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Treasury Tuesday – What A Coincidence – Capital Forced into TBills

TLT WEEKLYWhat a happy coincidence! 

The Treasury had to sell $66Bn worth of notes this week and there was no POMO for the Fed to bid with.  The US could have been really screwed but, luckily, the market crashed and everyone is panicking – INTO TREASURIES!  Isn’t that convenient?  With our 10-year auction tomorrow and the $33Bn 5-year auction today, yesterday’s panic sent the 10-year yield down to 2.82% – the lowest yield since December 1st and it should be even better this morning with TLT flying up to 97.50 and possibly getting back to November highs (hint for those of you not catching a theme – that was pre-POMO) if we can top 98

As you can see on David Fry’s chart, we are now repeating the pattern we had last summer but, unfortunately, last summer was annoying as we fell from 11,258 at the end of April to 9,614 in the beginning of July (14.6%), back to 10,720 (11.5%) in early August and then back to 10,000 (6.7%) at the end of the month and THEN there were first rumors and then confirmation of QE2 and by February we were back to 12,391 (up 23.9%).  A drop and a pop and a drop and a pop later, and here we are, right back at 12,500 in early July with our TBills back where they were in early July of last year. 

Sting and Jung would call this "synchronicity", which is "a coincidence in time of two or more causally unrelated events which have the same or similar meaning" – kind of the Universe’s way of starting conspiracy theories.  Well, for whatever reason, it sure is LUCKY that the global markets are crashing the same week the US has to borrow a crap-load of money, isn’t it?  Last year our motto was – "Hey, we may be a giant mess but at least we’re not Europe" and, this year our motto is "Hey, we may be a giant mess but at least we’re not Europe OR Japan."   Perhaps next year we can add China to that list as the Hang Seng dropped 684 points this morning, all the way down to 21,663 or as the great Surfaris said:  Wipeout!  

Despite Asia’s poor performance and Europe’s terrible open, the run up in the Dollar to 77 early this morning looked like our typical 3am trade so I sent out an Alert to Members at 3:40 am suggesting we go long on the Dow Futures (/YM) over the 12,400 line (contracts pay $5 per point) and on the Nasdaq Futures (/NQ) over the 2,350 line (contract pays $20 per point) as the Dollar (/DX) fell below 77.  While we waited, we played Copper Futures (/HG) short at $4.35 and those bad boys stopped us out at $4.32 for a $1,260 gain per contract.  The early bird may get the worm but we’re busy making enough money for a gourmet breakfast!  

Now we’ll have to wait and see if I picked a good bottom (of course we will take the money and run if rejected at 12,500!).  It’s 8:30 and the Dollar is testing that 76.50 line as it looks like the BOJ is sticking to our plan and buying up the Pound and Euro and leaving the Dollar alone because crashing the US Markets won’t help the Nikkei this evening.  What will help the Nikkei is our -$50.2Bn  trade deficit for May.  -$42.7Bn was expected by Economorons, who seem unable to grasp the concept that when oil is at $100 – it tends to add to the trade deficit.  

That’s right, last May (2010), we imported 357M barrels of petroleum products and paid $27.7Bn for them but this May, we imported 350M barrels and paid $38.7Bn for them.  See (and I’m explaining this for Bernanke’s benefit) – if you pay MUCH MORE MONEY for the same stuff – THAT’s INFLATION!  On the bright side, China’s FX reserves jumped yet another $153Bn in the quarter, not holding $3.2Tn in cash (mostly ours), which means it is going to be quite a while before China has to admit they have any problems with their economy.  The difference between China and the US is that we borrow money to buy things from them – a subtle but important distinction!  

Of course a little inflation isn’t stopping the unstoppable US consumer as ICSC Retail Store Sales are up 0.4% for the week and up 5.5% year over year.  The strength in sales is attributed to demand for seasonal goods tied to hot weather and back-to-school sales but it seems a bit early for back-to-school (I’m a parent) so I’d have to say the truth is that they haven’t got a clue why sales are picking up despite weakening Consumer Confidence.  Redbook’s same-store sales confirm the trend, showing 5.4% year on year growth, which is the best reading we’ve had since the crash.  Thursday, we get the more detailed Government Retail Sales Report but we got preliminaries last week and they looked strong (but then the markets collapsed anyway, so take it with a grain of salt).  

Pre-market update:  Just before the bell, the Futures are much improved after an Italian bond auction "wasn’t a disaster" and News Corp. (NWS) announced a $5B stock repurchase.  There is also a rumor that as many as 6 Spanish lenders have failed the new and improved EU bank stress tests. The failures look to be technical in nature, as regulators are not allowing cash set aside to cover losses to be counted as core capital. Results are to be released on Friday at 3pm but this should take the sting out of a bad report.  

Also, strangely enough, EU markets are improving as Dutch Finance Minister, de Jager says the "knot" of wanting private sector involvement in debt restructuring without calling it default has been broken.  It seems the  markets are just happy to see their leaders acknowledging reality.  If only that would catch on in this country!  With our own debt talks going nowhere, Gerald Seib reckons Obama is pushing for the grand deal of $4T, which the GOP is resisting, as it will make good election politics for him, although less so for his fellow Democrats.  And if you’ve got to cut Medicare and hurt the elderly, better not to drag it out. 

Let’s watch that Dollar on the 75.50 line and – be careful out there!  


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  1. Phil, I was surprised you recommended Silver at $35.  As the dollar continues to strengthen won’t all commodities take a hit?

  2. Oil Lines
    R3 – 97.38
    R2 – 96.66
    R1 – 95.58
    PP – 94.86
    S1 – 93.78
    S2 – 93.06
    S3 – 91.98 

  3. Heck of a coincidence.

  4. Dollar popped right off the 50 fib line from last night….

    PP for today:

  5. Great googly moogly!  Now that is some serious camel T!

  6. That, Matt is professional grade camel. There are no accidents on the beach.

  7. Institutional Action

  8. from Doug Kass:

    Preparing to Go ‘All In’
    7/12/2011 8:46 AM EDT

    Bullish TBT

    If the yield on the 10-year U.S. note gets any lower, I plan to go ‘all in’ on my short bond position.

    On any further drop in the yield on the 10-year U.S. note (based on the current flight to quality), I plan to go "all in" on my short bond position.
    I believe that slower economic growth has been almost completely incorporated in the term structure of interest rates.
    Position: Long TBT

  9. lol, Cramer still push NFLX at this price.

  10. leon/ Kass article?

  11. Good morning! 

    Gotta take this opportunity to sell 10 TBT Aug $32 puts for $1.10 in the $25KP and 20 in the Income Portfolio.  

  12. I also like selling the FAS July (Friday) $24 puts for .70 in the FAS Money trade as we do have long puts with gains we’re protecting.  Let’s also buy back the July $26 calls for .18 as that’s plenty to make and MAYBE we get lucky and have a pop on Europe being fixed or whatever the excuse de jour is.  

  13. Good morning,


    IWM     81.82,  82.81,  83.02  83.59,  83.88,  84.18,  84.56,  84.87,  and  85.58

  14. FAS Money – We should look to cover the 26 Calls short sold for around 0.95 that are now around $0.18 and collect another $0.70 this week. No open put so far. 

  15.  Anyone:USO
    Are weeklies available on USO Thursday?  TIA

  16. Phil / Mkt action    Can you explain why our mkts are relatively calm given the slide in Asia and Europe.  Would you short more into this ‘calmness’?  Thinking TZA again.  But, obviously the ECB can’t allow Italy to tip as it’s the 3rd biggest Euro economy, so here goes QE3 right?  Mkt positive?

  17. Sorry for the post on FAS Money as Phil and I were typing at the same time… But the 24 puts are now 0.57. Should we still sell them Phil? 

  18. i just can’t fathom a plausible fix for europe..if spain greece italy and ireland really thought this through they owuld leave the euro…buying greek debt at 50 cents on the dollar… using it as collateral with ECB to borrow 100%…is by any standard a scam..the problem for the idiots at imf is that they have many fixes to attend to and taxpayers are just starting to get it ‘they are the victims’..this is oging to get v v ugly..imo

  19. What about the $58 Qqq’s?

  20. tusca,

    The VIX is "cheap". in part because of  the Dispersion Effect which is the influence of market-neutral firms strategies causing VOLATILITY TO DAMPEN. MSCI Barra, a leader in risk management, highlighted that the global equity markets have been observing declines in the "cross-sectional" volatility or "dispersion". Since the Russian default in 1998 and Internet Bubble, dispersion has been in a downtrend and now continues down after the anomaly of the financial crisis which has only added more money to market-neutral funds. In fact, there was a recent report that there is now more money in market-neutral firms now than back in 2007, making for a continued dampening in volatility.

  21. CNBC was already hard to bear, but now with Cramer in the morning, for me at least, it is unwatchable, can’t even listen! 

  22.  best performing cds today..emerging markets sov cds index +11% to 192 bps

  23. This is where Apple and others (Dell, HP, etc.)  make their profits:
    One the graphics shows that an iPhone 4 costs only $6.54 in assembly (Chinese labor) and makes $360 of profits to Apple… Not sure I could sleep at night!

  24. Watching the Dollar at 76.50 (under is good) and XLF at $15 (over is good) will be a great directional signal today.  I hope people took the money and ran on those futures plays as we are LUCKY that we got this huge bounce into the open.  Now we can get back on board if we break over this morning’s tops so we’ll be looking for:

    Dow 12,520, S&P 1,320, Nas 2,800, NYSE 8,230 and RUT 832.  This is very Dollar-driven so I expect them all to either make it or break it together.  

    Nas is our worst performer at the moment and we stayed away from them as my theory was the market was too choppy for the Momos to survive and AAPL still has to be taken down by the attack dogs prior to earnings (pick a rumor, any rumor).   We’ll see how that plays out today.  

    We need the Euro to get back over $1.40 ($1.39828 now) and it would be nice if the Pound could manage the $1.59 line ($1.58621) while we DON’T want the Yen to get weaker, over 79.75 (now 79.67) because we need the Dollar to stay low and it’s hard to get the Yen weaker without the Dollar getting stronger and I don’t think these markets have enough conviction to overcome a strong Dollar.  

    This whole morning may just be Dips buying so try not to be a dip and don’t look a gift horse in the mouth – if you have a nice profit – take it because cash is REALLY good to have in this market!  

    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
    10:00 IBD/TIPP Economic Optimism
    1:00 PM Results of $32B, 3-Year Note Auction
    2:00 PM FOMC Meeting, Day 1 

    At the open: Dow +0.01% to 12507. S&P -0.14% to 1318. Nasdaq -0.13% to 2799.
    Treasurys: 30-year +0.37%. 10-yr +0.08%. 5-yr -0.01%.
    Commodities: Crude -0.39% to $94.78. Gold +0.08% to $1550.50.
    Currencies: Euro -0.36% vs. dollar. Yen +0.54%. Pound -0.38%.

    Euro Falls to 4-Month Low Versus Yen on Concern Debt Crisis to Reach ItalyThe euro fell to an almost four- month low versus the yen after the International Monetary Fund head said “nothing should be taken for granted” on Greece, stoking concern its debt crisis will spread to larger economies. 

    German ‘Nein’ Leaves Italy and Spain in Turmoil. Chancellor Angela Merkel called for more "frugality" in Italy, sticking to her script that Rome can solve its woes with an austerity budget. Her finance minister Wolfgang Schäuble said any boost to the EU’s €500bn (£440bn) bail-out machinery was "out of the question". Mr Schäuble denied reports that Berlin was ready to empower the fund to purchase Spanish and Italian bonds pre-emptively on the open market, a move seen by experts as vital to halt dangerous contagion to the larger economies. The market’s verdict on EU foot-dragging was instant and brutal. 

    Wolfgang Gerke, president of the Bavarian Center of Finance in Munich, said any potential plan by the ECB to double the European Union rescue fund to $2.1 billion would be "irresponsible," citing an interview with Gerke. Such "slogans" create scares and unsettle the financial markets, Gerke said.

    That didn’t take very long, did it?:  Greece Set to Default On Massive Debt Burden, European Leaders ConcedeEuropean leaders bowed to the inevitable and conceded that Greece is likely to default on its massive debt burden, which would be a first among the 17 countries using the euro. They also abruptly shifted tack in the eurozone debt crisis by raising the possibility of using the eurozone’s bailout fund to buy back Greek debt on the markets, meaning sizeable losses for Greece’s private investors and reduced debt levels for Athens. Following 12 hours of fraught negotiations in Brussels haunted by the risks of contagion in the eurozone spreading to Italy, now being targeted by the financial markets for the first time in the 18-month crisis, the 17 governments of the eurozone pointedly failed to rule out a sovereign debt default by Greece.

    Italy Becoming Spain Makes Crisis ‘Systemic’. Investors are treating Italy increasingly like Spain as contagion pushes bond yields in two of Europe’s biggest economies towards levels that forced Greece, Ireland and Portugal to request external help. The gap between Italy’s benchmark 10-year yield and that of Spain narrowed to 35 basis points yesterday, the least since November, even as Spanish debt yielded more than 6% for the first time.

    An Explanation of What is Really Going On Behind the Scenes as Rome Burns.

