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Turnaround Tuesday – Waiting for the Fed

Do or DIE today! 

We already went long in Member Chat last night, picking up Russell (/TF) futures off the 630 line but they stopped us out at 660 (up $3,000 per contract) so we switched horses to Oil (/CL) Futures at $80 in my morning Alert to Members and that’s already at $81.25, which is up $1,250 per contract.  Our third play this morning was shorting gold (/YG) at $1,765 and that one is also a quick score, with gold backing down below $1,755 already but gold is just $33.20 per dollar per contract so up $332 on that one, which is why we usually don’t play it – too boring!

Pre-market trading has been the only time it’s been safe to be bullish for the past couple of weeks as we’ve suffered the most relentless sell-off since 2008.  As I said in yesterday’s post, we expect the Fed to take action this afternoon (not just make nice noises) – anything less than that will be a disappointment – possibly a catastrophic one, so we’ve left our well-hedged hedges but we cashed out our directional short plays on yesterday’s dip.  As I said in last night’s Member Chat:  

It’s (the market drop) not extraordinary until/unless we break those -10% levels on our new chart. Otherwise, it’s a 20% pullback off a 100% run-up and that is very ordinary, although this is coming a bit sharply…  There is nothing wrong with cashing out and waiting for clarity but, as I said above – we’re SUPPOSED to have a 20% pullback after a 100% run in the markets. I’m sorry this time was not different and that we didn’t go to the moon just because the charts looked good but this is reality.  We were up on thin volume and now we are down on heavy volume, pretty much right after we were told that there would be no more heavy volume.

As you can see from the extended Big Chart, we’re just down 20% from the top, which was 100% off the bottom so we have one of those neat little Fibonacci retracements that we PLANNED ON in February, when our top was projected to be, at most, 1,440 on the S&P (1,364 was our best day) and our 50% retracement line was (drum roll please) – 1,122.  Where did we finish yesterday?  1,119!  Not bad for a 6-month old projection.  IF we break down here, our last support before Hell is 1,014 but let’s not think about that as it’s sad.  So all the recent action has done is proven to us that, without Quantitative Easing, we are simply back in the TOP HALF of the range that we had defined way back in the Spring of 2009:

Note that the bottom of our current Big Chart is simply the middle of our Fibonacci Zone, where we EXPECT to have some good support.  Hopefully Uncle Ben will wave his magic wand and money will once again rain down from the skies and all will be well as the Emperor is once again clothed in the very finest invisible garments (and I hope you watched yesterday’s clip as it completely explains our economy) and all of the people will once again marvel at our "wonderful" economy and the beautiful sheeple will once again stampede into the Stock Market Slaughterhouse for the next fleecing.  

Click to ViewAs Doug Short points out in our Chart School section at PSW, the Fed has nowhere to go with the Funds Rate (unless they are going to start paying people to borrow money) and I pointed out to Members in Chat last night that there was a Fed Meeting last August 10th and the statement made no mention of QE2 and the markets dropped like a rock THE NEXT DAY.  2 weeks later (as noted on chart), Bernanke capitulated.  

HOPEFULLY (not a valid strategy!) Ben has learned his lesson from last year and is not willing to risk another 10% sell-off due to his dithering.  Keep in mind my prediction of last Tuesday was that we would have a 20% drop and, when the woman on TV introduced me with that prediction, I was very quick to clarify that I meant 20% FROM THE TOP, not from where we were last Tuesday, already 7% down.

So it’s hold up or shut up day for me.  This is where we expect to make a stand but, unfortunately, it’s all up to the actions of "The Bernank", who has proven himself less than competent so far in forestalling crisis after crisis.  This time better be different or we will soon be looking like London – with crowds turning their anger on banks, businesses, government buildings etc.  As the announcer says about the looters:  "They don’t really care what they take – they just want to cause as much damage as possible."  Kind of like Congress!  


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  1. PP for today.

    Your question needs clarification – if you are asking can we apply some of Phils strategies on Canadian ETF’s, the answer is largely no.  Cdn ETF’s do not have as much liquidity nor do  many of them have options on them, if any, and in my experience, the leveraged ones do not perform as well as US counterparts.
    If your question is about how to do it on a Cdn discount brokerage, then the answers are:  1) if you only have an RRSP account, then you can buy any US security (etf, stock, option) in your rrsp but it will settle in Cdn $ – however, you cannot do option combinations/spreads in an RRSp, nor can you sell short – you can buy and sell calls, and buy puts, not sure if you can sell a naked put — likely not.

    If you have a non-registered account, then you only need to open a US margin account and then you will be free to follow any/most of the sugggestions you see here — contact me if you have any more questions.

  3. @Felipe
    Boring?  Gold?  In at 1695, out at 1770 8 hours later? 
    That’s been the most exciting quickie I ever had, with the sole exception of, ‘Peaches’, from Budapest,  my consort for a lap dance at Hustler’s in Paris in 2005.
    Aren’t you just a bit biased against this precious metal?

  4. Oil Lines
    R3 – 92.44
    R2 – 88.74
    R1 – 83.11 (we are here)
    PP – 79.41
    S1 – 73.78
    S2 – 70.08
    S3 – 64.45 (wow!)
    Yesterday’s high and low – 85.04 / 75.71
    No need for breakout lines today, the S/R lines are already at breakout points! 

  5. FAS Money Recap

    Long strangle – Jan 12 18.33 Puts (2.40 now 8.47) and 28 Calls (2.40 now 1.03). 
    Short Weekly – August 22 Puts (2.87 now 9.57)
    Short Monthly – August 23 Puts (3.65 now 10.57) 
    The long puts is what is holding us now! 

  6. Barry’s thoughts on the market.
    To keep in mind as we bounce this morning:

    The % of issues on the NYSE above their 200 day moving average is now ~10%. Under 20% is where I put together a wish list, and 15% is where I dip a toe in the water. However, October 2008 saw a 2.13% level leading to a bounce and rollover; March 2009 at 3.61% saw a lasting rally. 

  7. Phil- Don’t you think It’s sad that all we have to  look forward to is QE3? We are like teenagers hooked on heroin just waiting for our pusher to give us more. And when QE3 comes we will "get high" and still there will be no real investment in our countries infrustructure (which it desperately needs), no real plan from the top to get people working. To me, this requires vision and leadership at the top which does not exist.  I guess it makes Obama feel "at home" when the entire country looks like south Chicago? BTW, I live  in a town about 70 miles from Philly. I have seen ZERO construction outside of the building of banks. There must be 20 new branch banks being built within five miles of my home!  It seems to indicate these clowns have all this Govt. money they are refusing to loan out to new business but to give the appearance they are loaning it to themselves or am I completely wrong?

  8. ARNA info FYI – Arena Pharmaceuticals said that a clinical study that measured lorcaserin concentrations in human cerebrospinal fluid (CSF) and plasma and related data analyses. The study was conducted to provide additional data that may be informative for determining the human relevance of the observation of brain astrocytoma in male rats. Using the results of this study and other preclinical and clinical studies, Arena estimates that the mean exposure of the human brain to lorcaserin at the clinically tested dose (10 mg dosed twice daily (BID)) is approximately 1.7 times the exposure in the human plasma. In contrast, the measured exposure of the male rat brain to lorcaserin at the dose at which no brain astrocytoma was observed (10 mg/kg/day) is approximately 24 times the exposure in the rat plasma. That is a good thing.

    here’s what the fed can do: 1) another round of asset purchases2) maintain the size of its current balance sheet for ‘and extended period’ 3) change the composition of its balance sheet by selling shorter dated securities and buying longer dated securities( i think that called a ‘twist’) 4) cut the interest rates on reserves..i think additional asset purchases at this time are off the table..remember many inflation targets have been exceeded or met and the fed will be loathe to fly in the face of the structural issues ‘dysfunction’ that are the purview of fiscal jackson hole for more hints..last year the quote i remember most is ‘Central bankers alone cannot solve the world’s problems."’s going to be his way of leveraging action form washington…make progress and i will pile on with more big expectatons are fraught with risks right now.



  12. Angel- Agreed.  I think the market would like some reasurance from the FED they are prepared to move quickly if things continue eroding.  I’m still getting more short the market on any bump we get this morning.

  13. Pharm- That’s great! ARNA now down only 20% off my entry. I’ll take that as a win in this market!

  14. @Jakester
    Not so here in Pittsburgh.
    Theres are dozens of hghway construction make-work projects going on, no branch banks.  The highway bill is the least discussed boondoggle this side of Executive Bonus clawbacks. 
    The highway buiilders have to be getting the lion’s share of newly minted money, after the Offense Department.

  15. Angel,
    I think your point 2 is spot on – move out and flatten the yield curve a bit.

  16. oops – point 3

  17. Phil- I need to lay on an additional disaster hedge specifically focused on RUT taking me through Sept exp.
    Would appreciate your suggestions.

  18. how come youre called canuck i grew up with 40000 canucks in lewiston auburn maine i love em

  19. Amazing calls this morning and last night Phil, thanks for working overtime.  

  20.  lflan – plans for an Apple/index trade this morning on expectation of a run up into the fed? I can’t say I wouldn’t be surprised if shell-shocked investors don’t take advantage of today’s bounce and immediately start selling again. A scale in long trade might make sense though. 

  21. Data flowing from ARNA like melted chocolate: The PWG reviewed relevant tissues and reported that mammary fibroadenomas were distinguishable from mammary adenocarcinomas. The PWG reported shifts in the numbers of both tumor types from the initial report included in the lorcaserin New Drug Application (NDA) and that adenocarcinomas were no longer numerically higher than the control group in the lorcaserin low- and mid-dose groups.  This is also a good thing.

  22. Phil – Besides TNA Aug calls, I have some USO, QQQ calls (from yesterday’s suggestions) and some QLD (Sept $90 calls)  – is this a "sell into the initial excitement" day (assuming futures stay up), or would it be wiser to hold on a little longer but get out before the Fed announcement (as per your advice to Topher from yesterday’s post)?

  23. its interesting to ask what would be really the best market result.not clear at all to me that his being panicked into QE3 right here right now would actually support markets..  might be best just to give a strong promise of stand-by..if i were him i would not pull the trigger today.. i’d cock the gun, but no way i’d pull the trigger…course he would have to get his thumbs out of his ass to do that

  24. I live in Vancouver, our hockey team are the Canucks

  25.  Phil,
      I would greatly appreciate your guidance in uncharted waters. My TOS margin is down precipitously, to the point where I might go negative (like a dark real world freshman calculus problem: the limit as margin approaches zero). I have a lot of sold puts, most of which are still 10-20% above the strike; some, like RIMM sold Jan 12 $35s (rolled down from 50), not so much. Should I be closing positions, or whatever, before things get worse (which, hopefully, they won’t)? If so, what would make the most sense to liquidate first? The biggest losers; the ones that use the most margin?

  26. I thought Uncle Ben wasn’t speaking today.  Just a news release at 2.30.. no?  I could be wrong.  Any plays on CSCO?  Since their earnings doesn’t look that good for tomorrow, any easy ride down?

  27. Canuck, I thought your team was "The Swedes"… :-)

  28. Hey Canuck………Another Vancouverite here……..though moved to Toronto recently for work.  Big fan of the Canucks, was in Boston for game 6. :(

  29. Anyone going long on oil today?

  30. Phil
    When does it make sense if ever to buy a protective put (to offset earnings risk only)? Similar question as lolobear. I hold the CSCO 2013 12.5/17.5 BCS in at (4.15/2.86) now (3.1/1.23). Have already sold puts on an earlier adjust. Thank you.

  31. JR
    We need one of your fabulous statistics on potential market direction for today.

  32.  hey Canuck
    I’m from Calgary, plan to move to Vancouver in 6 mo, choose Burnaby, what do you think about this area?

  33. Did anyone here Cramer encouraging the weak of heart to sell into the rally this morning?
    That my be a buy signal

  34. illegal disclosure/stj:   Yeah, when I learned about the downgrade on Saturday morning a little light bulb, dim as it may be, went off in my head that said, "You know thousands of well connected people knew ahead of time or the market wouldn’t have dropped big time like that. There aren’t that many naturally prescient people." Scumbags is right….. and like a well connected friend of mine said years ago, the real currency on Wall Street is not money, it’s information.

  35.  Just a thought:
    Won’t the FED want some dry powder?  If they pull out QE here, and it’s not well received, it’s BIG trouble.  I think they might want to save it in case we still see much lower levels (where it would be more likely to create a big bounce and make them look potent). 
    I expect to hear that they "won’t hesitate" to use "all measures" to support the economy… and maybe even some novel ideas that will make headlines, but won’t amount to much.

  36.  Long IWM weekly 68 calls. Classic JR signals. 

  37. Good morning!  

    If you almost had a heart attack when last night’s futures fell 2.5%, now would be an excellent time to lighten up or hedge as you got a 5% swing back up this morning!  

    Congrats to all the early players.  Oil topped out at $82.50 and gold is still falling at $1,743 so $1,745 would be the stop line now.  The RUT (/TF) futures are at 670 now but it was too rough to ride and we’ll just have to see how the morning plays out.  

    As I mentioned in the morning post, we got our EXPECTED 20% drop – it just came faster than we expected.  Stock market physics and the 5% rule now dictate a 20% bounce (4% move up) off resistance at the 20% off line but that is a WEAK BOUNCE and even weaker so if we don’t bounce back as fast as we fell.  Since we had a big 5% drop day yesterday, anything less than a move back to Friday’s close will be a weak sign.

    Yes, that’s a lot to ask and that’s why we’re NOT going to take anything too seriously until AFTER we get the Fed statement but, if we don’t get one mother of a short squeeze this afternoon – we have big trouble still ahead.

    Friday’s close seems very far away at Dow 11,445, S&P 1,199, Nas 2,532, NYSE 7,415 and Russell 715.  Forget the fact that it’s almost 10% away on the Russell – THAT’S WHERE WE WERE FRIDAY NIGHT.  Due to math, when you drop 10% from 100, you are at 90 but if you rise 10% from 90, you are only at 99 – so that’s why it seems so hard to get back.  

    We need leadership from AAPL, the SOX, the Transports and, dare I say, the Momos, as we have to build that Nasdaq leadership and the Transports MUST turn it around to please the Dow theorists.  There is no reason for the Dow not to attract buyers at these prices.  Low fuel costs, low labor costs, low material costs, weak dollar, low borrowing costs – COME ON PEOPLE – what does it take to get a rally going.  So anything less than a 600-point gain in the Dow today is a FAILURE!  No matter what they tell you on TV.  

    So, if you want an upside play, it would be DIA Aug $111/$113 bull call spread at .82, selling the Aug $98 puts for $1 as that’s a net credit of .18 on the $2 spread and you don’t lose anything on the puts unless the Dow drops another 1,000 points.  You can, of course, use any bullish offset, or none as it’s more than a double as a straight bet but that’s the only upside wager I’m comfortable with at the moment (as all of our futures longs have stopped out on a not too good open).  

    The good news? A number of Dow stocks now trade at attractive yields for new investors. The DJIA currently sports a 3.26% dividend yield, comparing favorably to cash alternatives: 90-day T-Bill: 0.04%, 90-day Bank CD average: 0.24%, Money market fund average: 0.04%.

