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Will We Hold It Wednesday – 1,333 or Bust (as usual)

Here we go again!  

We blew right though our expected bullish levels of Dow 12,500, S&P 1,317, Nasdaq 2,775 and Russell 825 but failed to make 8,300 on the NYSE so, as usual, our biggest and most difficult to manipulate index is holding us back – flashing a warning sign while the other indices scream for us to "party on."  Fortunately, as I mentioned in yesterday’s morning post, we had already gone aggressively bullish with the SPY Aug $128/131 bull call spread at $1.83, selling the Sept $120 puts for $1.57 and that net .26 spread is already net $1.86 – up 615% since I posted the trade idea at 12:53 in Monday’s Member Chat.  

It’s good to have a few aggressive trades like this to take advantage of market bounces.  Before that we had taken the SSO Aug $51/53 bull call spread at $1.05, selling the Sept $44 puts for $1.07 for a net .02 credit at 10:46 in Member Chat (the SPY play was for late-comers who missed out on SSO).  The Aug $51/53 spread finished the day yesterday at  $1.35 but the real win comes from the short $44 puts, which fell to .70 so the .02 net credit is now a .65 net credit for .67 total profit, up 3,350% in less than 48 hours.  See, options are fun!  

The only other trade ideas from Monday were a long-term bullish play on RIMM (selling 2013 $22.50 puts for $4.20) a long futures play on the Russell Futures (/TF) off the 810 line (now 835) and I reiterated our bearish spread on CMG as I felt they would disappoint on earnings (they did).  Yesterday we picked up a long-term longs on GLW, RYAAY and WFR, half covered our FAS longs (iffy so far), took a poke at shorting the DIA that worked for a quick 10%, shorted oil with a DUG spread (futures too scary) and picked up another short spread on CMG – selling 3 Aug $330 calls for $16 ($4,800) against 2 long Dec $360 calls at $18 ($3,600) for a net $1,200 credit – those should be nice winners this morning!  

In the afternoon we flipped more bearish and picked up 10 SPY weekly $133 puts at $1.15 ($1,150 of our virtual dollars) for our $25,000 Virtual Portfolio and those are probably going to hurt this morning as the Dollar has been jammed down to 75.05 in pre-market trading and that’s down almost 1% from yesterday’s high but, since we’re only getting a .5% rise in the indexes – I’d have to say we’re right to be bearish and we will be pressing that bet into any rally that doesn’t take us over that critical 1,333 mark on the S&P.  

We’re also going to be very excited to be shorting oil this morning (/CL in the Futures) as we play it below the $99 line but, maybe with inventories at 10:30 and the weak dollar – we’ll have a chance to short the $100 line again!  You can "fix" Europe all you want and raise our debt ceiling to infinity and beyond but that still won’t make $4 per gallon gasoline affordable to beleaguered consumers…

Speaking of Europe and disasters we seem to be ignoring – Greek 2-year notes shot up to 40% this morning.  That’s right, if you are brave enough to lend Greece money for 2 years, they will pay you 80% interest on your money (if, of course, you get ANY of it back). Now how screwed up do things have to be in Europe for millions of potential investors to pass on 20%, 25%, 30%, 35% and now 40% annual interest on a Member Nation of the EU that is supposedly "fixed."  ARE YOU PEOPLE FRIGGIN’ COMATOSE?!?  

40% (Forty Percent)!  40%.  40%.  Sorry but it’s 40%.  Who gives you 40% interest?  Nobody, right?  Do you know why?  Because, generally, long before anyone is in a position to offer 40% interest – they are TOTALLY BANKRUPT!  There are no functioning businesses paying 40% interest on money.  There are no functioning countries paying 40% interest on money – IT’S NOT POSSIBLE.  WAKE UP PEOPLE – WAKE UP!!!  Think McFly:  

Even AAPL, who made $7.31 BILLION last quarter on $28.57Bn in sales CAN’T afford to borrow money at 40% because that’s "just" a 25% profit margin for them so they would be falling behind 15% a year on the loan at 40% interest.  At 40% interest compounded over 7 years, $10,000 loaned to Greece becomes $105,413.50 – AM I GETTING MY POINT ACROSS???  What the Hell is wrong with investors that they are not concerned about this?  This isn’t some minor African nation or some Asian Kleptocracy – this is the World’s 32nd largest economy ($305Bn) as well as the World’s oldest Democracy (yeah, that system’s working out great, isn’t it?).

If you have access to the capital markets, you can borrow $100M from your favorite Central Banks at 2.5% or less and lever that cash 8 times and buy $800M worth of Greek 2-year notes at 40% and collect $320M a year in interest.  That’s paying your Central Bank loan back the whole $102.5M in year one and having $217.5M to put in the bank (may as well lever up again, right?) and collecting another $400M next year and getting your $800M back ($100M of cash) so you net a profit of $717.5M in 48 months on $100M borrowed.  THAT is how rich people make money!  Who needs options or futures when you have this gig?  

That’s the game that’s going on now and that’s the same game the Investment Banks were playing with BSC and LEH in 2008 – they "KNEW" they were going to get bailed out so they kept lending them money at ever-increasing interest rates – even though those rates were obviously unsustainable.  Once the hyenas were done picking the bones clean off of one victim, they would start rumors and cause runs on the next bank, knowing that, ultimately, the Government would end up throwing the American people Trillions of Dollars into debt rather than let a wealthy bond speculator take a loss.  That was a definite with ex-Goldman CEO, Hank Paulson as Secretary of State – his friends were saved and his enemies were ground into dust.  

Now we have the EU crisis and DSK was removed on the eve of the meeting that was going to bail them out (May 15th) and now Christine Lagarde has taken his place at the IMF and rates are 15% HIGHER (60% of 25%) than they were in mid-May.  The Dow was at 12,500 on May 15th as well and we fell to 11,862 (5%) over the next 30 days as Greece was alternately "fixed" and then "not fixed" on a pretty-much daily basis.  If you take a step back and look at the above chart – it would seem Greece is not actually fixed, right?  

Ignoring the situation in Greece is like ignoring cancer because "it’s only in one lung" – not smart!  And it’s not only one lung, is it?  It’s Ireland paying 13.42% for a 10-year, Spain at 5.99%, Portugal 12.65%, Greece 18.11%, Italy 5.64%…  If the US were paying 6% interest on our debt, the interest payments alone would be $1Tn a year.  You could cut Government Spending to zero and we’d still double our deficit in 12 years.  At 13.42% for 10 years, Ireland must pay back $3.5Bn for each Billion it borrows – that would be like the US paying back $52.8Tn by 2021 on our $15Tn debt – assuming we had an otherwise balanced budget!  This isn’t a small problem – it’s a catastrophic one and it’s getting worse and worse every day yet this market is UP over 5% in the past month – as if there wasn’t a care in the World.  

Greece was first "fixed" last May and the global markets collapsed anyway. Ireland was "fixed" on Thanksgiving last year and we had a nice Santa Clause rally that topped out a Dow 12,400 in February before we fell back to 11,555 in March.  Now we’re back around our famous 2.5% levels of Dow 12,500 and S&P 1,333 and it makes sense the Dow is driving higher on earnings as the large-cap Industrials that do more business outside the US than inside it have been benefiting from a cheap (weak) Dollar on the exchange rates and that’s inflating their sales and profit figures (as long as you ignore the fact that it’s all transitory currency gains).  

Take IBM for example, Total Global Service Revenue Grew 10.1% last quarter but, measured in constant currency, that number is actually 2%.  Since American investors are completely oblivious to currency fluctuations (which explains why they let themselves get raped by the Fed as they repeatedly devalue the Dollar to prop up the markets), IBM jumped up 5% in yesterday’s trading anyway as the headlines were, in fact, excellent-looking and, as Fernando has taught us – It is better to look good than to feel good – and IBM LOOKS marvelous!  Also boosting IBM’s looks were share repurchases, which added 18 cents to profits (5.8%) which, according to Zacks, "fully offset weak margins in the quarter."  

Are you freakin’ kidding me?  

 

 


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  1. Oil Lines
    R3 – 102.28
    R2 – 100.63
    R1 – 99.55
    PP – 97.90
    S1 – 96.82
    S2 – 95.17
    S3 – 94.09


  2. FAS Money – We are short the 23 P (full cover with an entry at around $0.70) and the 23 C (1/2 cover with an entry at around $0.68). It looks like our short Put will look great this morning. Different story for the short calls!


  3. Good quote from the Greek Prime Minister this morning:

    Markets are saying pretty much what I’m saying too: that Greece is doing what it can, but that Greece is not going to be able to carry the weight of all of Europe and the other problems that Europe has…

    At this point, Greece might be getting better interest rates from bookies, the mob or American credit card companies who are generally limited to only 25% interest!


  4. Open letter to Uncle Trichet:
    http://ftalphaville.ft.com/blog/2011/07/20/628601/dear-uncle-trichet/
    Not sure who is doing their best (or worst) in this deal – ECB or the Fed. They both seem overwhelmed at this moment! 


  5. While this sounds like a solution, this also sounds very painful…
    http://ftalphaville.ft.com/blog/2011/07/20/628176/yes-greece-could-devalue-while-staying-in-the-euro/
    And to think that some countries have now upped their VAT to more than 20% in Europe! And Congress here cries about a 4% increase in some tax brackets! And state sales taxes in the US are below 10% everywhere (or 0% in some states). Europe has a spending problem, we have a revenue problem….


  6. First post for a rookie…
    Phil or anyone care to comment on following
    President wants deal on debt ceiling this week by 22nd.  What is the chance it gets done?  Would this not be a positive for stocks if goes with gang of 6 deal, which is harsh on people soft on companies?  Gold and silver, this is negative?  Possible U.S. downgrade another few months later or year or two?
    Thinking of selling some puts on SPY and QQQ due to this risk.


  7. Hi Phil — How should the Jan 365/415 BCS closed out today — closed the long call first then the short call on the pull back or both leg at same time. thx


  8. More upside oil propaganda $175 bbl for todays’ inventory push up
    http://www.marketwatch.com/story/bank-of-america-sees-brent-at-175barrel-in-2012-2011-07-20
    Also, overly optimistic growth expectation   "real global economic output accelerates to 4.8% as our economists project"


  9. FAS Money  Would you consider closing the 23 put today on the spike or hold?


  10. So they push CMG up 63 points in a month going into earnings, then they miss the #, and now it is down only $11??? WTF?


  11. why is NFLX dropping now?


  12. russellb73, welcome!  Let’s back up on your question-  how can a 3.7Trillion dollar reduction in government spending  be market positive for equities?  Definately the bond market.  But not stocks!  This is going to put us back in a recession.  Plain and simple.  Any pop in the market will be very short lived.  FYI, I’m the resident bear!


  13. Why lookee there.  TNA is dropping right back down to open below yesterday’s high.  I see a down day in our future!


  14. PP for today….oh, and CMG, jabo – just to piss you off (an me for that matter!)…


  15. Don’t we own these two….one buys the other!!!! One thing I have to agree on with AF, though…I don’t understand the merger.


  16. Phil, yesterday’s morning commentary not only sent shivers down my spine, but everyone else I sent it to that read it.  Great points.


  17. Don’t worry, jabobeast, I just closed my CMG shorts and went long, that’s a certain momo-killer.


  18. FAS Money / Joemayo – I would not be against covering the short put and getting between $0.40 and $0.50 of profits. We could also roll the 1/2 23 calls to a full 24 calls for close to even. Any ideas Phil?


  19. How much would the Dow and Nasdaq be down with AAPL flat today?


  20. lol Matt! – good with the warning label.


  21. Phil
    Thanks for backing me on IBM was actually weak. Also Apple is up on BS, foreign sales of iphones, and pads. Idon’t actually know anyone who buys a new phone or computer every year. The tech market is filling the consumers desires too quickly. IBM and Apple are selling of old inventory, will they build backup?


