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Just Another Manic Monday – Stagflation Official in China

Wheeee, everything must be great! 

We are crushing our levels as the market flies ever higher.  Our 11,500 target on the Dow looks sure to be tested and we're already flipping bullish with our "Breakout Defense" trades, in which our goal is to make 5,000% in 5 trades or less.  We are not ashamed to jump on the bullish bandwagon – if they are giving away money, we'll stand in line with everyone else, only we'll take a larger share – thank you very much.  We certainly know how to use leverage just like a Bankster – we have a spread and we're not afraid to use it!  

Speaking of Banksters, the must-read article of the weekend is the NY Times piece that goes into surprising details of secret bank meetings that are regularly held in NY where the Gang of 12 (just 9 of them) do their best to manipulate the derivatives market, influence regulations and regulators and, of course, crush their competition.  The article even goes so far as to name my old friends at ICE as possibly maybe having something to do with these shenanigans and I am SHOCKED at these allegations as the good people at ICE were so good about telling me how I had things all wrong when I made similar statements last year (which I now legally know cannot be proven and therefore must not be true).  

And thank goodness that the commodity and derivatives clearinghouse that was founded by Big Banks and is controlled by Big Banks cannot be proven to be operating in favor of Big Banks because we wouldn't want to think that the Big Banks had some preferential treatment (beyond the access to the discount window and the TARP money and the POMO money, etc.) – that would just be unAmerican.  By unAmerican, I mean the old America that they write about in the Declaration of Independence and the original Constitution, of course – not the Corporate Kleptocracy this country has developed into.  Under the new guidelines, leveraging your influence and having the government rob the people to increase your profits on which you don't pay taxes is the very definition of patriotism, isn't it?  

VIXAh well…  As I said last Monday, this is really Somebody Else's Problem because we are in "get it while the gettin's good mode" at the moment.  So we're not going to dwell on the negatives and we will, instead, accentuate the positive as sell our premiums to Mr. In Between to fund our bullish plays.  Our first two bullish plays in this series are already a week old as I put up trade ideas on DBC and FAS in the December 3rd morning post.  

While the FAS trade is already getting away with an 833% gain in the first week (out of 3,233% potential gain by April if the XLF keeps climbing), the DBC trade idea is still playable as commodities haven't quite run away just yet.  As you can see from the VIX chart on right, market complacency may be peaking or the fabulous Obama Administration may have truly eliminated all the potential economic negatives in just two short years – INCREDIBLE!  

Unfortunately, China does not seem to be as lucky as we are to have such tremendous leadership that all of their problems are solved and just this weekend they reported shocking 5.1% inflation – if by shocking I mean pretty much totally ignored by the US MSM.  The inflation was not, however, ignored by China's own Deputy Director of the Finance and Economic Affairs – He Keng, who was reported as saying that China began experiencing a period of stagflation in the second half of this year with high inflation and unemployment. The nation will also face the possibility of an economic double dip next year, the Guangzhou Daily cited He as saying at a meeting yesterday.  That's STAGflation, as in stagnant economy, not the more benign INflation, as in the stuff the US pretends doesn't exist.  

Speaking of inflation that doesn't exist – commodities are flying this morning as the dollar takes a nose-dive from 80.70 down to 80.20 and that should be good for yet another 1% day in the markets.  Gold is testing $1,400, oil is $89.30, copper is $4.18, natural gas is $4.52 and hi ho silver is away at $29.59.  That's enough to get us to finally move some of our cash off the sidelines as we're going to get less and less stuff for it every day at this pace.  The Euro jumped an entire penny from $1.318 to $1.328 since their open at 3am and our normal 3am trade on the Yen (as it tends to go down while the Nikkei is open) didn't see the Yen bottom out until 4:30 but then it violently gained half a point against the Dollar and is now (8:30) at the day's high.  

The dollar is down on excitement about the Obama Tax Cuts moving through the Senate today and the House is now expected to pass tomorrow so there's $1Tn worth of new debt we'll be taking on.  At the same time, the EU has been making moves to stabilize the Euro and it's expected that, by the year's end, there will be a fund bigger than the current $1Tn bailout fund the EU currently has at its disposal.  

Meanwhile, the Shanghai Composite leaped 2.9% this morning and led Asian markets higher as an anticipated rate hike by Beijing seems to have been put off until at least after the holidays.  Lack of tightening by the PBOC gave commodities the green light to fly higher with both Jiangxi Copper and China Oilfield Services hitting limit up at 10% this morning.  Investment sentiment in the region was also helped by Wall Street's gains Friday after data showed that U.S. consumers were more upbeat on the economic outlook in early December and that U.S. exports in October surged to their highest levels in more than two years.

It's the same old story – we go up because China went up and then Europe goes up because the US and China goes up and then we go up because Europe and China went up.  As long as none of us ever look down, it will all seem perfectly normal, I suppose – kind of like when the coyote heads off a cliff and keeps walking until the road runner points out that he's standing in mid-air.  

One short we will be taking today is oil as that is just silly back over $89.  We have a standing entry to short the Futures but USO puts should be attractive at $38.50 on that ETF as there are still 550M barrels on pretend order for the three front months at the NYMEX with 194M barrels scheduled for January delivery to Cushing, OK – a facility that has a capacity of 45M barrels and happens to be full.  Those contracts that are still open next Tuesday must be delivered and, with the January contacts at $89 and the June contracts at $90.08, it's hardly worth storing oil for 6 months to make $1, is it?  

As I pointed out to Members this weekend, there's no point in being skeptical when the Gang of 12 is determined to run the markets.  Just this morning the big gun analysts weighed in at Bloomberg with an average forecast of 11% gains on the S&P in 2011 (about 1,379) with Goldman's own David Kostin leading the bull charge with a 17% rally target.  Readers of the WSJ this morning were treated to GDP upgrades from the economists they polled with 3% growth now expected in 2011.  GS is also targeting index movers like AAPL for big upgrades – just what the doctor ordered to push the Nasdaq even higher..   

Yep, things could not possibly be better, I suppose – and that's what scares me!  


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  1. Phil,
    What is impact of these bullish plays on the 1050p current positions?  Are you adding these bullish plays now?

  2. S&P +5.10, Dow +44 at 7:42
    oil +1.55, gold +12.0
    NET $  = +.34, dx/y = (.24) at 7:45

  3. mike5885          Tell me how I can make money by reading your posts.   :)

  4.  and here comes Lloyd to give the markets a push into year end, initiating coverage on a bunch of companies, including AAP: w/ $430 price target.
    What a coincidence.

  5. Phil did you see the piece on NFLX?  AMAZING

  6. jabobeast…..Gil Morales writes this article, in which he lambasts the comments of a NFLX short-seller.  His comment reads…."our advice to investors would be to simply ignore the short-seller’s comments —"  Then, he admits to being long NFLX.    Perhaps we should ignore Morales’ comments as well. 

  7. Phil / DeGraw   Reading Ilene’s post today of DeGraw’s incredible article on how the Fed stole $12 Trillion from the American people left me dumbounded and depressed.  Our problem is that less than 5% of the US population can comprehend the article.  For goodness sake they just voted for a tax cut for the billionaires who perpetrated the $12 Trillion fraud.  America is now a feudal society.  So, after reading who really controls the world I’m thinking I need to put aside my fears of a coming mortgage tsunami, hold my nose and buy JPM, Goldman and BAC???  They’ll have Ben print as much money as needed to keep the mkt going up.  I’m more concerned now about my short positions.

  8. Good morning!

    Hey ho, let’s go!  It’s all about Dow 11,500 still.  WTF is wrong with the markets if the Dow can’t break 11,500?  Come on Dow, EVERYBODY’S doing it – don’t be a wimp…

    This is going to be one of those very annoying days where we watch and wait and everyone will be dying to buy something and I will say wait and they will say "what about this" and I will say wait and they will say "but it broke out on the charts" and I will say wait….  Perhaps if I invest in a "WAIT" sign now, it will save me some trouble.  

    Anyway, the only levels we care about now are:  Dow 11,500, S&P 1,220, Nasdaq 2,600, NYSE 7,750 and Russell 725 

    It would be ridiculous for the Dow not to pop 11,500 with the other indexes flying above their levels so we’ll see how this pans out.  