    The same downside hedges we took yesterday are working this morning and a good momentum short is the USO Aug $29 puts at .55 as oil hit $75.71 last night and is now back to $81 so those could double if we repeat that move but ONLY if we are below the $81 line with tight stops over it. 

    Hopefully, we won’t need the downside today as excitement builds into the Fed meeting but hope is not a strategy so make sure you are well-hedged or – CASH!  Cash is good, cash is King!  

    Watch that Dollar – it’s going to be hard for us to rally with the Dollar over 74.50 (now 74.66) – we need the Fed to trash the dollar or we get bearish later!  

    Be careful out there!

    At the open: Dow +0.61% to 10876. S&P +0.85% to 1129. Nasdaq +1.99% to 2405.
    Treasurys: 30-year -0.3%. 10-yr -0.34%. 5-yr -0.27%.
    Commodities: Crude +0.86% to $82.01. Gold +1.74% to $1743.00.
    Currencies: Euro +0.64% vs. dollar. Yen +0.52%. Pound -0.01%.

    Market preview: Shares could be set to rebound from yesterday’s rout, with S&P futures +1.7%. If Europe is any indication, though, it could be a rollercoaster day. Of the safe havens, gold and the Swiss franc hit further records, but Treasury yields rise. The big news of the day will be the Fed’s policy decision, due at 2:15. The Fed is sure to comment on the turmoil, but less certain is what it intends to do about it. 

    Redbook Chain Store Sales: +4.8% Y/Y vs. +4.5% last week.

    Main Street shops still hurting:  ICSC Retail Store Sales: -0.5% W/W, vs. -0.3% last week+3.6% Y/Y, vs. +4% last week. "Increased economic uncertainty led to a pull back in discretionary spending".

    Q2 Productivity and Costs: -0.3% vs. -0.9% expected and -0.6% (revised downward) prior. Unit labor costs +2.2% vs. +2.6% expected and +4.8% (revised upward) prior. 

    Zillow reports home values falling 0.4% in Q2, the smallest decline in 4 years. Additionally, the company puts the percentage of underwater homeowners at 26.8% vs. 28.4% previously. The company cites a slowing volume of foreclosures coming on market as a reason for the better performance.

    Treasury yields gain as the Fed meeting looms close on the horizon with the tantalizing prospect of a change in policy, bias or language. Yields: 2-year +1 point to 0.38%, 5-year +8 points to 1.16%, 10-year +7 points to 2.39%, 30-year +7 points to 3.71%.

    "Just do something, anything," seems to be the cry to FOMC, which is meeting today amid market chaos and a slowing economy. However, with interest rates at zero to 0.25% for nearly three years and $2.3T of bond buying not spurring growth, how much more can the Fed do?

    "Out-of-the-box policies are called for, especially much more aggressive monetary policy," says Ken Rogoff. Rogoff’s work on sovereign debt crisis is credited by some for the possibly mistaken focus on fiscal austerity instead of stimulus at a time of weak economic growth.

    Barry Ritholtz sees a short-term market bounce coming, but it will mainly be an opportunity to sell stocks again: "Today’s market action is in large part a reaction to the wildly oversold condition. The assumption is this will be a bounce for days or weeks, than we will see a resumption of the selling until we make a sustainable low."

    Don’t be fooled by talk of the surprising strength in the British pound. Sterling looks decent when measured against 2 other troubled currencies - the greenback and the euro. Against theswissie, the yen, gold … not so much. 

    Banks in emerging markets began to tighten credit in Q2 after much rapid expansion, a survey from the Institute of International Finance shows. The report could indicate a potential slowdown in global growth, as a lot of emerging-market demand has been credit-driven in the past couple of years.

    Uh-oh!  Concerns about financial turmoil infect the previously impregnable Hong Kong real estate market as the government sells land in the Sha Tin district to a property developer for $704M, 33% less than the expected the price. TAO -14% in the last month.

    PM David Cameron nearly triples the number of cops patrolling London to 16K as violence and looting continues and spreads to other cities. While the root of the rioting may lie in protest to government austerity, at this point the mayhem has a life of its own. "Come join the fun," shouts a looter in a London suburb. [

  38.  Fed should reduce and in fact charge interest on the banks’ fed-held reserves.   Put that money to work…

  39. Phil, do you still think Gold is going to $2,000?
    Any charts/stats on who is buying Gold?
    Isn’t it mostly the Chinese?

  40.  @angelcur

    The "heck" with the russell.  I’m still in Phil’s gold short.  

  41. Phil,
    Although I am 80% cash, with the number of sold puts I have received margin calls. I do not expect you to help with each one, but if you can help on a couple I can apply to the others. Thanks.
    -10 IWM Aug 73P (sold at 0.50)
    -5 TBT Aug 32P (sold at 1.13)

  42. London / Phil – JCaesar posted some news about the riots last night and you did mention the fact that it’s not being talked about much here, but it’s a real story… They even had to cancel an international soccer game in England. You know it’s bad. It seems to be that all the resentment from the austerity measures and the degree of despair from the youth is rising up at the same time using any news as a pretext for violence in this case. Not many people are talking about the protests in Israel either. They mention 300,000 people in the streets. It would be like 15 millions in the US. It seems that more and more people won’t take it anymore!

  43. TNA/ PHIL..   what do you think about covering the aug 45 puts…and selliing the aug 35 put for 2.75?

  44. Bought UCO at 30.71…think oil has found pretty good support level and will benefit grossly from a QE3. Downside support at 80 is pretty strong.

  45. Gold Flips – 5 points in 8 hours – how cute!  Congrats on that one but very sad if that’s your "best quickie" but, then again, you’re not a Democrat so I guess it’s a low bar…  8-)  I’m not biased against gold, I think there is no fundamental logic to gold at this price.  The only value of gold is that people believe it has value.  It produces nothing, it is not useful (at this price) other than as a decoration, which is nothing to bank on when consumers are being stripped of their discretionary incomes and it’s not a practical means of exchange (as I’ve detailed many times) and, worst of all, they make more of it every day so it’s not actually rare!  When the only "demand" for something is speculative demand – THAT’S A BUBBLE!  

    Unfortunately, like housing in 2006 and oil in 2008, no one will believe me until it is far too late and then they will all say how "obvious" it was that we were in a bubble.  The only good thing about a gold bubble bursting is it doesn’t take the market down with it like oil and housing do.  

    FAS Money/StJ – Damn, those suck.  Let’s add the Jan $12 puts at $3.50 and put a stop at $7.50 on the Jan $18.33 puts.  If we go down, we’re set up for a 2x roll and if we go up, we get our long put profits off the table.  Also, it’s time to roll the Jan $28 calls down to the Jan $18.33 calls ($2.60) for $1.50 and double down at $2.60.  If this is too expensive for some, 1/2 the Sept $15 calls can be sold for $1.90 to help pay for it but, if the Fed gives us love this afternoon, that would be a much-regretted cover!  

  46. This is what I think of the Fed speaking today, hope I’m wrong:

  47.  be careful….who knows how much of last couple of days was margin selling and if we can hold into afternoon we could see another surge….its a bad sign that germany cant even turn positive considering they have been one of worst performers in world last 5 days…i read that there were 67 stocks down for every 1 that rose yesterday…worst in history…only other time even close was in the 40s…when german tanks broke through french armies    

  48. Oh, come on rustle…

  49. Don’t be scaring us.

  50. Anyone know how to find the ATR of a stock in TOS? Thanks.

  51. Pharm – BSDM!

  52. FWIW from SentimenTrader
    Oversold extreme
    SentimenTrader also looked at the other times in history, and there were only three, when the S&P 500 sunk at least 5% in one day to a six-month low, after having lost at least 5% during the prior week. Note that every time, the index rebounded strongly during the next several sessions.

    Three Days Later
    Maximum Loss
    Maximum Gain

    May 28, 1962

    October 19, 1987

    August 31, 1998

    October 9, 2008

    November 20, 2008


    Notice the crash of 1987 is on this list, too.

    The month following most of these were also better for the bulls than bears, but volatility was extremely high, and after the short-term rebound, prices often violated the panic low at some point.

    This is by no means to suggest that a bounce is imminent, but it will likely come at some point. We entered into this correction with reasonable valuations and they’ve become even more reasonable, with the S&P 500 trading at a very low 11 times 2011′s expected earnings.


  53. Phil
    I don’t want to drive you nuts with the disaster hedge theme, but can you suggest a hedge for mainly NASDAQ exposure. I am holding 10 QQQ BPS Oct 50/49 (adjusted twice-so nearly free). Or should I just expand what I have? I want to increase my downside protection 1.5-2x what I currently have. I also looked at the TZA 53/60 hedge of yesterday. Seems too expensive now.

  54. @Felipe
    $1,770 – $1,695 = ??  How Much??
    You are so biased against one of the best investments of the last three years that your emotions get in the way of your math or you have been up all night and can’t see straight.
    Over $7,000 in 8 hours. Now do the math, agin. : )))

  55. Good morning,


    IWM  64.39,  64.97,  65.60,  66.03,  66.84,  67.38,  67.82,  68.67,  68.98,  69.80,  70.11,  70.67,  71.38,  and  72.75

    Phil, good title for todays post !!

    I’m in TNA !! Current target IWM 68.50ish

  56. Phil Correct me if I am wrong FAS set stop on Jan 18.33 put at 7.50 option istrading at 7.07 so we past the stop or what?

  57. Something up with MS

  58. whatever will happen within the next days, stocks are really cheap now:

  59. My order finally filled, my order finally filled. Hurrah!!

  60. Phil / Ben    With the revolving door of Goldman staff at the Fed shouldn’t we assume that ‘they’ know what will be released at 2.30pm?  It will be interesting to see what the bots do just prior to 2.30pm.  The mkt seems to be building in high expectations for the FOMC.  While my shorts are hurting this morning, I guess I should hang in and see how this breaks this afternoon.  I don’t think the FOMC minutes are going to release QE3, that will come later, so I’m guessing mkt disappointment?  If I’m wrong it will be expensive.

  61. JR,
    I was curious about volume on IWM.  As the stock advances, the volume has been steadily dropping.  Do you factor that into your buy/sells?

  62. QE3/Jake – Yes, it’s a terrible thing to depend on and we will very likely crash and burn without it.  Someone rightly said that ALL of this – ALL of the US economic problems – stem from the very faulty decision made in 2001 not to just let the economy crash then, as it naturally should have from the .com bust.  Since then, we have had nothing but various forms of artificial stimulus aimed at driving the markets higher, sacrificing everything else in order to prop up the wealth of the investor class and to avoid punishing them for over-investing in the late 90s.  That’s led to debt, unemployment (due to malinvestment) and social inequality on a scale not witnessed since the Great Depression and there is NOTHING that our Government is willing to do to make any of this better.  As you note, ALL of the money is being pooled to a very select group while being siphoned away from everyone else.  In the UK, they still teach economics in school so the people KNOW they are being screwed over and they are fed up and rioting.  In the US, people dress up like garden gnomes trying to win $1,000,000 on America’s Got Talent.  

    Fed/Angel – That would be too little I think.  If they do not aggressively step in and we fail on whatever it is they do end up doing – the market can very quickly go into free fall.  

    Disaster hedge/Pstas – I’d go with the Sept $60/70 bull call spread at $2 because $60 is nothing for TZA to get to on a mve from here ($57).  You can offset those with the sale of any of the following offsets:

    WMT Sept $47.50 puts can be sold for .92

    USO Sept $30 puts can be sold for $1.18

    JPM Aug $35 puts can be sold for $1.45

    GS Aug $105 puts can be sold for $1.85

    VLO 2013 $17.50 puts can be sold for $3.60 (who doesn’t want that?)

    VLO Jan $17.50 puts can be sold for $1.90

    VLO Sept $18 puts can be sold for $1

    XOM Sept $67.50 puts can be sold for $2.30

    All of these puts I like by themselves with 20% stops guarding against the Fed not coming through today.  

  63. Morning Phil
    would you initiate a new DIA hedge here if we only get a weak bounce?
    yesterday hedge was buy  DIA Sept 102.75 P $2.2  now 2.45

  64. I really hope he does the stand-by thing, because some little half-measure like putting the extended period on the balance sheet will be seen as the worst-of-all combination of fear and timidity.

  65. Phil/QE3
    Bama and the Fed are in a real pickle when it comes to QE3.  Like you said, if they don’t do it, market will probably drop….if they do….Republicans and the rest of the world will scream bloody murder.

  66.  i am looking at the ubs-bloomy ag spot index….technically it is still fine…bouncing off 200-day and still near RECORD high…i still maintain that if they do something that sends that to new records…it will be HORRIFIC for emg markets.

  67.  brazil/india have already crashed…china/russia would join them and send them down another 20-30% when market realizes their inflation getting worse with growth screeching to halt.

  68. Phil,
    Quick ques on the 20% bounce/5% rule and your feeling this AM that we would need to get to Fri close (120) or the rally would portend weakness. We fell approx 23 SPY pts (135 to 112) so 20% (of 23) would be 4.6 added to yes’d low of 12 = 116.60 which is significantly lwr than Fri cl of 120. Pls clarify when you have a moment.

  69. exec / volume

    A volume spike usually precedes a turn; higher volume on down moves than up !! ( so lowering  volumes on an up continuation is not abnormal) (if anything in this "market" is normal)

  70. Phil- any other offsets you can suggest on the TZA hedge/spread? I have enough short puts now and do not want to get in to margin trouble.

  71.  angel,
    inflation getting worse….  I thought inflation was going to SAVE the markets.  

  72. .i am stunned at how many people dont seem to see that qe2 has been directly responsible for part of the recent crash

  73. The Bernanke is already on record saying the 2nd half of this year will see an upturn in the general economy. Why would they offer QE3 with recent signs of improvement (although limited)?  I would be shocked at an announcement. This level of drop in the market doesn’t seem to warrant that type of drastic response and as Exec pointed out, there would likely be more bickering between the parties if that happens this early in the game. My $0.02 worth.

  74.  Phil,
    Am I understanding it right?  Get USO Aug $29 puts only if oil is below $81.  It is $82.48 now so stay away even if it is only $0.42 now for Aug $29 put versus when you recommended it this morning at $0.55?

  75. Art C thinks no QE3 …

  76. phil,
    how about the DIA Sept 102.75 Put at 2.5? Is it still a good hedge to protect the downside.

  77. Loosing momentum, taking profit before Ben (the wild card)

  78. Jake, more to do with market stability. If we do get QE3 then things are worse then what they signaled to believe. Are things worse than they were last year when they embarked QE2?

  79. Options House just upped their Margin Requirements 100%.

  80. LIKE! : Phil
    August 9th, 2011 at 10:40 am
    The notion of capitalism allowing destructive reconstruction has been lost these past ten years.
    You’re supposed to allow companies to FAIL in order to direct resources towards better enterprises.
    Big Government and Big Business are in bed together, and having an orgy at our expense ….

  81.  THIS is what I hate about options. I agree with JR and decided to take profits on my weekly calls. Problem is that despite the huge run up, with that little dip I’m basically back to where I started! Arrgh… I need to switch to TOS and start doing futures. 