  22. Don’t be a bagholder!  DBTFD!!


  23.  matt  - DBTFD…what does ‘D’ stand for :)


  24. matt
    I hope your right, yesterday I shorted on the way up to the moon.


  25. nicha – DON’T


  26. Home sales prices so bad they might be considered good (puts the Fed back in play).   


  27. Phil
    Should we buy oil /QM into inventory? Selling shortly before the news on the usual runup?


  28. Pharm / don’t — Phew!, I thought it meant "Double".


  29. Exited by $5 AAPL weekly spread for $4.95, thanks guys!


  30. If anyone wants to hear this, this is from GS:

    Dear Clients and Friends:
     
    We invite you to join us for a call on the debt ceiling deadline on Wednesday, July 20 at 11:00 am EDT.   Sharmin Mossavar-Rahmani will host the call, and she will be joined by Former US Senator Judd Gregg.
     

    Senator Gregg has spent over three decades in public office, most recently serving as the United States Senator from the State of New Hampshire from January 1993 to January 2011. During his tenure in the Senate, he served on a number of key Senate Committees including serving as the chairman and ranking member of the Senate Budget Committee, and the chairman and ranking member of the Health, Education, Labor and Pensions Committee, as well as chairman of various sub-committees. From 1989 to 1992, he was the Governor of New Hampshire and, prior to that, he was a member of the US House of Representatives from 1981 to 1989.

     

     
    Webcast:
    http://www.visualwebcaster.com/event.asp?id=80980
     
    Dial-In Details:
     
    Toll-Free: 866-706-1344
    Passcode: 847544


  31. rain!  After I submitted it, I went….doh!


  32. Rumors flying that ONTY data arer good……hummmm…..might want to buy back those puts from yesterday…I don’t like rumors coming out early.


  33. Phil: I made a (potentially dangerous) AAPL earnings play yesterday. Long AAPL 375 C and Sold 375 Put (net 0.40 debit).  I lost my oppurtunity to take profit at open. Its still doing very well (obviously). Would u wait to take profit on this or would take the money and run? Percentage profit wise, the profit is at a ridiculously high number. But I am looking at short put and thinking it can go lower a bit.  Whats ur thought?


  34. anyone know why are the financials flying today?


  35. Good morning! 

    Sorry but I can’t get past that Greek thing.  I try to get bullish, I really try but then I READ SOMETHING AND MY BRAIN TURNS BACK ON and it becomes very hard to follow the crowd.  I don’t relish being a stick in the mud – I’m a very optimistic person but when the Fundamentals COMPLETELY disagree with the market’s direction – I do have to put my food down.  I don’t enjoy it – it’s just my job…

    Anyway, we had a very deep discussion this morning (see end of yesterday’s chat) about all sorts of important things and it looks like we were right to be cautious as the opening is already knocking the markets lower.  This is why we take those short positions WHILE the market is heading up – here we are 5 minutes into the open and already you’d be chasing a big reversal.  

    As usual, it’s all about the Dollar (now 75.25) and let’s not get too bearishly excited either, we will probably bounce around between our levels until the EU does their thing tomorrow and then we see what the reaction is to that.  

    The Euro hit a high of $1.424 this morning and is back down to $1.418 at the moment and the Pound topped out at $1.615 and is back to $1.612 and they Yen just bounced (got weaker) off 78.8 and is, as usual trying to get back over 79.  That may be the whole reason the Dollar is rallying at the moment so we’ll have to keep a close eye on the Dollar and the Yen this morning.  

    Oil was again a great futures short (/CL) off that $99 line but those damned USO Aug $38 puts never hit $1.  Don’t forget that oil inventories are at 10:30 so we’re looking for a quick, small profit on the futures and, hopefully, a re-load on another run-up.  

    We’re done being long on S&P so we can now look at SDS Aug $20/22 bull call spread at .55, selling WFR Oct $7 puts for .45 (.10 net on $2 spread) or selling JPM Sept $37 puts for .50 for a .05 net spread.  

    Whether you are a bull or a bear – be careful out there – CASHY AND CAUTIOUS is the way to go and – by the way – I will not be here tomorrow morning – possibly not until late afternoon.  

     Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    10:00 Existing Home Sales
    10:30 EIA Petroleum Inventories

    Notable earnings before Wednesday’s close: AFAMLN,AXPCACAKECYSEBAYETFCEWBCFFIVINTCNENFX,QCOMRHISLMSTXTEXXLNX

    At the open: Dow +0.08% to 12597. S&P +0.28% to 1330. Nasdaq +0.45% to 2839.
    Treasurys: 30-year -0.12%. 10-yr -0.13%. 5-yr -0.06%.
    Commodities: Crude +0.87% to $98.71. Gold -1.11% to $1583.30.
    Currencies: Euro +0.32% vs. dollar. Yen +0.35%. Pound +0.06%.

    Market preview: S&P futures +0.5%, driven higher by Apple (+5.7%) following another outstanding quarterEMC (+2.9%) and its VMWare (+5%) unit are up also on earnings, althoughJohnson Controls -4% despite beating forecasts. Nalco is surging 30% after Ecolab (-3.1%confirms it’s buying the firm, while Clorox+4.6% as Carl Icahn raises his bidLater: existing home sales.

    June Existing Home Sales: -0.8% to a seven-month-low 4.77M vs. 4.9M expected, 4.81M prior. Inventory of unsold homes +3.3% to 3.77M; months supply 9.5. Median sales price +0.8% Y/Y to $184,300. "A variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month," NAR’s Lawrence Yun says. 

    Mixed signals coming from Germany’s PPI, as energy prices are falling but core prices are rising. Overall, PPI was up 0.1% in June, just above expectations for an unchanged reading. 

    A bit of a switch from the BOJ party line, deputy governor Yamaguchi pledges  "decisive" policy action should Europe’s debt issue spill over to damage the Japanese asset markets or boost the yen. Currency traders are unfazed, pushing the yen back up to a ¥78 handle vs. the greenback. 

    EU banks will have to raise €460B in new top quality capital under draft laws to implement Basel III. The banks will also have to strengthen their governance and face higher penalties for non-compliance.

    Strengthening the Dollar:  The Bank of England once again split 7-2 in favor of holding rates steady, according to minutes released this morning from the July 7 meeting. Most MPC members thought economic weakness would persist longer than previously expected, which "reinforced the case that inflation was likely to fall back."

    Weakening the Dollar:   China looks to protect its trillion dollar-plus investment in Treasuries with a warning shot to the U.S. to "adopt responsible policies" to protect investors. Reports show inflows into U.S. Treasuries from China have slowed, but Capital Economics says Beijing could be funneling investments through another country.

    "For the 1st time, the very survival of the euro is at stake,"writes a group of economists to EU leaders. The group calls for an expansion in the size and scope of the EFSF. "Deciding not to decide could make the end of the eurozone as we know it," they write, placing a great deal of importance on Thursday’s summit.

    France’s Sarkozy and Germany’s Merkel will meet later today, ahead of a key eurozone summit tomorrow where leaders will discuss the region’s continuing debt crisis. Merkel tried to downplayexpectations, saying the summit is unlikely to provide a comprehensive solution, but hopeful investors are bidding European markets up, with FTSE +0.9%. Euro +0.3% vs. USD. 

    Previously rejected by Germany, use of the €440B EFSFto provide credit lines to needy states, and even recapitalize banks are back on the table at tomorrow’s Brussels summit. Angela Merkel is curiously playing down expectations for the meeting – perhaps something is brewing.

    Lloyd’s chief market strategist suggests Germany put up the funds necessary to save the euro, even if it means taking a hit to its AAA credit rating. "That’s a lot better (scenario) than your entire banking system getting in trouble." Should go over well with German voters.

    Shareholders of Irish Life & Permanent reject a government plan that would have effectively wiped them out by injecting €3.7B into the bank. IL&P has no exposure to real estate, but nevertheless finds itself locked out of funding markets. Its nationalization is a requirement of the EU/IMF bailout. 

    Industry sources say European banks should sue if the EU goes through with a threatened tax on lenders to help fund Greece’s rescue. Such a tax would punish banks regardless of their holdings, goes the reasoning. The banks will make their own restructuring proposal to EU leaders on Thursday.

    Commodity BS from the Gang of 12:  Should the combination of restricted Libyan supplies, continued global growth, and "ultra loose" monetary policy continue, Brent crude could spike to $175/barrel in 2012, says BofA as it lifts its price target for crude for both Q4 2011 and all of 2012.

    Chipotle (CMG-3.3% premarket after missing Q2 earnings expectations, with a plunge in operating margin "driven by food cost inflation partially offset by leverage from comparable restaurant sales growth." But the bad news for customers, as described in the conference call: Prices will be hiked at 80% of its restaurants.


  36. Pharm…ONTY rumors "aren’t" good?  


  37. FXE – Started a small position in it.  I am buying the Sept 140/135 BPS for 1.40 or better. 


  38. Matt,
     
    You kill me……resident bear…..that’s a freakin understatement. 
     
    Tell me you didn’t short yesterday.


  39. Pharm – i have Sept $9 sold put and Sept 7.5/10 bcs for .03 credit. Any adjustments on this play or wait till exp?


  40. Hudson City Bancorp (HCBK): Q2 EPS of $0.19 beats by $0.01. (PR)

    More on Hudson City Bancorp’s (HCBKearnings: Net interest income -14.1% Y/Y. Deposits +1.5% to $25.6B. Tier 1 cap ratio 8.44%. "While low mortgage-related asset yields are restraining balance sheet growth, we believe that we need to be in a position to increase our loan production when such growth becomes more profitable for us." 

    Apple (AAPL) is releasing its much-anticipated Mac OS X 10.7 (Lion) today, with 250 new features being promised. Duringyesterday’s CC, Apple suggested pent-up demand for Lion (along with cannibalization by iPads) may have contributed to lower-than-expected Mac shipments. AAPL +5.6% premarket. 

    Estimates and price targets are predictably rising following Apple’s (AAPLFQ3 results. Ticonderoga is raising its PT to $666, arguing the iPhone and iPad’s growth is still in its early stages; UBS thinks gross margin guidance could be conservative; and Piper Jaffray and Cannacord expect massive emerging markets growth. AAPL+5.3% premarket. (PR) (CC transcript

    Not satisfied just selling ripoff products, Chinese shysters are opening fake Apple stores - including 3 in one neighborhood in Kumming. At first glance, the stores seem perfect -  even down to the hipster employees in blue t-shirts and chunky Apple name tags. The tip offs: cheap stairs and the wrong paint job.

    Why Cisco (CSCO) is a better bet than Apple (AAPL): Cisco is unlikely to grow as slowly as its depressed stock price is discounting, while Apple is unlikely to grow as fast as the market is assuming, contrarian Mark Hulbert writes. "Would you rather make a lot of money with a mediocre company or realize a mediocre return with a great company?" 


  41. Greece : who’s the biggest lenders ? French semi-nationalized banks and Germany’s DB. They badly need new capital. Greece can’t afford those rates; who’s helping it ? ECB, IMF. Where France and Germany bring most of the money. Money that goes round and round but interests are swallowed by the big 2 at each round. That’s the price to pay for Greece to keep the privilege to stay in the EU. Even when Greece sells its telecom flagship that is to Germany (at a deflated price).  As far as i can see those 2 bullies will end up fleecing up all the little ones and finally complete their age-old ambition : complete Europe domination. What Napoleon and Hitler couldn’t achieve, looks well in sight and this time without even one drop of blood.


  42. More oil to be released!  They haven’t even released the first batch yet….

    USO Aug $38 puts are $1.12 but let’s get 10 in the $25KP and plan on a DD if they go higher at about .88.  