    My thoughts on oil are the same and there’s a nice opportunity for a quick short buying the Dec $38 puts at .41 and hopefully pick up a quick .15 (.55) as they were .70 on Friday so not too much to ask for.

    And, of course, we still like going short on oil futures below that $89 line with very tight stops there.  

    Other than that, it’s a morning pop on low volume and the Hang Seng was not all that impressive this morning – we need to see more than this to get more bullish.  

  9. VIX almost always opens up after a weekend
    very weird, opened lower (4.32)%

  10. NET $  = +.92% highest I have seen, dx/y (.54)%
    oil = 1.37
    C =1244.22, F = 1239.50

  11.  that is VIX moves is very strange, maybe the opposite will happen
     maybe a bottom and sign of capitulation on volatility

    might want to watch that 16.78 open and remember that number

    not sure just thinking out loud

  12. Hypothesis: Retail traders (with the possible exception of PSW subscribers) are no longer the target of market manipulators at all; rather it’s the institutional investors who can trade AH & BH, so a lot of games have been transferred to those arenae. Or am I just slow to notice things?

  13. NET $  = +1.02%,  dx/y = (.54)%

    C = 1242.97, F =1238.00
    oil +1.26, gold +11.0,  vix (3.69)%
    10yr = +1.33%,  30yr = +.43%

  14. Good Morning!  No need for a wait sign here.  Patience has been profitable this year…… :)

  15. Forgot to mention must-read article from Phil’s Favorites on the whole Wall Street scam – sickening stuff but you need to be aware of these things!  

    Bullish plays/DD – Well if you didn’t do last week’s plays I think it’s prudent to have SOMETHING bullish in the portfolio but I AM STILL NOT BULLISH!  The fact that I am willing to go with the flow if the flow insists on going up hill does not mean I no longer believe in gravity – I just accept the fact that gravity can be defied for some period of time.  If I had to make a decision to put all of my money on a long or short bet between now and April – I would go short.  Between now and the end of next year, perhaps long but not intermediate, as I still feel a big correction is due.  

    There is simply no risk priced into these levels and that means that the appearance of risk from any source will come as a great surprise to the market and cause panic.  I’m not worried we’re going to miss anything if the market slowly climbs to 1,350 over the next 12 months – that’s a cake-walk for us.  I’m worried about a sudden devaluation of the dollar driving the S&P to 1,500 by July when priced in worthless dollars – that’s why I think we need some upside protection.  On a slow slope up, cash is just fine for now as we have all year long to make good returns.  

    NFLX/Jabob – Yes, they are the anointed company.  Much like GOOG was at one point when everyone gave up saying bad things about them and just picked numbers between $1,000 and $3,000 for their predictions.  AAPL is getting that way too and I am worried about them living up to these ever-inflating expectations.  

    CVX making new highs at $88!  

    Degraw/Tusca – Hey if you want to get ahead in China, you join the Communist Party, right?  I do think the financials are still the best remaining bargain.  We did JPM a few weeks ago as well as BAC but they both had big runs.  GS is a bit much but I had a GE play in the weekend post and they are a financial too that happens to also make stuff.  

    VIX below 17!

    Hypothesis/Snow – The way they write bots these days, everyone who puts a buck in play in the market becomes a target. 

    Poor DANG still dropping.  

    At the open: Dow +0.18% to 11430. S&P +0.25% to 1243. Nasdaq +0.29% to 2645.
    Treasurys: 30-year -0.41%. 10-yr -0.22%. 5-yr -0.12%.
    Commodities: Crude +1.57% to $89.17. Gold +0.84% to $1396.60.
    Currencies: Euro +0.68% vs. dollar. Yen +0.29%. Pound -0.29%

    Despite inflation that is "more broad-based and stubborn" than expected, China did not raise interest rates at the end of an economic policy meeting this weekend. Rate hikes and higher reserve requirements will be necessary in 2011, but for now stocks like the news. China +2.9%

    Defying predictions of a clampdown on credit expansion, China may set a loan quota for 2011 just slightly less or even the same as 2010. An analyst notes that any slowdown in credit could turn existing projects "into a pile of bad loans." Jim Chanos calls it a "treadmill to hell."

    Spain’s banks have a capital shortfall of €17B, according to Moody’s who maintains its negative outlook on the industry. Spanish banks have written down only €88B, while Moody’s calculates losses of €176B. Higher provisioning for losses combined with low loan demand and increased funding costs will squeeze profits in 2011. (STD) +1%.

    Banks’ total exposure to Ireland and the southern rim of the euro zone has been greater than previously thought, according to data from the Bank for International Settlements. The data illustrates how costly it would be if Greece or Ireland were forced to restructure their debts as part of a bailout.

    If the flow of credit really is the lifeblood of our economy, the U.S. would have died in 2009 if policymakers hadn’t taken the extraordinary measures they did, Barry Ritholtz writes. Bernanke & Co. deserve more respect for what they were – and are – up against. They are "heroes… for stabilizing the situation and pulling us back from the abyss." 

    After failing in earlier efforts to enter the New York City market, Wal-Mart (WMT) is in advanced talks with politically powerful construction unions over a deal to build stores with unionized workers. In a divide-and-conquer strategy for labor, Wal-Mart could use union laborers to build new stores here while still using non-union retail workers to staff them.

    Piper Jaffray is bullish on optical networking equipment provider JDS Uniphase (JDSU +4.9%), raising its rating to Overweight from Neutral. The optical market is no longer cyclical, and JDSU’s test and measurement gear for high speed networks will boost growth next year.

  16. NET $  =+1.15%,  dx/y = (.62)%
    C =1242.50, F =1237.75
    Chinese Yuan still falling faster, dx/y down today, but the nice peg keep the $$$/Yuan  = +.09%

  17. Phil,
    Where can I read how you calculate +1,000% on these trades? I’m just not getting it – yet.

  18. lflantheman

    cant’ I guess

    dx/y goes up, gold and oil go up

    dx/y goes down , gold and oil go up

  19. NAK is flying.  HMY is still the bargain gold miner and in a sweet spot at $12.50 as you can buy the 2012 $10/12.50 bull call spread for $1.40 and pay for 1/3 of that by selling the Feb $12 puts for .60 and that nets you in at $12.80 but the $10 calls keep the break-even at $11.40 so if you REALLY want to own a little gold, this is a mellow way to get started. 

    Dollar failed 80 now, down almost 1% from the open should be giving us a much stronger market move than this.  That leads me to think that the dollar is holding the markets up against selling pressure.  Euro at $1.332, Pound $1.578 and Yen jumped back to 83.69, which won’t make exporters happy tonight.  

    Calculations/Kallen – It’s just cash at risk vs cash paid out at the top.  I don’t have an article on how to do the math, it’s just the net difference.  

    OK, last Tuesday’s high on the Dow was 11,450 so that’s going to be key here.  

  20. Big Data Week Ahead:

    Date ET  Release For Consensus Prior
    Dec 14 08:30 PPI Nov 0.5% 0.4%
    Dec 14 08:30 Core PPI Nov 0.3% -0.6%
    Dec 14 08:30 Retail Sales Nov 0.8% 1.2%
    Dec 14 08:30 Retail Sales ex-auto Nov 0.6% 0.4%
    Dec 14 10:00 Business Inventories Oct 0.6% 0.9%
    Dec 14 15:15 FOMC Rate Decision Dec 14 0.25% 0.25%
    Dec 15 07:00 MBA Mortgage Applications 12/10 NA -0.9%
    Dec 15 08:30 CPI Nov 0.2% 0.2%
    Dec 15 08:30 Core CPI Nov 0.1% 0.0%
    Dec 15 08:30 Empire Manufacturing Survey Dec 2.9 -11.14
    Dec 15 09:00 Net Long-Term TIC Flows Oct NA $81.0B
    Dec 15 09:15 Industrial Production Nov 0.3% 0.0%
    Dec 15 09:15 Capacity Utilization Nov 75.0% 74.8%
    Dec 15 10:00 NAHB Housing Market Index Dec 16 16
    Dec 15 10:30 Crude Inventories 12/11 NA -3.82M
    Dec 16 08:30 Initial Claims 12/11 NA 421K
    Dec 16 08:30 Continuing Claims 12/05 NA 4086K
    Dec 16 08:30 Housing Starts Nov 545K 519K
    Dec 16 08:30 Building Permits Nov 570K 550K
    Dec 16 08:30 Current Account Balance Q3 -$124.8 -$123.3B
    Dec 16 10:00 Philadelphia Fed Dec 14.1 22.5
    Dec 17 10:00 Leading Indicators Nov 1.2% 0.5%

  21. Phil/TZA - picking up on the premium built into TZA  what about buying $16 ETF and selling April $13ps and $16Cs for $5.32 for net $10.74. A 48% return if the market goes south and it is called or put to you at net 2X TZA at $11.87, 26% below $16.

