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Financial Friday – EU Stress Tests and US Debt Mess

$WTIC WEEKLYFirst, the good news:

We did it again at the NYMEX, calling the crooks out in yesterday’s morning post and followed up with my Alert to Members, which was posted over at Seeking Alpha and on our Facebook and Twitter pages but not on StockTwits (more on this debacle later) so those guys missed out on yet another Billion Dollar opportunity (which I predicted we would get on the 9th) as we once again called a huge move in oil with my 9:50 Alert to Members saying:  

Europe is down half a point and we are up half a point so something is bound to give.  We’re not quite getting to $99 in oil so we have to be patient and wait for a break below $98.50 to re-short the futures (/CL).  On USO puts, roll up or DD on Aug and I’ll be liking the TOMORROW $39 puts at .50 on the assumption we get a bit of a sell-off after the nat gas inventories at 10:30 (as they tend to hold up hope until then).  

At the time, we had 185,000 NYMEX contracts to work with so plenty for everyone and, as per our June 1st plan to break the NYMEX speculators by using their own crooked game against them (because God knows the government does nothing) this is a PSW trade idea we share with everybody.  And why not – they gang up together to screw the American people – it’s only fair if the American people return the favor by calling their bluff! 

We called their bluff right on schedule at the 10:30 Natural Gas inventory announcement and as you can see from this intraday chart of our beloved /CL Oil Futures, it was a slam dunk for our futures players as well as our option traders, who picked up 250% ($500 turns into $1,750) in just 4 hours!  That’s a nice day’s work, don’t you think?  

Even a (yawn!) stock trader could have done well as USO plunged from $38.70 to $37.20 (4%) right on our schedule but we were after bigger fish as those 185,000 NYMEX contracts took a $647,000,000 hit so plenty of profits on our side to share for all of our readers and THAT is how you punish the speculators – with the only thing they do care about in this World – Money!  We can stop the con game by playing the con game so congratulations and thanks to all the wild and crazy people who participated in this experiment in social engineering, something I like to call profit with a purpose!  

As David Fry notes in the above weekly oil chart – you cannot make this stuff up but, as we noted in yesterday’s post – CNBC makes stuff up all the time!  Their blatant misrepresentation of the facts should be a dream come true for a clever class action lawyer – if we can get Uncle Rupert on the ropes, why not focus on the next cog in the great misinformation machine and begin getting back to an actual free press in this country that’s dedicated to truth, justice and the American way (or is that Superman?).

I already sent out an Alert to Members at 3:58 this morning warning them NOT to short oil as we’re into the weekend now.  We went long yesterday off that $95 line in Member Chat with a bullish USO play so we’re happy to let the speculators pump it back up into the weekend and we’ll get ‘em again at the top.  Isn’t this fun?  We also had long trade ideas this morning on S&P Futures (/ES) over the 1,305 line (now 1,310, up $250 per contract so far) and the Dow Futures (/YM) over the 12,400 line (now 12,420, up $100 per contract so far) so we can afford to pick up coffee and bagels before the market opens (we don’t risk gains into 8:30 data!) and we’re waiting for that so we can make our IMAX trade (bullish at $28 with a complex spread).  Like the Army, at PSW, we do have more trade ideas before 6am than most newsletters do in a week!

The data we were most concerned about this morning was the Empire State Manufacturing Survey at 8:30 which SUCKED last month with SUCKED not being a strong enough word!  Franky, if this one heads lower, we are in DEEP TROUBLE.  On the bright side, last month was so terrible (-7.8) that a flat performance will spark a relief rally.  We also have CPI at 8:30 and our core PPI was up yesterday, sending gold to all-time highs AND we have Industrial Production and wages, which will highlight the plight of the American worker as they work more hours for less money – which is GOOD for Corporate America (and what else in life matters?).  Michigan Sentiment is at 9:55 and that may be an upside surprise depending on what oil was doing when they took the survey (we had that nice dip last month).  On the whole, Michigan Sentiment has been pretty bad though:  

8:30 Update:  CPI came in -0.2% on the headline but, like the PPI, up 0.3% on the core and that, my friends is INFLATION and inflation means you can kiss your QE3 goodbye unless the Fed is truly hell-bent on destroying the World (probably 60/40 odds on that).  You can tell this inflation is the evil kind of top-down inflation I have been warning about since QE1 as the Empire State Survey shows ANOTHER 3.76% decline so Manufacturing in the New York region down 11.55% in June and July – is this a bullish premise by even a stretch of Jim Cramer’s imagination?


Still, it’s options expiration day and ANYTHING can happen but our easy bullish premise is shot but we had a nice chance to reload on the spike down on the data and now we’ll have to see how high the pumpers can take us into the open.  With this data, we are much more likely to flip short if we have a good rally now unless Obama says something truly amazing at his 11am conference.  We also have the EU stress-test at about 11am EST (4pm London) and we’re thinking it’s not going to be pretty or they would have announced it before their markets closed, don’t you think?  

So we are now officially in take the bullish money and run mode with tight stops as we head into that 9:55 Consumer Confidence (or lack thereof) Survey but first, we get Industrial Production at 9:15 and we resort to the old axiom there that a scared worker is a productive worker so we should get another nice number out of that one before the potential bad news from the Consumer front.  

9:15 Update:  Oops, Industrial Production was up just 0.2% vs. 0.3% expected and Cap Utilization is off 0.2% as well!  It looks like that Empire Manufacturing Index is picking up on a nasty national trend.  We got very good earnings from GOOG and C but they don’t manufacture anything so let’s not get too excited about that so it’s back to cashy and cautious into the weekend and we’ll play the ball as it bounces next week!

Have a great weekend,

- Phil


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  1. Back to good ol’ US of A, away from the debt and budget problems of Europe. It will be refreshing to finally be watching politicians acting like adults! Oh wait…. 

  2. Oil lines:
    R3 – 102.61
    R2 – 100.74
    R1 – 98.26
    PP – 96.39
    S1 – 93.91
    S2 – 92.04
    S3 – 89.56 

  3. Phone makers await Apple vs. HTC ruling. The future of Android (GOOG) devices will be in focus today, when the International Trade Commission is due to make a preliminary ruling over accusations by Apple (AAPL) that HTC violated iPhone-related patents. The ruling will be the first in a dispute between Apple and a phone maker that uses Android, and may provide hints as to the outcomes of disputes Apple has with Samsung (SSNLF.PK) and Motorola (MMI). The results of the wrangling could be worth hundreds of millions of dollars a year in royalty payments.

  4. Looking at futures, apparently earnings trump all the other crappy data from this morning. Can’t see this holding up all day.

  5. GOOG morning!  

    Dollar is below 75.60 so we’re going up until it crosses back over but be very careful out there!  

    GOOG July $545 calls are $52.50 so no premium left and the Next week $550s are $48 and the move was to kill the $550s at the open ($50) and as soon as the $545s drop to $50 you can kill the trade and be done with it in the $25KP.  If you need a cover for margin, you can roll the next week $550s (now $48) to the Aug $620s (now $9.25) and roll the callers to the next week $600s (now $8.50) and play for that premium to expire instead.  

    We have so many GOOG plays (mostly bullish, thank goodness) that you need to specifically ask me about it if you want to look at an adjustment.

    Meanwhile,  the GOOG TODAY $580 puts at .50 are the way to go for fun speculation.  10 in the $25KP!  

  6.  IWM  traders / JRW
    Does anyone use IB – they only offer Stoch.Osc. in their charting package – is there a way to implement his system using this or do I need to get a separate charting package?

  7. Hi Phil,
    Would you TMAR on TBT Aug 32 short puts or do you think they are "on track"?

  8. SQQQ TODAY $23 calls have no premium at .90 – 10 of those in the $25KP with a stop at .75.

  9. PP for today.

  10. GOOG $580 puts done at $1.  

  11. IMAX up 3.6% this morning 

  12. 100% in 9 minutes, for the records books…thanks Phil

  13. Buying straight-up AAPL Calls, August ATM.  Lots of them.

  14.  anyone else see bid ask spreads just blow out – by 3 cents

  15.  flash crash – that was really strange – bid asks blew out and then we had a big drop

  16. TMAR/Morx – If I knew what that meant – Maybe.  

    Consumer Sentiment 63.8 – Massive Suckage!  No more longs!!!!  

  17. DCTH announces 5,000,000 share secondary (11% dilution)…..not yet priced. DCTH  -9.7% @ 5.30

  18.  guess the consumer sentiment numbers explain it – interesting to watch that market move.

  19. FAS Money / Phil –  We either have the 24 Put sold for 0.70 (now 0.57) or 1/2 the 25 Put sold for 0.90 (now 1.45). Should we cover the 24 Put and look to roll the 25?

  20. Still long ammo and Xanax.

  21. Congrats to the GOOG players – those $545s dropped to $44.50 on that dip, clutching victory from the jaws of defeat!  

    IMAX/Stock – Was it me or did someone else say something?  I still like them at $28.40, of course.  

    Thanks Asaenz!  That was fun, I think I should head off to the pool after that one and call it a day.  

    DCTH/Gmarts – That’s the entry we wanted!  2 Jan $5/9 bull call spread at $1, selling 2013 $5 puts for $2 is net free on the $8 spread and the worst case is you own 1x for net $5.  

    FAS Money/StJ – I want to hold out for EU stress tests – hopefully we get a pop on those if they pass.  If not – we’ll sell some calls.  Roll targets for either put is a full cover on the next week $24 puts, currently $1.  No call selling over the weekend UNLESS the stress test go bad.  

  22. Phil / Oil   I keep returning to the inevitability of a Ddip.  The Michigan #’s reflect this sentiment and consumers are still 70% of spending.  Any whiff of short term ‘austerity’ in this budget settlement will quickly push us over the (employment) cliff.  Rosie spelt out his reasons for Q1 2011 neg GNP this morning.  You said wait until Monday to short oil again, but boy this move up this am looks silly with the consumer running for the hills?

  23. Nice pair trade Gmarts!  8-)

    I still have a droppy feeling about GOOG but it’s such a dangerous animal to play with on earnings day.  They are not really affected by consumer sentiment but these are big profits and clearly the news is bad so maybe a fund will want to take the money and run so I still like those $580 puts at .60  but I’ll like the $585s (now $1.30) a lot more under $1 so patience at the moment and let the SQQQ trade work otherwise.  

  24. iflantheman/AAPL
    You really have to be expecting a blow out number on the 19th? They have had quite a run up to earnings. How much higher can they go in this environment and is a great earnings number already baked in the current price? Thank you.

  25. Phil / Tusca – I understand and agree with Tusca’s logic on the economy and how it should affect the markets, but how do we weigh the fact that bad economic news may mean QE3 (and perhaps sooner than later)?  That of course boosts the market.   Or is this just an intellectual rat hole I’m going down?

  26. TMAR = take money and run, silly.

  27. Double dip/Tusca – Rosie is bearish?!?  No way!  You are right on oil, may as well grab the 10 USO Aug $37 puts for .95 in the $25KP and we’re happy to roll it or DD if oil goes back up.  

  28. Hi Iflan — AAPL — you mention to buy ATM aug call no cover, are you slowly accumulate before earning speculate that usually price action go up before earning.  The price right now is near High 365 back in Feb.  near resistant…. question if should wait for pullback then accumulate. thx

  29. A TA charter’d dream….the 5, 20 and 50d MAs on the daily SPY chart are converging……which way is it goona go?  MACDaddy is pointing down, VIX is pointing up, and …… 

  30. Spiders trying to hammer out a hairy bottom…. like Pharm says, who knows could go either way.

  31. Phil
    Out of SQQQ Jul 11 23 Calls (TMAR). 30% in less than 30 minutes. Thanks!!

  32. Banks stress test / Phil – Some thoughts from Barry’s site on the value of these stress tests:

    The European Banking Authority will release the results of their stress tests of 91 banks at 12pm est. While the results will render a pass/fail grade, a 2nd and very necessary analysis of the data will take place after by the rest of us. I say this because again, the tests don’t assume any sovereign default, particularly from Greece, just as Greece is about to be forced into a default. The results will show all the holdings of sovereign paper that the banks own and then it will be left to analysts to slice and dice it to come to a more comprehensive conclusion on who needs money and who doesn’t. An Irish newspaper is already saying their banks have passed but they passed last time only to fail a few months later followed by another recap. Ahead of the results, the troubled debt in Europe are all trading poorly again with the Greek 2 yr note in particular at a new low. The lower House in Italy should pass their budget package today. 

    Any stress test not assuming any default (even a partial one) can’t be worth much! This looks to me like another opportunity to prop up this market to take it down later!

  33. Facebook might worth a lot less now!
    Not that they were worth a lot before except in the eyes of many foolish potential investors…

  34. what is popping the mkt now?

  35. Good Morning—looks like I missed a lot of excitement--will try to catch up

  36. I have updated my "SPY in world currency" chart. It still looks a lot smoother than the actual SPY in USD chart. Looks like we are going to retest this crucial support.
    Also I zoomed on 2011 and did a trend line comparison there:
    Further I have updated my SPY/VIX volume indicators. Surprisingly they are quite bullish now:
    Amazing GOOG plays Phil! I luckily could sell all my GOOG stocks in premarket at 600.

  37.  Phil,
    Assuming the debt ceiling is raised by $2Trillions. In your opinion what numbers will the Nasdaq and dow jones run upto.

  38. Frenchy, I had a really really tough night, so I am a lot stupider than usual.  where are we on next weeks FAS/money?  and when are stress tests released Phil is waiting for?  Odd, but that 4th bottle of wine seemed to be a fine idea last night…

  39. Obama Statement - "Even as we raise the debt ceiling, we solve the underlining problem of national debt"
    Wow, do people really believe this?  If lying was illegal…what percent of the goverment would NOT be in jail?

  40. TMAR/Morx – Ah, now I get it.  It’s options expiration day on a busy week – I’m burned out!  I always think TBT $32 puts are on track, even if TBT is at $30.  As long as you don’t mind rolling them out on a failure, unless they are up more than 50% with more than 2 weeks to go – we’d rather wait for the full 100%.  

    Rat hole/JC – I’m a lot more concerned about the debt BS.  Reps just came on TV and said no deal so that could tank the dollar BUT, then again, it might boost the dollar as we’re going to stop spending them and shut down the Government AND, if we default on our debts – we won’t owe anyone any money BUT that might make people panic into the Dollar – so there are many ways to totally tank the markets in absence of a debt deal.    

    At the open: Dow +0.29% to 12474. S&P +0.37% to 1314. Nasdaq +0.88% to 2787.
    Treasurys: 30-year -0.47%. 10-yr -0.1%. 5-yr -0.04%.
    Commodities: Crude +0.84% to $96.49. Gold -0.31% to $1584.30.
    Currencies: Euro -0.16% vs. dollar. Yen -0.08%. Pound -0.26%.

    10:00 AM On the hour: Dow +0.29%. 10-yr -0.01%. Euro -0.12% vs. dollar. Crude +1.38% to $97.01. Gold -0.28% to $1584.80. 

    June Consumer Price Index: -0.2% vs. +0.2% expected, +0.2% prior. Core CPI +0.3% vs. +0.2% expected, +0.3% prior.

