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Mandarin Monday Meltdown – Again!

Didn’t we do this last week?  

Hmmm, let’s see – Massive Chinese inflation and a popping bubble of an economy cause a sell-off in Asia and renew concerns of EU stability causing a relative rise in the Dollar that tanks commodities and melts down the global indexes.  Yep, check, Check and CHECK!  I’m not only going to say "I told you so" and I’m not going to even bother telling you again as you can just read last week’s post where our plan was to short oil Futures (/CL) at $97.50 (now $95, up $2,500 per contract) and our trade ideas from the Morning Alert to Members were:  

If you want to play a pullback in China, I like 10 FXI Jan $40 puts at $1.90, selling 5 Aug $40 puts for .40 as a bearish spread.  That knocks 10% off the purchase price with 5 more months to sell so it’s a nice way to stake a starter hedge on China.

Also, of course, I loves my EDZs.   The Aug $17/19 bull call spread is .55 and can be offset with the usual suspects (any bullish short put you REALLY want to own) or the short EDZ Aug $15 puts .50 on the assumption EDZ doesn’t drop another 10% or, if it does, that’s not a bad place to commit long anyway as it would be below the 52-week low (and good options to sell).  

We were bearish all week (see Stock World Weekly for a nice summary of the week’s events and trade ideas for the week ahead) and, although the market didn’t seem to agree with us, we simply scaled in and rolled our short positions higher – taking a couple of protective longs on Friday’s dip – just to get a little balance but, as you can see from our weekend reviews of the $25K Virtual Portfolio and our Income Virtual Portfolio – we are still leaning pretty bearish until the market does a little more than fake some technical moves to impress the retail suckers.  

SPY 5 MINUTECertainly our Weekend Reading post did little to cheer us up.  In fact, it was so depressing I had to resort to cute pictures of kittens and babies to keep it from getting too sad.  As noted in David Fry’s SPY chart for Friday, the gap down on the jobs numbers was genuine but the rest of the day’s action was fake, Fake, FAKE:

So after a large rally in stocks over the past week of trading days we hit what should have been an epic sell-off given the employment report. But this didn’t happen as stocks only sold-off modestly and rallied smartly off their lows. Why? I’m not sure. A lot of hedge funds and trading desks have put some serious bullish markers down recently and need to defend them.

They also must believe corporate earnings will be great as jobs are outsourced and the weak dollar makes sales overseas look better. There’s also more than just a whiff of QE3 in the air. Further with interest rates this low M&A can take place not to mention financing of more stock buy backs.

Bulls must believe we’re stuck with high unemployment and a poor housing economy so they’re just hardened to it. Consumers are shopping building up their credit card debt and cars are always easy to finance so they focus on that. Further, bulls just believe, for now anyway, government debt issues whether here or overseas (Italy on Friday) will be resolved one way or another.

Despite our belief that Friday’s recovery was total BS – we had to respect the manipulators’ ability to hold our 2.5% lines – especially after starting the day with such terrible employment numbers.  Of course, as usual, bad news is good news because it’s been all QE2 as $600Bn spent by the Fed since the September 2010 announcement lifted the Dow 2,500 points but really it’s only 1,500 points from where QE1 took us (11,000) and then we dropped 10% before QE2 was rolled out.  

Now, as with the summer of 2010 – we are beginning to drift back to the lower end of our channel (our -2.5% lines) with the occasional run-ups on pretty much any rumor that QE3 is coming just around the corner.  I think that, unless we break BELOW our -5% marks, we’re not going to get a QE3 intervention any earlier than we did last year, which was at the September Fed meeting in Jackson Hole.  

The problem is that, this time, we have already run-up in anticipation of QE3 – over and over again!  Also, as I mentioned in our weekend reading, we are at the point of diminishing returns on QE programs so the Fed is going to have to come up with something bigger and better than just a plan to buy another Trillion in TBills to accommodate our brand-new $17Tn debt ceiling.  

I didn't   get a harrumph outta that guy!Just as we HAVE to respect the technicals when everyone is over the 2.5% line (never happened as NYSE hit it like a brick wall – which was our danger indicator all week), we HAVE to respect those same technicals when we have a 5-index breakdown, like we are likely to have this morning.  After that, we can flip more bullish if we see 3 of our 5 levels get back over the line but I’d be more concerned about holding our "Must Hold" levels unless we get some miraculous pop today (and miracles do come daily in this phony baloney market – Harrumph!).

In an attempt to protect their phony baloney jobs, the EU has called emergency meetings to respond to yet another banking/credit crisis, which may be beyond the EU’s ability to throw money at. The European rescue fund now in place does not have enough assets to cover Italy’s problems. The cost of insuring against default on Portuguese, Irish and Greek government debt rose to records.  In a classic act of misdirection, Italy is ordering short sellers to disclose their positions, because after all, the entire European credit crisis was caused by analysts who identified over valued stocks. A whiff of desperation hangs over this diversionary action, reminscent of similarly foolish attempts done in 2008 in the US

As Barry Ritholtz noted this morning: "The bottom line remains: The Low hanging fruit in this rally appear to have been picked, and a modest correction appears to be underway. Markets have been modestly overbought, and in need of some corrective action. Whether this turns into anything more than a pullback off of recent highs will be determined in the coming days . . ."  We’re also watching that budget debate in Congress but the process is a total joke.  Per the NY Times:

On “Fox News Sunday,” the Senate Minority Leader Mitch McConnell of Kentucky said that he was “for the biggest deal possible, too, it’s just that we’re not going to raise taxes in the middle of this horrible economic situation.”
Yes, we are in a “horrible economic situation.”  Of that there can be no doubt.  But the horribleness of that situation is not being felt by a segment of the population — High Net Worth Individuals (HNWI) — whose numbers and net worth have swelled even over the past two years.  Per the annual Capgemini/Merrill Lynch World Wealth Report:

The population of HNWIs in North America rose 8.6% in 2010 to 3.4 million, after rising 16.6% in 2009. Their wealth rose 9.1% to $11.6 trillion.  [Ed note:  Per Capgemini's 2010, the HNWI gain in 2009 was 17.8%.].

Barry points out: "While the single biggest asset most of us own is our home (still deflating, unfortunately), the single biggest asset most HNWI own is their investment virtual portfolio (S&P500 up almost 100 percent over the past two years); real wages for working stiffs barely budging while those in the C-suite party like it’s 1999 (or 2007). These folks — presumably the “job creators” about whom we hear so much on a regular basis — have seen their wealth rise by about 28% over the past two years."  That’s about $2.5Tn that’s been transferred from the bottom 99% to the top 1% in just 2 years and the Republicans are willing to let the whole country go down in flames to protect those gains – isn’t that special?  

Just to be clear – in order for 3.4M American taxpayers to make $2.5Tn more in a flat economy, the other 106.6M taxpayers must make $22,452.16 less EACH.  Now, if you happen to be bright enough to be in the top 20% (people earning over $60,000 a year) then you can probably figure out that most of that $22,452.16 PER TAXPAYER wasn’t taken from the bottom 80%, who barely have enough disposable income to buy a $8 burrito at Chipolte.  That’s right, that money is being ripped out of the hands of the middle class and out of the profits of small businesses and being shoved into the vaults of the VERY privileged, VERY few.  

Of course you only notice part of the theft – that’s the genius of the thing!  Sure you pay more for food and fuel and clothing and health care and education but that doesn’t seem like the kind of thing you can just pin on the 3.4M people who own those businesses, can you?  They are just innocent Capitalists making their profits at your expense but that’s the game, right?  What you don’t see is that they are also being handed hundreds of billions of Dollars in loans and bail-outs and the debt for that infinite money creation is a bill that the bottom 93.6% haven’t gotten – YET.  

WAKE UP AMERICA – It’s almost too late!  


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  1. NFLX  – "Netflix has another year or two on most of these contracts, and then the game completely changes," says Michael Pachter, analyst at Wedbush Securities. Pachter predicts Netflix’s streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.

  2. ….all the lonely lemmings
    …where do they all come from?

  3. ES Chart from ST.


    PP for today:

  4. The Squawk Box with Joe Kernen has turned into the O’Reilly Factor.  It’s let’s bring one Democrat down to the studio and gang up and bash him with erroneous facts and not answer questions directly when confronted with a fact but divert to another topic immediately.

  5. It is 1999 all over again, if Living Social is expected to be a 15 billion valuation on their IPO, Groupon which is twice as big should be at roughly 25 billion.  Here are there finances for last year:
    "The Chicago-based company’s upcoming initial public offering of stock is expected to be in high demand, even though it lost $413 million last year on revenue of $713 million."
    Now you don’t even need a profitable company to be in the billions and in high demand when they are losing money, merchants are souring on them and Facebook will probably wipe them out completely.

  6. terrapin—thx for the article. I just don’t understand how NFLX never goes down. Insane!

  7. Today is a last POMO

  8. Phil / TZA   Thanks, followed your sentiment and carried a very big TZA position into the weekend.  Continue to hold today?

  9. Good morning Pharm,  does ShadowTrader have an update on levels this am?  Looks like IWM could open BELOW S3!  Thanks-

  10. Good rant about managing OPM: Deflecting Bullets

  11. cramer is up early, phil, try not to through up in your mouth. 

  12. DIA puts with another big payday. I love seeing red, that just doesn’t sound right.

    Geico commercial with the 5 yr old dunking cracks me up.

  13. that should be throw, i’m still half asleep,     ROFL

  14. NFLX up again? WTF?

  15. Morning matt – unfortunately not.  The post was from last night and he does not update based upon ON action. 

  16. The whole Dow is taking a dirt nap. Oil at 95 on the button. I’ll play the break again on this line for USO.

  17. jabo – GS upgraded them with a price target of $330.  Good riddance!

  18. GS???
    FU GS!!!

  19. MITI said it signed a cancer-drug development deal with U.S. biotech giant AMGN for up to 695 million euros ($1.01 billion) plus royalties and reimbursements.….Um, yeah!  Up 5%.  This is going to be a nice little company for us to play with in the future as well!

  20. ARNA starting to move.  $1.58…high today.

  21. Selling all my July DIA puts. I’ll hold the Aug ones.

  22. Pharm--did GS say that NFLX would hit 330 this week?
    Looks like another rally day for the MoMos soon.
    Market down 138—NFLX almost 300!

  23. Wake me up when crude stops dancing on 95 so I have something to do today.

  24. Just BTFD…it’s an amazing thing to watch!

  25. how long before pcln goes green? How the F do they do it?

  26. Jero – From Opt:  Netflix price target raised to $330 from $300 at Goldman

    Goldman raised Netflix’s price target based on its announcement that it will launch in 43 countries in Latin America and the Caribbean this fall. Shares are Buy rated.

  27. FYI
    i made 7% shorting the EUR over the weekend :)

  28. Pharm, do you know what is going on with OPK?  any thoughts?

  29. DCTH up again on solid volume, something is up….

  30.  Oil lines:
    R3 – 97.47
    R2 – 97.11
    R1 – 96.40
    PP – 96.04
    S1 – 95.33
    S2 – 94.97
    S3 – 94.26

  31. gmarts/DCTH
    It just keeps going up. Yet I can’t find much to support. A lot of rumors.

