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Which Way Wednesday – Wherefore Art Thou QE3?

China is still rolling along and the Fed says "maybe" on QE3.

That was all it took to get us to yesterday’s highs but we took the money and ran at 2:24, when I told Members in Chat "DON’T BE GREEDY!"  As I had mentioned in yesterday’s post, our Morning Alert to Members put us long on Dow Futures (/YM) at 12,400 and Nasdaq Futures (/NQ) at 2,350, which made vast sums of money of course with the Dow up well over 100 points at the time.  During Member Chat yesterday, we took advantage of the early dip to go long on TBT, FAS, WFR and QQQ  while killing our short positions on USO, EDZ and FXI (see Monday’s post) as they had a great run and WE ARE NOT GREEDY!  

Of course we have our bull call spreads from last week so we’re pretty bullish BUT still cautious because our indexes are not holding their lines – especially the always-troubling NYSE, which did not hold the "Must Hold" line and when we name a line "Must Hold" well, it MUST be held!

The other thing I said to Members at 2:24 in yesterday’s Chat was:   

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).  

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.  

That’s good advise for today as well.  A mere hint of QE3 does not change the cost of Italian debt, nor will it help our Treasury sell $21Bn worth of 10-year notes today at 2.9% (what kind of idiot would trust our Government to give them back Dollars with less than 3% interest to guard against inflation?), nor will it employ people and we ABSOLUTELY know that QE3, if done like QE2, is going to drive gasoline back over $4 (retail) and food to unbearable prices.  

[15691771-15691774-slarge.jpg]Speaking of food – US ethanol refiners are now consuming MORE corn than livestock and poultry farmers for the first time, causing disastrous rises in the price of  food as 40 PERCENT (40%) of last year’s corn harvest (5Bn bushels!) was burned up as fuel.  Just to put this in perspective – only 10% of the entire US corn crop (1Bn Bushels) is actually consumed as food (think popcorn, corn syrup, corn flakes, corn starch, corn meal and, of course, corn on the cob, to get an idea of how much people eat!).

So, with 300M people in America on the "all the corn you can eat" plan consuming "just" 1Bn bushels (3.3 bushels per person), consider that if we DIDN’T put 5Bn bushels in our gas tank and burn it – we could feed another 1.5 BILLION people!  Isn’t that great – World hunger could be solved if Americans would just stop being idiots!  Ethanol has many issues but enough food to feed 1.5Bn people replaces just 15% of our gasoline consumption – getting people to inflate their tires properly would replace 10% by itself…

We have driven corn prices 90% higher than a year ago with 5Bn bushels of corn creating 13.7Bn gallons of gas.  How much cheaper is ethanol than gasoline?  In Chicago trading yesterday, ethanol futures were 30 cents cheaper than gasoline futures and at 15% of a gallon of gas – that’s 4.5 cents a gallon saved (but it’s subsidized so we’re really paying for it in taxes anyway) but we pay $7 for a bushel of corn vs $3.75 last year.  Boy are we dumb-asses!  

Of course we could only WISH that was the dumbest thing being done in America these days but PLEASE – we still have our Government – and we elect only the dumbest of asses.  Today Congress gets to chat with the Chairman of the Fed and, if you ever needed a reason for why I think there should be tests to see if people are smart enough to serve in Congress – just listen in on the questions they ask Bernanke (and this is the Finance Committee!).  

The goal of the Republican Congresspeople is to get The Bernank to say QE3 as often as possible because their Bankster constituents want MORE FREE MONEY.  The goal of the Democratic Congresspeople is to get The Bernnak to say that you can’t balance a budget without raising taxes or, failing that, to say that cutting Government spending does not create jobs.  The goal of Ron Paul is to launch his 2012 Presidential campaign so let’s look forward to another exciting episode of "When Ron Paul Attacks".  

Senate Republicans weaseled out of accepting Obama’s challenge to match one Dollar of tax cuts to $3 of spending cuts – proving they are not in the least bit serious about cutting the deficit – as they unexpectedly proposed that President Obama be given new powers allowing him to request an increase of up to $2.5T in the debt limit as long as he simultaneously suggested spending cuts of greater size.  Notably, legislative technicalities mean the debt limit increase would be a shoe-in with no guarantee the spending cuts would ever face a final vote.  

This is, of course, a trick because it means a Republican President could spend another $6Tn (Bush still holds the record!) that we don’t have on bombs, tax cuts and oil subsidies while SIMULTANEOUSLY gutting Social Security, Medicare, School Lunches, Public Transportation and of course all the budgets for our regulatory agencies to keep them away from Big Business as they ship another 20M jobs overseas.  If you care, this is one you should really write to your Congressperson (this post can be Emailed or Twittered or FaceBooked below) about as this plan is PURE EVIL!!!  

We’re playing today bullish as long as they can get the Dollar below that 76 line and as long as we can quickly get the S&P over that 1,320 line and the NYSE holds 8,200.  Of course we will be shorting oil on it’s silly run-up into inventories at 10:30, hopefully with another chance to short the Futures (/CL) below the $97.50 mark.  USO Aug $37 puts at $1 should be a fun way to play as well.  

It’s going to be a crazy day – be careful out there! 

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  1. @Felipe
    Actually, far less consumption of High Fructose corn products, or ANY corn  or product derived therefrom,  is a highly desirable outcome.  Sooner a more nutritious diet descends upon the people, the better.   The cost savings alone in a lessening of the diabetes II pandemic, would more than offset the cost increase of food.
    Let the refiners have it all.

  2. Phil,  I closed 90%% of my hedges yesterday except for the Aug EDZ 15 short put and TZA 32/24 BCS, both small positions. Seem like the open would be a good time to get one – what would you suggest now? Thanks

  3. FU JP Morgan!!!!!






    MARKET TALK: JPMorgan Positive On US Internet Stocks

    Jul 13, 2011 07:54:27 (ET)

    7:54 (Dow Jones) JPMorgan starts coverage of five US Internet stocks with a positive overall view driven by strong secular growth, increased online accessibility via mobile devices and tablets, and strengthening of social media and video trends. Firm believes online advertising and eCommerce have "many years of double-digit growth ahead on a global basis," while monetization of online video content, virtual goods, applications and cloud-based services will bolster the industry. Netflix (NFLX), the firm’s top pick, started at overweight along with Amazon (AMZN) and Google (GOOG). Yahoo (YHOO) and EBAY started at neutral. NFLX up 2.9% to $299.66 premarket; AMZN climbs 1.4% to $214.09; GOOG gains 0.8% to $538.40. (

  4. The ethanol (farm) lobby in this country is infuriating.  Burning food is morally repugnant to me.

  5. I mean TZA 32/34 BCS

  6. Phil
    Last Friday you liked GLL Aug 24 Calls @ .40. I know they’re lightly traded, but worth holding onto?? What’s your view on gold over the next couple of weeks? Thanks

  7. PP for today.

  8. Come’on matt.  You can drink ethanol for more energy than high fructose corn syrup!

  9. champ87 Contrary to myself Phil is a non believer in Gold. It might go up to 1600 and 2000 in the near future. It can as well go done below 1500 again take it a bit like the VIX It goes some what in tendem. No I think the price is to high to enter now. My 2 cents

  10. Pharmboy/Ethanol drink – 5-hour Ethanol gets me through the entire day!
    Matt – as a "farmboy" myself who has made a lot of money with the ethanol craze, yest is a scam indeed!  Ethanol only makes "cents" if some company figures out how to use the cellulose in the stalks, instead of the corn itself.  Even so, stealing the "waste" stalks off the ground removes much needed nitrogen and nutrients for the future rotation crop, so it isn’t really "waste" when you looking at the bigger picture.

  11. Good morning,


    IWM     81.82,  82.81,  83.07,  83.41,  83.59,  83.88,  84.21,  84.52,  84.87,  and  85.58

  12. We can go either way from here; this is the case for a bit more downside:

  13. It was, of course, our all-knowing and devilishly effective government that mandated ethanol be blended with gasoline at the pumps, and spent money to subsidize it besides. NOW, somebody is finding the unintended consequences, and that’s without mentioning the damage being done to our vehicles by ethanol.
    See a problem, mandate a solution, then throw your hands up in amazement when, for the thousandth time, the thing fails, makes the problem worse, or creates a worse problem than you had to start with.

  14. Good Morning!  

    As JRW says, we could go either way.  It’s all about Uncle Ben’s testimony, which is roughly 10-12:30.

    In the $25KP, we have a TNA  $86/88 bull call spread at net $1 and we can take the $86 calls off the table for $1.20 so let’s do that and we can re-enter later if things look up.  Also, the USO $37/38 bull call spread is .75 and that’s .25 profit we can take and run if you didn’t yesterday.  Our last bull spread was on the Dow and we’ll leave that to protect the naked TNA calls at the moment.  

  15. FU Bernank!

  16. JRW – Still looks like a cup with handle to me, and ‘they’ can push it to 1350 or so on SPX, 86.10ish on IWM. 

  17. A break above IWM 83.76 probably means at least a short term bottom is in !!

  18. I would think oil would be up more.

  19. Hmm…markets are cheery right now.

  20. Its all about the dollar.

  21. Wow, look at TLT drop with Bernanke’s announcement that a QE3 plan is in the works.  Doesn’t make sense he’d drop that bomb when they are trying to sell bonds right now.  Who the hell is going to buy tomorrow’s 30yr?  The ink on QE2 isn’t even dry yet!  What a friggin joke.  It’s trickle down stimulus.  Those who can ride the asset wave up prosper.  Those who can’t get hungrier and hungrier.  What a madman!!

  22.  Lulu jumping – FU lulu

  23.  the bernank has a history of killing the markets when he speaks – can he do it again?

  24. OK, to continue, Asia was up about 1% but Europe is flat and shaky and we are already fading our open so nothing at all to be excited about.  Keep in mind those $25KP bullish plays were just hedges to protect our short plays so we’re fine losing that DIA play completely if we get the profits off the table on the other two.  

    On the TNA naked $88 caller, now .50 – let’s just put a stop at .70 (last sale, not the ask!) in fact – so we can not worry about it and just take the loss if we have to.  If we get more QE3 mania, we can pick up another hedge .  

    My main concern is that the Dollar is at the 76 line, which should be strong support AND the Yen is at 79.15, which is not acceptable to the BOJ and the Pound cannot get over $1.60 (now $1.59714), nor does the Euro look very strong over $1.40 ($1.4086) as they were harshly rejected at $1.41  so a lot of work to be done to get the Dollar down.  

    As with Europe, we’re getting a morning pop on all the QE3 rumors and gold is at $1,584, whcih is nuts with silver at $37.56 and copper at $4.41 so it won’t be long before people remember inflation but, for this morning, it’s Euphoria time.  

    Earnings have been pretty good but the big picture news is still terrible.  It’s VERY hard to buy into this rally and very silly until we establish some better support lines (see morning post).  