    Spanish Spending Vote Looms as Zapatero Seeks to Stave Off Election Risk. Spanish Prime Minister Jose Luis Rodriguez Zapatero will seek lawmaker backing today for a spending plan for next year as his Socialist government prepares a budget that may determine whether he can finish his mandate.

    Portugal Slump to Deepen as Austerity Bites, Central Bank Says. Portugal’s economy will shrink more than forecast this year and contract in 2012 as the austerity measures that were required for an international bailout take hold, the country’s central bank said.

    Full Letter From Greece’s G-Pap Blasting His Rescuers and Confirming Beggars Can Be Choosers.

    Here’s What’s In That Brand New Report on Banks and Sovereign Debt. Banks in the Eurozone face some huge threats. That’s the implication of a new report from the Bank of International Settlements, which devised a chilling analysis of why the economic situation in Europe is quickly going from bad to worse. The study analyzes the impact of sovereign risk on banks, in part based on data taken from the last few years. The bottom line: As goes the country, so goes the banking system.

    Janus Capital(JNS) Leads Fund Manager Declines on Withdrawals, EU Debt CrisisJanus Capital Group Inc. (JNS), owners of the Janus, Perkins and Intech fund families, led asset-manager declines, after investors continued to exit its funds in June. 

    Profits Climb to 51-Year Mean as S&P 500 P/E at Crisis Level (Bloomberg)
    • The Federal Government Races to the Cliff (Jeff Frankels Blog)
    • Fed on Hold Longest Since 1940s (Bloomberg)
    • Realty trade group overreported Chicago home prices (Chicago Tribune)
    • Monetary Rage (NYT)
    • Short-termism and the risk of another financial crisis (Washington Post)
    • Super-PACs & Dark Money: ProPublica’s Guide to New World of Campaign Finance (Pro Publica)

    Cisco(CSCO) to Fire 10,000 People.

    What The U.S. Government Doesn’t Want You To Know About Saudi Arabia’s Involvement in 9/11.

    I know this all sounds very bleak but, think of it from a global perspective – where’s the safest place to put your money?  US EQUITIES and TBILLS!  Especially with Obama talking tough about $4Tn in cuts while Timmy borrows another $66Bn this week – quite the theatrical performance and we can expect a compromise closer to $2Tn once we’re done selling paper but, for now – the Dollar sounds "safe".  

  25.  the ag spot index is touching the top of its downward sloping channel..close to breakout

  26. Long TNA off the 82.81 line !! Financials curiously strong Smiley

  27. JRW / Vix   So you are underpinning Phil’s observation that this is now just a trader controlled market, with ‘investors’ increasingly irrelevant.  Still, coming austerity has to bite with public sector layoffs so I still see us sliding into a Ddip and the mkt traders will have to (at some point) price this in?  And, oil will have to correct to reflect the injured consumer.
    Did you play TNA at the open?

  28. JRW,
    did you cash out your puts or waiting after expiration?

  29. Seems to me like it’s pointless to short the market through options in this environment. All the big dips happen after hours and then they reblow the bubble by the time the US markets open. If my IWM puts were /TF shorts I would’ve done much better. It’s really annoying to see IWM bid/ask down $2 at 4am only to be back to even by market open.

  30. jrw that strength gotta be short covers

  31.  oil tankers strong too and they have been worse than financials over last year

  32. Phil – Do you think TBT will be moving to the upside if we get the debt ceiling passed? That will strengthen the dollar and drop yields?

  33. Just trying to understand your reasoning for liking it…I see the technicals but trying to understand fundamentals

  34. tusca,

    I bought at 9:56 and 9:58


    I still have my Aug puts !!

  35. Boy, I can’t find it within myself to go long in the equity market even though I know at times it will be going up.  I just can’t drink the kool-aid.  But what kind of kool-aid must a person drink to buy Treasuries from us?  That must be some strong a$$ed brew!  I simply wouldn’t have enough hands to hold my nose and do it.

  36. Silver/RPME – $35 is strong support and we thought they Dollar would pull back.  The whole key to playing the future is to identify those strong support lines so you can make a trade with a very obvious place to stop out if things go the other way on you.  I look at all the various futures that we play looking for which one has the best line to play off given the broader market movements I’m seeing.  I’m not endorsing silver long-term, it’s just a momentum trade off the line and we’re thrilled to make .25 at $50 per penny per contract.  

    Coincidence/Exec – Isn’t it just.  Geithner should buy lottery tickets as he’s so "lucky".

    Kass/Leon – I don’t know about "all in" but I agree with long TBT and short TLT. 

    Breaking that $84 line on TNA should be pretty bullish (if).  

    USO/Lincoln – Yes, Thursday.  The July contracts are the current weeklies, that’s why it looks funny.  

    Calm/Tusca – It depends who starts selling first.  We fell off a cliff on our Jobs report on Friday so the global markets are playing panic catch-up but we’re done with our panic and tomorrow they will have to play turn-around catch-up if we manage to hold up today.  I would not short more right now until/unless we see all 5 indexes fail the 2.5% lines.  Just as the NYSE held us down when everyone else bounced up, the Dow has been holding us up as everyone else fell.  So, to be bearish, we have to look at Dow earnings and think about whether or not bad things will happen to the Dow components that will send it lower.  I think those companies are in the sweet spot with a weak Dollar and, of course, XOM and CVX, who should have rockin’ earnings.  The Dow will be hard to kill but it must die for the bears to get a break below the Must Hold zone.  

    FAS Money/StJ – Well, now they are .46 so now, if you missed selling the $24 puts for .70, I’d rather sell 1/2 the $25 puts for .9 than a full sale of the $24 puts at half the price BECAUSE, if we head lower but hold $15 again, I probably wouldn’t mind adding 1/2 the $24 puts for another .70 and that’s going to be a very nice collection if we get a bounce back over $25 and, if not – that’s what rolls are for!  

    Europe/Angel – The EU has to lend money to the PIIGS and stop having them borrow it themselves.  Germany is selling notes at 1.5%, France is also under 2% – it’s RIDICULOUS to make the PIIGS borrow money at 6-16%.   Germany and France need to decide, NOW, whether they want the EU to survive or not and, if they do, they need to stop taking half-assed measures to deal with the problem.  I would issue Piggy Bonds at 3% and have France and Germany guarantee them and that would be how the PIIGS fund their next 2 years worth of debt.  That’s kicking the can so far down the road that we can move on to actually fixing the underlying economic issues, rather than just running around putting out endless brush fires.

    Meanwhile – We’ve been talking about PIIGS (Portugal, Italy, Ireland, Greece and Spain) for 2 years now – how is this still a shock to people.  Italy and Spain are right there in the acronym!  To some extent, I suppose people (not us) didn’t think Italy would blow up so fast but that was obviously going to happen as soon as you chased the sharks away from Greece – they just move on to the next swimmer that looks like they are struggling.  Therefore, this "news" isn’t new enough for me to alter my long-term bullish outlook so far.  

    QQQ/Celest – That’s a lot of premium if you mean the Friday ones.  I’d sell the $58 puts for .58 rather than buy the $58 calls at .46 with the Qs at $57.90 if you want to play the Nas up for 3 days.  

    Dispersion/JRW – That’s interesting but we’d need a pretty big sell-off to really test that theory.  The VIX is not historically cheap, under 15 used to be normal and 20 was a real panic.  

    Cramer/Dave – You have to listen to Cramer as he is the manipulator in chief.  I find it useful when you pick up on his objectives although, today, I didn’t pay any attention to him as it sounded like the same BS as yesterday except a little more desperate.  

    I hope EDZ and FXI money was taken and ran with!  

    IPhone/StJ – That’s COOL!  I find that margin hard to believe but I’m sure it’s pretty good anyway.  The good news is that, eventually, every kid in the World will have very cheap internet access (think face-time with your friends in Nigeria, Palestine, New Zealand…) and maybe, just maybe  - things will begin to change.  

  37. No problem, Italy is in good hands !!

    pisa, italy, editorial sidebar

  38.  i think the fact that so many hedgies have gotten so burned by msb(mystery sloppy buyer) this year has caused a self-fulfilling cycle of these moves lower that are characterized by vicious moves higher….they covered at the slightest hint of stabilization due to fact they are underperforming so badly

  39. Phil I like your view on AMZN One of my small gambles I sold the Jan 12 155P for 11 now 3.77 and sold the OCT 200 call for 9.29 now 24.42 . Even that the caller has about 10$ worth of premium it looks that AMZN is not stopping of going up. To give a more even play I was thinking of rolling the Jan12 putter to Jan 12 200 put for a credit of net 11.00 putting me a bit closer to the run away caller thks

  40. Out of TNA on the failure to break 83.42 on the third attempt for $1.70  !!

  41. Minutes today at 2pm?

  42. Notice Boener and company came on to nix compromise rumors and that knocked the Dollar down and pushed the markets up so it seems like Obama is now talking austerity and deficit reduction to pump up the Dollar and knock down borrowing costs and the market while the Reps want to panic bond buyers and drop the dollar to pump up the markets (and oil hit $95.60 in a huge run-up on that little talk).  This is going to be fun for the next few weeks!  

    Shorting/Jvest – That’s why I’ve been into the futures lately.  Huge money to be made off the 3am trade but not so much from market close to market open most days.  That move in /TF today was epic.  

    I like the tweedle dumb and dumber show in CNBC with the two Congressmen arguing.  Wouldn’t it be amazing if there were a single thing they agreed on?  

    TBT/David – It depends on what budget we pass it with.  TBT will be higher on Budget cuts over $2Tn – anything under that and they may as well do a stimulus as that’s just $200Bn a year cut off a $3.6Tn budget and would show they are not serious about anything.  So it all comes down to tax increases because, if we just cut $400Bn of government spending and don’t raise taxes, we’ll throw another 8M people out of work and this economy is doomed.  The moron Rep that was just on TV said "we need those tax cuts to create jobs" yet we’re down 25M jobs since Bush began cutting taxes and that’s WITH 2M soldiers and 2M contracters being hired by the Government so, CLEARLY, that doesn’t actually work.   My main bullishness on TBT is based on the international perspective as there are far better countries to loan money to than US and, without the Fed buying 75% of the TBills at auction – I very much doubt they can keep a lid on rates, no matter how scared people are about other investments.  

    And what Matt said.  

    Burns/Angel – Any short seller that hasn’t learned to cover between 9:30 and 11:30 am is probably out of the markets by now anyway.

    Dollar below 75.40 – that should give us a nice leg up!   

    AMZN/Yodi – I’d buy back the put and that raises your basis on the call to about $16.50 with, as you say, $10 of premium it’s not much to worry about.  Then see what happens at earnings before you make any new decisions.  

    TNA/JRW – Man, I think they were waiting to get rid of you that time!  

  43. If "they" can get the bull cross (almost there), "they should be able to break 83.59 !!

  44. Nicha / google options — I have some script that grabs option prices from yahoo (20 minutes delayed). Give me an email to send it to. 

  45. Been too easy daytrading USO yesterday & today. Every .50 stray from 95 start legging into a return to 95. Sell, wait, repeat.

  46.  piggy bonds can kicker but it would mean greatly diminished sovereignty…which is the goal for the radicals…and im not sure the moderates will go for that

  47. not sure th elows are in today..whats the catalyst coz nothing is better

  48. DE 50/200 death cross, 82 support violated briefly, next support at 80.

  49. those congressman can’t agree! if they did  they would have to be coming up with an idea to fix things instead of just lefty and righty friends are fed up with both sides of the aisle..boehner and obama can’t deliver their respective yeah this is going to be fun

  50. Good pipeline.  Check.  Good phase 3 data. Check.  Beaten down stock.  Check.  Breakout.  Check.

  51.  dday97:USO
    I’m curious, what is reasoning for you day trading USO vs futures?  or do you do both?  TIA

  52. Picking back up where I left off with TNA breaking 83.42 !!

  53. MITI is rockin’.

  54. Phil, would you share some of your thoughts on WFR. I would not have imagined 5 months ago that the stock would lose almost 50%. I still believe the stock is worth something more on the order of $14.00-15.00, but it is a test of patience.

  55. Fed minutes at 2pm.  The calendar says "meeting" but I don’t think there is one (definitely not one scheduled).  Ben does the Humphrey Hawkins thing in Congress tomorrow at 10 (Financial Service Committee) and again on Thursday for the Senate Banking and Stuff Committee.  That’s going to be it from the Fed until the BBook in two weeks but lots of Fed Speak scheduled as all the Governors try to put their spin on things.  

    Good USO program DDay.  

    Back below 76.40 on the Dollar and Europe closing (always good to get rid of them) down "just" 1% so if we’re going to rally up, this should be it. 

  56. Phil JRW
    They sucked me out, take 10 min. and miss .75! SSSSSSSSSSSSSSSt

  57. Pharmboy -

    Good time to pick up MITI?

  58. David – just above where I bought them a few months ago, so sure.  Sell the Feb12 7.5 C and 5 Ps for 1.20 or better.  We are in the Novs, but the price is not as good. 

  59. For those, who doesn’t know
    futures don’t count against your day-trade-pattern allowance.
    so if you want to setup account with less then 25K – you can still day trade futures there.
    However leverage there is big and you can loose A LOT in seconds, and run out of margin and get liquidated on swings (if you have low margin)
    So be careful

  60. shadowfax
    Well JRW told you not to go to the Schmidt house when you trading!!!