  32. OPK/lun – no.  Just their normal range bound motion.  Buy at 3.3-3.5, sell at 3.9-4.10….wash, rinse, repeat! 

  33. BPAX – I like the stock here, selling the $3.5 C/P for 95c.  Round 1.

  34. DCTH – b’c we are in it! ;)

  35.  FAS Money / Phil – The 26 calls sold on Friday for $0.83 are now less than $0.30 for another potential $0.50. That would make over $1.00 of premium collected in 2 days. Do you want to sell some puts now, (the 25 are $0.80 and almost all premium) or is it too risky at this point.

  36. Good morning! 

    I’m just going to take the day off today and you can simply recycle my comments from last Monday.  

    The short story would be – we had a nice gap down and we should assume it reverses, especially oil into inventories and the key indicators are going to be whether or not we hold those 2.5% lines.  

    You know they are in trouble when Jim Cramer puts on a suit and runs out to narrate the opening bell.  That means things are not going according to plan and the Empire has sent Darth Cramer to control the minds of the masses and, failing that, prepare to slaughter the sheeple through any means necessary.  

    At the moment (9:40), we have a fairly low-volume sell-off so it shouldn’t be too difficult to reverse and we’ll be DEEPLY concerned if "THEY" can’t save it on low volume.  Of course first we have to wait for the Dips to stop buying (right at the open) and then we have to wait for the EU to stop panicking (usually they have to close at 11:30 before that happens) and THEN we have the markets all to ourselves and the TradeBots can go wild!  

    Currently we’re looking at Dow 12,530 (12,505 is 2.5%), S&P 1,328 (1,333), Nasdaq 2,833 (2,809), NYSE 8,281 (8,280 is must hold – 8,487 was 2.5%!) and Russell 842 (835) so it’s Danger, Danger, Danger, Almost Totally F*cked and OK, so far for our 5 major indexes and needless to say we’ll be watching that 8,280 line on the NYSE with a great deal of interest.  

    So we are not very bullish until the S&P gets back over 1,333 and even that won’t convince us if the NYSE caves in below 8,280 as that was our very reliable bearish indicator last week.   Meanwhile, though – we can certainly play for an upside move with a couple of fun WEEKLY bull call spreads that can be stopped out if 2 of 3 of the RUT, NAS and NYSE fail their lines:  

    • DIA July $125/126 bull call spread at .50 (100% potential gain if Dow gets to 12,600 on Friday)
    • USO July $37/38 bull call spread at .50 (100% potential gain if USO gets to $38 on Friday)
    • TNA July $86/88 bull call spread at $1 (100% potential gain if TNA gets to $88 on Friday)

    It’s good to take advantage of spikes down to speculate long – especially when you have bearish plays to protect – so I like these and you can offset those with anything you think you REALLY want to own if we do head down another 5% or more.  Like 

    • HPQ Aug $33 puts can be sold for .44
    • FAS Aug $21 puts can be sold for .60
    • AAPL July $345 puts can be sold for .72

    Piper Jaffray’s Gene Munster estimates the average Apple (AAPL) iOS device owner will download 83 apps in 2011, up from 51 in 2010. Munster also estimates the average selling price per paid iOS app is up 14% in 2011, reversing 2010′s 18% decline. This is further evidencethat iTunes is on its way to being a big business for Apple. 

    Let’s do 10 of each of the above bull call spreads in the $25KP for $2,000 total (and we don’t want them if we can’t get our price!) and we’re not going to cover yet but we’ll decide what to do if we break 2 of three of our watch levels.   Plenty of data AND earnings as the week progresses.  

    Date ET Release For Actual Forecast Consensus Prior Revised From
    Jul 12 08:30 Trade Balance May   -$44.0B -$44.0B -$43.7B  
    Jul 13 07:00 MBA Mortgage Index 07/09   NA NA -5.2%  
    Jul 13 08:30 Export Prices ex-ag. Jun   NA NA 0.5%  
    Jul 13 08:30 Import Prices ex-oil Jun   NA NA 0.4%  
    Jul 13 10:30 Crude Inventories 07/09   NA NA -0.889M  
    Jul 13 14:00 Treasury Budget Jun   -$45.0B -$45.0B -$68.4B  
    Jul 13 14:00 FOMC Minutes Jun 22          
    Jul 14 08:30 Initial Claims 07/09   425K 418K 418K  
    Jul 14 08:30 Continuing Claims 07/02   3700K 3700K 3681K  
    Jul 14 08:30 Retail Sales Jun   -0.3% -0.2% -0.2%  
    Jul 14 08:30 Retail Sales ex-auto Jun   -0.1% 0.0% 0.3%  
    Jul 14 08:30 PPI Jun   -0.2% -0.2% 0.2%  
    Jul 14 08:30 Core PPI Jun   0.2% 0.2% 0.2%  
    Jul 14 10:00 Business Inventories May   0.9% 0.9% 0.8%  
    Jul 15 08:30 CPI Jun   -0.1% -0.1% 0.2%  
    Jul 15 08:30 Core CPI Jun   0.2% 0.2% 0.3%  
    Jul 15 08:30 Empire Manufacturing Jul   0.0 1.0 -7.8  
    Jul 15 09:15 Industrial Production Jun   0.3% 0.2% 0.1%  
    Jul 15 09:15 Capacity Utilization Jun   77.0% 76.8% 76.7%  
    Jul 15 09:55 Mich Sentiment Jul   70.0 71.4 71.5  

    At the open: Dow -0.63% to 12577. S&P -0.67% to 1335. Nasdaq -1.06% to 2830.
    Treasurys: 30-year +0.45%. 10-yr +0.43%. 5-yr +0.26%.
    Commodities: Crude -1.13% to $95.11. Gold +0.84% to $1554.50.
    Currencies: Euro -1.44% vs. dollar. Yen +0.24%. Pound -0.81%.

    10:00 AM On the hour: Dow -0.8%. 10-yr +0.39%. Euro -1.4% vs. dollar. Crude -0.52% to $95.70. Gold +0.9% to $1555.40.

    June Employment Trends Index: +5.4% Y/Y to 100, vs. 99.5 in May (revised). "The abysmal uptick in employment in the past two months is not just a reaction to the slowdown in economic activity in the first half of 2011, but also a result of employers becoming downbeat about their hiring needs in the coming months," The Conference Board says. 

    Everyone is having meetings!  The EU is holding an emergency meeting of top officials today on concern Europe’s sovereign debt crisis could spread to Italy after a sharp sell-off in Italian assets on Friday. Five-year CDS on Italian bonds hit a record high this morning, and the euro is -0.9% against the dollar.

    European banks take a hit as debt contagion fears grow. DB -4%

  37. Phil

    European banks take a hit as debt contagion fears grow. DB -4%UBS -1.2%RBS -3.7%ING -6.3%STD -4.6%CS -2.8%BCS -4%HBC -1.3%.

    The European Commission grants temporary approval for Bank of Ireland (IRE -4.7%) to receive up to €5.35B ($7.6B) in extra capital from the Irish government. Final approval is conditioned on a new restructuring plan from IRE, which is expected by month’s end.

    President Obama and Congressional leaders will meet again today for another tete-a-tete on raising the $14.3T debt ceiling. Little progress was made in an unexpectedly brief session yesterday.

    Almost two-thirds of small-businesses don’t expect to increasetheir workforce over the next year. With many firms worried about the economy, another 12% plan to cut jobs, while only 19% said they would increase payrolls. The survey follows Friday’s dismal jobs report.

    RBC estimates China’s GDP will cool to 9.5% from 10.3% as global demand for Chinese-made goods slows down. Analysts don’t forecast a hard landing for China’s economy, and see the recent CPI report as the high-water mark for inflation. 

    Look out below (and, boy, did I tell you so!): Moody’s warns on 61 Chinese companies to highlight accounting risks and weak corporate governance, but stands pat on taking ratings actions against the publicly-traded firms. The SEC meets this week with counterparts from the PCAOB on increasing its ability to inspect the books of Chinese companies.

    Yay!  News Corp.’s (NWS -0.1%) hopes of buying BSkyB (BSYBY.PK) are fading after the U.K. government says it will seek fresh regulatory advice about the acquisition following the phone-hacking scandal at the News of the World. In London, BSkyB -6.2%   The phone-hacking affair could open News Corp. (NWS), and in particular James Murdoch, to investigations in the U.S. and the U.K., putting his position as heir apparent into doubt. A U.S. investigation could also cost News Corp. over $100M and last 2-4 years.

    Shares of Ford (F-1.6% premarket on reports showing global car sales in India grew at their slowest pace in two years, and carmakers may be stretching it with their forecasts for worldwide car sales. Also pitching in to pressure Ford’s exports, economists see GDP in China slowing

    Netflix (NFLX) marches strong with 23.6M global subscribers and sales of $2.2B, but competition is about to heat up, say industry analysts. Studios are starting to pay closer attention to streaming video, likely to push up content costs for Netflix, and big cash-rich companies are set to fight for streaming video subscribers. 

    While other firms worry about competition, Goldman is lifting its PT on Netflix (NFLX +1.6%) to $330 from $300 on account of the company’s Latin American expansion. Goldman is also raising its FY2012 and FY2013 EPS estimates due to higher forecasts for subscriber growth, average revenue per user (ARPU), and profit margins.

    Go Yellow!  And congrats to all our players:  YRC Worldwide (YRCW +18.2%) says it received a commitmentfor a $400M asset-backed loan to replace its existing loan agreement, which keeps the trucking company on track to complete its restructuring by the end of July. The new facility ”helps support our industry’s seasonal pattern of revenues and provides the financial flexibility and run room we need to grow the business," YRC says.

    By the way – great job by the Administration calling the Republicans’ bluff!  

  38. Pharm:
    They have their NFLX’S, CMG’s, and we have our DCTH.

  39. Phil,
    i bought NFLX Aug put 270 @ $9 (now $8) a few days ago. is it a good time to add more puts now? thanks,

  40. Some thoughts on the price of gold:
    I was surprised at the correlation between gold price and income in China! 

  41. Darth Cramer…:-)  I love it.

  42. And finally, fun in China…
    Key sentence:

     Despite the best efforts of policy architects in Beijing, the share of household consumption in China’s economic growth last year actually moved in the other direction, in part because there are political powerbrokers within the elite who have made too much money from the old model to fully embrace a new one. 

  43. Not into the bull call but I did buy the USO 38 calls for .31.

  44. PDLI – The Second Judicial District Court of Nevada ruled in favor of PDL on two motions to dismiss filed by Genentech and F. Hoffmann LaRoche, Ltd. (Roche) in PDL’s lawsuit related to the 2003 settlement agreement with Genentech.  The court denied Genentech and Roche’s motion to dismiss four of PDL’s five claims for relief and, further, denied Roche’s separate motion to dismiss for lack of personal jurisdiction.