    July Empire State Survey: Manufacturing -3.76 vs. +4.2 expected, -7.79 prior. Employment 1.11 vs. 10.2 prior. New orders -5.45vs. -3.61 prior. Prices 5.56 vs. 11.22 prior.

    June Industrial Production: +0.2% vs. +0.3% expected, -0.1% (revised) prior. Capacity utilization 76.7% vs. 76.9% expected, 76.7% prior. 

    July Reuters/UofM Consumer Sentiment: 63.8 preliminary – lowest since March 2009 -  vs. 72.5 expected and 71.5 in June. – That’s MARCH 2009, as in "when people were stocking up on beans and ammo in preparation for the end of the World!"  

    NY Fed’s future indexes rebound after a steep decline in June – signalling conditions should improve over the coming six months, but optimism remains well below levels observed earlier this year. Manufacturers were mixed when asked about plans to expand their labor pool and capital spending. 

    The NPD Group estimates U.S. sales of video game hardware and software fell 10% annually in June, to $1.03B. This may be evidence the top 3 video game consoles are showing their age, but it’s also perhaps further proof of the effect mobile and online gaming are having on traditional, console-related gaming.

    Citi’s Kate McShane is lowering her FQ2 EPS estimate for Best Buy (BBY) and reiterating her Sell rating, due to strong price pressure for flat-panel TVs, which account for about 25% of Best Buy’s sales. DisplaySearch recently noted weaker-than-expected demand for LCD TVs in North America and Western Europe

    Oil-and-gas takes the pole among premarket gainers following Petrohawk’s (HK +63%) $12.1B bid from BHP Billiton (BHP -1.6%) as itmoves deeper into the U.S. shale. The deal values HK at 50% higher than 30-day prices. LNG +6.2%CHK +5.6%FST +4.7%SD +4.2%XCO+3.8%EOG +3.7%HES +2.3%

    Shares in EU banks are flat after falling earlier as markets await the results of stress tests. Ten out of 91 banks are expected to havefallen short, while the results could cause market turbulence as investors scour them for disclosures of banks’ sovereign debt holdings. (previous)

    EU preview?  Europe’s banks remain insufficiently funded, the IMF saidyesterday, warning it’s "critically important to put in place and immediately publicize credible plans" to deal with failing banks. The results of stress tests on European banks are due out later today.

    Sources tell the that the Irish banks – including Bank of Ireland (IRE) and Allied Irish (AIB) – have passed the latest roundof stress tests "comfortably." Last year about this time, the Irish banks passed the 1st stress test, only to need billions in capital within weeks in order to stave off collapse. 

    AAA – "risk free" – debt issuance never went away after the GFC, it just moved from ABS to government debt. With bank regulation pushing investors into holding government paper, plus central bank buying, there has been plenty of demand for it. It’s another reason why the sovereign debt crisis is both painful and potentially far more damaging. Fascinating stuff. 

    With foreign investors increasingly nervous over the possibility of an August default, the U.S. Treasury has been waging a covert battleto calm investor fears. Foreigners now hold nearly half of all U.S. debt, up from 30% in 2001.

    Municipal bond defaults fell 60% Y/Y in the first half of 2011: 24 defaults totaling $746M vs. 60 for $2.29B in the first six months of last year, and 144 for $4.89 in the first half of 2009. Time seems to be running out on the credibility of Meredith Whitney, who predicted “hundreds of billions of dollars” of municipal defaults this year.

    Bubble, bubble, toil and trouble:  China FDI jumped 18.4% in H1, climbing to $60.9B as companies scrambled for access to the world’s fastest-growing major economy. "The market is large, the investment environment is sound and labor costs are still competitive," says a Commerce Ministry spokesman.

    Why are these 2 contradictory sounding?: Foreign investment in China slows according to a government report, but officials remain confident China will continue to receive more large-scale investments like Nestle’s (NSRGY.PK$1.7B purchase of Hsu Fu Chi. Investments from the U.S. dropped 22% for the first 6 months of the year, accounting for a significant portion of the downturn.

    McDonald’s (MCD) reacts to high inflation in China by lifting prices in what it calls a "structural price adjustment." The firm could face the wrath of China’ planning agency tasked with stabilizing prices, after Unilever (UN) was hit with a $308K penalty for merely commenting on an intended price increase.

    Dollar booster: Westpac reverses its call for higher rates in Australia, now saying it expects a series of rate cuts to commence by 2011′s end. "Interest rates are too high … given the state of the non-mining sectors and a downward adjustment is required to avert a damaging round of contraction." The aussie dives 1% on the news, now buying $1.0652.

    Congressman Jim Cooper slams the House Oversight Committee over its partisan treatment of CFPB’s Elizabeth Warren during hearings on the role of the new financial watchdog set to launch next week. Members of the committee grilled Warren over the bureau’s power to ban products it finds abusive to consumers. 

    In a tersely-worded statement, Credit Suisse (CS) says it’s the target of a DoJ investigation over hidden Swiss accounts for wealthy U.S. clients. Credit Suisse had previously disclosed that it received several subpoenas. 

    Citigroup (C): Q2 EPS of $1.09 beats by $0.13. Revenue of $20.6B (-7% Y/Y, +5% Q/Q). Shares +2.6% premarket. (PR)

    Our banks are fine!  First Tennessee National (FHN): Q2 EPS of $0.16 beats by $0.05. Revenue of $361.63M (-15% Y/Y). (

  41. Phil


    Our banks are fine!  First Tennessee National (FHN): Q2 EPS of $0.16 beats by $0.05. Revenue of $361.63M (-15% Y/Y). (PR)

    Genuine Parts (GPC): Q2 EPS of $0.96 beats by $0.07. Revenue of $3.2B (+11.9% Y/Y). Shares +1.6% premarket. (PR)

    Mattel (MAT): Q2 EPS of $0.23 beats by $0.07. Revenue of $1.16B (+14.1% Y/Y). (PR

    Ha ha!  OpenTable (OPEN) shares have fallen 9.2% in the last two days, after Benchmark lowered its FQ2 revenue estimates on the belief that OpenTable’s core reservations business is facing more competition, and that its deals service is struggling. Recent data from Alexa and Google Trends has raised the possibility of slowing growth.

    Google (GOOG) is now heavily undervalued, Piper Jaffray says. Yesterday’s strong Q2 will force investors to credit Google with at least 20% revenue growth next year – the hurdle for a growth stock. Firm notes Google has made "a concerted effort to focus on improving ad quality and click through," and boosts price target to $750 from $673.

    So much love suddenly:  Google’s (GOOG) scorching hot Q2 earnings show that its stock is a bargain hiding in plain sight, Heard On The Street writes. Even with an 11.5% surge in the opening minutes today, Google’s shares, when net cash of $107/share is excluded, are trading at only ~16x expected 2011 earnings, and are still below where they started the year. 

    But not here (Ha ha, part 2):  Evidence of widespread discontent over Netflix’s (NFLX) price hike continues to grow: 54% of voters in a poll from The Street claim they’ll cancel their subscriptions, outpacing even the high figuresreported in polls from Business Insider and Geekwire. Coinstar’s (CSTR) Redbox is increasingly seen as a beneficiary of Netflix’s move.

    AAPL a day time: In a sign that rumors of a pending revamp to Apple’s (AAPL) MacBook Air line may be true, Amazon is discounting its entire lineup of current Air models. Deutsche Bank has estimated sales of the suddenly-popular Air could reach 1.5M units/quarter

    Another competitor bites the dust:  Sony Ericsson (SNEERIC) reports shipments fell to 7.6M units in Q2, a 31% Y/Y fall and 6% Q/Q fall, and the company swung to a net loss of €50M from a net profit of €12M a year earlier. Calling the quarter "lost," CEO Bert Nordberg says supply-chain constraints resulting from Japan’s earthquake hit the company very hard.

    Nomura believes tablets running Android and Windows 8 will challenge the iPad’s dominance in 2012 and 2013, respectively. However, it thinks the challenge will primarily come from PC manufacturers rather than phone vendors such as HTC (HTCCF.PK), Motorola Mobility (MMI), and Samsung (SSNLF.PK), who are beginning to view tablets as "margin-dilutive."


  42. FAS Money / Lapper – Tough night here as well as I was traveling back from France! That 9 hour flight also seemed like a good idea!
    Right now, we are still short either the 24 (up) or 1/2 25 puts (down). Phil wants to wait for the release of the stress test from the European banks (I believe at 12:00 PM) to plan next week’s move. 

  43. Wow, I need a squelch knob on my trading desk.  Everything between IWM 82.82 and 82.22ish is pure noise.

  44. In the end…govt will make some "Modest modifications", without "raising taxes"…to keep the ponzi scheme active.  The middle class will lose $190B/year healthcare write-off, $80B/year mortgage write-off, and $15B/year in property tax write-off….almost $300B/year savings…that could start a third war with such free money!  RIP 10%-90% wage slaving taxpayers…

  45. Good morning, 


    IWM    81.82,  82.26, 82.49,  82.81,  83.07,  83.34,  83.59,  83.88,  84.14,  84.49,  84.87,  and  85.58

    Max pain on SPY is 132, so I think we go up a tad !!  I’m long !!

  46. Oil is just indestructible.
    No matter how bad it fails on inventories.
    Next day at runs up.

  47. dclark/gucci…..AAPL……I’ve been accumulating calls for weeks, and selling weeklies against for extra $.   I sense continued runup to Tuesday and a likely pop with earnings.   I’ll likely scale back exposure next week before earnings are reported.  I won’t usually risk any more than 3% portfolio on an earnings play.  I think the odds are in favor of a post earnings pop.     AAPL should be trading around 370+ right now.  

  48. Phil, 
    I have the C diagonal 20 short July 41 C’s against 20 long Oct 42′s (net .85). An order to sell the longs for 1.90 never triggered…But nonetheless still profitable trade.
    To continue selling premium.  Would you keep the 42′s and sell the Aug 41′s or 42′s (if I get .70 for the 42′s I could have the Oct longs almost as a free play)… Which gets me to the important part-- do you like those 42′s for Oct? 

  49. Phil/Debt Vote
    What a feakin joke…….they talk about going in debt by trillions like they’re referring to penny’s.
    Better pile in long… know the idiots on CNBC and the rest of the puppets are going to trumpet this as some great historical event that is great for the economy…..probably even find a reason to report that it will create jobs…….BUY>>>BUY>>>BUY……..

  50. Obama – "I think about this as a layer cake"  Me too…the destruction of a civilization is totally yummy!  Pass the forks, break out the milk…lets get this party rolling!
    Obama – "The American people are sold"  "80% of American people support a balanced approach"  I totally agree, wage slaves have sold their souls as they attempt to balance their lifestyles.
    "to make sure the govt living within its means and making responsible choices"…
    "we simply need to make these tough choices"
    "and here is the good news, it turns out we don’t have to do anything radical to solve this problem"
    "every commission that is out there has said the same thing"
    "lets least advert armagedon"
    "I always have hope, don’t you remember my campaign?"

  51. JR – aside from the max pain number I don’t see anything compelling either way at the moment, do you?  Looks like a typical opex day which usually means a good beach day.

  52. Microsoft has snatched up the domains and Apparently MSFT doesn’t usually buy pairs of domain names, so make what you will of it…

  53. Damn, still an hour before EU test results.  

    You’re welcome Champ – Good exit!  

    Prop and Drop/StJ – Yep, I imagine that’s the move but possible US default is still on the table and there’s no balance sheet that can hide from that.  Obama making nice noises those and that is, perversely, lifting the Euro and pushing the Dollar down at the moment but nothing matters until 12, when we should get the defining move for the day.  

    Facebook/StJ – Now MSFT is making one too – it would be insane to invest in them, about as dumb as buying myspace (Ha ha Rupert!).  

    Thanks Pentax and congrats on the perfect exit on GOOG – even if they go up again, just saving the stress of the drop is worth it:

    Debt/Rehat – Raising debt limits by themselves won’t boost the market.  That just means it’s business as usual for the government and the only "positive" there is that they won’t be laying off 8M people to save $400Bn a year in spending but no one believes that will happen.  Even as I write this, Obama is saying there’s no way he will back a plan that hurts "ordinary folks" but has no sacrifice from the top 1% and our Corporate Masters.  

    Debt/Troy – Well we sure aren’t going to solve crap if we don’t raise the debt ceiling and our borrowing costs go up as it costs us $150Bn per percent increase in borrowing costs so moving from a 2% average now to 4% would drop us $300Bn further in the hole and moving to 6%, like Spain and Italy, would be $750Bn ADDITIONAL interest costs per year – that’s certainly no way to "fix" the deficit.  If we have to borrow at over 5% – where would the additional $50Bn a month come from that we would need just to pay interest?  The Banksters don’t care, they would love to buy US debt at 15% because, if we default – who can blame them?  Meanwhile, they are sitting on $1.6Tn they borrowed from the Fed at 0.25% just waiting for an opportunity to pounce, which is being engineered by their pet politicians yet Obama is taking flack for attempting to stand up to them.  Plus ca change, plus ca reste pareil….  

    75.40 on the Dollar is likely to be bouncy and that can knock us down some more.  Those GOOG $585s are down to .40 – VERY likely to expire worthless but what fun if GOOG drops back to $580.  Obviously, half out if you are lucky enough to get a double but a fun craps roll for $80 (you need to to get 1/2 off).  

    House/Kramer – They are voting on a bill that Obama and the Senate already doesn’t back – ridiculous.  

    Obama: "Let’s at least avert Armageddon" – Oh that’s what our policy has come down to?  

    Oil/Lol – They always want to jam it higher into the weekend to screw the drivers.  Gasoline $3.14 and an excellent short into the weekend as there is no demand catalyst at all.  

    Silver at $39.  AGQ at $205 and you can pick up the Aug $225/215 bear put spread for $6 and sell the Sept $145 puts for $5.50 for net .50 on the $10 spread and that’s expecting silver to pull back from $40 but not totally crash back below $32. 

    C/Amatta – You are in the Oct $42s then for net .85 naked as C is still under $40 and the short calls will expire worthless.  The Oct $42s are $1.55 so how about taking 1/2 off the table to lock in a free trade?  Then you can let it ride into the EU bank tests (maybe we get a pop) and, after we see what’s what, perhaps sell the Aug $40s for $1.30 and use that money to roll your remaining 10 Oct $42s to the Dec $40s (now $3.05).  That way, you have all your money off the table and, although you have less longs, you have twice as long to sell calls for income and, if C goes up over $40, you have cash to add more long calls no problem.  

    Obama done and said nothing.  There is no deal and they are not even close.  I can’t believe people aren’t selling like crazy.  

    Dow volume at 11:30 is 104M – most volume all week and it’s pretty bullish considering all the bad news so far.  

  54. @Kwan
    That would give MSFT a huge chunk of the gaming market.

  55. SGEN/Pharmboy,  
    Is now the time to buy Sgen?

  56. Obama – "The American people are sold" — That about sums it up!

  57. phil,
    i bought GLD Aug 151 put at $2.32 now $1.56. do think i should wait or add long to hedge or buy AGQ as you just recommended? gold price will not drop as long as people are still worried about euro debt crisis or QE3 or more US debt correct? Thanks,

  58. Rainman
    I did not know I was for sale.   Was I posted on Craigslist?

  59. 11:00 AM On the hour: Dow -0.05%. 10-yr +0.21%. Euro -0.19% vs. dollar. Crude +1.37% to $97.00. Gold +0.01% to $1589.40. 