  61. Pharm – was that trade on AMAG you posted yesterday morning a Jan BCS? I didn’t see the month.

  62. morx – here are most of my trades.  Jan $17.5/22.5 BCS for 2.10 or better.  Selling $16s for 1.30 or better.

  63. yodi
    Didn’t go to the S house, just sold out and went to kitchen back in part way now.

  64. WFR — according to yahoo, book value is $10.10

  65. Took half my cover off at IWM 83.60.  Will take the other half off at 83.88.

  66. someone is guning the euro everytime its about to cascade…dont worry its going to cascade lower

  67. Hi, Craig,
    Are you around?  Care to share your trades of shorting VXX?
    Yesterday, there were quite a bit discussions on VXX.  It looks like shorting VXX is a good strategy.

  68. matt,

    I like your levels !!  8-)

  69. out with .48 got um back!

  70. GMCR falling hard. Down 5.5%

  71. iPhone / Phil – I have friends in New Zealand now, but Palestine and Nigeria! Of course, apparently I have a lot of deceased friends and family in Nigeria that left me tons of money so I guess having kids with iPhone there will make it easier to get in touch the appropriate people!

  72. 10:00 AM On the hour: Dow +0.04%. 10-yr +0.05%. Euro -0.26% vs. dollar. Crude -0.21% to $94.95. Gold +0.01% to $1549.40. 

    11:00 AM On the hour: Dow -0.12%. 10-yr +0.03%. Euro -0.39% vs. dollar. Crude +0.59% to $95.71. Gold +0.14% to $1551.30.

    European shares close near their highs of the session after reversing heavy early losses. At its low around 4:30 ET, Italy was off about 12.5% in less than 3 days, before a 6.6% bounce. Stoxx 50  -0.7% after being -3.1% earlier. EWI +1.3%EWP -0.1%EWG -0.6%,EWQ -0.4%.

    Macroeconomic Advisers takes another look at 2Q GDP, slashing its forecast to 1.6% from 2%, as it delves into the trade report and finds weak net imports with slowed-down production on tap. The research firm also has deep suspicions on the labor front, and is thinking hard on its call for 3Q and 4Q GDP.

    The CBOE Volatility Index wakes up, +5.5% for the day, as it makes a slow march towards the psychologically-important 20 mark. The index remains well-below the panic levels seen in the aftermath of the financial crisis, surprising some traders. 

    Uh oh!  Now this ones going to hurt!  Pres. Obama talks about eliminating tax breaks for hedge funds, private equity firms, corporate jet owners, et. al. Andrew Ross Sorkin suggests adding day traders and speculators who buy and sell futures contracts. A trader who flips an oil contract in less than a year pays no more than a 23% tax on any profit, while the same sale of a stock or mutual fund can be taxed as high as 35%.

    No need for fancy computers and software to find alpha, nor to to even track markets, says Mark Hulbert. Just be 100% in stocks at the turns of each month and prior to holidays. Be in cash at all other times. This method, the Seasonality Trading System, is one of the best-performing market timing systems of all time.

    To lift the housing market, the government is exploring letting Fannie (FNMA.OB) and Freddie (FMCC.OB) rent foreclosed homes and relax their rules for loans to investors. Officials could also give banks more incentives to cut loan balances for those behind on payments or suffering negative equity.  Yes, let’s help the rich people buy up all the land when it’s cheap!  May as well fly to England and burn the Magna Carte!  

    The NFIB’s measure of small-business sentiment fell slightly, landing at 90.8 for June. The NFIB says the index is in "recession territory," but saw some improvement in a subindex measuring employment.

    The latest rout in PIIGS sovereign debt began right about the same time the ISDA declared a Greek default would not be considered a credit event. If owners of government paper – long CDS to hedge themselves – are told they are no longer hedged, might they have no choice but to dump their holdings?

    Bank of America recalls as recently as 2008 – adjusted for inflation – investors judged Italian paper safer than German! BofA further notes the path Italian yields are on could bring the country’s debt servicing to unsustainable levels within a week, with Spain next up at bat.

    "If the ECB doesn’t come in, the Italian bond auction is likely to fail," says Citi chief economist Willem Buiter of Thursday’s scheduled sale. Buiter sees the ECB doing just that, ending 15 straight weeks in which the bank refrained from purchasing sovereign paper.  More from Citi chief economist and former BoE memeber William Buiter … attacks on rating agencies and short selling are like "throwing (the) thermometer out of (the) window when it indicates a temperature."

    This is a bad trend:  UBS (UBS -1.1%) and Credit Suisse (CS +0.1%) will reportedly axe thousands of jobs due to falling trading volumes and rising costs given the strong Swiss franc. UBS could announce the cuts when it reports its Q2 results in two weeks. 

    Josh Brown sees "only bad headlines and lackluster comps" in the futures of underperforming Bank of America (BAC) and Morgan Stanley (MS). "Why do these two banks look so much worse than most large company stocks over the last few years?  Simple, we have no idea what business they’ll be in tomorrow." Latest ugly header: BofA "again faces faces questions over its ability to withstand losses."

    Goldman’s take on Italian and Spanish debt? Spreads will decline if a "convincing solution for Greece" is found. Over the near-term, that means a bailout. But over the long-term, it also means larger investments in European sovereign debt by "non-EMU investors," and "greater clarity on the Eurozone’s governance fiscal structure."

    Shares of airline stocks slip on Europe worries. Airliners face the usual Europe debt stress, but are also in a fight with the EU over emission standards under a new proposal, starting next year, capping emissions at 97% of their average 2004-06 levels. Airline losers: American (AMR -2.3%), Delta (DAL -2.3%), United Continental (BAL -2.9%

    Solarbuzz expects spending on manufacturing equipment for silicon and thin-film solar panels to drop 47% in 2012, to $7.6B, as capacity expansions in 2010 and 2011 are producing excess inventoriesand weak prices. Applied Materials (AMAT) and GT Solar (SOLR) would be among the equipment vendors affected by such a decline.

    Texas Instruments (TXN -2.8%) hits a low on the wake of aFQ1 warning from Microchip (MCHP -12.5%), and a price target cut on shares from Nomura to $26 from $28. Adding to the misery, Nomura findsmore downside risk for the firm relative to large-cap peers.

    In a weak economy, why are dollar store chains such as Dollar General (DG), Family Dollar (FDO), and Dollar Tree (DLTRhaving a rough time? Fuel costs are one reason. Another, however, is that even dollar store customers are proving price-sensitive, with shoppers opting for low-margin staples over higher-margin discretionary items.

    Shares of Sears (SHLD +2.4%) rise, joining the rally in retail stocks late. Could Sears be looking for aggressive online growth? The firm is controlled by Edward Lampert, a hedge-fund investor reported to besniffing around for web deals. Shares are the largest gainer on the NASDAQ-100.  I told them years ago that they should bring back the Sears Catalog – that WAS their brand and I bet people would still love a cool old-style catalog full of modern things.  They didn’t listen

    As sure as night follows day, any rise in Annaly’s (NLY -1.6%) shares far enough above book value generates an offering by the company sure to drive the price back down. The company uses these shares to pay bonuses, but an investor might use the pullback to pick up a high yielder on the cheap.

    AAPL a day:  Some see Treasurys as a safe haven. But for Ticonderoga’s Brian White, Apple (AAPLfits the bill - White calls it "a beacon of hope in an increasingly concerning world." White is reiterating his Buy rating and $612 PT on Apple’s shares, while lifting his FY2011 and FY2012 EPS estimates due to higher forecasted iPhone and iPad shipments.

  73. Pharm, what’s the deal with TLT? Seems like the 97.50 line is a tough nut to crack! Still bullish? Everyone else seems to be betting on TBT. Of course, the debts ceiling "talks" could have an impact on that… 

  74. Despite lofty praise for Apple (AAPL +0.1%) as "a beacon of hope in an increasingly concerning world," shares are flat today, perhaps due to a Reuters report saying the company’s chief patent lawyer is leaving at a time when it is engaged in an expanding web of litigation concerning smartphone patents. 




    GMCR falling hard – sign of the Apocalypse or just sanity?  


  75. That was a VERY nice rally – good opportunity to get more cash!  (notice a theme to my comments?)

  76. Phil:
    Any news on BXP? Up 2% today.

  77. Piggy Bonds/Angel – Well, I am just here to provide economic solutions, they have to pay me extra to solve their political problems too!  8-)

    Catalyst/Angel – The Dollar dove to 76.33 and the reason I’m bailing on this "rally" is the same reason I bailed on the sell-off early this morning – it’s all based on a Dollar move and has nothing to do with the fundies and the news sucks so we just count our blessings, get back to cash and wait for the next super-obvious trade.   

    I would love that 11:19 stock Pharm if I could read who it was?  

    WFR/Jbur – Solar is getting slammed all week.   They are a good company in a sector that’s bottoming.  I always say, it’s a long-term play.  I think I mentioned yesterday, I just got a quote on my house for solar and there’s no reason not to do it – it saves more than it costs and, as the utility costs go up, it saves even more.  If the government would simplify the programs that are attached to it, this industry would skyrocket and I have been pushing my solution around trying to get it into the conversation but I doubt we’ll get anything solid until after this budget nonsense (State and Federal) is past us.  Until then, they will treat the Solars like crap.  

    That being said, how can you not love WFR at $7.50, selling the 2013 $7.50 puts and calls for $3.65 for net $3.85/5.67 and, since you make $3.65 at $7.50, you can also sell the Aug $8 calls for .32.  Let’s call that 5,000 in the Income Portfolio (net $18,250) plus the short sell of 50 calls at .32 for $1,600.  

    Sucking/Shadow – That one was nasty.  I watched JRW exit and then it took off.  Very evil thin-traded market BS.  

    Futures/Lol – No one with just $25K should be touching futures!  You can lose $5K going to the bathroom…

    76.32 – more fuel for the fire!  I’m good being off the run now and watching the NAS for an entry as they are lagging (SOX off 2.7%!) so they should be good for a nice pop if everyone else is heading higher.   NOW I like the QQQ July $57 calls for $1.06 so 10 in the $25KP with a stop at .95

  78. TLT/stj – yes, very hard to crack it.  Just waiting for a star to fall, and it will burst through though. 

  79. I think that we are going to be "fixing" Italy for a long time:
    But hey, think of all these Monday morning rallies! 

  80. Hi Phil — do you recommend to add some bullish position today, I do not have enough long bullish position, took most position off last week, and add more short  like 10  Dia august 124 put and  25 September 119 long put, should I closed these out and wait for opportunity to open bullish bet. thx

  81. Welcome to the USSR 2.0; bank holidays coming soon !!

    And because of budget constraints the SEC will be forced to utilize local enforcement !!

  82. Damn, these Bernanke Q&A won’t be as entertaining anymore… 

  83. IPhone/StJ – My kids make all kinds of friends through family connections on Facebook and I’m kind of excited about the Skype link as it is very cool to let them talk to people around the World but it will be a lot better when those phones are $50 and 5Bn people have them (I still like CSCO!).  

    Oops, bad timing on the Qs – looks like the Dollar found a floor at 76.30, now 76.34 and over .35 will probably push us off but better to lose $100 on the attempt than press our luck if the Dollar’s going up.  

    There’s a little nervousness heading into the 3-year note auction but if that one gets an "A" rating from Rick and he has his usual on-air orgasm about how great it is – we could still get a very nice pop so I WANT to have a bullish play but, after the run we had (off the futures lows), it’s hard not to be nervous.  

    NFLX/StJ – That’s a huge change.  If it sticks, they look a lot better.  

    BXP/DC – Nothing particular.  Just retracing the drop by 2/3 so far.  

    Damn, 76.38 on the Dollar – no sense waiting as we can kill the Qs for $1.01 in the $25KP.  

  84. Out of TNA, btw, on the failure of 83.59 for a 40 cent gain !!

  85.  NFLX / Phil – Ya think… If you can raise the most popular subscription plan by 50%, that’s a lot of additional revenues. I am guessing some will cancel, but customer growth should easily make up for it. They don’t seem to be very worried about the competition at this moment…

  86. JRW / Lines:  I like your lines better!
    Phil / Futures / Your Country Needs You:  Don’t look at it as paying more taxes… look at it as an excellent opportunity to put your money where your mouth is!
    Isn’t that cop car what Officer Flo drives in all the Richard Scary books?  …or is it a motorcycle.  Geeze, I should know.  Son #2 will NOT have me read anything else for him.  EVER!

  87. this rally is all short covering..we could be up another day but what has changed..junker and tricchets underwear a few times is all

  88. Lincoln. I trade both futures & USO. That’s why I’m not on here all day. I take intermittent naps since I start at 2 am.

  89.  It’s officer Flossy and she rides a bike to catch Dingo Dog!

  90.  I think that these people can afford more taxes so that hedge fund managers can keep their hard earned money:

    Among two-parent families, median earnings did rise by an inflation-adjusted 23% from 1975 to 2009. But the parents’ combined hours worked increased by 26% during the same period–accounting for most of the income gains.