  45. AA -3.6% today ahead of earnings. Telling?

  46. Good morning!  

    Don’t you love that picture of Christie?  

    Goldman making a big move to save NFLX only makes me want to short them more!  Someone is willing to pay us $5.50 for selling them the July $300 calls – I have to like those odds, especially since the Aug $320s are $11 so you can, if you have the margin for it, sell 2x the Friday $5.50s and just make sure you do the roll to 1x the Aug $320s before it costs you more than $3 and you’d end up with a net credit of $8 on 1x the short Aug $320s so the bet is really that NFLX doesn’t go over $328, even though you are initially selling the July $300s.  

    SPX/Pharm – That does not look very encouraging, does it?  

    Your Teacher Said What?!: Defending Our Kids from the Liberal Assault on CapitalismKernen/Rustle – Yeah, ever since he wrote that book on how to brainwash your children and turn them into souless Conservative drones – he’s gone way off the deep end. 

    Groupon/Rustle – Actually I head that Groupon was going to be featured on Facebook and will have coupons for CMG and NFLX so, of course, we multiply the valuations of all 3 partner companies together which is $10 x 16 x 100Bn which gives Groupon a valuation of $16Tn, which will be $1.6M per share if they issue 10M shares.   8-)

    TZA/Tusca – Yes, as I said above, we could go much lower so, rather than cash out our short positions, we can protect our gains with a few bullish spreads that we can, hopefully, stop out of if we fail to hold our levels without too much damage.  

    DIA/DDay – Smart play.  

    PCLN/Jabob – Haven’t you ever seen Cramer’s instructional video for how to manipulate a Momo stock?  He did that with a $300M fund – imagine what people like GS can do any time they want to!  

    EUR/Z4 – VERY NICE – Congrats!  

    FAS Money/StJ – Not yet on the put selling.  I’m almost tempted to roll the calls lower but let’s be patient and watch that $15 line on XLF.  If that fails, we will want to consider selling a lower call.  

  47. If we dont’ hold here..  we could go a lot lower today.  It’s now or never I’d say-

  48. Wow, Europe off huge. 

  49. USD pushing for 76.50, crapping all over the markets

  50. thx phil—sickening

  51. Legged USO 38 calls to .26 avg. so far.

  52. So far so good – the Dips who bought are getting bent over the table and now it’s all about the EU panic sellers for another hour.  The DAX is testing the 2.5% rule at 7,220 and the CAC is down 3% at 3,795, blowing that critical 4,000 line.  FTSE is our star player, down just 1.23% because, thankfully for them – they are not actually part of the EU.  

    Dollar testing 76.50 – over that and we’ll be heading down 2.5% as well!  Euro at $1.40124 so below the $1.40 line is EXTREME danger.  Pound is $1.58848, they need to take back $1.595 and that’s probably not on today’s agenda.  Poor Japan worked so hard to get the Yen back to 81 but now it’s back to 80.42 and that knocked the Nikkei futures back below 10,000 – down 200 from Friday’s open.  EDZ, of course, having a party at $18.25.  

    By the way Pharm – Congrats on those brilliant calls in Stock World Weekly (and here in Chat too, of course)!  

    Partial/StJ – All just semantics.  It’s amazing how they can even play these games when it’s so obvious it’s nothing but a shell game but local banks have been doing it for years with their CRE as have the big boys with MBS and, since they are all in the same club – I guess all the Banksters just pretend things are OK by habit now (and do they have a choice if they want to protect their phony baloney jobs?).  

    NFLX/Ethan – That’s going to be a very tough target to hit.  I would sell the July $290 puts for $4.50 and use that to roll up to the Aug $280s (now $13) to get you a little closer to the money and I’d save the additional sideline money for another adjustment IF you have to.  

    Gold/StJ – Thanks for reminding me – Gold is, of course, totally wrong at $1,555 and it is a good time to get back into GLL in the $25KP so let’s say 20 Aug $22/23 bull call spreads for .50 ($1,000).  Gold goes up on EU panics but the Dollar rise trumps gold and, if the EU is "fixed" again – gold usually calms down despite the dollar heading a bit lower again.  

    AA/Rain – Telling that the appetite for risk is fading fast.  

  53. Dollar keeps going up. Can’t be good for any long positions.

  54. Hi Phil :bought TZA  Jan $25 C at $ $7.90,now $9.20. Add stop at $8.70 (50 % profit) or sell Jan. $40 C at $4.85 ?
    On INTC, I have the stock at $$19.55 and sold Jan. $21 C at $1.21 for net $17.65 for projected profit of 14.4% of which 4.4% remains.I think it may be too early to sell Jan.$20 P. Should I roll Jan. $21 C to April $21 C or just hold until I cansell some puts ? I prefer to keep stock because of dividend and long term attractiveness.Thank you.   

  55.   most of this news over the weekend should have been expected…it was obvious debt deal was not going to work with what both of them were saying, china inflation hot..shocker….italy coming unraveled last week, greece not solved…..but REALLY market is efficient and has discounting mechanism….hahahah..IF WE BOUNCE TODAY I WILL DO SOMEHTING UNTOWARD UNDER A CLOUDLESS SKY AT HIGH NOON ON MAIN STREET

  56.   talked to a realtor over weekend that said there are TONS of properties that are NOT on the market that are bank-owned…inventory WAY worse than appears…for whatever reason they are not even trying to sell them.

  57. and there goes 12,500!


  59.  Keep in mind that we are not even back to where we started last week.
    IWM broke out from 82.50 – we are at 83.30 – so we have not even wiped out a weeks worth of gains -

  60. Wheee! for the shorts!

  61. God call on NFLX, Phil. July $300′s Down 50% in 30 mins. Too bad I didn’t take it.

  62. What happened to the "Sunshine and Lollipops" crew on CNBC?

    TZA/Dflam – How about choice C, which is selling the Jan $33s for $7 and then you are in the $8 spread for .90 that’s 100% in the money?  That way, anything other than a move back up in the Russell for the year net’s you another $7.10 while you can find something more interesting to do with the other $7!    On INTC I’d just roll the caller out to the 2013 $22.50s even and that gives you a free $1.50 bump and then keep your eye on collecting at least $2 for the 2013 $20 puts (now $2.15) and then you have a net basis of $15.65/17.83, which is about where you are now on your 1x covered trade and your upside at $22.50 is about 50%.  

    LOL Angel – "Something untoward.." reminds me of "On a hot summer night would you offer your throat to the wolf with the red roses?"  I do wonder how long it will be before people do end up walking into town with guns and just going Rambo on people.  

    Inventory/Angel – If they try to sell them, they have to mark them to market.  Under current rules, any property on their books is considered a full-value asset until it’s proven to be worth less (worthless?).  The residential stuff is just a drop in the bucket compared to the CRE scam with banks extending and pretending their asses off trying to cover up that mess (and that one hits the local and regional banks hard).  

    Gov gone wild/Jabob – It’s good to see people speaking up but we need a real revolution here.  Poor Obama has CNBC running the Debt Clock again while he’s trying to have an adult conversation with people.  

    Hedge Funds/Angel – That’s why we’re keeping it small for now.  

    Good point Samz – Just a normal pullback so far and Europe about done now.  

    QQQ July $58 calls at .60 have a nice .53 delta and they can stop out if the Qs fail to hold $58 (Nas 2,800) for a small loss so 20 in the $25KP is risking about a $100 loss to make a lot more if we get a run-up.  

  63. Phil – Not much reaction from oil to Europe close…worried about the bull call spread not working on USO? Dollar in tough situation that it needs to come down and only will come down if Europe rebounds…

  64. phil
    don’t you mean QQQ July 58 Calls with delta of .53?? Thanks

  65. Phil / USO – roll July $36 puts to august for ~$0.80?  i’m in at $0.35. 

  66. Nevermind Phil…you got it bud!

  67. Thanks Nicha!  Don’t worry about missing them, the idea is just to log that information so you learn to recognize opportunities like that (silly spikes after a BS upgrade) and then you’ll be better prepared to take advantage of them next time.  

    11:00 AM On the hour: Dow -1.32%. 10-yr +0.66%. Euro -1.89% vs. dollar. Crude -1.94% to $94.33. Gold +0.35% to $1547.00.

    Excuses, excuses: "Our failure to create jobs is a choice, not a necessity – a choice rationalized by an ever-shifting set of excuses," Paul Krugman writes. "Listening to what supposedly serious people say about the economy, you’d think the problem was ‘no, we can’t.’ But the reality is ‘no, we won’t.’" 

    Those "cheap" bank stocks (XLF -2.2%) just keep getting cheaper, among the biggest decliners today on the specter of debt crises on both sides of the Atlantic. It could get even worse, as big banks begin to report Q2 results later this week amid expectations of Q/Q revenue drops averaging as much as 25%. A sea of red:JPM -3%,BAC -2.8%C -3.6%GS -1.7%MS -2%.

    The currency forecasters with the best track records over the last 6 months (per Bloomberg) believe the dollar’s decline is ending, with the currency expected to gain against the yen and edge up against the euro through December. In addition, hedge funds and other speculators have been paring their bets against the dollar.

    Cotton futures slide -3.3% to 8-month lows on concern demand will slow down. A report over the weekend showing Chinese imports grew last month at the slowest pace in 20 months hurt, as did an international trade report saying cotton prices will decline significantly this season due to slowing global demand. 

    DisplaySearch believes top LCD TV brands missed their production targets by 10% in May, due to weak demand in Western Europe and North America. In addition, firms are being cautious in their future production plans. Corning (GLW), with its heavy reliance on glass sales to LCD TV manufacturers, could be affected.

    JMP Securities’ Alex Gauna is slashing AMD (-2.9% premarket) to Market Underperform, claiming AMD’s Fusion processors aren’t faring well with PC OEMs and retailers. Gauna also believes OEMs could abandon AMD as their main alternative to Intel (INTC) once PCs featuring chips using ARM Holdings (ARMH) CPU cores arrive

    While JMP Securities takes a hammer to AMD, CLSA does so to Intel (INTC -1.1%), with analyst Srini Pajjuri expecting Intel’s FQ3 outlook to fall short of Street forecasts, due to weak PC unit growth. Between Acer’s (ASIYF.PKshipment cuts and the tablet market’s effect on PC sales, Pajjuri’s prediction doesn’t sound far-fetched. 

    Cisco Systems (CSCO) will soon cut its workforce by 7%, according to Gleacher & Co.’s Brian Marshall. It’s estimated the job cuts will save Cisco $1B in annual expenses, and boost its calendar 2012 EPS by 8%. While positive on the move, Marshall still believes Cisco needs to lower its long-term growth and operating margin targets.

    Companies have won marketing approval so far this year for 20 new medicines that work differently or better than existing drugs, or tackle ailments lacking good treatments; there were just 21 such approvals all last year. "If you’re a patient with a terrible disease, a serious cancer… you ought to take heart," says the director of the FDA’s drug division. 