  43. Matt1966
    Thanks for responding.  I didn’t state my questions very clearly.  Considered selling to close some protective puts on SPY and QQQ before Friday, because thinking maybe deal gets done (maybe over weekend) and market bounces higher….YES absolutely agree that medium long term deal is bad for markets.  I am very bearish medium to long term.  Seeing lots of rise in materials costs, going to eventually shrink margins in a quarter or two.
    EU is a mess and so now puts look like a good idea to hold on to for now.
    Really a complete rookie with options so thanks for taking the time.


  44.  Phil,
    WYNN backspread—Bravo!, and thanks. it was a gutsy call


  45. nicha – be nimble for now.  These type of things usually are not ‘leaked’, and if they are, the SEC gets involved very quickly.  We are 70c off the AH high.  I am skeptical.  Not saying it did or did not work, I just don’t like run ups like that for no reason.


  46. FAS Money – The 23 P are now $0.17. The 23 C are $1.35 but the 24 C are $0.61 so a roll is possible and affordable since we are only 1/2 at 23. 


  47. No release of more oil inventories. And zoom goes oil.


  48. Phil,
    I like CSCO but I would like to buy CSCO relative to the Nasdaq-100. What would be the best way to play this.
    Maybe a bull call spread on CSCO and bull call spread on the SQQQ with the same delta?


  49. Europe is totally strange:  DAX flat (100 points down from close), CAC is near it’s high, up 1.3% and FTSE is just off their high at 0.6% so, I would have to say that our move up yesterday was complete and utter bullshit BUT – now we are getting a genuine bullish move in Europe so this might be a bottom for us, especially if they can get the Dollar back under 75.20 (now 75.25).  

    Oil inventories down 3.7Mb but distilates up 3.4Mb and gasoline up 700Kb.

    Now that rumor that they WILL release more oil has been reversed and they are saying they will NOT release more oil.   From that timing, I’d have to say that it was designed to create a short squeeze into the inventories but that’s fine as we want to own 20 USO Aug $38 puts for net $1 (if we buy 10 more at .88) because, obviously, they STILL haven’t released the oil from the SPR.  

     EIA Petroleum Inventories: Crude -3.7M vs. consensus of -1.5M. Gasoline +0.8M vs. consensus of +2M. Distillates +3.4Mvs. consensus of +1M. Futures +0.8% to $98.71


  50. Crude went from up .26 to up .95 in about 5 seconds. USO Jul38P for .24.


  51. Phil I must compliment you on showing your trade recommendations in red like USO stands out very well!


  52. Summers sounds like he’s had some extra caffeine today! I’ve never heard him speak that fast!


  53. Release oil. Ooops, we changed our minds. What a scam.


  54. Zillow +125% worth $1.5B. Tell me we aren’t in a bubble.


  55. USO, Selling Aug 41 call for .40


  56. CNOOC buying OPTI Canada (oil sands developer).   Another energy acquisition for China. 


  57. BA on fire


  58. I can’t believe this POS CMG is creeping back up and will probably close green! Would it be at 400 if they actually BEAT earnings?
    FU CMG!


  59. Pharm – are you concerned abt AMAG? or buying more?


  60. Phil / Oil   The real tell is gas and distillates. Shorting at 98.48  People are cutting back.  I thought I read that the banks and foreign oil companies had bid on the SR release and would simply put into storage tankers etc, so no mkt impact?


  61. To help solve the deficit, why doesn’t the government trade oil?  Release the reserves at around $100 a barrel and just buy the reserves back at $6-$8 less.  With the amount of oil we have, doing that a few times a year has to add up to some coin and would also temper how high oil might go knowing the government will call the speculators on it.


  62. Big biotechs and pharma are selling off some (e.g.,IMGN, ABT, etc) tells me risk is off now.  ABT raised guidance, but is down ~2%.


  63. AMAG/morx – well, they sold off the amount that they are paying (roughly) for Allos.  I don’t understand the move, but it is a dilution of about 10%.  IF they can get any traction, then they may have something.  I would like to see sales of AMAG  b’f making a decision one way or another.  Currently down about $1/spread, so not bad yet, and plenty of time.


  64. Z opened at $57 – what a friggin’ joke!  Up 160% at the open.  Too bad you can’t short it.  

    FAS Money/StJ – That’s why we did the half sell.  Just have to wait and see what holds up today at the moment, likely a 2x roll tomorrow.  Let’s take out the $23 puts at .16 as that’s plenty of profits and leaves us flexible to sell more puts on a dip.  If no dip, we’re clean to sell new puts tomorrow.  

    25% limit/StJ – Good point.  Unfortunately, I doubt Greece would qualify for an Amex card….

    Welcome Russellb!  I posted an article early this morning from the NYTimes (last post) that pointed out that 95% of the Rep Congressmen have signed a "pledge" stating that they will not raise taxes under any circumstances – INCLUDING – closing loopholes.  That kind of makes me think there’s never going to be a deal…  I think Clinton is right – Obama should just declare the debt ceiling unconstitutional and tell the Reps to screw off.  They can go to the Supreme court and try to enforce it but that will buy us time – probably all the way to the election and then the people can decide whether they want to vote to shut down Government or not.  

    AAPL/Gucci – You don’t have to close it at all as you are just "on target" for $50 but Rule #1 (and there are only 2 rules) is: ALWAYS sell into the initial excitement.  So, when you have a spike up and you want to get out, you SELL your calls and then wait to buy back the callers.  Of course once you do go naked, you need serious stops as you are gambling at that point but it’s a rule and it says ALWAYS because it’s pretty damned effective in general.  

    Oil propaganda/Dave – Good call.  

    FAS/Joemayo – Very good call!  

    CMG/Jabob – Lots of dips buying.  NFLX dropping because they are the next to be revealed naked. 

    Great opening call Matt.  

    Dollar testing 75.20 – a bit below and they can jam us back up but beware the EU close in 30 mins!  


  65. Pharm / DCTH -  would you roll the Sept 6 calls out and let the Sept 11 callers expire and sell again 


  66.  Offline today, running around NYC, nice Post today Phil, I’m dumbfounded over Europe, can’t talk myself into being long anything.  If I’ve learned anything from this site [and I've learned much] it is, when confused, stop, wait, watch, be cool.  Good luck, gents!


  67. exec, what’d I do?  I bought TZA yesterday afternoon looking for a pullback.  I didn’t get it so I sold half at close for a $.03 loss and then the other half AH for a $.09 gain.  I shorted TNA at today’s open adding to my long term short TNA position.  DBTFD!
     
    russell, that’s cool.  I don’t know options either.  I just know BS.  And this market reeks of it worse then usual!  I’m sure they will try and engineer a bounce off an agreement.  But I think it will only be used to sell into. Chances are we go down today so why not wait and sell you puts for more tomorrow.  Then, be ready to buy them back quickly after the spike.  GL.


  68. FAS Money – OK, we are out of the 23 P with around $0.50 in our pocket! Still holding on the 23 calls for now. 


  69. DCTH/terr – I would buy back the calls, let the 11s go.  If you have the $6 Ps, I would roll them out and down to Jan12 $5s and wait.  I don’t want to put any more money in to them at this time.  That was a net credit spread, so they need to hold $5.


  70. AAPL:     Today bought back the August 350 AAPL puts for 70% profit.  I’ve now sold some October $400 puts for 27.00 each.  This may seem like an odd trade to some, but I think it’s very logical.  AAPL with its blowout earnings will be experiencing upward price pressure over the next 3 months moving toward October’s earnings report.  I’ve very little doubt it will be well above $400 in October.  The margin on the puts at TDA is about $11,000 per contract.  This is a yearly rate of return of about 100% on the trade.  I’ll take that.  And if the stock doesn’t move upward as expected then the trade can be rolled easily to January puts.    The trade requires little watching and represents the sale of premium, always better than buying premium.  And, congrats to all of you who made money this week on AAPL, my favorite trading stock. 


  71.  Pharm – Interesting note on biotech sell off you mention above.  I agree, it looks like risk off.  I noticed in my IRA that XLV, the health sector ETF, is a real laggard compared to everything else.  It has been my most consistent performer in my 401K all year, but not holding up now.


  72. LXRX – if you have them.  Get out.  BMS just got a big question mark from the FDA, and that is not going to help LXRX any.  Move on.


  73. momos rallying as usual. will be green soon. good grief.


  74.  Jabob/MoMos — if you want to get back at a MoMo, SODA calls still selling for stupid prices…Aug 80/75 BPS + 75 calls looks like $0 to put on, with SODA at $69.60….PE at 71.1.


  75.  Phil: Short Calls
    When selling short calls, only on a stock you wouldn’t mind being short on, is there ever a point where you would go ahead and take the assignment and then hedge the short stock?   TIA


  76. USO weekly 38P averaged to .22


  77. Salesforce.com Started At Neutral By Longbow Research >CRM


  78. You gotta love this, only in Washington!
    Treasury Department can’t print money – only the Fed can do that – but it does have the right to mint a coin and assign any value to it, even if it has no relation to the value of the metal used to mint the coin. Voilà, a platinum coin worth $1 trillion!
    http://www.marketwatch.com/story/smoke-and-mirrors-with-the-federal-deficit-2011-07-20


  79.  Pharm – Any chance the pullback in health care today is related to the possible Gang of 6 deal in the Senate?  Who will be negatively affected if there are cutbacks to Medicare?


  80. The last time our budget was 18% of GDP (as of demanded by the GOP plan) was 1966…  Things have changed since:
    http://www.americanprogress.org/issues/2011/07/sixties_budget_plan.html
    Remarkably, we have gone backward on minimum wage! All figures in 2010 dollars. When the world changes around you, you have to adapt!


  81. stjeanluc
    Great graphics make it very clear!


  82. Rev – good question, and could be part of it.  I think branded drugs are going to have major margin squeezes, which is why big pharma is going after niche products and cancer.  Those generate high margins b’c people ask for ‘living’ longer, if only for a few months.  That will change at some point, but until then, it is the area to be in (hence our portfolio being heavily weighted to treating such diseases). 

    I still firmly believe that biotechs are going to be the engines, and big pharma is going to be the juggernauts to move things to market.  The days of building a company are over in all industries, as they will be bought by the bigger companies (think of Fringe on Fox and Massive Dynamics (aka GE)).  GE is moving into healthcare and oil and expanding R&D to 6%, what’s not to like?


  83. Thanks Rustle!

    Good call on FAS/StJ – Never underestimate the value of flexibility.  

    Tech/Shadow – It’s an early stage Fad but, for AAPL, at least, they have such a small share of the laptop market that I sure wouldn’t bet against them this decade.  IBM I like too but they got too far ahead of themselves.  IBM is a juggernaut that should go up about 10% a year, when they go up less, they’ll catch up and when they go up more, they’ll come down.  I think the game-changer for them will be marketing Watson as that one computer system can replace about 50M customer service people so, if IBM charges $500 a month per employee they replace, that’s $300Bn a year in revenues.  Sucks for the people but a nice boost for businesses.  

    NFLX/Jabob – They are worth as much as Blockbuster over time – just a different way of delivering movies to people but BBI wasn’t making money on the film – they made it selling candy and popcorn and on late fees.  NFLX doesn’t have late fees and their competition will charge as close to zero as they do as there are plenty of models that work with advertising so they compete with "Free" (and HBO on demand let’s you load up the IPod with everything that’s on your TV anyway) but the best thing about Blockbuster that, even now makes them a better investment than NFLX is that Blockbuster – DIDN’T USE 1/3 of all the bandwidth in America!  What’s going to happen when they go to countries that don’t have our kind of bandwidth?  It’s just a stupid business model – it can’t last.  

    Oil/Dave – Good call, that’s always a high-percentage play.  

    Good job Dr. C!  

    GS/Rustle – That’s cool, thanks. 