    That’s how we deal with the deficit…

  91. on-air orgasm?
    Is that something happens when he pumps air into his a-s?

  92. Phil / my 12:17 post

    Did you know about gold and silver becoming illegal for US nationals on Friday ?!!

  93. Did I miss something or did LULU split?

  94.  And why the latest rally might have lacked credibility…

  95. JRW, WTF?  Link please!

  96. Anyone
    What is a US national?

  97. Like I said, welcome to the USSR 2.0 !!

  98. So does that mean we will no longer be able to buy our gold from anywhere other then directly from an exchange?  Or, does it mean if we buy gold from a company that they in turn have to buy it from an exchange?  That seems much more plausable..

  99. shadow

    U.S. citizen, ie YOU !!

  100. shadow – In my experience, a US national means a US citizen? What’s the context?

  101. US citizen.  No question mark.

  102. Phil, I"m long the USO July $37 calls (from yesterday, I believe), doing well so far, is there a selling point on the horizon?

  103. Buying 1/3 TNA off IWM 83.42 !!

  104. Holding on that buy; mixed signals !!

  105. Well, the auction is over.  Will they move us back up and close around IWM 83.88?  Something tells me yes.  But have no doubt, I will be SHORT overnight.  I know.  Shocker.

  106. Italy/StJ – Oh it’s so cute that the FT doesn’t see how the ECB can sustain those bailouts.  It doesn’t occur to them to JUST PRINT MONEY!  Come on – everybody’s doing it….   This is the end game that will lead to global hyperinflation – EVERYBODY prints money to get out of trouble. 

    Bullish/Gucci – I’m for cash into the uncertainty.  Now we’re back around the 1.25% lines (as expected) and those are not strong indicators in either direction.  When we’re either up at 2.5% again or down at Must Hold – then it will be interesting to play for a stronger move but this is just a drift zone, where you may as well flip a coin trying to guess direction.  

    No more Ron Paul/StJ – OK, now I do have to run.  Only problem is I would never be a Congressman – may as well be a male prostitute except at least a male prostitute can feel good about himself sometimes…  A Senator I would consider as you don’t have to kiss as much ass after you are elected but, unfortunately, these days you see people blowing $100M trying to be a Senator and failing…  Nope, I still need to be appointed Caesar and then I could appoint Ron Paul grand inquisitor on the Financial Torture Committee.  

    Competition/StJ – Or perhaps the competition has all agreed it would be wiser if they all shared a bigger pie, rather than fight over a smaller one – kind of the way Cable TV fees kept creeping up and up and up and up – all without any "collusion" (that was proven).  

    Money/Matt – I think it’s fine because I realize that I may pay $100,000 more taxes but the top 10 hedge fund managers, who made $17.5Bn last year, would pay $1.7Bn more (10%) and that DOES help the economy to the point where I feel better about living in this country and that has real value to me.  And you know what?  If I become one of those top 10 hedge fund managers and I make $2Bn in a year and I have to pay $700M in taxes – I’m OK with that too as I’ll still have $1.3Bn left and, frankly, it’s more than I probably need to live comfortably while $700M can provide a year’s worth of lunches for 2M poor kids or pay the salary of 20,000 new teachers who can help 4M children learn.  What would I do with the extra money otherwise?  Buy a yacht?  A stupid big house?  Collect cars?  Take a painting that should be in a museum and stick it on my wall?  Sorry, I do look at it as an excellent opportunity to change the World for the better – by simply collecting the proper taxes from all citizens (and Corporate Citizens) equally.  

    Two income/StJ – That’s a very misleading statistic because it simply reflects families where women (not to be sexist but that’s 99%) didn’t work at all or worked very little who had to transition to two full-time workers to make ends meet.  They love to use that statistic to show how family incomes are increasing.  

    Oh it’s auction time!  Rick is pretty happy but not ecstatic, more like a B than an A but not bad enough to do any damage.  Dollar fell to 76.29 so let’s see how low it can go now.  Back to bullish as long as it’s below 76.30.  

  107. Phil

    What would I do with the extra money otherwise?  Buy a yacht?  A stupid big house?  Collect cars?  Take a painting that should be in a museum and stick it on my wall?

    YES !!  Smiley

  108. nflx squeeze again with the new pricing news (good analysis phil)

  109. BPAX….

    BioSante CEO Stephen Simes says the developer is in talks with "many, many companies" about a potential partnership deal for its sexual dysfunction treatment LibiGel. The testosterone drug, which is applied directly to the skin, recently passed a Phase III safety trial.

    Since Viagra’s approval in 2009, developers have advanced many possible treatments for the condition, but they have been unable to bring any to market. If BioSante is successful with this new therapy, it would represent the first approved treatment in a market worth up to $4 billion.

    "Nobody really wanted to touch BioSante when they had a three-, four-, five-year window ahead of them," Rodman & Renshaw analyst Elemer Piros tells Bloomberg. "The company is just being recognized, just starting to appear on people’s radar screens." Recent safety data has drawn interest from potential partners, but the real test will come when BioSante gets Phase III data from two trials of the drug’s effectiveness. The results are expected later this year.

    Analysts point to Pfizer (already experienced in the erectile dysfunction market), Endo Pharmaceuticals and Warner Chilcott as possible partners for LibiGel. BioSante could land up to $1 billion in a buyout early next year if the company’s Phase III trials are successful. The developer hopes to file and NDA with the FDA next year and bring the drug to market by 2013.

  110. fdo, dg, dltr – don’t forget that because of their they cannot really raise prices

  111. A restriction of PR trading, now? Holly sh.. are we that far already? if you look back in history you will see that this measure has a “synchronicity” (thank you Phil) with flawed currency systems. The government needs the monopoly over PR to rescue or introduce a paper money system. It’ll be simple to kick out investors of exchange traded products as they now you. One fine day your GLD shares will all of a sudden be converted to paper money at a regulated value…

  112. SGEN notes are out from the FDA.  In summary, nothing new.  T’will come down to a yes or no.

    The folks at Seattle Genetics ($SGEN) might rest a bit easier tonight heading into an advisory committee meeting that will consider its experimental lymphoma drug later this week. An FDA staff review of the firm’s drug, brentuximab vedotin, or Adcetris, appears to have produced no unexpected red flags. Yet the review did raise the question of whether the small trials completed for the drug to date offer enough evidence of its benefits.

    "Small size limits the benefit-risk analysis," the FDA said in its review, as cited by Bloomberg this morning. "For this application, consideration for accelerated approval would be consistent with regulatory actions taken in the past decade for similar hematology applications based on single arm clinical trials."

    With some exceptional results in small trials of the drug--which is an antibody linked to an anti-cancer toxin--many people across the biotech industry are closely watching how reviews of the treatment go this week. The FDA staff review noted safety issues in patients treated with the drug such as peripheral neuropathy, infections and a type of suppression to the immune system--but not much there that hadn’t already been revealed about the drug’s safety profile or what was expected from the review.

    The next big test for Seattle Genetics’ drug comes on Thursday, when an advisory committee of experts will weigh in on the firm’s application to gain approval to market the drug as a treatment for Hodgkin lymphoma and anaplastic large cell lymphoma. If the panel recommends approval, that would be a key endorsement of its application ahead of the FDA’s decision likely to come sometime next month (or by the PDUFA date of Aug. 30).

    Seattle Genetics has a shot, not only at its first FDA-approved drug, but also at bringing to market the first of a class of armed antibody drugs. What makes the drugs potentially powerful weapons against cancer is that they combine the binding properties of antibodies with the killer punch of toxins. While armed antibodies offer a potential way to precisely target cancer cells, the FDA showed last year with its decision not to approve a similar type of drug, Roche’s T-DM1, the technological wonders aren’t immune to additional regulatory hurdles.

    In its pursuit of approval of the drug, Seattle Genetics will be relying heavily on two single arm studies. Yet both studies have produced some stellar results, with its Hodgkin lymphoma trial showing the drug wiped out visible signs of disease in 34% of 102 patients, and with similar success in just over half of 58 patients with forms of anaplastic large cell lymphomas, to mention some of the key data.

    While Seattle Genetics clearly has the most at stake in brentuximab vedotin’s success, a regulatory win would also be a victory for its partner for commericializing the drug outside of North America, Millennium: The Takeda Oncology Company. It could also bode well for others with a stake in the armed antibody game such as developer ImmunoGen ($IMGN), which provides the linking technology for Roche’s T-DM1 and has its own pipeline of such drugs.

  113. pentaxon – what’s PR trading?

  114. Oil heading back to $97.50!  Looks like we’ll get to go short again tomorrow.  

    12:17/JRW – I couldn’t see the link – is that what it said?  I haven’t heard that.  

    LULU/DrC – Yes 2:1.

    That move down felt very flushy after the note auction…

    Gold & Silver/JRW – That’s interesting.  At least we still have options (for now).  

    US National/Shadow – I believe that is citizens and residents, legal or otherwise.  

    Meaning/Matt – It seems to mean that we (retail traders) can’t trade /YG or /SI as of Friday or Monday until/unless they modify the regs. 

    USO/Jerconn – Oh sure, I’d take the money and run.  $97.50 is where we want to go short (but not before inventory).  You don’t know what will happen overnight and they expire on Friday – not much time to recover.  

    Very mixed JRW – Cash is good.   Sorry, by the way, I forgot I was pretty much laying out your lifestyle! 8-)

    NFLX/Jabob – Now we’ll see how much of that was already baked into the big run-up. 

    That Dollar weakness didn’t last very long, did it?

    GLD/Pentax – I know, it seems silly to restrict futures and not options or ETFs.  All turning into a very large joke – unforutnately, it’s on us.  

    "If the American people ever allow the banking system to control their money, first by inflation, then by deflation; their children will one day wake up homeless on the continent their fathers conquered." – Jefferson 


  115. Phil / Oil   Interested in shorting at $76.80?  Hard to see the $ going much lower with all the uncertainty in Europe.

  116. JR
    Don’t get cocky……before this so called unresolvable deal gets cut their going to fleece your ass big time. 
    The Dem’s probably have a picture of you in the negotiating room that they point to every time they refer to taxing the rich.

  117. Phil , sorry $96.80

  118. Phil ok saw your $97.50 entry point above.

  119. Phil/Today’s Article – The Fed will need a global market crisis when $467B matures in August…on top of the regular monthly debt….so we are looking at around $600BILLION! Market longs beware in August…

  120. USO. That 38 call from yesterday (.31) is now up .21 cents. Either sell & enjoy the day or put a .05 TS on it and walk away. The major thing I learned when I lost it all 10 yrs ago is to use trailing stops almost all the time (after you’re all legged in of course). It eliminates emotion for those that can’t control themselves. That’s my 2 million dollar lesson given to you for free.

  121. Troy…thanks for that!  Helps a ton.  Oh, and that looks like QE2 money!

  122. phil—is this NFLX news a game changer? they seem to be doing everything to keep this stock moving higher. I would normally think that this could hurt their revenues with people preferring to pay less instead of more. But WTF do I know ;-(

  123. matt
    You said you would be short overnight, even if we don’t see about 84 today?

  124. exec / Picture on Dems wall

    LOL !!

  125. Phil / Flushy:  I agree ie., hope. 

  126. dday97
    USO TS I did as Phil said above take the money and … I am just waiting for the Guro’s short signal on USO! TS do not help very much over night. It is only limited

  127. Corn and Wheat futures are going to the sky hand in hand with gold!

  128. Shadow, yes.  It’s the only way you can claw back from being underwater.  The AH moves either make ya or break ya.  Tomorrow and Thursday have auctions each day for 10 and 30 yr notes, respectively.  They’ll really have to herd people into those smelly things.

  129. Phil /CL is easing of. USO long put short call or what??

  130. Oil/Tusca – That’s a tough trade into inventories.  All the EU has to do (as they did with Greece a half dozen times) is say they have an outline of agreement to do something that won’t work and we’ll rally.  Also, Fed at 2pm makes it SUPER DUPER DANGEROUS to short as any hint of QE3 will be party time as clearly conditions are much worse than they were at the meeting so as long as the Fed said "if conditions deteriorate," that’s going to sound like game on for MORE FREE MONEY! 

    Note to all, I have a meeting in NYC so I’ll be gone at 2:30 – hopefully we get a nice ride up into the close but beware the head fake off the Fed!  

    $96.80/Tusca – I knew that.  

    Crisis/Troy – Let’s remember to keep good track of that.  We can make a killing shorting into it.  

    USO $38 calls/DDay – For sure take the money and run!   You don’t mess around when you win with a weekly.   Good lesson, thanks!  

    NFLX/Jabob – It does explain the insane run-up, people must have known.  I would not short them at the moment but, long-term, they still have an indefensible model and will be no more valuable than Blockbuster in about 3 years.  NFLX accounts for 30% of peak internet traffic – that’s just ridiculous.  Something has to give before they can double up and grow into their valuation.  Oh, and in those other countries they plan to get into – they will be 90% of the traffic in some!  

    USO/Yodi – Generally, we wait for the inventories to go short.  This is the big week to short, when they have to dump their contracts ahead of the July 21 rollover date.  