    Could the News Corp. (NWS -5.9%) phone hacking scandal take down the head of the WSJ? Prior to taking over at Dow Jones in 2007, Les Hinton oversaw News of the World, and on two occasions he was called to give evidence to British Parliament that the Guardian reports now appears to be misleading.  I totally called this one back in 2007!  Also, from June 2007, I said:

    Another man with a plan is Rupert Murdoch, who wrote a letter to the Bancroft family assuring them that no one could better safeguard the integrity of the Wall Street Journal than the man who gave us these fine headlines:"



    News Corp’s (NWS) "withdrawal of undertakings" at the Competition Commission lays a path for the U.K. to conduct a full competitive inquiry of the BSkyB takeover proposal, which could slow the process considerably. NWS -6%BSYBY.PK -8%. (PRprevious developments)

    Google+ (GOOG) is off to a strong start, with Chairman Eric Schmidt claiming the service already has "millions" of users, and an estimate from’s (ACOM) founder putting the service’s user base near 5M. However, Business Insider’s Matt Rosoff recalls how the much-panned Google Buzz got off to a hot start as well.

    Quick take on Google+’s growth: While no near-term threat to Facebook, Google+’s architecture should keep drawing followers. By allowing users to "follow" anyone they wish, but also offering tight controls over who can see new content, Google+ can both produce viral growth and sidestep the critiques leveled at Facebook regarding a lack of authenticity.

  68. Oil/David – Well it’s just the usual nonsense we expect into Wednesday’s inventory report.  If we get a good pop and we’re up 20% or better before inventories, we would be inclined to take that money and run.  Dollar doesn’t have to come down per se – only needs to stop going up as all movements are relative.  

    So far, Obama did not seem to inspire much market confidence, did he?   $58 holding up on the Qs so I’m not worried until it fails (Nas 2,800) because that would mean they’ve even lost control of the Momos and THAT can cause some real panic!  

    QQQ/Champ – Yes sorry, that was the July $58 calls, now .57.  

  69. Goldman Sachs’s Ingrid Chung this morning raised her price target on shares of Netflix (NFLX) to $330 from a prior $300 to reflect the upside that the company may see from expanding its streaming video service to Latin America and the Caribbean, which the company announced a week ago.
    Chung raised her 2012 and 2013 estimates to $6.96 in EPS and $9.65, from $6.87 and $8.95, previously.
    On the plus side, Latin America has more than 37 million broadband households, almost 4 times the amount in Canada, Netflix’s only other market for streaming outside the U.S. so far. The continent is receptive to U.S. programming, streaming content rights probably can be bought inexpensively, she thinks, and there is little video-on-demand “penetration” in the continent.
    A gating factor are the slow broadband speeds, with an average of 2 megabits per second, she notes. But Netflix’s streaming “limits video/audio speeds to 625 kilobits/64 kilobits per second,” she writes, and so she’s not worried about the bandwidth.

  70. Phil / Obama   Maybe I’m too cynical, but don’t you think Timmy and Ben will be manning the pumps this afternoon to make Obama look like he’s in control?

  71. USO/Terra – I’d sell the $37 puts for .50 to some other sucker and use that money to roll to the Aug $36 puts.  Just put a stop on 1/2 the short calls at .70 and it’s still cheaper for you (net .15 credit per long) than doing the naked roll.  

    TBT Aug $32 puts can be sold for .75 – always a fun trade on rates rising.  

  72. Obama/Jabob – I’m not so sure.  You may have missed it as it was kind of subtle but Obama said that Businesses need to "speak up" and not be intimidated by Congress (because they have business before them) and, if they don’t, then it won’t be his fault if something bad were to happen to their stock price.  His delivery was very much like a mafia lawyer making sure the prosecution’s witness is aware of the consequences.  

  73. obama???

  74. lol.  From Bob Pisani:
    The problem is, the notable rally we had in the last half hour on Friday likely blew out the last remaining shorts left; with fewer shorts left to cover it will be harder to bounce much today unless some miracle comes out of Europe. Italy has changed the game.
    Better feel again Bob!

  75. Phil don’t you mean TBT Aug 32p?

  76. SPY – P/C ratio is at 2.5.  Since this is my short of choice (DIA is Phil’s), I tend to notice with the ratio begins to move up >2, the sticks typically come in.  In other words, that last Friday stick at EOD moved the ratio down to 1.68, and ‘they’ started buying Ps b’c the suckers were buying calls to cover their shorts……very interesting.  This is why it is good to sell the premium that Phil always notes.  Right now we are at June 30 support on the SPY.  Right now 20d MA is holding this crap up.

  77. Good morning,


    IWM     82.81,  83.59,  83.88,  84.18,  84.56,  84.87,  85.58  and  QE 2.5 !!

  78. Obama/Jabob – Oops, that was for Tusca.  

    Italy/Matt – I don’t think Italy has changed the game except for the retailers who were blinded by the BS from the MSM because the issue has been pretty obvious to us for a year.  Just be careful with your shorts because the EU is meeting right now and they will keep meeting until they figure out something nice to say and, whether it’s enough or not, you know the power of "fixing" things in Europe.  

    TBT/Yodi – Thanks, I don’t know what’s up today, I’m looking at the wrong strikes a lot.  

    Dollar can’t get below 76.30 – not good!  

    SPY/Pharm – Good point.  I’m still liking those QQQs as well.  

    12:00 PM On the hour: Dow -1.19%. 10-yr +0.53%. Euro -1.66% vs. dollar. Crude -1.56% to $94.70. Gold +0.31% to $1546.40.

    In spite of concerns over inflation and monetary tightening, Pimco remains positive on emerging market economies, expecting their corporate profits to grow by 10-12% in 2011. Pimco sees larger economies such as China transitioning to a "more balanced growth model," with greater reliance on domestic consumption relative to exports.

    Gee, I wonder if this could have anything to do with PIMCO’s optimism?  The ETF version of Pimco’s Total Return Fund (TRXT) will cost just 0.55% – 35 basis points lower than its nearly $250B mutual fund counterpart [PTTAX]. Some are taking the release of specific expense data as a sign TRXT’s launch is imminent. 

    Wynn Resorts (WYNN -1.8%) receives an early boost after S&P upgrades the firm to the cusp of investment-grade status and Nevada’s gaming board cites soaring revenue on the Las Vegas Strip, before the sector tails off on pessimism. Shares of casino operators: (MGM-5%, (MPEL-1.7% (LVS-3.4%, (IGT-1.1%.

    Three lunchtime reads:
    1) As government aid fades, so may the recovery
    2) Seven companies paying large dividends fully covered by earnings
    3) How many jobs needed to keep jobless rate steady? 

  79. @Felipe
    re: SODA  Xspread trade of last week
    Are you staying with it, or should we take the very nice profit that we have now? 

  80. My prediction for the market this week:

  81. PHil – any reason not to do the QLD instead of the QQQ’s?  Too risky?

  82. Phil/VIX - Vix up 16% today, the VXX I purchased Friday is only up 6%?!?  How to you play the VIX…futures, etc? 
    JRW - Just cashed out a  6% profit today on a risky weekend hold on TZA…done for the day as I’m good with that and have to take the family shopping.  My 1-3 day momentum trades have been crushing my day trade profits recently…plus I don’t have to watch the screen all day.  Your levels gave me the confidence to short over the weekend…thanks for posting them every day! 

  83.  Pharmboy…
    Phil’s reference to 2) Seven companies paying large dividends fully covered by earnings.
    AstraZeneca (AZN) ($50 per share; MV $68 billion; EV $65 billion) is a major pharma firm that develops cardiovascular, gastrointestinal, infection, neuroscience, oncology and respiratory and inflammation medicines. It had ten drugs with annual sales of $1+ billion in 2010, including Crestor, Nexium, and Seroquel. Crestor sales rose 26% from $4.5 billion in 2009 to $5.7 billion in 2010, while total revenue increased 1% to $33.3 billion in the period. The Street expects AstraZeneca to earn $7.17 per share in 2011 (7x P/E), followed by $6.07 (8x) and $5.97 (8x) in subsequent years. The annualized dividend of $3.00 per share, an increase of 18% from a year ago, implies a yield of 6.0%. AstraZeneca has boosted the dividend six times in seven years, delivering an annualized growth rate of 18% for the period. AstraZeneca has a high-return business, with a seven-year average return on equity of 36%. 
      What’s your take on a position here?

  84. rustle--great video..that is the feeling being short the momos these past 13 trading days!

  85. Poor poor AMRN.  Damn fish oil is nothing but a gimmick!  If I had lots of money, I would short the carp (no not a misspelling) out of them, but the P/C ratio is high and that could send things flying.

  86. DXD/Phil – last week I picked up some July DXD $17/18 bull call spreads at net .32, now down about half. I am suprised is not doing better on today’s fall.  Your thoughts on how to best adjust or hold out for more fall in the DJI?

  87. iTrade – waiting for the Crestor vs Liptor data to come out.  IF it is superior, then I would happily get in.  IF not, then I would happily short.  Lipitor goes off patent in November, and that is $12B they are competing against.  Zocor is off patent, and that was $5B.  Statins were all the rage, and now they are getting a bit of bad press.  I still like MRK & BMY (pay a better dividend) and NVS better. 

  88. Sold some V Sept 77.5 p for 1.12

  89. DXD/Phil – more particularly.. i’m not sure i want to double down this close to expiration if we are going to expect another rise in the markets like last week. With current dynamics, would you suggest best to roll down, roll out, or yes double down? thanks

  90. You know there is going to be some act of desparation with the debt ceiling to paste the cracks with bubble gum and the markets will rally 150 points.

  91. Troy,

    You are welcome; I’m still short, retest LOD then decide !! Here’s where we are on SPX:

  92. To JRW’s puts last week….

  93.  QQQ 58 calls.  - Phil what level are you stopping out the of 58 calls in the 25KP?

  94. Troy/VXX: As I understand it, it’s a triple derivative product; a derivative (options), on a derivative (the VIX), which is in turn a derivative of SPX derived options. It has a tremendous amount of frictional loss, transactions for rebalancing, rolling over etc. Many of my friends have lost $ on it. Not many people around here like this widowmaker. 

  95. QQQ July $58 calls/Phil, the QQQs failed $58 but Nasdaq Comp is still holding 2800. Which one is the stop line for the $25KP? We’re down 22% or about $260.
    "QQQ July $58 calls at .60 have a nice .53 delta and they can stop out if the Qs fail to hold $58 (Nas 2,800) for a small loss so 20 in the $25KP is risking about a $100 loss to make a lot more if we get a run-up."

  96. FB authentication – see, that’s something I don’t understand even after reading the comments on the link, and I think the problem is an underlying assumption. (somebody kick me if I’m wrong; you’re all pretty good at that ;-)
    We are not "users’ of FB, or google, or yahoo – we’re merchandise. The users are the companies who are buying us from these outfits with the goal of selling us stuff. Realizing that raises one’s level of understanding of what’s going on with these apps.

  97. Pharm, thanks Smiley

  98. Phil / Sheila Blair    Bull by the Horns: What Main Street Must Do To Fix Wall Street in 2012    I suspect this book will expose a lot of dirty laundry (people) and maybe be relevant to policy heading into next years’ election cycle?