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    8:30 Import/Export Prices
    9:00 Ceridian-UCLA Pulse of Commerce Index
    9:10 Fed’s Rosengren: ‘Collaboration and Leadership in Smaller Industrial Cities’
    10:00 House Hearing: Monetary Policy (Bernanke)
    10:30 EIA Petroleum Inventories
    1:00 PM Results of $21B, 10-Year Note Auction
    1:20 PM Fed’s Fisher: Economic Outlook
    2:00 PM Treasury Budget
    2:45 PM SIFMA Conference: Dodd-Frank Impact Analysis

    Notable earnings after Wednesday’s close: MARYUM - YUM should be good (International Revenues) but MAR is iffy.  

    At the open: Dow +0.36% to 12491. S&P +0.43% to 1319. Nasdaq +0.76% to 2803.
    Treasurys: 30-year -0.1%. 10-yr -0.08%. 5-yr -0.06%.
    Commodities: Crude -0.4% to $97.04. Gold +1.09% to $1579.30.
    Currencies: Euro +0.72% vs. dollar. Yen +0.21%. Pound +0.3%.

    10:00 AM On the hour: Dow +0.41%. 10-yr +0.13%. Euro +0.51% vs. dollar. Crude -0.87% to $96.58. Gold +1.07% to $1579.00.

    MBA Mortgage Applications: -5.1% vs. -5.2% last week. Thirty-year fixed mortgage rate decreased to 4.55% from 4.69%.

    Market preview: Strong China GDP data sends S&P futures+0.3%, as shares look to rebound after three days of losses. Gold futures are trading at record levels due to ongoing fears in Europe. Transatlantic+6.1% after Validus (-5.1%offers $3.5B to buy it, topping Allied World Assurance’s (+2.3%) bid. Kinetic is being taken private in a deal worth $6.3B. Later: Bernanke testifies. 

    Stocks fly as Ben Bernanke preps for QE3, telling Congress the Fed is prepared to act if the economy weakens. The dollar is getting hammered and commodities are popping. Watch live here

    Ben Bernanke is due before Congress today, when he is expected to warn against steep near-term spending cuts because of the tepid economy, as well as against not raising the debt ceiling. However, his appearance comes with the Fed divided and its toolkit looking increasingly bare.

    The rumblings of QE3 grow as Boston Fed chief Rosengren, calling Friday’s NFP report "dismal," says the central bank must "maintain sufficiently accommodative monetary policy." T-minus 6 weeks until Jackson Hole

    Whatever the result of the debt ceiling debate, a U.S. default at some point is "inevitable," Emergent Asset’s David Murrin tells CNBC. He calls America the last of the Christian, Western empires: "Who do you pass your values to as China grows and challenges? No one. So you are forced to continue to spend and one day you cannot afford it."

    S&P opines on the next financial crisis, saying Dodd-Frank’s prohibitions against bailing out one of the SiFis will be ignored or amended if the situation gets hairy enough. All of the ratings agencies continue to assume government support for the SiFis in their models, to the chagrin of lawmakers and regulators. 

    JPMorgan says internet companies will experience double-digit growth in coming years, as the monetization of new online video content, virtual goods, applications and cloud-based services bolsters the industry. The firm initiates coverage of five Internet stocks: Netflix (NFLX+2.5%), Amazon (AMZN +1.4%) and Google (GOOG) are started at overweight, with Yahoo (YHOO) and eBay (EBAY) at neutral.

    Ceridian-UCLA Pulse of Commerce Index rose 1% in June, rebounding from declines in April and May but below its level at the end of Q1. "The U.S. economy has been in ‘she loves me, she loves me not’ mode,” PCI’s Ed Leamer says. “Bad news has been alternating with good, leaving investors and forecasters nervous and unable to identify sustainable trends.” 

    Maybe running a bit scared now, Spanish finmin Salgado tells lawmakers the government may need deeper spending cuts than the 3.8% reduction planned for 2012. "It is more necessary than ever to show our firm commitment towards austerity."

    It was just last month Moody’s warned on France’s big 3 banks because of their Greek holdings. At nearly $400B, they also have by farthe most exposure to Italian paper. BNP Paribas (BNPQY.PK), Credit Agricole (CRARY.PK), and SocGen (SCGLY.PK) are all off more than 10% this month. Is an actual downgrade far behind? 

    Gold futures are now trading at record levels due to ongoing fears over eurozone debt problems, with the current settlement price for short-term contracts easily surpassing the record set on May 2. However, adjusted for inflation, gold is still below its Jan. 1980 high.

    With the hacking scandal gaining momentum and the U.K.’s parliament calling for Murdoch to testify, News Corp. (NWS) is scrambling to contain the fallout and keep its BSkyB deal on track. Among the options reportedly being considered: selling its roster of British newspapers, though buyers may be scarce. 

    More on dropping of Sky (BSYBY.PK) bid: News Corp. (NWS -0.5%) feels the situation has become "too politicized" for it to continue with its offer, a source says, although NWS intends to remain a long-term shareholder. Sky shares are -4% in London. 

     The Bank of Thailand raises its benchmark interest rate 25 bps to 3.25%. It’s the 7th hike in the last 8 meetings. With the newly elected government promising wage increases and a raft of spending programs, look for the Bank to remain hawkish. THD +1.4%.

    A top government official in India says the central bank will probably need to continue with interest rates hikes to combat inflation, helping push government bond yields higher. Bankers expect a double-digit inflation report tomorrow due to a ripple effect from higher fuel prices.

    China orders ConocoPhillips (

  25. Phil

    China orders ConocoPhillips (COP +0.3%) to halt operations on two platforms in Bohai Bay, saying recent oil spills were not fully under control and the U.S. company’s efforts to contain them have been "temporary and remedial."

    Casino operator MGM Resorts (MGM +2.4%) trades higher on anupgrade from KeyBanc. The firm says the Macau casino market continues to be strong, with overall market growth for the year-to-date surpassing expectations.

    Jeffries isn’t thrilled with Netflix’s (NFLX +2.9%price hike, which was received well by the Street. With prices rising 60% for many customers, Jeffries believes churn could grow, damaging Netflix’s subscriber growth and valuation. But Jeffries does see Netflix’s average revenue per user increasing to as much as $14 from the current $11.80.

    With speculation abounding of a China Mobile (CHL) iPhone release, rival China Telecom (CHA) might beat it to the punch. Reuters is reporting China Telecom and Apple (AAPL) will introduce an iPhone that runs on the former’s EV-DO 3G network by year’s end. As of May, China Telecom had 105.7M subscribers, including 19.7M 3G users. 

    Quick take on Apple/China Telecom: Developing an iPhone for China Telecom would be relatively easy for Apple, since Apple has already released an EV-DO iPhone for Verizon (VZ), whereas no iPhone exists that uses China Mobile’s TD-SCDMA technology. In addition, there are questions about China Mobile’s long-term commitment to TD-SCDMA.

    Looking at a "refresh of virtually every product line between July and October," Apple (AAPL) is strongly positioned for the peak holiday selling season, and its stock – already starting to tick higher - will benefit, Citi’s Rich Gardner writes. iPhone demand has been strong this quarter, he adds, raising his sales estimate to 16-18M units, above 16.5-17M consensus. AAPL +1% premarket. 

  26. Phil:
    What plays would you consider if we do get QE3?

  27. Phil, I think I need more bullish cover, can you recommend a play?


  28. Oil goes….up!

  29. Bernanke looks like he’s been beat-up and about ready to cry. Almost feel sorry for the guy, except he’s such a tool.

  30. he isn’t the one beat up…itis the idiot shorts who bet against him like me ;-(
    FU market!!!!

  31. WE ARE JAPAN!  I have been saying it for over a year now. 

  32. @ Phil, Ben just told us in his own way that there will be a QE3, the question is when… is it time to start picking plays for this? or do you think we still have time for a pullback and get better prices for the QE3 rally? thanks…

  33. Phil / Oil     Now 98.45  Are you waiting to hit $99 to short again?

  34. Damn, markets were flying while I wrote that but Dow volume just 27M so simple lack of sellers, not a ton of buyers believing in the QE3 fairy.  Certainly not something we want to bet against at the moment but here come oil inventories so we’ll see.  

    Dollar down to 75.67 on that dip but now 75.73 so let’s figure over 75.75 will stop the rally and over 76 will reverse it.  

    Oops, oil inventories down by 3.1Mb, gasoline down 800K and distillates up 3M so net nothing and this reaction (over $98) is very silly so we will be happy to short it but first need the Dollar to stop dropping!  Hopefully they test $99 but below $98 is good on the futures (/CL) with a tight stop as would be $98.50 or, of course $99 so plan on losing a few nickles before catching a wave!  

    On USO, those Aug $37 puts are .92 but now the FRIDAY $39 puts are getting interesting at .76 so let’s plan on a day trade with those if we can figure out where oil tops out.   

    Keep in mind a draw in oil and a build in distillates means they simply make fuel that nobody wants. 

  35. Anata wa tadashiidesu Pharmboy!

  36. Wonder how long it will take for this to blow over?  He clearly said it was contingent on a weaker then expected second half of the year.  That would mean it’s definately not happening this year.  But look out in 2012.  In the meantime, markets gettting way ahead of themselves.  Not that that ever stopped them. 

  37. Looks like oil might’ve hit a floor for today, Phil, time to short?

  38. Hi Phil Sco Aug 45/50bcs for 2.36 — how to adjust or leave along as you mention last post it on track. thx

  39. Phil, what possible motive could Bernanke have in mentioning QE3 so far in advance? Is it supposed to make the country feel warm and fuzzy?  Congress warm and fuzzy?  The banksters warm and fuzzy?  Or just b & c-  It sure isn’t going to make China feel warm and fuzzy!

  40. Dollar still falling.

  41. Busy, busy this morning.  

    So, what do we have?  We needed 2.5% lines of Dow 12,505, S&P 1,333, Nas 2,809, NYSE 8,487 and RUT 835 – so that’s the 3 of 5 we need to be more bullish but that S&P gets double weighting as an indicator so let’s not get too crazy until/unless we get that critical cross.  

    $98.50 is holding tough on oil so game on there and I like the Aug $37 puts on USO, now .90 but the Friday $39 puts, now .72 are kind of scary but let’s pick up 10 at .65 (if possible) in the $25KP and plan on a DD if they move higher, say at .45 and we’ll hope gravity takes it’s toll as they are forced to roll out of these contracts.  

    Click for
    Current Session Prior Day Opt’s
    Open High Low Last Time Set Chg Vol Set Op Int
    Aug’11 96.40 97.45 96.40 97.43 20:07
    Jul 12
    2.28 308209 95.15 219452 Call Put
    95.75 20:07
    Jul 12
    2.23 117030 95.62 251084 Call Put
    96.89 20:07
    Jul 12
    2.16 47741 96.11 78149 Call Put
    78.01 20:07
    Jul 12
    2.10 32234 96.64 71819 Call Put
    101.31 20:07
    Jul 12
    2.05 53975 97.19 195124 Call 

    On the FAS Money trade, I like selling the July (Friday) $25 calls for .62 on the assumption that either the $24 or $25 puts were sold, of course.  