  22. XLF Jan $15/16 bull call spread at net .58 is a simple way to make money if things go higher so 20 of those in the 1050P can make us $840 if we head higher and we can set a stop at net .45 to limit the losses to $260 if things turn south on us.  XLF is at $15.75 now and I like trades where they have to work to take the money away from us.  

  23. Good Morning Phil, do you have a new short play on FCX now? it looks unstopable.

  24. Phil? HMY? no such symbol.

  25. Yes, it does.  HMY:Harmony Gold Mining Co. Ltd.

  26. dollar gettin hammered against the Swiss Franc = (1.44)%

  27. dx/y was (.54)% just after the bell now (.67)%
    the NET $ got hammered even harder, fell from +1.15% to +.53%
    C = 1243.37, F =1239.50
    oil = +1.42,  gold +12.90

  28.  The big losers today:  NFLX  PCLN  CMG.   All red .  Almost everything else is green.

  29.  AAPL.
    Over the weekend, there was news that I-pad 2 was coming.
    BUT, with a small screen, maybe 1/2 the size of the current version.
    That is weird.
    Particularly after Steve Jobs comments a month or so ago, denigrating all competitors like RIMM saying that a 7" screen would be too small to be functional.
    And now AAPL may come out w/ a 5" screen.
    I dunno, something weird going on.

  30. Cap, I think iPad 2 will have a 7" screen which is about half of the size of 10" iPad.  You are correct about Steve Jobs comments on a 7" screen and now it looks like Apple is making a 7" iPad 2.

  31. Pharma,
    I am still trying to recup some of the losses on BCRX got the stock at 10$ now 5.07 Playing puts and call against this stock. What is the future look out on this stock.
    I can not fail noticing that Phil is warming up on GOLD !!!!!! HMY

  32.  TLT at support at 92.50

  33. Good morning Phil,
    On the 1050P we are still long the QIDs and the DIAs? I have 2 x the 111P than the Dec sold 113′s… USO 36P’s still holding too? 

  34.  CMG … I think we may see upside bias thru tomorrow at least, CEO going to be interviewed tomorrow Noon by Motley Fool.  Be careful / patient w/ it.

  35. Since Phil gave the advice on the HMY play 10/12.5 Jan 12 option went from 1.40 to 1.45 interesting to many people placing orders at the same time!!
    I entered a B/W on HMY selling Feb 13c and Feb 12 p for 1.05 if expires worthless 9.4% called away 6.9%

  36. barfinger
    HMY is Harmony Gold Mining on NYSE

  37. rvnelson
    HMY yes NYSE

  38. Two questions I’m contemplating……Will the senate tax vote pass on the first call, and if not (or if so) how will the market respond?   Any thoughts? 

  39. Phil,
    The USD has dropped over 1.3% today and the markets have barely budged (up 0.3%).  I have been thinking for a while that a "big" drop will finally occur when the correlation between the USD and markets breaks down ie. they both fall simultaneously.  Does this make sense and could we be seeing the beginning of that breakdown?

  40. Just thinking out loud here Phil
    so is this dollar selling or is it the Yuan
    maybe Chinese inflation and them not raising rates is causing fear about inflation and their currency in China
    so two sceanrios
    1) people do not have easy access to sell the Yuan, so sell the dollar and get the benefit of the peg and get the Yuan down that way
    2) the Yuan is leading the way lower and the dollar is following

  41. lflantheman
    They will be playing  funeral taps,as the dividend and capital gains are suddenly in potential peril

  42.  Button -
    Correlation on USD and SPX looks really good over one year period – not so much on a three month chart – both have been rallying.

  43. Good Morning Vietnam!…. Oh, wait… Good Morning Wall St!
    Phil / big 9 — I’m surprised you didn’t reference the coming big banks currency manipulation platform. If you control the money, you control the markets! All of them, not just commodities.

  44. Sorry to do this during market hours, but I just wanted to make a website related suggestion to Phil and everyone here that we start prefacing ticker symbols with the "$" sign like they do on Twitter to make searches on tickers easier (e.g. $AAPL, $NFLX, $GS etc..). 
    As it is now, its near impossible to run specific searches on one and two letter tickers like C, X, S, BA, T.  Adding the dollar symbol adds a unique identifier that separates it as a ticker symbol.  It should make life easier for everyone.

  45.  Phil… time to dump those NFLX puts again?  In fact – I bought the Jan 150′s instead of the 155′s so I’m up about 20% now.

  46. C = 1244.36, F =1238.75 at 10:30
    10yr = +.58%,  30yr = +.16%
    VIX (2.84)%
    oil  +.66, was +1.26 earlier

  47. thank you. for some reason, it didnt show up on my site temporarily

  48. Phil, question for you that I have been pondering ever since becoming a member, and that is:  How am I supposed to understand your typical suggestion, that is, the bull spread combined with selling some puts; are the puts simply in order to help pay for the bull spread?  Or, as you repeatedly advise, not to sell puts unless we really want to own the underlying stock?  Furthermore, when buying the spread, is the intention for us to buy the underlying as well? 
    If things go the way you want on these suggestions, and the stock rises, then is your intention to sell the spread (buying back the short call and selling the long one), as well as the short puts (that should be cheaper at that point)?  And if things go the opposite direction and the underlying goes down, what do we do with the combo?  In other words, I’m trying to fathom the mechanics of this trade before I actually try it, because it’s not clear to me how to manage it…
    Thanks for your help, it’s clear there are some good ideas and smart people contributing to the banter on the "chat," but there may be some other rather inexperienced people like myself out there as well…

  49.  Yodi, 
    I am new on here.  To make sure I understand your HMY play, you purchased stock and then basically did a short strangle, selling the Feb puts and calls, right?

  50. TZA/Brook – TZA/Brook – Perfectly good buy/write.

    FCX/Bob – Crazy copper pricing and gold over $1,400 means stay away from shorts unless you have some real conviction.   Jan $105 puts at $2.45 would be the best bang for the buck as a short on them.

    IPad/Cap – I heard same size with 2 cameras.  Something between IPhone and IPad size is just what I want, I was kind of bummed out when Steve was dissing a smaller product.  I think something about the size of  a paperback would be perfect for reading.

    Gold/Yodi – Well, if we’re going to the moon on gold, we don’t want to ignore it.  We were done with HMY, NAK and ABX last week – HMY is the only one I can see reloading on at the moment.  

    1050P/Amatta – Yes, the lyrics come to mind:

    Suffering in silence, they’ve all been betrayed

    They hurt them and they beat them, in a a terrible way.  

    Praying for survival at the end of the day.

    There is no compassion for those who stay…

    Holding our short positions kind of reminds me of that at the moment.  

    Actually, in the 1050P, I favor taking out (buying back) the Dec $113 puts at .28.  If the Dow turns down here it will be a wise play and, if not, it will be hard to be more screwed.  

    Wheee – finally oil breaks down!  

    Dollar/Button – That’s what I’m thinking.  If the dollar falling no longer boosts stocks, what will be left.  We need another Trillion of stimulus to get another 5% move?

  51. Good morning,


    No change; still in the channel 

    IWM 78.68, 78.22, 77.98, 77.62, 76.81, and 76.45……………but there is this from PUG


    Primary count is that major [1]-P3 ended at 1240.40 Friday with minute wave (5) of minor 5 terminating in an Ending Diagonal (ED) with a small over-throw.  The first significant target for the developing major wave [2]-P3 correction is minor A-[2]-P3 at 1177/1187 pivot support.  There is gap at 1180/1187 that needs filling.  This A-[2]-P3 wave should take 2 to 3 weeks or the end of 2010.  Minor B-[2]-P3 should bounce to the 1219/1229 pivot area by mid-January Q4 earnings season.  Finally minor wave C-[2]-P3 will terminate in the 1153 area in mid-Feb 2010 for a 38% retrace of major [1]-P3.  So what we are looking at here is a minimum 87 point -7.0% correction for major [2]-P3.  There are certainly deeper correction targets of 1126 (50% retrace) and 1098 (62% retrace), but 1153 is the minimum target.