  99. Euro looks to be rolling over, they need to do something to weaken the dollar…somebody from the Fed most likely says something before the day is through


  100. LNKD is getting to a very shortable level again.

  101. SODA/Flips – That was the July $80/75 bear puts spread at $3.30, selling the $75 calls for $2.80 so net .50 now $1.25?  $1.25 is now at risk to make $3.25 more at $75 or under so still a good risk/reward profile and I’d rather risk stopping out even than give up on the trade with just 5 days to go and SODA at $72.50 but you have to have conviction because, of course, it’s an idiotic Momo stock and could jam up and down a few Dollars any time.  

    QQQ barely holding the line but Nas at 2,803 still gives us hope.  Dollar at 76.39 though and 76.40 is going to hurt most likely.  

    Pain is right Rustle.  

    QLD/Jercon – Well, they have much wider bid/ask spreads and nowhere near as liquid, so when you are making a contingent play that you may want to dump quickly – it’s a poor choice.  

    VIX/Troy – If I play the VIX, which I don’t do often because it’s so stupid, I prefer a bull call spread coupled with a put sale if I want to be bullish.  For example, the July $17/18 bull cal spread is .50 and you can sell the $17 puts for .40 for net .10 on the $1 spread that’s 169% in the money – that’s a nice way to play volatility and you can roll those $17 puts to the Aug $16 puts (now .40) which I assume, is a place you don’t mind being long anyway.  

    Oops, Dollar spike is very likely a flush to get rid of the longs prior to a move up – be alert!  

  102. VOD: Buy/Write buy 26.20, selling 2013 25 puts and calls for 7.70

  103. AGNC income portfolio players I feel it would be time to load up on some stock if you lost it at 2.97 again and sell some DEC 29 puts for 1.45 or if you wish to play safer 28p for 1.00 Hold with the DEC calls at .80 now al premium but they still could go higher

  104. tusca, thanks for reminding me.  Sheila Bair had a great op-ed piece in the Wash. Post Outlook section yesterday.  She called it how it is and laid the blame for our financial crises squarely at the feet of Wall St. AND Government.  This country is in danger with people like her leaving government.  I wonder what she plans on doing next?  Bet she won’t get any offers from W. Street!

  105. Preparing to break North of IWM 83.42; sold 2/3 TZA, selling the last now and buying TNA !!

  106. Holding on the TNA buy. (not confirmed)

  107. Beyond the debt ceiling machinations, the focus will be on Bernanke’s Wednesday and Thursday appearances on Capitol Hill. While the central bank chief has maintained a fairly steady line when discussing the economy in recent months--inflation is temporary, unemployment is higher than expected, the Fed is unlikely to do more to stimulate the economy--Friday’s dismal jobs report will serve as fresh grist for lawmakers on both sides of the aisle.

  108. The Euro chart looked bad at 1:30 now it looks plain ugly

  109. Tomorrow we test 12400

  110. Everyone stopped out of QQQ calls in 25kp?

  111. WHHEEEEE!

  112. Phil / 2.5 breach    Since we’ve broken the lines, looking at volumes, do you see anyway ‘they’ can stop us closing in on the ‘must hold’ levels tomorrow?  I don’t see any credible ‘Europe fixed’ story arriving.

  113. Evidently, we are going to IWM 83.00 or 82.80. Oh well.  Smiley

    Scaling back into TZA !!

  114. JR – yeah, that was unclear, as some other indices did not confirm on a double bottom (XLF).  Now we have ‘breakthrough’….

  115. My perfect week outlined:
    Market falls to 12000 by end of week
    Eric Cantor, John Boehner and Paul Ryan get caught in a tapping my foot bathroom scandal
    Warren Buffet buys CNBC and decides to clear house and puts as anchor Keith Olbermann.
    Rupert Murdoch is forced to sell Fox.
    And Jim Cramer bets heavily on Orange Juice and loses everything and his kids don’t go to private college and they repossess his Bentley.  Thanks Dan and Eddie.

  116. rustle – did u buy any puts today? Thanks.

  117. Had dia puts already and had calls on SCO, SCO stock, open calls on UCO and covered 2/3 of position.  But still have EDZ and TZA.  Didn’t trade them yet.

  118.  Troy,  VXX is actually great.  But only if you want to use it short the VIX.  Shorting VXX has been my most consistently profitable trade all year.

  119. Volume is crap at 65M at 1:45.  

    Dollar at 76.425 and hit resistance, even though earlier it was at 76.55 so that’s one reason I thought the move was insincere.  Also, didn’t get much of a negative reaction from gold, oil, or gasoline (which is back to $3.07 so big crack spread for refiners) but the index futures fell in lock-step so very fakey-looking.  

    Poor CREE – $31.23

    MO holding up well.  

    Fish oil/Pharm – In the good old days we had SNAKE oil!  Of course, back then it was guaranteed too…  

    DXD/Scott – Yes, not a good deal on those.  If you are using it for protection, you can spend .50 to roll to the Aug $17s, wait for the July caller to expire and then sell the next $18s for .30+ and that raises your net to .52 and buys you a month.  If we head much higher – THEN you can roll or DD the Augs.   

    V/Yodi – Seems like a sound bet.  

    Desperation/Pharm – Little doubt of that.  Nothing freaks out Republicans more than a dipping market.  

    SPX/JRW – I think it’s more prudent to play for the bounce off that line (1,320) until proven it can’t hold.  Lots of room to the downside if it fails.  

    QQQ/BGB, JVest – As long as we’re holding that 2,800 line on the Nas, I’m inclined to ride it out.  It’s one of those "No risk/no reward" kind of situations.   It’s all well and good to make a plan at the outset but then I see that 1,320 is hanging tough on the S&P and 12,500 on the Dow and the Dollar seemed to be pushed up for no good reason (now back to 76.39) so I would be more inclined to hold on now than I was earlier.  

    Merchandise/Snow – That’s right, the only difference between us and the Matrix is the people in the matrix were fed and housed and entertained as the machines used them – we, on the other hand have to work so we can PAY to do all that stuff and THEN be used to power the machines.  Boy are we stupid!  

    Bair/Tusca – I don’t have too much hope.  She’s a life-long Republican and I think this is more of a finger-pointing book (away from her) than a proper expose of the system.  She’s only 57, not ready to retire yet and, of course, the FDIC isn’t really on top of all the really good stuff.  

    Yen now rising past 80.20 (going lower than…) That is not good for Japan at all.  Going to be hard to get the Dollar to weaken from here (76.33) unless the BOJ goes heavy into Euros.   Oil can’t get over $95 on a very lame (so far) NYMEX stick and that’s not going to maek the oil companes happy, who are already down 2.5% today (see sectors below).  

    LNKD/Rustle – Good idea.  I like the Sept $105/85 bear put spread at $10, selling the July $97.50 puts for $2 (net $8) and a plan to sell something like the Aug $80 puts for $4 (now $4.20) to knock the basis down to $4 on the $20 spread.  In each case, 1/2 of the short puts should be stopped out at 50% up.  

    Italy has come out of left field?  Can Pisani REALLY be that clueless?  

    VOD/Jomp – I like those guys.  

    AGNC/Yodi – I think it’s a great time to sell the Sept $29 calls for $1.40 (+.45) and the Jan $28 puts for $2.40 and then you can set a buy at $30.25 and you’re in for net $26.45 but then hold off on buying in for a hopeful pullback off $30.  Once you get to $29 or less, you are golden on the entry, even if you do get called away.  

    Euro/Kustomz – Maybe just testing $1.40 before moving up.  Same with Pound on $1.59 but we should see it by the close.  Oil was terrible into the NYMEX close, just $95.10.  

    QQQ/Etrad – Yes, .50 was too much to bear for a $200 loss but I’ll be very angry if we get a stick into the close now.  

    Tomorrow/Tusca – You can never expect to move down 5% in two days.  4% would be huge but probably, tomorrow, a 1% drop if that.  Depends on the Dollar of course but are we ready for 77 already?  

    Good plan Rustle.  

  120. David Ristau – do you still like JASO fundamentals? They’re down 30% since you recommended them in April.

  121. ..Phil./ GLD…  your thoughts on a play here?  thnx

  122. ”Pull off the Band-Aid. Eat our peas. Now’s the time to do it," the president said.
    No, 2 years ago was the time to do it!  And quit stealing my lines!!

  123. 01:00 PM On the hour: Dow -1.18%. 10-yr +0.51%. Euro -1.52% vs. dollar. Crude -1.46% to $94.80. Gold +0.44% to $1548.40.

    02:00 PM On the hour: Dow -1.14%. 10-yr +0.59%. Euro -1.64% vs. dollar. Crude -1.2% to $95.05. Gold +0.46% to $1548.70. 

    Railroad carload traffic rose a scant 0.9% Y/Y in June, and intermodal traffic (using intermodal or shipping containers) gained 4.6% vs. June 2010, the Association of American Railroads reports. Rail carload traffic has recovered less than half its volume from its Nov. 2008 collapse

    Nearly two-thirds of small-business executives say they’re not expecting to add to their payrolls in the next year and another 12% plan to cut jobs, according to a new Chamber of Commerce survey. Just 19% say they plan to expand their workforces. "To start hiring, we need faster economic growth and a change of course in Washington," CofC’s Tom Donohue says. 

    Oh noooooooooooooo!  Sales and profit growth have begun to stall at deep-discount retailers after showing strength during the recession, as even cheap toys and other small indulgences become a stretch for some consumers. In recent weeks, DGFDO and DLTR all missed quarterly earnings targets, and cost and margins pressures are beginning to echo those at TGT andWMT.

    The pain of this recession has been concentrated among a smaller group; in the 1982 recession, the share of people who experienced unemployment was more than one-third larger than in 2009. Catherine Rampell suggests that it could explain why unemployment has not become a larger political issue.

    Doug Kass isn’t mincing words: "Sell stocks," he says. The two-week rally in stocks is "giving the wrong signal of smooth and self-sustaining growth" – a signal that’s unjustified after the dismal jobs report and Europe’s sovereign debt contagion.

    Mark Thoma believes Pres. Obama’s latest remarks show a disappointing embrace of austerity as a valid means of economic stimulation. "There is no evidence that this works in a situation like ours, i.e. that deficit cuts create so much confidence that they stimulate the economy," Thoma writes, but "there is plenty of evidence that the fall in demand from deficit cuts is harmful.

    Hmm, now why would Jim Rogers want to talk down the Dollar?  The U.S. will "default one way or the other,” and deficit reduction talks are "a sham" that can’t hide the fact that the U.S. dollar is a "terribly flawed currency," Jim Rogers says. In his investments, Rogers tells CNBC he’s long commodities and short emerging markets and U.S. tech stocks; silver, in particular, is “going to go much, much higher over the next decade.”