    AAPL/Etrad – What’s Rule #2 (of 2)?  When in doubt – SELL HALF! I’d hold on for now as long as they hold $388 as you are uber-bullish but your premium ($8) will melt away on the call side but a stop at $5 on the $370 puts (now $4) should be fine as you are net $15.20 now.  Very nice trade, by the way…

    Financials/Jabob – Earnings are OK.  Lots of loan-loss adjustments to make numbers but I’m tired of complaining about that as no one listens so we take earnings at face value and say – Yay!  Also, would you keep your money in an EU bank?  

    WWIII/Csaw (good name) – That’s an interesting take but, as we learned from Highlander:  In the end, there can be only one!  

    Wynn/Edro – You are welcome and congrats to all the WYNN players.   Reality is quite a bitch at earnings season.  

    CSCO/Pentax – I am so not a fan of those complicated things.  Why not just go long CSCO?  For example, you can buy 1,000 shares of CSCO at $15.90 and sell the 2013 $15 puts and calls for $4.50 for net $11.40/13.20 ($11,400 out of pocket), which is 17% below the current price so you only care if the Nas drops 15% of more.  That would be 2,338 (down 480) and that would pump SQQQ up 35% and we allow for Decay and say 25% (to $28) and then you can cover with 5 Dec $23/28 bull call spreads at $1 ($1,000) and that pays $2,500 if the Nas tanks.  That’s the cost of your first round of insurance to cover you for an additional 10% drop BELOW the 20% you are already covered with the Buy/Write.  If we do break down lower, you can always add coverage and, if we head higher and CSCO looks safe, you should be able to get out with a $250 loss.  Your upside if CSCO simply doesn’t drop more than $1 is $3,600 so nothing wrong with allocating $1,000 to the hedge over time as making net $2,600 on the $11,400 you lay out is still 22% and that’s about right for a hedged trade.  

    FAS/StJ – Don’t forget to consider the alternative of selling 5 $24 calls and NOT rolling the $23s as it still adds .60 of premium (meaning we sold $1.30 total) and that covers the current run on the 5 $23 calls but also leaves room for a nice bonus if things turn down sooner.  

    Why thank you Yodi – I do try to remember – especially if it’s a crazy day.  

    BA adding about 25 points to the Dow (8 points per dollar on components).  

    CMG/Jabob – Patience….

    Oil Storage/Tusca – Some of it will hit the market.  Not much but even 1M barrels here or there makes a huge difference on the inventories.  

    SPR trading/Rustle – That was my plan last month.  I could have made Obama at least $20Bn this month if he would have given me the keys to the SPR!  

    Good attitude ZZ – have fun in NYC! 

    Great job on AAPL Iflan!  

    Short calls/Lincoln – Not really.  I never see the point of being short a stock when I can sell naked calls for premium or at least get into a bear put and force premium.  

    Smoke and mirrors/Dave – And don’t forget, changing the CPI screws everyone who gets COLA adjustments like SS and Government pensions (screw the Army over) and Government contract workers.  That’s a big savings!  

    Medicare/Rev – I think most people in that space will take a hit on cutbacks.  

    Great chart, StJ:  

    charticle graphic


  84. EU Summit – Tomorrow morning could be very interesting as while we sleep here in the US, the European overlords will be meeting. I think that there is a greater risk to the upside as almost everybody has lowered their expectations for a faster resolution to the European crisis. Any sliver of a good news and the market could take off! But there is risk on the downside as well as they could just decide not to decide anything! I would say 60/40 to the upside… 


  85. Time to go long?


  86. FAS Money – I have to make sure we are on the same page. The 23 Puts are gone, no probs. Are you OK to roll to the 24 then or do you want to wait for tomorrow? I was only suggesting it but we have not done anything. It makes sense to me as I see danger on the upside with the EU, see previous post.


  87. wow-- Judd Gregg works for GS. Amazing!


  88. FAS Money – I should read all your comments before posting…. We’ll sell 5 24 for now then and wait for tomorrow to roll the 23 if we need to!


  89. Pharm – nice cartoon lol


  90. EU opinion letter in the FT.   Merkle is going to bail them out.  And JRW’s moon shot will be fulfilled.  Then what?  Hence my question above, time to go long?


  91. Oh, and what StJ said as well.  I think we go UP!  Moving out of my shorts, and if you remember yesterday’s shadow bars, well, the shorter ones have filled.  Still waiting for 130.95!


  92. FAS Money – We are now short 5 23 Calls (entry $0.68 now $1.33) and short 5 24 Calls (entry $0.59). Puts have been bought back earlier today! 

    Phil, I know of a couple of people who have not jumped in yet and would like to start the trade now. I guess we could start something tomorrow if and when we sell new puts and roll the calls!


  93. P/C ratio on FXE is 5.6…..that is going to be one mother of a squeeze if it happens.


  94. Inverse cup and handle forming on iwm intraday chart.


  95. Are these guys for real? There’s that number again: Is a $666 Price Target for Apple Reasonable?


  96. Phil / Oil  Down $1 from short entry.  Do we play for much more down today?  Target oil price for exit?


  97. 12:00 PM On the hour: Dow -0.18%. 10-yr -0.19%. Euro +0.25% vs. dollar. Crude +0.71% to $98.55. Gold -0.21% to $1597.70. 

    More on the home sales report: When all else fails, just make stuff up. Commenting on the weak numbers, NAR spinmeister Lawrence Yun adds the "federal budget debacle" as a factor depressing sales. Yet interest rates have fallen to YTD lows during the "debacle," if anything, a boon to sales. 

    While employment rates have slumped in the general population since 2007, they’ve gone up among the elderly, probably because of plummeting home values and retirement assets in 2008. The trends contradict Keynesian theory that the marketplace fails to recognize the degree to which people want to work.

    Moody’s says a U.S. default could result in lower ratingsfor four AAA insurers: New York Life Insurance, Northwestern Mutual Life Insurance, Teachers Insurance & Annuity Association of America, and United Services Automobile Association. The insurers, though, could handle a one-notch U.S. downgrade. (PR)

    The Debt Limit and National Security (Economix)

    The U.S. will almost assuredly not miss any coupon payments on its debt, but that doesn’t mean it won’t default, writes Jeff Rubin. Japanese insurers suffered huge losses in the 70s, as the dollar fell 40% vs. the yen. They’d have been better off in lower-yielding JGBs. China might expect the same. 

    And the Republican Bankster Puppet of the Day Award Goes To:  The CFPB opens for business tomorrow aiming to curb mortgage and credit card abuses, even as the fight over who leads the agency rages on. Senate Republican leader Mitch McConnell threatens to hold up the nomination of Obama-pick Richard Cordray if the new agency isn’t made more accountable and transparent.

    Understaffed SEC/CFTC Atlas Shrugged. Will Regulators? (WSJ)

    And the Reps will sell out their constituency if Obama backs off the Banksters:  Reading between the lines of Tim Geithner’s WSJ op-ed, John Carney sees indications the White House is willing to amend parts of Dodd-Frank as part of a debt ceiling deal. Carney also thinks Tom Coburn’s recent return to the "Gang of Six" could be sign of a compromise, given Coburn’s long-standing opposition to Dodd-Frank.

    Germany’s so-called "5 wise men" – a panel of independent government economic advisors – call for allowing a 50% haircut on its outstanding debt, lowering the debt/GDP ration to 106% from 160%. Unless Greece’s debt burden is eased, they say, the country will continue to be a drag on the EU. - Like 106% is going to make them all better?  

    Euro strength "depends entirely on your vantage point," writes Ambrose Evans-Pritchard. The currency looks decent vs. the greenback, but has crashed vs. several currencies. An epic rally is in store for the euro should an EMU breakup – with one or more of the weak states leaving – occur.

    It’s China’s smaller banks that have the most relative exposure to troubled local financing vehicles. These lenders are also most reliant on the interbank funding market, meaning monetary tightening hits them hardest. Perhaps this is why China Everbright (CEVIF.PK) pulled its Hong Kong IPO.

    NFLX competitor #27:  Pandora’s (P +1%) internet music streaming servicelaunches for TV customers of Verizon’s (VZ +0.8%) in four states beginning today, and will be available in more markets shortly. Pandora sees its quiet period end on July 25.

     No New Social Network Launched Today (Borowitz Report)

    The easiest ways to differentiate an economist from anyone else in society” (Andrew Gelman)

    Three lunchtime reads:
    1) The Shameful Murder of Dodd Frank
    2) Germany’s Undernourished Democracy
    3) Rip currents

    A few quick thoughts on today’s Housing data by Barry:

    1st, we must begin with the laugher NAR headline: June Existing-Home Sales Slip on Contract Cancellations, but Prices Stabilize; My advice to them is to switch to bottled water, as there is obviously some psychotropic polluting their tap water.

    Second, the data remains soft:

    • Total existing-home sales declined 8.8% below June 2010 sales.
    • EHS are at annual rate of 4.77 million in June 2011 vs 5.23 million unit level in June 2010
    • National median existing-home price for all housing types was $184,300 in June, up 0.8% from June 2010
    • The median existing single-family home price was $184,600 in June, up 0.6% from a year ago.
    • Distressed homes, foreclosures and short sales accounted for 30% of sales in June 2011
    • Total housing inventory rose 3.3% to 3.77 million existing homes, a 9.5-month supply
    • All-cash transactions accounted for 29% of sales in June 2011, up 5% from the 24% level in June 2010
    • First-time buyers purchased 31% percent of homes in June, down from 43% percent in June 2010 when 1st time home buyers tax credit was expiring

    Is anyone still seriously expecting a Housing recovery anytime soon?

    Last, our favorite housing chart, courtesy of Calculated Risk:>

    Existing Homes Sales, Non Seasonally Adjusted 2005-2011

    click for ginormous chart

    Source: Calculated Risk


  98. And poof….just like that it’s gone.


  99.  Phil / SPY Weekly Puts,
    Per your call, we should be stopped out. Do you see weakness which may make it worthwhile holding a bit longer, or should I fold?
    Thanks.


  100. ssdirk???


  101. Dumped those USO 38P weeklies for .37. Up 59%. This stifling heat is BS, time to hang out with the kids in the pool.


  102.  PHIL    Thank you for the oil short.  Holy smoke.  Time for a drive in the Lotus


  103. Stj – nice oil chart!


  104. A perfect example of the magic that those that control this market have can be found in the last 10 mins or so of TNA.  Look at the 5 min chart and then look at the 1 min chart.  The price is essentially flat over the period of time.  But looking at volume on the 1 min chart you can clearly see there is far greater selling going on then buying.  When the bagholders show up they simply dump into their hands.  Then, when they’re depleted, they stop selling and start buying to jack the price back up by only having to buy relatively few shares.
     
    1966, now that was a great year!


  105. That existing home sales chart will induce seizures…


  106. Phil
    If the EU situation were to be "fixed" and the Gang of 6 `were to get some  House accpetance, is there a moon-shot SPY call spread that makes sense at current call premium levels?
    Thanks
    Strether


  107. matt 1966
    That TNA observation is amazing and  scarey. Thanks
    Strether


  108. 60/40/StJ – That would be a good time for CASH!  On FAS Money, I won’t be here tomorrow but you’re either going to want to do a 2x roll to next week or, maybe, leave the 5 new calls until Friday (if we still think things get weaker into weekend – likely as there is no clear resolution) AND roll the other 5 to next week (but at a higher strike than you otherwise might have if XLF looks like it could go higher).   On the whole, I don’t see much positive to bet on into the weekend.  If we are going to start a new cycle for new people, let’s do that on Monday as the weekend is dangerous time to start.  

    FAS Money team was 100% bullish for tomorrow.  Several of their viewers were quoted as saying "Bahhhhhhhh".  

    666/Rain – Ignore the sign at your peril!  

    Oil/Tusca – Well $97 is totally fine with us, you can be brave and widen your stop but back over $97.25 is out to me (.25 trail) – plenty for one day….  Also, if you stop at .25 then you have lots of nickels to try re-entering at the next .50 cross.  