  82. FAS Money / Phil – These 18.33 Puts dropped to 7.25 quickly after you posted your comments and have been dropping since then.  I am assuming that most people were able to get out at 7.25 at least. And get the 12 Puts for 3.25 which is where they were then! Being out of the 18.33 puts, we can just roll the 10 Calls to the 18.33 Calls for around $1.60 then! No need to double down so we keep a balanced strangle with 10 contracts on each side. Close enough?

  83. What time is Ben?

  84. FAS Money Position Recap

    Long Strangle – Jan 12 12 Puts (3.25) and 18.33 Calls (2.18)  (Collected $4.85 on the put and paid $1.59 to roll the calls) – Your prices may vary as things have been moving fast this morning!
    Weekly – Short August 22 Puts (2.87 now 8.50)
    Monthly – Short August 23 Puts (3.65 now 9.50)

  85. 2:15 est

  86. Phil- much specualtion that a big part of the problem the last several days has been related to HFT.  Given most of the trading going on is "bot to bot" that would seem to explain the quick and powerful extreme moves. Maybe things are happening as they normally would if humans were trading but much faster because it’s machines?

  87. Phil,
    It has taken a year, but on some of these issues you are starting to turn me into a DEMOCRAT!
    I tried to tell my wife the other night and boy did she shoot that down, but I have a hard time disputing some of your perspectives…
    (Well, maybe it is also my recent move to Chicago…this town is so liberal it can’t see straight)

  88. W. Ross’ take.

  89. You are welcome Bruce!

    Upside calls/Jercon – Well we can’t afford to ride out weeklies, lucky to get our money back at this point.  On the longer-term ones – if you regretted owning them on yesterday’s dip, cash is better but if you are willing to gamble on the Fed (a binary event) then they could have a nice pay-off as we may have a 10% up day.  We may also have a 10% down day, of course…

    Margin/Kevin – Well you need to organize your short puts first by which ones you have lost faith in – silly to hold those, THEN by margin but, don’t forget, you don’t have to kill whole positions, buying back 1/5th releases 20% of the margin as may buying some long, cheap covers that will also serve to make sure you lose a little less on the way down.  Also, if for example, the RIMM Jan $35 puts (now $12.80) are a big problem, you can buy 1x the 2013 $17.50 puts for $1.97 and roll the puts to 2x the Sept $25 puts at $3.40, which have $1.45 x 2 ($2.90) in premium that expires in 38 days.  IF RIMM breaks over $25, you can always roll 1x of the puts to something longer and more expensive but, otherwise, making back just the $2.90 premium in a month against your $12(ish) loss would be a nice partial win.  As I said in yesterday’s chat – don’t try to win back your money with a grand slam – just hit a bunch of singles.  

    Bernanke/Lol – Not speaking that I know of, just the statement, which makes me nervous.  On CSCO, we are already long so just waiting/hoping for earnings that don’t suck. 

    Gold $1,726 – someone is less nervous at least.   Dollar 74.75 unfortunately holding us back but also building up fuel for later if it turns back down.  

    Long on oil/David – You snooze, you  lose dude!  We went long at $80!  Now we’re rejected at $82.50 it makes a better short.  

    Protective put/DC – I am no fan of those!  You are betting against yourself so what’s the plan?  Let’s say you cover with the Sept $13 puts at .53.  You are only guarding against a 10% drop (CSCO $13.86 plus the money spent for the puts) and, if it goes the other way, even if you get out with .25, you are guaranteed to lose $1 a year if you do it 4 times.  You have to either believe in a stock or not.  As you are bullish on CSCO in your spread, you can sell the Sept $14 calls for .85 and pray they don’t go up more than 10% and put you in a bad spot but, if that doesn’t appeal to you – then why on earth would you be buying puts?  

    Cramer/Exec – I would at least hedge into a rally but yes, I think CNBC is working double overtime to keep retailers out of any rally until the big squeeze is on.  I predict Cramer will use the phrase "game changer" somewhere around 3pm. 

    Information/Jbur – I think that was Gordon Gecko…  8) 

    Dry powder/Peedle – That’s like saying "don’t shoot until they saw the whites of their eyes" – unfortunately, by the time you are ready to pull the trigger, you are poked full of arrows and your scalp is hanging around someone’s neck.  They don’t have to "pull the trigger" today but they do have to make a definitive statement – not the usual vague BS they like to put out. 

    Banks/LV – They aren’t lending any money now, what difference would it make.  

    Gold $2,000/Prof – I think it will on inflation but we haven’t had anything near the kind of inflation that justifies $1,700, let alone $2,000 yet.  I’m still looking for a proper pullback to $1,250 before I’ll want to go long again.  It’s all speculators and the Chinese government is just another group of speculators – they buy oil and gold and copper and cotton and corn and rice and they are very silly about it.  

    Gold/Chaser – Good going but out now I hope, that was a nice run.  

    Margins/Ross – See above.  The IWM Aug $73 puts have (on TOS) $13 in margin at $6.60.  So that’s costing you $13,000 in margin and you are down around $6,000.  What you can do, is kill the position and flip to 30 IWM Sept $67/71 bull call spread at $2 ($6,000) as you need about the same move up to get even and there’s no margin there.  If we tank later though, you’re going to have to kill it or flip bearish by rolling the $71 callers ($1.85) down to the $65 callers (now $5.10) to turn it into a bear call spread on momentum but that’s tricky (but still just $6K in margin with 30 contracts).   TBT is easier as you can just roll out the loss ($3.85) to the Sept $30 puts ($3.60) or 2x the $28 puts ($2.20) if that works with your margin.  

    Mad as hell/StJ – Didn’t I predict this outcome last year?  (note last cartoon)

    TNA/Topher – Do you mean making a bear put spread?  I do not like negative risk/reward set-ups, especially on very volatile ETFs on days when market-moving news is pending but that’s JMHO.  

    Dollar 74.85, tempering the rally so far.  Will be interesting if it turns around and boosts it…

  90. The Volume Speaks Volumes… Again
    The levitation resumes. And as expected, the second this happens the volume divergence from average goes red. Good to see that no matter how big of a beating they experience, the robots will always be here, apocalypse or shine. In the meantime, the carbon-based whales are sitting on the sidelines until 2:15 pm. Anything less than the expected from the gospel of St. Chairsatan will promptly push the volume bar from red to green, and the direction of stocks (inversely) appropriately.

  91. Back (2/3) in TNA on a buy signal; 67.82 breaks or it doesn’t !!

  92. i hhope you guys got into some chf (swiss franc in th elast week)

  93. germany just went slightly positive into close.

  94. TNA..  no bear put spread..   just thought cover the 10 aug 45 for a 3 point loss ($3,000)…and maybe
    sell 15 of the aug 35 puts @ 2.50 …  to try to get back to even???… if they crap out , I would rather own 1500 TNA at 32.5 entry than 1000 TNA @ 41.5..   and maybe buy some SPXU for protection??

  95. Europe closing with FTSE up 1.5% at 5,149, DAX down 1% at 5,853 and CAC up half a point at a pathetic 3,143.  

    • Up 1.5% with the capitol in flames for the UK is pretty impressive and they spun off a drop to 4,800 yesterday so up 7.3% in 2 days is not a bad recovery.  In the bigger picture, FTSE climbed from 3,460 to 6,100 (up 76%) from low to high and now they are back at 5,149, which is still up 48.8% and down 15% from the top.  That is a market LESS AFFECTED (I would not say unaffected) by QE2 and gives us an idea of the true value of equities.
    • In Germany, they bottomed out at 3,588 in 2009 and topped out at 7,600 in April (up 112%) and they pulled back to 5,500 (27.6%) but have now bounced back to 5,853, which is 23% off the top but only 18.5% off the 100% line at 7,166.  They are still up 63% from the bottom.
    • France went from 2,465 to 4,169 (up 69%) on their run and fell to 3,000 (down 28%) but are back to 3,143 (down 24%) and up just 27.5% from the bottom.

    NOW CNBC discovers UK riots – this is how the media manipulates the message.  No mention of the fact it’s been going on for 4 days while they didn’t cover it – ALL of the anchors are treating it like it’s breaking news.  

    Oops, the numbers I got from the WSJ must have been delayed, they EU closed a bit higher but you get the idea.  Still not officially the end of the World…

  96.  Phil,  
    were you saying you like oil short here?  At what levels?  Out before 2?
    - We went long at $80!  Now we’re rejected at $82.50 it makes a better short.  

  97. Phil, 
    Being that any QE3 is not supposed to be directed at buying bonds, will TBT benefit from the announcement (of QE3)?

  98. Phil / Bernanke statement – Would the alternative be presenting the Fed’s position before a Congressional committee?  If so, perhaps he’s doing this to avoid the slings and arrows from the Ron Pauls of Congress, with the assumption being that he’ll be announcing something like a new round of QE?  Just a hypothesis.

    Rail traffic in July 2011 continues to degrade year-over-year, and now is literally showing no growth over 2010. Econintersect believes transports are the window into the economy.

  100. Doug Kass: The consensus view is that the Fed will extend the maturities on their Treasury note purchases today.  A bigger foot print!

  101. Phil
    I have recovered 55% of yesterdays loses, still have QQQ and USO calls, USO is green and now TNA goes up more without me, not fair!

  102. Things could be worse !!

    From Bespoke

  103. Phil,  did you hear anything from Income Trader? He didn’t answer member’s questions since Aug. 4.

  104. iwm cant break 64.80

  105. sorry 67.80, but looks like it just did! more green maybe….

  106. KASS:  i hope they dont do that. i can rationalize why it may be a good idea, but it is a small idea, and it will look weak and inexplicable

  107. Phil / " "game changer" somewhere around 3pm" — I thought game changing was his standard operating procedure, no need to state it. Short Attention Span Theater doesn’t remember what he’s said in the past anyway. 8)

  108. For anyone following my AAPL trades:  Yesterday I established a short strangle on AAPL weeklies 355/370.   I bought back the call side of the trade in late atternoon for a 26% proft, leaving the short puts.  Today I’ve repurchased the 355 puts for  2.43 for a 46% profit.  Now, I’ve sold the weeklie 345 puts for 1.17.    That may seem odd to some, but what I’m doing on the last trade is to squeeze about 1/2 of the remaining potential profits out of the put side of the trade, with much less risk.  I won’t be online the rest of the day.  My bother has arrived from California for a visit.   That’s why I didn’t make any a.m. trades.  I hope you all found something to make money on this morning.  These wide swings in the market are perfect for swing trading.  Catch you later.    lflan

  109. London / Phil – The following is from The Telegraph. You should sue someone for plagiarism!

    It is no coincidence that the worst violence London has seen in many decades takes place against the backdrop of a global economy poised for freefall. The causes of recession set out by J K Galbraith in his book, The Great Crash 1929, were as follows: bad income distribution, a business sector engaged in “corporate larceny”, a weak banking structure and an import/export imbalance.
    All those factors are again in play. In the bubble of the 1920s, the top 5 per cent of earners creamed off one-third of personal income. Today, Britain is less equal, in wages, wealth and life chances, than at any time since then. Last year alone, the combined fortunes of the 1,000 richest people in Britain rose by 30 per cent to £333.5 billion.
    Europe’s leaders, our own Prime Minister and Chancellor included, were parked on sun-loungers as London burned. Although the epicentre of the immediate economic crisis is the eurozone, successive British governments have colluded in incubating the poverty, the inequality and the inhumanity now exacerbated by financial turmoil.

    Britain’s lack of growth is not an economic debating point or a stick with which to beat George Osborne, any more than our deskilled, demotivated, under-educated non-workforce is simply a blot on the national balance sheet. Watch the juvenile wrecking crews on the city streets and weep for all our futures. The “lost generation” is mustering for war. 

  110. JR,
    I’m with you….taking profits until after the Bernanke

  111. here also, just sold TNA….

  112. bobhu / Income Trader – I think he’s just hoping the index comes back up to 745 by the end of option expirations this month.  His last post said he was "monitoring the situation" if I remember correctly.  His monitoring is probably just waiting and hoping.  At least that’s my two cents.

  113. Phil,
    regarding the suggested puts, are the 20% stops not to close (they are over yesterdays lows). sometimes there are quite some index shenanigans after the fed statement. So you think we will get a drop or surge right away?

  114.  S&P said this morning that it doesn’t see a France rating cut for at least 2 years….that shows you how sinister their downgrade of US was, in my opinion.

  115.  angel,
    AGREE!  that’s nuts.  Far more going on than meets the eye.

  116.  but as true as that is i am not entirely unsympathetic.. the US policy mechanism is dangerously broken

  117. Well Congress will now be grilling S&P instead of working on a budget.  They’re looking for any distraction.

  118.  everyone thinks their move was political…gop thinks it was to promote tax hikes…dems think it was to hurt economy/obama….im leaning towards thinking it was to help china…i know that sounds crazy, but based on their comments…i think china wants weaker dollar at all costs…even if their treasury holdings decline.

  119. PhiL/GLW: When u  have a moment, need help on :
    Buy 1000 shares GLW at $16.67,now $$14
    Sell 10 Feb $16 C at $1.94,now $.82
    Sell 5 P,Feb. $16 at $1.32,now $2.95

  120. S&P — The fact that our government is even paying attention to the S&P downgrade is disturbing. What’s next, roll our debt to zero interest credit cards? :)

  121.  angel,
    Why would S&P be looking out for China?  is there a connection?

  122. China / Angel – See this link and that explains the hypocrisy of China relating to our debt! They need it…

  123. We should break North right about here !!  (or not)  8-)

  124. That would be a big QE3:
    Key paragraphs:

    First and foremost, the Federal Reserve should announce an additional $2 trillion of asset purchases, including longer-term Treasury bonds, agency mortgage-backed securities (MBS), and foreign exchange. This is more than three times the size of the woefully underpowered quantitative easing of late last year (dubbed QE2) and it should be accompanied by a clear statement that more is forthcoming if the economy continues to underperform. The goals are to push down bond yields and mortgage rates, to push down the value of the dollar in terms of foreign currencies, and to boost stock prices. All of these help households deleverage their balance sheets and encourage consumption, investment, and exports (which would become cheaper for foreign buyers as a result of the dollar’s depreciation). Businesses would need to hire more workers to meet the additional demand.

    It is important to recognize that $2 trillion of monetary stimulus is not comparable to $2 trillion of fiscal stimulus. In my previous proposal, I estimated that this policy would boost US GDP by an amount comparable to $500 to $800 billion in fiscal stimulus. However, monetary easing reduces rather than increases our national debt. An additional step the Federal Reserve should take is to stop paying interest on reserves held at the Fed. At a rate of 0.25 percent, these interest payments are a small but unnecessary subsidy to banks and a minor disincentive for bank lending. 

  125.  Phil
    I bought 1500 SWKS @ $26.8 —  now $20.25 up .85 today.
    Would you sell some front month C’s to  guard profits  and then keep rolling them up as stk price moves back up?

  126. phil or stj,
    i had some short FAS puts put to me (i own them at a net of $22!).  Do you suggest writing calls against them while they recover…what maturity/strike do you suggest.
    thanks in advance.