  42. Bernank statement -  "We are not costing any money as far as the deficit is concerned"

  43. Dollar 75.55 – WOW!  Yen testing 79, Pound flew over $1.60 in big jump and Euro plowed up to $1.4163 so looks like BOJ tried to buy Euros and Pounds but it’s not helping.  I don’t see that they have a choice but to buy Dollars at 75.50 so let’s watch for a turn here.  

  44. HAHAHHAHAA!! Ron Paul!! going to miss the good Dr.

  45. If I were China, I would protest Bernanke’s statements today by boycotting the auctions for at least the remainder of this week.  What’s Bernanke thinking?  He just cost the US plenty today~  borrowing costs went up at 10am on the nose. 

  46. Planning to be ready to switch to TZA at IWM 84.52, but we are stalling early. If this is not a back test of R2, I will at least sell my TNA !!

  47. Corn/Flips – I agree with that but we’re not going to stop consuming corn as it’s just 10% of the crops use – what will happen is just we will pay more and more and more for it while other nations who would love an ear of corn for dinner, will simply starve.  

    EDZ/Jomp – Oh, that was one I specifically called off!  I hope my commentary was bullish enough to let you know it was time to bail on those.  

    JPM/Jabob – Yes, lots of positive commentary on index movers – another reason I have no faith in this mega-pump this morning.  

    GLL/Champ – Not looking good are they (now .25 for the Aug $24s).  I still like them conceptually and if you can go for .50 to roll them to the $22 calls, I prefer that position and hopefully you can sell the $24 calls for .50 on a pullback and end up with a .40 net again on the $2 spread.  

    Gold/Yodi – Way too high.  Only reflecting fear in Europe after rallying on fear of the Middle East for 3 months.  I guess we could have a fear of America rally next to get to $2,000 but what then?  Fear of Mars?   Just like a horror movie – after a while the audience gets a little jaded.  

    Overall I think lack of affirmative statements on QE3 from The Bernanke will disappoint the markets.

    DIA Friday $126 puts are .85 and were $2 yesterday so let’s go for 20 in the $25KP with a stop at .75 and 1/2 out at $1.15 with a .20 trailing stop after that.  

  48. Phil, where do you get the oil data you referrenced above?  I would like to study it in more detail.  TIA.

  49.  Bomb blasts in Mumbai, India.

  50.  75.50 broke!  Holy cow they are pulling out all the stops!  

  51.  Phil: QE3
    First repeating this approach makes me sick.  Second if the idea is that QE3 will allow "THEM" to profit yet again from free money wouldn’t "THEY" want to drop the market big before buying back in? 

  52. Phil, You mean I should have no hedges – dosen’t sound like you. So my tiny Aug 32/34 BCS is enough?

  53. Dollar $75.39!

  54. This chart from JRW looks to be right on….

  55. 75.40 – not helping much is it?  We’re up about 1.5% on a 1.1% drop in the Dollar (so far).  

  56. IWM 84.52 it is then !!

  57. phil
    i have bought TBT Aug 32 Call at 1.21 now it’s 1.48. is it time to cash out? thanks,

  58. Phil--you think this rally reverses?

  59. and I posted this on Monday…

  60. Phil / $   Euro is now about to embark on their own QE3 to save the PIIGS.  So, this $ weakness is silly.  The unemployment and trade #’s showed we have no meaningful employment creation.  The GOP will ensure no fiscal stimulus initiatives, like Pickens Plan. 
    So, it’s only a matter of time until Ben starts his stealth printing again – he won’t be the author of the 2nd Great Depression.  THey have more info than we do and I suspect he’s really scared.  We are really scr’d, but he’ll choose inflation over Depression.  I guess today’s presentation makes shorting more risky?

  61. Dow volume 42M coming up on two hours – no conviction.  

    75.39 – At least Dollar bears have conviction and here’s why:   

     Fitch gives a thumbs-up to Italy, saying the country’s 4 year, €40B deficit-reduction plan is consistent with stabilizing its credit profile. "The sharp rise in Italian and other eurozone government bond yields … reflect a crisis of market confidence in the European policy response … rather than deteriorating sovereign credit fundamentals."  Keep in mind Fitch is the agency that pretty much just makes whatever call GS wants them to make.  

    Goosing the Transports on $99 oil:  FedEx (FDX +1.2%pops onto the select list at Stifel Nicolaus with a price target of $130. The firm picks FedEx as its #1 large-cap transportation stock.

    EIA Petroleum Inventories: Crude -3.1M vs. -1.3M expected, -0.9M prior. Gasoline -0.8M vs. +0.1M expected, -0.6M prior. Distillates+3M vs. +0.2M expected, -0.2M prior. Crude futures reverse course,+0.6% to $97.98. 

    In six of the last 10 trading days, all 24 S&P industry groups finished in the same direction (up or down). Bespoke notes that this has occurred only three times in the past 10 years, and each preceded big moves (up or down) in the market, so "a stable and sleepy summer of trading is probably out of the question." 


  62. The dollar is almost to support and SPX and IWM are almost at resistance !! Smiley

  63. JRW / have you now flipped to TZA?

  64. BOTs on oil…..

  65. Phil / Oil short   Had to short at this level.  $99 oil guarantees a Ddip.

  66.  Anyone know whats going on with copper futures?

  67. For those of you who watched Bernanke testimony in Congress, was he questioned under oath as to whether the Fed envisioned QE3 or did he just volunteer the information?

  68. Not quite 84.52, out of TNA for $2.23 (another one of my favorite calibers) !!

  69. QE3/DC – If we get it, just long on everything basically.  Looks like it’s being baked in as we speak though so, if they announce it late next month and we’re up 10% – it may be a sell on the news thing by then.  Keep in mind the logic here is the economy is SO TERRIBLE that the Fed has no choice but to pump money into it to inflate equities and commodities, which will probably throw Greece, Ireland and Portugal into Middle-East type revolutions as people can no longer afford to feed their families and those that work have special taxes placed on them to subsidize mounting government debt.  This is just madness…   

    Bullish cover/Palotay – Sure, TNA Aug $85/80 bull call spread at $2.60, selling DIA Aug $122 puts for $1.40 for net $1.20 on the $5 spread that’s $1.90 in the money but I have zero faith in that position and I think we’ll head down as soon as today’s nonsense runs its course.  

    QE3/Asaenz – He did not say that.  QE3 would be a catastrophe and he know it.  He is not a soulless son of a bitch like Greenspan and he will work as hard as he can NOT to pull that trigger.  Notice he says he didn’t watch the HBO Movie that was about him with an Oscar-winning actor playing him – Obviously he is very sensitive about what people think of him…  

    $99/Tusca – Just tapped it!  

    Not that that ever stopped them/Matt – Good point!  

    SCO/Gucci – Those are still fine but you can get a roll down to the $42 calls for $1.50, which I kind of like as it raises your net to $3.86 but drops you $2.90 in the money.  Doing that pretty much commits you to spending another $2 to roll to the Oct $42s (now $6.50) if things go badly in August, so bear that in mind.  

    Motive/Matt – He’s motivated by his primary job, which is to protect the Banksters.  Bernanke doesn’t work for us, he is the head of the US Reserve Banks, that are essentially the Gang of 12 and they want the markets up and commodities flying and Bank stocks looking good – they weren’t getting that this week so it was time for QE3 rumors so they can at least tank the VIX and buy more puts.  

    Dollar bottomed out at 75.37 and is now bouncing up to test 75.50.  


    India/Nicha – That sucks.  Haven’t seen mention on CNBC. 

    Drop/Lincoln – I think so but we just did drop 4% – that’s a lot.  As I mentioned above, I do thing today’s rally is more about stopping out the shorts and setting a bull trap while the big boys reload on cheaper puts (like the ones we’re buying). 

    Hedges/Jomp – At the moment, I think adding upside plays is chasing.  If we hold our levels today I may feel different tomorrow but this one-day move up is just as silly as Thursday and Friday’s huge move down and, as I said yesterday – we fell from 12,750 on Thursday to 12,450 yesterday and up 150 points today is exactly a 50% retrace (strong bounce) but not at all impressive if they can’t hold it.  

    TBT/Ethan – I’d go for it on the 30-year.  With no POMO is MIGHT be a disaster tomorrow.  

    Reverse/Jabob – Yep. 

    Inflation/Tusca – That’s why I’m long-term bullish but we won’t have real, sustainable inflation until we get wage inflation.  More top-down inflation leads to more riots, which tanks the markets first.  Once concessions are made to the people – THEN we get long-term hyperinflation and, at that point, we’d BETTER be bullish!  

  70. JRW
    22.250 is just a 1/2 cent loss but with longer legs!

  71. Good timing JRW! 

    Great picture Pharm! 

    $99/Tusca – I don’t see them going to $100 because that will put too much attention back on oil prices.  You would think they would want to play it smarter than that.  

    There goes $98.50 again.  

    Oath/Matt – I don’t think he’s under oath here.  

  72. tusca / TZA

    Yes, we stalled at 84.47 when the dollar started to strengthen, so I sold there (hoping for 84.52) and bought a 1/3 TZA position; I will buy more on a break of 84.21 !!

  73. Should calulate better that is 2 cents more.

  74. shadow / 22.250

    I have one of those as well; I use it at the ranch for varmints !!  Smiley

  75. Phil,  No – I mean don’t you see any good downside hedges now as I closed them yesterday on the drop and too bullish now. Today has been good but it never lasts so I’m looking for SDS, DXD, etc hedge to get more neutral. Just want to ask the guru on a good one now. Thanks

  76. JRW / .22 250 — Switched to a .17 and actually like it better for < 200 yards.

  77. 11:00 AM On the hour: Dow +1.22%. 10-yr -0.13%. Euro +1.36% vs. dollar. Crude +0.95% to $98.36. Gold +1.56% to $1586.60. 

    12:00 PM On the hour: Dow +1.09%. 10-yr -0.21%. Euro +1.38% vs. dollar. Crude +1.15% to $98.55. Gold +1.5% to $1585.80.

    Pump it baby!  Goldman’s Jan Hatzius’ take on Bernanke’s prepared testimony: "We see this as an upgrade of the seriousness of the easing discussion on the {FOMC} … a moderate dovish surprise." Stocks and commodities are stable at higher levels. The greenback continues to dive.

    F Them, right Jabob?  Through Jeffries is cautious about Netflix’s (NFLX +2.6%) price hike, Goldman and Piper Jaffray are reiterating their Buy and Overweight ratings, respectively. Goldman believes the revenue and margin boost from higher prices will offset any churn increase, while Piper expects growth in streaming-only subscriptions to increase profitability.