    Alternate count is that an ascending triangle for wave (4) broke-out today with a wave (5) target of 1251 by Tuesday, 12/14.  This would finish up at the Inverse H&S target of 1251 off the 1011 low of late June 2010 with neckline at 1229.  The major wave [2]-P3 correction from this alternate count are virtually the same as for the primary.  The 1257 pivot resistacne should stop this alternte count

    SP-500 5-min chart (EOD):

    SP-500 15-min chart (EOD):

    SP-500 60-min chart (EOD):

    SP-500 Daily chart (EOD):


  52.  Pharm/ AWRY
    thinking to open Buy/write, do you see any risks to do it now?

  53. JRW – Great charts. Thanks for all the help

  54. JRW / S&P  -- so your charts say "it’s going to go one way or the other", right 8)
    Any idea what software that is?

  55.  Pharm
    sorry it is ARRY

  56.  MolyCorp (MCP) being pumped by CNBC. Up 11% today.

  57. danosu77
    On HMY yes you are correct by buying the stock you will not pay margin on the short caller but you only pay margin on the putter. Just remember Phil’s rule sell only putters if you like the stock and in this case you would buy the stock at a dicount of in my case .50 for 13.50 if consigned to you, but remember in that case you still have the credit of the caller so your net is 11.75 in my case.

  58. Hi JR,
    You TNA on this POMO day?  How’s the weather in your area.  Nice blizzard in our parts.

  59. JRW as my dad used to say, "you are one fart smeller!" but i think what you were trying to tell us is that we are either going to go up or we are going to go down. :)  

  60. aw, rainman beat me to it.

  61.  Can our PSW Vegas planner send me an email?  I have some questions about the meeting. Thanks

  62. danosu77
    Some of our members are very strong on buy write, which should be the fundamental base of a portfolio. We do have now a excel calculator on B/W. , A combination of effort from various members. You just need to check when entering a B/W that your basic profit is over 3% per month so it does not help to set up these plays for many month ahead if your return is less as well as you are exposed for a longer time! Stock paying a good divident will not pay very much for the callers. But you always can combined the interest together with the pay on the short caller.

  63. Yodi:
    Where is the "excel calculator on B/W" located?

  64. GOLD , Phil , I am to old to look for it on the moon but I am in the gel1 camp on this one, It does not bring you much return, but is feels to me like a hedge against todays up and downs.

  65. Looking for a bounce at IWM 77.62 +/-

    rainman, morx

    Wow, you guys read my book 8-)

    exec / TNA

    I was in TNA but got out as IWM failed 78.22; looking to get back in !!  60 degrees and clear here; perfect for maximum air/fuel ratio; I may have to scoot out early 8-)

  66. Phil , Your EBIX play is showing life again up 1.32. The Dec 21putter is now running out of steam, shall we roll it to a higher number 22 or even 23 1.50 or 2.07  Mar 11? thks

  67. Phil,
    It’s amazing what is going on with the banks.  Did they really F*** with you for daring to use ICE name in vain?

  68. Phil
    What is the NFLX target, got the puts @ $1.60, $2.20 + mow?

  69. dclark41
    I do not know how to place it on Phil’s site but can send it via email send request to

  70.  Thinking/Mike – Always a dangerous thing to do!  That’s interesting but the Dollar is not pegged to the Yuan, it’s the other way around and I’m seeing more and more evidence that China has been funding their growth and keeping the Yuan low by simply printing tremendous (on a relative economic basis) amounts of currency and the shocking food inflation they have now is the early sign of hyper-inflation.  That means they CAN’T stop it because they don’t really have the money everyone thinks they do.  Of course they are buying up commodities because the suckers who sell them are exchanging them for bills that come right off the printing presses!  Of course, the commodity pushers aren’t so dumb because the BS Chinese "demand" drives up the price all over the World so maybe they get ripped off by the Chinese but the Americans, Japanese and Europeans are all dumb enough to pay their own semi-legitimate currencies for oil, gold, copper, etc. at the insanely inflated China prices.  

    This is the kind of abuse that creeps into the system when nations begin to abuse the fiat money system and today’s market action is more of a recognition that China and the US are currently engaged in a race to the bottom in valuation.  To some extent, you may be right – perhaps it’s Timmy and The Bernank who are trying to keep up with the PBOC, who simply flood their local market with more and more cash to make their Billion people feel richer. 

    Speaking of which, now Disney feels compelled to explain why inflation is a bad thing!  

    Currency manipulation/Rain – Oh, that was so last week.  We’ve moved past that one already.  As I said in the secret meeting post "Yawn."  Hard to be outraged by the daily outrages that are uncovered…

    Adding $/Kinki – It’s a good idea but I forget to do it on Twitter too.  We have the Wiki going up and we’ll have to see if they have that indexing problem licked or not.  

    NFLX/Sr F – You should ALWAYS be thrilled to make 20%.  Beats losing 20% by 40%, you know…  This is where they held before but you can always (when in doubt) sell half and put a stop even on the rest so you lock in a 10% gain and have a nice buffer (20% trailing stop).  If you are well ahead on other positions, you can afford to take chances on something like this but not if you have struggling short positions and this is one of a few winners.  

    Spreads/Jercon – I think we should focus on the word NEVER, as in NEVER sell a put in a stock or ETF you don’t REALLY want to own long-term at the net strike.  That means some trade ideas will be ones you want and some will not.  These are not the kind of things that play out in short amounts of time and, as is suggested in the New Member Guide, I would suggest setting up your own virtual portfolio (TOS has a good one) and just plugging in plays you like and following them along.  What you are doing right now is like asking a chess player why they moved their night out on move 3 because you don’t see how that’s going to get them a checkmate on move 26.  There are millions of possibilities in between and there is no magical answer that will clear everything up for you overnight.  

    This is a system and you must learn how to enter and manage trades under various market conditions and the key to getting good at it is practice, practice and practice.  The most important things to learn are pretty simple – learn to take profits and learn to scale into positions – both covered in the Strategy section.  There are also, in the linked article on Scaling, a bunch of long comments about strategy but you can read and read all day long and it’s no substitute for practicing the trades under real market conditions.  This is a "get rich slow" strategy, not quick…

    Charts/JRW – Well, it looks like we’re at an inflection point – at least that’s pretty clear.

    MCP/Aug – It’s funny because I saw that interview and all I get out of it is – It’s not actually rare, more like it isn’t worth mining in most places due to low concentrations but that means there’s a ceiling on price as supply becomes infinite at a certain level and commodities like that (like Ag commodities) are prone to very sudden swings of oversupply once prices spike and production ramps up at marginal sites.  

    Selling puts – By the way, this reminds me.  Keep in mind that you can make a very nice 30-100% on just the bull call spreads – it’s not like you MUST sell the puts to make a trade.  Also, as I outlined in the weekend post, you don’t HAVE to sell puts in things I suggest, sell puts in whatever it is you do REALLY want to own to raise the cash.  If there’s nothing you REALLY want to own – DON’T SELL PUTS!!! 

    Gold/Yodi – It was a hedge 50% ago, not it’s an inflated commodity.  Could go higher but VERY dangerous.  

    Speaking of which – oil $88.20 – Yahoo!  Amazing how many times we can make that same trade!  

    EBIX/Yodi – Sorry but I have no memory of that recently.  I know we liked them last year at like $18.  Anyway, I think you can play with the 50 dma at $23 as support if you want to play more bullish.  You can get $1.10 for the Jan $23 puts and those can roll to the March $21 puts if you get in trouble so may as well take the money sooner than later.  

    ICE/Exec – I really can’t talk about it other than to say they were very nice about clearing up some discrepancies between what I suggested was happening in the article and what I could prove.  This kind of thing goes on all the time – how many writers can afford to litigate something as slippery as the truth in a corporate case?  That’s why I found the NYT’s use of "like" amusing – it’s a trick I’ve since learned.  

    NFLX/Shadow – 37% is generally good for me.   I think NFLX should be at $170 but clearly there are many who disagree with me and this has been firm support so why not just take money and run.  As I suggested above to Sr. F – Take half and stop half at 20% and lock in 30%ish.