    Click for
    Current Session Prior Day Opt’s
    Open High Low Last Time Set Chg Vol Set Op Int
    95.42 * 20:06
    Jul 11
    232231 95.15 219452 Call Put
    95.75 * 20:06
    Jul 11
    70791 95.62 251084 Call Put
    96.89 * 20:06
    Jul 11
    27647 96.11 78149 Call Put
    78.01 * 20:06
    Jul 11
    19151 96.64 71819 Call Put
    101.31 * 20:06
    Jul 11
    35403 97.19 195124 Call 

    Since last time we looked, they went from 263K in Aug and 215K in Sept to the above so almost 40 down and 40 up to match so the rolling has begun.  Look how cheap that spread is to roll – that indicates they won’t have much trouble so not a good time to short and we have to hope for a bummer of an inventory report tomorrow but, of course, until then we wish them the best and they can go to $99 for all we care.  

    Fed time!  

  131. "Slow growth COULD make QE3 appropriate." – That should be all the bulls need to go nuts!  

  132.  I still like the QQQ $57s at $1.05 again so 20 in $25KP this time – same .95 stop and 1/2 out at $1.20.  

  133. Sorry It should have been PM trading. (not PR) I meant the restrictions to OTC precious metal trading.

  134. Sorry, no time to highlight minutes but QE3 discussion is a nice bullish bone for the dogs – if this can’t move us higher, it’s not a good sign: 

    Developments in Financial Markets and the Federal Reserve’s Balance Sheet
    The manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets during the period since the Federal Open Market Committee (FOMC) met on April 26-27, 2011. He also reported on System open market operations, including the continuing reinvestment into longer-term Treasury securities of principal payments received on the SOMA’s holdings of agency debt and agency-guaranteed mortgage-backed securities, as well as the ongoing purchases of additional Treasury securities authorized at the November 2-3, 2010, FOMC meeting. Since November, purchases by the Open Market Desk of the Federal Reserve Bank of New York had increased the SOMA’s holdings by nearly the full $600 billion authorized.

    In light of ongoing strains in some foreign financial markets, the Committee considered a proposal to extend its dollar liquidity swap arrangements with foreign central banks past August 1, 2011. Following their discussion, members unanimously approved the following resolution:

    The Federal Open Market Committee directs the Federal Reserve Bank of New York to extend the existing temporary reciprocal currency arrangements ("swap arrangements") for the System Open Market Account with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank. The swap arrangements shall now terminate on August 1, 2012, unless further extended by the Committee.

    Dynamic Stochastic General Equilibrium Models
    A staff presentation provided an overview of ongoing Federal Reserve research on dynamic stochastic general equilibrium (DSGE) models. DSGE models attempt to capture the dynamics of the overall economy in a way that is consistent both with the historical data and with optimizing behavior by forward-looking households and firms. The presentation began by discussing the general features of DSGE models and considering their advantages and limitations relative to other approaches of analyzing macroeconomic dynamics; with regard to the latter, the presentation noted that while the current generation of DSGE models is still somewhat limited in the range of policy issues these models can address, further advances in modeling should increase the usefulness of DSGE models for forecasting and policy analysis. The presentation then reviewed some specific features of DSGE models that are currently being studied at the Federal Reserve Board and the Federal Reserve Banks of New York, Philadelphia, and Chicago. This review included the four models’ characterizations of the forces affecting the economy in recent years and the models’ current forecasts for real economic activity, inflation, and short-term interest rates. In discussing the staff presentation, meeting participants expressed the view that DSGE models are a useful addition to the wide range of analytical approaches traditionally used at the Federal Reserve, in part because they provide an internally consistent way of exploring how the behavior of economic agents might change in response to systematic adjustments to policy. Some participants also expressed interest in seeing on a regular basis projections of key macroeconomic variables and other products from the DSGE models developed in the System. Finally, participants encouraged further staff work to improve these models by, for example, expanding the range of questions they can be used to address.

    Exit Strategy Principles
    The Committee discussed strategies for normalizing the stance and conduct of monetary policy, following up on its discussion of this topic at the April meeting. Participants stressed that the Committee’s discussions of this topic were undertaken as part of prudent planning and did not imply that a move toward such normalization would necessarily begin sometime soon. For concreteness, the Committee considered a set of specific principles that would guide its strategy of normalizing the stance and conduct of monetary policy. Participants discussed several specific elements of the principles, including how they should characterize the monetary policy framework that the Committee would adopt after the conduct of policy returned to normal and whether the principles should encompass the possible timing between the normalization steps. At the conclusion of the discussion, all but one of the participants agreed on the following key elements of the strategy that they expect to follow when it becomes appropriate to begin normalizing the stance and conduct of monetary policy:

    • The Committee will determine the timing and pace of policy normalization to promote its statutory mandate of maximum employment and price stability.

    • To begin the process of policy normalization, the Committee will likely first cease reinvesting some or all payments of principal on the securities holdings in the SOMA.

    • At the same time or sometime thereafter, the Committee will modify its forward guidance on the path of the federal funds rate and will initiate temporary reserve-draining operations aimed at supporting the implementation of increases in the federal funds rate when appropriate.

    • When economic conditions warrant, the Committee’s next step in the process of policy normalization will be to begin raising its target for the federal funds rate, and from that point on, changing the level or range of the federal funds rate target will be the primary means of adjusting the stance of monetary policy. During the normalization process, adjustments to the interest rate on excess reserves and to the level of reserves in the banking system will be used to bring the funds rate toward its target.

    • Sales of agency securities from the SOMA will likely commence sometime after the first increase in the target for the federal funds rate. The timing and pace of sales will be communicated to the public in advance; that pace is anticipated to be relatively gradual and steady, but it could be adjusted up or down in response to material changes in the economic outlook or financial conditions.

    • Once sales begin, the pace of sales is expected to be aimed at eliminating the SOMA’s holdings of agency securities over a period of three to five years, thereby minimizing the extent to which the SOMA portfolio might affect the allocation of credit across sectors of the economy. Sales at this pace would be expected to normalize the size of the SOMA securities portfolio over a period of two to three years. In particular, the size of the securities portfolio and the associated quantity of bank reserves are expected to be reduced to the smallest levels that would be consistent with the efficient implementation of monetary policy.

    • The Committee is prepared to make adjustments to its exit strategy if necessary in light of economic and financial developments.

    Staff Review of the Economic Situation
    The information reviewed at the June 21-22 meeting indicated that the pace of the economic recovery slowed in recent months and that conditions in the labor market had softened. Measures of inflation picked up this year, reflecting in part higher prices for some commodities and imported goods. Longer-run inflation expectations, however, remained stable.

    The expansion of private nonfarm payroll employment in May was markedly below the average pace of job gains in the previous months of this year. Initial claims for unemployment insurance rose, on net, between the first half of April and the first half of June. The unemployment rate moved up in April and then rose further to 9.1 percent in May, while the labor force participation rate remained unchanged. Both long-duration unemployment and the share of workers employed part time for economic reasons continued to be elevated.

    Total industrial production expanded only a bit during April and May after rising at a solid pace in the first quarter. Shortages of specialized components imported from Japan contributed to a decline in the output of motor vehicles and parts. Manufacturing production outside of the motor vehicles sector increased moderately, on balance, during the past two months. The manufacturing capacity utilization rate remained close to its first-quarter level, but it was still well below its longer-run average. Forward-looking indicators of industrial activity, such as the new orders diffusion indexes in the national and regional manufacturing surveys, weakened noticeably during the intermeeting period to levels consistent with only tepid gains in factory output in coming months. However, motor vehicle assemblies were scheduled to rise notably in the third quarter from their levels in recent months, as bottlenecks in parts supplies were anticipated to ease.

    Growth in consumer spending declined in recent months from the already modest pace in the first quarter. Total real personal consumption expenditures only edged up in April. Nominal retail sales, excluding purchases at motor vehicles and parts outlets, increased somewhat in May, but sales of new light motor vehicles declined markedly. Labor income rose moderately, as aggregate hours worked trended up, but total real disposable income remained flat in March and April, as increases in consumer prices offset gains in nominal income. In addition, consumer sentiment stayed relatively low through early June.

    Activity in the housing market remained depressed, as both weak demand and the sizable inventory of foreclosed or distressed properties continued to hold back new construction. Starts and permits of new single-family homes were essentially unchanged in April and May, and they stayed near the very low levels seen since the middle of last year. Sales of new and existing homes remained at subdued levels in recent months, while measures of home prices fell further.

    The available indicators suggested that real business investment in equipment and software was rising a bit more slowly in the second quarter than the solid pace seen in the first quarter. Nominal orders and shipments of nondefense capital goods declined in April. Business purchases of light motor vehicles edged up in April but dropped in May, while spending for medium and heavy trucks continued to increase in recent months. Survey measures of business conditions and sentiment weakened during the intermeeting period. Business expenditures for office and commercial buildings remained depressed by elevated vacancy rates, low prices for commercial real estate, and tight credit conditions for construction loans. In contrast, outlays for drilling and mining structures continued to be lifted by high energy prices.

    Real nonfarm inventory investment rose moderately in the first quarter, but data for April suggested that the pace of inventory accumulation had slowed. Book-value inventory-to-sales ratios in April were similar to their pre-recession norms, and survey data also suggested that inventory positions generally remained in a comfortable range.

    The available data on government spending indicated that real federal purchases increased in recent months, led by a rebound in outlays for defense in April and May from unusually low levels in the first quarter. In contrast, real expenditures by state and local governments appeared to have declined further, as outlays for construction projects fell in March and April, and state and local employment continued to contract in April and May.

    The U.S. international trade deficit widened slightly in March and then narrowed in April to a level below its average in the first quarter. Exports rose strongly in both months, with increases widespread across major categories in March, while the gains in April were concentrated in industrial supplies and capital goods. Imports grew robustly in March, but they fell slightly in April, as the drop in automotive imports from Japan together with the decline in imports of petroleum products more than offset increases in other imported products.

    Headline consumer price inflation, which had risen in the first quarter, edged down a bit in April and May, as the prices of consumer food and energy decelerated from the pace seen in previous months. More recently, survey data through the middle of June pointed to declines in retail gasoline prices, and prices of food commodities appeared to have decreased somewhat. Excluding food and energy, core consumer price inflation picked up in April and May, pushing the 12-month change in the core consumer price index through May above its level of a year earlier. Upward pressures on core consumer prices appeared to reflect the elevated prices of commodities and other imports, along with notable increases in motor vehicle prices likely arising from the effects of recent supply chain disruptions and the resulting extremely low level of automobile inventories. However, near-term inflation expectations from the Thomson Reuters/University of Michigan Surveys of Consumers moved down a little in May and early June from the high level seen in April, and longer-term inflation expectations remained within the range that has generally prevailed over the preceding few years.

    Available measures of labor compensation showed that labor cost pressures were still subdued, as wage increases continued to be restrained by the large amount of slack in the labor market. In the first quarter, unit labor costs only edged up, as the modest rise in hourly compensation in the nonfarm business sector was mostly offset by further gains in productivity. More recently, average hourly earnings for all employees rose in April and May, but the average rate of increase over the preceding 12 months remained quite low.

    Global economic activity appeared to have increased more slowly in the second quarter than in the first quarter. The rate of growth in the emerging market economies stepped down from its rapid pace in the first quarter, although it remained generally solid. The Japanese economy contracted sharply following the earthquake in March, and the associated supply chain disruptions weighed on the economies of many of Japan’s trading partners. The pace of economic growth in the euro area remained uneven, with Germany and France posting moderate gains in economic activity, while the peripheral European economies continued to struggle. Recent declines in the prices of oil and other commodities contributed to some easing of inflationary pressures abroad.

    Staff Review of the Financial Situation
    Investors appeared to adopt a more cautious attitude toward risk, particularly later in the intermeeting period. The shift in investors’ sentiment likely reflected the weak tone of incoming economic data in the United States along with concerns about the outlook for global economic growth and about potential spillovers from a possible further deterioration of the situation in peripheral Europe.

    The decisions by the FOMC at its April meeting to continue its asset purchase program and to maintain the 0 to 1/4 percent target range for the federal funds rate were generally in line with market expectations. The accompanying statement and subsequent press briefing by the Chairman prompted a modest decline in nominal yields, as market participants reportedly perceived a somewhat less optimistic tone in the Committee’s economic outlook. Over the remainder of the intermeeting period, the expected path for the federal funds rate, along with yields on nominal Treasury securities, moved down appreciably further, as the bulk of the incoming economic data was more downbeat than market participants had apparently anticipated. Consistent with the weaker-than-expected economic data and the recent decline in the prices of oil and other commodities, measures of inflation compensation over the next 5 years and 5 to 10 years ahead based on nominal and inflation-protected Treasury securities decreased considerably over the intermeeting period.

    Market quotes did not suggest expectations of significant movements in nominal Treasury yields following the anticipated completion of the asset purchase program by the Federal Reserve at the end of June. Although discussions about the federal debt ceiling attracted attention in financial markets, judging from Treasury yields and other asset prices, investors seemed to anticipate that the debt ceiling would be increased in time to avoid any significant market disruptions.

    Yields on corporate bonds stepped down modestly, on net, over the intermeeting period, but by less than the decline in yields on comparable-maturity Treasury securities, leaving credit risk spreads a little wider. In the secondary market for syndicated loans, conditions were little changed, with average bid prices for leveraged loans holding steady.