    Pres. Obama played the Social Security card in debt ceiling negotiations - "There may simply not be the money in the coffers to do it" -  but there are several ways the Treasury Department can juggle payments to make sure seniors get their checks even if the Aug. 2 deadline passes, Washington Post‘s Glenn Kessler writes.

    The shutdown of Minnesota’s state government forces MillerCoors, a joint venture of MolsonCoors (TAP +0.8%) and SABMiller (SBMRY.PK), to pull products out of stores, restaurants and bars due to an expired license, reports say. Employees who process license renewals were laid off when state government shut down services. 

    Irish PM Kenny lashes out at the EU, not the ratings agencies, following yesterday’s downgrade. "Moody’s problem is not with Ireland," but with the handling of the situation by EU leaders. He plans on skipping Friday’s EU council meeting unless attendees are prepared to do something worthwhile. 

    As Euro officials take contrasting views on the downgrade of Ireland, Wilbur Ross claims Moody’s is attacking the wrong country, noting the government has already carried out major spending cuts. Ross warns if the agencies "downgrade enough people recklessly, nobody will be able to access the public markets in 2013."

    Gold futures jump $20/ounce to $1,582, an all-time intraday high, after Bernanke says the Fed is examining ways to stimulate growth if the economy weakens. The European debt crisis is helping prices rise, but even if it is addressed, a BofA analyst says "the developed countries are in so much debt that it will continue to drive gold up for the next 10 years." 

    Silver (SLV +5.1%) gains on more reports stockpiles lag global demand, and hints from FOMC minutes – coupled with Bernanke’s comments today – suggesting another round of quantitative easing is still on the table. Gainers: Silver Standard (SSRI +6.4%), Endeavor Silver (EXK +5.3%), Silvercorp Metals (SVM +7.9%), Silver Wheaton (SLW+7.2%). 

    Investors receive a new option to play the world’s 3rd largest economy with today’s launch of the Maxis Nikkei 225 Index ETF (NKY). The fund is the first to track Japan’s best-known equity index. NKYcharges 0.50%; Japan ETF leader EWJ costs 0.54% and currently has $8B in assets.

    Walgreen’s (WAG +1.6%boosts its dividend by 28% – the largest increase in its history – and launches a $2B share repurchase program. CEO Greg Wasson says the move confirms the company’s "commitment to return cash to our shareholders." 

    Coinstar (CSTR +3.8%) shares surge, as its Redbox DVD kiosks could be big winners from Netflix’s (NFLX +2.8%controversial plan to separate its DVD and streaming subscription deals. Outraged customers could downgrade to Netflix’s $7.99/month streaming-only plan and then rent individual DVDs from Redbox kiosks at $1/night, Merriman writes.

  78. JRW
    I have a ackly magnum, expanded 7mm case 25 caliber, you have to load your own. Almost 22.250!

  79. USA Scores!!!!
    Women up 1-0 in 9th minute vs. France.  (If you’re not aware, we’re in the semi-finals of the Women’s World Cup).

  80. Phil – Are you short oil? Not sure I understood the options comment before.

  81. Downside/Jomp – Oh I like all sorts of things to the downside:

    • USO Aug $37 puts, now .85 
    • DIA Aug $122 puts, now $1.45
    • TZA Aug $30/35 bull call spread at $1.90
    • EDZ Oct $18/22 bull call spread at $1.15
    • GLD Sept $142 puts at .85

    Bullish offsets that are nice are

    • RIMM Aug $27.50 puts can be sold for $1.27
    • BA Aug $70 puts can be sold for $1.45
    • BA 2013 $62.50 puts can be sold for $6.10
    • UNG Jan $7 puts can be sold for $2
    • JPM Jan $35.50 puts can be sold for $2.35
    • WFR 2013 $7.50 puts can be sold for $1.75

  82. phil, is there any target line for GLD short? thanks,

  83. An hour later on the Dow and we’re up to 52M shares so we dropped to 10M shares traded in the last hour (50%).

    World Cup/JC – Thanks for reminding me to Tivo that!  

    CCJ maybe finding a bottom off the $25 line.  I love them as a 20-year hold.  Now $26.14, you can sell the 2013 $25 cals for $5.20 and the $20 puts for $2.20 for net $18.74/19.37 so the worst case is you have 2x at a 25% discount to the current price, which itself is 25% off the pre-Fukushima levels already!  

    Oil/David – Yes, we expected it to go up on inventories and it’s hitting our max expected at $99, where we have conviction to go short as we don’t think $100 is sustainable for any length of time.  

    GLD/Ethan – I think it needs to pull back to $1,250 before it can really make a move to $2,000 (if it ever does) but it’s not being very cooperative.  They topped out at $1,577 on the first day of May at the top of a mighty run and we were back to $1,462 about 3 days later, which is why I like the GLD puts above.  I just don’t see the Dollar going back below 75 without ACTUAL QE3 – rumors of QE3 do not trump Europes ACTUAL mess (and don’t forget Japan!). 

    This is the end of Bernanke time – Now we’ll see if they can hold it.  

  84. This assumes, of coarse, a constant dollar value !!

  85. Phil / Tivo   They’ll have to play topless to get me to watch women’s soccer!
    Oil gone from $94 to $99 in 2 days and Obama wonders why growth is faltering.  What bs.

  86. JRW – How did you arrive at that graph?

  87. phil..since the corn price has changed so radically over the last year.. does that correspond with a change in ethanol manufacturing over the same period?

  88. tusca – What, you don’t like the USA?  Phil, take him off for moderation!
    You have to agree this is an amazing set up and score (whether done by men or women).

  89. This Q and A has become unwatchable….

  90. "We elect the dumbest of asses"  Phil, you are so right… unfortunately…..

  91. jcaesar / graph

    Just our range since February.

  92. being short the momos is chinese water torture. they never stay down. look at NFLX,CMG, and PCLN.

  93. BTW, support at IWM 84.07, 83.88 and 83.59 !!

    Resistance at 84.30, 84.49 and 85.15 !!

  94. Phil do you feel comfortable to sell any USO calls at this stage ?

  95. This would be a good time for a Buy program, or :they’re going to lose it !!

  96. Fitch News- Greece default a "real possibility"

  97. JRW,
    do you think we are going lower?

  98. USA 1-0 vs. France at end of first half.

  99. JRW - approaching 200 sma as it levels out…TBT caving, VIX looking up…hmmm…oh, plus the let Cortes speak some truth on CNBC…danger Will Robinson!

  100. TLT is moving…up.  Not good, remember they need to buy bonds…

  101. That’s a cool chart, JRW.  

    Topless soccer/Tusca – As you wish.  

    Corn/Angel – Yes, they are running on this insane ramp-up schedule (mandated):  

    Ethanol Production, Consumption & Economic Impact graph

    The Bush plan (just another bomb left over from that administration) targets 35Bn gallons a year by 2017, which is, amazingly 150% MORE than we’re making now even though we are currently using 1/2 our total corn crop to produce 13.5Bn gallons.  Is that irrational?  Insane?  Catastrophically stupid?  Sure, but that’s our Bush and good luck overriding something that makes ADM and MON and the farm belt so much money – what do they care if corn triples and millions die of starvation?

    Here comes the Dollar and wheeeeeeee!

  102. phil / streaker   Amazing, where do you find this stuff?

  103. Tusca / soccer — How ’bout Football?

  104. OMG!  That’s an amazing shot… in oh so many ways!!  Tanks fer the pickmeup.  8-)

  105. lol730 / Going lower

    Well, I certainly hpoe so !!  8-)


    All good points !!  Oh, and WHEEEEEEEEEEEEE !!

  106. 1/3 out of TZA on the 83.88 line !!

  107. Called the top perfectly again, vintage Phil.  Great call.

  108. Phil- the bush plan (which was terrible) maxes corn use out in 2014 or 2015, with not much greater increases than now. All gains in ethanol production after will come from switchgrass, miscanthus, and other advanced biofuels. Unfortunately, switchgrass, etc will still compete for farmland, water….

  109. Phil,
    Too early to buy DRYS for $4 and sell 2013 $4 C/P for $2?

  110. Another 1/3 gone for 50 cents !!

  111. And the last only gets 41 cents; almost 2% on the move !!

  112. Phil / bullish offsets..  
    UNG Jan 7 puts can be sold for $ 2..  ???   wrong strike or symbol??  or did I miss a correction?

  113. Hey Phil, what do you think about GOOG calls?  They fluctuate alot based on earnings.  Wondering if there’s a chance to capitalize?

  114. USA 3-1. Wow

  115. Phil / Fundamentals   I like circling back to this.  Since Friday’s disasterous jobs report, things have gotten worse.  Europe in increasingly volatile, austerity is in vogue and oil has jumped $5.  Ben’s perf today just confirms that the ‘insiders’ know we are facing a Ddip.  Question is, will he be able to, politically, go for QE3 before he has the evidence of a slide into Ddip?  Strikes me that he has to let evidence of our moribund economy emerge first, which will hurt the equity mkts, before pressing the inflation button again?  Seems to me this rally is a bit premature?

  116. And that’s a win for the USA 3-1 against the Frogs!  On to the final!

  117. Busy day. Took a bite of Jul38P for .16

  118. Trying to defy gravity….just does not work…..

  119. Smiley

  120. Hello everyone!     I haven’t posted for a LONG time, but that doesn’t mean I’ve not been making reams of $ trading AAPL.    Actually, I’ve been perusing the site almost daily, without comment, looking for, and finding tons of great trading ideas from Phil and all the rest of you, which I greatly appreciate.     I decided to refrain from posting for two reasons:   I’m extremely busy with my "other job", and…..I think there are plenty of trading ideas out there without adding mine.  Having said that, recently I’ve noted something unusual about AAPL’s stock behavior that I’ve been able to capitalize upon.   It’s a bit laborious to explain and I’m right in the midst of that "other job" , so I’ll post it this evening.  I think you’ll find it worth reading. And if you want to use it for an AAPL trade you’ll have to place orders before opening in the morning.   I’ll be back around 6 or 7 p.m.  to chat with you.    

  121. Look forward to it Iflan!

  122. Iflan: Happy to hear you are still around. Thought we lost you there!

  123. lflantheman, funny, I was wondering what happened to you this morning.  Good to see you are back and look forward to reading your observations.

  124. Phil,
    Would you sell 310 JUL NFLX calls for $1. Looks like easy money for a 2 day timeframe?

  125. i could understand NFLX today because of the "news" and upgrade
    I can understand PCLN today because it dropped for 2 days
    But WTF is CMG doing up $8????

  126. Welcome back Iflantheman. Hope you have some new trade ideas for AAPL tonight.

  127.  PHIL   I am short oil at 99    Would you hold or wait a little longer.  Any levels ring a bell for today?

  128. Phil / overnight    How do you think mkts will, tonight, digest this Ben repeat of ‘QE3 in the wings if needed’?  Is the Tepper put back in play, or do we give up these euphoric gains?  I read Ben’s commentary to confirm we’re headed for Ddip and he’s scared.

