over $100 to $140 – people just don’t understand how badly that guts the economy – it’s totally unsustainable other than as a purely inflationary increase coupled with wage inflation to match.  That’s why the gold/oil disconnect bothers me – oil is priced as a consumable asset driven by speculation but gold is pure speculation and is not tethered by actual demand – that’s why the prices can get so unrealistic.  

    Welcome back Iflan!  On ADBE, that’s the disadvantage of those kind of spreads, you can’t really take advantage of a move that comes sooner than expected but, on the bright side, if they do get bought, that will accelerate the trade.  I agree that there’s no point in touching it, just have to wait to be rewarded in full.  

    72,000/Cap – This is a great example of the BS you guys like to latch onto.   I love the fact that Gel right away sees it as an affirmation as well even though I know he is smart enough to read a statistical report and make his own conclusion – he’s simply been brainwashed to snap to any right-sounding statements.  Were he to be analytical, rather than visceral,  Gel would immediately see that $13Bn/$250 = 52M checks and that 72,000 out of 52M = 0.1% or one out of 1,000 checks sent.  Of course the WSJ very conveniently leaves out that critical bit of information – an innocent oversight, I’m sure…   But, it does of course check out with the same math that says $22.5M out of $13Bn was mistakenly sent.  Since the checks are being sent to people over 65, who have an average (due to the US’s very poor health care system) of just 9 more years left to live or 108 months, it should be pretty obvious that, out of 52M people who a check is mailed to, we can expect 481,000 of them to die in the same month the checks are being mailed or about 100,000 people a week so it shouldn’t be very surprising to any intelligent person that 72,000 checks were sent but, by the time they got to the recipient, they had died.  

    Of course it’s also interesting that 41,000 people returned the checks.  I’d be very curious to see how that group broke down on party lines!  99.8% efficiency is not good enough for Cap of course – imagine the amount of government waste there would be if we tried to make every single operation perfect.  A good businessman knows there are points of diminishing returns but a good businessman also knows who is really responsible for government waste, pork and debt – as noted in the charts above.  

    Jobs/Maya – Minus anything will cause a huge sell-off but maybe then a rally as the QE2 cheerleaders begin to think that locks the Fed into position.  Good numbers may have the opposite effect, with a rally followed by a sell-off as the Fed comes off the table if they don’t seem to be needed.  

    Futures looking wishy-washy.  

    Dollar might be a little bouncy against Euro but 3am trade started at 82.45 Yen to the Dollar and it looks like it’s good for 84.25 at least, we’ll have to see.  Oil continues down and copper did fail to retake $3.70 (now $3.68) so that’s another one to watch today.  Gold is steady from the close at $1,334 but that’s bad as Asia did not seem to consider it a buying opportunity after a $32 drop yesterday.  

    There’s an IMF meeting this weekend and the Dollar is now considered a global crisis so we can expect at least statements out of them into Monday.  If there is any dollar-supportive action – we could get a big commodity/market sell-off next week. 

    As we expected, the Shanghai is playing catch-up and jammed up 3% this morning but the Hang Seng was flat and the Nikkei fell a point.  Europe is flat but heading down at the moment.  They are firmly on the austerity bandwagon so I think all this talk of coordinated global Quantitative Easing is BS, just like it was BS when they said there was going to be coordinated global stimulus at the last G8 but it was really just us vs the World in that camp.  

    Of course, some things never change:


  204. For you Phil…..the centrifugal bumblepuppy….or "who you jivin` with that cosmic debris?"
    http://www.recombinantrecords.net/docs/2009-05-Amusing-Ourselves-to-Death.html


  205. QID & XLK- The most recent QID reference (10/3) I can find is as follows which is a Jan play:
    Right now I like the math of a QID play.   QID is a 2x short on the Nasdaq, currently just $14.70, so you can simply go for the Jan $13/16 bull call spread at $1.10 and sell $13 puts for .72 so you are in the $3 spread for net .38 which means you can go for 20 of these spreads and get $6,000 worth of upside protection for $760.  It looks to me on TOS like $1.25 in net margin on the short put side plus the $1.10 cash you lay out and, of course, your obligation is to buy 2,000 shares at net $13.70 if QID goes down about 7%, which is 3.5% up in the Nas
     
    Are you referring to a different play?


  206. Huxley/Ben – Wow, that’s brilliant!  It’s funny because, generally, I am an Orwellian and certainly a lot of that goes on in Government but they make a great point that the masses have been moving straight down Huxley’s path, almost like they are following the script to the letter.  I guess it’s because I don’t go that way that I don’t generally think of my fellow man in those terms either but this is the epitome of "sad, but true"! 

    QID/Pstas – Oh, that was a Jan, wasn’t it?  Well of course those are the kind we cash early on a good run and Jan is better than December (mid Santa Rally) but, on the whole, thinking about it as the "today me" with better information, I would lean towards a Nov or March/April position, depending on what you want to protect.  I think I went with Jan because the Nov combos all sucked (as they do right now), not so much because I wanted that time-frame.  When you are in the money-you can afford to be out in time a bit further as you can roll out you calls on exit.  The bottom line is always your net delta – on this trade it’s .29 on the call side and .29 on the put side so you’ll collect .58 per $1 move on QID regardless of the theta (where you have the advantage of being in the money on the calls and a seller of the puts).  Since .58 is 148%, you make about 300% at $16, even if it comes early, and that’s usually where we end up cashing out, even if the upside is much higher.


  207. Phil, nice job this early morn – as for our Republican’t friends, those pesky statistics can be such a nuisance….. :)


  208. Phil – How’s Dad doing?


  209. Yawn…. I got up early…for this?…. :)