    Broad U.S. stock price indexes declined, on net, over the intermeeting period, apparently in response to the downbeat economic data. Stock prices of financial firms underperformed the broader market, reflecting the weaker economic outlook, potential credit rating downgrades, and heightened concerns about the anticipated capital surcharge for systemically important financial institutions. Option-adjusted volatility on the S&P 500 index rose somewhat on net.

    In the June 2011 Senior Credit Officer Opinion Survey on Dealer Financing Terms, dealers pointed to a continued gradual easing over the previous three months in credit terms applicable to major classes of counterparties across all types of transactions covered in the survey. Dealers also reported that the demand for funding had increased over the same period for a broad range of securities, with the exception of equities. More recently, however, against a backdrop of disappointing economic data, heightened uncertainty about the situation in Europe, and, possibly, concerns about the U.S. federal debt ceiling, market participants reported a general pullback from risk-taking and a decline in liquidity in a range of financial markets.

    Net debt financing by nonfinancial corporations was strong in April and May. Gross issuance of both investment- and speculative-grade bonds by nonfinancial corporations hit a record high in May before slowing somewhat in June, and outstanding amounts of commercial and industrial (C&I) loans and nonfinancial commercial paper increased. Gross public equity issuance by nonfinancial firms maintained a solid pace over the intermeeting period, and most indicators of business credit quality improved further.

    Commercial mortgage markets continued to show tentative signs of stabilization. In recent months, delinquency rates for commercial real estate loans edged down from their previous peaks. However, commercial real estate markets remained weak. Property sales were tepid, and prices remained at depressed levels. Issuance of commercial mortgage-backed securities slowed somewhat in the second quarter.

    Conditions in residential mortgage markets were little changed overall but remained strained. Rates on conforming fixed-rate residential mortgages declined about in line with 10-year Treasury yields over the intermeeting period. Mortgage refinancing activity picked up, on net, over the intermeeting period but was still relatively subdued. Outstanding residential mortgage debt contracted further in the first quarter. Rates of serious delinquency for subprime and prime mortgages were little changed at elevated levels. The rate of new delinquencies on prime mortgages ticked up in April but remained well below the level of a few months ago. In March and April, delinquencies on mortgages backed by the Federal Housing Administration declined noticeably.

    The Federal Reserve continued its competitive sales of non-agency residential mortgage-backed securities held by Maiden Lane II LLC over the intermeeting period. Although the initial offerings of these securities were well received, investor demand at the most recent sales was not as strong, a development consistent with the declines in the prices of non-agency residential mortgage-backed securities over the intermeeting period.

    Conditions in consumer credit markets continued to improve. Growth in total consumer credit picked up in April, as the gain in nonrevolving credit more than offset a further contraction in revolving credit. Delinquency rates for consumer debt edged down further in recent months, with delinquency rates on some categories moving back to pre-crisis levels. Issuance of consumer asset-backed securities remained robust over the intermeeting period.

    Bank credit was flat, on balance, in April and May. Core loans--the sum of C&I, real estate, and consumer loans--continued to contract modestly, pulled down by the ongoing decline in commercial and residential real estate loans. In contrast, C&I loans increased at a brisk pace in April and May. The most recent Survey of Terms of Business Lending conducted in May indicated that banks had eased some lending terms on C&I loans. The survey responses also suggested that the average size of loan commitments and their average maturity had trended up in recent quarters

    M2 expanded at a robust pace in April and May. Liquid deposits, the largest component of M2, maintained a solid rate of expansion, likely reflecting the very low opportunity costs of holding such deposits. Currency continued to advance, supported by strong demand for U.S. bank notes from abroad.

    The broad nominal index of the U.S. dollar fluctuated over the intermeeting period in response to changes in investors’ assessment of the outlook for the U.S. economy and the situation in the peripheral European economies. Since the April FOMC meeting, the dollar rose modestly, on net, after depreciating over the preceding several months. Headline equity indexes abroad and foreign benchmark sovereign yields declined over the intermeeting period in apparent response to signs of a slowdown in the pace of global economic activity and reduced demand for risky assets. Concerns about the possibility of a restructuring of Greek government debt drove spreads of yields on the sovereign debts of Greece, Ireland, and Portugal to record highs relative to yields on German bunds.

    In the advanced foreign economies, most central banks left their policy rates unchanged, and the anticipated pace of monetary policy tightening indicated by money market futures quotes was pared back. However, central banks in several emerging market economies continued to tighten policy, and the monetary authorities in China increased required reserve ratios further.

    Staff Economic Outlook
    With the recent data on spending, income, production, and labor market conditions mostly weaker than the staff had anticipated at the time of the April FOMC meeting, the near-term projection for the rate of increase in real gross domestic product (GDP) was revised down. The effects of the disaster in Japan and of higher commodity prices on the rate of increase in real consumer spending were expected to hold down U.S. real GDP growth in the near term, but those effects were anticipated to be transitory. However, the staff also read the incoming economic data as suggesting that the underlying pace of the recovery was softer than they had previously anticipated, and they marked down their outlook for economic growth over the medium term. Nevertheless, the staff still projected real GDP to increase at a moderate rate in the second half of 2011 and in 2012, with the ongoing recovery in activity receiving continued support from accommodative monetary policy, further increases in credit availability, and anticipated improvements in household and business confidence. The average pace of real GDP growth was expected to be sufficient to bring the unemployment rate down very slowly over the projection period, and the jobless rate was anticipated to remain elevated at the end of 2012.

    Although increases in consumer food and energy prices slowed a bit in recent months, the continued step-up in core consumer price inflation led the staff to raise slightly its projection for core inflation over the coming quarters. However, headline inflation was still expected to recede over the medium term, as increases in food and energy prices and in non-oil import prices were anticipated to ease further. As in previous forecasts, the staff continued to project that core consumer price inflation would remain relatively subdued over the projection period, reflecting both stable long-term inflation expectations and persistent slack in labor and product markets.

    Participants’ Views on Current Conditions and the Economic Outlook
    In conjunction with this FOMC meeting, all meeting participants--the five members of the Board of Governors and the presidents of the 12 Federal Reserve Banks--provided projections of output growth, the unemployment rate, and inflation for each year from 2011 through 2013 and over the longer run. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy. Participants’ forecasts are described in the Summary of Economic Projections, which is attached as an addendum to these minutes.

    In their discussion of the economic situation and outlook, meeting participants agreed that the economic information received during the intermeeting period indicated that the economic recovery was continuing at a moderate pace, though somewhat more slowly than they had anticipated at the time of the April meeting. Participants noted several transitory factors that were restraining growth, including the global supply chain disruptions in the wake of the Japanese earthquake, the unusually severe weather in some parts of the United States, a drop in defense spending, and the effects of increases in oil and other commodity prices this year on household purchasing power and spending. Participants expected that the expansion would gain strength as the influence of these temporary factors waned.

    Nonetheless, most participants judged that the pace of the economic recovery was likely to be somewhat slower over coming quarters than they had projected in April. This judgment reflected the persistent weakness in the housing market, the ongoing efforts by some households to reduce debt burdens, the recent sluggish growth of income and consumption, the fiscal contraction at all levels of government, and the effects of uncertainty regarding the economic outlook and future tax and regulatory policies on the willingness of firms to hire and invest. Moreover, the recovery remained subject to some downside risks, such as the possibility of a more extended period of weak activity and declining prices in the housing sector, the chance of a larger-than-expected near-term fiscal tightening, and potential financial and economic spillovers if the situation in peripheral Europe were to deteriorate further. Participants still projected that the unemployment rate would decline gradually toward levels they saw as consistent with the Committee’s dual mandate, but at a more gradual pace than they had forecast in April. While higher prices for energy and other commodities had boosted inflation this year, with commodity prices expected to change little going forward and longer-term inflation expectations stable, most participants anticipated that inflation would subside to levels at or below those consistent with the Committee’s dual mandate.

    Activity in the business sector appeared to have slowed somewhat over the intermeeting period. Although the effects of the Japanese disaster on U.S. motor vehicle production accounted for much of the deceleration in industrial production since March, the most recent readings from various regional manufacturing surveys suggested a slowing in the pace of manufacturing activity more broadly. However, business contacts in some sectors--most notably energy and high tech--reported that activity and business sentiment had strengthened further in recent months. Business investment in equipment and software generally remained robust, but growth in new orders for nondefense capital goods--though volatile from month to month--appeared to have slowed. While FOMC participants expected a rebound in investment in motor vehicles to boost capital outlays in coming months, some also noted that indicators of current and planned business investment in equipment and software had weakened somewhat, and surveys showed some deterioration in business sentiment. Business contacts in some regions reported that they were reducing capital budgets in response to the less certain economic outlook, but in other parts of the country, contacts noted that business sentiment remained on a firm footing, supported in part by strong export demand. Compared with the relatively robust outlook for the business sector, meeting participants noted that the housing sector, including residential construction and home sales, remained depressed. Despite efforts aimed at mitigation, foreclosures continued to add to the already very large inventory of vacant homes, putting downward pressure on home prices and housing construction.

    Meeting participants generally noted that the most recent data on employment had been disappointing, and new claims for unemployment insurance remained elevated. The recent deterioration in labor market conditions was a particular concern for FOMC participants because the prospects for job growth were seen as an important source of uncertainty in the economic outlook, particularly in the outlook for consumer spending. Several participants reported feedback from business contacts who were delaying hiring until the economic and regulatory outlook became more certain and who indicated that they expected to meet any near-term increase in the demand for their products without boosting employment; these participants noted the risk that such cautious attitudes toward hiring could slow the pace at which the unemployment rate normalized. Wage gains were generally reported to be subdued, although wages for a few skilled job categories in which workers were in short supply were said to be increasing relatively more rapidly.

    Changes in financial market conditions since the April meeting suggested that investors had become more concerned about risk. Equity markets had seen a broad selloff, and risk spreads for many corporate borrowers had widened noticeably. Large businesses that have access to capital markets continued to enjoy ready access to credit--including syndicated loans--on relatively attractive terms; however, credit conditions remained tight for smaller, bank-dependent firms. Bankers again reported gradual improvements in credit quality and generally weak loan demand. In identifying possible risks to financial stability, a few participants expressed concern that credit conditions in some sectors--most notably the agriculture sector--might have eased too much amid signs that investors in these markets were aggressively taking on more leverage and risk in order to obtain higher returns. Meeting participants also noted that an escalation of the fiscal difficulties in Greece and spreading concerns about other peripheral European countries could cause significant financial strains in the United States. It was pointed out that some U.S. money market mutual funds have significant exposures to financial institutions from core European countries, which, in turn, have substantial exposures to Greek sovereign debt. Participants were also concerned about the possible effect on financial markets of a failure to raise the statutory federal debt ceiling in a timely manner. While admitting that it was difficult to know what the precise effects of such a development would be, participants emphasized that even a short delay in the payment of principal or interest on the Treasury Department’s debt obligations would likely cause severe market disruptions and could also have a lasting effect on U.S. borrowing costs.

    Participants noted several factors that had contributed to the increase in inflation this year. The run-up in energy prices, as well as an increase in prices of other commodities and imported goods, had boosted both headline and core inflation. At same time, extremely low motor vehicle inventories resulting from global supply disruptions in the wake of the Japanese earthquake--by contributing to higher motor vehicle prices--had significantly raised inflation, although participants anticipated that these temporary pressures would lessen as motor vehicle inventories were rebuilt. Participants also observed that crude oil prices fell over the intermeeting period and other commodity prices also moderated, developments that were likely to damp headline inflation at the consumer level going forward. However, a number of participants pointed out that the recent faster pace of price increases was widespread across many categories of spending and was evident in inflation measures such as trimmed means or medians, which exclude the most extreme price movements in each period. The discussion of core inflation and similar indicators reflected the view expressed by some participants that such measures are useful for forecasting the path of inflation over the medium run. In addition, reports from business contacts indicated that some already had passed on, or were intending to try to pass on, at least a portion of their higher costs to customers in order to maintain profit margins.

    Most participants expected that much of the rise in headline inflation this year would prove transitory and that inflation over the medium term would be subdued as long as commodity prices did not continue to rise rapidly and longer-term inflation expectations remained stable. Nevertheless, a number of participants judged the risks to the outlook for inflation as tilted to the upside. Moreover, a few participants saw a continuation of the current stance of monetary policy as posing some upside risk to inflation expectations and actual inflation over time. However, other participants observed that measures of longer-term inflation compensation derived from financial instruments had remained stable of late, and that survey-based measures of longer-term inflation expectations also had not changed appreciably, on net, in recent months. These participants noted that labor costs were rising only slowly, and that persistent slack in labor and product markets would likely limit upward pressures on prices in coming quarters. Participants agreed that it would be important to pay close attention to the evolution of both inflation and inflation expectations. A few participants noted that the adoption by the Committee of an explicit numerical inflation objective could help keep longer-term inflation expectations well anchored. Another participant, however, expressed concern that the adoption of such an objective could, in effect, alter the relative importance of the two components of the Committee’s dual mandate.