  129. Just got a call from my broker.  He said their inventory of TNA is diminishing and therefore I may have to cover some of my short position.  Translation:  folks are getting out of the RUT!

  130. Phil/Anyone – Legging in to a long call and financing with a short put strategy question.
    It seems like this makes sense. But, maybe there is something I don’t get.
    If you are basically bullish on a stock. Buy a longish dated call (not too close so you don’t lose much premium before you sell the put). Then wait until the stock pulls back to sell the put – so you get more money for the put you sell (assuming its closer to the strike, the market pulled back and vix is higher, etc.) If it never pulls back then, you can take your money and run, sell a higher call to turn into a spread, etc.
    Does this make sense rather than just putting it all on at once or is there a downside I’m not giving enough weight to? The only downside I can think of is losing premium on the call that is not offset by another sold option.

  131. Bought 2/3 TZA off the break of 83.75 !! Watch out for 83.60ish then 83.38ish !!

  132. Kustomz, the pomo schedule is what JRW calls QE 2.5. reinvestment of their gains into treasuries.. 

  133.  Phil   Never mind out at 98.02

  134.  Dollar dropping a little

  135. is it stick time again? FU stick!!!!

  136. Momos/Jabob – That’s why they are called Momos, you know – they lead us up.  

    USO/Yodi – I never like selling USO calls because of the possibility of Rent-A-Rebel attacks somewhere.  Too much risk on that side.  

    Streaker/Tusca – I was looking for a guy saying "goaaaaaaaaal" the other day and that one came up – I guess due to massive popularity.  That was a nice-looking girl who’s good at soccer – I would have liked to see her interviewed.  

    Lingerie League/Rain –  It would be good if they could play a good game too.  

    Thanks Rustle!  

    Switchgrass/Jrom – What happened to seaweed or something?  Substituting food for fuel is just stupid.  Also, instead of mandating 15% ethanol – why not mandate 30Mpg cars – that would decrease fuel consumption by 33% over about 5 years (lifespan of current 20mpg fleet).  

    DRYS/RJ – We got so burned on EGLE I lost my taste for shippers.  I still like EGLE better but the BDI is lame so not exciting right now.  

    UNG/Topher – Oh, those are some kind of split puts – scratch that one as an offset!  

    GOOG/Lol – Playing with FIRE on those.  The fluctuate a lot because GOOG could go up or down $50 easily on a gap – better off waiting until Friday and trying to catch momentum (if any, more often than not they flatline after the initial move).  

    QE3/Tusca – We need some sort of crisis for QE3 to be palatable, even though, technically, the Fed can do whatever it wants.  To get a crisis, all they need is to have Fitch downgrade Italy, Spain or France, have Pimco say something bullish about the Dollar and have GS and JPM downgrade a couple of sectors and PRESTO! – a crying need for QE3.  

    Gravity/Pharm – That was a great play.  The green girl was so good it was like a concert performance, you couldn’t wait for her to sing the next song.  

    Hey Iflan!  Looking forward to your take on Apple.  

    NFLX/Rehat – I wouldn’t just based on it’s a lot of margin for a little reward but it’s a good percentage trade. 

    CMG/Jabob – Cramer is pumping them like crazy – maybe his fund buddies are bailing into earnings?  

    Oil finished about $98 at the NYMEX close, very weak off a $99.21 high.  

    QE?/Kustomz – That’s just their rollovers.  

    Oil/Willsons – I like them into tomorrow but out on a nice move down if they show signs of coming back.  If you mean futures though – half out with the $1 profit and a .25 trailing stop on the rest is smarter.  

    Overnight/Tusca – There is no QE3 so reality is not the market’s friend.  Then it depends what happens in Europe who, like us, are not very impressive on their bounces.  

    TNA/Matt – Interesting.  

  137. TBT almost down for the day… maybe ‘they’ could push down yields and DXY while pushing equities higher?

  138. OMG – I can’t see the little bars, as they are hidden behind my support/resistance lines. What’s going on in the market?

  139. ROTFLMAO – I almost spit my sandwich out – ‘that green girl" Phil?  That is the Wicked Witch!

  140. Yea FU stick!!!!

    Bernank basically said today…go ahead short the markets..I DARE YOU!

  141. Phil -
    I want to start trading the Income Portfolio. I’ve read all the posts on it but I need your advice on how to get started since I’ve missed all the trades up to this point. Thanks.

  142. @Felipe
    re:  SODA     Trade of last week….
    Staying the course thru expiration on Friday?  

  143. Legs/Judy – Yes, that strategy makes perfect sense but you’ll find we think getting a 10% gain is very, very dull – pretty much beneath most people’s thresholds so we pretty much never do them.  Keep in mind I’m not an option strategist and we’re not looking for delta-neutral strategies – I’m a fundamental value trader (mostly) who uses options for leverage and hedging so, in other words, I am so confident that my targets are right that I’m willing to make a real commitment to maximize the payoff if I’m right and, as long as I’m right more than 40% of the time, we’re in very good shape.  Also, in the strategy section there’s a link to an article on scaling in – that is key to the strategy as well.  Make sure you read the comments below that post as there’s a lot of good discussion there.  

    Trying hard to shove that Dollar back below 75.50.  78.98 Yen to the Dollar is not what the BOJ wants to get the Nikkei back over 10,000 this evening.  Euro at $1.41477, Pound at $1.61014.  I’d bet down still.  

  144. Phil / Anyone – Interested in how you think the debt ceiling stand off could play out.  I saw an interview with David Walker (former head of the GAO) the other day and he said there would be no credit default.  i.e., we would pay our bills first.
    Of course if we didn’t, that would be catastrophic.  Do you see the market getting more concerned about this if there is no deal as we approach August 2nd?

  145. ADBE continue to go down on this up market.
    Time to sell some puts?  Or wait?

  146. Phil-Are we holding USO $37 aug puts overnight?

  147. Yes, Pharm, I did figure that out during the course of the play.  I just can’t remember he name.  

    Income Portfolio/Hextra – Patience!  We enter new trades from time to time but we WAIT PATIENTLY for very nice opportunities (we added WFR yesterday).  It’s a LONG-TERM portfolio that is not likely to have more than 20 positions max so figure 5 major additions or subtractions per quarter but plenty of shorter-term put selling WHEN IT’S A GOOD DEAL – which it isn’t at the moment with this big run-up.  Any of the above short-put offsets would be appropriate for the Income Portfolio as they are picked on the same principle. 

    SODA/Flips – Looks good to flatline to $70.  

    Debt/JC – No way we don’t pay our bills over a technicality.  


  148. Fully in TZA ; matt must be ecstatic !!  Smiley

  149. Sold TZA! Enough edge of chair day.

  150. JRW – we may bounce at LOD 83.23…

  151. Selling 2/3 TZA on a buy signal  and 83.38 support for 56 cents !!

  152. Phil
    I have the USO Aug 37 puts about cost plus com., hold overnight?

  153. Phil do we kill these FAS 25C JUL 50% profit or would you call this greedy?

  154. yodi
    Your being greedy, give half back!

  155. VIX went Green. 

  156. If this goes through, SPY goes piffffffttttt…..97.50 Phil…..97.50.

  157. yodi
    BTW I am below the poverty line in taxable income again so far this year. I could open a donation sympathy fund!

  158. ADBE/Cwan – I’d wait for earnings.  AAPL has tremendous market share and has frozen them out – who know how many sites have dropped them.  

    Still no volume, just 86M on the Dow at 3:30. 

    USO/Celest – Yes, I think the big sell-off comes tomorrow.  

    Good job Shadow!  I think you nailed that turn.  Yes on USO – we’re still waiting for that rollover pain to hit them.  

    FAS Money/Yodi – As they are balanced with puts, I’d rather ride them out for the premium.  $15 on XLF is about where we should finish on Friday.  FAS Money is different than the $25KP, where we were scalping quarters, this is about selling premium and we like to squeeze them dry unless we get a very early move (like Friday or Monday after we sell the new weeklies) or a move that we think makes no sense.  

    I can’t wait to hear this spun by Fast Money and Cramer as a good day in the market….

  159. TBT shoved back down again ahead of that 30-year auction so mission accomplished!  TBT Aug $32 puts can be sold for $1.12. 

    This can turn super-ugly if volume comes in to the downside!  

  160. The stick is broken.

  161. I am sure Cramer will say it was a great day and buy buy buy CMG and NFLX!!!

  162. Phil:
    Great calls today!

  163. Getting late in the day; getting out of the last TZA !!  (at IWM 83.30ish)

  164. JRW
    Glad to hear your out at 83.30 ish 83.40 was close enough for me, Notice I don’t move the market!@!!!!!!

  165. Phil you were nailing it today, thanks!  

  166. Pharm/CELG – I have sold July $60 call as a cover against my long call. I was thinking of rolling it to either Aug $60 for a $1.50 credit or close to even for Aug $62.50 roll. What do you think?

  167. Phil, thanks for calls today. I am a new member and you really help me make some mula today!

  168. Thanks DC, Bruce!  

    Good timing JRW.  I still think there’s another shoe to drop on the RUT but 835 is hanging tough for now.  

    Dow volume still sucking at 95M with 10 mins to go but picking up and all down – might be a flash-crash finish and I’ll be surprised if they manage to stick this higher.  

    WYNN flipped negative again but CMG still selling those golden tacos.  

  169. USO july 37 puts – i took the intraday 33% after commission gain.. but i’ll reload if pops back up!

  170. looks like a mini stick to me ;-(

  171. 3:58 stick for the brave!

  172. nicha – 60s

  173. JRW,
    If you would care to divulge your inner sanctum secrets in an AH tutorial,
    (1) what prompted the buy signal @3:23 today – I didn’t see an engulfing candle above the 9ema
    (2) what was your basis for feeling a LOD close Tue would mark a reversal (below)?
    <<Tue a close at LOD will signal the reversal, imho !!>>

  174. Looks like they are saving the extra .5% for tamara.

  175. JRW
    And it closes at your 83.60 ish!

  176. Damn, I was wrong – gotta get used to playing those sticks again.  

    That was a totally fun day – let’s do it again tomorrow!  

    You are very welcome Jack – glad to have you aboard.  

  177. Good day/Phil, yes tomorrow again would be great. and thanks for the various calls!

  178. Phil, could you explain your reasoning on :
    USO/Celest – Yes, I think the big sell-off comes tomorrow.

  179. MaxPain/Pharm – i believe you (or JRW?) have linked to a max pain calculator site in the past. was trying to find it again today. can you put that out here again? and…love and comments from anyone who -uses- a max pain indicator: what do you do with the info it provides? does it give an indication of where bots might try to peg at expiry?