    In his just-concluded press conference, Pres. Obama pressed for “the biggest deal possible” but advocated at least getting a “down payment” on cutting deficits soon. He continued to call for revenue increases: "The notion that we would be doing that and not asking anything from the wealthiest among us, or not closing corporate loopholes, that doesn’t seem like a serious plan." - Yet that’s the plan the Reps are voting on next week.

    The Fed picks up post-QE2 with its ongoing open market operations (where it reinvests proceeds from agency debt and agency MBS), buying $2.88B in Treasurys maturing 2015-2016, of $13.478B offered by dealers. The shorter end of the curve gets a lift: 10-year yield -0.02 to 2.93%; five-year -0.05 to 1.45%. But 30-year: +0.03 to 4.28%

    Drawing up a worst-case scenario, Deutsche Bank believes equities around the world (as measured by the MSCI World Index) could lose 35% of their value if Europe’s debt problems degenerate into "a full-blown financial crisis" similar to 2008. The firm recommends investors buy liquid puts on equities for crash protection

    On the other hand:  A rally in real estate stocks (IYR +0.8%) suggests investors see more signs of recovery for housing than reports on prices would suggest, Mark Hulbert writes. New default filings are declining; since a foreclosure begins with a default filing, the logic goes, such a decline must eventually translate into a lasting drop in the number of foreclosures.

    This might spread:  Swiss banks may initially pay $4.9B-$9.8B as part of a settlement regarding tax evasion by German clients. UBS and Credit Suisse (CS) are among the firms likely to be affected – both by the settlement, and the potential for foreign clients to withdraw assets as a result.

    Jefferies upgrades the oil service sector today, saying the offshore drilling cycle is finally starting to show signs of "moving beyond a simple demand recovery and closer to one featuring real, albeit modest, pricing power." The firm raises Atwood Oceanics (ATW +3.8%), Noble (NE+2.8%) and Transocean (RIG +3.1%) to buy, and reiterates Rowan (RDC+1%) and Ensco (ESV +2.1%) as its top picks.

    Our old favorite junior coal:  Patriot Coal (PCX +5.3%) pops after BMO upgrades the stockon improving macro conditions for coal producers. The firm says metallurgical coal prices should rise due to three factors: strong China-led demand, supply disruptions and cost-push inflation.

    comScore believes U.S. online video "viewing sessions" rose to 6.2B in June, with nearly 37% of these sessions happening on Google’s (GOOG) sites (primarily YouTube). Meanwhile, Hulu generated nearly 19% of all video ad views in spite of accounting for only 2.5% of all viewing sessions, underscoring the site’s value to potential acquirers.

    "No – I LOVE Google more!!!"  Piper Jaffray is far from the only firm praising Google (GOOG+12.1%) following a stellar Q2JPMorgan gushes over surging international growth, and calls Google "a more focused company" under Larry Page; and Barclays belives the success of non-core businesses is bringing back Google’s reputation as a growth stock. (PR) (CC transcript)

    Funny ad:  


  60. ss / Beach day

    Well, I’m looking at it (the coast), but unfortunately, I’m dealing with some computer issues this morning and I want them fixed for the last hour and a half !!

  61. Phil/debt – Don’t you see the damage is done already, the world knows our situation, and will ultimately take advantage of it in the future (think BRIC countries…especially China).  You state that Greece is selling their soul and should default on the bankers to solve their issues more quickly, but you think we should keep the American fantasy rolling?  The quickest way to a long term solution is default.  Yes it would be hell for 3-5 years, but I’d rather start the healing process today than wait until we have a real, physical "non-financial" crisis (peak oil, airborne avian/swine retrovirus, etc)…because at some point in the future we run the risk of the historical human crisis solution…global war.

  62. Oh gee, was there an important propaganda release ?

  63. Must be something strange today even my favorite CMG is down today no fire today

  64. June’s sum of U.S. equity fund outflows, index fund inflows highest since ‘09
    "While there has been a continuing trend of money flowing into passively managed funds from actively managed funds, the amount of disparity has analysts worried."
    There’s where the consumer spending is coming from!

  65.  GLD/Ethan – Adding AGQ won’t fix your gold as they’ll likely move together.  If the dollar fails $75.40 on the EU tests (because the Pound and Euro fly up in relief), then you are screwed and maybe want to turn it into a bull put spread (selling higher puts). 

    8 banks failed – one less than expected.  Happy days are here as the Dollar is diving!  It’s all BS – I would not chase it.  16 banks (out of 90)  "barely" passed and they’re not even counting a Greek default.  So 20% of the banks need help and who knows how many if Greece goes under – once you get to 30 banks – doesn’t that mean the average European has a 33% chance of being wiped out by a Greek default, which is in process?  How the Hell can this be viewed as bullish?   

    The higher they go, the more I want to short!  

    Yen back below 79 (too strong) so someone not trusting these results.  Euro at $1.417, Pound $1.615, Dollar 75.30 (look for 75.25 to hold).  Oil $97.43, gasoline $3.1465 (I like the /RB short off the $3.15 line with very tight stops!), Nat gas $4.50 (also a good short below that line on /NG).  Gold is $1,589 but if EU banks are "safe" then gold should sell off, right?  Silver $38.90 and I prefer the AGQ trade above to selling silver.   

  66. JRW/Propaganda Release - why yes, only 8 tiny banks failed the EuroBankTrash test.  Oh, oh, oh…and they were only tiny banks, so its all good…full speed ahead…LOL!

  67.  I bought the FAS $24 Put back for 0.40 just now, as it seemed a little risky to hold.  $1.82 gain for the week, after commission!  Thanks for the great calls Phil.

  68. Troy,

    Watch that support trend line from yesterday at 3:00 !!

  69. Wow, I had to turn off CNBC before my brain got washed!  Bill Gross on Bloomie – not too impressed but you can’t trust that guy to tell you what time it is.  Dollar back at 75.40 already, that’s a critical line to watch. 

    Debt/Troy – Of course there’s damage done already.  This whole thing is about people like Gross who first lend us $15Tn and then do what they can to push a government policy aimed at paying off our debts at all costs.   It’s not an American fantasy, it’s a bond-holder fantasy that needs to end – they lent too much money to a country that can’t pay them back.  Saying "go ahead and rob your employees and customers" is not a rational business repayment plan but that’s the one being pushed by the top 1% on the Government.  Default would be great and, since it’s going to happen anyway (outside of hyperinflation, which is a default of sorts anyway) then ‘twer best done quickly.  They should have let things go in 2008, we’d look like Iceland by now (best performing economy this year).

    75.50 – Go dollar go!  

    FAS/Palotay – Nice job, congrats!  

  70. O.K. if we can’t break 82.81 on this try we are going down !!

  71. JRW - agree, thanks!  Made some decent coin twice off your 82.81 line…the first off the 10:00am headfake took a few months off my lifespan…=)  The only line on my screen that is not one of yours is yesterday’s EOD support (82.27).  Right now I’m playing it safe to retain my profits…although probably a mistake, I always hate risking early Friday profits as it will piss me off over the weekend if I loose it…HA!

  72. JR – I think iwm open of 82.61 is the major line today, as is often the case with the open price.  I view it as a large magnet.  Until IWM forcefully breaks the magnetic field it can often spring right back to it

  73. Still think GOOG drops before the EOD?

  74. Ss- watch that ascending triangle that has formed from 1pm yesterday to now…could be building for a breakout past 82.81 resistance, we shall know in less than 10min!

  75. For my 2 cents
    Make or break is 82.60 ish.

  76. 2/3 short now !!

  77. $25KP Update:  

    • LULU pinning $60 – we’ll let it run down as they still want .40 for the $60 calls but offering .10 is a good idea.  We’re out of the longs too (now $4.60) – that trade went great! 
    • DIA bull call spread is dead.  
    • GLL Aug $22 calls (1/2 of spread), now .70, can be rolled down to $20 calls for $1.10 ($1,100 for 10).  
    • QQQ July $57 calls hopefully were out at a dime as GOOG went the wrong way on us (that was our premise).  
    • TNA short $88 calls will expire worthless
    • GOOG gone this morning.  

    And Wheeeeeee!  

    GOOG/Jabob – Not looking good now but whole market getting weak so big maybe.  

    Italy/Rain – Yep, that calmed things down for about 10 minutes.

  78. Motley Fool Stock Advisor recommends TIBX and BCPC today

  79. Listening to CNBC is always backwards. INTL’s problem is their new technology is only of interest to super gamers that really don’t know facts. Unlocking processors speed is nothing new, you can do it to locked processors. For greater speed the chip must be inlarged to disapate the heat. Even liquid cooling is limited by case size. How much liquid nitrogen can you afford to dump on your motherboard. Demand is down because computer companies bought the new chips in the first quarter.

  80. FTR/Phil – any reason not to love these guys at this price? i see a number of 2013 $7.50 straddles have been transacted.. looks like buy/writes.. giving a $5.51 entry for a stock with a 75 cent divended (13.6% yield)..

  81. I missed the GLL move what is the other leg of the spread?

  82. EU Banks / Phil – I think that it’s probably even worse than we think:
    If you look at the graphs, there are already over 30 banks below the 6% mark! They accepted banks still raising capital to make up for it even though the capital has not been raised yet. Unreal! 

  83. Debt/Phil – " Default would be great and, since it’s going to happen anyway (outside of hyperinflation, which is a default of sorts anyway) then ‘twer best done quickly."  so… does this mean you are with the republicans then, and are saying NO to raising the debt ceiling? on another note, observing congress in action does give one a nostalgic yearning for the good ol’ days of serious behind the shed hidings!

  84. Is the market open today?--levels look the same as 20 hours ago at a quick glance

  85. Phil/Motley Fool Hidden Gems – do you have a subscription to this Small cap publication?  Andy Cross & Seth Jayson have made some excellent picks in the past, I’m thinking of signing up again.  I have an old April 2009 copy on my desk right now…they were pushing a 3% portfolio buy into Chipolte, stating "Chipolte spends plenty of enchiladas to open new stores each year, which it then recoups in just a few years at returns on investment north of 40%. It runs a lean operation, and I expect to see continued solid growth rates for the next few years".  They seem to do a great job meeting the CEOs, visiting the companies, etc.  Your thoughts?

  86.  Wow, going from CNBC to Bloomberg is like going from Kindergarten to College – suddenly people are having intelligent discussions and not even looking at the momentary market jitters.  

    FTR/Scott – They are a long-time favorite of ours.   That’s a very good entry. 

    GLL/Doro – It was a bull call spread with the $23s – the naked $20 call is fine if you are daring.  

    Banks/StJ – Looks like 20 problem banks to me..  Also, they mark to fantasy over there too and I wonder how much Chinese land is on their books as an asset?  

    Just saying no/Scott – Not really, I’m for a selective default of debt.  If you want to pass a law, you pass a law walling off our debt payments that THOSE are the first thing to fail (to the tune of over $1Tn a year principal and interest).  That would close our budget gap (in a nasty way) and we could then sit down with our creditors and work out a payment system we CAN afford to service over 30 years ($500Bn a year an no interest) and THEN we find a way to cut $500Bn from the budget by raising taxes (newspeak for closing ridiculous loopholes) and cutting military spending.

    20 hours/Strether – Just the normal pin action.  Sometimes we jerk around but we usually flatline to wherever Thursday drifts into by Friday’s close.  

    Dollar ditched hard back to 75.40 – that’s one way to break us out of a rut!  Don’t chase a run based on Dollar bashing as people will probably wise up over the weekend.  

    Hidden Gems/Troy – I used to subscribe and I liked them for ideas but a monthly pick isn’t my style.  

  87. Troy
    To add to Phil’s above, they were off in the second half of 2009.

  88.  Hello, I’m a new member. just joined a few minutes ago.
    Thoughts on GOOG from here through end-of-day?

  89. Welcome gsank!

  90. I am reflecting on the concept that I can’t stay tuned to Bloomberg because the rational truth has nothing to do with the movement of the markets…  

    12:00 PM On the hour: Dow +0.28%. 10-yr +0.11%. Euro +0.12% vs. dollar. Crude +1.69% to $97.31. Gold -0.01% to $1589.10. 

    01:00 PM On the hour: Dow +0.02%. 10-yr +0.16%. Euro +0.02% vs. dollar. Crude +1.03% to $96.68. Gold +0.04% to $1590.00.

    All "fixed":  Europe stress tests: Roughly as predicted (or leaked), eight of the 91 banks that went through the tests failed, more or less where they were expected: five of Spain’s savings banks, two in Greece and one in Austria. The combined worst-case capital shortfall was €2.5B, vs. last year’s €3.5B.

    Now it’s 24 marginal banks:  More from Europe’s banking stress tests: Aside from eight that flunked, another 16 (seven more in Spain) "narrowly" passed (5-6% capital ratio). The tests were almost preordained for a "strict" reputation – but if the big three Irish banks (which scrambled for capital after last year’s passing grades) made the grade "comfortably," just how tough were these exams? Euro now +0.09% against dollar; AIB +6.1%IRE+17.2%

    As S&P sends shivers up the spine of U.S. debt-holders, theGuardian drills down to find the nations most at risk. China leads the list at $1.1T of course, but only added a modest 3.6% during the tracking period. Nations upping their Treasury holdings the most: U.K. +252%, Canada +144%, Thailand +70%, Chile +55%.

    The New York Fed’s Empire State Manufacturing Survey (.pdf) reports 26% of firms say business worsened for them, contributing to the Empire State Index staying in negative territory. Future indexes suggest a positive outlook, but remain below the relatively high levels recorded earlier this year.

    Joining the country’s Senate, the lower house of Italy’s parliament has reportedly approved the country’s €47B austerity package314-280. Italy paid the highest rate in years in bond auctions yesterday. (previously

    Asia’s growing appetite for pizza and cheeseburgers has been a boon for American cheese exporters. But Kraft (KFT) and Costco (COST) aren’t pleased, as soaring cheese prices has led to higher commodity costs. Global food costs in general have doubled over the last 6 years, according to a UN index.

    Three lunchtime reads:
    1) The crude solution
    2) Return of the Gold Standard as world order unravels
    3) Housing: Fannie-backwards


    Data summary


    Click heading to sort table. Download this data

    April, 2011
    Jan, 2011
    June, 2010
    % change, June 2010 to April 2011
    China, Mainland 1,152 1,155 1,112 3.6
    Japan 907 886 800 13.4
    United Kingdom 333 278 94 252.4
    Oil Exporters 222 216 210 5.4
    All Other 199 194 199 -0.1
    Brazil 207 198 164 26.3
    Carib Bnkng Ctrs 138 166 179 -22.8
    Hong Kong 122

  91. gsankaran
    Our first rule is sell into the inital excitement, two is when in doubt sell half!

  92. Phil/Bloomberg news - suuuure you like the "talk", and not the model quality reporters!  It would seem they only hire 20 and 30 year old female reporters…maybe 1 over 40 out of their 50 some reporters.

  93. still spellcheck would be nice!

  94.  "I am reflecting on the concept that I can’t stay tuned to Bloomberg because the rational truth has nothing to do with the movement of the markets…  "
    Clever realization Phil!!