    Participants also discussed the medium-term outlook for monetary policy. Some participants noted that if economic growth remained too slow to make satisfactory progress toward reducing the unemployment rate and if inflation returned to relatively low levels after the effects of recent transitory shocks dissipated, it would be appropriate to provide additional monetary policy accommodation. Others, however, saw the recent configuration of slower growth and higher inflation as suggesting that there might be less slack in labor and product markets than had been thought. Several participants observed that the necessity of reallocating labor across sectors as the recovery proceeds, as well as the loss of skills caused by high levels of long-term unemployment and permanent separations, may have temporarily reduced the economy’s level of potential output. In that case, the withdrawal of monetary accommodation may need to begin sooner than currently anticipated in financial markets. A few participants expressed uncertainty about the efficacy of monetary policy in current circumstances but disagreed on the implications for future policy.

    Committee Policy Action 
    In the discussion of monetary policy for the period ahead, members agreed that the Committee should complete its $600 billion asset purchase program at the end of the month and that no changes to the target range for the federal funds rate were warranted at this meeting. The information received over the intermeeting period indicated that the economic recovery was continuing at a moderate pace, though somewhat more slowly than the Committee had expected, and that the labor market was weaker than anticipated. Inflation had increased in recent months as a result of higher prices for some commodities, as well as supply chain disruptions related to the tragic events in Japan. Nonetheless, members saw the pace of the economic expansion as picking up over the coming quarters and the unemployment rate resuming its gradual decline toward levels consistent with the Committee’s dual mandate. Moreover, with longer-term inflation expectations stable, members expected that inflation would subside to levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate. However, many members saw the outlook for both employment and inflation as unusually uncertain. Against this backdrop, members agreed that it was appropriate to maintain the Committee’s current policy stance and accumulate further information regarding the outlook for growth and inflation before deciding on the next policy step. On the one hand, a few members noted that, depending on how economic conditions evolve, the Committee might have to consider providing additional monetary policy stimulus, especially if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run. On the other hand, a few members viewed the increase in inflation risks as suggesting that economic conditions might well evolve in a way that would warrant the Committee taking steps to begin removing policy accommodation sooner than currently anticipated.

    In the statement to be released following the meeting, all members agreed that it was appropriate to acknowledge that the recovery had been slower than the Committee had expected at the time of the April meeting and to note the factors that were currently weighing on economic growth and boosting inflation. The Committee agreed that the statement should briefly describe its current projections for unemployment and inflation relative to the levels of those variables that members see as consistent with the Committee’s dual mandate. In the discussion of inflation in the statement, members decided to reference inflation--meaning overall inflation--rather than underlying inflation orinflation trends, in order to be clear that the Committee’s objective is the level of overall inflation in the medium term. The Committee also decided to reiterate that economic conditions were likely to warrant exceptionally low levels for the federal funds rate for an extended period; in addition, the Committee noted that it would review regularly the size and composition of its securities holdings, and that it is prepared to adjust those holdings as appropriate.

    At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance with the following domestic policy directive:

    "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to complete purchases of $600 billion of longer-term Treasury securities by the end of this month. The Committee also directs the Desk to maintain its existing policy of reinvesting principal payments on all domestic securities in the System Open Market Account in Treasury securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability."

    The vote encompassed approval of the statement below to be released at 12:30 p.m.:

    "Information received since the Federal Open Market Committee met in April indicates that the economic recovery is continuing at a moderate pace, though somewhat more slowly than the Committee had expected. Also, recent labor market indicators have been weaker than anticipated. The slower pace of the recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Inflation has picked up in recent months, mainly reflecting higher prices for some commodities and imported goods, as well as the recent supply chain disruptions. However, longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated; however, the Committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline toward levels that the Committee judges to be consistent with its dual mandate. Inflation has moved up recently, but the Committee anticipates that inflation will subside to levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

    To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee continues to anticipate that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

    The Committee will monitor the economic outlook and financial developments and will act as needed to best foster maximum employment and price stability."

    Voting for this action: Ben Bernanke, William C. Dudley, Elizabeth Duke, Charles L. Evans, Richard W. Fisher, Narayana Kocherlakota, Charles I. Plosser, Sarah Bloom Raskin, Daniel K. Tarullo, and Janet L. Yellen.

    Voting against this action: None.

    External Communications
    In follow-up to discussions at the January meeting, the Committee turned to consideration of policies aimed at supporting effective communication with the public regarding the outlook for the economy and monetary policy. The subcommittee on communication, chaired by Governor Yellen and composed of Governor Duke and Presidents Fisher and Rosengren, proposed policies for Committee participants and for Federal Reserve System staff to follow in their communications with the public in order to reinforce the public’s confidence in the transparency and integrity of the monetary policy process. By unanimous vote, the Committee approved the policies.2 Participants all supported the policies, but several of them emphasized that the policy for staff, in particular, should be applied with judgment and common sense so as to avoid interfering with legitimate research.

    It was agreed that the next meeting of the Committee would be held on Tuesday, August 9, 2011. The meeting adjourned at 12:10 p.m. on June 22, 2011.

    Notation Vote
    By notation vote completed on May 17, 2011, the Committee unanimously approved the minutes of the FOMC meeting held on April 26-27, 2011.

  135. Yodi. I hear you on the overnight TS. I use that obviously just for the day and evaluate what I want to keep overnight at 3:45. I can’t say I never hold into inventories, depends on my gambling mood. In this case though I have a TS set and if it doesnt trigger I’ll dump before close. I’d much rather play early morning futures pre inventory.

  136. Oops, here’s link for Fed minutes.  

    CL/Yodi – What?  I do not like playing USO or /CL right now as USO had a $3 run today (3%) and maybe it get s to $97.50 or higher but this was a very satisfying move so we take our bullish money and cash out and wait PATIENTLY to see what happens tomorrow when we get FACTS from inventory instead of just blindly guessing what will happen.  

    AND they ditch the Dollar to 76.10 – BRILLIANT!  

  137. Thank you Phil

  138. matt
    The week before last I took a big loss because the cable line went down that also took the phone down. I have been crawling back but tried an overnight last week that set me back half as much, now I’m less than a grand down. Seems to me slow and steady wins the race. Made .80 on last run but only half in just like the .48 earlier.

  139. OK, I have to go – DON’T BE GREEDY!  Watch that 76.10 line on the Dollar (and then the 76 line if that breaks) for a stopper on the way up.  Set trailing stops and enjoy the ride.  Keep in mind this rally has 100 Dow points to go just to get us back to Friday’s close (12,660) so don’t be impressed with less (S&P was 1,344, Nas 2,860, NYSE 8,411 and RUT 852).  

    So, at the moment, we’re not even getting a 50% bounce of this morning’s bottom and Friday’s close was way below Thursday so it’s very easy to give us a "rally" by tanking the Dollar and floating rumors of MORE FREE MONEY but, for now – it does nothing to change the greater reality.  


  140. Somebody in the gold trade appears to have gotten the Fed minutes about 20 minutes early. I’m betting  it’s Blythe’s crew at JPM

  141. JRW
    What’s with 83.75?

  142. Looks like the dollar could go to 75 !!


    In order to:

  143. and now PCLN rallies
    gooble gobble

  144. shadow / 83.75

    No idea, but this action implies more downside, I’m shorting; a close at LOD will signal the reversal, imho !!

  145. Ha. As I typed that my TS triggered at .57. I’ll take the .26 profit and be done for the day.

  146. shadow, slow and steady wins absolutely.  The only reason I’m staying in AH is because I believe the run up last week was complete BS and they have a lot of Treasuries to sell this week.

  147. Everytime it looks like a can’t lose we’re moving higher, it’s always too good to be true.  Glad I still have some shorts because like Phil said, if we close down today or flat, not good.  Looking forward to shorting oil again tomorrow, hoping we hit 99 at one point.

  148. Gold/Sliver shoots up at 1:25PM, 35 min before FED minutes realised.

  149. Looks like they’re going to take us lower and not higher.  I think the QE3 blip was a fake at this point.

  150. WHeeeeeeeeeeee !!

    We are probably going to IWM 82.81, but may stop at 83.01. then there is always the Stick so watch the 3 min chart !!

  151. Funamentals     Mkt has quickly forgotten the disasterous employment, trade balance, unaffordable oil, moribund GDP #”s.  Austerity (budget ceiling settlement) now in vogue, means accelerating (public sector first) unemployment, Ddip.  Meanwhile we are vunerable to successive Euro shocks driving up $.  I don’t see a huge downside to being short the RUT at 835, but the machines are in control, so I’ll defer to Phil to get the timing right.  There has to be a gap down before we get QE3.

  152. our whole economic strategy revolves around emerging markets buying our exports….they have huge inflation problems…yet we talk about qe3, which then raises odds of hard landings in those same economies….hahahaha

  153. i wonder why these guys dont realize that the euro should be much lower which would help european economies and bring down inflation…and look at the yen

  154. Looks like a stick is starting. MAYBE, $ down.

  155. I’m with Matt, think QE3 was a fake and think we head lower.  Too many potential black swans out there to keep us higher and we are still up 600 pts on BS from a week and a half ago.

  156. tusca / QE 3

    Remember, "they" haven’t used QE 2.5 yet !!  (The revenues from cashed QE 1 assets)

    I don’t think we’ve seen the lows yet for this pullback, but I see a higher high before the abyss !!  Smiley

  157. JRW
    Higher high in what timeframe?

  158. FU nflx!

  159. vic55

    This year !!

  160. For those who want a short-term bearish play, the SPX 1320 calls (jul) have two days to go and offer around $8 of premium. This is a lot higher than usual.

  161. I see higher also sometime then crashville!

  162. Everytime I hear the term abyss during trading, I think of this great quote from "Wall Street" :
    Man looks in the abyss, there’s nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.

  163. @ JRW "I don’t think we’ve seen the lows yet for this pullback", where do you the lows? do you think we´ll get there this week? Thanks!

  164. rustle, fyi, I’m pretty well covered.  I will uncover at close though.  My hope is that I will be able to cash in my cover instead of cashing out!  Looks like there is a battle to determine direction right now.  Everytime TNA gets to the 8ema it gets clubbed.  So, one would have to say the trend is down.  But just once, I’d like to take advantage of a stick!

  165. JRW / QE2.5    But that’s not net NEW money, just recycling from say agency mortgages to Treasuries (if the agencies can find the cash).  So, I think we need QE3 to halt an equity swoon.

  166. My take for the close is the evening news needs some green or both parties loose!

  167. The news reports the DOW and NASDAQ!

  168. matt
    I may short if they stick!

  169. holding the remaining shorts into tomorrow.  Have to roll the dice on this weak response to the fed so far.

  170. asaenz / lows

    Probably SPX 1288-1300 !!

  171. tusca / Equities swoon

    Equities have always been sacrificed at the alter of BONDS !!

  172. $TVOL on TOS is very low today.  I still believe that the debt ceiling compromise is reached in the next two days, and then….

  173. matt
    I also may hold long if we close LOD!

  174. ireland downgrade a nothch above junk

  175. where’s the jamesons!

  176. JRW,
    What do you think of tomorrow’s markets? Up or down?

  177. Greece takes a week to fix, seems they fix Ireland in minutes.

  178. And may hold cash.

  179. They are absolutely walking this doggy down-

  180. Just one week after the S&P 500 (SPY) finished off an historic stretch where all 24 industry groups finished higher on four out of five days, the index has now had two straight days where all 24 groups were down. That makes it six days in the last ten where all 24 groups finished the day in the same direction (up or down). Looking back over the last ten years, there have only been three other periods where this has occurred. Those occurrences are highlighted below and came in August 2007, November 2008, and June 2010.

    As shown in the charts, the last two occurrences came near intermediate-term market lows, but the occurrence before that came in the midst of the S&P 500′s last ditch attempt to rally right before the long bear market began. Apropos to the title of this post, these occurrences have preceded big moves (up or down) in the market, so a stable and sleepy Summer of trading is probably out of the question.

    (Click charts to enlarge)

    From Bespoke !! This is why I still have my puts !!

  181. OK – TRGT, the little company spun out of RJR/MO for neuroscience and I noted here..well, it is time.  AF on the street dot com just noted them, and I want to start the accumulation.  Data are due out in Q4, so how about the Feb12 $20/25 BCS for 1.85 or better.  That is 80% ITM and we can start by selling the Aug 20 Ps for 80c or better, which offsets almost 1/2 the cost.  I do not want to play the puts later than October JIC of bad news.  1/4 entry

  182. cwan120

    Depends on the close !!

  183. Pharm,
    what do you think about KIRK?  Thx

  184. rustle 123
    The problem is pizza land.

  185. JRW- They seem to have just tested for the stick…now or never here!

  186. Watch out for a rebound here (IWM 83.09) to push up to an 83.50 close !!  1/3 out of TZA !!

  187. Sorry will re-post for those on Alert.

    OK – TRGT, the little company spun out of RJR/MO for neuroscience and I noted here..well, it is time.  AF on the street dot com just noted them, and I want to start the accumulation.  Data are due out in Q4, so how about the Feb12 $20/25 BCS for 1.85 or better.  That is 80% ITM and we can start by selling the Aug 20 Ps for 80c or better, which offsets almost 1/2 the cost.  I do not want to play the puts later than October JIC of bad news.  1/4 entry

  188. Troy
    Last try 15:50!

  189. Quick, someone release the stick "stick" save…as regular stick isn’t cutting it!  Maybe we can get one of those 3-5 minute super sticks?