    SPY/$25KP, Gsank – We’re just lucky to get out even on those.  If they were Augs, I’d keep them as the EU may not make a move and we go down or they may make a move which is considered a bailout and the Euro goes down and the Dollar goes up and our markets go down so several ways to win with the puts but  not worth the risk.  

    USO/Dday, nice job selling into the excitement and excellent call on the pool – can’t wait to do that myself.  

    You’re welcome Willsons!  

    01:00 PM On the hour: Dow -0.11%. 10-yr -0.16%. Euro +0.35% vs. dollar. Crude -0.57% to $97.30. Gold -0.34% to $1595.70.

    Moody’s reports a 6.3% pop in commercial real estate prices in May, the first green move in 6 months. The key was distressed sales – normally a drag – showing a 4.8% increase in price. The index is a volatile one, owing to those distressed sales, so its best not to extrapolate one month’s performance.

    CNBC reports Senate Antitrust Committee Chair Herb Kohl calling for the AT&T (T)/T-mobile (DTEGY.PK) merger to be blocked, citing substantial harm to competition and consumers.

    Go Mishy!  PPP Survey Shows Bachmann Ahead. Tea-party favorite Rep. Michele Bachmann (R., Minn.) took first place – just barely — in Public Policy Polling’s new national survey of Republican primary voters, besting former Massachusetts Gov. Mitt Romney 21% to 20%.

    It’s payback time:  Japan Should Have Nuclear Weapons: Ishihara. Tokyo Governor Shintaro Ishihara criticized Prime Minister Naoto Kan’s vow to reduce dependency on atomic energy after the Fukushima disaster, saying instead the country should deepen its nuclear embrace to include weapons.“Japan should absolutely possess nuclear weapons,”

    Currency ‘Fear’ Gauges Show Anxiety as Europe Crisis Worsens. The currency market’s fear gauges are flashing red as investors dump wagers that the euro will rise ahead of Thursday’s European summit aimed at tackling Greece’s financial crisis. A gauge of expected volatility in the euro/dollar exchange rate, based on options prices, has risen to about 13.6 from 13.2 on Friday--near its highest level of the year. A similar measure for the euro/Swiss franc rate hit 14.8, the highest level in two years.


  109. Ah – See on oil how you can stop out at $97.25 and then look to re-enter at $97.50 or $98 (whichever one it next crosses below).  

    SPY/Streth – That’s an interesting idea.  I’d go SSO with 2 Sept $55/57 bull call spread at .82 ($160), selling 1 MO Jan $25 put for $1.25 ($125) for net $35 on the $200 spread.  Another offset could be MSFT Jan $6 puts at $1.50 for net $10 on the $2 spread.  


  110. Phil I might be mistaken SPY/$25KP, Gsank but I set up this play for AUG 128/131 Sept 120p to sell looking good to me so far shall we hold as I do not have them in weeklies? thks


  111. Good morning, 

     

    IWM    82.59,  82.75,  83.07,  83.37,  83.69,  and  84.15

    I’m in TNA waiting for the breakout !!


  112. Phil
    Thanks
    Strether


  113. SPY/Yodi – You sold Aug $128 puts against the long Sept $120 puts?  That’s a pretty bullish play – just be aware of that but I do like it for an upside cover. I don’t mind one-month spreads so much when there are weekly premiums to sell.  

    Good morning JRW!  

    75.11 on the Dollar, Dow volume 81M at 1:50 (light and stickable).  Going to be very hard to shove the Dollar lower though.  


  114. JRW- 82.18 TNA…riding the acending channel…looking to break out, agreed!


  115. Phil – What are you thinking on the SDS spread? Still bearish into tomorrow?


  116. JRW – extremely controlled ascent on low volume…need a super buy program to kick in about right now, as still stuck in the channel!


  117. JRW – out for .50…reload at 82.40ish…


  118. Phil
     
    SSO Sept 55 calls arte 2.03, Sept 57 are .76--so the difference is 1.27, not .82.
    Are those the right calls for the spread??
    Thanks


  119. OK, I want to know!  Who BTFD? 
     
    Those existing home sales are a real shocker.  Almost as big of a shock as when the pending contract numbers came out in May that were 16% y/y.  Now, which numbers are you going to believe in the future?  Real estate is such a slimy profession!


  120. Phil – hi.
    I have the EGLE Sept $4 short puts. EGLE now has some longer term rolls possible. I could go to the March 4s for even or slight credit, maybe. What do you think about it?
    Already had the $4.50s put to me so i would rather roll these along.
    thanks


  121.  Wow, CNBC really streatching to talk up the markets.  Now their premise is that if they had put AAPL in the Dow, instead of CSCO, that the Dow would be about 15,000 now. 

    More Gang of 12 Action to push the markets (note timing):  01:57 PM Credit Suisse sees another 8%-9% upside for the Russell 2000 (IWM) in the second half of 2011, with M&A activity picking up and P/E multiples still near their long-term average. Favorite small-cap names in the $2.5B-$5B market cap range: BEAVFHNIACI,PENNROCSIRORSSBHSPWTERTSOZION

    Oil pushed back to $98.50 into NYMEX close and THAT is a re-entry point to short the futures (with tight stops on /CL)

    02:00 PM On the hour: Dow +0.04%. 10-yr -0.24%. Euro +0.44%vs. dollar. Crude +0.35% to $98.20. Gold -0.24% to $1597.30.

    The debt fight already may be hurting the U.S. economy, Goldman’s Andrew Tilton says, with the standoff likely a “contributing factor” behind the plunge in consumer confidence over the past month. The fight also may have led investors to cash out of the stock market, Tilson says; in June, the outflow from equities was the biggest in almost three years.

    Tesla Motors (TSLA +4.5%) scores a much bigger deal than expected after a SEC filing shows the agreement to supply an electric powertrain for Toyota’s (TM +0.1%) RAV-4s between 2012 and 2014 is worth approximately $100M.


  122. Phil No I sold the Sep puts against the AUG DEbit spread Phil I might be mistaken SPY/$25KP, Gsank but I set up this play for AUG 128/131 Sept


  123. @lflantheman

    Looking at your trade this a.m. I sold the AAPL Oct 390s and at 2:10 p.m., am up 10%.  I think I know your answer, but i’ll ask anyway:
    Buy them back or simply hold till October?


  124. Phil
    I agree 100% on IBM. I will add that they are developing a new twice as fast half as expensive solid state technology that is expected to be in use next year and I do believe they are unloading old inventory in a tight business market, that is holding onto their cash. High revinew with relatively lower profits. Apple is completely diferent, they sell higher end comsumer products. The rich are not going to buy enough and the consumer is going broke. In the last month I have had at least 6 people say they wanted a Macbook but it cost too much and I believe those that can afford Apple computers and phones are srinking. I also think CISCO, one of my favorites, is hurting because groves of new people are not going on line. I known too many that have shut off on line service and shut off cell phones, to save money. This is all the bottom sqeeze and I don’t see an end.


  125. Talk about momos — daytrading SLW is turning into quite the roller-coaster!


  126. There could be tough slugging ahead for XLF. Here are some Fib retracements. There is one line that held at 15.13 and then 15.53!
     



  127. Phil
    I want to admit that I am not making enough and I am watching my parents spend all their savings and will definately loose their house before they die. My sister and I accept that we inherit $2,000 and need to take care of the end expenses. My Dad 95 doesn’t understand but Mom at 86 is sharp as a tack and knows that when he dies her SS check is $284 per month! Waching this is heartbreaking. This may effect my view?


  128. here comes that annoying stick--dangit!
    please don’t let those f n momos recover today!!!


  129. jabo / stick — they have to take out 75 on the $ to keep the stick going.


  130. All. Found this if interest.
    For all their gains, the wireless incumbents are, by some measures, destroying value. Technology is progressing rapidly and consumers are finding workarounds that let them pay AT&T and Verizon less than they used to—or not at all. Moreover, the changing competitive landscape now includes the well-capitalized likes of Microsoft (MSFT) and Google. (GOOG)
     
    http://www.businessweek.com/magazine/for-wireless-giants-atampt-and-verizon-reception-may-get-spotty-07142011.html


  131. shadow – so, sorry to hear about your parents and your situation. I don’t mean to pry but from listening to you talk about yourself, how can you afford to be on this site and manage to build a pc with multiple monitors and trade, etc? 


  132. Phil Sept SSO call spread--did you mean 56/58--not 55/57?


  133. Nice how they jamb everything up against resistance at the same time. Think they have an $100 bill behind their drivers license to push it higher?


  134. Rainman/Jamb it up – yeah, tell me about it.  Parabolic SAR can indicate reversals, unless they jamb it up with a buy program…such as the 2:07 and 2:14 today!  JRWs EMA works much better…live and learn…


  135. Phil, is the oil quote /CL\Q11 ? where do you get /CL ….
     


  136. Out of TNA with $1.44 !!


  137. Nice job shoving the Dollar down to 75.05 again to goose oil into the NYMEX close.   The coordination required for this on a daily basis is just amazing.  Even if it were legal it would be hard to get so many trades to go off at the same time….

    Good call on TNA Troy! 

    SDS/David – I don’t see anything fundamental to change our minds.  Europe could be "fixed" and burn all shorts so it’s a gamble of course but we have longs to protect so it’s about balance.  

    SSO/Streth – Time to change brokers!   Sept $55s are bid $2.04, ask $2.05 and the $57s are bid $1.17, ask $1.21 – if your broker is showing anything close to $1.27 – you should cash out your account asap and find a non-crooked broker because those guys are taking you to the cleaners!  

    EGLE/Morx – Well they have no premiums so you may as well roll them.  I’d go 1.5X the March $3.50 puts at $1.15 (net $2.35).  CSX had great numbers – I can’t imagine where they are getting the stuff from…

    SPY/Yodi – OK, you have an Aug bull call spread and sold Sept puts to pay for it?  Thats a good play.  

    There’s the NYMEX close, right at $98.50 and that should be it for the "rally" – what idiocy!  Dow is a fun futures short (/YM) below 12,550 (now 12,546) but not if the Dollar is under 75.05.  

    Bottom squeeze/Shadow – Yes but AAPL has 1.4Bn top 20% global clients to sell to – they don’t care if the bottom 80% of 310M population America can’t afford their stuff and, anyway, there will be some $199 IPad at some point.  Like any electronic product – first they want to exhaust all the people who are willing to fork over $500+ and THEN they’ll come out with the "light" model –  they do that with everything they make.  They sell those little $49 nanos and kids collect different colored ones – doesn’t cost more than a game cartridge so why not?  Probably costs AAPL about $3 to make.   Good job realizing your personal situation colors your view – you always have to try to compartmentalize those things away from your trading. 

    Woops, Dollar bumped back to 75.095 and freaked out the indexes already – what a friggin’ joke!  


  138. Troy / SAR — I’m not following your data points. I have the SAR on the IWM switching at 2:05 and 2:10. What chart are you seeing 2:07 and 2:14?


  139. Guess they didn’t have that "Benny" behind their license after all.


  140. HEY!  Who pulled the rug out from under all the ‘investors’?  ….I’m trying to be nice.  8-)


  141. I’m shorting the /nkd here. Unless we have a debt agreement, fukashima is solved, or there is some yentervention then there is no way the Japanese
    Market goes up .5% tonight with the yen up so high…


  142. EDZ Aug $16/19 bull call spread at $1.35, selling Oct $15 puts for $1.05 is net .30 on the $3 spread that’s $1.85 in the money.  


  143. rain, looks like you are using a 5 min chart.  They’re using 3 min.


  144. nicha
    I am breaking even with $100,000 to trade with. My goals are modest at $100 per day. Monday I made back $2,500 lost when I lost cable a few weeks ago, took out the phone also. Yesterday and today I am down $400on my IWM puts. I missed the 1:00 run making lunch and helping Mom get ready for PT. I also lost too much the day of the Japan quake or I would be doing good enough. I assume those things are rare and the system was an investment so I felt I could do the JRW system which I am sure I could do well if I was at home alone, breaking even is OK because I am spending profits every week.