  95.  Phil,
    I’m digging out of a hole I created for myself on LULU.   Would you recommend a trade similar to the $25k p for August?   The August $60s are $3.40, so same price but more time.  Thx

  96. Thoughts on selling next week’s FAS $24 calls for 0.56?

  97.  Or should we sell the $23′s for 1.07 because we expect further downside?

  98. "I am reflecting on the concept that I can’t stay tuned to Bloomberg because the rational truth has nothing to do with the movement of the markets… "

    Does that mean you are now a technician and don’t believe the fundamentals? That’s how I view the two stations – CNBC=Technical+MoMo+Sheeple, Bloomberg=Fundamentals+WTF,  Bloomberg+CNBC < 1 :)

  99. JRW
    Hope computer issues are solved. What is your take now? Thanks!

  100. Pretty tame OpEx so far, where’s the violence?

  101. Phil – HK – yeah, still in it, thanks.

    Score 1 for me.

    My next trick will be to blow up all the stupid momo stocks.

  102. Lots of squeezy patterns for you TA people!  

    Welcome GS!  The fun play on GOOG is to play for a sell-off but they are more likely to flatline into the close to burn most of the remaining contract holders.  As GOOG has weekly options, I like the July 22nd $570 puts at $1.30 as a fun play for a pullback and you can pair that with the $585/590 bull call spread at $3.50 so a move up gets you out even while a move down should give you a nice profit on the downside.  Don’t forget, GOOG was $526 yesterday so a 50% retrace takes them back to $560 ($10 on those puts).  

    Babes/Troy – But the young girls on Bloomberg know more about the markets than almost anyone on CNBC.  

    Spellcheck/Shadow – Use Chrome, it’s built in. 

    Realization/Lzega – Well I did know, which is why I torture myself with CNBC in the first place but flipping to Bloomberg during the day really hits you.  In non-market hours, I only watch Bloomie.  

    LULU/RDN – I think it’s kind of freaky that the Dec calls held their value so well – kind of irrational and I wouldn’t pay that much to buy them (which is why we’re getting out).  What do you actually have?  Damn, now I have that song in my head again!  8-)

    FAS/Palotay – I would be pulling money out of EU banks and into US.  C was solid, regionals should be solid – I’m for going naked over weekend on the long side.  

    Technician/Rain – That is why I need to keep tabs on CNBC, to monitor the sheeple and I don’t need Bloomberg to explain the fundies to me but I sure do prefer it to the prattle on CNBC.  Fox is unwatchable on the other hand, last I tuned into them, they were interviewing people at a bar – there’s causual (think Daily Show interviews) and then there is stupid…

    Violence/Rain – The only violence done on OpEx these days is the violence done to the people who buy premium into the last day!  

    That’s a trick I’d like to see, Cap! 

  103. Where’s the algos, dark pools, HFT’s to provide liquidity in the market.  Can they not match any bids to offers.

  104. Cap—on HK--just sold out of the short puts releasing some margin—had closed out the bcs earlier in the year--should have waited--oh well—but Tnx for the great  trade

  105. Phil
    I promise to try Crome this weekend on a secondary system, but I hate ggoooogle!

  106. shadow,

    Still 2/3 short !!

  107. I hope GS will follow the GOOG play meaning buy the next week 570 put and sell the 585 call and buy the 590 call just German translation

  108. AAPL going nowhere the calm before the storm?

  109. yodi
    German? How long have you lived in Mexico?

  110. That’s more like it :) .

  111. JRW – three of my indicators are screaming short and we pierced the triangle…although OPEX has me concerned about true direction!

  112. shadowfax
    TOOOO long 20 years

  113. Troy,

    Trade what you see, not what you believe !!

  114. IWM sitting on the support trendline from yesterday’s and today’s lows.

  115. And – ditch the dollar, goose the markets – wash, rinse, repeat…  

    Algos/SS – There’s no liquidity when we’re dropping, just roaches trapped in an inflated with a very small hole to escape from.  

    GOOG/Shadow – It’s way faster than IE was for me. 

    Wow, C got smacked down.  

    Guy being interviewed makes a good point – the fact that 8 banks failed this very lame test is kind of alarming.  

  116. incidentaly, that same slope matches today’s tops exactly.

  117. Phil, what’s your thoughts on FAS?  Do you still think it has much further to go down?  It’s been taking a nice beating in the last week.

  118. Wow, C got smacked down. My question what was wrong with C this morning???

  119.  GOOG / Phil / yodi
    I’ll definitely try the July 22 GOOG play. am sitting on TODAY-GOOG 600 Put. looks like this is going to drop further.
    Chrome has been proven to be much faster than IE because it’s not as bloated.

  120. FAS Money / Phil – What do you suggest for the Puts – the 24 are now 0.85 (sold for 0.70) and the 25 (1/2 sold for 0.90) are now 1.87. Next week’s 24 are around 1.30 now although the 23 have more premium at 0.80 or so. 

  121. FAS Money – I have to assume that the 24 Puts were covered this morning when they were around 0.40 this morning. Palotay played it perfectly… 

  122. JRW/Trade what you see – great point…I believe I’m using too many indicators.  I’m out at 34.52…MACD concerning to me

  123. a stick today Phil? GOOG?

  124. Conclusion on C’s drop 1.2 % exposure to Euro Banks same with JPM .8% not much but that is why they down

  125.  Well Phil, it’s me that needs the help. What I have is a big-ass loss on a LULU  vertical I rolled twice- it was like putting your last quarter into a parking meter and having it still say expired.  There’s no saving the position now, but LULU at $60 is 45% above its June low and 17% above its April high.  This is for a company that sells black synthetic pants for $108 – yes they are great quality and have that nifty keyholder in the waistband, but if I’m NIKE, I’m gonna start putting that keyholder in my $60 dollar pants right after I fire the product manager who hasn’t already done so.  Obviously I need to reflect on the serious mistakes I made on this one, but as the coach said, "we didn’t lose, we just ran out of time."   

  126. Troy – if you draw the trendline I talked about you can see that we broke below it.  It will often come back up to it from the underside to test it again (the ole underside kiss).  If it can’t break back in it there is more downside to come.  However, no one ever went broke taking a profit

  127. Is this a flush? Monday up?

  128. 82.26 that is trouble!

  129. Phil / Monday   What do you think will drive mkts Monday?  To hold EDZ into the weekend?

  130. JR – how low you thinking?  I will take some off if we get to 82.06.

  131. ss / 82.06

    I will be ready, but wait for a signal !!

    Or 82.26 breaking up !!

  132. 2/3 out with 45 cents !!

  133. Good call SS. 

    FAS/Rustle – No, I think $14.50 on XLF is a bottom and $15 is a pretty good spot to count on so, when we’re below, I’m not too thrilled to cover – especially on something that can burn you as badly as FAS. 

    C/Yodi – I don’t know about that one.  Earnings were much better than expected.  Maybe some ugly stuff on their books?  

    GOOG/GS – Don’t forget though that buying Premium is nothing more than gambling and it’s exactly what we teach people not to do so trades like that are what I call a "craps roll" – in other words, you shouldn’t play with more money than you would bet on a single roll of the dice at a casino (comfortably!).

    You said it SS – Wheeeee! 

    FAS Money/StJ – Now we need to play it safer and go for the next week $23 puts (full cover) as it’s about even from the 1/2 sale (and of course we still have the .90 we collected).  Yes on the $24 puts, we discussed those.  

    Now if only GOOG would drop $30 I would be so happy!  

    GOOG/Jabob – I love GOOG, they should go higher BUT, there is the off chance they could pull back 50% into the close, maybe 1 in 10 but that 1/10 pays a lot more than 10:1 so it’s fun to play.  

    No 2:30 stick.  Dow volume 139M – we’ve had whole days with less.  

    LULU/Rdn – I agree with your fundies but the split was a good idea for them and it’s a very tough play, perhaps there are better places to make back money like the FAS Money spread, which has been a nice little cash machine so far.  Sometimes you have to look at a stock and consider you don’t have a good read on it or you have too much emotion in it to trade it well so it’s best to move on to something you can be more dispassionate about . 

    Flush/Shadow – Monday?  We have 90 minutes left today!  

    EDZ/Tusca – For sure I’d hold that but next week it’s all about earnings, we have plenty next week.  Could go either way, cashy and flexible is key.  

  134. All out of TZA; tick, order flow etc

  135. UNG finally on a roll

  136. JRW
    Excellent for you, I’m still realing with rule #2 at 12:15

  137. Phil/Stj--just to be clear--we are going short the july 23 p full cover in Fas Money?

  138. FAS Money / Savi – Yes, selling 10 23 Puts (July 23). Buying back the 5 25 Puts for 1.72 or so. About an even roll.  

  139. JRW/SS – congrats on the calls…my MCAD histogram/momentum "prop job" alarm went off slightly at 12:15…still tweaking it, as the same chart was screaming go long at 2:33, but it just "whispered" at 12:15.  Left 20 cents on the table…grrrr… 

  140. Phil
    how long do you think the japanese will tolerate the Yen this low.  thank you

  141. Maybe i should have said this high. 

  142. FAS Money – I’ll try to post a recap this weekend on how this has gone since we started. We started with a $4.80 long strangle as a hedge and some like Palotay collected 30% of that selling premium this week alone. This trade started about 4 weeks ago, so a good time to do a recap.

  143. Phil / Deutche Bank article     Scary read.  Do you think the ECB and Ben will start massive, pre-emptive, QE3 before a global sovereign debt crisis actually breaks out, crushing mkts. Or, will they dither until it’s too late to salvage mkts?

  144. Good to see that nothing happened all day….been in meetings.


    Please, Cap, make CMG come down to 260.  Thanks.


    ARIA – all time highs.

    AMAG, TRGT, BPAX, DEPO, PLX, CRIS, CERS all looking fine.

    SGEN – let’s wait to see Monday.   Aug $17.5 Ps will be the ones to jump on.  

  145. Nice timing JRW! 

    FAS/Savi – Yes, my plan is selling full cover July 22nd $23 puts, now .70. 

    02:00 PM On the hour: Dow -0.13%. 10-yr +0.31%. Euro +0.01% vs. dollar. Crude +1.35% to $96.98. Gold +0.14% to $1591.60.

    Allied Irish Bank (AIB +22%) and Bank of Ireland (IRE +38%) are soaring in the wake of the European stress tests. The report confirms the banks exceed their capital ratio thresholds, showing a significant capital surplus for each in both the base and stress scenarios.

    Citigroup (C -1.5%) shares turn negative, reversing an early 3% gain, as investors find the bank’s earnings beat less exciting upon closer inspection. Revenues rose 5% Q/Q but fell 7% Y/Y, and expenses jumped 5% Q/Q and 7% Y/Y. Credit losses fell 35% Y/Y, but net income at its main business fell 2%. Big banks slide: JPM -1.2%BAC -0.6%WFC -0.2%

    Add FBR Capital’s Craig Berger to those who think a weak PC market is going to ding Intel (INTC), which releases FQ2 results on Wednesday. Berger believes Intel’s FQ3 forecast could fall below consensus, and is worried about weak notebook build data; potential share losses to AMD and Qualcomm (QCOM); and the impact of tablets on PC demand.

    Delta (DAL -1.8%) plans to reduce flights in 24 underperforming cities, the firm announced. Replacement airlines will be selected by the DOT in some markets, while Delta will conditionally continue to operate service in others. (PR

    Prostate cancer screens could improve with gene technology, as firms seek to find an alternative to the industry standard PSA blood test. Two companies set to capitalize on the $740M market for a better test are Myriad Genetics (MYGN +1.3%) and Genomic Health (GHDX+0.3%), says InvestorPlace.

    FU Momos!  Now "neutral" is good for a pop?  Shares of OpenTable (OPEN +4.2%) right the ship after losing 9.2% in two days, spurred on by a Neutral rating from Janney.

    Amazon’s (AMZN +0.5%battle to allow California residents a referendum on paying online sales taxes heats up again. Two Democrats set the stage for a pitched legal battle in state court, by declaring the vote invalid. Amazon still has an ace up its sleeve with a U.S. Supreme Court decision restricting states’ rights to collect sales tax.

    Google’s (GOOG +12.8%blowout quarter sparks this question:Has Facebook has missed its IPO window? Google+ is proving a worthy competitor, quickly amassing 10M users and revealing Facebook flaws. Barry Ritholtz thinks the window remains open, but Google+ may have shaved "some billions" off the IPO price – tens of billions if Google+ growth accelerates.

  146. BUY program!

  147. Wasn’t this guy on CNBC back then ?

  148. If it is Friday the evening news needs to report green!

  149. FAS/Phil
    Believing that XLF is bottom at 14.50, wrote the FAS 20 Puts for Aug and got .69.  Hopefully will get a bounce up in next week or towards end of month and can cover at half that or not have to cover at all.  Then will look to write calls if it does get a pop.

  150. Phil – You made a comment about the premium of gsankaran’s GOOG play, but I thought he said he was just following up on your trade idea (GOOG 22 July).  Did I miss something?  Sorry if I’m bit slow on this one. 

  151. JRW
    Another crystal ball guy.

  152. WTF
    Sell program,sellsignal, and buy program!

  153. jcaesar
    As Phil said on GOOG it is a crap game buying options is in general for suckers!!! sometimes however it will work !

  154. yodi
    Hope so I have USO puts!

  155. Shadow- speaking of crystal ball…I’d love the crystal ball of the trader who bought 17,900 TNA at 15:20…only to see it go up 0.30 in 30 seconds. 

  156. Not much time left, but I might buy off 82.81 if we get there !!   ( I did say max pain was SPY 132 )

  157. shadowfax
    Always take it with a pinch of salt!!!! welcome to the casino

  158. shadow, aren’t those 1306.5 and 1298 ish levels are pretty tough right now?

  159. Pharm/ARIA – holding stock @ $8.80, covered with July $9 call. Let it called away or roll to Jan $12 for even?

  160. nicha – let it go and sell some Aug $12 P.

  161. shadowfax
    You see you should have stuck with TNA nice weekend D

  162. Yen/Z4 – I think they’ve given up on 80 and are now defending 79.  Nikkei stuck below 10,000 is not a good thing for them and the Dow being 25% higher than the Nikkei is also crazy – something has to snap…

    DB/Tusca – If the EU is involved, the dithering is mandatory.  Also, Ben doesn’t want to do QE3 without a crisis to point to.   

    Yes Pharm, very dull…

    CNBC/JRW – There’s no such thing as a track record.  That’s why TV and Radio are such good gigs.  Doesn’t matter if you are right or wrong or how much you blew it last time – as long as they know your name….  

    38 minutes for GOOG to drop $27 for me.  Not looking likely….

    Dollar back under 75.50 is boosting everyone.  

    FAS/Rustle – That’s a good sale.  Hard to imagine us going that far down and rollable anyway.  

    GOOG/JC – Just because it was my idea doesn’t mean it isn’t dangerous!  He is new so I wanted to make sure he knew that. 

    Wow!  Who forgot to remind me to play the stick? 8-)

    This is just getting silly now – I wonder how far they will go?


  163. ARIA – New entry on them is the $10/15 Jan12 BCS, selling the 10 Ps for a net $1 debit.

  164. GOOG is popping 600!

  165. If you missed the GOOG trade, or are not day trading TNA/TZA, this would be a very boring day! I’m in the boring day camp. Have a great day everyone!