  180. LOL Dow volume finishes at 139M so about 45M in last 10 minutes – very natural there.  So if we had a surge of 45M orders and all we got was a dinky 30 point move in the Dow up – then the bulls are in DEEP TROUBLE!  

  181.  CMG / PCLN, classic bull-trap

  182. 8800 / 3:23

    1) Tick turned positive and order flow went green

    2) It was the third down day and I expected capitulation (big down with close at LOD); yesterday, however was NOT capitulation, so we shall see !!

  183. IMGN/Pharm    In looking at your spreadsheet from yesterday, I see you still have stock and short July12c.  What is the plan going forward,  roll or get called away.  Are we looking for a new entry?  Thanks.

  184. Yum! Brands Inc. Announces Second Quarter 2011 EPS Growth of 13%, Excluding Special Items; Driven by Outstanding China & Emerging Market Performance; Raises Full Year 2011 EPS Growth Forecast to at least 12%, Excluding Special Items
    But this part does not bode well for CMG who is likely to suffer the same: Our outstanding international results were offset by a 28% decline in U.S. profits, driven by higher commodity costs and a 4% decline in same-store sales.

  185. JRW,
    Thanks, as always (AH tutorial)

  186. 6+% on the day; ending with a gravestone doji, and black at that !! As I have said before, black candles can be near turning points in EITHER direction, and a gravestone doji is usually Bullish; we shall see !!

    Here is the famous quote from Soros:
    “… the most significant is that it’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong. …”

  187. Nice day JR

  188. Phil- seaweed and other algae are cost prohibitive…. You are absolutely right though, mandating fuel efficiency is DEFINITELY the way to go if we ever get serious about energy independence…. Unfortunately, no special interest groups/big businesses gain from such a mandate…..

  189. Is anybody watching the index futures?  The dollar is down and the index is going down also… any news?  TIA.

  190. I think it is Moody’s puts US on watch list for ratings downgrade.

  191. USO/B1 – See chart of NYMEX rollover.  They have until the 21st to dump 200M barrels out of the Aug contracts and spread them across the next few months.  That’s next Thursday so they have 6 sessions to move 200Mb and that’s 33Mb/session so a lot to dump and, from experience, we know they often end up with a day or two where they really have to bite the bullet and dump oil when the inventories are this bloated plus the ACTUAL release of SPR oil will hit the market soon, probably also for Aug delivery.  

    Oil Futures (/CL) still a good short here below the $98.50 line.

    At the close: Dow +0.36% to 12492. S&P +0.31% to 1318. Nasdaq +0.54% to 2797.
    Treasurys: 30-year +0.4%. 10-yr +0.23%. 5-yr +0.14%.
    Commodities: Crude +0.47% to $97.89. Gold -0.21% to $1582.20.
    Currencies: Euro +1.23% vs. dollar. Yen +0.54%. Pound +1.21%.

    Market recap: Stocks sloughed off much of their gains but still finished with their first gain in four sessions, after Ben Bernanke didn’t quite shut the door on more easing. CATMRKGE led the Dow and Basic Materials paced sectors. Europe concerns led to more gains in precious metals, with silver up nearly 7%.

    Here’s that other shoe I was talking about – Freaking out the after-hours action!  Moody’s places the U.S. Aaa bond rating on review for downgrade, citing the possibility a debt ceiling deal will not be reached.  Very bad because Dollar is down AND market is down.  

    U.S. stock index futures are off about 0.4% in the wake of theMoody’s warning. The dollar fell sharply on the news, but has retraced most of its loss. Treasury futures fall a bit, implying yields of 2.91% on the 10 year, 3 basis points higher than before the announcement.

    The U.S. Treasury Department responds to the Moody’swarning: "Moody’s assessment is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country’s obligations and agree upon a substantial deficit reduction package."

    Dallas Fed President Richard Fisher sees growth picking up to 3%-4% this year, and paints himself as an inflation hawk: "If I see inflation continuing to rise and, most importantly, inflationary expectations beginning to spread, I will be the first out of the box to advocate the removal of the substantial monetary accommodation now in place."

    More from Dallas Fed chief Fisher: "I firmly believe the Fed has already pressed the limits of monetary policy … U.S. banks and businesses are awash in liquidity. Adding more is not the answer to our problems." Stocks give up some of their gains and the dollar firms a bit, but Fisher has talked tough for months without once voting against QE. (previous).

    Kansas City Fed President Thomas Hoenig retires from the central bank in four months, but he isn’t going quietly. The chronic dissenter blasts current FOMC policy yet again, and publicly rakes over the coals Fed officials, Congress, Wall Street and financial institutions deemed too big to fail.

    Since the start of the recession in December 2007, American consumers have spent $7,300 less, on average, than what they would’ve spent if the recession never happened. Real per-person spending, while having rebounded from its 2009 bottom, is still 1.6% below pre-recession levels

    After an intervention scare yesterday evening sent the yen plummeting for a few hours, it has returned back to a ¥78 handle. In Europe, the Swiss franc is also at extreme levels vs. both the euro andthe greenback. Exporters are feeling the pain and politicians the pressure. It seems only a matter of time until one or more interventions.

    SNB Vice-Chairman Jordan expresses concern about the sharp rise in the swiss franc and threatens action if necessary. "The central bank is neither powerless nor unable to act." Markets yawn, having taken the SNB to the cleaners for billions when it intervened in 2010. FXF+1.4%

    With the aussie back near all-time highs, some bet the currencycould be getting set up for collapse. The biggest risk may be a slowdown in China, but the Aussie economy has its own troubles. Consumer confidence is sinking and high-end retailer David Jones tells of a "dramatic and rapid deterioration in trading conditions." FXA +1.7%.

    Citing the absence of a new and fully funded financing program for the country, Fitch downgrades Greece 4 notches to CCC – a rating that implies a substantial risk of default.

    Bonds are calm today in Italy and Spain, but yields in Ireland are blasting to Greek-like levels. The Irish 10 year is up 65 bps to 14.0%, with the 2 year skying 243 bps to 20.16%. This in a country that,according to Wilbur Ross, is doing things right. 

    "The euro area needs a buyer of last resort," writes the team at RBS. Nix the ESFS, which would need to be increased to a politically unacceptable €3T. Nix China which isn’t going to commit that kind of dough. All that’s left is the ECB, which so far has been reluctant to turn on the printing press, but might, if it gets political reform in exchange.

    With Germany insisting policymakers can now take their time in crafting the details of a 2nd Greek bailout, PM Papandreou disagrees. "If we do not soon decide … the program will undermine itself." The latest proposal, a buyback of Greek paper at pennies on the dollar, gets a thumbs up from G-pap.

    Calls for an investigation of News Corp (NWS +1.5%) continue to heat up on this side of the pond. Just a day after Sen. John Rockefeller called for an investigation into the whether News of the World hacked into the phones of 9/11 victims, representatives for various victims groups and their families are now asking for the same.

    Federal prosecutors won’t use RICO statutes to go after News Corp (NWS +1.74%), but it could be an option for private plaintiffs. Civil RICO cases may be difficult to win, but are tempting to try as damages won at trial can be tripled.

    The key to Warren Buffett’s success is he doesn’t invest like a man, according to a new book penned by Louann Lofton. Warren Buffett Invests Like a Girl: And Why You Should Too takes the argument women are superior decision makers – and runs with it – concluding more estrogen would help tamp down emotions raging through the markets.

    An online shopping study conducted by MarketWatch shows Amazon (AMZN +1.1%) has a clear online pricing advantage over Target (TGT -0.5%), but loses out slightly to Wal-Mart (WMT +0.2%).The study contradicts an early finding by William Blair that Amazon held an 11% pricing advantage online. 

    "It’s inevitable that there will be a consumption dimension" to broadband billing, says Time Warner Cable (TWC) Chairman Glenn Britt. With Netflix (NFLX) being the most obvious home bandwidth hog – likely getting even bigger due to its new pricing plan – it’s no wonder the company is loudly warning of the danger of usage-based pricing.

    More ammo for those believing Netflix’s (NFLX) price hike will backfire: reader polls at Business Insider and Geekwire respectively have 41% and 35% of subscribers planning to cancel. Some of this anger may die down; and with Netflix’s shares still up 2.7%, the market isn’t bothered. But there is clearly a groundswell of frustration with Netflix’s move.

    Marriott International (MAR): Q2 EPS of $0.37 in-line. Revenue of $2.97B (+7.3% Y/Y). Shares -4.2% AH. (PR)

    Tuesday Morning (TUES -8.5%hits new lows for the day after saying Q4 sales were lower than expectations, down 3% YoY at $194.8M. The company cut its Q4 EPS outlook to a loss of $0.03 to $0.05, vs. a profit a year ago.

    Yum! Brands (YUM): Q2 EPS of $0.66 beats by $0.05. Revenue of $2.8B (+9.4% Y/Y). Shares +3.1% AH. (PR

    More on YUM: The story is – what else – China, where 25% growth in operating profit offset a sharp decline in U.S. earnings. The company also raised its guidance 12% for 2011, expecting profits of $2.83/share. (previous)

    Three lunchtime reads:

  192. CMG/Kramer – Yes but CMG may rise on YUM earnings (because investors are sheep) and will make a fantastic short (again) tomorrow.  

    Good Soros quote JRW. 

    Yes, we can blame Moodys for stating the obvious.  I find it very scary that a statement like that can panic people – it shows you how little research the average investor has done into the market climate before making their commitments.  


  193.  Phil: messages Oltac 6/30+7/1 (2) – 0 response.  ??

  194. Today’s levels. An additional seven days was added to each chart to keep the 5% levels in sight on all five indexes.

  195. Oltac/ZZ – I’ll send him a note.  

  196. Phil/debt ceiling poll – Latest Gallup Poll shows taxpayers against raising debt ceiling.  Even if we have a debt ceiling increase soon, I believe the global focus on our debt crisis has already created irreversible damage.  I still can’t wrap my mind around why raising a artificial debt ceiling "number" matters…as it only stand to hasten the end game.  If raising the debt ceiling could effect our fiscal reality in a positive manner, why not just change it to infinity…and thus never have to deal with it again?  I should probably just join the cult and pretend to believe in a fairy tell ending…perhaps we can feed the volcano Debt Gods a sacrafice, starting with the bernank.  Oh wait…MaDMan Cramer just hit the screen, wearing a ninja headband playing "pin the rally tail"…perhaps he can be first!  At any point, Matt’s posts are ruining my happy place…daaamn you Matt!!! =)

  197. JRW – technically, that is not a gravestone doji  (see my TA book above!!!)…..but the point is well taken b’c of the candle b’f that being an inverted hammer, which IS a reversal pattern!