    Analysts expect more bad news later this week for investment banks, already stinging from Europe contagion, when earnings come in. Research from Credit Suisse suggests 1Q trading revenue could be 25% lower. Banks are mired in red: (BAC-3%, (JPM-2.8%, (C-3.8%, (WFC-2.1%, (MS-2.8%, (GS) -1.6%

    The VIX stays calm, even with dramatic headlines coming in by the hour from Europe. The market’s volatility index, +7% for the day, stillstands at a mild-reading sub-20 level, well-off the higher spikes in fear recorded in March and June.

    After Italian regulator Consob ordered short-selling disclosures, speculation turns to whether a naked-shorting ban is ahead amid what some are calling a "speculative attack" on the country and its banks. UniCredit (UNCFF.PK-5.7%; Intesa Sanpaolo (ISNPY.PK-10.1%.

    Shares of Chinese internet firms sink, giving backs gains from astrong rally in the sector since June. Losers: BIDU -3%RENN -8.6%,SINA -6.2%DANG -7.7%NTES -3.2%.

    Another day, another take on alternative energy. Today’s slant:Government should be the one to invest in wind, solar, nuclear, biofuels and other energy souces because free markets allocate capital based on trends and growth, and miss out on investing in energy insurance policies for large oil price spikes and black swan events.

    An AAPL story a day keeps the bears at bay!  An old rumor gets fresh legs as UBS’ Maynard Um joins Piper Jaffray’s Gene Munster on the Apple (AAPL -1.4%) HDTV bandwagon. Um sees Apple increasing market cap by $50B-$100B after it enters the flat-panel or internet-connect TV market with a "core level of differentiation" that leverages its existing high-flying media services.

    Microsoft is reportedly interested in offering a subscription video streaming service for Xbox Live, making it a direct competitor of Netflix (NFLX), Hulu Plus, and Amazon’s (AMZNPrime Instant Video. Competing against Netflix wouldn’t be easy, but Microsoft could make some headway by packaging the service with an Xbox Live subscription.

  124. This is funny. I am still in France watching the news where one of the big story is the fact that Total is raising the price of gas by 1 to 4 euro cents a liter (or 5 to 22 US cents a gallon) as the price of oil is going down! And now the CEO of Total has been called to the office of the Finance minister to explain the situation! I am sure he’ll change his mind after that…  

  125. lol, matt.

  126. My view on NFLX is it’ll take awhile for the competition to grow content and member base, years probably but the real downfall of NFLX is when content agreements come up again and they get slammed hard.  The studios HATE seeing NFLX make all this money on people renting their movies instead of buying them and that they are basically cut out.  And NFLX funny accounting is hiding the fact they don’t have great cash flow now.  So they can still play games with the stock for awhile especially with more revenues coming in from other countries now, but 2 years from now this stock can be right back at $50.

  127. Of course I could be wrong and the stock might go to $1,000 if the entire population uses them but on my account alone, 5 people were using streaming NFLX at the same time this weekend.

  128. Phil: what do you think about Italy. this is pretty scary What would you do if were italian and you had money in an italian bank? i think would be safe to move them out of the i too pessimistic?thanks

  129. Phil/AGNC: i see Jan. $28 P at  $1.75 ,not $2.40. Did you mean another Jan .$29?

  130. So what’s today’s plan?
    what does Oracle says – we don’t have stick? Correct?

  131. Hoping for no stick, just heavy stone

  132. Imagine if someone hacked in on President Obama’s conversations, this is major treason:

  133. dflam
    AGNC it is JAN 29p

  134. EU Bond Spread are …. well, Whoa Nelly.

  135. Yeeeeeehaaaaaaaaaah  !!  Smiley

    Hey, Ben, can you fix this ?

    Portugal 10Y – just for fun
    portugal.png (5.76 KiB) Viewed 24 times
    Italy 10Y
    italy.png (7.3 KiB) Viewed 24 times
    Spain 10Y
    spain.png (6.37 KiB) Viewed 24 times

  136. yodi: thanks

  137. AA CEO will be on CNBC after the release of earnings, must be good if he’s agreed to show his face on CNBC.

  138. @JRW
    Great pic

  139. Phil / Oil   The Euro is likely to remain under attack and slide lower.  Would you short oil at this $95 level again?  I use DTO to get leverage.  Or, is there more money to be made just shorting the broad mkts with TZA and EDZ?  Do you think oil’s decline will be a bigger or smaller % than equity mkts?

  140. Last 1/2 hour push; getting out of TZA !! (target IWM 83.43 or 83.60)

  141. BPAX 95c straddle filled against the stock at a higher price!  Oh yeah!  Giddy up….

  142. DXD/Phil – thank you. i like the option you suggested to roll the longs, let the short expire, and rewrite short calls after expiry. got first round of rolls done at .43.

  143. Phil / Overnight   I cashed in my big TZA position, which luckily I held into the weekend.  Do you think we open down tomorrow, on more follow through in Europe and Asia?

  144. Craig / VXX: How do you short VXX?  Selling naked calls?

  145. Jvest -

    We are no longer involved in JASO…We sold it probably about two to three weeks ago. We, however, have not changed our opinions. Obviously our price target is probably not obtainable in the next nine months, but the "exaggerated" price was just to show you how ridiculous the market prices solar because they do not want any smart type of energy to ever exist. They want us to all hate solars.

    I love solar long-term, and there will be a day when it will be a MAJOR source of our energy. Until then, we get screwed so we hate them.


    Sorry for the loss. I think if you have the ability to ignore short-term and look at it again in 12 months…you can make money. If not, then probably best to take the loss as I did.

    We in fact also sold out of SPWRA for a gain, TSL and FSLR for a loss.

  146. really shitty attempt of a stick, we will probably close near the lows of the day, so glad i held TZA into the weekend (sold 2/3 of those), think this pullback has lots of legs…

  147. AMAG has filled for 2.10, still waiting for the Ps at 1.30, so a bit better entry on the Ps, but 2.05 could fill on the 17.5/22.5 Calls (all Jan).

  148. Savi, any updates on Vegas?  Might’ve missed a post.

  149. Does anyone know for sure when the monthly JUL RUT and SPX will settle – Is it the last trade on Thursday or the first trade of Friday.

  150. I have shorted it by selling naked calls 3-6 months out, or selling verticals using the weeklies.  If I were to do a play now, it would be to sell the SEPT 27 CALL for a credit of $1.19 or better.  This naked call only uses up $222 in margin.  So you make 50% on the margin used in 67 days.
    If you want a set and forget play, I would go with selling the JAN 30 CALL for a credit of $2.30.  This uses up $223 in margin so you make over 100% on your margin in 193 days.  
    The built in decay on this thing is out of controll.  This is not taken into account when you use the black scholes formula to calculate the option prices.  In my opinion, there is a 0% chance of this thing being above $30, 193 days from now.  The only way I could see this happening is complete collapse of the financial system.  At which point you wouldnt be able to get any money out of your broker any way.

  151. GLD/Topher – It think it’s going down.  All this disaster and it hasn’t really gone up in months.  If there’s a real panic it will sell-off as people pile into the Dollar.  The Jan $150/140 bear put spread is $4 and you can sell Aug $149 puts for $2 if you think I’m wrong and gold goes higher and that puts you in the protective spread at net $2 and if you put a stop at $3 on the Aug $149 puts, you still net $5 on the bearish spread and if you can sell $1 per month in premium and win a few months, you’ll have a free trade in no time and THEN you can go bullish on oil with a nice, free backstop.  

    I like the RUT Futures (/TF) bullish off the 830 line with tight stops.  

    Nas/Jvest – I like the /NQ 100s, easier to watch AAPL, ORCL, GOOG, INTC, CSCO, BRCM, QCOM, MFST & AMZN as that’s pretty much all that matters on the index.  

    Volume at 3:15 on the Dow is 82M – low.  

    Dollar 76.40, oil $95, gold $1,553.  

    TOT/StJ – Wow, I wish our Oil CEOs had to answer to someone.  

    Italy/TraderM – Keep in mind this is not that different than Greece and we are simply in the extreme fear stage of a 3 to 6-month process that will have many ups and downs.  Italy can be fixed as it’s "only" $1.4Tn in debt (Ireland was $867Bn and they are "fixed") and they leap-frogged Spain ($1.1Tn) before the fund are tapped out.  As long as the crisis doesn’t get to France or the UK, it can be contained although kind of the same way a fireman might say a blaze was "contained" to just taking out the bottom floor of your house with "most" of the structure intact.  

    AGNC/Dflam – Sorry, I must have been looking at the Jan $29 puts, still a nice sales at $2.40 (last sale was $2.30).  

    Stick/Lol – No, I’m still expecting something that keeps us over the -2% lines for the Day, that would be a move back to 8,240+ on the NYSE and 836+ on the RUT but we’re running out of time and the Dollar is back at 76.44 so BAD.  

    Treason/Rustle – And that guy wants control of 100% of the satellites that broadcast to most of Europe.  

    LOL JRW!  

    Oil/Tusca – Not ahead of inventories.  Now we have to wait and hope they go up so we can get a nice short opportunity.  I think, generally, oil moves about the same as equities but oil will probably hold $85, which is 10% and 10% would be a bit more than I expect the equities to fall.  

    You’re welcome Scott!  

    Tomorrow/Tusca – Well this is a terrible finish and Asia should snap down hard and then Europe is very likely to fall another 1.5% so, absent of good news from AA or something, we will probably open low and then it depends on many things whether we keep going down or recover but I think 12,500 holding along with 2,800 and 1,320 into the close is a good sign (for the bulls) that things aren’t out of control yet.  

    I have a meeting but will come back later to catch up. 

  152. There she is…welcome back volume surge.  Where art thou been hiding?

  153. 5% on the day, even if it was a little sloppy at the end !!  Smiley

  154. Craigzooka -
    What is the VXX -
    It was at 100 one year ago.. 480 in FEB of 2010 — and now at 22-- it cannot be volatility only.. I cannot understand how it is possible – I would want to understand how does a S&P volatility index move from 480 to 22??? 

  155. how could the MoMOs be down? Impossible ;-)

  156. rehat, volatility index is vix, VXX is fund and use short term futures and lost value then roll next month futures. Japan eartquake time vxx jump 38 and today….

  157. JRW what are you talking about you played it well maestro!! IWM 83.43 on the button.

  158. Anybody know how to get option prices to display in google docs?

  159. Peter D- Strangles- how are you doing on July? What was shaping up to be a very good month turned ugly with the run up causing some uncomfortable roll ups. I closed most of my July positions today on this pull back. Still turned a profit but a modest one.
    What are you looking at for Aug and beyond? I may just sit out for a while or just take a few small positions. Seems that we could get a big move either way.

  160. Phil, why did NLY make an offering for stock today. AH the stock is way down. They have done this several times this year, cause for concern?

  161. Nice SPY shadow bar up to the close last friday…..Who are these ….

  162. rpme – one needs to look at the books, but CIM did this to keep up the dividend…..


    2.5M…someone just bought 2.5M shares at 134.38 @ 1:24 pm…….