  127. a german govt adviser out today saying efsf isn’t for italy or spa

  128. Americans also think it is ridiculous...

  129. Out of TNA for 70 cents !!

  130. but i hate to let him in on this the efsf nevertheless is

  131. Impressive flush.

  132. jcaesar/Income Trader – Thanks.

  133. flush?

  134. commercial traders short 330 k of old contracts thats MASSIVE and explains the crap action in the gold stocks last few days..

  135. gold*

  136.  berkowitz and bill miller down -28% and -35% ytd, respectively through yesterday…wow

  137. Angel / Flush — That’s what it looks like to me. Kind of odd though, the IXIC dropped volume half way through the drop since 12:30 while DJI, SPX and IWM increaseed. Now volume is dropping back down we’ll see what they can do with it.

  138.  miller must have gotten  hooked on the financials again, like he did in 2008

  139. i think everone in the tugetarium right now

  140. Buy signal again;,an hour and ten minutes to go; final wording being drafted !!

    1/3 TNA at $41.66 !!

  141. QQQ/DC – I’m confused.  QQQ is a bullish play, is that what you want to hedge AGAINST or is it a bear put spread?   Either way, for reasons that I HOPE are now very obvious to people, you get A LOT more bang for your buck hedging for disasters with Ultras but (see TZA) they also kill you if you are greedy and don’t take it an run.  If you are already in an ultra-hedge and are thinking of getting more bearish – I would say today is a bad day for that but, very likely, I will be posting some new hedge ahead of the Fed AFTER we rally – just in case.  

    Math/Flips – Oh, that’s much better then!  I have not always hated gold.  Notice Prof, who hasn’t been on for a while, came in and asked if I still thought it was going to $2,000.  I was bullish but I thought the rally was overdone at $1,450 and have been bearish since (and wrong) but, as you know, I don’t change my mind about something just because a lot of people are crowding into a trade.  Also, on what planet has gold been "one of the best investments of the last 3 years" – there were about 1,000 stocks that kicked it’s ass, many of which we played.  From $400 to $1,400, I was a big fan, but you can keep this last 20% in the last year rally – we’ve had MUCH better places to put our money since last November.  

    Thanks JRW. 

    FAS/Yodi – Yes, that stop should have triggered.  Now we HOPE the Fed does something encouraging.  

    Great chart Pentax, thanks!  This pretty much says it all folks – in REAL MONEY, other than the panic spike low of 2009, US stocks have not been cheaper in decades.

    2:30/Tusca – So far, we’re on track for a 7.5% to 10% up day.  Most people want that to happen so I don’t think I’d want to bet too heavily against it.  If we do go down, we’re going 5% down easy, which is a 15% gain on TZA (to $65) so why not just play something like (because others have asked):  

    TZA Aug (next week) $56/64 bull call spread at $1.90, selling any of the above bullish offsets or just risking $1 on a stop-out if the Fed goes the other way.  Pays better than 4:1 on a 5% drop in the RUT (to 640ish) and we were at 623.7 last night so a disappointing Fed should take us right back there.

    Keep in mind with the bear put spread, it won’t pay in full unless we stay down next week so it’s a play on bad news we do not recover from over the next 8 days.   Keep in mind I’m NOT bearish – I believe in The Bernank!  

    Dow volume a nice 158M at 12:20.  We dumped well over 2M in the past 10 sessions so it will take a long time for people to change their minds if they try to get back in!  

    DIA/Ban – I don’t think we fall until just ahead or just after the Fed but the move up could be very violent and kill that position so I don’t like it today.  If you want to go short with a directional play – try the USO Sept $30 puts at $1.18 as USO hit $30.50 last night, which is 5% down from here and we still expect a sell-off in oil over the contract cycle winding down so a couple of ways to win on that one, regardless of what the Fed does. 

    Bounce/8800 – We fell 225 points since July 22nd without any significant bounce.  That was down from 1,350 (16.666%. thanks Lloyd!) so the 20% bounce we expect is 45 points, back to 1,165 so technically, we can live with that on the S&P but that’s a WEAK bounce – that’s not enough for me to get bullish.  A stronger bounce is going to get to that 38% Fib level or a 40% retrace so 1,200 fits the bill and especially after a drop this sharp, we NEED the market to act like it was a big mistake that will quickly be erased.  

    Don’t get so hung up on exact math – I made this rule up and it’s based on OBSERVING consolidation zones so we throw out a lot of spikes and round off our tops and bottoms etc.  I came up with the 5% rule after observing he design of various trading systems I consulted on as well as the process by which the parameters are set and the organizational process that leads to adjustments being made in the systems.  As there are many variant systems out there and many different types of people using them – you have to observe those consolidation points to pick up the baselines (places where the mood changes) and then we can extrapolate pretty accurately where our next set of resistance points will occur.  

    Offsets/Pstas – What, more?  No those are good ones for now although I’ll keep looking but it pays well enough that you don’t NEED an offset, it just super-sizes your returns on cash.  

    QE2/Angel – It’s all nonsense but, be real.  It’s not like our elected officials are going to raise taxes or create jobs or do anything else useful so – it’s all we’ve got!  

    USO/CJI – Yes, that was super advice earlier as they held $81 and went higher.  Now I like the Sept puts better because I want more time to be right or adjust. 

    DIA/Pat – No, see above. 

    Did I say that Prof?  That’s deep…

    Back to start/Dr C – Yes but the stock you can now buy are 20% cheaper.   Why does no one get that that’s a good thing?  

    FAS Money/StJ – I like the DD still on the call side.  If you are not going to buy when FAS is down 50%, why have a bullish side at all? 

    HFT/Jake – Oh absolutely, we have a "normal" 20% pullback in the markets and now a "normal" 20% weak bounce (4%) off the floor but at hyper-speed.  I’m HOPING this trend continues and we have a "normal" 50% retrace by the end of the week and then we settle in right where we should be, back in the bottom end of our old range, having taken some fundamental damage from earnings (which were not great) as well as our ratings downgrade.  These things get programmed into the bots as time moves on and they re-adjust their targets accordingly.  Right now, it’s kind of chaotic as people are throwing switches and changing parameters on programs to try to "take advantage" of the market move when, in the end, they all end up just trading around the same lines anyway.  

    Thanks Danosu, We accept you – one of us!  

    TNA/Topher – You can do that but a 7% dip on the RUT and those $35 puts go in the money – it’s just very scary ahead of the Fed and you are pressing your bet, not hedging.  IF the Fed is nice and we head up, you will make your money back and won’t need the short sale.  If the Fed is mean and we go down,  you will be able to sell lower puts for much more money to cover (if you are still in the mood to be bullish at all as we plunge 5%+ into the close.  

    Oil/Peedle – Generally, we are THRILLED to catch a $1 move.  $82.50 is a critical zone and the way oil plunged off it yesterday, I’m thinking it’s going to form a bit of a barrier on the way up.  See above Sept short on USO and note I am not making ANY $25KP plays today BECAUSE IT’S TOO RISKY!  And, when it’s too risky to trade – not trading is SMART!  

    Ben/JC – I have to think that he sees this as his moment to shine.  I don’t think he needs "permission" nor does his ego want him to seek it.  Congress has failed, POTUS has failed and only Ben Bernanke can brilliantly (in his mind) use the power of the Federal Reserve to save America from the brink of doom.  That’s the way he wants the history books to read – as someone said – never let a good crisis go to waste.  

    Fairness/Shadow – Not worth risking any more, you averted a total catastrophe and should be thrilled to get back to cash!  

    Income Trader/Bob – No, I saw that he didn’t make a new post but was unaware he stopped chatting.  He’s going to get the boot at this point.  If you bring me up to speed on where you guys are, I can take a look at anything that’s outstanding.  

    Telegraph/StJ – Very well said!  If Americans wake up like our English cousins, this could get really ugly fast.  They have cameras everywhere in the UK so much easier to identify trouble spots than in the US but it’s not just London, the whole country is erupting in violence and we have 25% youth unemployment here too – just most of them are hooked on video games and their only form of protest is killing another 1,000 zombies but one day, Grand Theft Auto will turn into Grand Theft Los Angeles and New York and Chicago.  When the parents lose their homes and the kids get cut off from the web – what do you think is going to happen…  

  142. jcaesar
    What position do you Hold in the Aug RUT?

  143. lflantheman/AAPL: Thx for the updates on your AAPL trading, very useful to see what someone else is doing on the AAPL -particularly weeklies which I am selling most weeks (on the sideline at the moment)!
    Your details (and thinking) are much appreciated!

  144. is bernanke actually supposed to speak today

  145. Phil, on the USO play above are you selling the September puts?

  146. RUT pack – we are trading at the top of a descending channel created by connecting the close of 8/3, touching the 2 oclock candle on 8/5 and where we are now.  The bottom is from the low of 8/3 connecting the low of today.  This is one of those tza entries with a defined stop if you are so inclined.

  147. FAS Money / Phil – OK, then we can add another 10 Jan 18.33 Calls at around $2.00. We’ll have 20 calls to sell against and 10 Puts right now. 

  148. Out of that TNA for 16 cents !!

  149. Phil,
    alternative to TZA — Sept SDS  27/32 bcs, net $0.95?

  150. Phil/Income Trader — Where we are is:  The put side is theoretically still on, but at 745/735, it’s a very big loser at somewhere around $8.00 negative….but, I can’t imagine anyone still in at that price.  It seems that the Income Trader guy just stopped chatting sometime on Thursday last week, on that huge down day.  No adjustments, no hedges.

  151. Phils Any suggestions/ help for these positions:
    Short 4 VIX Aug calls, long 4 Sep 25 calls-
    Short SCO Aug 49 calls, Long Oct. 60 calls-
    My goal is to reduce margin and risk. Thanks,

  152. Phil
    Hard to see how a FED written statement without a BB press statement/speech does much here.

  153. yodi / IC – I only have Aug RUT in my paper trading account.  Still have the 745/735 open for a loss.  In my real money account I’m trading Oct RUT ICs.

  154. Bernak can do what he wants, but when productivity is -0.3%, there are more cuts to make in the business world, and we have had a bunch of announcements already.  IF we go up, it only will be a matter of time.  Business may go on a buying spree with all their cash, but they sure as hell are not hiring OH.  Too much of a cost burden.

  155. BSDM/mrm – sure hope you sold into that excitment.  I bought ARNA again this morning at 1.37.  Will get out again if it moves to its high (1.60ish).

  156. MRX – missed that one….but rumors are Valeant may be on the prowl.

  157. jcaesar Phil
    Sometime last week I adviced that I rolled my putc to 710/700 so I do not know who is still in this trade 11.07/9.02 now 46.05/39.85 So the short put is still 8.32 premium as per now.

  158. Phil/Income Trader,
    The original trade was sold Aug. RUT 910/920 call spread and 745/735 put spread for $1.15 to $1.20 on July 13. 
    Last Trade recommened was close the call side for $0.25 to 0.30 on July 15.
    And last chat by Income Trader was on Aug. 4 as following
    “To All -
    We are monitoring the market and the position and will issue an alert if we see fit. We are looking at the velocity of the down movement and the explosion in volatility  and at this point trying to roll  or buy insurance will not be strategic. “
    I rolled 735/745 put side to 1.5X Aug. 720/730,  Kwan rolled his to 2X Aug. 710/720. And some members were not rolled yet.

  159. vix moves up again

  160. Sorry I confused you. Did I write it wrong?
    "I am holding 10 QQQ BPS Oct 50/49 (adjusted twice-so nearly free)."
    I started 8/3 with the Sept. 52/51 BPS (Bear Put Spread/ sorry I didn’t spell it out or write it correctly?). Adjusted the short out to Oct 49′s on 8/4 for more downside protection. Then adjusted the 52′s yesterday afternoon to protect some gains. Yada, yada, yada. Ok I get your point about the QQQ’s not being great for a disaster, but it was just a hedge for a flat to down market when I originated it. I am up 300 on it so no big deal. I was caught off guard, as many others by the breadth of the sell-off. On the other hand, I am only protecting short puts (first entry 1-2 contracts) on depressed stocks (CSCO,IMAX, JPM, WFR, HOV, GLW). I didn’t feel the need for more protection at the time. I am boring you and the rest. Just don’t want you to think I haven’t learned anything while here!

  161. RUT pack – getting good seperation from the upper channel resistance. 

  162. ss / TZA

    I took a 1/2 position in TZA on your call; barring a new signal I will wait until 2:15 but am keyed in !!

    If there is no new accommodation language, they might as well say they are declaring Chapter 7 !!

  163.  CNBC keeps hawking "what the market wants to hear from the Fed".   Then the traders say they want to hear "confidence and leadership"…from a Fed statement?   How can those expectations be met from a piece of paper?   Seems like the Fed is being set-up as an excuse to flush again, with all the hype from CNBC being very suspicious.

  164. Selldown into FED statement….feels like a setup

  165. Hi All -

    For those following WFR – there’s been some insider buying reported today. Not huge, but still:

  166. Short puts/Pentax – Good point, we can expect some spikey action on the Fed but I think it’s simple, if not QE3 – let’s error on the side of caution and dump one-way bullish positions, 20% or not.  We can always reload once we’re sure we’re not going to crash.  Could be a huge head-fake, we’ll have to be very alert.  As I said before – CASH is the safest, smartest way to go.

    GLW/DFlam – You have a buy/write at net $14.07/15.03 which isn’t due until Feb.  GLW is at $13.93 so barely off track.  The simplest thing to do is roll the 5 Feb $16 puts ($3) down to 10 2013 $12.50 puts at $2.07, which is a credit of about .50 per long so net $13.57/13.04 and, if you want to be more worried, you can pick up another $1.30 per long by rolling the Feb $16 caller (.85) to the 2013 $15 caller ($2.15) and that would drop your net all the way down to $12.27/13.63 but that last roll doesn’t really give you enough of an improvement to bother, in my opinion.  

    SWKS/Ban – The trick is to hedge WHEN you buy the stock, not after it falls 20% – good note for next time!   I’d sell the stock (now $20.08, so $30,120 with a $10,080 loss) and sell 20 Jan $16 puts for $1.70 ($3,400) and buy 30 2013 $15/20 bull call spreads at $2.70 ($8,100) for net $4,700 on the $15,000 spread so all SWKS has to do is hold $20 through 2013 and you end up with a small profit while using just 15% of your cash (and about $5K in margin) and your "worst case" is you end up back in 2,000 shares at net $18.35 ($36,700) but, of course, those Jan $16 puts are an even roll to the 2013 $12.50 puts so it’s a lot better than that.  

    FAS/Lunar – If you were short the puts, all it did was wipe out the remaining premium, drop $22 of cash into your account and stick you with the short puts.  You can simply use the cash to buy them back and go back to shorting the puts you originally planned.  You don’t really want to sell calls when FAS is at $13.60 to try to get even on $22.  

    USO/Danosu – No, that was BUYING the USO Sept $30 puts, now $1.50, up 27% already!  

    FAS Money/StJ – That’s good because I only like doing half sales and we SHOULD make a sale on a spike up while we have this VIX so this is the way to go as we can sell 10 and 10 against 20 and 10.  

    SDS/Canuck – Sure, that works find.  Keep in mind SDS is "only" a 2x ETF so you need a 7.5% drop in the S&P to get you a 15% gain to put that in the money – that’s the real difference.    