  198. Hey!  Why you gotta drag me into this Troy?  What did I do?  It was Moody’s who made the bold statement that if we default they’re gonna have to really get serious about maybe downgrading our credit worthiness.  Sometime~

  199.  Despite all the sturm und drang regarding the "destruction of the middle class", WSJ 7/13 p.1 suggests that U.S. middle class is by far the biggest beneficiary of U.S. federal tax breaks — e.g., mtg. interest deduction, prop. tax deduction, exclusion of employer-provided health care from income, tax breaks for retirement savings.  Middle class defined as those making less than 10% top earners and more than bottom 40%.
     States that eliminating Reagan tax cuts — taxing the rich — would not raise enough to curb deficit by much, because there’s not enough income to tax, nor would cutting spending on the bottom 40%, because there’s not enough spending on them to cut.
    However evil M. Snyder of "Economic Collapse" believes the rich to be, it seems rather to be the case that the wealthiest demographic aggregate in America — the 50th to 90th percentile of Americans — eat up the lion’s share of the tax breaks that must shrink if the deficit is to be reduced.  I suppose it is just coincidence that this group encompasses the largest percentage of election voters.
     The politics of envy make it satisfying to "blame the rich" for America’s fiscal woes, but the mathematics of voter subsidies appear to tell a different story. 

  200. Matt/posts - you "made" me short the Russel over the weekend…if I were a nice guy, I’d send you a slice…but then of course JRW and "Phil and the Greg" might want a cut too…=)

  201. moody’s…a ticket to political theatre..europe is th eproblem as is china we are the best of the worst

  202. btw how can anyone believe that there was a 16% rise in consumer spending in the bs china growth number this am..who spent it ..what trash..and it has been the growth engine of th eworld..its riven with fraud and a complete lack of ethics….more chinese bs tonight headlines form china: china plans to add 6.5 billion barrels of oil reserves and china gold demand to rise 20% this year…hahahaha they must consult with cramer on his comedy show

  203. Isn’t it strange reaction to downgrade?
    /ES fell, but just 10 points. I’d expect really catastrophic fall
    Am I missing something?
    Or are we going to get more serious reaction after Europe opens?

    Is it worth to short futures now? Or they can spin it in positive way and push us into rally tomorrow?

  204. I love Hoening….and he is from my neck of the woods!

    Hoenig said that for most of U.S. history, and as late as 1980, the nation’s banking industry was relatively unconcentrated. The largest five institutions had 29 percent of total banking assets and represented 14 percent of gross domestic product. Today, the top five institutions control more than half the industry’s assets and almost 60 percent of GDP. The largest 20 institutions control 80 percent of the industry’s assets and 86 percent of GDP.
    “Is it any wonder then that in the fall of 2008 we experienced the greatest financial crisis since the Great Depression?” Hoenig said. “Financial institutions had again become irresponsible in their lending practices. They had increased their leverage ratios to unprecedented levels. They became ‘dry kindle’ for a financial fire, and with the end of the housing boom, the match was struck.”

    Now we know how badly the game is rigged.  And why the sell-offs are ‘controlled’.

  205.  Hello All….Here’s my post on AAPL i promised earlier.  It has to do with an observation I made recently on the trading patterns and price movement in the stock which I then converted into a short term trading strategy which has been very productive.  Look at any detailed AAPL chart over a 10 day period and you will note a couple of things.  One, there is almost always a volume uptick in the first hour of trading.  It is transient, then the trading volume levels out.  Furthermore, it is generally selling volume, not buying volume.   This results in the stock price taking an early morning dip, then quickly recovering, sometimes within minutes, but over 80% of the time, before the trading day is done.  Now the options prices move with this dip and recovery, but magnified several times, as  you would expect.  And the options that move the most, take the widest swings in the shortest time, if you will, are the slightly out-of -the-money weeklies.  So, with this in mind, what I’ve done for the past two weeks or more is to put in lowball buy orders for the slightly OTM weeklies the night before, then just wait for the result.  For instance, say the stock price is 355 and the 360 weekly closed today for one dollar.  So I’ll put in the following orders which will take effect at open the next morning:  Buy 10  360 weeklies at open for 1.00,  buy 15 for .75, 20 for .50, 40 for .25,  buy 75 for .15, and buy 100 for .05.     Now when the market opens these standing orders will fill as the morning dip takes place.   You will usually get some to fill, but not all, although one day last week I did get a fill on the .05 options.  Then wait for the morning action and put sell orders on each one.  You can sell them at market because they are traded so heavily.  I prefer trailing stops but you can take profits at any time on any of the trades in any way you see fit.  And you will  take profits, if the pattern holds.  And take some profits, even if only 20 percent or so.   Don’t get greedy.    Now on Fridays I do this a bit differently.   I take profits on the trades much quicker, then prepare to SELL the friday weekly at about noon.  I’m selling these against August long calls, so there isnt any margin.  AAPL often pins at an option price number, so selling the calls is generally safe, but the Friday trades are tricky, so you may want to try this method the first 4 trading days only.  Also, I suspect the pattern will change after earnings are reported.   It’s interesting to conjecture as to how this pattern got established.  I’m cynical.  I think it is manufactured, by some large trader selling a large block or blocks of shares each morning, perhaps buying some cheap resulting calls, then repurchasing the stock.  I don’t really know how it came about, but I know it’s helped me rake in a lot of cash on AAPL recently.  I’ve looked at a couple of other stocks to see if there is a similar pattern.  I can’t find it, but I’ve not looked hard yet.  If I can find something similar in a highly traded stock with liquid options, then of course I would try my hand at trading that equity as well, using a similar method.   

  206. Pharm, there was a good article on the banks and the bailout in this weekends NY Times magazine, talking with the former head of the FDIC.

  207. The WSJ notes CSCO is selling switches (which handle internet traffic) with technology that outpaces the traffic that demands it. This effectively means "companies can do more with less."; may impact future sales.

  208. Debt/Troy – It’s all nonsense.  We set an arbitrary limit once upon a time to give the illusion that something is being done to balance the budget – it’s not like we can’t pay our bills, just that (in theory) we won’t.  All political theater but other countries think it’s serious.  If anyone were actually worried about the "good faith and credit" of the United States, they never would have let it get anywhere near this far.  Newt shut down Government twice (11/14/95-11/19 & 12/16-Jan 6) so the first shutdown didn’t bother us enough not to do it again a month later, did it?  According to Wikipedia:

    A 2010 Congressional Research Service report summarized other details of the 1995-1996 government shutdowns, indicating the shutdown impacted all sectors of the economy. Those included: health and welfare services for military veterans were curtailed; the Centers for Disease Control and Prevention stopped disease surveillance; new clinical research patients were not accepted at the National Institutes of Health; and toxic waste clean-up work at 609 sites was halted. Other impacts included: the closure of 368 National Park sites resulted in the loss of some seven million visitors; 200,000 applications for passports and 20,000 to 30,000 applications for visas by foreigners went unprocessed each day; U.S. tourism and airline industries incurred millions of dollars in losses; more than 20% of federal contracts, representing $3.7 billion in spending, were affected adversely

    Clinton’s approval rating fell significantly during the shutdown. According to media commentators, this indicated that the general public blamed the president for the government shutdown.[7] However, once it had ended his approval ratings rose to their highest since his election.

    So what’s the big deal?  

    Middle class/ZZ – Oh come on, you know better than that!  Lies, damned lies and statistics there.  How is the middle class the biggest beneficiary of tax breaks when the top 1% pay 17%?  Yes, the $500M TBoone doesn’t have to pay in tax pales in comparison to my neighbors getting to deduct $8,000 off their income the year they buy a home – PLEASE!  

    The top 20% make 82.7% of the money – how completely ridiculous to make any kind of comparison about what the bottom 80% should be paying.  Note on the chart above, you have to be in the top 15% just to get to a 6-figure income.  The bottom 66% top out at 65,000 so where exactly is your "Middle Class" that has it so good?  

    Also, keep in mind that all this is a massive distraction to keep people from looking at the real tax criminals in our society – which are our Corporate Citizens, who make more money than 1,000 Gates or Buffetts yet pay practically no taxes at all ($197Bn last year vs $2.2Tn paid by workers).  Just 40 years ago – Corporations paid more taxes than citizens and wages have gone DOWN while Corporate profits have more than tripled (inflation adjusted) yet we now tax them net 90% less.  There’s our entire $15Tn deficit right there but good luck getting it back because you can’t even frame them into the debate as you’re so distracted with petty distinctions between you and your neighbors – which is exactly what they want you to be doing which is why you see this kind of nonsense endlessly debated in the Corporate Media – anything to distract you from reality…

    And of course, it’s not all about income because a person earning $31,244 (the bottom 90%) has NOTHING left at all.  That means they can’t save, they can’t send their kids to school without taking on massive debt, they can’t accumulate assets because all of their money goes to food, fuel, clothing, shelter and medicine.  That means they don’t compete with us for stuff – they are not even allowed in the store.  They can’t buy beach homes or art or cars that have resale value or desirable properties and they can’t take up space at tables in our restaurants or bother us as Sachs.  

    This is the problem with those of us in the top 10% – we’re so far above the bottom 90% that we begin to think people in the top 20% are middle class because we simply don’t associate with the bottom 80% that the system is designed to chew up and spit out.  That’s fine, I understand how that happens but please don’t try to feed me this propaganda BS that tries to make you feel somehow good about it… 

    China/Angel – They did give massive raises to people this year and since the only consumer spending would be the salarymen and the millionaires anyway, I could see where there may be some truth to those numbers.  Also, don’t forget they have 20% food inflation so it’s not like poor people had a choice – I’m sure savings went to zero or negative while the money was forceably extracted from the lower classes but I’m also sure ZZ would point out that the "middle class" got most of the tax breaks so that makes it all OK somehow.  I like the oil and gold rumors – that’s the classic "infinite Chinese demand" story that drives the speculators into a frenzy.  So, they are ADDING 6.5 BILLION barrels or 9 times the ENTIRE size of the US SPR (720Mb)?  And I’ll bet if you look at the comments attached to that story not one person points out how completely ridiculous that number is.  

    Futures/Lol – Not if you missed that drop.  We’re drifting now as the Nikkei opened down about half a point (too strong Yen) but the Hang Seng, Shanghai and BSE are up about a point.  Now comes the 3am trade, where they pump up the Dollar to take down the Yen a bit and the Dollar is way down at 75.14 now.  I guess you can short a bit between now and 3am but then it would be time to go long again – unless S&P wants to warn on US debt too! 

    Concentration/Pharm – That’s why there’s never going to be reform.  This country was taken over by Bankers a long time ago and the Bush 1 S&L crisis eliminated their competition and, ever since then, it’s been 30 years of glorious growth until they got to the point where the people of this nation have to go $8Tn into debt when they have a bad quarter.

    AAPL/Iflan – Thanks, that’s a very good thing to watch.  Also, I do notice negative AAPL stories in the mornings (I-something killer, margin issues, supply issues, patent issues), followed by pumping stories (sales, profits, new stuff) later in the day.  All connected…

    CSCO/Kwan – That’s my overall bullish premise.  They have stuff that’s way ahead of the curve but expensive.  Once companies begin to spend again, CSCO will do very, very well.  