  166. Ok, all clear on GOOG and premium.  Just wanted to make sure I wasn’t missing something.

  167. yodi    
    I have some TNA with a sell at 82 or hold. I am usually wrong on over anything but it’s a small position.

  168. shadowfax
    Don’t worry it will still heat up 20 min to go

  169. Notice how we went down on very heavy volume but we went up on two massive spikes – one at 2:45 and on at 3:05 and the rest was just suckers being reeled in to follow the move who got sold right back into.  

    I’m still liking SQQQ, Aug $22/23 bull call spread is .55 now and you can sell the $21 puts for .50 for net .05 on the $1 spread.  

    LOL – CNBC is surprised.  Bill says "Hey, look at that, a rally in the last 20 minutes!"  It’s only surprising when there isn’t one…

    You too Jbur!  

    TNA/Shadow – 82 does look like a good spot to short but so scary after they flew up from 80.  

  170. any thoughts for monday or next week?
    I am trying to close the income trader call credit spread and was not able to to get .30.
    wondering what monday will bring.  I kinda think it will be up.

  171. Most of you missed the GOOG pop.  How many will miss the AAPL pop?   :)

  172. Iflan – congrats on the AAPL play.  I grabbed a little money from it today.  Thanks.

  173. lflantheman
    AAPL mostly holding longs and short puts what more do wish for ??

  174. yodi.  Perfect.   Can’t wait for Monday!

  175. Monday’s notable earning reports:
    Before the open –  HAL
    After the close – IBM, MOS, WYNN
    Any thoughts Phil?

  176. Earnings surprises – IBM has beaten by a couple of percent the last 5 times, WYNN has beaten 4 out 5 by large amounts and MOS is a mixed bag! 

  177. I hate this market… What a f$cking joke…. Have a good weekend all! :)

  178. Too funny.  AH SPY 132.  Saw that this morning JRW.  Thought no way they can do that.  YES THEY CAN!

  179. Today’s stick was not parabolic like last day.  Has feeling of very reluctant move. I’d guess It’s juts because of expiration.

  180. Next week/Willie – It all depends on how good people thing the EU stress tests were.  I think this rally into the close looks very desperate and I don’t think we have a reason to open up on Monday but, then again, never underestimate the excitement that can be generated by the EU being "fixed."  

    Earnings/StJ – I think all those earnings should be good and, apparently, so do the people buying into the close 

    Damn!  And a super-spike into the close too – relentless.  I can’t believe that wasn’t a flush but what can you do – the shorts were wrecked today and are continuing to be wrecked in the futures with the Qs hitting $58 and TNA punched over $82 (RUT 828).  Didn’t quite get us back to 12,500 on the Dow and we’re still red on all of our 2.5% levels and the NYSE still couldn’t get back over the Must Hold but – hey – that was some rally, right?  MADNESS! 

    Have a great weekend, more nonsense next week – I’m sure!

    - Phil

  181.  do options really continue to trade for 15 mins after the close? what about pricing? are they based more or less on stock price bid/ask after-hours?

  182. We’re getting bigger moves up after hours than we had during the day!  That’s good because that puts on a show for Asia and gets them to buy and then the EU comes in and buys and then we open higher on Monday and then the Boyz can sell all the crap they bought today at higher prices before they pull the rug out – THAT’s my prediction for next week!  

    Dow volume 215M at the end with the dollar at 75.42 and oil at $97.40.  

    TNA now $83.  

    Options/GS – Some do – most of the index ones.  The spreads get wide and the volume is thin but I love the next week (7/22) QQQ $58 puts at .70 to play off this 27 point move in the Nas today.   Of course we were bullish yesterday so we’re protecting gains – these are very risky as downside bets.  

  183.  Thanks, Phil.

  184.                            Well, no EOD play for me; 3% for the day as I had partial positions, but 28% for the week !!

    Have a great weekend all !! 

  185. Question:
    I have shares of VXX, covered with short calls strike $23.00 expiring today.  At 4:00, VXX was somewhere around 23.11.  But it went down to 22.99 after 4:00.  Do my short calls expire worthless or not?
    BTW, I found VXX not a good hedge.  But that’s a different topic for another day.

  186. BTW, regarding my question at 4:18, I won’t know the answer, because I rolled the short calls to same strike next week.

  187. cwan, we write 100 times, that VXX only good for shorting. If you use search, I think you find smth.

  188. Holy $moke JRW, that’s some good shootin!

  189. Phil / Monday prediction    Then my EDZ position might become painful.  I need Papendreo’s resignation over the weekend.

  190. CMG- Phil, looking for some suggestions on handling a couple of naked short calls (Aug 310′s) which were roll ups from July short strangle plays. My concern is with earnings coming up next week we could get a ridiculous pop ala GOOG. So, I really don’t want to roll them out to Dec/Jan if I can avoid it but I don’t want to get completely buried nor do I want to miss a correction on a potential miss/dissappointment. Any suggestions on how to play this position through earnings?

  191. Today’s levels.

  192.  Greetings, earthlings.  Had to take a real stress test of my own today, docs concluded that I’m still alive.  Then I got on a waiting room computer and immediately sold my Goog position for one of the biggest single gains ever.  Embarassing, really — rather than being a product of  clever and intricate strategy, I stumbled into it in last six minutes yesterday cuz I needed a balancing position.
    Portfolio up 4.3% on Goog spike [and Phil's UNG recommendation], a one-day record, proving once again that it’s better to be lucky than to be smart.  Especially if you’re not too smart.   It almost covered the butcher’s bill on my wife’s NYC shopping spree, so thanks again, Phil

  193. Phil, 
    I have a close situation as pstas above with WYNN on earnings Monday. Sold 2 Aug 150 Calls (net $5.00 now $16)… Looking at their earnings surprises, I see that last time was a monstrous beat and they went up "only" roughly 7%. So that would put them at around 174 (hopefully unlikely that they beat that badly this time) or around 150 down if they miss. 
    Was thinking either selling 2 170 calls 2 150 puts for $8.50. If they beat and go up to $170 the $150′s will be $24 ($8 higher than they are as premium will be gone after earnings) hopefully like last earnings they retreat from there (if we are expecting market also to pull back from these levels in next month that would be expected and so the $170′s would be "only" $4 in the money) and I’d have to roll the 150′s out to December 165′s looks like. Hopefully with all said and done keep a a good portion, or best case all of the $8.50 from from the 170′s plus the putters. And use it towards the roll of the 150′s. If they go down, I am golden. Down to 132 or so. 
    Other idea I had was to sell the 160 Puts for $7.00 to give me that cushion on the short calls (almost the $8 I expect them to go up on a 7% rise). If they head down my short calls offset more than 1 for 1 the fall. 

  194. Pahurik, RE VXX:
    Yeah, I learned the lesson the hard way.  I read about VXX on this board.  But I didn’t listen.  I now have some shares.  I am selling calls aggressively to drive down the costs so that I can break even.

  195. lol, good stuff zeroxzero.  I had a dr visit today, too.  A little nip tuck on the family jewels and they are ‘safely’ off the market.  Whew!

  196. General question when you are setting trailing stops are you setting them to Mark, Last , or Bid?

  197. Phil/Futures platform - Have you tried the TT Trader futures program at Etrade?  They said it will be integrated in 6 months…although that is what I was told a year ago.  Llast time I tried it two years ago, it was unstable and had a quirky interface.  Your thoughts on the best futures trading platform?

  198. Way to go ZeroxZero! But how was your stress test? I hope it was better than the EU banks! Congrats on your trades!

  199. matt1966:
    Strange music, cold hands, and another guy touching my junk making casual conversation! You brought up bad memories from 10 years ago!

  200. cwan120
    I bought that piece of junk (VXX) about a year ago and still haven’t found a way to get rid of it. I figure I will just hold it forever until I can get out even. If nothing else it is a reminder of how far I have come! Thank you Phil.

  201. doro,  how you set your trailing stop depends on what you are trading.  If you are using a liquid option such as USO with a .01 spread then I set the TS to trigger from the Last highest price to sell at Market when it hits my trail.  At Market you may only lose a penny but you’re assured to get out.  If that lost penny gives you heartburn then just set your trailing stop closer by a penny.  My TS is usually 5-10 cents.  If I have 100 contracts or more I use .04 & .09 cents because that penny matters to me.  Anything less I use .05 or .10.

  202.  dclark:  Thank’s for asking, stress test went well — nurse said my results put me at 23 years old on her chart, I am rather more than double that age.  I responded, "my wife will be glad to hear that" and she smiled back "I suspect she already knows."  It would be nice to think so.

  203.  Platinum:  I thought this interesting:
    "Is it a precious or industrial metal? That is the question many metals traders are trying to answer regarding Platinum. While Gold it trading near record highs vs. the US Dollar and at a record high vs. the Euro, Platinum is still trading nearly $600 off its all-time high, despite supplies being rather tight. In addition, it appears that auto production in Japan is resuming much quicker than had been anticipated, which should boost the demand… It appears traders are more focused on the sluggish jobs picture here in the US….This view has kept Platinum prices in check, as slowing economic growth could hurt industrial demand. Longer-term, there are some concerns about Platinum output out of South Africa, which is the world’s largest Platinum mining country. Though production rose to 4.6 million ounces in 2010, the country has faced labor disputes that have the potential to halt production….It appears that Gold’s role of a "safe haven" or even an alternative "currency" has kept a bid under the yellow metal, whereas Platinum has suffered from its more industrial rather than precious metal role. This has kept the spread differential near the $200 Platinum premium level for most of 2011. There have been times when Gold prices have traded at a premium to Platinum in the past few decades, but that has been a short-term event."

  204. At the close: Dow +0.35% to 12480. S&P +0.56% to 1316. Nasdaq +0.98% to 2790.
    Treasurys: 30-year +0.15%. 10-yr +0.34%. 5-yr +0.19%.
    Commodities: Crude +1.76% to $97.37. Gold +0.23% to $1593.80.
    Currencies: Euro +0.02% vs. dollar. Yen +0.08%. Pound -0.13%.

    Market recap: M&A activity (III) and solid earnings reports (I,II) provided support for a stock market that could’ve been battered by bad news from the impasse in debt ceiling talks, more threats from bond raters, waning consumer sentiment and weak economic reports (III). Gold tallied another new high, and crude oil finished over $97. NYSE gainers led losers three to two.

    "The debt ceiling negotiations are setting a dangerous precedent," James Galbraith says. The U.S. government is becoming a place of blackmail where politicians strongarm one another to push their ideologies: "It needs to be recognized that this is not something you tinker with [and] that it is inappropriate to call into question the obligations" of the U.S. government. 

    No one should be surprised by the "extremism and irresponsibility" exhibited among Republicans during the debt ceiling talks, according to Paul Krugman. There has been no price to pay for the GOP’s "tax-cut fanaticism," or "to show any kind of responsibility, or even rationality… If you’re surprised, that means that you were part of the problem."

    The U.S. economy is teetering "one small shock away" from going back into recession, David Rosenberg warns, but apparently itwon’t come from a default; a deal failure would drive market rates down because of "deflationary implications from the massive fiscal squeeze that would ensue," and if not, "rest assured that the Fed would step in aggressively."

    S&P is threatening to put numerous financial firms on negative credit watch in tandem with a downgrade of the U.S. government’s credit rating, should the latter default. The list of firms includes Fannie Mae, Freddie Mac, AAA-rated insurers, fixed-income funds, ETFs, and hedge funds, among others.

    Moody’s is downgrading Portugal’s 7 largest banks, even though all passed the EU’s stress tests. Interestingly enough, Moody’s cites its own downgrade of the Portuguese government last week as a key reason for today’s action, claiming the prior move "implies a weakened ability of the Portuguese government to support its banking system." 

    Many analysts expected as many as 20 banks to fail Europe’s stress tests. That only eight failed reflects the fact that banks scrambled to raise new funds ahead of the tests, but also that the tests used some benign assumptions. They may have underestimated worst-case unemployment in countries such as Spain, and didn’t look at what would happen if Greece or Portugal default. 

    Consumers may care about food and gas prices, but the bond market pays little heed, according to Cullen Roche. While Roche found an 83% correlation between between 10-year Treasury yields and core CPI data since 1990, he found only a 52% correlation between 10-year yields and headline CPI data, which includes food and energy costs.

    Central bankers remain too transfixed by 2% inflation targets, a Reuters column argues. While they dumped traditional banking traditions in expanding their balance sheets by trillions, they steadfastly resist any suggestion moderate inflation of 3% or 4% is sustainable. 

    Bond raters have been vocal about the ramifications of a U.S. debt default, but bond investors barely notice; 10-year Treasurys still yield ~2.9%, and short-term debt hardly pays any interest. Dave Kansas sees two possible explanations: the markets aren’t buying the D.C. theatrics, or a default would be a net non-event with sanity quickly restored after Aug. 2. - How about "or they crash the market at bond auctions to scare people into them"?  This market has gone straight back up since they dumped those 30-year notes Thursday at 1pm.  

    Investors who hold taxable bond mutual funds or ETFs should take a close look at their holdings to understand how they may be affected by a potential downgrade of U.S. government debt, S&P analysts write. Funds with more exposure to longer-term bonds figure to suffer the most in the event of a downgrade, S&P notes.

    Felix Salmon’s take on "the most important chart in the world right now": It wasn’t greed and speculation that sparked the financial crisis, but "an excess of overcaution" marked by a surge in demand for AAA-rated bonds – dangerous "precisely because they’re considered risk-free. They breed complacency and regulatory arbitrage" which lead to excessive leverage, "the cause of all big crises."

    Freakonomics dissects the pro-environment consumer, and finds a propensity to signal a green commitment by buying the more hybrid-looking car or placing solar panels on the front of the house – even if the back receives more sun. Along those lines, a recent study found a 3.5% premium for solar panels in towns with more college grads and Prius hybrids.

    From Barry, his succinct summation of week’s events:  


    1) Three very successful Treasury auctions with longer term maturities in particular drawing buyers, reflecting no concern of not getting interest payments
    2) Initial Claims fall to just above 400k, lowest since April
    3) Headline PPI and CPI moderate on decline in energy prices
    4) China’s Q2 GDP, Industrial Production and Retail Sales all surprise to upside, soft landing!?


    1) June Retail Sales mediocre
    2) Core PPI and CPI surprise to upside, makes monetary policy that much more difficult
    3) Trade Deficit jumps to highest since Oct ’08, trims Q2 GDP by up to .4%
    4) Refi’s fall to 10 week low, low interest rates losing its influence
    5) Bernanke whips market around with QE3 talk followed by ‘not now’
    6) UoM confidence drops sharply to lowest since Mar ’09
    7) IP less than expected, continued drag from auto’s
    8) NFIB small biz index falls to lowest since Sept ’10
    9) Debt of Italy, Spain, Greece, Ireland and Portugal continue lower with yields jumping and CDS much wider, Greece moving closer to being forced into a default (would actually be good long term)
    10) China CPI rises 6.4% y/o/y, most since June ’08.

  205.  Large accounts need to reduce positions in risky assets if they feel prices are about to role over, these accounts require prices to stay up or hold a trading range so they can sell into it. In short they are willing to pump up prices in the short term to latter sell into it, this is the Wyckoff distribution phase.