  145. Rainman – Sar 3 min, IWM


  146. Hey all,

     

    The Oxen Group is going long on Norfolk-Southern (NSC) into next week with straight equity.

    We are involved at 72.57. Think it has potential to 77.50-78.00 by next Tuesday.


  147. If IWM 83.01ish(+/- 3) fails, I will go short !!


  148. Troy / SAR — Hmmm, the 3 minute IWM on TOS doesn’t show a SAR crossover in the 2pm hour at all. On Fidelity, it shows the 2:06 crossover (bearish) then the 2:09 back bullish. What platform are you using?


  149. FAS Money (Monthly) – On an aside, on Monday we sold the August 21 Puts for $1.21, they are now $0.54. Do you want to wait until tomorrow to sell calls in case the market jumps on Euro news. In that case, would it also make sense to take our profits on the puts?


  150. Rain/ETPro


  151. JRW – watch shorting as we are in the same channel, just a 0.25 less lower limit…


  152. JRW – why would the let it go in the last hour, after using so much ammo?


  153. Back 2/3 in TNA !!


  154. Troy — Thanks. Interesting how minor differences in implementation can change the call. freestockcharts.com doesn’t agree with any of them either. 4 different platforms, 4 different calls!


  155. Phil currency trading is coordinated by the 10 largest banks, wish I could see whats going on in the interbank market. What stops JPM from selling $’s and going long erl? Its not regulated.


  156. matt
    This morning you said you don’t do options. I think after I sell the IWM puts I should do the same. I bought them to balance playing TNA on the up but I am thinking it’s a distraction that doesn’t work out like hedging. Phil’s USO put calls are working out about every time even though I usually bail too early. If anything  too quick to take the money and run! I didn’t do USO this time because I never got a fill at a buck even, Phil makes it TOO easy! Keep up the BEAR side.


  157. Out of the TNA now with 11 cents, disapointing !!


  158.  Phil—I had a very nice position in IDCC until two days ago when the stock started soaring, now up 67% in 2 days. I had a number of short puts which I bought back for a nice profit yesterday but am now  holding a diagonal calendar which I’m not sure how to handle. I’m long 10x Jan13 $60 calls (net 5.68, now 16.00) and short 5x Jan12 $40 calls (net 17.81, now 28.70), short 2x Jan12 $45 calls (net 7.30, now 24.25) and short 3x Jan12 $50 calls (net 6.00, now 20.35).  The short calls don’t at all seem rollable. I’ve thought about selling puts slightly otm but sense some danger there if Google says they’re not interested in acquiring IDCC. I would welcome your ideas here. Thanks.


  159. JRW, you missed bailing by $.02 and then you turn around and go 2/3 long.  You are a machine!
     
    shadow, just think of me as that friendly bear at the bar on The Cleveland Show.  I simply don’t have the mind to adjust options that go sour.  I’d be like Amatta with all the questions.  And knowing me, I wouldn’t be able to sit on my hands  and wait until the fat pitch came along.  Best not for me to go there at all.  A man must know his limitations.  I’ve always been in awe of Phil’s ability to quickly come up with plays and then salvage them when they go against.


  160. Phil / Anyone – I’m puzzled by how apparently easy it is to make short term, profitable trades on oil (my view is based on many paper trades, some real trades and just watching this board).  I know that in theory markets are completely efficient and none of us should be making money at this game at all.  But what is it about oil that makes it serve up so many trading opportunities?  I don’t get it. 


  161. matt,

    Thank you, and you are correct !!  8-)


  162. flipspiceland.    I’d just leave those puts alone.  The trade has such a high probability of success (I’d say > 90%) that you can just ride them into the sunset.  The only time I get out of a trade like I see this one to be is when I see someplace better to put my $.   So I wouldn’t close the trade for just 10% profit.   Now if you get to 50% profit….ask the question again then.    At 50% I’ll often roll the put or call for more profits. 


  163. David Ristau/NSC
     
    "We are involved at 72.57. Think it has potential to 77.50-78.00 by next Tuesday.",
     
    Little late for this?  It’s $75 now.  good pick up though.


  164. how the f is PCLN and NFLX down more than CMG? WTF???


  165. matt
    I feel like adopting your self rules today, after all I spent a bunch to do the JRW system with safety and I am in the green. I feel the same about options except USO puts by Phil, forget spreads and fixes.


  166. And another observation on AAPL.  It’s only moved to 387 following stellar earnings and is still a bargain, in my opinion.  If it drops under 380 I’ll buy more calls!    Volume high today, as expected.  Partially profit – taking and offset by new buyers, so the curve is level.  


  167. Iflan/AAPL – I have a naked $380 call (part of a vertical), which I sold yesterday for 12.10, buy it back now or wait a few days…i am afraid if the European situation improves, mkts go up and take AAPL with it?


  168. That’s Aug $380


  169. Telcos/Jbur – Still a long way to go before you don’t need that web connection and they are smartly moving into cable services and such.  The whole thing is fluid but the Telcos infinite amounts of cash flow mean they can keep at it until they figure things out.  The chance of any outside company like MSFT ever funding a build of "last mile" connections is pretty much zero and WiMax doesn’t seem to work (I think it scrambles people’s brains or something) so plenty of mileage left in that sector.  

    SSO/Streth – Really, that is some terrible pricing you are getting!  

    Oil/B1 – That’s how TOS lists the front month, they omit the Q11

    NKD/Jrom – The BOJ said they would intervene aggressively. If they do that and the Nikkei pops, you will be unhappy.  

    Trading/Shadow – You might want to try trading futures.  Very quick ins and outs and you get back to cash whenever you need to do something at home.  It’s the same entry and exit points and if you trade single contracts – you can manage your risk with practice.  

    NSC/David – Good call, they should have the same general earnings as CSX, who were very good.  

    FAS Money/StJ – Oh, I forgot about the slow one.  I think take the money on the Aug $21 puts (buy back at .55) but sell the Aug $25 calls for $1.15 because, even if FAS goes to $27 (now $24.23) we can pick up another $1 for the $26 puts (now $1.80) so we have more than $2 of premium off the $25 line.  To be clear – JUST the sale of the Aug $25s for $1.15 for now (and the buyback of the Aug $21 puts).  

    Ammo/Troy – Because it would have been a total disaster had they not propped it up.  We’ll see, Dow volume is just 101M so I certainly hope that didn’t stress them out too badly with 30 minutes left.  I wouldn’t bet bullish though – there’s still some major sellers lurking that couldn’t wait to dump into the open this morning and they might not be done.  

    Currency/Kustomz – That’s the problem, nothing stops these guys from doing whatever they want.  The logic is that it’s a $4Tn daily market so price should find proper levels but the TradeBots have warped that reality by allowing someone with $1Bn to trade $500Bn worth of transactions in a day.  

    IDCC/Fortep – Well if they get bought out you are toast, of course.  That was a very bearish spread and this situation is exactly why they are so dangerous.  You gained about $11 on 10 calls and lost about $14 on the 10 short calls so net $4,000 down is your actual problem, right?  I’d sell 10 2013 $50 puts for $4 ($4,000), take the rest off the table and be done with it.  If they drop hard, you can probably roll them down to 20 2013 $40 puts even (now $2.60) at least and if you don’t want to own 2,000 shares at $40 – why the heck are you in this trade at all?  

    Silver back over $40 – waiting for Gold to hit $1,600 again.  Dollar hovering at 75.07.

    It’s just practice Matt.  You should paper trade to pass the time.  

    Oil/JC – It’s just manipulated in a fairly predictable way and the reason is that there are many billions of dollars riding on the closing price of oil every day (96M barrels (2.3Bn gallons) sold daily around the World) so the interests of the end sellers trumps the interests of the floor traders most of the time and that means they will damned sure run oil up into the 2:30 close every day and they will pretend almost every inventory report is a reason to send oil higher.   Because of the way oil trading is set up – almost everyone trading oil has their interests aligned in seeing it go higher so they push the band every day and, when it snaps back on them, they just fall back and start pushing it again.

    All right, it’s crunch time (3:45) – To stick or not to stick?  We’ve been straight up since 3:30 already but now they need to push us green and, as I said before, that’s going to be hard with the Dollar already at 75.07 and if the EU can’t agree tomorrow, it’s going to be a good day to be short overnight. 

    I won’t be here but the DIA Aug $122 puts at $1.22 with a stop at $1 is a fun way to play overnight and into the weekend.  Dow has not really gone anywhere and looks propped. 

    Speaking of propped – look how hard they worked to get the NYSE over our line – now 8,286!  


  170. nicha…Holding a naked call on AAPL  right now could be dangerous!   If it’s part of a vertical  or a diagonal then it’s not naked, and that’s different.  But if it’s really naked I’d get rid of it. 


  171. nicha ….by naked call I mean having sold a call.   Just to be sure we are on the right page.


  172. FAS Money (Monthly) – Buying back the August 21 Puts for $0.58 ( $0.63 profit) and selling the August 25 Calls for $1.13.


  173. TBT holding 32 well. Might be a good naked put line or even some calls up from here, picked up at a discount on down days.


  174. Iflan – out at $14.50…thanks. Wasn’t really comfortable with it. 


  175. I bought an iPad yesterday. IMPRESSIVE apple makes so much money having 20 blue-shirted employees wandering around the store (though it was fairly crowded for a random weeknight).


  176.  ONTY — I’m in love


  177. Ok- Now we’ve reached the yelling portion of the day:
     
    QUIT PROPPING UP THIS FRIGGIN MARKET AND LET IT DROP ALREADY!!!!!!!!


  178. PErfect horizontal channel over last 30 minutes…looking to park @ S1 1325


  179.  re IDCC:  Thanks Phil


  180. Beep…Beep…Beep…backing the markets into the close…


  181. JRW,
    Can you provide a source for the tick data you use?
    Thanks


  182. Eric Cantor is having a good day.


  183. Somebody mentioned going to Saratoga Springs this weekend. I am a half hour from there.  It would be nice to meet someone from PSW. Let me know.


  184. CMG/Jabob – Now it’s the devil you know (better than the ones you don’t).  

    That was a pretty lame stick and the Dollar at 75.075 means the risk is very much to the downside.  Now we see some earnings…  

    TBT/BDC – I always like selling $32 puts when they touch $32 (usually $1+).    Those AAPL stores are the best.  They should outsource their store system to other retailers.  

    Wow, Dollar flew back to 75.115 as soon as they stopped holding it down.  Not a big number but quite a little .04 spike.

    Saratoga/Nicha – I like that town a lot.   

    Well, that was a fun day – I’m sorry I will miss tomorrow.  I will make a post but I have a 9am meeting that will last a long time.  


  185. AAPL/ Iflan..  now since AAPL reported, have you found a new pattern yet ???  LOL..  great input.. thnx.  :)


  186. 2 1/2% on the day, oh well; Gap up and run or  Fail; that’s where we are !!

    See you all tomorrow !!


  187. stjeanluc
    Must congratulate you on the job you do on monthly and weekly FAS great!!!


  188. Wow.  Just got the TZA I’d accumulated today sold AH at 33.64.  It closed at 33.38 32 mins ago.  Something afoot?


  189. topher7           yes…………….up.


  190. Phil
    I will start following your futures trades. I have no clue at this point and my only account with high level trading 4 is etrade. Don’t know if they even do nights, stocks are 6 AM to 6 PM. Today my account is 99,000 is that enough to get approval I can send some more to them but not much. Thanks for anything you know as you use pro, they have fixed my trading bitches! A drop and my puts will be a few thousand and tomorrow may be better no visiting anyone just give me volitivity.


  191. Phil
    New thought, Dad woke me at about 2 AM crashing stuff in the dark, by the time it was over, well I’m still awake, your idea may be perfect but I would be lieing to say it doesn’t scare me!