  71. shadow

    Talk about symmetry. Right now it’s real simple. Trend channel support is the lower green line. Trend channel resistance is the top green line at about 210-212. A retest of the recent highs is 205 so to the upside those are places where they’ll have to deal with some issues.

    So where to from here? All we know is where the technical support and resistance levels are, actually that’s all one ever needs to know when trading stocks.

    As an aside from what we understand there are 11 million shares short this issue, but that doesn’t mean they are all going to cover. And the index funds have 5 days before this issue is in the SPX. What remains to be seen is whether they’ll have an upward bias from now till then.

    That also by the way is right smack dab into options expiration for December.

  72.  Thanks Phil… I have several struggling shorts (the 1050P ones)… but I agree NFLX needs to go lower.  I took your suggestion (sold 1/2… and put in a 20% stop on the rest).  This give me a 22% gain worst case.  Thanks for the great insight as always!

  73. humvee,
    Just a note to make sure you saw the nyt article about ntap. An awfully big bite at $20B as takeover.

  74. Phil,
    Since I am 90% cash I am looking for a couple of down trodden long term plays. I like DF down here with their 12B in revenue. Since they do not pay a dividend do you have any spread ideas, or just buy the stock and sell leaps?

  75.  rj_jarboe/long term down trodden plays – see CSCO play from last Thursday.

  76. Thanks for the thoughts and the Disney video

  77. Phil / ICE

    And I thought your article was about THIS private club !!


  78. Judy;  thanks so much for remembering me; no, I didn’t see the article, I will check it out right now!!

  79. Phil JRW
    Thanks for the advice, just sold @ $2.25 FOR 40%, to bad only 5 contracts on the 1050P.

  80. And there goes the dollar !!

  81. Hmm, where would the Nas be today without AAPL, who are about 20% of the index, being up 1.25%?  That’s 0.25% added to the Nas by AAPL alone yet the Nas is kind of flat.  Uh oh….

    DF/RJ – No need to buy them at $8.22 as you can just go for the 2013 $7.50/10 bull call spread at $1.10 and sell the $7.50 puts for $1.65 and that’s .55 in your pocket on no worse margin than buying the stock but you make $3.05 at $10 and have a break-even of $6.95.  

    10:00 AM On the hour: Dow +0.21%. 10-yr -0.13%. Euro +0.87% vs. dollar. Crude +1.83% to $89.40. Gold +0.93% to $1397.80.

    11:00 AM On the hour: Dow +0.38%. 10-yr -0.32%. Euro +1.26% vs. dollar. Crude +1.48% to $89.09. Gold +0.97% to $1398.40. 

    Today’s POMO has the Fed buying $7.79B in Treasurys, of $18.268B offered by dealers. Meanwhile, the Fed’s new schedule set the next month’s buying at $105B, less than expected, though two operations on Dec. 21 may make a good day for slower holiday markets.

    EU POMO:  The ECB purchases €2.67B of government bonds – mostly of Ireland, Portugal, and Greece – last week. The number is much lower than expected after bank trading desks saw the largest trades being made since the program’s launch in May, when the ECB purchased €16.5B of sovereign debt. 

    12:00 PM On the hour: Dow +0.36%. 10-yr +0.27%. Euro +1.3% vs. dollar. Crude +0.82% to $88.51. Gold +0.84% to $1396.60. 

    Democrats predict that the tax agreement will clear a crucial hurdle in the Senate today, with a margin they hope will add momentum to the deal in the House. A key lawmaker believes that some version will pass the House before the current session ends, but Speaker Pelosi walks a tax-cut tightrope, letting angry members vent frustration while also preserving the chances of passage. 

    Kevin Hasset plays down fears of a catastrophe should Ireland default. Just because the world is interconnected "doesn’t make every cough a sign of pneumonia."  Instead of making tough policy changes, lawmakers use this worry of "panic around every corner" as an excuse "to do whatever they choose." 

    Municipal bond issuance may drop 20% next year, Citigroup forecasts, in part due to sales moved up to this year to take advantage of expiring federal programs. Issuance this year is nearing 2007′s record of $430B.  

    The number of underwater homes dropped last quarter, CoreLogic reports, but that’s because of ramping foreclosures rather than any rise in values. The number of homes worth less than their debt dropped to 10.8M (22.5% of those with mortgages) from 11M (23%). But continually declining values are likely to bring even more negative equity. 

    A tire-dispute victory for the U.S. as the WTO rules against China in its complaint over U.S. tariffs. It’s another step in a growing storyline on the world’s top two economies and their disputed trade in tires, steel pipes, poultry, car parts and entertainment (so far). 

    In order to keep up with seemingly insatiable Asian demand, Brazilian miner MMX (MMXMY.PK -3.3%) will invest $2.9B to increase production at existing projects. This follows last week’s news of MMX’s $2.2B purchase of iron-ore shipping port, PortX. 

    They’ll beat ANY estimate!  Although analysts raised Apple’s (AAPL +1%) Q1 earnings estimate to $5.26/share, the number "is still way too low," says Stephen Rosenman. He examines both the number of devices sold and operating income per device sold. In Q1, he predicts Apple will sell 43.7M devices to earn $5.5B, or $6.05/share.

    Noting the WikiLeaks hackers’ limited success so far in crashing sites, investors should "buy every dip" on Amazon (AMZN) and eBay (EBAY) that’s based on any resurgent attack rumors, says Formula Capital. It also recommends Cisco (CSCO), given it offers technology to fight these denial of services assaults.

    A Virginia federal judge rules part of the healthcare reform law – the individual mandate setting fines for those who don’t carry insurance – is unconstitutional, siding with the state against the federal government. Brief spikes in insurers have largely come back to earth: WellPoint (WLP) +0.8%; Cigna (CI) +0.1%; Aetna (AET) +1.3%; UnitedHealth Group (UNH) +1.6%; Humana (HUM) +0.3%

    Treasurys were under pressure after today’s Fed POMO purchase, but they’ve recovered in the wake of a judge’s ruling striking part of healthcare reform. The 30-year yield now -0.03 to 4.39%; 10-year -0.05 to 3.27%; 5-year -0.08 to 1.9%; 2-year -0.04 to 0.6%.

    Three lunchtime reads:
    1) The eurozone is in bad need of an undertaker
    2) China: the bear case
    3) Say goodbye to the bond bull market

  82.  ObamaCare UnConstitutional   (no surprise there)  
    A Judge Just Ruled Obamacare To Be Unconstitutional by @thestalwart
    United States District Judge Henry E. Hudson ruled that individual mandate "exceeds the constitutional boundaries of congressional power.
    This will wind up in Supreme Court …

  83. ICE/Gel – I wonder if the serve warm drinks at least…

    Dollar/JRW – Damn, 79.5!  Not getting much market movement out of it but time to kill new Dec USO shorts (.60) as well as NFLX Jan $155 puts ($2.25) in 1050P.

    Quick 1050P notes:  QID Jan $10s – holding, DIA Jan $111 puts now naked, XRT Jan $46 puts – holding, USO Jan $36 puts – holding.  

    That’s it for positions there now! 

  84. Interesting to see insurers stock spike after the judge rules individual mandate unconstitutional (2 have ruled it constitutional BTW) as the individual mandate is favored by the industry – more clients. Once again, irrational reactions in the market! And starting tomorrow, I am cancelling my car insurance. The government can’t force me to pay for that either!

  85. And banks stocks should head higher soon:

    Spencer Bachus, Republican of Alabama and new Chairman of the House Financial Services Committee:

    “In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks,” he said.
    It seems to me that bank robbers are now just trying to get their money back…. Where are Bonnie and Clyde when you need them.

  86.  Phil, if you GOOGLE "netflix short"  the first 5 entries are articles saying not to short netflix yet.  Is this a tell?