    You guessed it the public is not a great benefactor of distribution phase. They are the patsy required to buy stock at this time.

    Distribution is defined as: 

    Source: Wyckoff Terms

    Distribution area is where the Supply overcomes Demand and stops the upward move and eventually begins the downward move. Distribution refers to the elimination of a long investment or speculative position and often involves establishing a speculative short position by professional interests in anticipation of a decline of price. In the distribution area the professional investors or speculators who had previously had bought stock, sell there stock to the public. The public buys and it generally buys because of good news of various sorts. Good news on the company, its product, the economy or any news which will entice untrained people to rationalize there buying decision. The best news of all is the advancing of the price of a stock. Often the reason that untrained people buy is that they do not want to miss out on the anticipated profits they think there are going to get as the stock continues to move up. Or they may buy because the stock has reacted a few points from the top and they think they are getting a bargain. After having sold there long stock professionals have no reason to support the stock on reactions and so they cancel there bits under the market, they may not only cancel the bids but they may establish short positions in anticipation of a large decline in price. Distribution is usually accomplished in a relatively SHORT TIME, Whereas accumulation takes MUCH LONGER, sometimes over many years. MAJOR distribution occurs in only a few weeks or perhaps a few months very rarely over a several year period. Distribution is usually characterized by wide price movements and heavy volume and GREAT activity.

    The chart below shows that volume has been larger on sell offs than rally’s. If the Wyckoff composite man expected higher prices in the immediate future then why would he be selling stocks now. At the moment the  professionals wish the market to hold a range to sell into, so far this is being provided and the professional fund managers are very happy that this remains so. (see video below)

    Click for popup. 
    SP500 distribution


  207. Obviously wise words:

    The US may be on the verge of making among the biggest and least- necessary financial mistakes in world history.

    -Martin Wolf,

    Will they be ignored . . . ? 

  208. Zeroxzero
    Those were awesome results! What do you attribute to those results? I am 48 and a bit of a fitness nut, but I don’t think I would score that well. And I most certainly don’t think my wife would buy that chart that said I was half my age!…….but that’s just me! 8^)

    Does this mean we can short the market every time they have a significant bond auction until we are fixed:

    How about “or they crash the market at bond auctions to scare people into them”?  This market has gone straight back up since they dumped those 30-year notes Thursday at 1pm.  

  209. CMG- Phil, looking for some suggestions on handling a couple of naked short calls (Aug 310′s) which were roll ups from July short strangle plays. My concern is with earnings coming up next week we could get a ridiculous pop ala GOOG. So, I really don’t want to roll them out to Dec/Jan if I can avoid it but I don’t want to get completely buried nor do I want to miss a correction on a potential miss/dissappointment. Any suggestions on how to play this position through earnings?

  210. Good morning! 

    VXX/Kwan – I believe that the pricing is determined the next day so likely the very last thing you see but, of course, check with your broker.  As noted by others, VXX is a terrible thing to play to the upside but very good to bet down (when it’s high, of course).

    EDZ/Tusca – You will note that it held up well all day, right until the end and FXI actually went down into our close (but then up in the after hours).  That close was the biggest load of BS I have seen in a very long time, by the way – a HUGE effort was put into spiking the indexes up but oil didn’t break $97.50 and copper finished lower ($4.39) than it had been earlier in the day and the Nikkei futures didn’t respond and the Dollar went down to 75.42 without a real corresponding move in the Euro ($1.415), Pound ($1.613) or the Yen (79.21) and, in fact, the dollar was much lower (75.3) at noon.  So the move at the end of the day on no news at all made no sense unless, perhaps, someone was flushing the shorts ahead of a big move down OR someone knows something spectacular is coming this weekend but, if that were the case, then copper and oil should have gone up 

    The Dollar has support at 75 from the 50 dma and was rejected by the 200 dma this week at 76.93 (topping out ahead of our 10-year auction by coincidence, I’m sure).  Both the 200 dma and the 50 dma are now rising while the 50 dma for theEuro is turning down pretty sharply (future death cross?) but supported, so far, by a flattening 200 dma at $1.391.   The Pound has a similar issue with the impending death dross a little more obvious there so it’s really only the Yen holding the Dollar down - AND THEY DON’T WANT TO!  Last time the Yen was this high was after the quake in March (repatriation talk) and the G20 had an emergency meeting to take it down around the 18th so we’ll see what happens next week but, as I said yesterday – the Dow should not be 25% higher than the Nikkei.  

    CMG/Pstas – At $23, the Aug $310s have $9 in premium still.  The game is to sell premium so what would you do if CMG popped 20% to $380?  You would owe $70 to the caller but the current Jan $320s (on the money) are $35 so we can assume you can do a 2x roll to the Jan $380s if CMG pops to $380.  That’s probably the worst-case and, if you can live with that – then why blow off the premium now?  Also, if you are very worried, you can buy the Jan $340/370 bull call spread for $10 and that pays you $20 if CMG pops so high you have to do a 2x roll but the next delta is just .14 so a $20 drop in CMG should cost you about $3 so $20 worth of upside protection for about $3 is not a bad trade-off.  CMG is not GOOG, nor are they YUM, whose TERRIBLE US sales were offset by Asia growth.  CMG is all American and was under investigation by the Department of Labor last quarter and had to replace over 1,000 illegal workers – it’s very hard for me to imagine they will justify a p/e of 54 with the stock up 100% from last July (and they sold off after those earnings) but only projected to earn 15% more than they did last Q2.  We’ll find out Tuesday but I’m in the down 10% camp, not the up 20% one…

    By the way, if you can’t comfortably live with the "worst case" rolls – then you shouldn’t be selling naked calls in the first place!  It’s the same as a short put – NEVER sell a naked call in a stock you don’t REALLY want to be short on for the long-term.  

    Congrats on passing your stress test ZZ!  You are very welcome, glad it was such a good week for you.  

    WYNN/Amatta – Yeah, those guys are annoying!  There was an article in Bloomberg that Macau casino revenue may rise 42% this month that was kind of misinterpreted because it’s based on the addition of new casinos, not because WYNN will get 42% more business but there is a lot of internal growth.  Last Q, WYNN reported 46.6% more revenues in Macau and beat estimates by a mile, reporting $1.38 per share but Vegas has gotten worse, Macau is diluted by new casinos and ONLY up 42%, not 46.6% from last year.  Analysts are averaging 99 cents for the Q2 estimate, which is still probably low but they are already up 33% from last Q so anything less than a big beat is going to disappoint people at $162.62.  

    You already sold 2 Aug $150s for $5 so pretty screwed there at the moment at $16 but you can roll them up to 2x the $170s (now $9.35) to put $1.35 each more in your pocket and shove them up to big premium.  If you want to cover, let’s assume WYNN misses or disappoints but nothing terrible and they fall back to the 50 dma at $145 (200 dma is $130) – then you can sell the Sept $150 puts for $5.60 as long as you don’t mind rolling those along if WYNN gets a big pullback (Jan $125 puts are $5.50).  

    The problem you have (and Pstas too) is you set up and earnings play and then you lose you nerve heading into earnings and start betting against yourself – so you are certain to lose one side or the other, right?  Don’t make earnings plays you are not willing to ride out through earnings and never make any short call (or put) play that you are not willing to DD at least twice on.  As you sold two, I think you are learning and I would just do the roll up to 4 of the short $170 puts and make them prove they can get to $180 before you go betting against yourself on the next adjustment.  You cover ideas are fine – I’m just saying you haven’t given your analysis (which I agree with) a chance to play out before playing it like you’ve already lost.  

    This, by the way, is why I MUCH prefer ratio backspreads – at least you have a buffer!  You would think that GOOG play in the $25KP would have been a disaster but not at all because we had an even spread there and sold our long calls first and took a non-greedy exit on the drop (which was fortunate as they turned back up quickly).   That’s another key thing – when you get burned on your premise and you have a chance to get out even – YOU TAKE IT!  It’s no longer the trade you signed up for so stop trying to make it work!  

    Trailing/Doro – Last.  If no one is actually selling, then it’s not very realistic.  Of course, our trailing stops are, whenever possible – mental stops.  In other words, we don’t let the system automatically sell something just because there is a quick spike down or up – we set a stop and make a decision as it’s reached.  With a lot of brokers, when you set a stop it’s visible as an order and the bots will attack it, just to trigger your panic sale – and then they go right back to where they were before.  I’ll be demonstrating how to play with bots on the futures in Vegas – it will help you understand what the ones you can’t see are doing too.  

    Futures/Troy – I don’t actually use ETrade for anything but the Pro Charts, which I like.  It’s from a very old account.  I never liked futures trading until I got TOS and I’m super happy with their system which, as I said above, I will be demonstrating in Vegas (someone will have to let me use their live account – I cannot use the hedge fund’s account as a demo!).  

    GDP/DC – That is double plus ungood!  


    • Following another week of weak economic data, we have cut our estimates for real GDP growth in the second and third quarter of 2011 to 1.5% and 2.5%, respectively, from 2% and 3.25%. Our forecasts for Q4 and 2012 are under review, but even excluding any further changes we now expect the unemployment rate to come down only modestly to 8¾% at the end of 2012.
    • The main reason for the downgrade is that the high-frequency information on overall economic activity has continued to fall substantially short of our expectations. In particular, our “bean count” for second-quarter GDP has deteriorated further and our monthly Current Activity Indicator (CAI) is showing growth of just 1.3% in June.
    • Some of this weakness is undoubtedly related to temporary factors, namely supply chain disruptions and (the temporary part of) the oil shock. But the slowdown of recent months goes well beyond this. One major concern is the anemic growth in domestic final sales of just ½% (annualized) in the first half of 2011. There is only one precedent in the postwar period for such weak demand growth outside the immediate vicinity of a recession.
    • We have no hard information about final sales in Q3 yet, but Friday’s preliminary consumer sentiment index for July from the University of Michigan fell to the lowest level since March 2009 (!) and is now back in territory normally associated with recession.
    • Our forecast remains no fresh monetary easing from the Federal Reserve, but the probability has risen. In particular, Fed officials would undoubtedly ease if the economy returned to recession—not our forecast, but clearly a possibility given the recent numbers.


    Well, that’s pretty much what I said about those Consumer Sentiment numbers this morning – the last time they were this low, people thought the World was about to end and the Dow was at 6,500, not 12,500!  I like the way they wait until after the pumped-up futures closed to drop that bomb – all in line with my 4:12 prediction.   

    Test/ZZ – My theory is if you live through the test, you’re fine.  I don’t know about yours but my guy makes me run a marathon on the stair machine before he’s satisfied….

    Platinum/ZZ – Worth watching.  

    Bonds/DC – I’m thinking it’s worth remembering for next time as that was my theory for this week and it’s just what happened. As I said the other day, I’m not good with those kind of charts but it would be interesting to correlate the market with the auctions.  

    Light Bulbs/DC – That’s a TERRIBLE thing Congress has done!  Light bulbs are totally wasteful of energy and the CFL bulbs are cheaper in the long run but consumers are short-sighted and would rather buy 10 bulbs for $2 over 10 years than one bulb for $12 one time – even though the one bulb uses 70% less electricity, saving $4 PER YEAR PER BULB on the average, not to mention cutting US fuel consumption – what the Republican Congress has done, as usual, is kill another program that was meant to cut down our dependence on foreign oil and, of course, this law would have been bad for the Koch’s, as they would be selling less electricity too.  


    Republicans passed the amendment over objections from Democrats, environmental groups and lighting manufacturers such as Fairfield, Connecticut-based General Electric Co. (GE), which have retooled factories and products to meet the new standards. Critics said consumers should be able to buy the cheapest bulbs on the market.

    “The federal government has no right to tell me or any other citizen what type of light bulb to use at home,” said Representative Michael Burgess, a Texas Republican who sponsored the amendment, during debate yesterday. “It is our right to choose.”

    President Barack Obama’s administration has said the light- bulb standards will save consumers $6 billion in 2015.



    Efforts by Democrats to add millions of dollars to energy- efficiency and renewable-energy programs were rejected by Republicans during debate on the measure. The Appropriations Committee had cut $1.9 billion from the Administration’s $3.2 billion request.

    The bill adds $45 million to pay for a waste-repository at Yucca Mountain, Nevada, which the administration is seeking to shut down.

    Environmental groups said the trace amount of the toxin in the bulbs isn’t a problem when they are recycled properly, and that the standards will eventually save the amount of energy that would otherwise be produced by more than 30 power plants.


    While the 2007 law passed with bipartisan support and was signed by President George W. Bush, Republicans have cited it this year as an example of an intrusive federal government. 

    Well I choose to use bulbs that taser Conservative jag-offs!  And who wants that Yucca Repository – that’s right, the Kochs!  

    By the way, for those of you with businesses, these air conditioners are very good energy savers.

  211. Barry’s take on the state of the WSJ:
    It ain’t pretty… But there is hope with Murdoch’s little problems! 

  212. Light bulbs / Phil – Good thing that the new Republican congress is focusing like laser on jobs… BTW, since they took power, the job situation has been getting worse. We report, you decide! 

  213. Great point at the end of that article (and one I’ve been making for years): 

    In the US, Murdoch’s Fox News has coarsened the political process and LITERALLY made the American public dumber. Fox News viewers consistently rank amongst the least knowledgeable, worst informed people when it comes to the FACTS about the issues of the day. Over the short run, it has been a cynical yet highly profitable infotainment machine, but ultimately, highly destructive to our body polity.

    You cannot have a functional Democracy without a vigorous press and a well informed electorate. Here’s to hoping that the net effect of the unfolding scandal is a more aggressive press run by Journalists, and fewer media barons mucking up the process.


  214. Phil,
    I bought some JPM Jan $37.50/45 bcs for $5.20 (now $3.20) and sold Jan13 $40 Puts for $4.55 (now $6.25). I kept waiting for the financials to turn around, thinking they could not take the market up any higher without including the financials. It is still a long way to expiration on the spread, but the fact that JPM could not hold a gain for even one day after their earnings is making me nervous. It is not looking like JPM is going to decouple from XLF even with good earnings. I still believe JPM has a deal with the devil that will allow them to come back, but Jan is looking iffy. I thought I would roll down the callers to take some money out of the spread on a pop above $41, but even earnings couldn’t get them there. Any suggestions on how you would play this trade would be appreciated.

  215. Phil:
    I said the light bulb thingy with "tongue in cheek". I didn’t mean to rile you up or get you on a rant. I just don’t like those bulbs because you can’t see anything when you use them. Perhaps they will solve that problem down the road. But I can adapt. And thanks for all the information about them.

  216. Phil/light bulbs
    I recently converted my most used lights to the LED ones, and the CFL ones indoors.
    Yes, they are not as ‘glorious’ as the older technology bulbs and produce slightly less leight ( I took pictures of rooms befoe and after and most rooms look better light wise wi the new bulbs- actually).
    However, my electricity bill has been halved and I have already paid for the cost of bulbs, without even considering the ongoing savings, moving forward.
    The last time I filled gas at a gas station was on April 29. The chevy volt that replaced my Infinity M45, costs half in monthly lease payments.
    I have used 6.8 gallons of gas since April 29, and according to my electricity bill so far, only $78 in car charging costs com pad to my previous “gas” bill which was $70 PER WEEK.
    Next project, solar for the house!