    LOL – CNBC playing up the shooting of a guy as the cause of the riots and I’ve seen newspeople interviewing rioters and asking about the guy who was shot and they says "who?"  This is about voter/youth outrage at the financial situation no matter how they try to spin it.  

    Income Trader/Esco – Well, to some extent, there’s not much you can do about it other than wait to see if you get a bounce by next Wednesday and then, if you have to, just roll the loss and write off the month.  I don’t think it’s a big deal as you guys play to make $2 on each end every month and it’s certainly not possible to win EVERY month, which is why I don’t like those trades – if you string together two consecutive losses, you can spend 6 months trying to get even.  In a "normal" market, that’s fine but we haven’t had a normal market in 20 years now!  Anyway, if it were my trade, I’d say wait until next week because you can’t be more screwed and then you have to deal with it on a roll. 

    Speaking of rolls, market rolling over as Dollar shoots back up over 75.75.   Can’t blame the Yen (77) or the Euro ($1.421) or the Pound $1.621) so just nonsense I think.  

    Oil fell back below $80 and that’s $1.73 on the USO Sept puts and that’s up 46% and you are some greedy bastard if that’s not enough to make in a couple of hours so very tight stops here.  

  167. IC / Yodi and Jcaesar – Like JCaesar, I am holding an October RUT IC (550/560/835/845). Got to say I am happy to have opened it with about 20% downside protection. But that volatility is just crazy. As we speak, my short put which is 106 points below the market has a delta of 19! Crazy stuff… 

  168. RUT pack – don’t be greedy.  Selling half for a 6+% TZA move is a good thing.  And never ever let the opening price of 66.92 get away from you.  Without a doubt the opening price is usually the hardest fought line throughout the day.  Setting a stop there with a few pennies on the other side is a good stop.  Other than that let the 3m8p be your guide.  These long-swift trends don’t happen everyday so enjoy them.

  169. Phil – with a large move down as we’ve gotten the past couple weeks, is it wise to roll shorter-term callers down to collect more premium on simple buy/write positions?

  170. expectations of FED are so high, that it’s too easy to disappoint

  171. Also, draw an /es channel from the high on Friday touching the high on Monday and the high today.  We broke through that channel at 10 this morning.  We are not backtesting it.  If we bounce off tza is over.  If we reenter the channel :) .

  172. VIX/Randers – Didn’t we do this already?  Yes we did, I answered that one in yesterday’s chat early this morning! 

    Statement/Strether – I agree or I would nave been gung-ho bullish.  

    USO, now $80 can be the stop line as the puts are about $1.80 and we can move the stop line up .25 each time they cross the next one by a dime (just like our futures trades). 

    Productivity/Pharm – No, lower productivity means hiring.  They’ve pushed people to the limit and now they actually need more workers.  Bad for Corporate Costs, good for Human Beings!  People are just stupid these days – you can still go on strike and grind US business to a halt.  If it were up to me, I’d stage massive bank withdrawals and mortgage protests (just don’t pay your bill) and in 60 days or less you’d have Congress writing any legislation the people want.   

  173. Should read: We are now backtesting it.

  174. Beware the first move after the minutes, usually a head fake !!

  175. Phil — Income Trader — Thanks, but I stopped out a long time ago!  There is no way I’m gonna ride a loss from $1.50 down to $8.00 on the losing side of a condor….

  176. Puts/Yodi – Well, either way, we have to see where things shake out first.  

    Rolls/Bob – See above comment for Yodi.  Its silly to even think about it ahead of the Fed. 

    • Bear momentum play (on no QE3):  IWM Aug $63 puts at $1.50
    • Bull momentum play (on QE3):  DIA Aug $113 calls at $1.10.  

  177. JR – if the market doesn’t like the language…….it’s a long way down to the bottom of the channel.

  178.  Phil, Can you recommend a nice bullish cover?

  179. I guess what I was referring to was productivity was going down, costs were going up….thus more layoffs.  Sorry, mixed signals.

  180. Fed site is crashed!  

  181. NOW WHAT! :)

  182. the chinese did it- LOL!

  183. no site crash and statement is nothing

  184. Bid Ask spreads are nuts right now — chaos!

  185. FWIW.  Treasuries pared losses as the sale of $32 billion in three-year securities drew the lowest yield since records began in May 1981 in the first note sale after Standard & Poor’s cut the U.S. credit rating.

    The notes drew a yield of 0.50 percent, compared with the average forecast of 0.523 percent in a Bloomberg News survey of seven of the Federal Reserve’s primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.29, compared with an average of 3.15 for the past 10 sales. The Federal Reserve is scheduled to issue a policy statement at 2:15 p.m. New York time.

  186. angelcur
    site address?

  187. A little bullish because they are negative on the economy but no firm commitment to more cash so DOWN WE GO – GAME ON WITH BEAR PLAY ON IWM! :

    Release Date: August 9, 2011

    For immediate release

    Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected.  Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up.  Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed.  However, business investment in equipment and software continues to expand.  Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity.  Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions.  More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks.  Longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.  The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate.  Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further.  However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

    To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent.  The Committee currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.  The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.  The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

    The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability.  It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

    Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.

  188. All in TZA now; head fake as I said !!

  189. they defined extended period and thye are standing by

  190. big drop

  191. There are heads exploding in Japan.

    Until 2013, thats bad.

  192. JR – Bottom of the channel right here.  Ugly below

  193. Shakeout!

  194. and Fidelity crashes!

  195. IWM  64.39,  64.97,  65.60,  66.03, and 66.38 !!

  196. Phil/anyone  - woooh…Etrade just screwed up and gave me TNA at a $1 discount…I sold it immediately…wonder if they can take it back…it was a lot of $$$…wow…not bad for a 7 second trade, perhaps their MMs had it a dollar cheaper???

  197. JR – that was not the bottom, but the midpoint.  I was too zoomed in.

  198. Information received since the Federal Open Market Committee met in AprilJune indicates that the economic recovery is continuing at a moderate pace, though somewhat more slowly growth so far this year has been considerably slower than the Committee had expected. Also, recent Indicators suggest a deterioration in overall labor market indicators have been weaker than anticipated. The slower pace ofconditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the recovery reflects in parthousing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan. Household spending and business investment in equipment and software continue, appear to expand. However, investment in nonresidential structures is still weak, andaccount for only some of the housing sector continues to be depressed.recent weakness in economic activity. Inflation has picked up earlier in recent monthsthe year, mainly reflecting higher prices for some commodities and imported goods, as well as the recent supply chain disruptions. However, longerMore recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks. Longer-term inflation expectations have remained stable.
    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated; however, the Committee now expects the a somewhat slower pace of recovery to pick up over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate to resume its gradualwill decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Inflation has moved up recently, but Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will subside tosettle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.
    To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee continues to anticipatecurrently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month andat least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
    The Committee will monitor the economic outlook and financial developments and will act as needed to best foster maximum employment and price stability.discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.
    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. PlosserEvans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.
    Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.

  199. IWM going the wrong way here….


  201. another head fake Phil? on (IWM)

  202. dclark- fidelity is working fine for me, as is Etrade and TOS

  203. came back on. Thanks

  204. OBV of /ES still points downwards. big volume isn’t buying it (so far)

  205. I believe the fed just said there will be further de-leveraging in the economy

  206.  phil--do we weaken or strengthen into the close?

  207. Well Bill Gross is a happy camper…

  208. Yodi, do you an email address I can use to get in touch? (Mine –

  209.  CNBC saying how wise the FED is.  Weren’t we waiting to hear about direct $$$ in?  Only oil way down

  210. Its very possible we revisit last nights lows in the futures.

  211. ss / Lines

    Do you have anything below IWM 64.97 and 64.39 ?

  212.  Phil,
    think we’ll revisit the overnight lows?  Not the reaction expected, huh?  
    Is that good?

  213. Am I the only one having trouble refreshing PSW?

  214. JR – I’ll check but right off is S1 at 63.35

  215. Gold busting out

  216. Bottom of the channel is 62.80 at this moment.

  217. No big sell-off is good.  Dow volume 229M at 2:30.  

    Would have rather had a big reaction, this is certainly bearish as we needed to be exceptionally bullish to break the cycle.  

    Can’t keep the Dollar under 74.50, bearish.  Oil at $79.32 – bearish!  

    TNA/Troy – That’s cool (and strange).   Maybe you benefited from someone else’s fat finger.  

    Nice Angel, thanks!   An optimist would say they are setting the stage for action at Jackson hole but a pessimist would be going to cash between now and  then! 

    IWM/Lol, DC – ROFL, you guys are funny. I didn’t know they had 15 second charts…  The premise was no QE3, go with a bearish bet.  There was no QE3 and I don’t care what people buying IWM think – there’s still no QE3.  Not only that but the Fed says "the economy sucks" and they don’t think it’s getting better until mid 2013 (God knows how).  So it’s best to be covered a bit more, maybe if the bottom holds we can stop out in case there’s a stick and, of course, we could always  tack on some DIA calls if we think things will turn back up.

    Close/Jabob – I would not be surprised if we go into free-fall now.  Hope of Fed action was the only reason we didn’t open down 2.5% and we’re up 1.5% now so 4% to drop at least to get back to where the pessimists had us last night.  

    Too bad, WFR was up 15% today….

    MA Sept $280 puts at $10.50 are a good way to play, out if they break back over $300. 

  218. This is yo-yo business is wearing me out.

  219. WOw, Etrade just screwed up again on my order, but the servers caught it before I had a chance to sell…weird!

  220. I think we’re getting our panic here!

  221. Phil – Checked the bloomberg time stamp…my order was within the range, but level 2 was showing 96cents higher.  Etrade delay must have paid off for once!

  222.  here we go

  223. JR – WOW is all I can say.  The biggest monster move I have ever seen.  Oh, /es at 61.8% fib level, may stop here.

  224. Phil, do you think this gets carried over tomorrow, bought DIA puts when we were up 100 and now wondering do I hold or close out at close today.

  225. Scaling out , chanel bottom, my last line of IWM 64.00 !! (13%  $68.31)

  226. IWM puts up $1 already, 66% in 20 minutes sure takes the old sting out.  DON’T BE GREEDY, this is a nice move down – best to set a stop (now $2.57) of a trailing .25.  We can always buy something else if we break lower after stopping! 

    Oil $77.80!  Dollar 74.40.  

  227.  Back to even on the day with a TF trade. "TG" OXP didn’t screw it up. 

  228. JR/SS – got in TZA on the 1000 bounce…humans love round numbers…rule 13…=)  Out already…don’t see a break over 8ema coming yet

  229. Phil
    Those IWM puts are up from 1.50 to 2.50 in 20 minutes--time to sell?

  230. TNA…not TZA

  231. Holy Mother of all whipsaws Batman!

  232. Out at $67.35 average !!

  233.  Flipping bullish as 77.80 is being rejected on Dollar, that’s just the fuel we needed to rally.  Maybe a poke at DIA Aug $111 calls at $1.50 with a stop at $1.25 or a failure of 10,700. 

  234.  Too bad, WFR was up 15% today….

    I believe that firms with enough money to pay for it get insider buying information from the SEC long before the average person ever could, and they buy shares up with their robot-trading machines, automatically within milliseconds.  

  235. Troy – when tza/tna is that far from the 3m8p it’s usually a judgement call to avoid the reversion to the mean.  In this case from the very bottom to the 3m8p was a full 1.29 or 5.9% of tza.  Best to have a limit order at a line like S1.  I like to place it a few cents shy of it in order to be sure of getting the fill.

  236. Phil / IWM puts - nice call on those.  I’m out w 33% gain in 20 minutes.

  237. TOS is very slow today on the updates.

  238. Phil
    Got out at 2.54.

  239. As we used to say when I was a kid, "that was a serious spaz attack!!"

  240.  china euro jamming failing..coming back

  241. Phil & JRW – looks like we held 1,100 on SP…based on your read of flows, has selling fatigue maxed out?

  242. JRW. great trading along with your lead, +5.3% today,  to here.  Thanks for those lines, really solid . Been profitable almost everyday, up beautifully overall

  243. Money poured into the bond market at light speed and equities are pretty stable…I find this action hard to swallow.

  244. @ Phil, so whats next? i think maybe they will just let the markets crash, and of course fix them just in time for the elections, although last year we didn´t get any news on the fed statement about qe2, we did get it on jackson hole…. so cash is still the way to go right? or maybe add some more short/medium term bearish plays?

  245. Large insider, CEO, buy of NYX – and yes, that stock is up almost 6% today (

  246. homebuilders destroyed

  247. ilene / insiders — or the bots are owned by the firm doing the purchasing for the insider. Cheaper that way :)

  248. I’m a bit confused… are we bullish or bearish for the next couple of days?

  249.  TOS Slow Updates/Pharm — I’m noticing that too, my Google finance chart is updating faster …WTF?

  250.  Phil,
    Just want to understand your thinking here… flipping bullish for the afternoon?  the week?
    Thought you were very bearish on lame FOMC statement… is the lack of a big move down changing your mind?  

  251. rainman – cutting out the middleman (the sec) – makes perfect sense. 

  252. Carry/Rustle – CASH!  CASH is GOOD!  CASH will let you buy something else next time there’s an obvious trade that makes 66% in 20 minutes.  You want to leave winning DIA puts to the mercy of Mr. Stick and the after-hours pump crew?   

    Nice JRW! 

    Good call Streth!  

    Selling fatigue/Sns – Yes, very possibly we have actually exhausted all the sellers.  It’s possible you can no longer come up with news that can make people more depressed about the markets.  

    Congrats Loopster.  

    TBT Goal at $25.50!  That’s people PAYING interest to have the US hold their money – MADNESS!  

    TBT weekly $25 calls at .90 10 in the $25KP.  

    Next/Asaenz – Not crashing off this statement is a bull victory but a red close will turn it very sour so we’ll have to see.  

  253. Phil / Held my triple bears from last night.  FOMC just confirmed the Ddip ahead which you’ve been fcting for ages.  And, they didn’t even mention the stupidity of short term austerity.  This mkt is behaving like a broken heroin junkie.  Down from here until panic and fear validate Ben using QE3?  Maybe Jackson Hole if the slide is fast enough.  The 3 dissenters are blind.

  254. izega…’ve got it exactly right….we’re bullish or bearish for the next number of days…:)

  255. @strether
    Ummm…..I am a rookie here BUT the last time I had a nice profit and I didn’t sell at least half, if not all….well lets just say I got chewed out AND I lost a lot of money…..look back for the post
    Phil or someone please else answer @strether further on this when you have time…

  256.  Oil has a 7 handle again… that’s where the real damage is.  Why is the trend not our friend here?  

  257. Is this whipsaw the brokers?? Are they just trying to make everyone trade like crazy?  Or is this battling bots??  Just curious…

  258. Phil- did you notice that they smoked the staples (PG, etc) after the announcement? Fed annoucement seems quite deflationary

  259. Out of bullets? — Guy on CNBC says Uncle Ben’s term is up in 2013.

  260. Buying TNA at $38.38 !!

  261. Confusion/Izega – We got the drop I expected, 4% gains wiped out but we held 1,100 on the S&P (new information) and 640 on the RUT and 10,600 on the Dow and 2,325 on the Nas and 6,900 came right back on NYSE – that’s all I wanted was a test of our bottoms.  VERY CAUTIOUSLY BULLISH is my plan at the moment but sure worth taking a few pokes – you never know what funds may decide it’s safe to jump back in the water.  