  87. C = 1245.34, F =1240.25 at 12:40
    oil +.35, gold +13.70
    10yr = (1.09)%,  30yr = (.79)%
    VIX (3.58)%

  88. NET $ +1.62%, dx/y = (1.13)%
     if the NET is anywhere close to right, things (market) should be collpasing, but gold and gold seem to be showing the NET $ as invalid
    this is the biggest discrepancy I have ever seen on the two, see what the market does
    the $$$/Franc (1.60)% now

  89. stjeanluc

    do you have a link for that quote, I have someone I need to share that quote with
    sounds like him though

  90. let me know which worked, trying to get embedding down cold :)

  91. Phil,
    A technical question in in rolling a short caller to the following month as the present caller has run well in to ITM.
    I wish to refer to , which I recommended a while ago. Sold the MSB Jan 50 caller in combination with the stock for 3.30 stock MSB went up to 57.68 3$ today! The 50 Jan caller is now 8.60 with a delta of .80 Rolling the caller to Mar 11 say 55c at 6.50 with a delta of .60. The basic question, is it better to roll at present circumstances or wait till the stock has cooled down. just for the record I bought the stock for  originally 9.80 and 42.70. The same is actually on fire with an interest payment of 6.3%.
    Obviously the .80 delta always has a better bang than the .60. When and where to would you roll. Thanks

  92. thank you

  93. Phil DIA mattress I am thinking of rolling the Mar11 114 to 115 for .45 or to 116 for .92 your thoughts

  94. banks and wall street going to love that Bachus quote, unreal

  95. Wow, nice pop in oil going into close….

    maybe misguides, but all I can think of, is that old support becomes resistance

  97. Car insurance/StJ – That’s another massive scam.  Necessary to a degree but mostly about paying off lawyers. 

    Getting a nice move down in DECK.  

    Banks/StJ – Isn’t that just sick?  I think you’re right and I think my cousin’s show (Bonnie and Clyde Musical) will be a big hit as it’s good timing.   It was a similar situation, the banks wrecked the country and, in the depression, the bank robbers were the heroes.  

    NFLX/Craig – That’s very interesting.  I wonder how much something like that can be fixed by title selection, etc.  

    See what the market does/Mike – Why up of course.  That’s what it pretty much does in all circumstances…

    BAC/Mike – Wow, I thought that was far away.  The 2nd one was not embedded, it’s embedded when in a link like this.  

    MSB/Yodi – Sometimes you just need to resign yourself to getting called away.  You made your $53.30 off whatever basis and the stock is at $57 with the $50 call at $8.50.  You can roll it along and accept more risk but is that safe or is that the best use of your money?   I’m sure you want to 7% dividend but that’s why we usually go out much further in time on these – they don’t pay good premiums so we sell as much as we can.  If you roll to the June $50s, you will get about $2 more and keep all the protection.  If they call you away – so what?  That $2 more in your pocket (4%).  If you are willing to DD, you ca sell the $45 puts for another $4 (8%).  That plus the dividend is a nice combo.  

    Bachus/Mike – LOL, this guy is funny, as are his friends: 

    "I think it’s tremendously important for Alabama. There are a lot of states which have a significant banking community but don’t have a voice in many policies that affect them," said Palmer Hamilton, an Alabama lawyer and lobbyist who represents financial institutions in Congress.  Those poor bankers!!!  I guess this guy never heard of New York – I’ve heard they have a couple of banks over there too.  



    Mattress/Yodi – Yes, good idea to roll up to the March $116 puts (from $114 puts) for +.92.

    Oil/Jrom – That’s why we take the money and run on the Dec puts.  

    my other rant
    sure seems like the FED and ZIRP, is just being funneled into these pre-structured bankruptcies as stealth bailouts

  99. Up almost 90 cents going into close, what a joke.

  100. while we are waiting, Phil, i am looking at the CAKE trade from this weekend. Cake is a bit down today but the spread looks to be costing more than you calculated. I’m seeing about 4.90 instead of 3.90. Is that what you get? thank you.

  101. Pre-Lehman S&P/mike:  Looks like the DXY index was in approx. the same area (79) at the time too. 

  102. 01:00 PM On the hour: Dow +0.43%. 10-yr +0.43%. Euro +1.54% vs. dollar. Crude +0.43% to $88.17. Gold +0.9% to $1397.40. 

    02:00 PM On the hour: Dow +0.43%. 10-yr +0.42%. Euro +1.47% vs. dollar. Crude +0.51% to $88.24. Gold +1.04% to $1399.30.

    The market’s gains last week had the scent of desperation buying by investors playing catch-up, some veteran traders say. Smaller stocks – the Russell 2000 jumped 2.7% last week, vs. a 1.3% gain in the S&P -  especially are being snapped up by "the guys who didn’t get in when they should have gotten in" a few months ago.

    A bipartisan group of Senators is writing Bernanke expressing concern with debit-card interchange-fee limits, saying that as with most price-fixing, consumers are set to lose. The limits could wipe out billions in revenues for big debit-card issuers like BofA (BAC), Capital One (COF), Citigroup (C) and JPMorgan Chase (JPM). The Fed is set to discuss the fees Thursday in a webcast meeting

    As investors cheer China’s decision not to raise rates last weekend, FT’s Lex argues inaction in the face of rampant growth in money supply, production, investment, and inflation "should prompt concern, not a rush to take on more risks." Gavekal suggests inflation may be about to peak, taking away the pressure for rate hikes. 

    The big banks aided by the bailout are set to close out their second-most profitable year ever, after last year, thanks in part to derivatives. A NYT investigation lays out how a handful of banks are working with derivatives exchanges to protect their own profits. Meanwhile, a new poll says Americans overwhelmingly support banning big bonuses at bailed-out banks.

    Recent shipment data indicates the Q4 PC notebook market is in better shape than expected, argues Sterne Agee, largely through demand in China. Some original device manufacturers claim that PC shipments are either flat with Q3, or down by just 5%, better than the seasonal expectation of a 10% to 15% decline.  What?  We’re worse than last year? 

    With options pointing to $100/barrel oil next year, OPEC cheating is at a six-year high as producers plan to pump that crude. Cartel countries (excluding Iraq) have exceeded quotas by 1.934M barrels a day this year – the most since 2004 – and unchanged quotas for next year aren’t likely to hold in this price environment. 

  103. Phil just like to correct DIA Mar 11 114 to 116 is .92

  104. CAKE/Morx – I would not pay an extra $1.  .25 max.  I’m liking the 2012 $30/35 bull call spread at $2.50, selling the $25 puts for $1.90 and that’s net .60 on the $5 spread that’s $3 in the money and worst case is you own them at net $25.60, which is more than 20% off.  Of course CMG is off 2.6% today so there’s a sector drag. 

    SQQQ March $35 calls at $2.65 are nice considering they were $5.75 last month and SQQQ was $45 in October. 

  105. Mattress/Yodi – Thanks very much!  So goal there is naked March $116 puts, now $4.55.

  106. Damn, now NFLX falls!  We do hold up the markets with our puts…  

  107. Full story here !


    Based on the latest S&P 500 monthly data, Short concludes that the benchmark is overvalued by 59%, 42% or 37%, depending on which of the three metrics you choose.

    Indeed food for thought …

    Click here or on the graph below for a larger image:

  108. maybe I can get this right eventually on embedding

  109. According to Richard Russell,

    "and as I write the dividend yield on the Dow is 2.56%. I go along with Charles Dow’s ’rule’ − a dividend yield under 3.5% is risky if not dangerous.

    Based on history and based on the current dividend yield, stocks are not now priced to produce profits over coming years.”

  110.  NFLX & CMG being taken to the woodshed today !
    Now its FCX every bot wants.

  111. This is not good

    Large consumer (5.1%) and producer price (6.1%) gains in China was not immediately met with an interest rate hike from the PBOC, at least not yet, and the lack of one sent the Shanghai index up almost 3% and the rest of Asian markets followed. That strength spilled over into Europe and has the S&P futures also higher. Copper prices are rising to fresh record highs. The consequence though of all of the above is another rise in interest rates where the US 10 yr yield is at another fresh 6 month high. Tomorrow, the FOMC gets together for the 1st time since Nov 3rd when they announced more asset purchases for the sole purpose of suppressing interest rates. Instead since then, the 10 yr yield is up 78 bps and the average 30 yr mortgage rate is up by 66 bps. Oh to be a fly on the wall of that meeting.

  112. JRW
    Thanks for all the input today, I posted last week that I believe the market is do to retrace but are we wrong? I am still holding those IWM puts like you. I think next time I will sell calls for half the position to offset the premiums. As usual you see things better than me but I need to make up for the shorts that lost. SELL SELL SELL!!!