  217.  IRA and 401K funds @RJ and Phil -
    RJ – I think you mentioned an interest in a portfolio designed for IRAs a few weeks ago.  I’m a dedicated follower of the Income Portfolio in my margin account, but have been back and forth trying to find a low touch way of handling my IRA and 401K and my wife and mother’s IRAs as well.  I’ve decided I would like to start posting again on IRA investing, but in a less ambitious way than writing covered calls every month and explaining each trade in detail.  I’ve been running retirement funds with a portfolio based on Mebane Faber’s "Ivy league Portfolio," which is a great read.  I’m going to track it on my website as well as other ideas for busy traders who work full-time and don’t have time to babysit trades during the day.  I posted my current portfolio strategy today and will update about two or three times a month with ideas that I find.  I hope others will post their ideas on IRA/401K strategies as well, drawing on group wisdom.  I’m not posting this other places or trying to draw a readership.  Its just more of an in-house thing for PSW readers if they want to chat about retirement and keep the conversation thread accessible.
    Just click on my user name to get to the site.

  218. Phil
    Not all conservatives are jag-offs or imbeciles that only watch FOX news. Hell, I get most of my news from you and what I research on the net. Don’t you think most of the so-called news channels can be deemed "infotainment"? I think that would be a more fair and balanced assessment rather than just singling out FOX news. I am not here to defend FOX because I think you are right, but other channels deserve just as much criticism. There are folks that prefer FOX and others that prefer MSNBC or CNBC or one of the other major networks. And then there are those on both sides that only "believe" what their channel says. My point is, I consider most everyone here, including you, a comrade. You may think different than I on occasion, but that hardly makes you a "jag-off" or an "idiot". I would hope that one day I can read the great research and thought from you and your site without the insults and barbs. Don’t you think that is the problem with America today? The least we can do is set a good example on your site.

  219. Maya:
    Do they make "can" lights (recessed ceiling lights)? I have those all over my house and they are quite expensive to use. I also am married to a "light hog"! If it were just me, I would only use the light I needed in the room that I was in. But sadly I spend my time doing what my parents did. That is following all the occupants and turning off the lights they left on.

  220. Revtodd,
    I will go check out your post. I have been spending many hours per week looking for trade ideas that will work in IRA portfolio’s. I am having a hard time committing capital at this time though. I still think we are going to correct and am tracking trades to enter at that time.

  221. revtodd – I use Pharm’s trades for my IRA which is small ($25k in 2 IRA’s). The advantage with Pharm’s trades are, 1) they are lower priced, 2) he is on top of them, 3) high risk/high reward. I had one bad experience with ARNA but that was because of position sizing issue and not getting out when he recommended. Otherwise I have had good luck with his picks. Also, buying leaps of good companies and selling covered calls has been profitable. 

  222.  Dclark/light hog
    Me too bud, me too!

  223.  Nicha – I like Pharm’s trades too, and just starting trading them in my margin account.  I mix the Income Portfolio with Pharm’s trades there, then put my IRAs more on auto-pilot with monthly re-balancing if necessary.

  224. Now, now DC – there you go sterotyping again.   There are many fine conservatives that I would be very upset to see electrocuted on my kitchen floor just because they passed by one of my special bulbs.  When I say "Conservative jag-offs" I mean those conservatives that are jag-offs, not YOU!   My anger at the time was specifically aimed at Michael Burgess, who is a 4th-term Rep from Texas with a medical degree who is on the Energy and Power Committee as  well as Health for some reason.  This is the guy who took over Dick Army’s chair so the general qualification in that district was "breathing" and now he’s one of the rabid Tea-Party right wing-nuts   He has a reprehensible record and is little more than a mouthpiece for big oil companies who squashes any possible bills aimed at conservation or encouraging renewable energy scoring an amazing 0% in 8 years on issues to help make America energy independent as measured by the Campaign for America’s Future.  Now, you would think it would cost a lot to buy that kind of voting record but this little piggy was paid just $85,400 by energy companies last cycle as part of a war chest that had him outspend his Democratic opponent $1,031,000 to $106,000 – which was a lot closer than his previous election where he outspent his Democratic oppenent $1,049,000 to $7,421.  

    What does Burgess do with all that money?  Well he spent $19,000 on American Airlines (34 trips, which is a lot for a district), gave $95,000 to Bogart (get it!) Associates for "fundraising", another $60,000 to Campaign Financial Services in Bethesda for "bookkeeping" on his campaign (this is all for one campaign!), spent $27,000 at the Capitol Hill Club in just 15 meals (Cristal for EVERYONE!), $90,000 for the Election Group in Austin for (printing and postage?), another $23,000 to Engage for more fundraising (wouldn’t it be cheaper to just not raise funds?), $45,000 to Turner Gaza (TX) for fundraising and another $107,000 for Kim Gaza (TX) for more fundraising and $84,000 to Lilly and Co (TX) for more fundraising and $209,000 he PAYS to the NRC (don’t even ask on this scam!) and $154,000 to Talent Paymaster in Bethesda (no idea what they do but it sure looks fishy) and there’s tons of other crap but somehow he also manages to have the World’s worst phone contract, paying Verizon Wireless over $10,000 a year!  

    And this is the Tea Party hero who’s going to make sure we cut out Government waste?  Sorry but "jag-off" was my morning politeness for this tremendous douchebag mockery of our political system!  

    OK, gotta go – just stopped by to read the comments actually!  

  225. DClark/lcan lights
    Yes, they make bulbs that fit into the can lights too.
    And I have a few strategic places in the house, like master bedroom,front door exit and garge exit where I can use a single “All Off” switch to switch everything off in the house before leaving or when I get to my bedroom…no need to go around the house doing it.
    From what I understand, ‘Home Works’ and a few other companies can do a retro fit to allow this convenience. I did mine 10 years ago, when I built the house.
    I understand the ‘wife being a light hog’ problem. mine left when she found out I could override her lights with a single switch. (kidding- she did leave,but for other reasons)

  226. Phil
    You the man! I forgot to wear my rubber boots and felt a little buzz from the open wire on your kitchen floor!  But my thick skin kept me from any real damage. I still love you man! And love your site too!!! 8^)

  227. Maya:
    Thank you for the information. I should probably be careful because I too am on "light hog" part deux. The first one is costing me way more than any savings I could realize from changing a few lightbulbs  (about 65 to be precise). I like that thing with the single switch.

  228. enni:
    Some things never change!

  229. To all who might be interested-- (Phil, I hope you don’t mind if I pan-handle a little today.)
    A good friend is seeking to make a film this fall and is looking for investors. He’s made a few films so far, at least one was feature length and did see theatrical release, winning modest critical acclaim. I would describe his style as being somewhere between Kevin Smith, and Woody Allen. His minimum budget is $40K, and so far he’s about half way there. I can send the proposal and script, if you are interested. Email me at

  230.  Meanwhile, here in LA we are conducting a massive experiment that appears to be proving once and for all that gasoline’s demand is far more elastic to price than anyone on CNBC admits: CARMAGEDDON.   In response to warnings of 75 mile backups (that would be a price=time function) caused by the closure of the 405, apparently NO ONE is driving anywhere.  I think most of the people on the freeways are newspaper reporters driving and reporting at the same time (dangerous)).  We’ll see what happens if Monday comes and it’s still not open, but I’ll bet people have backup plans to stay home and just not drive in to work.
    By the way, I kind of hate those CFC lights.  Love the Idea, but they seem to be too sensitive to voltage fluctuations in my house and have been burning out after 6 months max- getting real expensive.

  231. Phil
    Do you have a view on BIDU which reports earnings Wednesday?

  232. Phil/CMG – I noticed that Yum had a decent quarter, but if you look at the numbers, US sales increased by only 4%….thus the US based CMG could see similar results.  What is your play for short earning on CMG?
    ZZ/Platinum – The New Scientist has a graph that shows reserves, recycle rates, and industrial uses for resources.  Note that it is a few years old, and although from university data per the credits, it is confusing to read and questionable on some aspects….never the less, a great pictorial representation that drives the point home that the Earth can not produce easy to recover resourses indefinately.  Also, popular science June 2011 issue has a unique article titled "critical matter" on the 29 long ignored elements, on which the clean-energy rovolution will depend on.  It has charts showing US production, world production, and price overlaid on one graph.

  233. ZZ/Platinum – Hmm, might be nice if I gave you the chart link!

  234.  dclark, adding to the conversation, I’m left-wing most of the time ((I guess) and I watch FOX all the time. Mostly for the entertainment value. Most news comes from the web. PSW, zerohedge, fark, etc  :)


  236. This chart is unfair as the budget cycle begins one year after a Prez takes office but a good illustration of the overall problem: 

    Reagan is still undefeated in percentage (up 300%) – hopefully that record will never be broken!  The reality is Bush II was good for $6Tn of increases (100%) and Obama just $2.5Tn (so far) in his first two budgets so he has a long way to go if he wants to take on the champ! 


    Generous Offers Rejected

    Over the past few days, Obama has shown that he’s willing to sacrifice Democratic sacred cows. He hasn’t released a detailed official plan; he’s too cagey for that. But sketchy reports of possible cuts have leaked. Among them: a switch to using chained CPI for Social Security (which would adjust the calculation of the Consumer Price Index in a way that cuts benefits); an increase in the age for Medicare eligibility from 65 to 67; cuts in student loans and reimbursements for hospitals; and the elimination of the cherished last-in, first- out accounting methods, which enable businesses to reduce their taxable income.

    Even if those huge items weren’t on his list, he’s offering about $3 trillion in spending cuts over 10 years, with an additional $1 trillion in revenue increases, mostly in the form of greatly reducing the myriad favors for corporations embedded in the tax code.

    Thus the 3:1 ratio that some liberals view as overly solicitous to the opposition and that right-wingers (I can’t bear to call them conservatives because they’re not, in any traditional sense) see as a violation of their religious conviction that no taxes of any kind must ever be raised on anyone by anyone for any purpose, even if the future of the country is at stake.

    A Winning Message

    The good news for Obama is that the more liberals, lobbyists and apologists for the rich squawk, the more fiscally responsible he looks to the independent voters who will determine the election.

    Better yet, under McConnell’s plan Obama would get credit for good budgetary intentions without blame for the pain, which will remain theoretical for now. At the risk of mixing dessert and vegetables, the “Big Fudge” lets him pose as a responsible pea eater without actually ingesting any of the wrinkled little suckers.

    You can hear the centrist 2012 message now. “We wanted to slash the debt by $4 trillion and protect our children’s future,” the Democrats will say, conveniently forgetting how loud they’re bellyaching this week about their own president’s proposed cuts. “But the Republicans killed responsible deficit reduction to protect corporate jet owners.”

    Republican Miscalculations

    Republicans are under the mistaken impression the public shares their conviction that tax increases are universally unacceptable, no matter how necessary. With polls showing public support for tax increases on the wealthy, the fallout from Republicans rejecting a deal could help ease the pressure on Obama of 9 percent unemployment. And by avoiding the painful Medicare and Medicaid cuts he was prepared to make part of the deal, Obama can resume campaigning against Representative Paul Ryan’s unpopular Medicare privatization plan.

    Hope for a last minute grand bargain isn’t entirely gone, but it’s close. Even if your average Tea Party voter would take $4 trillion in deficit reduction over tax favors for the rich any day, theRepublican Party continues to make its bottom line clear: Tax cuts uber alles.

    They thought Obama would budge. They were wrong, now it’s fudge.

    So the president will probably win this bitter round. Then, look for him to begin de-emphasizing the deficit and move at last toward a jobs agenda that shows he’s in touch with the country’s biggest concern. It’s about time.

  238. Problems still ongoing in Yemen and Libya.

  239. Trailing stops.  I’d agree to set mental stops for futures and options with large spreads.  You’d get killed with a hard TS on the books.  BUT, usually when I set a hard TS I have already won the bet and took at least half or 3/4 off of the table.  I’m letting the other half or quarter run in this instance and and set the TS to protect my win and perhaps make me a few more bucks.  In this instance I’m already making a cocktail and a booked TS may get me botted out earlier than if I was watching but in my younger stupid days I snatched defeat from the jaws of victory by having a mental TS and either forgetting about it or letting my emotion win the battle (which turned out to be a loss). 
    Now I trade less than 5 stocks regularly plus futures (the real money maker).  Using a booked TS on USO for example has treated me well while letting me enjoy the finer things in life…like buying old lightbulbs and stomping for the tea party.

  240. I actually like FOX news, the little I watch.  If I’m not trading I’m usually watching History, Discover, Nova, Food or Travel networks.  Unlike most here, I like CNBC.  I liked it much more when Erin was there and the old Fast Money crew (The Commissioner).  I think Santelli is brilliant and witty and by far the best of the bunch.  I’m actually waiting for him to slam down Cramer again, saved the old one as my favorites on YouTube.  Pasani is aces but I have to shake my head in disbelief whenever Liesman speaks.  Cramer is a smart man but his responsibilities are displaced so now he’s basically there for entertainment value.  They do get some good outside interviews.  Hire Erin back, replace all of the Squawk crew and make the 11 o’clock hour the time when everyone shoots spit wads at Liesman’s head and I’ll be a happy man. 

  241. Phil,
    could you please write couple of sentences on managing vertical spreads?
    How do you judge if it’s on track. when do you decide to get out. How do you set the stops?

  242. AAPL- Phil, earnings on Tues 7/19 after the close. Any play you like ?

  243.  Phil: TBT income play?
    Thoughts on TBT as alternative to FAS as weekly income play?   TIA

  244. FWIW:

  245. Vegas Baby; Legionnaire’s Disease Reported, What Is It?
    Six cases of Legionnaire’s disease that appear to be linked to stays at Las Vegas’ Aria Resort & Casino according to the state’s Health District. What is Legionnaire’s and what can happen to you if you take the gamble?

    The pneumonia-like disease, which was identified and reached epidemic proportions in 1976 after an American Legion convention in Philadelphia (221 cases resulting in 34 deaths, according to The New York Times), is spread by inhaling airborne particles that contain the Legionella bacteria. Contaminated air conditioning and water sources such as showers can spread the disease. Legionella pneumonia has a fatality rate of 28%.

    Jennifer Sizemore, Public Information Manager at Southern Nevada Health District, said sampling was conducted at the 4,000 room City Center resort after the Centers for Disease Control and Prevention notified her office of cases found in travelers who all had stayed at Aria.

    The bacteria grow best in warm water, like the kind found in hot tubs, cooling towers, hot water tanks, large plumbing systems, or parts of the air-conditioning systems of large buildings. Indoor ornamental fountains have been confirmed as a cause of Legionnaires’ disease outbreaks, in which submerged lighting as a heat source was attributed to the outbreak in all documented cases.

    As of Thursday afternoon, no guest or any of the resort’s 7,700 employees had come forward in response to the alert, the Aria press office said. No deaths have been reported. Whew.

    In a statement Aria said:


    "Aria has in place a water treatment program and, once the initial tests were received, we immediately implemented a comprehensive abatement effort. All subsequent tests have come back with no detectable levels of active Legionella. If anyone has further questions, we have representatives standing by at 1-877-326-ARIA (2742)."

    Sizemore told the Las Vegas Review-Journal that the CDC cases dated only to April of this year; that means so far, no one has come forward saying he or she contracted Legionnaire’s during the time the samples showing elevated levels of bacteria were taken.