  190. Not going anywhere without the dollar dropping.

  191. Oh noooooooooooo,  they just downgraded Ireland !!

  192. Fully back in TZA, of course !!

  193. Yeah baby, no sticky on Tuesday.

  194.  barfinger – thanks for the heads-up on the 1320 SPX call premium. That one is working out nicely already. :-) I sold a small number of 1320/1335 spreads for $6.10 each.

  195. No Stickee For You! 

  196. I don’t know if 82.81 will hold now !! Selling 1/3 TZA here !! In fact it’s late, selling all !!

  197. JRW  / Europe won’t like this tomorrow.  You going to hold overnight?

  198. JRW    Thanks for the lines!  Great day to you.

  199. no they downgraded ireland at 326 i posted it its a shitstorm over there and everyone thinking prinitng money s oging to fix seems doubtful to me

  200. Pharm- great pick with plx!

  201. tusca,

    THAT is why I have @ 450 puts !!

    I’m now in cash in my DT account !!

  202. wilsons,

    You are most welcome !! 

  203. if the boj couldnt prop th eeuro today and china was on the sidelines its a bad sign one of my firends in ireland just said to watch belgium and that the finmins were about to go on a two month that gives us hope..this is like a fellinin movie

  204. Dow volume is only 127M.  Isn’t it quite low?
    What does that mean on such a day like today?

  205. cwan
    It means the move means nothing.

  206. JRW III
    July 12th, 2011 at 2:46 pm | PermalinkIgnore this user
    WHeeeeeeeeeeee !!
    We are probably going to IWM 82.81, but may stop at 83.01. then there is always the Stick so watch the 3 min chart !!

    Nice call JR!

  207. the confluenece of all this trouble is completely unpredicatable in terms of the immediacy of the problems..there has been no real discounitng of this perfect storm if you will and throw china into the mix and you c why phil is moving to cash….

  208. Wow, I was expecting this and it is still hard to believe.  To the uninitiated, after the last week and a half they must be ready to run for the hills.  And they should.  AFTER buying a nice T-Bill along the way!

  209. KIRK/roma – ur asking me about a home goods store?  LOL!  I would have to be on psychotropic drugs to shop there!

  210. Pharm -
    What’s your current take on SGEN ?

  211. 3% on the TZA play; 5+% on the day !!

    BTW, will someone tell me if I’m posting too much Smiley

  212. JRW- post more!  Especially your entries…=)

  213. Troy / call

    Thank you 8-)

  214. Pharm,
    OK, very-very valuable opinion :) )

  215. i just don’t see why you are posting at must have a billion dollars!…i think you must have some attachement to those of us who are thank you!

  216. JRW, Troy speaks my mind – more post, better.

  217. Believe it or not, this could be a bottom (LOD from 2:31 post), so I’m liquidating some puts, fwiw !!  $$

  218. Hi, JRW,
    I don’t trade your system, because I’m no good at day trading and I don’t want to get a heart attack.  BUT, your posts gave me some ideas of the market ups and downs.  And they do help me placing my orders.  So, please keep posting!

  219. JRW -
    Thanks – your posts help a lot.

  220.  JRW – agreed, keep posting at least as much. 

  221. rainman – Thanks.

  222. edro – we got out of all long positions on SGEN yesterday and last Friday except the SWW position of the stock with the 15C/Ps sold.  The positions we currently hold are our ‘mrm’ hail mary’s condor (Sept11 $25/30 BCS with the 17.5/15 BPS STO for a net debit of 20c as well).  I also have the Sept $30 Calls for 20c in another account. 

  223. JRW, less talk, more pictures!

  224. Think that is going to hold JRW?  Even after the Irish downgrade?

  225. UR looking at this though, ain’t ya!?

  226. Today’s levels.

  227. Hmmmmmm……a rare close on LOD……not good for the bulls.
    I’ll bet the big boys are slowly dumping everything to the BTFD’s.

  228. JR,
    I have you on ignore so it doesn’t matter…….:)

  229. In my mail today was an invite from NFLX with a free trail offer with the new pricing plans.

  230. Doro
    I got that too. I may try it just to see what all the excitement is about!

  231.  As Daneric said tonight on Zero Hedge, we may have one more push up--one "Last Hurrah" rally --amid a can-kick debt ceiling "fix" next week —before a sobering plummet in late July.

  232. Seems that GLP-1 antagonists Novo’s Victoza (liraglutide) and Lilly’s Byetta (exenatide) help in Alzheimer’s….curious, but none-the-less something to watch.  Data are here.

  233. Seems to me that this could be a cup-with-handle formation on many graphs…again, pointing to JRW’s consessions on the SPY P front…..

  234. sorry, chart is below….

  235. Good evening!  

    Dollar smacked back down to 76.33, lifting futures a bit but nothing exciting so far.   Asia seems flat an boring but they have a lot of work to do with the Yen at 79.47 but that’s much improved over 78.47 at 5pm.  

    Big chart not looking very pretty with S&P failing to hold 1.25% and NYSE well below Must Hold already.  The Dow lost support of 2.5% (12,505), which we knew was shaky but the EOD failure locked it into a negative trend and now it’s not holding up the other indexes.  That will let the NYSE drift down to the -2.5% line and pull the others down like an anchor if they don’t gap back over their lines tomorrow so lots of fun ahead.  

    Usually, the Dollar builds up into 3am as the BOJ does what it can to make the Dollar strong to make their exporters happy.  Once the Nikkei closes, the dollar drifts back down and that lifts our indexes off their lows (the 3am trade).  This trade is working best when the global markets are generally being pushed higher.  It had not been working too well during POMO time – probably because the manipulators had bigger fish to fry during the day but, without the  Fed pumping free money into the system – it’s much cheaper to push the indexes around in super-thin, after-hours trading.  

    The Euro is $1.39914 and the Pound is $1.59372 so it seems to me like people have major sell orders in at $1.40 and $1.60 that’s keeping them from getting back over the line.  The BOJ has a lot of firepower but they tend to try to use it constantly in small doses, rather than in big pushes so we need a catalyst to get rid of the EU currency bears.  Nothing exciting out of Europe so far so I’m going to use an old Jedi mind trick that makes time go faster while I wait for news – sleep!  

    At the close: Dow -0.47% to 12447. S&P -0.44% to 1314. Nasdaq -0.74% to 2782.
    Treasurys: 30-year +0.42%. 10-yr +0.18%. 5-yr +0.1%.
    Commodities: Crude +1.7% to $96.77. Gold +0.43% to $1569.00.
    Currencies: Euro -0.38% vs. dollar. Yen +0.95%. Pound +0.07%.

    Market recap: Stocks faded after Moody’s downgraded Irelandto junk, wiping out gains that had set in on news that a few Fed officials had suggested more stimulus if economic growth falters. Tech stocks sank as downbeat outlooks from two leading chip firms pointed to weak semiconductor demand. Oil and gold posted solid gains, Treasurys held steady. NYSE losers led gainers three to two. 

    It’s starting to look like 1937 all over again, Bruce Bartlett frets – growth, followed by stimulus reversal, then tighter fiscal and monetary policy. "Given the economy’s fragility, policy makers need to be very careful, because it may take only a small misstep on either the monetary or fiscal side to tip the balance. The experience of 1937-38 should be a warning."

    DoubleLine chief Jeff Gundlach, in a conference call with investors, doesn’t share the view that not lifting the debt ceiling is a disaster. He instead believes it will result in "instant austerity" where cuts are made to everything except coupon payments. More worrisome: the growing U.S. wealth inequality – if not solved at the ballot box, it will be solved in the streets. (Full presentation). 

    Pulling out the big guns in the battle over the debt ceiling, President Obama tells CBS he cannot guarantee Social Security checks will go out on August 3 if the issue is not resolved. "There may simply not be the money in the coffers to do it.

    Moody’s downgrades the GO bonds of Los Angeles to Aa2 from Aa3, and changes its credit outlook on the city to negative from stable. Five straight years of deficits have removed much of the city’s financial flexibility, says Moody’s. While some costs have been trimmed, higher labor and retiree expenses still loom.

    Moody’s downgrades Ireland from Baa3 to Ba1, with outlook negative. The main reason is the agency’s belief that Ireland will need "further rounds of funding" once the current bailout dries up at the end of 2013. The euro drops a bit, but surely markets have known this was coming. 

    After just six months, 2011 is already the worst-ever year for insurance losses: $265B so far, which easily exceeds 2005′s $220B for the year as a whole. The loss amount was more than five times higher than the first-half average for the past 10 years.

    With a U.S. student dropping out of high school every 26 seconds, the unemployment rate seems sure to keep rising. Dropouts are ineligible for 90% of the total jobs in the economy, and those who find work earn 40 cents of every dollar a college grad earns. And in this recession, the gap between educational haves and have-nots is growing. 

    Italian PM Silvio Berlusconi is vowing to push through an austerity bill featuring tax increases and public sector cuts. A possible about-face by Berlusconi regarding his support for FinMin Giulio Tremonti, scheduled to meet with lawmakers on Wednesday, could prove crucial to its passage.

    China’s Y/Y GDP growth fell to 9.5% - down from Q1′s 9.7%, but slightly higher than the expected 9.4%. June industrial output was up 15.1% Y/Y, while retail sales were up 17.7% – all amid Premier Wen Jiabao’s reiteration that slowing inflation is the country’s No. 1 concern.

    China secures its first-ever top level IMF post as ChristineLagarde appoints former PBOC deputy governor Min Zhu to the newly created Deputy Managing Director position. White House adviser David Lipton is appointed to succeed John Lipsky as First Deputy Managing Director. 

    Now this is straight talk!  "You have rich resources; we have a lot of money," says the head of a Chinese investment bank to an audience of Aussie execs, explaining the attraction the 2 countries have for each other. Beijing plans on investing 1/3 of its $3T reserve stockpile outside China in the next 5-10 years. 

    Out with the old….:  A survey from the Consumer Electronics Association estimates as many as 10% of households could cancel their pay TV services over the next 12 months, as online video gains steam. Credit Suisse believes such a decline could reduce the EBITDA of cable networks such as Comcast (CMCSA) and Time Warner Cable (TWC) by 20-25%.

    … In with the new:  As iPad sales have taken off, the notebook market’s annual unit sales growth has plummeted, and is now barely in positive territory. Hewlett-Packard (HPQ) and Acer (ASIYF.PK) have been especially hard hit, but Apple (AAPL) continues to do well on the back of surging enterprise sales and MacBook Air demand. 

    Earnings season began with a thud in tech land (III), as lower guidance from chip maker Microchip Technology (MCHP -12.8%) and equipment maker Novellus (NVLS -11.3%sinks the semiconductor sector(SMH -3.3%). S&P sees signs that "excess chip inventories may be building up in the electronics supply chain, which in turn could hurt semiconductor device demand down the road."

    Shares of Green Mountain Coffee (GMCR), up over 175% this year, are down 4.5% on a Stifel Nicholas report that the company’s market share of its K-Cup coffee grounds is declining at the hands of J.M. Smucker (SJM) brands. Further share declines might occur as Dunkin Donuts and Starbucks (SBUX) begin rolling out K-Cups this year.

  236. and here is SPX

  237. Oil lines for the early bird
    R3 – 102.57
    R2 – 100.03
    R1 – 98.62
    PP – 96.08
    S1 – 94.67

  238. Oops, fat fingers…
     R3 – 102.57
    R2 – 100.03
    R1 – 98.62
    PP – 96.08
    S1 – 94.67
    S2 – 92.13
    S3 – 90.72
    Volatility explodes after yesterday’s big move! We moved all the way to R3 yesterday.

    Dollar smacked down all the way to 76 after the usual 3:00 AM move! And the S&P futures are of course looking better now. Up some 10 points from last evening lows.

  239. stjean – Can you tell me a bit about how you trade oil?  Do trade off the resistance and support lines?  (i.e., short when it hits resistance and buy when it hits support?)  Do you do that only in the futures or the whole day?

  240. Oil / Jcaesar – You can’t just trade of the S/R lines. I also use other indicators using the lines to confirm. For example, if you have a buy signal right under a line, you want to wait to have a decisive breach of the line to enter a trade. Same for support. For example, yesterday I had a buy signal at 2:05 PM, but there was R3 at 97.38 only a couple of pennies above the close. That and Phil’s gut which seems to be the best indicator!

  241. stjean – Thanks!  Not to bother you too much further, but which indicators do you use (you don’t need to go into any detail, I’m just interested in which ones)?  Also, do you just trade the futures or do you also trade USO during the day? 
    Lastly,  I agree that Phil’s gut is probably the best indicator.  :-)  
    Thanks again.

  242. Indicators / Jcaesar – Please remind me another time as I don’t have time to go into details right now. 

  243. FAS Money Recap –  If you were able to get 0.70 for the 24 puts, you are short 10 of them. If not (I missed it myself) you should be short 5 25 Puts for around 0.90.

  244. Sure, thanks.