  113. Phil / Cash   What % cash are you currently guiding?

  114. Strange music – Beatle version of Stairway to Heaven.  

    Yay Mike!!! You did it

    Funny how today they are using all available firepower to push the Dow and everything else is slipping.  It’s like watching a juggler when they are just about to lose the whole thing…

  115. South Korea boat sinks in Antarctic sea; 22 feared dead

    In this undated photo, South Korean fishing boat No. 1 In Sung is in a port. Fishing boats searched for 17 missing sailors from the South Korean vessel that sank Monday, Dec. 13, 2010 in the Antarctic Ocean, leaving five dead, officials said. YONHAP / AP Photo
    By HYUNG-JIN KIM & RAY LILLEY Associated Press
    Published: 12/13/2010  6:57 AM
    Last Modified: 12/13/2010  6:57 AM

    WELLINGTON, New Zealand — A South Korean fishing boat sank in the Antarctic Ocean’s frigid waters Monday, with 22 sailors feared killed in the open sea where vessels trawl for deep-water fish.
    Five sailors were confirmed dead and 20 survivors were rescued shortly after the 614-ton vessel went down some 1,400 miles (2,250 kilometers) south of New Zealand, about halfway to Antarctica, South Korea’s Foreign Ministry and coast guard said. Seventeen sailors were missing.

    Read more from this Tulsa World article at


  116.  Hi everyone:
    GOOG just completed "Filling the gap" from its last earnings announcement ($540-$600 on Oct 15, 2010), closing in today on $600, after dropping to about $555 two weeks ago.  Looking to sell short term (dec) 600P covered by 580P for net credit of about $5.  I am already short dec 600C (sold at $4.7), so via this trade, looking to create a buffer that GOOG will be pinned somewhere between $590-610 into expiration, and hopefully,  with luck, at $600.
    It’s a bit too risky and would like to hear what others think about this trade idea..

  117. wow
     the NET $ just jumped to +2.30%, as the dx/y = (1.24)%


  118. Cash/Tusca – I’d go for at least 70% and that’s expecting that the bulk of the 30% is very well protected (deep buy/writes with 20%+ downside protection).  I would not be in the least bit surprised to wake up one day to a 10% drop so I think it’s crazy not to be ready for something like that.  Probably, the more cash the better as there will be huge opportunities if we do get a nice sell-off and, if we don’t – then we’re on the way to 1,400 and we can just pick pretty much anything and look smart.  The longer we travel above those breakout levels – the better support they become so we can get more and more confident with investments as these tops prove themselves to be bottoms.  So far though, I’m still waiting for the Dow to prove 11,500.  

    War/JRW – SEP in action.

    GOOG/DrMtv – Well any bet that GOOG will roll over and play dead for you within a $20 range is risky.  To me, if they are going to hold $600 then they could easily pop back to $620 any time.  If they are not going to hold $600, then $580 makes sense for a re-test.  In short – you play with fire and it’s fun but you may get burned – just be realistic about the prospect.  There’s a reason they pay you big money to take on the risks.  

    Net/Mike – This was quite a violent day.  Very disturbing that the market stayed pretty flat against it.  

  119. DrMtv/GOOG – since stock prices mean nothing except in relation to market cap / shares outstanding, I sometimes I like to remove a digit or two and then ask myself if it still sounds like a good idea. For example, if GOOG was a $60 stock, would you expect it to stay in a $59-61 range? If it was a $6 stock, would you expect it to stay in a $5.90 – $6.10 range?

  120. JRW
    do you have a subscription to the Tulsa World or did you find that article on another site. The link you have won’t let me read it.   Thanks

  121. Sell the f-ing pops!

  122. z401 / OK subscription

    No, but this should work; and then there is this.

  123. matt / pop — but this is a dip! ;-)

  124. Now that’s funny! Maria says the momentum has come OUT of the market! Looks like downward momentum to me!

  125. JR,
    RUT weak today any idea why?

  126.  Finishing ugly for a change.  

    Dollar 79.66, Euro $1.34, Pound $1.586, Yen 83.41.  Silver $29.45, Copper $4.21, gold $1,394, oil $88.32, Nat Gas $4.41.

    I’ll be surprised if they don’t stick the Dow back to 11,450 after all this effort.  

  127. Colder than a well diggers rear end at Disney World.  Not busy at all (which is why we chose this week).  Nothing missed in the market I see…check back late tonight.


    OREX – someone sent me an email and I apologize about not getting back right away.  Scaling into the Ps in April range is my preference and selling C and Ps in the front months (January now) on the ups and downs of the roller coaster is the best way to play.  I am going to look into some good verticals or even a few OTM Ps. Later all!

  128. Does anyone know if tomorrow is a POMO day?

  129. funny almost went negative on the S&P and then everyhting just came to a screeching halt

    cannot have that

  130. Oh dear, where did all these sellers come from?  8-)

    Well that was fun but anything could happen tomorrow as we wait for Senate vote and then it’s a Fed day.

    I have to run to a meeting, we’ll see where things wind up after hours.  

  131. exec / RUT

    It’s been a MOMO; now it’s not 8-)

    No POMO tomorrow !!

  132.  Market Watch Article on NFLX – reasons not to short

  133.  samz/NFLX — and marketwatch published this on a -6% day …. credibility zero.

  134. Phil,
    Here is the root of my question earlier today in trying to understand the estimated high percentage gains for these trades. Following the FAS trade introduced on Friday 12/8 …
    Buy the FAS April $20/25 bull call spreadfor $2.70, sell the April $21 puts for $2.55, which is net $0.15 on the $5 spread that’s already $4.25 in the money.  So, if FAS makes a $0.75 gain between now and April expiration and holds it, this trade makes a 3,233% profit
    In forcing those limits into ToS today (Mon 12/13) and using actual costs (factor of 100) - buying 1 contract  of the call spread and selling 1 contract of the puts, it looks like I commit $2,115 in capital and the net profit at expiration (if transacted today) would be $485.
    If we assumed that it was bought at Friday’s low of 25.96, it looks like there would have been another approx. $30 of profit at expiration which would bring estimated profit at expiration (expires above $25 strike price) to $515.
    How do we get to 3,233% profit? I must be missing something elemental.

  135. Phil,
    Never mind. :-) It’s a good think I thought this out in front of everybody.

  136.  Ken,  I didn’t get this either at first, but for a .15 cost you earn 458.  .15/458 is 3,233%

  137.  Sorry 485/.15 is 3233!  

  138. Well, I am sure he was objective:
    Henry E. Hudson, the federal judge in Virginia who just ruled health care reform unconstitutional, owns between $15,000 and $50,000 in a GOP political consulting firm that worked against health care reform. You don’t say! 

  139.  I was hoping CMG would get this sell-off in before Dec expiry.

  140.  Phil
    FAZ is now about 15% lower than it was back at the April highs. Do you like it as a bearish play? if so – how?

  141.  For you shoot the messenger folks, expand your minds behind knee jerk liberal talking points:
    Judge Hudson’s opinion is particularly valuable because it dispatches the White House’s carousel of rationalizations for its unprecedented intrusions. The Justice Department argued that the mandate is justified by the Commerce Clause because the decision not to purchase insurance has a substantial effect on interstate commerce because everybody needs medical care eventually. And if not that, then it’s permissible under the broader taxing power for the general welfare; and if not that, then it’s viable under the Necessary and Proper clause; and if not that, well, it’s needed to make the overall regulatory scheme function.
    But as Judge Hudson argues, the nut of the case is the Commerce Clause. Justice can’t now claim that the mandate is "really" a tax when the bill itself imposes what it calls a "penalty" for failing to buy insurance and says the power to impose the mandate is vested in interstate commerce. Recall that President Obama went on national television during the ObamaCare debate to angrily assert that the mandate "is absolutely not a tax increase."
    Moreover, Judge Hudson says that no court has ever "extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market."
    Liberals are attacking Judge Hudson because he was appointed by George W. Bush, but his ruling is relatively narrow. He didn’t strike down the rest of ObamaCare even though it lacked a severability clause, and he didn’t enjoin the law’s implementation pending appeal. His opinion also doesn’t touch Virginia Attorney General Ken Cuccinelli’s long-shot claim that his state’s "health freedom" law can nullify an act of Congress. In fact, federal laws that are constitutional are supreme under the 10th Amendment.
    Yesterday liberals were crowing that even if the mandate is eventually declared illegal, it’s no big deal because the rest of ObamaCare’s new system would remain intact. Yet they’ve argued for years that the mandate is essential to health reform, because the mandate is at the heart of the regulatory machine. ObamaCare without a mandate would mean individuals wouldn’t have to pay into a system until they were sick, driving up costs even faster and ruining what’s left of health insurance markets.
    While Judge Hudson’s ruling is the first to declare part of the law unconstitutional, more than 20 state attorneys general and the National Federation of Independent Business are also suing in Florida. Oral arguments will be heard on Thursday in that case, which we think is the strongest constitutional challenge to the law.
    As the Virginia case shows, ObamaCare really does stretch the Commerce Clause to the breaking point. The core issue is whether the federal government can order individuals to do anything the political class decides it wants them to do. The stakes couldn’t be higher for our constitutional order.