    Outbreaks of Legionnaires’ disease typically receive significant media attention. However, this disease usually occurs as single, isolated cases not associated with any recognized outbreak. When outbreaks do occur, they are usually in the summer and early autumn, though cases may occur at any time of year. Most infections occur in those who are middle-age or older.

    Patients with Legionnaires’ disease usually have fever, chills, and a cough, which may be dry or may produce sputum. Some patients also have muscle aches, headache, tiredness, loss of appetite, loss of coordination (ataxia), and occasionally diarrhea and vomiting. Laboratory tests may show that patients’ renal functions, liver functions and electrolytes are deranged, including hyponatremia. Chest X-rays often show pneumonia with bi-basal consolidation. It is difficult to distinguish Legionnaires’ disease from other types of pneumonia by symptoms or radiologic findings alone; other tests are required for diagnosis.


  246. WSJ – Few Signs of Progress in Debt Talks – July 17 1:47 P.M. ET 
    Both sides have separately proposed reducing the deficit by close to $4 trillion over 10 years, but the ultimate savings from the McConnell/Reid plan would likely take close to a year to DETERMINE because lawmakers would have to design and vote on spending cuts or other changes in the future.
    Vegas Baby; Legionnaire’s Disease Reported, What Is It?

  247. New post is up here.

  248. Good evening!

    I’m coming off a lovely, relaxing weekend and I am VERY pleasantly and not very surprised to see the entire BS run-up of Friday’s close already erased in the futures.  

    As I always say:  What can easily be done – can just as easily be undone!  

    Now we’ll see what’s real.  There was a super-spike down in the Nikkei futures (/NKD) that dropped it from 10,020 to 9,465 but now back to 9,945 so a real mess in Japan.  The Yen fell (got stronger) to 78.95 and below 79 is still a place the BOJ will try to defend.  The Dollar shot up to 75.80 and that’s what’s hitting our futures as the Euro falls from $1.415 at Friday’s close to $1.405 at about 9pm (3 hrs after futures opened) but they bounced off that line.  The Pound took a much better looking bounce from $1.615 at Friday’s close to $1.6065 at 9 but back over $1.61 again now (9:25).  

    Oil was right on our $97.50 line for shorting and now down to $97.10, today is a good day to short the futures (/CL) but then we’re back into inventory time again so it gets tricky after today.  Gasoline (/RB) topped out at $3.1522 and fell to $3.14 but is halfway to recovery at this point.  Gold still failing to hit $1,600 at $1,597, silver  hit $39.88 and still near it and copper is $4.41 so, of course, natural gas is in about the same place at $4.55.  Dollar over 75.80 will not be good for the futures and they are down about 0.666% at the moment – a bad sign!  

    Overall, as we expected, people are less than thrilled with the EU stress tests but these lows should hold up for now as the BOJ is not likely to let the Dollar keep moving up from here so we’ve got 12,375 on Dow futures (/YM), 1,306 on the S&P futures (/ES), 2,345 on the Nas (/NQ) and 623 on the RUT (/TF) to watch for signs of weakness along with the Dollar above 75.80.  Oil won’t prove anything as they still have 116M barrels open so about 80M need to be dumped by Thursday – not undoable but probably not a cheap thing to accomplish either.  

    EU: Stress Tests Fail to Convince Analysts

    So I endorse trading the futures up over these lines but with very tight stops because, if we fail here – we REALLY fail!  

    And now, for some news:  

    While the debt talks may be stuck, the sides agree that selling federal property would be a good way to raise money, especially as the U.S. owns over 45,000 under-utilized buildings that cost $1.66B/year. However, red tape, the cost of shutting buildings, and and local opposition have blocked such efforts in the past. - Come Watson – the game is afoot!  

    Obama Presses Congress for U.S. Debt Deal While Dismissing Republican Plan

    Republican Logic 101:  We can’t get a $4Tn deal done so let’s complicate things further by pushing for a $9Tn deal that will also never happen - Coburn of Oklahoma to Offer $9 Trillion Budget-Cut Plan to Spur Debt Talks

    The consequences of downgrades from the U.S. not raising the debt limit would include increased costs for municipalities and federal agencies, while funds that must hold certain levels of AAA assets could have to sell Treasurys, weakening prices and sparking sales by other funds. 

    The ECB renews its call for the EU’s rescue fund to be used to buy government bonds on the secondary market, where prices are lower than nominal valuations. Greece could reportedly cut its public debt by 20B ($28.3B) if it were allowed to do this, with EU leaders warming to the idea having rejected it in the past. - Video of Bill Gross’s reaction to this news.  

    Euro Falls as Debt Concern Mounts; Franc Gains

    Meanwhile, we still have our own problems!  Regulators shut four banks on Friday, bringing the totalfailures in 2011 to 55 so far. Two banks were closed in Georgia and one each in Florida and Arizona, with the combined cost to the FDIC’s insurance fund expected to be $129.1M. [FinancialsU.S. 

    Dimon Says Mortgage Clash Swells as ‘Everybody Is Going to Sue’ (Businessweek)

    Income Expectations Point to Slowdown in U.S. Consumer Spending

    Bank Delays May Push 1 Million U.S. Foreclosure Filings to 2012

    Why Some Home Sellers Are More Delusional Than Others (Moneyland)

    Warning Signal? Dow Jones Transports Slumping (WSJ)


    Semiconductor Manufacturing Shares Fall in Hong Kong Premarket Trading 

    Are you ready for the China crash (if it happens)? What seemed like an invincible story has seen a shift in sentiment on Chinese market particulars. A downturn (defined as less than 7% growth – nice if you can get it) would likely be due to inflation or a collapse of shaky real estate. 

    Felix Salmon’s take on "the most important chart in the world right now": It wasn’t greed and speculation that sparked the financial crisis, but "an excess of overcaution" marked by a surge in demand for AAA-rated bonds – dangerous "precisely because they’re considered risk-free. They breed complacency and regulatory arbitrage" which lead to excessive leverage, "the cause of all big crises."

    So you decided Treasurys aren’t safe; now what? You can’t cut one risk without raising others. If you follow heavy hitters, they’reincreasing international exposure - of course, moderation is the watchword. 

    The phone-hacking scandal at News Corp. (NWS) inspiresliterary Twitter users to make mirthful comments using lines adapted from Shakespeare. "I have of late – though wherefore I know not – lost all my Chief Executives," is just one example from Hamlet.

    U.K. police are reportedly investigating News Corp. (NWS) execs, including James Murdoch, over whether they were involved in covering up the extent of the phone hacking. BSkyB (BSYBY.PK) board members are to discuss Murdoch’s position as chairman, while leading NWS shareholders are calling for it to sell its U.K. papers.

    The ITC makes an initial determination that HTC’s (HTCCF.PK) phones infringe on two of Apple’s (AAPL) patents, with one of the patents appearing to be relevant to Android. HTC plans to appeal the ruling. If the ruling is held up by the ITC’s full commission, it could lead to a ban on the import of HTC phones into the U.S.

    Quick take on Apple-HTC: The ITC’s ruling bolsters Apple’s cases against HTC, Samsung (SSNLF.PK) and Motorola (MMI), and paves the way for Apple, like Microsoft (MSFT), to collect royaltiesfrom Android vendors. Expect HTC to try to cut a deal before the final ruling … though Motorola is more likely to fight on, given its stronger patent position.

    Dearth of Demand Seen Behind Weak Hiring - The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey

  249.  Dclark:  I mostly attribute stress test results to genetics – dad died at 87, his mom 93, my mom 84 and still with us, etc.  Otherwise, I was a distance runner since 7 years old, gave up running when I destroyed a few discs windsurfing and took to the water, swim every day, also weights a few times per week.  If I can take any credit beyond my genes, I would say it’s because I never stopped – there was never an off year, maybe a month off at most.  Then there’s luck, which explains most of my positive trading results :)
    Light bulbs –  I gotta build a house where electricity is super-expensive.  Anybody have experience [behavioural] with automatic systems?  Motion sensors, timers, that sort of thing.  I really need to pare down the load, and I have kids for which "economy" is terra incognita.  Do those systems make sense, or just make you crazy, having to wave your arms in the middle of a conversation to turn the lights back one, etc.?

  250. Go $

  251. Gotta love that 3am trade!  Dollar hit 75.965 so far and if that’s not the end of it we are going to be breaking below those 9pm lows again.  Oil still going the right way at $96.71 and all of our indexes are now back where we started so maybe good for longs again as the Dollar gets back below 75.95 but, as I said in the last post – look out below if those levels don’t hold!

  252. If Europe opens badly and sends the dollar over 76 then our futures will break below their 9pm lines and we’ll have one of those sloppy, broken "M" patterns that generally does not end very well so I’m nowhere near as confident going long here as I was at 10:15 when I sent out that Alert (we peaked out at midnight and are now back where we started).  

    All about the Dollar, of course and we’ll know more once they open the EU in a few minutes. 

  253. Gasoline dropping like a rock – testing $3.11 now.  Copper barely holding $3.40 so not good signs from our demand indicators.  

    Let’s not forget how awful the data has been and we had the GS economic downgrade after hours Friday.  EU is opening down a bit but nothing too exciting so far….

  254. Tremors before the quake…

  255. JPM/RJ – You have an artificial buy/write at net .65 for a $38.15/40.65 entry and JPM is currently at $39.98 so keep that in mind before you panic.  I agree with your "evil will prevail" theory on them long-term so why not roll just the Jan $37.50 calls (now $4.50) to the 2013 $40s (now $5.05) for .55 and you buy a year, you still have a $5 spread into the Jan $45s and, if JPM heads lower, THEN you can roll the Jan $45 caller ($1.20) to the 2013 $45 caller ($3.10) and that will pay for most of your roll down to the 2013 $35s (now $7.85) so for net about $1 out of pocket you would end up moving your spread to the 2013 $35/45 bull call spread with the same $40 puts or, if JPM goes up, still have a very nice spread with a year to roll and no worries.  

    Nice job going green Maya!  I’m very pleased in my dealing with the One Block off the Grid people so far for the solar panels.  With my roof, the lease deal works out to be free (and they guarantee the energy generation) at my current rate (as the electric savings more than offset the lease payments) so unless my utility rates go DOWN, this more than pays for itself.  As bills go up, we still use less energy so, long-term (and they warranty the system for 20 years at rated output) it should save quite a bit AND NJ has a very nice SREC (Solare Renewable Energy Credits) program which can actually generate a nice income for as long as my boy Chris leaves it alone (so I’m not counting on it but it does seem safe through 2020).  If you are in an SREC state – going solar is pretty much a no-brainer.  That’s a funny thing about the Volt – they really don’t do a good job of advertising results like yours where you save so much on gas – it’s practically a free car!  

    IRA Plot/RevTodd – There is certainly an interest but I don’t understand why not at least sell calls?

    Light Hogs – Tina put in a lot of lights that automatically go on and off based on motion around the house.  They are great with the kids as you can’t win that war of telling them to turn lights off and we’re all used to it now – it’s like one of those science fiction movies where the hallway lights up as you walk towards it and the lights automatically go off behind you….  

    Breakdown/Pstas – Yep, Euro banks down 2.5% at the moment and our futures are turning ugly with the Dollar testing 76! (3:52) 

    Thanks DC!  I love a good weekend debate.  

    Film/DrC – I did that one time on a small film and it was fun being a "producer" but, of course, not a dime came back!  I had a good old time going out to Hollywood and hanging out on the set and going to parties etc. though so that was all worth it as an experience – I think that’s how these guys should market a film investment – they should have Hollywood weeks that rich folks just pay for the whole experience – lots of people don’t mind losing $10-20K if they get a cool experience out of it.  I still have about a million shares (1.3%) of BSEG, in fact (about .03 each now!).  

    CFC/Rdn – We had that problem at first, you have to get the right type for your home’s electric – they don’t do a good job of explaining that but some bulbs don’t work with some systems apparently.  

    BIDU/Streth – Too crazy.  GOOG obviously did very well so you really can’t bet against BIDU as they should have similar metrics but, as a crazy Chinese ADR – I wouldn’t bet on them either.  Long-term, they are probably a good play so, if you want to establish a position, I’d go with 5 Jan $160s at $13 ($6,500) and sell 4 Sept $150s at $9 ($3,600) for net $2,900 on the 5 longs (net $5.80 each) and 4 months to roll the callers.  

    Of course, if they go down hard, then you can sell some 2013 puts for $6 and cover your net longs completely (right now the 2013 $80 puts are $6 with the stock at $146 so figure the Jan calls don’t fall lower than $6 unless the stock drops about $30 (20%), which means perhaps, you would be able to sell the 2013 $50 puts for $6 so, if that net entry ($50) appeals to you – this trade makes a lot of sense).

    CMG/Troy – That’s our bear premise on them – they don’t have the buffer of foreign sales and $324 is kind of ridiculous.  You can sell 5 Sept $330s for $16 ($8,000) and buy 4 Jan $340s for $26 to cover ($10,400) for net $2,400 on the assumption CMG doesn’t screw up so badly that the long calls fall below $6  or you could be more aggressive and just cover with 3 ($7,800) to net a $200 credit to start but, as with any Momo – you never know what kind of insanity may drive them.  That’s a fantastic consumption chart, thanks!  

    CNBC/DDay – Notice they added Sorkin to the morning team (with Cramer, unfortunately).  That’s a good add as he’s a respectable guy, first positive change I’ve seen in ages.  Now if only they would jettison Kudlow! 

    Verticals/Lol – D’oh!  We had a whole conversation about being on or off target recently..  I hope someone has the link as I’m not actually in the mood but, if not, remind me tonight. 

    AAPL/Pstas – Well, me love AAPL long time and we’ll see if $365 is "too beaucoup."  I’d go for the Jan $365/415 bull call spread at $19.15 and the plan would be either AAPL goes up and you’re on track for a nice gain or AAPL goes down and you can sell something like the 2013 $250 puts for $20+ (now $14) and use that cash to roll the Jan $365s (now $37) to something like the 2013 $365 (now $57.50) or better (assuming we think AAPL will recover) or just to offset the loss.  

    TBT/Lincoln – Yes, I do like that idea but I’m not bearish on TBT so I’d go for the 2013 $30/39 bull call spread at $3.50 and sell 1/2 the Aug $34s for .62 as that’s net .31 per long and you have 18 sales ahead of you so you only need to average about .20 per month to get a free long spread.  You COULD pair that with a monthly naked put sale – I find any time TBT hits $32, then selling $32 puts generally seems to work out quite nicely.   All it takes is a dime here and a dime there to seriously augment the call-side earnings! 

    Great point on Cap gains Pharm. 

    Waving arms/ZZ – If you have a pet, you need to make the sensors less sensitive and you do end up waving at the lights sometimes but it really doesn’t exactly ruin your life to wave once in a while compared to the 40,000 times you don’t have to flip a light switch on and off (and you can set both time and sensitivity on the sensors).  

    Those crazy Europeans finally calmed down (or maybe BOJ stepped in as Yen just broke above 79 again (weaker)) and the Dollar is back to 75.85 and the futures seem on firmer footing so all is well now for our bullish premise again and now we can set trailing stops and take a nap (well, that’s my plan anyway).