  192. Might be a busy day for me tomorrow too…..my company was just bought!!!!  Yeah!



  193. matt
    Afoot, I really need a good sell off the last hour and a half was a yo-yo of hope now down. I couldn’t trade it only watching history. I really love your posts, your view is so contra PSW mostly. GO BEARS!


  194. CONGRATS PHARMBOY!


  195. Today’s levels.


  196. Shadow- Be careful trading TF futures. You must have a rock solid internet connection, and great trading platform. OXP sucks for futures and I have lost money because of stop orders that "auto-cancelled" for one reason or another (usually a fast market). Once in pre-market OXP lost contact with the clearinghouse. I had an active order at the time that should have executed, but would not confirm.. and a stop order that I couldn’t be sure had been accepted. This is a cardiovascular stress test no one needs! On OXP it takes forever to adjust a stop, so I would typically go with trailing stops that come with their own risks and benefits.
     
    I’d like to try it on a platform that allows, as Phil indicated regarding TOS, setting up movable "lines" that allow you to adjust hard stops very quickly.


  197. Pharm does that mean your getting fired

    Congratulations!!


  198. Pharm – hope you get a golden handshake!  Better yet, a piece of the action!!


  199. Thanks Yodi! 


  200. Futures/Shadow – I would just open up a paper-trading account in TOS to practice first.  Futures takes a lot of getting used to but you can follow JRW’s system tracking the RUT (/TF) and see how the triggers line up.  They even have Pivot Points as one of their studies under the active trader tab.  I don’t know if you can customize them (I can’t be bothered – always use defaults) but they seem close enough for eyeballing resistance.  

    At the close: Dow -0.12% to 12572. S&P -0.07% to 1326. Nasdaq -0.43% to 2814.
    Treasurys: 30-year -0.54%. 10-yr -0.29%. 5-yr -0.14%.
    Commodities: Crude +0.61% to $98.46. Gold +0.23% to $1600.50.
    Currencies: Euro +0.47% vs. dollar. Yen +0.53%. Pound +0.19%.

    Market recap: Stocks edged lower with investors taking a breather after yesterday’s rally, as no news was seen in the debt talks and existing home sales tumbled to a seven-month low. Banksbounced up, but techs fell despite Apple’s blowout quarter. Oilregained some footing, gold and silver slipped, and Treasury yieldsrose a bit. NYSE losers led gainers three to two. 

    It’s not just Apple (AAPL +3.2%) – earnings season is off to a strong start. Of 88 S&P 500 companies reporting so far, 78% beat the Street’s earnings expectations, vs. the typical 62%; the miss rate is 9%, half the average.

    The White House is signaling it could accept a mere short-term increase in the debt limit if it’s accompanied by a major deficit-reduction agreement. On Tuesday, President Obama made positive remarks on the "Gang of Six" proposal for a 3.7T deficit-reduction plan.

    The Philadelphia Fed’s Charles Plosser tells Reuters thebank is actively planning for the possibility of a U.S. default. "How the Fed is going to go about clearing government checks? Which ones are going to be good?" As for Fed chair Bernanke’s assertion a default could have "catastrophic" effects, Plosser isn’t so sure, but "do we really want to run that experiment."

    The possibility of a U.S. default has narrowed the difference between government and triple-A corporate debt so much that some investors wonder if corporate yields could fall below Treasurys. Credit default swaps on the U.S. now imply a 0.75% cumulative chance of default over five years; such swaps imply a 0.7% chance of default forMSFT over five years, 0.5% for XOM and just 0.35% for JNJ.

    With yields on 10-year Treasury notes well below their February and April peaks, the bond market doesn’t appear concerned about the potential for a post-8/2 default. However, 1 in 5 companies surveyed by the Association of Financial Professionals said they would pare their Treasury positions in response to the possibility of default.

    The FT reports on the latest Greek rescue plan, saying it could include €71B in new loans and a €50B tax on eurozone banks that will be used to purchase 20% of Greece’s outstanding debt. Another proposal has holders of Greek notes being encouraged to swap their paper for new 30 year bonds.

    Lagarde tightens the noose!  Alan Beattie suggests the IMF, growing weary of the "chaotic babble of eurozone policymaking," may seek to disengageitself from further rescues. The Fund agreed to the most recent disbursement to Greece only because of what a disorderly default might do to financial markets.

    And a gang of 12 Member says not to worry about it:  In contrast to Goldman Sachs, Morgan Stanley says Italian bond yields would have to rise another 300 bps and stay there for government finances to reach a breaking point. What the MS analysis misses is the negative feedback loop a much smaller rise in yields would set off – what George Soros calls "reflexivity."

    It’s only political will, not economics, that prevents a solution to Europe’s debt crisis, writes Joseph Stiglitz. The ECB must be made to recognize a deal without private sector involvement is politically unacceptable. If anything, a haircut makes Greeks bonds safer – the ECB should be more, not less willing to accept Greek paper as collateral.

    Budget busters:  The Pentagon estimates the first few production runs for F-35s are exceeding cost projections by close to $1B, of which the government will have to pay an extra $635M. The defense contractors on the job, Lockheed Martin (LMT -0.9%) and Pratt & Whitney (UTX -1.9%), will have to pick up the remaining part of the tab.

    This will not end well:  The U.S. government plans to shutter 800 of its 2,000 data centers as part of a broader shift to delivering applications and services over the cloud. Consolidation on such a massive scale could end up being a boon for VMware (VMW) and other virtualization software providers. 

    United Technologies (UTX -1.9%) shares slide despite solid Q2 results and upward guidance, as AMR‘s big order for Boeing (BA+2.1%) and Airbus (EADSY.PK +4.1%) planes is viewed as a win for GE (GE +1.1%) and a potential loss for UTX. In its deal with Boeing, AMR chose to re-engineer the existing 737, which uses a GE-manufactured engine, rather than opt for something new. 

    Watch this one tomorrow!  While demand from Apple (AAPL) is clearly strong, NAND flash memory manufacturers are being pressured by many inventory-laden customers to cut prices, following a weak Q2 featuring underwhelming tablet sales, European debt troubles, and general macro weakness. Flash giant Sandisk (SNDK) reports earnings tomorrow. 

    American Express (AXP): Q2 EPS $1.07 beats by $0.09. Revenue of $7.62B (+12% Y/Y). (PR

    More on American Express (AXP): Q2 earnings rose 31% as credit card spending increased a record 18% over the quarter, while loan loss provisions fell to $357M from $652M. "Strong revenues and excellent credit performance helped us deliver record earnings," says CEO Ken Chenault. Shares -0.2% AH.

    US-only consumer companies NOT doing well:  Cheesecake Factory (CAKE): Q2 $0.42 in-line. Revenues of $430.7M (+3% Y/Y) misses by $4M. Increasing its FY11 share repurchase target to $125M-$150M from $100M. Shares -2.8% AH. 

    eBay (EBAY): Q2 EPS of $0.48 beats by $0.02. Revenue of $2.76B (+25% Y/Y). Shares +2.1% AH. (PR)

    eBay (EBAY): Q2 non-GAAP EPS of $0.48, beats by $0.02. Revenue of $2.8B (+25% Y/Y), beats by $190M. Expects FQ3 revenue of $2.85B-$2.95B, ahead of $2.68B consensus. Expects FQ3 EPS of of $0.46-$0.47, below $0.48 consensus. Expects FY11 revenue of $11.3B-$11.6B and EPS of $1.97-$2.00, above $10.9B and $1.96 consensus. Shares +0.3% AH. (PR

    Genworth Financial (GNW-9.7% AH after forecasting a Q2 loss and saying it will use the shares of a foreign subsidiary to prop up its U.S. mortgage insurance unit. Genworth expects a net loss of $92M-$112M, or $0.19-$0.23/share, and will increase reserves in its mortgage unit by $300M.


  201.  Intel (INTC): Q2 EPS of $0.59 beats by $0.08. Revenue of $13.1B (+22% Y/Y) beats by $280M. Shares +0.7% AH. (PR)

    More on Intel’s (INTCFQ2 results: PC group revs. up 11% Y/Y; data center group revs. up 15%; Atom revs. down 15%. FQ3 rev. forecast of $14B (+/- $500M) above the $13.5B consensus; FY11 gross margin forecast unchanged at 63% (+/- 2%). FY11 capex forecast lifted to $10.5B (+/-$400M), up from $10.2B (+/- $400M). Shares now -0.2% AH. (PR)

    Intel (INTC) shares give up gains, now -1.8% AH, despite the large beat on earnings. Herb Greenberg points out that revenue growth continues to fall, +22% this quarter vs. +32% one year ago.

    Qualcomm (QCOM) reports FQ3 non-GAAP EPS $0.73,beats by $0.02. Revenue of $3.62B (+34% Y/Y) beats by $0.03B. Company raises FY11 non-GAAP EPS guidance to a range of $3.15-$3.20, up from $3.05-$3.13. Raises FY11 revenue guidance to a range of $14.7-$15B, up from $14.1B-$14.7B. Shares -2.5% AH. (PR)

    More on Qualcommn’s (QCOMFQ3 results: The company is expecting 8-13% Y/Y growth in FQ4 for baseband chip (MSM) shipments, down from 17% in FQ3. However, the company is lifting its estimated FY11 average selling price for CDMA devices (on which it collects royalties) to $204-$210, up from $199-$209. Shares -2.3%AH. (PR)

    Seagate Technology (STX): FQ4 EPS of $0.28 beats by $0.03. Revenue of $2.9B (+8% Y/Y). (PR)

     


  202.  Shadowfax -
     
    Stay away from /CL trading until you get lots of experience under your belt.  If you must trade oil, try /QM first, you will only loose 1/2 as much!


  203. Congrats Pharm!  

    Dr C – You must try TOS.  I used OXPS for a while and I wanted to strangle them (and not in the nice option strategy way!).  Tos makes futures trading a snap but it’s still mega-dangerous although not much worse than options on TZA or TNA and, of course, much cheaper to get in and out of and that’s key.  If you pay a $10 fee to get in and out and you can make $200 in 5 seconds – that’s fine!  With an option, you can’t take those quickie profits as the spreads and fees kill you if you try to rapid trade.  


  204. Pharm – maybe, now you can retire comfortably!! Congratulations.


  205. Phil/Futures – your suggestion is a minimum of 100K account to trade futures, right?


  206. Congrats! Pharm!


  207. Dr C and Shadow, for what it is worth, my cost of trading futures is $2.75 per contract per direction with TOS.  Not too much more than stock options.


  208. Michael Burry, the neurosurgeon doc whose hedge fund shorted subprime and made a fortune, is profiled at ZH:
    Profiling "The Big Short’s" Michael Burry 
     
    On Michael Burry’s early days juggling medical school and investing:

    "[Michael Burry] told me that he had been working so hard both studying for medical school and studying on these financial things that during a complicated surgery he fell asleep standing up, and crashed into the oxygen tent that had been built around the patient and was then thrown out of the operating room by the surgeon, you know, very angrily. So that tells you how hard he was burning the candle at both ends. "

    "Michael tends to be very, very intense and focused when he does things, definitely more than the average person. Definitely more than most investors I had ever met. It was really driven by, I think, a passion to learn and to really understand the underlying mechanisms of what’s going on."

    —————————————
      An interesting study, as after he made his fortune he dumped his hedge fund to work on his own wealth.  He invested heavily in farmland, gold, and small tech companies in Sept 2010…and obviously still making a fortune on his fortune!


  209. If I may please quote my favorite author….
    "F U CMG !!!"  -jabobeast
     


  210. Pharmboy – congrats!  Now perhaps you can focus on being a dedicated investment "machine"…the rumor is Phil’s hiring…=)


  211. Phil on your trading on /cl futures can you give us the settings on TOS active trader with other words the studies you put in to detect you buy and sell signals thanks


  212. $100K/Nicha – I have no idea what is appropriate.  You have to check with broker but you need spare margin and you want to be able to run a 1:1:2:2:4 scale, at least, if you intend to play aggressively.  