    Flipping/Peedle – See above.  It sucks that we got the completion of the sell-off I expected in 30 minutes but that’s Bot-trading for you.  As I just said above, I don’t understand how a 5% drop from top to bottom does not constitute a "big move down" for you guys! 

    10 More TBT weekly $25 calls at .60 in $25KP!  


  262. Russell
    Whipsaaw--I have no idea--maybe there was rapid short covering after the first drop, onmce that ceased, more drop

  263. Wow, and the only way to do well in that sell-off was to look at 15 min. charts! :) Sometimes even you do it! But that’s ok, its your site! :) ROFL!

  264. Phil / 5% — Big?That’s not big! You’ve got too many addicts on the 3x train. TZA had a 18.5% swing today!

  265. If they can get through the IWM 66.38 – 66.52 area, target will be 67.80ish  or 68.50ish !!

  266. Score on TLT as it goes to 108! These were the highs last August. This seems like a good place to go down from here! Pharm must be dancing in the street! 

  267. Heroine/Tusca – Doesn’t matter now, the BuyBots are on the prowl – they were going to take us up after the Fed regardless it seems.  

    Whipsaw/Russell – If they intended to take the markets up, it’s pretty normal to flush out the suckers first.  That’s why cash is king in these markets, we get a quick bear play, then flip bullish and if the bots flip again, we cash the DIAs and flip bearish again – FUN!  

    Staples/Sns – That was a BS move after the Fed, big flush.  Took me a while to catch it but got them just in time!  

    Now we have to look to stop out again if we fail to take back the day’s highs.  

    Damn, gold gave us a reentry at $1,780 and I missed it.  

    Addicts/Rain – You are right, that is quite the craps roll any time you enter it. 

  268. wow what a wonderful day…this thing could just ramp…fed  and foreign buying of bonds and now sotcks form abpraod is my bet…euro porbs are NOT solved

  269. Well, let’s just say that this makes up for yesterday !!

    Thanks, ss, your contribution is always appreciated !!

    Still all in TNA !!

  270. $1500 profit on IWM puts and $1200 profit on DIA calls! Thanks Phil
    Would you suggest I buy some IWM puts for protection overnight? Which strike would u choose?

  271. Phil/TOS futures – I decided to cash out for the day and play around with TOS Active Trader doing TF futures. I’m trying to figure out how it is you can set up the "football lines" for stops, as you suggested TOS can do. Can’t find ‘em. Perhaps you can comment after the close. 

  272. Catching up from 1:50!  

    No problem DC – let’s go over your stuff after the close and see where we are.  

    Rolling callers/Chuck – Depends on the stocks but, if we put in a bottom here, I’d be more inclined to buy them back and wait for a pop.  I’ve been waiting for the Fed to update the Income Portfolio but you’ll see me pontificate on the subject when I get that update done as many of those are buy/writes that have gone down quite a bit.  

    Great call on head fake JRW – Always good to remind us! 

    Yay, caught up (if I missed a question, feel free to re-ask)

    TLT Sept $104 puts at $2.15, 10 in $25KP.  In a bigger portfolio, you can sell the Aug $110 calls for $1.42 to offset.

  273. Thanks for the help Phil- I must have missed that this AM. Was able to do similar adjustments.
    I am limited to working with some challenging brokerage platforms from employer requirements,
    after 25 minutes they were able to find out why more orders were moving to caancelled and not executing.
    Time to simplify.Both SCO & VIX sure do move these days !

  274. Making sense of confusion, a gift I don’t have.  The market seems as unstable as ever to me.

  275. PHIL, 
    Got whipsawed with my EDZ hedge on the announcement, I had 3,500 shares bought yesterday at 28.90 and when announcement came up and we shot up 90 points I anticipated a rocket up so sold at 27… as we whipsawed back and forth positive and negative I bought it back at 27. You feel this was bottom and would it be safe taking off the hedge?or lightening up? This covers about 50% of portfolio losses.

  276. Loosing momentum again, scaling out of TNA for $1.50  !!

  277. No dancing here StJ….I just call it as I see it….and that one was clear.  TLT good, TBT bad. 

  278.  Nice call on the TZA hedge this morning Phil.  I bought the spread this morning with the market up, sold into the drop for a 60% gain and now things are up again!  I’ve been in cash for so many weeks it has been fun to make some quick money.

  279. The 1 yrs are at 0.0% as well.  So the banks are storing their money at 0%.  What does that tell you about the market.  Where is it going in the long run?  Well, in my small world.  Down.

  280. If the Fed decision had failed to meet the true liquidity needs of this damaged market environment… dont you think gold would have fallen — wasa minimalist do soemthing statement …

  281. I’m 2/3 out of TNA (too soon) waiting for the last !!

  282. Weak dollar trade is on, the finacials stink worse than a cavemans arse

  283. Pharm – You’d think it would be a great time for the US government to refinance all our debt at 0%… I have always been told that if you can borrow money at 0%, you should take is as there are many safe placed where you can get more than 0%! 

  284. Wonderful/Angel – Isn’t it funny how these things work out?  

    Dollar 74.30 – in case anyone was wondering why we’re rallying again…  

    TOS/Dr C – I thought it was the default.  Just put an order to buy our sell out of the money in the level 2 part of the active trader screen and a line should pop up on the chart.  They have good tech support who can do better than me on that. 

    Dow volume 308M at 3:30 – that’s a pretty heavy last 3 days!

    Let’s keep in mind that this (2% gain) is not even a weak bounce off that drop.  The weaker your bounce and the longer it takes to bounce, the harder your upside resistance becomes so be careful and out of those DIA and whatever other loose bullish calls by the day’s end and back to good old loveable CASH!!!!

    03:00 PM On the hour: Dow -0.4%. 10-yr +0.69%. Euro +0.2% vs. dollar. Crude -3.27% to $78.65. Gold +2.91% to $1763.00.

    Fed Open Market Committee: "Extended period" isn’t enough; rates will be near-zero until mid-2013 at least. Growth much slower than expected. And more news: Fisher, Kocherlakota, Plosser dissent – the last time three dissented, it was 1992.

    More from FOMC: Now expects "somewhat slower pace of recovery" than at last meeting, and downside risks have increased. Deterioration in labor. "More recently, inflation has moderated" with energy and commodities off peaks. Along with the watershed hold on ZIRP for two years: no QE3, but the Fed will keep reinvesting principal. For those disappointed by no bolder move today: Jackson Hole is in just a few weeks…

    The Fed seems to be saying the market is on its own until after the 2012 presidential election, and the market isn’t liking it; the Dow now -203, Nasdaq -26, S&P -17. "Long on gloom and short on solution was not a combination that bruised market participants would have wished to see." 

    Today’s FOMC meeting underlines the dangerous addiction to Fed largesse, Peter Boockvar laments. "This sad state of affairs is solely due to the actions of the dynamic Dr. Feelgood duo of Greenspan and Bernanke where every economic ill, every market cry and whine was met by some sort of monetary easing that just encouraged more borrowing and more market manipulation." 

    Fed funds contracts – mentioned earlier today as pricing in only the smallest of rate hikes over the next two years - rally sharply, eliminating nearly all chance of higher rates. The August 2013 contract +23 bps to 99.75 vs. the August 2011 at 99.91

    Yields on Treasury notes sink in the wake of the Fed’s expectation of zero rates until mid-2013: The 10-year yield now -0.01 to 2.31%; five-year -0.07 to 1%; two-year -0.08 to just 0.185%.

    The CBOE Volatility Index (VIX -9.4%), still running red-hot fueled by market worry, broke just slightly lower after the FOMC statement was released. The VIX is still at a level typically associated with concerns of "great economic stress," meaning the Fed’s 2013-commitment did little to tamp out fear.

    The prints in the currency market are hard to believe, with the dollar and euro (FXEcompletely capitulating vs. the Swiss franc (FXF). USD/CHF now -6% for the day at CHF 7100. EUR/CHF -5.4%at CHF 1.013.

    Goldman Sachs (GS -3%) shares turn red after federal regulators file a lawsuit accusing the firm of violating federal and state securities laws in the sale of $1.2B in mortgage-backed securities. The suit seeks damages of $491M for securities Goldman sold to credit unions that the government claims were “destined to perform poorly.”

    OPEC cuts its global oil demand growth forecast for 2011 by another 150,000 barrels/day, and warns that weaker-than-expected consumption could cut the outlook further. But crude oil, now +0.5% to $81.68/barrel, and oil stocks (XOI +2.6%rebound from yesterday’s selloff. Among major producers and refiners: VLO +8%,ESV +7%MRO +6.5%.

    A month after receiving a favorable ITC ruling against HTC (HTCCF.PK), German news agency DPA is reporting Apple has received a preliminary injunction blocking the import of Samsung’s (SSNLF.PK) Galaxy Tab 10.1 tablet into any EU country except Holland. Apple is also looking for a U.S. injunction against 4 Samsung products; a hearing is set for October.  - AAPL is close to 1% of the Nasdaq’s gains today!  

    Apple (AAPL +3.6%) passes Exxon Mobil (XOM -0.3%) as the world’s largest market cap, breaking through the $350B barrier. But that’s just child’s play says one tech writer who makes the case for a +$1T market cap for the Cupertino giant.

  285. Trying to get to 1150…

  286. Phil / FMOC   I thought the theme was no QE3 and the mkts tank.  So, they told us Ddip ahead and we’ll keep zirp and the mkts are up.  I don’t get it?  Why is this positive for stocks?  We haven’t taken back your our Friday levels so what does todays close mean?  Do I take my loss on 3x shorts now (which hedge long positions) or hold overnight.

  287. IWM 67.82, here we come !!

  288. OMG, "they" are going for it (IWM 68.50ish) !!

  289.  Phil – Kwok (kyw2006) can’t access the site and is texting me to ask you what to do with his TBT positions.
    Short puts- 
    20 Aug 32
    20 Sept 30
    10 Sept 36
    With all positions he his down 20K, so he’s looking to get that back. 
    He would prefer not to roll all the way out to 2013. 

  290. Bottom/Amatta – Yes, it seems like a good bottom (as we expected at the 20% line).  You have to have faith in the longer-term charts, watching short-term moves after announcements and reacting to them can be lethal (other than, of course ALWAYS selling into the excitement).  

    TZA/Rev – Very nice, congrats!  

    Gold/Angel – I love that your statement had a shelf life of less than 10 mins!  8)   You also need to get your head out of the 1-min charts!  

    74.11 AND Gold is looking weak!  

    0%/StJ – I think if you try to borrow $15Tn, it might push the rates up a bit….  

    There’s my 10% off the bottom on the RUT futures – Now THAT’s BULLISH! 

  291. Boy is this market a death trap.  Congrats to all those making $ today.  Especially you Phil.  Very quick on the draw!

  292. Are we really out of sellers? Things are going parabolic!

  293. Not much oxygen at 10,000 ft., so I just had a mild hallucination – GS in a downward spiral. Should we be fading those bad boys, Phil? The “Taibbi Effect” may finally be taking hold. Not to mention crap trading results lately.

  294. Look at that volatility drop!

  295. WHUCK?  I have the Dow up 320!
    The Fed seems to be saying the market is on its own until after the 2012 presidential election, and the market isn’t liking it; the Dow now -203, Nasdaq -26, S&P -17. "Long on gloom and short on solution was not a combination that bruised market participants would have wished to see." 

  296. Today is looking like a flush.  Could be a reversal in the making… could be a set up for more down.  But since this is stick action.. It’s most likely temporary.  Still, a major swing .  Looks like they’ve got the algos chasing them now-

  297. Ahh, now every thing is fine…..

  298. Bailing the last TNA at over $6.00 !!  (EOD for me)

  299. This $hit should be outlawed!  Madness-
    Wonder if Shadow capitulated?  Sure hope not.  But he would have a lot of company if he did.

  300. Tanking/Tusca – We tanked (back to our 20% levels) and then buyers stepped in.  That’s the end of that premise.  Let it go!  It’s not positive until/unless we get follow-through, which is why we cash out the DIA calls and whatever else isn’t a hedged spread into this excitement and wait with our lovely, lovely, cash to see what happens tomorrow. Not taking back Friday levels leaves us iffy but we do have 10 mins left..  Yes, if you have ultra shorts and you didn’t take the money on that move down, you now stand the risk of being gapped to death tomorrow.  

    TBT/Dr. C – Wow, that’s a mess.  Tell him to Email Greg.  Sept $36 puts are worst at $9.80 so I’d guess he can roll all to 60 Jan $30 puts at $5.30 for about even (whatever number is even or 40 to get $20K back) and just wait patiently but, if TBT fails $25, he needs to buy some puts as momentum plays.  

    693 on RUT – ROFL!  11,185 on Dow – What a friggin’ manipulated joke this market is – I couldn’t be happier!  

  301.  This is friggin insane.

  302.  Phil,
    What is your current thinking on HOV?

  303. JRW, great trading, I got out a little early, but still had an awesome day

  304. DIA $111 calls at $3.  Is it OK to keep half for tomorrow.  They would be free.

  305. There must been a code in the FOMC minutes for the bots that spelled out QE3. 

  306. TZA went from 68 to 51 in 90 minutes.   Wild!  

  307. If I had held I would be up $2,600 over yesterdays entry. Who has my head on the block?

  308. I can only imagine what the outcome would have been if Bernanke actually announced QE3.


  309. BTFD.  Any questions?

  310. WOW !!  Smiley I didn’t think "they" would let regular folks get this kind of return anymore !!

    Have a great evening all !!

  311. GS/ZZ – I wouldn’t put a lot on a long bet with them but they are like roaches – can’t stop them.  

    VIX down 26% to 35. 

    Nicely done on TNA JRW – quite a ride.  

    HOV/Kevin – I still like them but it’s a long-term patience play.  Years, not months.  

    DIA/Damion – Sure, you can do that. It’s free money now and most likely we can salvage 50%, even if we dip tomorrow as the are Augs, not weeklies – good call.  

    Dip/Flips – My question is, what happened to that logic for 2 straight weeks.

    Don’t worry Shadow, we’re on firmer footing now with many bargains still around (unless we gap up 10% tomorrow). 

    Wow, what an amazing finish!  Congrats to all the bulls – that was an INTENSE day of trading!  

  312.  Great day for me.  Thanks Phil.  Calm head, perfect calls, you are the man!

  313.  Oh holy crap. I went to a 1:30 PM meeting feeling like a fearful schmuck for buying back my short puts and leaving on my downside cover. Halfway through the meeting I started feel MUCH better about my decision. I just got out of my meeting. Really? Are you frickin’ kidding me? Up 200, down 400 then back up 650. In 2.5 hours? Really? 
    I quit. I’m going to invest in real estate.

  314. Thanks Phil for the TBT weekly calls. They jumped from 0.7 to 1.6 for me. What do you suggest for putting the stops? I guess it is 20% of the profit. Profit = 0.9. 20% is 0.18. So will it be (1.6 – 0.18).