  209. Briliant! From ZH, an interview with Terry Coxon
    The time horizon for people in politics is maybe one or two years, just about the same length of time there is before the next election. Their goal is always to survive the coming election. That means what is rational for the politicians looks irrational to everyone else, and I don’t see any reason to expect that to change. The purpose of a politician examining a problem is not to solve the problem but to find a way for someone else to get blamed for it.

  210.  Phil:  Quick answer:  don’t confuse fairness with arithmetic.  Your point is that the rich don’t pay enough, relative to their annual gains in wealth from the standpoint of fundamental fairness.  That is probably true.  My point is that rolling back the Reagan tax cuts and making the rich pay more won’t balance the budget — only reducing middle class [as defined] subsidies have a hope of doing that.  This does not exclude in any way the notion that the rich should pay more;
    I have previously acknowledged that if a wealthy person has sufficient capital, they only pay "income" tax to the extent they sell their holdings and realize a gain — the appreciation of the assets they do not sell do not, by definition, generate a taxable gain. Hence a "miser" who eats cornflakes and lives in a straw hut may become the richest man in America while paying no tax at all.
    But surely you can see that, unless confiscating untaxed capital and giving it to the government for free becomes the law [and let me hasten to point out that confiscating 50% of Previously Taxed capital is exactly what the estate tax does], it is middle class entitlements that must be reduced in order to balance the budget, because half of all Americans pay no tax at all and receive a host of benefits from money borrowed by the government to pay them.  This is not ideology; this is simple math.  That you may not like it doesn’t mean it’s not true.
    Face it; the root of the problem has nothing to do with American income inequality whatsover.  It lies in the systematic outsourcing of U.S. jobs and the abolition of import tariffs which U.S.laws were changed to permit over the last 40 years so that U.S. politicians could continue to provide all Americans with an outsized level of national income far above that of the billions of foreigners who work under appalling conditions at a fraction of what even poor Americans earn, or in many cases are given for free. I fail to understand why you apparently view this as an American birthright, or why the humanistic sentiments you reserve for America’s "99%" do not apply to these "huddled masses" as well. 
     America’s loss has been the gain of millions of very hard working people in Asia, Africa and Eastern Europe, and I’m not sure why, from the standpoint of fundamental fairness, you would not applaud rather than deride that fact.  And I do not believe it unpatriotic to do so; it is One World, in the end, and if we don’t make some effort to hang together, we will eventually hang separately.

  211. OK, it wasn’t a quick answer, sorry to be such a bore. 

  212. Lflan-
    Thanks, verrrry interesting ………….

  213. If anyone really cares about what drives the price of crude, here’s a link.  I like interactive stuff and I have nothing better to do at 1 am while I gear up for trading.  Something about an intimate knowledge of the things I trade makes me feel more confident in what I’m doing.
    Also.  Here’s a list of current news relating to oil.  For instance, if there’s a rebel attack…it’ll show up here.  I have plenty of more stuff but here’s a couple in case anyone is interested.  I’d post my trading lines but they’re usually within .15 cents of everyone else that trades crude so I haven’t really seen the point.  Enjoy.

  214. this 3am (actually today 0:30am) trade is insane when it works – but it looks so unreal and fake.
    They probably can run it to the Moon.
    But it’s too scary.
    Cashing out at 835.8 on /TF

  215. Good morning!  

    Gotta love that 3am trade!  This should be about the top of it as Italy has a bond auction coming up and the Dollar is testing 75.10, which is silly low but below 75.10 is a no trade for the bears and the 75 line is a bounce we’d want to play for.  They don’t want the Dolllar too low (I would think) as it might tank the 30-year auction and that sets mortgage prices for the week and the last thing they want is bad housing data (again, I would think as some people are trying to wreck the economy to score political points while others are trying to save it to keep their phony-baloney jobs).    

    Oil just touched our magic $98.50 line so a good short if we get back under as I doubt they get back to $99 but, if they do, then shorting at $99 would be fine with us.

    Gasoline hit $3.175 on inventories yesterday and made a better short than oil, now back to $3.1278 and nat gas is back to tracking copper at $4.388 with copper at $4.4033 – still running off the same bot, I guess…  Gold at $15,94 and silver at $39.25 so happy days are here again in the commodity pits. 

    In a very desperate attempt to get the Nikkei futures over the 10,000 mark, they Yen was spiked down from 78.50 to 79.59 at 1:40 am – an attack on the longs I guess.  It lasted for about 5 mins and they fall back to 79 but could’s hold it and now back to 78.90.

    Asia ended up kind of flat, with the Nikkei doing worst, down 0.2% and the BSE up 1% despite terrorist attacks.   Europe is off about half a point so far.

  216. Morning Phil,
    Dou you already have a plan for the USO puts that you recommend yesterday? Thanks.

  217. USO/Pentax – Sure, roll em up or DD or whatever if we open this high but don’t count your chickens at 5am.  

    Politics/Vic – Also, don’t forget that politics is just a job for a lot of these people.  Modern politics is all about personality and favor trading and nothing about competence so most of these guys, especially Congresspeople, live in constant fear of losing their jobs so they sell out for favors or cash or whatever they can get because they never know if they’ve even got 2 more years.  

  218. Phil, it’s alreay lunch time here, and the chicken I count is on my table… ;-) I guess you meant that we should wait an see.

  219. Fairness/ZZ – You fall into the trap of believing we have insurmountable debt problems when our government only collects 14% of the GDP in taxes vs 30% average in other developed nations.  And it’s not the poor who fail to carry their weight nor is it the money we give to the poor because THAT’S THE WHOLE IDEA OF REDISTRIBUTING WEALTH!  No, the problem is the people who make the most money pay the least taxes.  That plus our $1Tn a year military budget, which is the entire GDP of all but the World’s 10 largest countries and is 1/2 of the military spending on planet earth despite the fact that we have only 20% of the planet’s GDP (so that would be 5x more proportional spending on military by the US).   

    Even WITH the $1Tn military running government spending up to $3.4Tn, that’s still just 21.25% of our GDP so ALL you have to do is place a 25% transaction tax (VAT) on everything but food and then let the free market set prices and you won’t have to tax people anything at all, not even SS or Medicare.  I wouldn’t mind because I pay more than 25% tax now.  Poor people wouldn’t mind because they will keep getting that disproportionate government aid and they get to work without 12% of their paychecks confiscated for retirement programs that are never going to pay them anyway.  The only people who would mind are rich people and corporations who don’t pay anything like 25% taxes, especially all those businesses like GE, who have $150Bn in sales and pay ZERO taxes, let alone $37.5Bn we could be collecting from them.  

    Another great benefit is foreign corps would have to pay it too, including oil companies so that’s $875Bn additional dollars just from taxing our $3.5Tn worth of imports – if you want to sell to the US market, you pay the VAT (we pay it in Europe and other countries).  Who knows, perhaps we’d end up collecting over $4Tn and paying down our deficit – if only taxes were actually fair.  

    That’s a good link DDay, thanks. 

    OPEC boosts oil production by 530,00 barrels per day

    The 12-member Organisation of the Petroleum Exporting Countries’ (OPEC) pumped an average 29.57 million barrels per day (b/d) of crude oil in June, an increase of 530,000 barrels per day, market watchers have revealed.

    The boot in production was largely due to increases from Saudi Arabia, Kuwait and the United Arab Emirates (UAE), a Platts survey of OPEC and oil industry officials and analysts showed. In May, OPEC production was 29.04 million b/d.

    Despite the month-on-month increase, however, the June volume was lower than the 29.8 million b/d estimated for February, when the escalating unrest sweeping across North Africa and the Middle East was beginning to affect Libyan production. Increases totalling 760,000 b/d were partly offset by combined reductions of 230,000 b/d.

    Obama/Troy – Sounds to me like "Oh now brer Fox – PLEASE don’t throw me into that briar patch!"  

    75.37 – oil coming down nicely already (along with the markets).  

  220. Initially got stopped out and lost a quarter on CL.  Waited, reshorted and it looks like I’ll be able to make that back ++.  We’ll see.

  221. Thursday morning festival of links from Barry:

    • Bill Gross Warns Washington: Don’t mess with the debt ceiling (Washington Post)
    • Polls Show G.O.P.’s No-Tax Stance Is Outside Political Mainstream (NYT)
    • Is Facebook Worth $100 Billion? (WSJ)
    • A Marshall Plan for Greece? (Project Syndicate)
    • Creating an Infrastructure Bank for the Future (NYT)
    • Forbes editors appear to have been abducted:
    . . . -Does Anyone Still Remember Why We Have The Bush Tax Cuts? (Forbes Blog)
    . . . -The Rich Are Now Richer Than Before The 2008 Credit Meltdown (Forbes Blog)
    . . . -A Country in Denial About Taxes (Forbes Blog)
    • Financial Crisis Panel Commissioners Leaked Confidential Information To Lobbyists, Report Alleges (HuffPo)
    • Alex, I’ll take historical revisionism for $100: Bancroft Family Members Express Regrets at Selling WSJ to Murdoch (Pro Publica)
    • New Service Offers Music in Quantity, Not by Song (NYTsee also PLAY Is a Fantastic Free Music Streamer and Player for iPhone and Android (Life Hacker)

    • Engineering Oceans To Suck Up Carbon Has Eco Consequences (Fast Company) 


    I love that Forbes set – that is VERY interesting as they threw me off the site for being too liberal for their readers just last year.  The Bush Tax Cut article is great.  


    Imagine if the transfer of wealth had not been interrupted in 2008 – they would probably be at $50Tn now!

  222. Easy Money Makes the World Go Stop
    "Turns out we do have a fractional reserve banking system, but the fraction is greater than one. 3/2, if anyone’s counting. For every two dollars customers deposit, the bank keeps three at home."
    It’s not the deposits the banks are trying to cover, it’s the bad housing assets. They have a 3 smoke to 2 mirror ratio :)

  223. "I love that Forbes set – that is VERY interesting as they threw me off the site for being too liberal for their readers just last year.  The Bush Tax Cut article is great."
    Well to be fair to them, you’re so far left you’re missing oncoming traffic and hitting mailboxes.  But I like you’re trading acumen so I’ll just have to live with it.  We’ll discuss politics someday when I come to the city for lunch.

  224. JP MOrgan has foreclosure issues, this is from their earnings release  Noninterest expense was $5.6 billion, an increase of $1.4 billion, or 32%, from the prior year, driven by elevated foreclosure and default-related costs, including $1.0 billion for estimated costs of foreclosure-related matters.

  225. Matt/TNA drop – The Bernank comments about QE3 caused the drop just now

  226. Wow, all the fed speak is spooking the robots…the computers must track the word "default" as it is mentioned ever other sentence today!

  227. CNBC is doing a HORRRIBLE job covering the bernank speak today…anyone have a better feed online that doesn’t interupt during critical conversation???  Thxs