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?
Ah 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!
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):
Pharm/ AWRY
thinking to open Buy/write, do you see any risks to do it now?
JRW – Great charts. Thanks for all the help
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?
Pharm
sorry it is ARRY
MolyCorp (MCP) being pumped by CNBC. Up 11% today.
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.
Hi JR,
You TNA on this POMO day? How’s the weather in your area. Nice blizzard in our parts.
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. 🙂
aw, rainman beat me to it.
Can our PSW Vegas planner send me an email? I have some questions about the meeting. Thanks drdanwilliams@mac.com
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.
Yodi:
Where is the "excel calculator on B/W" located?
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.
Looking for a bounce at IWM 77.62 +/-
rainman, morx
Wow, you guys read my book 😎
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 😎
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
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?
Tom
Phil
What is the NFLX target, got the puts @ $1.60, $2.20 + mow?
dclark41
I do not know how to place it on Phil’s site but can send it via email send request to yodiet@yahoo.com
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.
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.
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.
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!
humvee,
Just a note to make sure you saw the nyt article about ntap. An awfully big bite at $20B as takeover.
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?
rj_jarboe/long term down trodden plays – see CSCO play from last Thursday.
Thanks for the thoughts and the Disney video
Phil / ICE
And I thought your article was about THIS private club !!
Judy; thanks so much for remembering me; no, I didn’t see the article, I will check it out right now!!
Phil JRW
Thanks for the advice, just sold @ $2.25 FOR 40%, to bad only 5 contracts on the 1050P.
And there goes the dollar !!
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….
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.
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
ObamaCare UnConstitutional (no surprise there)
A Judge Just Ruled Obamacare To Be Unconstitutional by @thestalwart http://read.bi/gUv5VY
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 …
ICE/Gel – I wonder if the serve warm drinks at least…
That’s it for positions there now!
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!
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.
Phil, if you GOOGLE "netflix short" the first 5 entries are articles saying not to short netflix yet. Is this a tell?
C = 1245.34, F =1240.25 at 12:40
oil +.35, gold +13.70
10yr = (1.09)%, 30yr = (.79)%
VIX (3.58)%
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
stjeanluc
do you have a link for that quote, I have someone I need to share that quote with
sounds like him though
http://finance.yahoo.com/news/BofA-unit-launches-electronic-apf-960752014.html?
that was fast
sorry here it is embedded
finance.yahoo.com/news/BofA-unit-launches-electronic-apf-960752014.html
let me know which worked, trying to get embedding down cold 🙂
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
Link/Mike5885 – Here you go – http://blog.al.com/sweethome/2010/12/spencer_bachus_finally_gets_hi.html
thank you
Phil DIA mattress I am thinking of rolling the Mar11 114 to 115 for .45 or to 116 for .92 your thoughts
banks and wall street going to love that Bachus quote, unreal
Wow, nice pop in oil going into close….
blogs.wsj.com/marketbeat/2010/12/13/pre-lehman-highs-dont-look-now-but-sp-is-almost-there/
maybe misguides, but all I can think of, is that old support becomes resistance
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:
Oil/Jrom – That’s why we take the money and run on the Dec puts.