  315. Pharm / Mind Crime — One of their best albums.

  316. Phil – your take on USO 30 puts and GMCR Sep 92.5 Puts ( they are up 11% today). Thanks

  317. Phil/ BW: Thanks for your support. Need help on these:

    PFE  Bought 1000 shares @ $16.67,now $17.21,sold  10 Jan. $ 20C at $1.42,now $.41 and sold 10 Jan. $ 20 P at $1.42,now $3.05

    PNC  Bought 500 shares  @ $59.27,now $49.32 and sold  5 Jan. $60 C at $3.75 which I closed today @ $1.35

    WAG: Bought 1500 shares @ $38.35,now $ $36.22and sold 4 Jan. $38 P @ $2.43,now $ $4.30 Have not sold C sin ce I was waiting for a better price.

    WIN: bought 1500 shares @ $13.14,now $11.79 and sold 15 Jan. $12.50 P at $2.66,now $3.06

    Thanks again

  318. I got whipsawed.  Sold TBT 25′s at 1.02 and bought TZA at 61.83.  Doing to many things at once.
    At least RIMM is up.

  319. @ Phil, what needs to happen in the next couple of days to confirm the bottom? i want to be ready to act and try to catch the most part of the rally (if we do get one)…. this thing went down so fast, that now i am a little worried that it can go all the way up at the same speed…..thanks!

  320. Phil / casino    I didn’t understand anything that happened today, from a logic standpoint.  No QE3, FOMC confirmed Ddip ahead and now we’ve mkt euphoria?  I thought you’d signalled we go to hell without QE3 to prop the mkts.  Are you now bullish? 

  321. WOW!  Can we please go back to 1% moves on the entire market in a day?  This is just crazy.

  322. 431M on the DJI and we close up 4% (5.7% swing) after Uncle Ben replaces "extended period" with "at least until Mid 2013". I think it might be time to drop a line or two in the water for the mega cap multinationals. You don’t suppose anything repulsive will come out of Jackson’s Hole do you?

  323. Looked like a ton of short covering the last 24 minutes…we stayed above the upper bollinger band the entire time, and didn’t pause at any significant level or Fib retracement.  Bots took shorts to the cleaners…and then some! 

  324. I’ve changed my mind. I’m not gonna’ quit. Instead, I’m changing my screen name to Costanza and posting my trades so everyone can do the opposite and make money.

  325. dsheara – lol  i am in the same boat  

  326. Look at the candles on /ES from today and yesterday – mirror images – Open 1169 / Close 1084  and today Open 1082 / Close 1169 (continuous contract). Insane 2 days!

  327. Your not alone dsheara……

  328. When is CSCO earnings?

  329. JRW/"Regular folks" -  How many regular folks sit behind a computer all day, watching for stick saves, short covering, forced liquidations, etc.  Most regular folks are busy being productive…and most likely sold out Monday evening and are now thinking "What the fk happened today?"  And as such, it is going to get tougher and tougher for Wall Street traders to keep playing the game without feeding on each other, as regular folks are walking away from the game in record numbers…just ask anyone who is in the biz of trying to sell Wall Street to the regular folks…a tough sell, indeed!

  330. I was massively short the market towards the end of Q2 as I had been anticipating this all along.  Got squeezed out that last week when we ran up 6%+ out of no where.  I joined the site right before this crash and picked up a few hedges……but no where near enough.

  331. How can i learn about JRW lll ‘s system?

  332. !@dsheara
    I’ll split anything I make with you if you do so.  A bellweather that is wrong 100% of the time is just as valuable as one that is right 100% of the time.
    Let’s start tomorrow.  Post your first trade ASAP before 10:00 EST.
    (be forewarned: science has proven that an object under scrutiny behaves erratically, unpredictably,  and not at all like it would if it were in isolation). 
    Thanks again. 
    While I didn’t buy IWM,  on your  ‘go green’  after the FED caused you to  "go red", and then back, it had an even bigger impact when instead I sold short calls. (Instead of selling the 1/3 position of my TZA that you recommended yesterday, I sold the Friday weekly calls on TZA at 63.00. They doubled in very short order, about an half hour, after you went green and if the market stays at least somewhat stable thru expiry on Friday, they’ll expire worthless.  And I’ll still have my TZA position which may yet provide even more of a chance to sell or roll.  Frankly, I like these volatile days more than a steady up or down, relentless, one direction market.

  333. Phil
    Dollar (DXY:IND) at 73.9, at what level do you think would Japan intervene again?  When you have time please.  Thanks so much for the TEF example last Friday and all the great calls.   

  334. @Tuscadog
    By now you must realize that Felipe is a Hunter/ warrior. His instincts are stronger than his logic by a load factor of 10 to the tenth, unlike his logic (which his politics prove so well), which is so-so, inscrutable, or beyond the powers of ordinary human beans.
    Those instincts are what made for the three quick moves after the FED, possible.  Logic, if there be any, is rapid fire change based on the law of the jungle. I picture him like Tarzan with his chimps, ditto with JRW III, dropped down naked, into an unknown jungle, with nothing more than a Smart Water bottle, and a Swiss Army Knife which they must use to survive.
    Think:  The billionaire Anthony Hopkins played in, "The Edge".   In the end he was the only survivor because as he said, "I have no imagination".

  335. Today’s levels.

  336. Phil
    I did read all three crash stories. I got screwed up by trying to day trade and deal with my parents so I decided to follow your advice and not watch. I bought IWM Sept.puts to ready for the next leg of the crash and they are way south after close, now you say maybe 10% up tomorrow, this is beyond depressing. I hope you are completely wrong, I need a 500 point fall at open. Then I will stop until I can go back to day trading, not sticking to that has been a disaster. Seems I need to switch back and forth 2 to 4 times a day or day trade anyway. What should I do with the puts that offset holding the USO calls.

  337. CSCO Earnings / Lolobear – Tomorrow after the bell at 16:05  

  338. flip – this statement of yours is so true:
    "be forewarned: science has proven that an object under scrutiny behaves erratically, unpredictably,  and not at all like it would if it were in isolation"
    I got into the Aug DIA 110/113 bcs and sold the 98 puts for about .16 cents a spread. I also got into the IWM 63 puts for $1.55. After the fed statement release, I saw Phil’s message "Game on for IWM puts", which led me to sell the DIA spread at a loss of .70 cents. I scaled out of the IWM puts for average $1.85. Then at the end of the day I see DIA spread up huge. Dumb Ass!!! Totally handled it like a moron.

  339. As a novice voyeur here trying to comprehend all the comments, how would I get more info about JRW III methods?

  340. Troy / Ordinary folks

    I meant people like me, as opposed to people who work for Lloyd or Jamie !!

    I was NOT referring to the masses !!

  341. phil you were right about my  gold thesis for about as long as i was..or a little shorter than your certainty that the fed would move aggresively to quell the markets..its statement was ever so slightly more activist than i expected..

    i am still not sure why anyone was really expecting much more from the fed… the immediate reaction had been negative…with the day’s rally in stocks entirely reversed..but then of course it came roaring those of you who were anticipating a far more agressive stance would the reaction have been any better if QE3 had been announced.. as though in panic… with ben buying downgraded treasury bonds exactly when everyone else is already buying downgraded t bonds..i dont think so but it underscores my point that in the end it all comes down to psychology..and all of you are shrinks with shaman kits..i had a superb day with a very different outlook..crazy huh..vive le difference!…as long as your on the right side who gives a crap why…lines gann angles the collective psyche of the board..phil is a bot and has never really been seen by anyone (pay no attention to that man behind the curtain!!)..congrats to all who made a singel parthing today it doesn’t get much tougher than was a tombstone market..the quick and the dead..put yer guns up and get hammered y’all earned it!

  342. nicha
    I fell for the same thing since Friday, at least I’m in company that fell in the same trap. It just can’t get worse than this!

  343. Phil, you are right.  An absolute joke of a manipulated market!  I find myself thinking this is simply a short squeeze.  But then in the back of my mind, looking at the chart and ignoring the noise, it looks a lot like the beginning of a reversal.  So, I’m not convinced about a direction either way.  All I know is that we are not done going down.  However, bearish sentiment is so extreme that it is the perfect time to rally the markets for the time being.
    Who the f knows.  There is no figuring it out.  But Phil, your levels are definately in play.  All the indices are either on one of their lines or exactly between them (1.25% increment).  I lost more then I did yesterday but didn’t get shellacked.  I guess that’s an improvement.  Those double headfakes are tuff- 

  344. All
    This is a good story and place to send a few $S
    Its amazing what you can do for $200.00,
    To learn how to help send remote-control trucks to soldiers, visit

  345. Last night both Cramer and Dr. J on CNBC were ripping into the hft bots.  Interesting- maybe change is in the cards.

  346. But I wouldn’t short the exchanges on it.

  347.  To all,
    Well I would just like to say Good Trading to all.  I haven’t been able to trade the markets since I’m on a extended vacation, currently in Cape Hatteras, NC.  I had my first kiteboarding lesson yesterday, and my second lesson today.  The two most important trading days since I left my job back in Feb.  I was in mostly cash, but boy did some of those disaster hedges pay off.  I wish I could have been trading the markets like you all.  Congrats to all who are squeezing the opportunity out of this beast!  Its been great reading the site each night before I hit the sack.
    (I should have been up last night trading the /NQ futures from 2.30am – 4.30am.  What a run up!)
    See ya in Vegas,

  348. Learning the hard way – call me an experiential learner…and these last two days (and week) were quite a learning experience with a heck of a price tag. thought i had plenty of cash and margin, but too many 2013 short puts soaked it all up along with all other longs falling. today was GOOD though. and most everything rolled to better positions or lightened somewhat. more to do though. way too little margin on hand still. wild. need to get to where i can ride it rather than chase it…and i am learning that means still fewer LT holds!

  349. Phil, with 10 yr bond rates almost at the March 2009 bottom should we not be close to the bottom on stocks?

  350. ROFL – First thing Cramer said in his intro: "The game has just changed dramatically"!  What a predictable POS he is…   (see my 11:29 comment).  

    At the close: Dow +4.01% to 11243. S&P +4.77% to 1173. Nasdaq +5.32% to 2483.
    Treasurys: 30-year +0.69%. 10-yr +0.56%. 5-yr +0.42%.
    Commodities: Crude -0.68% to $80.76. Gold -0.54% to $1733.60.
    Currencies: Euro +1.15% vs. dollar. Yen +0.92%. Pound -0.17%.

    Market recap: In some of the most see-saw stock action ever seen, post-FOMC sentiment swung wildly from "market, you’re on your own" to full-on QE3 trade - with stocksTreasurysgold, andoil all ripping higher into the close. Financial stocks rallied after yesterday’s massacre, with BofA +16%Techs pushed Nasdaq+5.3%. NYSE gainers outnumbered losers five to one.

    Yields on 10-year Treasurys fall 15 bps on the day to end at 2.17%, the lowest close since Dec. 30, 2008. At one point during the wild post-FOMC gyrations, the yield touched 2.04%, a crisis-era low. The two-year Treasury note settled at a yield of 0.185%, the lowest on record going back to 1973.

    All 30 Dow stocks end up higher, led by financial stocks. Biggest gainers: BofA BAC +16.9%, Alcoa AA +7.9%, American Express AXP +7.1%, JPMorgan JPM +6.9%, Travelers TRV +6.2%.

    The stock market rally may have arrived late in the day, but it wasn’t so late the rest of the Americas missed the wild ride. Major indices: Canada +3.8%. Mexico +2.1%. Brazil +5.1%. Argentina+4.6%

    Release the Birinyi!  The bull market is intact, Laszlo Birinyi proclaims, and while his S&P 1,450 target looks shaky, "our more important conclusion that a rational, disciplined portfolio can attain a 10%-plus return in 2011 is not." Stocks are hampered by political factors, not financial, which makes him more optimistic; "we would hope that at some point, financial trumps political, which has historically been the case."

    California tax revenues plummet in July, coming in 10% below expectations, and nixing hope a $4B budget gap would be filled by a ramping economy. Deeper government cuts will now likely be necessary. August’s stock swoon could make things worse as the state is heavily reliant on capital gains taxes.

    The Democrat side of the D.C. "super committee" charged with finding $1.5T of budget savings reportedly is set, as Senate Majority Leader Harry Reid selects Patty Murray as co-chair, plus Max Baucus and John Kerry. The formal announcement will come tomorrow. 

    Nomura’s Richard Koo believes ratings agencies might "destroy the global economy," due to their failure to grasp the nature of "balance sheet recessions" marked by household and corporate deleveraging. In such circumstances, Koo thinks governments have no choice but to support the kind of deficit spending opposed by ratings agencies.

    Bankrate’s Greg McBride says mortgage rates likely will remain low as long as the U.S. is battling a sluggish economy. "The downgrade didn’t tell us anything we didn’t already know… As long as people are worried a recession is right around the corner, you are not going to see an increase in mortgage rates."

    Walt Disney (DIS): FQ3 EPS of $0.78 beats by $0.06. Revenue of $10.7B (+7% Y/Y) beats by $0.2B. Shares -1.7% AH. (PR

    More on Walt Disney (DISQ3 report: Revenue from global theme parks +12% Y/Y. Sales from cable networks +11% Y/Y on higher ad rates, offset by last year’s World Cup. Broadcasting sales +20% Y/Y. Studio entertainment sales flat. Consumer products +13% Y/Y, driven by Cars merchandising. Interactive media +27% Y/Y. (PR

    Sunpower Corp. (SPWRA): Q2 EPS of -$0.19 in-line. Revenue of $592M (+54% Y/Y) beats by $9M. (PR)

    More on SunPower’s (SPWRA) Q2 results: "We significantly improved inventory turns and reduced inventory by 15% from the first quarter… We are on track to meet our second half profitability goals." Sees Q3 revenue at $700M-$750M and non-GAAP EPS $0.05-$0.15, vs. $0.21. Sees full-year revenue at $2.8B-$2.95B vs. $2.76B, non-GAAP EPS of $0.75-$1.25 vs. $0.70. (PR)

  351. Let’s recall Peter D’s wise piece of advice yesterday evening:

     Keep in mind that bear market rallies are fast and furious.

    The overall trend is still down, most markets are under the 15, 50 and 200 dma! We do need confirmation that we hit a bottom! It would be nice though!

  352. Never looked that close at a dollar bill: 

  353. scottmi
    I had so many problems with margin that I stopped trying to trade Phil’s spreads, it takes a lot more money than I have, maybe it is only a rich man’s game. I will say I have enough day tyrading power if I just stick to that. Hope this helps you.

  354. Developed countries’s rating list and BBH’s take following S&P downgrade from Barry’s site: 
    The AAA list is getting smaller and could get even smaller soon! The only safe one is probably Switzerland!

  355.  PHIL!
    WOW.  You weren’t stubborn about your no QE3 call and saw what was coming.  Felt like I was stubborn about your call!  Anyway, saved me tons keeping me from selling!  This is why I follow you.
    Great job!  Can’t wait for 3 AM!

  356. Thanks, stjeanluc, for requoting.  In remembering my own advice, I covered the short calls as fast as I could, but /ES going up 6 points every 3 minutes for nearly the entire hour was furiously fast.