  163. Today’s levels.

  164. How is AA’s earning?

  165.  VXX / Rehat – The problem with historical quotes on VXX is that like TZA, TNA and other 3x ETF, they reset the index when they reach a certain value due to decay! Last time, when VXX went below 12, they did a 4/1 reverse split which reset the index to 48. It’s makes it hard to compare various times as decay varies with volatility.

  166. rpme – since REIT’s are required to pay out almost all their profits dividends (I think it’s 90%), so as a general rule the only way they can grow is by by more stock offerings – this probably why you see it so frequently

  167. sorry, should be "as dividends"

  168. Hey tcha,
    I’m just back from a camping trip and saw your note on Friday.  Let’s chat.
    July has been ugly for sure.  My portfolios need a good week this week to get to the 2% profit target.  Actually, the low touch portfolios have done wonderfully with a 3% profit and the shorts look to expire worthless.  The high touch is where they got whipsawed both ways.  Well, that’s part of the game as we know we can’t win all the time.

  169. Volume/Pharm – Maybe a surge but Dow finished at 133M, still 20% off.  

    VIX/Rehat – It’s a very poorly constructed ETF that has so many moving rollover parts that it just eats itself alive through fee churn and in and out spreads.  USO does that too to a lesser extent, which is why we like shorting them more than going long.  

    Momos/Jabob – This is an outrage – I demand an investigation – TURN THOSE MACHINES BACK ON!  

    NLY/Rpme – If it’s the best way for them to get capital to make new loans then more power to them.  They are pulling in $1.8Bn in cash in exchange for a 12.5% dillution.  If you trust them to do it, they will lever this up about 7:1 and they can make $12.6Bn of additional loans which is 15% of their current base so it’s a smart move for them but the dilution will impact earnings short-term.  If you sold calls – no problem and maybe a chance to buy them back if we get more of a dip.  

    Shadow bar/Pharm – In a lot of places.  Too bad it didn’t affect the Futures, could have cashed out the RUT.

    Not good/StJ – Yes, many not good indicators.  

    AA/Cwan – Penny miss in earnings (3%) but revenues up 27% for a very tiny beat. Margin concerns keeping them down.  Company gave good outlook and guidance so nothing wrong with short puts.  

    China/StJ – Do we even have room on our plate to worry about that?

    REITs/Jerconn – They can plow money back into acquisitions but then they must book their purchases at certain times.  Seems NLY is betting we turn up by next year.  

  170. At the close: Dow -1.2% to 12505. S&P -1.81% to 1319. Nasdaq -2% to 2803.
    Treasurys: 30-year +0.98%. 10-yr +0.62%. 5-yr +0.36%.
    Commodities: Crude -1.16% to $95.08. Gold +0.43% to $1555.90.
    Currencies: Euro -1.75% vs. dollar. Yen +0.41%. Pound -0.84%.

    Market recap: There’s a growing "where will it end" sense to the cascading European debt problem, as Italy’s situation casts doubtthat the crisis can remain localized to countries such as Greece. On top of the dismal U.S. jobs picture and debt ceiling fight, stocks andindustrial commodities sold off, and the dollar and Treasurys rose in a flight to safety. NYSE losers led gainers nearly five to one. 

    When Bernanke testifies to Congress this week it won’t be the same old song-and-dance as lawmakers try to score points on voter issues of energy prices, jobs and spending cuts. But don’t be surprised if Bernanke turns the table, and issues his own dire warning to Congress on the impact of not getting the debt limit raised.

    Want proof that individual investors have grown disenchanted with stocks? Google it. Terms such as “investing,” “stock investing” and even "bonds" have fallen sharply in the last seven years, according to a researcher, and even the two-year rally has barely moved any interest. The most popular investment-related terms: "saving," followed by "bankruptcy."

    As Italian debt fears wreak havoc on markets worldwide, investors are again looking to Treasurys as a safe haven. The yield on 5-year notes is down 10 bp to 1.48%, while the yield on 10-year notes is down 11 bp to 2.92%. Meanwhile, with the yield on 30-year notes down only 9 bp, the yield curve appears to be getting steeper.

    OK, now THIS may be too much to handle:  Keep an eye on Spain too, after the new leader of the Castilla La Mancha region says the area’s government has a budget deficit more than twice as large as previously thought, raising new concerns over the true state of Spanish finances. Italian and Spanish yields jump to euro-era records

    About time we got this data!  While Nevada gambling revenue surged in May, Rodman & Renshaw says much of the growth was due to Strip casinos doubling baccarat winnings during a month that included a big boxing match. "Fight fans tend to be gamblers, and major boxing cards bring high-rollers into town," Rodman writes. Las Vegas properties trade lowerLVS -4.7%,WYNN -2.8%MGM -6.4%

    Release the Birinyi!  Investors will look past the European debt crisis and high U.S. unemployment to propel stocks another 15% over the next year, Laszlo Birinyi predicts. “What I worry about are situations that the market doesn’t understand… Greece and employment and so forth, these are well within the scope of the market to understand and discount.” He anticipates a "very impressive" earnings season.

    And promise MORE FREE MONEY:  In economist David Rosenberg’s view, QE3 is all but inevitable. With unemployment well above the FOMC’s year-end projection band of 8.6-8.9%, and higher still from its end-of-2012 projection of 7.8-8.2%, the Fed has no choice but to provide more stimulus. Rosenberg previously gave a 99% chance of a second recession happening.

    And have a Gang of 12 Member say nice things:  Morgan Stanley’s David Greenlaw still sees second-half GDP growth at 3.5%, citing an eclectic mix: auto assembly schedules pointing to increased production after recent disruptions, cheap gas prices likely to translate into real consumption growth, incentives for businesses to spend expiring at year-end, and a seasonal quirk that will boost Q4 exports.

    You can never bee too bullish on AAPL it seems:  Lazard Capital’s Daniel Amir believes the Street is underestimating the positive impact Apple’s (AAPL) products will have on chip suppliers Broadcom (BRCM) and OmniVision (OVTI) during the second half of the year. Already, DigiTimes’ sources have provided some heady numbers for second-half iPhone and iPad shipments.

    Amazon (AMZN -2.6%pressures retailers for market share due to its competitive price advantages, a report by William Blair found. The firm has an average 11% price discount on each item, and even higher for online bulk sales. Retailers rated at above-average risk for share loss:HGGBBYBBBYTGTDKSKSSPETS 

    American Superconductor (AMSC) will be restating its FQ2 and FQ3 2011 results, as the company cancels its recognition of revenues on unpaid shipments. As a result, the company expects FY2011 revenues to be approximately $307M, well below the consensus estimate of $360M. Its shares are currently halted. (PR)

    Alcoa (AA): FQ2 EPS of $0.32 misses by $0.01. Revenue of $6.58B (+27% Y/Y) beats by $0.2B. Shares +0.9% AH. (PR)

    Alcoa (AA): A slight miss came despite revenue that climbed higher than expected. Eyes were on guidance: Alcoa reaffirmed forecasts of 12% demand growth for aluminum that would double by 2020 on 6.5% annual growth. Demand "continues to rise and so does growth in our major markets." Company reports it’s well ahead of 2011 targets. (PR;earnings

     Novellus Systems (NVLS): FQ2 EPS of $0.79 beats by $0.02. Revenue of $350.2M (+9% Y/Y) in-line. Shares -1.87% AH. (PR)

    More on Novellus (NVLS): Profit edges higher for the quarter, but bookings, a closely watched indicator of future business, dropped 25% from Q1, and shipments slid 4.7% over the same period.

  171. Hi, Peter D,
    Long time no see!  Looks like you are enjoying yourself, with all the profits from strangling the SPY!
    So, you have a low-touch portfolio and a more active portfolio?  Can you elaborate?  What are the different strategies and what kinds of securities do you have in each of them?
    Meanwhile, I have some SPX July 1350 calls.  I sold them for $1.00 or so a while ago.  They went into ITM last week.  I was biting my nails off!  Do you think I should roll or wait?

  172. Hi cwan,
    Howdy!  I have about 9 large portfolios, 3 of which are low touch, i.e. the profit target is low and plenty of reserve margin.  For low touch portfolios, I can afford to let them get into ITM, and only making adjustment when absolutely necessary.  As we know, the drop in the past couple of sessions really killed the callers, bringing low touch accounts back to profit.
    High touch accounts has the same type of short strangles on SPX and RUT, but with more contracts.  I would go for maximum profit possible when selling shorts.  So when the market moves, I make frequent adjustments.  Except for July, the high touch accounts have returned much more than the low touch ones.  The eventual goal is to have 90% of the account as low touch. 
    As for the July 1350 callers, you can roll them when they get down to $0.7 or so, which is highly probable in the next day or so.  I have some of those too and what a great feeling.  They went down $6.4 today (at $1.275 now), so we won’t let them get away again!

  173. Hey Ilene,  So far, Lee Adler’s prediction that the Fed would sacrifice the equity market to protect the Treasury market is panning out.  And since today were only the short term bonds.. I would think there will be more follow through to the sell off.  Those longer bonds are much harder to sell.  Looking forward to it!

  174. That’s an interesting thought.  Can anyone correlate market dips to large bond sales?  Would be a very interesting predictive model but also very scary if they are willing to play those kinds of games.  

  175.  The population of HNWIs in North America rose 8.6% in 2010 to 3.4 million, after rising 16.6% in 2009. Their wealth rose 9.1% to $11.6 trillion.  [Ed note:  Per Capgemini's 2010, the HNWI gain in 2009 was 17.8%.].
    This statement I will assume is true.  But how true is it, in the context of the equity selloff in 2008?  2009 was a market recovery year. My perception is that the wealth of the HNWI’s merely recovered to 2007 levels in 2009/2010; a fortunate position to be in, admittedly, but it doesn’t necessarily mean that their wealth rose to a historical high. but merely regained its previous level.while the non-HNWIs wealth [mostly the value of their houses] most assuredly did not,
    I surmise that if the government had had the power to re-inflate the value of the U.S. housig market, it would undoubtedly have done so; the stock market was simply the low-hanging fruit from the standpoint of pumping up consumption.  Not that it worked; too narrow a consumption base.

  176. Phil,
    You recommended to buy VIX bull call debit spread 15/19 and sell 17 put. Do you plan to recommend when to close the position, otherwise what exit strategy would you recommend?
    My goal is speculating, not hedging for this trade. I’d be taking profits on strength. Its curve makes only upward spikes, main trend is down, so taking profits has to be fast.

  177.  Craig/VXX – Interesting you mention shorting VXX is most consistent trade of the year. I have a friend who
    observed the same systematic weaknesses in the construction of this product and is shorting it long term as a major portfolio position. He started talking to me about it a couple months ago. Seems amazing that it just keeps getting reverse split to get back to market friendly #’s. Can’t go on forever though, can it?

  178. @ Phil, regarding NLY, how much do you think they will be affected (negatively) when the fed decides to raise the rates? I know its still a long time for this to happen, but i am really considering adding NLY to my long term portfolio and tomorrow might be a good day to sell puts. Thanks.