  142.  Cap
    I’ve been away all day… looks like I did not miss much – just a lot of "back and forth" trading dollars. It is hard to overlook your posts, as I "get religion" after reading your late in the day missives. Lots of stuff happening in the "tug-a-war" between the libs and conservatives. I think the balance is in favor of the conservatives, as the folks are tired of the fiscal mismanagement and extraordinary level of deficit and accumulated debt., which is "killing" this country. As a California resident, this catastrophe is in full dress, and it is honestly not even a concern of the liberals. " As Pompeii burns, the party-goers are oblivious to the consequences. Keep it up, Cap… at least I know I am not alone in my thoughts!

  143. Gel – you know you arent alone! Flip, humvee, Hoss, Cap, all are very vocal in their politics! The liberals on this board (myself, shadow, Biodiesel, and others) are usually quiet and only RESPOND to CAP’s constant attacks…

    Today Hussman writes a warning to stock investors: 

    “In recent weeks, the U.S. stock market has been characterized by an overvalued, overbought, overbullish, rising-yields syndrome that has historically been hostile to stocks. Last week, the situation became much more pointed. Past instances have been associated with such uniformly negative outcomes that the current situation has to be accompanied by the word "warning." 
    The following set of conditions is one way to capture the basic "overvalued, overbought, overbullish, rising-yields" syndrome: 

    The following set of conditions is one way to capture the basic "overvalued, overbought, overbullish, rising-yields" syndrome:
    1) S&P 500 more than 8% above its 52 week (exponential) average 
    2) S&P 500 more than 50% above its 4-year low 
    3) Shiller P/E greater than 18 
    4) 10-year Treasury yield higher than 6 months earlier 
    5) Advisory bullishness > 47%, with bearishness < 27%
     The historical instances corresponding to these conditions are as follows:
    December 1972 – January 1973 (followed by a 48% collapse over the next 21 months)
    August – September 1987 (followed by a 34% plunge over the following 3 months) 
    July 1998 (followed abruptly by an 18% loss over the following 3 months)
    July 1999 (followed by a 12% market loss over the next 3 months)
    January 2000 (followed by a spike 10% loss over the next 6 weeks) 
    March 2000 (followed by a spike loss of 12% over 3 weeks, and a 49% loss into 2002)
    July 2007 (followed by a 57% market plunge over the following 21 months)
    January 2010 (followed by a 7% "air pocket" loss over the next 4 weeks)
    April 2010 (followed by a 17% market loss over the following 3 months)
    December 2010
    …cyclicals are nearly as overextended relative to staples as they were at the 2007 peak… 
    From our standpoint, the return/risk profile of the equity market is the most negative that we ever observe historically, so we are willing to speculate neither on the hope for government wisdom, nor on the hope of government recklessness.”

    See the whole article for more detail: Warning- An updated Who’s who of awful times to invest. 

  145.  jromeha
    Yes, we must all keep each other "aware" of the hazards of poor government – the debate "must go on", as our work is cut out for us to influence our fellow man to follow a road that leads to prosperity, and not self-destruction, as is so apparent today.
    I am relieved we all recognize the abyss that our government has so selfishly created through their profound stupidity, and Cap as well as so many others, are just doing their best to hopefully spark a change for the better. I respect the libs on the board, as you guys are intelligent and offer an opinion that needs to be fully considered – as consensus will always have to be structured with intellectual thought on all sides. All issues certainly have diverse opinions… makes for interesting debate, as long as those that participate are informed and intelligent. I mustl admit, Cap does know how to get the thought process activated !  He keeps us informed, for sure.


    Very interesting Brookings study of worldwide metro-area economic standing/performance pre/post recession.

    "because metros
    form the fundamental bases for national and international economies,
    understanding their relative positioning before, during, and after the
    Great Recession provides important evidence on emerging shifts in the
    location of global economic resilience and future growth."

    "Nearly four in five boast average incomes (as
    proxied by per capita GVA) that exceed averages for their nations."

    "As a result, these metro areas punch above their weight in national
    and global economic output. In 2007, they accounted for just under 12
    percent of global population, but generated approximately 46 percent of
    world GDP."

    Between 1993 and 2007, roughly half of the metro areas that achieved
    the strongest growth in GVA per capita and employment were located in
    rising nations of Asia, Latin America, and the Middle East that benefited
    from new heights of global economic integration

    The negative impact of the global economic downturn, commencing
    in 2008, was widespread among the 150 metro areas. Roughly seven
    in eight lost either employment or income in at least one year between
    2007–2008 and 2009–2010.

    Fully 28 of the 30 top-ranked
    metros during that period were located outside of the United States
    and Europe, with China accounting for the top five

    The most recent year, from 2009 to 2010, appears to have further
    strengthened the relative economic standing of metro areas in the
    rising nations of Asia, Latin America, and the Middle East. Of the top 30
    ranked metros in this period, a diverse group of 29 was located outside
    the United States and Europe. China and India alone accounted for 10,
    Latin America registered seven, and the Middle East and North Africa
    recorded four. Most of these metros posted annual growth rates of at least
    2.5 percent in employment, and 5 percent in income, in the first year of
    worldwide recovery.
    While the recession hit U.S. metros harder than their European
    counterparts, the recovery seems slower to take hold in European than
    American metros. Metros along Europe’s western, eastern, and northern
    peripheries, from Porto and Valencia, to Thessaloniki and Sofia, to
    Helsinki and Stockholm, anchor the bottom 30 economic performers
    from 2009 to 2010. Meanwhile, several U.S. metros that suffered severe
    economic declines during the recession, such as Detroit and Cleveland,
    posted significant rebounds in their rankings on the strength of robust
    income growth, even as metros such as Atlanta and Las Vegas await a
    stronger recovery.
    The upshot: The past two decades have seen lower-income metro areas in
    the global East and South “close the gap” with higher-income metros in
    Europe and the United States, and the worldwide economic upheaval has
    only accelerated the shift in growth toward metros in those rising regions
    of the world.

    .….the shifting metro map points toward
    an emerging array of productive metro-based economic relationships that
    could drive regional and national prosperity in the decades to come."

  147. Good morning!
    This is too ugly to use in my post but a great chart:


  149.  And this one:

  150.  Dollar starting to look dangerously weak again (but also possibility of 78.50 making a higher low in an uptrend:

    This makes it very hard not to like TBT!  

    This one is interesting:  

    Fed also lent $71Bn to hedge funds – I wish I had known, I would have loved to have had a Billion at 0.25% in early 2009!  

    Ouch, Scary!  

  151. Phil –
    Can you explain the e-mini chart further. How do they determine buy programs?
    The more I read non msm stats the more worried I get.
    Rail cars is really bad

  152. bby missed significantly, sss down 3.3%

  153. danosu77…..
    You mentioned that there was an Excel spreadsheet available for B/W.  Would you point us to it??
    "Some of our members are very strong on buy write, which should be the fundamental base of a portfolio. We do have now a excel calculator on B/W. , A combination of effort from various members. You just need to check when entering a B/W that your basic profit is over 3% per month so it does not help to set up these plays for many month ahead if your return is less as well as you are exposed for a longer time! Stock paying a good divident will not pay very much for the callers. But you always can combined the interest together with the pay on the short caller."

  154. interesting idea - go long KRE eft in case of short squeese.  see note below from ZH. 
    Yet what may be the most curious datapoint is that the shorts outstanding as a percentage of float in the KRE ETF (the KBW Regional Banking ETF) have exploded from 13.2x to 24.6x! This means that there are 24.6 more shares short this ETF than there is daily volume. Should there be a forced squeeze in KRE, the intraday stock price will likely make the Volkswagen short squeeze seem pale in comparison.