    Settings/Yodi – I just use the TOS standard settings except in Active Trader, I add a pivot point study but I never did that before JRW started talking about them as I actually use the 5% Rule and could care less about squiggly lines on a chart.  

    Later all!  


  213. Pay up Mortgage Holders - Latest news is the mortgage interest tax write-off is going to be "reformed"… that should help housing.  Worst case scenario is a complete elimination for those rich folks making over $110,000/year.  Thus a middle income sized $350k 30 year mortgage @ 4.5% would loose about $80k of tax write-offs at 28% "middle income" fed tax rate ($288k total interest x .28%).  If the price of fuel going up 50cents/gallon is enough to throw the consumer off the cliff (15,000miles/year, 20 miles/gallon = $350)…basically $350/year… what will taking an average of $2,688/year out of their pockets do?  THe first year alone on a mortage will cost them $4,760 more in federal taxes.  And with 35 million people writting off their mortgages…OUCH. 
    http://www.bloomberg.com/news/2011-07-20/senate-debt-cutting-plan-yields-tax-cut-tax-increase-in-yardstick-shuffle.html
    The Senate Finance Committee would be instructed to lower tax rates, eliminate the alternative minimum tax and “reform” tax breaks for health care, charitable giving and homeownership.
    The outline calls for three individual income tax brackets with a top rate between 23 percent and 29 percent, down from 35 percent today. The corporate rate would drop to a single rate of between 23 percent and 29 percent, down from a top rate of 35 percent today. The tax system would need to retain its current progressivity and retain benefits for low-income workers such as the earned income tax credit.


  214. Phil
    Great comment to drcraig, I will try to figure out a TOS paper trading account. I tried many times to do the same with JRW’s whatever swartz trading and never got to first base. I will try but just because I know how computers really work I am the dombest SOB on figureing out their BS to get in. Was hoping you had a clue with etrade that has taken a year to figure out. I am a machine level know it all, dumb SOB in computer talk, I failed to find spell check on chrome. Thanks so much, you are way more swavy than me and I am at this level humbled, I don’t even know what some initials mean on the PSW site, math, machine programing I get. Thanks so much for all you do and try to do, their are a million problems that prevent success and we all have our limits, I have never quit!


  215. Phil/tax "reforms" - if these tax reforms pass…a big IF of course…healthcare, housing, and companies that provide products and services for charities could be ripe for shorting.  I thought we might see a VAT instead of taking the write-offs from voters…but that would put too much pressure on corporate earnings, and would be way to obvious to our oblivious taxpayers.   


  216. Phil On /CL trading today please corect me if I am wrong at 2.22 oil was trading at 98.50 Buying one contract at that time.At 2.46 price was 98.90 and showing a  down trend. Selling the contract at that point would bring you .40 x 1000 = 400.00
    At 3.40 we again down to 98.51 now we could have shorted oil at 2.46 and taking the down train making an other 400.00
    At 3.40 oil is showing an up trend again and we buy a contract. At 4.20 I would have sold the contract again at 98.90 and made an other 400.00.
    This up and down goes on all morning and up to 99.26 at 7.26.
    At 9.00 AM we reach an other high of 99.37 going rapidly down to 98.18 at 9.42AM  The movement during the day is not that destinct. But at 13.20 at the low of 96.93 we again start an uptrend until 14.22 to 98.57  From here we stay prety level where I would not trade any more. Interesting the last trade 13.20 to 14.22 would have gained 1.64 x1000 = 1640.00 unreal. I just noticed that each contract cost a margin of 10,000.00 or 7,500.00 on a PM ACC. Like to hear any commends thanks


  217. Long corporations/short taxpayers…
     
    Territorial Tax Switch
    The proposal also calls for the Finance Committee to switch to a territorial tax system, under which U.S. multinational companies wouldn’t face taxes on income they earn outside the country. The U.S. Chamber of Commerce and other business groups have been urging Congress to make such a change.
    Senator Ron Wyden, an Oregon Democrat who has proposed his own bipartisan tax-code overhaul, said yesterday that driving rates down that far would require making big changes to breaks that many taxpayers enjoy. Those include the mortgage interest deduction and the deduction for charitable contributions.
    “You would have to cut back very dramatically on some of the middle-class tax incentives,” he said.


  218. What the hell just happened to the futures?  Did someone just discover a pile of gold on a Greek Island no one knew about?


  219. shadowfax
    If you have an ACC with TOS I gladely help you to set it up. As you can see my commends to Phil above it is always easy to play Monday mornings quarter back but once in real is always differnt. Just email you skype name and we set it up.
    D


  220. Shadowfax,
    From my limited experience trading futures through discount brokers, I would recommend against it.  Transaction costs are too high and margin requirements are much greater than what the exchanges actually require.  If you were interested in trading futs I would reach out to a couple of clearing firms and see what types of requirements that they would need.  I currently clear MFG and when I decided to back a trader to scalp e-minis they only required 25k and the clearing was much better then the $3 a side alot of stock brokers charge.


  221. malsg/futures – "the obama" just flip-flopped on a short term increase on the debt ceiling.  Politicians ran the numbers, and concluded it would be difficult to obtain bribes from lobby groups for the 2012 campaign if they didn’t spend at least 6-12 months milking the issue… 


  222. Great news Pharm! I guess you’ll have even more time to roam this board and do some research… 


  223. Troy,
    Thanks.  I was distracted by watching my own priminister flip flop on associating/hiring with ex Murdoch Editors in complete innocence. I didn’t see the can being kicked out the ball park. :-)


  224. Thanks all! Has been a wild ride but a great group of scientists I have worked with for 10 yrs (first at big pharma until we started this one)!  I have been here since our inception and do have some stock/options, but the VCs get the lions share.  My boys can actually go to college now on my dime!! ;)   LOL!  News should be out sometime, but until then……. ssshhhhhhhhh!
     
    I have told Phil I could be full time, but I am rather expensive! :)


  225. Shadowfax
    I use IB Trader work station for trading then with my account I can open 3 book traders with (one for each stock or future I’m trading) when I’m trading /cl I only have one open. I only 40,000 in my acount and between 9am and 230pm I can run with up to 4 contracts after230 margins change and I cann have 2 contracts. I shot for 10 cents per trade  and have a 5 cents soft stop loss. most of my trading is after hours and it can be very slow moving with very large jumps in price. When you are in a position you can’t  leave your computer as they will come and get your hard stop in a second.
     
    I also have a TOS paper account and use futures trader for  charting  usually have dollar, euro,oil, /tf, /es on chart and trade oil off of dollar and euro movement. Miss most of Phils plays during the day because I have to work and have found that turning away from screeen cost me lots of money. 


  226. Pharm—Congratulations!!!


  227.  Hi StJeanLuc,
    Question for you on the FAS Money weeklies; Do you happen to know what the net margin requirement has been running (approximately)  on a full cover of both the puts and the calls?  I’ve had them in papertrading but don’t have anything short right now to judge.  
    Thanks


  228. Phil- I wasn’t talking longer term, just tonight bc I believe youre right. I sold at 10060 and covered at 10020…


  229. But to be embracing risk now is insane. Things are blowing up all over the place. Greek yields at nearly 40%--how can anyone want risk? The implication is that risk aversion will swing back hard and bite the optimists on the rear end. This is dollar-favorable. So, the less-ugly girl is the US.
    http://www.fxstreet.com/fundamental/market-view/strategic-currency-briefing/2011/07/20/


  230. Savi – sorry, I will not be able to make it for the Vegas trip. Thanks.


  231. Congrats Pharm! Thanks for all your great picks during the almost 3 years I have been a member and we’ll drink in Vegas to your success!


  232. Pharm: Congrats! Are you buying the beer?


  233. will update Vegas this weekend—need one more definite as nicha will not be able to make it--we need a gang of ten minimum


  234. Congrats Pharm!  You do good work- 
     
    But why would Phil want to ruin the great deal he’s got going now by paying you?  8-)


  235.  Yodi and Shadowfax
     
    The problem with /CL is that it is like a bucking bronco.  If you look at a 133tick chart you will see it can oscillate 0.20 or more in 133 ticks, moreover, you cannot predict the direction very well and when it moves quickly it skips over lots of bid/asks so your stops don’t get filled or when they get filled they are way more/less than you expected.  You cannot use hard stops easily cause the bots get them and you loose every time.
    Be cautious my friends.
     
    Be cautious of doubling down – you can loose $5,000 in a blink of an eye.


  236.  Yodi and Shadowfax -
     
    Look at todays action between 12:44 and 12:55 on the 133tick chart


  237. Hugs and kisses to U2 matteo!   


  238. Futures. I still use optionsxpress. They give me such good deals it’s hard to leave. Never really had a problem. Im always looking for a better platform so I opened paper trading accounts with TOS & MB Trading (anyone use these guys?). I’m pretty simple, I use a few simple charts but I already have the prices I want & am looking for before I trade so I guess I’m a head charter.

    Off to Saratoga tomorrow. Golf tomorrow & Friday and horse racing on Sat. Maybe make some trades on the way out (I’m not driving). Enjoy the markets, I’ll be busy winning the superfecta.


  239. futures:
    If you want to ride them longer don’t forget that overnight margin is twice.
    Also if it goes against you too much and you want really hold it, you margin will be bigger and bigger.
    And you want to be able to DD at least twice, just in case.
     
    So unless you have 100K you may be not as flexible as you’d like to be


  240.  Good morning!

    Crazy ride in the futures last night, sorry I missed it but now we’re all flat again like nothing actually happened.

    Taxes/Troy – Isn’t that amazing?  They are raising the taxes on middle-class homeowners by $100Bn and giving even more tax breaks to the top earners?  i guess they figure housing has more of a cliff they can push it off.   

    Machine Level/Shadow – You’ll love the futures then.   Once you get to late-night trading – it’s just you and a bot trading.  Once you learn the patterns, it’s not too hard to scalp nickles and dimes and, at $50 to $100 per move – they are worth scalping when you have a small account.

    Oil/Yodi – Well, yes but I was not looking for long plays.  I prefer to wait for oil to hit a high target, like $98.50, and then hope to just catch a good move down below the line.  Also, you don’t play EVERY cross, just the ones where you feel it’s time to go down, usually after a bit of a move the other way, like we had at 7pm (which failed to break down) and again at 10:30 (which gave us a good ride back to $98) and again at 2:30, which failed and then at 3:30, which is still going from $98.50 back on the way to $97.50.  I have said before that the reason my calls on oil seem so accurate is because I DON’T call 99% of the crosses, do I?  I wait until the Dollar is right and the Euro is right and the Yen is right and Gasoline is right and Gold is right and the news is right and the time of day is right and the s/r lines are right and THEN I can get it right maybe 2 out of 3 times.  It’s very much a patience game and trying to play it both ways can quickly lead to overtrading – especially as you don’t have the conviction to ride out a move in either direction.  

    Moving on to the new post now….


  241. @Iflan
    AAPL reversed right after (or as) i wrote to you so now I’m slightly under.    Your caution to ask again at 50% , is well-taken.
    Thx


  242.  Pharm – a belated congratulations and thanks for commentary yesterday morning too.


  243. Pharm- congrats- your ship came in. Now, that is the kind of wealth re-distribution I can believe in!
    I don’t know your story but I’ll bet there have been many personal sacrifices ; occasional sleepless nights; many, many long nights and weekends at the office while others were at the beach or golf course not to mention , perhaps a few anxious moments when one may have wondered if it all was going to work.
    Now you know. The best to you and your partners.


  244. Amazing, Pharm – you’ll actually be able to afford college for your kids? Congratulations, how often does that happen!


  245. Any guesses why the dollar is being hammered so much? 


  246. Congrats Pharm!