  179. 15 companies snare crude from reserve

  180.  Hi Peter
    did you see TZA lately? Volatility is huge, you can buy vertical and sell Oct.60 calls, according to OptionVue 100% probobility to win, to touch 60 strike RUT should correct 30%
    would like to know how you play low touch, (would like to set up 500k account for it) especially when VIX is low, what is your criteria to open, adjust and close

  181.  Peter, Swan
    for last 6 month I’m testing back ratio spreads and start liking it more and more, you can open them at any market where Vol is high ( corn, wheat, oil, TZA,…..) low risk and can squize up to 20% for 2 month
    how I play them: couple of month till exp. sell 2x options with delta around 0.10 and buy half amount longs (chose long strike that will be small creadit. if Vol smile exist from both sides (puts and calls) I open from both ends.
    after 3-4 weeks I start moving my longs closer to the market reducing amount (with zero debit, for example from 10 to 6) and move some shorts closer to longs ( converting it to verticals + shorts)
    idea is: when I sell shorts at the begging with delta 0.10 and high volatility chances that they will be touched only 10% and you have very good protection with longs to adjust if necessary, when half of life past through, chances to be touched even lower and we convert them to verticals + shorts

  182.  but really like to set up some low touch, conservative strategy with indexes with about 20% per year potential to park big chunk of money

  183. Dollar just broke through the ascending triangle (bullish).  Fib retrace are included. 

  184. Hi tcha,
    Thanks for the TZA reminder.  I stopped looking at them a while ago as TOS hike the margin 3x on the 3x ultra.  But selling the OTM calls is a good idea with the decay nature of the ultras.  I like the back ratio spreads too.
    For the low touch portfolios, it’s basically money management.  If you aim for 1-1.5% a month on PM, you only use up 10% to 15% of the margin.  That allows you to roll 2X a few times.  Selling 2-3 months out would also help with reducing the market noise.  More tomorrow if you need examples.

  185. FAS Money / Phil – Any guidelines for today? With weak futures this morning I expect a lower open and 15 should be breached on XLF. The 26 calls will most likely be toast or close to. The 25 calls might not have much premium left either. Should we just collect our 0.80 on the calls and call it a week on the call side? With the 0.60 (x1.5 as we rolled to 15 contracts) and the 0.80 (at least) we could collect today, seems like a good week! On the put side, there should be some premium left to collect, but I am worried we have not bottomed yet.

  186. Good morning (unless you are in Europe in which case – Ahhhhhhhhhhhhhhhhh!) 

    EU opening up gapping down 2%, which is twice as bad as expected after Asia is off 1.5-2% with the Hang Seng dropping 490 points (2.2%) with an hour left but below the critical 22,000 line at 21,856.  The EU was smacked lower thanks to DSK’s replacement saying about the worst possible thing to panic the markets:  

    12:45 AM Stock index futures and the euro sink to new night session lows following comments from IMF chief Lagarde that the Fund and the EU are not yet ready to discuss the details of a 2nd Greek bailout. "Nothing should be taken for granted," she says, adding the IMF "is not just a cash machine." Euro -0.7% at 1.3952. S&P futures -0.7%.

    The Dollar flew up through 77 on the 3am trade and that, so far, has sent our futures down about 1.25%.  The Euro is $1.3872 and the Pound is $1.,5836 and, despite the Dollar strength – the Yen is much stronger and all the way down to 79.82 to the Dollar.  This is a problem because the BOJ may intervene and if they buy Euros only, that’s OK for us as it will weaken the Dollar but if the BOJ buys Dollars, our markets will fall off a cliff with everyone else.  Hopefully the BOJ realizes this…

    Oil hit the $94 line, gasoline (/RB) is down from our old $3.10 shorting line on yesterday’s spike up all the way back to $3.04 and nat gas is holding up better than expected at $4.26.  Gold is $1,548, silver (/SI)  $35.38 and a nice long off the $35 line – especially if you are protecting gold shorts and copper, somehow, is $4.35, which is kind of crazy high with all this economic turmoil.  

    I’d love to say it’s good to go long here but not unless the Dow futures, now 12,377 crosses back over 12,400 and then the Nas, now 2,345, would also make a good long over 2,350 but with tight stops and only if the Dollar (/DX) is below 77, and it’s right on that line.  Copper (/HG) is the best short at $4.35 as that’s just a silly price with everything else falling apart so let’s call that the Dollar over 77 play!  

    So we’re testing those 1.25% lines today and, if we hold those, that’s bullish but, if not, it’s a clean shot back to Must Hold levels but the same way I don’t think much of a market move up based on the Dollar moving down – we shouldn’t be panicking about a market move down based on the Dollar moving up.  I am certainly not saying BUYBUYBUY but we expected an Asian sell-off (check) and 1.25% EU follow through (over-check) and a 1% gap down for us that should be the low of the day.  Perhaps we’ll overshoot but this is a very big move down now and don’t forget those 4% lines (from the top) are very strong (and the 4% line is the spot 0.25% under the 1.25% line) because when we get to 5% (the Must Holds), we expect a 1% bounce (to the 4% line) anyway so that makes that area (between -1.25% and Must Hold)  pretty slow going generally.  

    EU Finance Ministers are still meeting this morning – dithering while Rome literally burns!  The claim they will think of something – this should be fun!  

    Tuesday’s economic calendar:
    7:30 NFIB Small Business Optimism Index
    7:45 ICSC Retail Store Sales
    8:30 Trade Balance
    8:55 Redbook Chain Store Sales

    Notable earnings before Tuesday’s open: FASTINFY

    Republicans say they will refuse to raise taxes, but Peter Morici thinks they would be smart to reconsider. Barry Ritholtz wants to hit high net worth individuals whose numbers and net worth have swelled during the past two years. The population of HNWIs rose 8.6% in 2010 to 3.4M after rising 16.6% in 2009, according to a CapGemini report, and their wealth jumped 9.1% to $11.6T. 

  187. I had to repost the above comment as I entered it under the weekend post earlier and it took me a while to figure out what happened.  

    Hopefully that’s the end of the sell-off but nasty, nasty moves down of about 1.5% in our futures so right about 4% down from the top of this run now and this is a place to go long if we turn back up.  S&P (/ES) 1,300 is a good line to play to the upside (now 1,298.75).  Copper did get slapped down to $4.3145 so a nice downside quickie there and silver bottomed (so far) at $35.11 and is back at $35.25 now.  The Pound finally found a floor at $1.58005 so that would be the bearish line if we fail that again.  

  188. Morning Phil!
    The Pound finally found a floor at $1.58005 so that would be the bearish line if we fail that again. 
    Please do keep us posted!

  189. Wow, Hang Seng dropped another 200 points in the last hour, down 684 at the end (3.06%) and only saved by the bell.  Nikkei finished down 1.4%, Shanghai off 1.7% and the BSE also dropped a lot into the close, finishing down 1.99%.  I don’t see any news – I think Europe’s open just freaked them out so that’s good as a bounce in Europe should really cheer Asia up tomorrow so maybe we take money and run on FIX puts and we should look at cashing EDZ too if it looks like we’re bottoming. 

    You have to admit the timing of this is incredible.  Two months in a row we have a panic sell-off the same week that the US needs to sell about $100Bn in bonds.  This should push TBT back to 32 with TLT around 97.50 just in time for today’s 3-year auction and that means tomorrow’s 10-year should have momentum as well:

    Tuesday Jul 12




    8:55 AM ET

    FOMC Minutes
    2:00 PM ET


    Eric Rosengren Speaks
    9:10 AM ET

    Ben Bernanke Speaks
    10:00 AM ET

    Richard Fisher Speaks
    1:20 PM ET

    Treasury Budget
    2:00 PM ET


    Weekly Bill Settlement

    Retail Sales
    8:30 AM ET

    Jobless Claims
    8:30 AM ET

    Ben Bernanke Speaks
    10:00 AM ET

    Money Supply
    4:30 PM ET




    Lots of Fed speak this week and they will be scouring those Fed Minutes today for hints of QE3.  I have a meeting in the city this afternoon so I’m out of here at 2:30 so, hopefully, the Fed Minutes won’t be too exciting

    HNW/ZZ – I’m not sure that matters.  If 100 people lose 30% of their assets and 4 of those people get it all back while the other 96 people remain at 70% then the relative wealth gap has increased substantially.  Let’s say that 96 people had $60,000 and 4 people had 333 times so $20M.  Now the 96 people have $42,000 and the 4 people are back to $20M but now it’s 476 times more than the rest have so their situation has actually improved by almost 50% relative to the bottom 96%.  Now the top 4 can EACH buy and sell ALL of the bottom 96 5 times over.  That means if they want to buy a house – they can have any house they want and the bottom 96 get what’s left.  Unless, of course, the top 4% want 10 houses each, in which case the bottom 96% can fight over the remaining 60 homes and they will have "inflation" because home demand exceeds supply, doesn’t it?  This kind of wealth imbalance is like a cancer that affects the system – destroying the host (the 100% national body) for the good of a greedy few.  

    VIX/Petro – The July spread I would close today (assuming we have a good pop) as I think we’re bottoming (at least I hope so!).  Once you make 20% on any trade, you should be setting tight stops so you don’t blow it (see Strategy Section).  I can’t possibly baby-sit every trade idea I have but you can always ask.  If you are speculating, then you should be much more eager to take profits – there’s always something else you can play with 120% of the cash you had last time.  

    UK with huge 4.2% inflation – that’s not good!  All down about 2% over there at the moment.  

    VXX/Strat – Yep, you can fool some of the people all of the time.  

    NLY/Asaenz – They have such a huge spread I doubt it will affect them much unless the Fed goes hog wild.  Of course a Fed increase should push up the yield of the instruments they invest in too.  

    Oil/Dave – Interesting as it came in a lot lower than the $127 they quoted over the weekend.  The government got $3.3Bn and had Obama given the money to me like I asked him, we cold have shorted oil at $113 at the time and rode it down to $94 and picked up another $5Bn – THAT’S the way to manipulate the market with the SPR!  Oh well, maybe next time…  

    FAS Money/StJ – I think I like selling puts down here but we’ll see what the prices are.  I expected $15 to hold on XLF and we got a quick test tomorrow but today should confirm.  Yes to buying back the calls and I won’t be too keen to sell more at the moment.  

    Wow, Thomas Cook (UK Travel company) down 28% as earnings are off due to lack of travel to Middle East.  Those things are like 7-11s in England, they are on every other block as people like to take quick weekend holidays to foreign countries so they have all sorts of specials in the windows – it’s kind of fun, actually – I’d hate to see that die out.  

    Posted/Matt – I think this should all hold at this point – unless someone says something stupid which, with our leaders – it VERY possible.  

  190. Phil, if they are indeed trying to sell bonds this week you can rest assured that the Fed won’t be breathing a word of QE3.  In fact, my hunch is that the absence of any hint will drop stocks even more.  Just in time to sell 10 years tomorrow!

  191. Holy $hit!  TNA is down 5.7% AH!! 
    Back in the black baby!

  192. Ok, so it’s on only 1700 shares.  But I like the tone they’re trying to set!