  357. Looks like someone else got downgraded…
    Not looking good for politicians all around, but looks like the lack of compromising is taking a toll! 

  358. st jean
     I  remember Peters post, thanks for the reminder as matt  also says he does not believe this is just a correction, niether do I and now I have a little faith in my Sept IWM puts.

  359. The dollar was taken all the way to under 74 AH! And the yen is way back where it was before the last yentervention. They must be hiding the samurai swords at the BOJ! 

  360. peedlew99, were we reading the same comments today? Phil clearly said no QE3 then the markets tank. Did you mean his call that there was only hope of QE3 and that is not a strategy? 

  361.  Hello Phil,
    With the Fed’s commitment to leave rates alone for at least two years, would you agree that for at least the next two years they have removed nearly the entire risk in owning the Mortgage REITs that hold only Agency Paper? Names like NLY & AGNC  & CYS & HTS & ARR?

  362. peedlew99, please ignore my prior message. I went back again to the chain of coments and see Phil flipping bullish precisely at the right tim. I am new to the site and still getting used to it, plus I did not trade today (thank God, otherwise I am sure I would have done a lot of damage).

  363. Phil
    Your cloud computing is failing when most important. It has fogotten when the going is tuff the tuff gets going, way too show today even now!

  364. Thanks Peter D!

  365. One more evidence to prove that the game is rigged….
    "S&P may have more to worry about than just the U.S. Senate investigating its credit downgrade decision. There’s mounting evidence that the ratings agency leaked the pending action to a select group of banks and hedge funds prior to its public announcement, which is a clear violation of SEC rules."

  366. Hope the S&P did leak, would love to see them go down but from what I heard, it was when the White House found out and they leaked it to a couple reporters who leaked it to some others.


  368. @Flip
    That’s only in classical physics theory.  Classical management theory however states that when you measure performance it improves!  Which, I suppose, would negate my Costanza plan.
    An Elder book I read mentioned what I personally call “the market giving you the finger”.  I think stjenaluc said something about the past two days’ candles being mirrors.  Elder mentions reversals (in hindsight) can look like a finger(s) sticking out of the chart.  So maybe it IS a reversal.
    But I see candles bumping their heads on Phil’s lines as resistance.  I think it is a snap back rally just prior to another leg down.  Aren’t we where we were in 09/2008 just before falling of a cliff?  But that’s just me bringing personal bias to what should be objective, rule-based, un-emotional  trading.  Though the economic and financial problems of the world aren’t really fixed today, are they?
    Oh, and the past two days has enabled my epiphany whereby I have found the solution to perfect un-emotional trading; keep your money out of the market.

  369. Just a thought, having the globe spin with the red dot’s on the title page really slows down the refresh rate.
    Cost me some money today as wild as we were. Any chance to going spinning after hours only? It does look
    cool, I like it  but anything slowing done your calls is bad.

  370. Phil
    The cloud is beyond lame today/tonight!

  371. Ian Bremmer in a debate with Roubini sums up the current situation:

    The real point is that this has been the year of kicking the can down the road. The Europeans are doing it; Japanese are doing it; the Americans are showing that they’re doing it. And the biggest danger is (though, I personally don’t think it’s 2013-2014; it’s later) is the Chinese are kicking a bigger can farther down the road than anyone else.

    And Felix Salmon on Reuters is giving advice on investments!


    There is a good chance that the popular averages have begun to make a stand. The double reversal today was a good start. After a few days of further rally, we could revisit and possibly break the low made intraday today. If fewer stocks drop sharply on the next test, we could have a good base for a tradeable advance.

    While GDP growth is very modest, there is reason to expect more rapid growth ahead. For example, during recession, decisions to buy houses and autos are deferred.  So it was, for autos, in the recent recession.  Auto sales fell to annualized levels near nine million new units in the U.S. For many years, 15 or more, auto sales averaged over 15 million units.  That included the recession years of 2001 and 2002.  As a result, the average auto is the most aged ever, at something over ten years.  So there is pent up demand for autos and, especially, light trucks and vans.  The auto companies know this and are ramping up production right now.  Workers are being called back to work, adding to the slight quickening of economic activity expected soon.

    Further, the tax law allows for 100% write-off of capital goods paid for this year, but does not extend into 2011.  That, too, will require some work force adds.  sadly, housing demand will not be a help anytime soon. Maybe after the next economic cycle.  still, the auto and capital goods job adds are positions that pay well and put shoppers back in the malls.

    Another boost to domestic activity is the weak dollar. Manufacturers in the U.S. Will benefit as imports will cost more and our exports are attractive in Europe, Japan and in Asia.  Wage rates in China and other Asian nations have been rising rapidly. Add in freight costs, and our products are competitive again, for the first time in decades. 

    A prospective negative for the economy is the likelihood of fiscal drag in the years ahead. Congress is cutting spending to some degree. The economy has come to like the overspending of recent years and the reductions in spending growth will be missed like a narcotic. GDP growth could be reduced by 1% or more but, again, not enough to cause a recession. 

    So, I do not think we are headed back into recession.  The market may have already discounted a double dip.  I think that is premature and possibly quite wrong. time will tell, but note that markets often experience emotional extremes of volatility in late summer, which often leads to important lows and excellent entry opportunities.  We will be watching closely in the days and weeks just ahead.  We have some cash reserves and will be prepared to invest if markets evolve as we expect.

    Arthur J. Bauernfeind
    Chairman Emeritus
    Westfield Capital Management


  373. shadow, since you mentioned me in a comment, I want to make sure there is no misunderstanding with what I said so I’ll say it again.  I’m conflicted with today’s action.  Part of me thinks the definite period of ZIRP changes nothing.  And in terms of stimulating the economy.. I think that’s true.  However, we’re not trading the economy.  We’re trading in a casino that is filled with players that have access to the fed window and/or others with insider information.  Therefore, I think the carry trade could heat up some thereby dropping the dollar further and juicing the stock market.  I’m inclinded to think we’ve bottomed for now.  Probably until the next major crisis blows up. 
    Today’s chart looked like a total flush.  There was heavy buying early on and starting at 2:45pm.  Yes, there was heavy selling too.  But mostly when they spiked the market after the announcement.  That was the flush.  We could be set up for a meteoric rise near term.  We may test today’s lows tomorrow or Thursday.  But I don’t think we’ll breach them near term.  My premise fwiw.

  374. I have to admit that these numbers are surprising! Not what you would expect if you shopped at Wal-Mart of course…

  375. NPR did a piece on why owning gold is not smart.  Now the Reuters blog telling us to go long?  They really have the MSM working it now-  who’s going to fight the Fed this time?  Not me.  I think the Reuters piece is probably right for now and the NPR piece is DEFINATELY wrong.
    NPR is the last place to take advice from.  They woudlnt’ know unbiased reporting if their Federal funding depended on it!

  376. matt
    Thanks and as is you don’t know what is going to happen either up or down. I thought that you were in the bear camp, sorry!

  377. I usually don’t do anything but go to bed, I am totally uneasy about direction and so I monitor what the PSW thinks. Fact is I believe we as a cooperative are at least 60/40 correct!

  378. And Dylan looked a tad upset this afternoon!
    That’s refreshing! Unfortunately, he seems to have the right approach, but whoever would try that would not make it 4 years in office… 

  379. Phil
    Why is the cloud so slow?

  380.  So Phil,
    Should we all say we see the kings glorious cloths again?

  381. Phil, I know the system is broken. But it has never been that great and with some of the societal and technology advancements, we actually are a lot better off than before from a purely 60,000 ft view (and i think thats why the plutacracy has gotten away with what they have). Our government didn’t fix the system by any stretch of a politician’s imagination (which stretches quite far). Unfortunately, we are living in pea soup where the real truth is simply not available even if its right in front of us. The changes implemented by Dodd Frank suck (although I probably disagree with you as to why – a good topic for another day). But the credit/financial systems are now anchored to the US central bank et al so it simply isn’t going to break up until we do (and we are not there yet). So, I don’t see a reason for doom and gloom, plus most normal people want the recession to be over. If you have a chance please list your short doom and gloom issues – btw, Europe is on my list of issues, but to me its clear they will have to unite more fiscally, something these very childish Europeans (e.g., Trichets recent comments on radio) are tantruming about (who are we in the US to say anything right?).

  382. Phil, have been out for a while. What exactly is the 3am trade? I figure it has something to do with yentervention.

  383.  Phil- at times my  refresh rate was slow also. could be the globe.

  384. matt, there is something deeper going on. Not sure what it is but, you dont get moves like we’ve seen recently in the bond market for no good reason. Marc Faber agrees

    On how Faber would play the markets right now:
    "I think right now the technical picture is so horrible that I would use a rebound as a lightning up opportunity. I think [equities] will move lower. I mean, some say you should move back into emerging economies because the fundamentals of emerging economies are far better than the fundamentals of European countries and the fundamentals of the United States. This is something I will consider."
    "The only thing I have to say, basically the market has sold off in such a rapid way and with so much momentum that I am smelling as if something really wrong happens in the next two or three months, because the market is a discounting mechanism. Like March 2009 the market started to go up and people were baffled why it started to go up. Now it starts to go down, and maybe after three months people will wake up and scratch their heads and say now, we know why it started to go down, because maybe there is geo political problems, maybe the Middle East blows up, maybe the economy is horrible."

  385.  My refresh rate has been painfully slow ever since the globe appeared, and hasn’t gotten much faster even though I finally ditched DSL for cable.

  386.  The globe at the top is definitely a problem. google chrome’s status line is always telling me that it is waiting on it. Sucks up a lot of time with no value add but it does looks pretty. Maybe you could just keep it on the main page only?

  387.  what is the globe anyway?

  388. Thanks Angelcur, interesting perspective.

  389. scottmi
    You make great points. I too have come to the realization that I still have too many position for my pay grade! I am going to get there if it kills me! There is so much to remember and follow. Let alone making the right commitment and allocation between being a day trader or someone who is trying to leverage the use of options to get better entries on stocks I want to own. I want to be the latter. I don’t have the time for all of Phil’s day trades. For God’s sake, I own a business on top of this. I can’t tell people enough to listen and take to heart when Phil tells you not to over-invest. Too many positions will eventually burn you. Thanks Phil.

     So PHIL & Others… I’m curious what your thoughts about the eventual creation of a Global Currency is?
      The way I’m looking at it is the euro zone, the US and others will continue debasing and quantative easing policies and devalue the national currencies until they feel the only way out is to create a *NEW* World Currency. This would be a governmental roll over of debt that would be trusted to a national reserve.
      For the US, I think this might work out well as we are a relatively undervalued currency (compared to the pound, yen, Euro,etc). So when the Euro was made it killed the german dollar… So these other currencies will off set the pain of the peso… the dollar being a net even to gain in the senario.
      With riots, with massive national sells offs and with the Fed stating there will be a double dip recession… it seems like we are just setting this up on a platter for the Global Currency. And maybe even Global Tax 0.1% of every expenditure to maintain the reserve and the currency production.

  391. Faber / Angel and Kustomz – While I have a tendency to agree with the social commentaries that often accompany his market predictions, the guy is a perpetual bear and he is bound to be right sometimes! That being said, as I posted earlier, today could have been a bear market rally and keep in mind that the overall trend is still down and until that changes we’ll have to be careful!

  392. Good studies of what happens after big up-days:
    Basically, not much! 

  393. I meant, not much on average! There are some big days, but the studies shows that it could go either way just about evenly! 

  394.  Globe/Peedle — the new 3D spinning globe at the top of this webpage.

  395. Shadowfax – The spinning ‘revolver map’ was killing the site earlier today.  I installed Adblock Plus for Firefox and added a rule to block it, i.e. ||** (remove anything on the page with that in it.)  I also found this spinning globe, although ‘cool’ eats CPU and I believe was ticking up in RAM usage.  Either way, everything is fine with it gone now.

  396. PHIL/GLOBE - THe Globe "Revolver Maps" program that was recently added…beyond the fact it slows your web site, it also lists the country, city, and state of each person who posts via their ISP final node location.  Your IP guy never contacted me, via the email I sent you about this last week…

  397. anybody have the link to JRW’s system?  Thx. 

  398. If these numbers can be believed, that’s a lot of iPhones:

    Still, there appears to be a significant backlog of buyers holding off for Apple’s next iPhone release. According to one small survey by Gene Munster with Piper Jaffray, 64 percent of Verizon users plan to buy an iPhone for their next mobile, and 74 percent of those said they are waiting for iPhone 5. Just over half of AT&T users who plan to buy a new iPhone are also waiting for iPhone 5.

  399. Its no secret Faber isn’t a big fan of US policy and that’s a big influence on his views.
    I think today we witnessed a bit of intervention when markets sold off after the Fed announcement. It doesn’t take much to get the HFT gang rolling. We’ve had easy money for going on 3 years now, whats changed besides the prices we pay for goods and services? So Faber refuses to listen to the tune Bernanke (pied Piper) is playing. Its bad policy that the data clearly show have not worked. Should we feel at ease that the fate of the financial world is hinged to QE3? We better stop kidding ourselves and soon.
    Markets were created to promote wealth..not destroy it so markets have a propensity to rise. Shit has to hit the fan sometimes though, he’s just delaying the inevitable deleveraging event that needs to take place. I just don’t want to be the piggy in the straw house when the big bad wolf comes to blow.

  400. I am no technical analyst. I neither believe nor disbelieve, an attitude I apply to most phenomena – I know a few things, know I don’t understand quite a few more, and merely have vague suspicions about the rest of what passes for “knowledge.” I suppose tech analysis has it’s good days, not because devouring candles inevitably shred pointy arrows due to the cosmic forces that propel them, but rather because, on your average trading day, enough people think they do and respond with self-fulfilling behavior.

    The last week wasn’t normal. I would be curious as to how the technical stuff worked out. Did it really predict anything, or is it just a more mystical version of Cramer, who always manages to explain why he was right all along after the fact, despite evident daily cluelessness?

  401. Phil / Web Site Slowness    
    I would like to chime in and say that my access has been awful since that stupid spinning bubbling globe has been added.  Most of the time if the globe isn’t hanging, it’s option monster.  I’d kick that to the curb as well.
    PLEASE PLEASE PLEASE PLEASE remove the un-necessary junk from the PREMIUM members section if possible.  The Globe is of 0% use to everyone here.  If it makes the webmaster feel nice about himself, please let him use it on his personal page, and watch the spinning colors and little red dots, while the rest of us make bank in the markets.
    No offense, but man it feels good to say that!

  402. Yes, that spinning globe is causing a long refresh rate – I 2nd the opinion to remove it.

  403. Good morning! 

    Very flatlined futures so far.  That’s not very bullish as you would think we’d get some follow-through but, PERHAPS, they are trying to not piss off the retail investors with the usual shenanigans.  It’s also possible that the US had a huge over-reaction to a nothing Fed statement and we got our weak 4% bounce and now it’s back to Hell in a handbasket!  

    Asia had a very muted reaction to our rally.  The Nikkei opened 2% up but drifted back to 9,038 at the close, up 1%.  The Yen is still ridiculously strong at 76.76 with the Dollar at 74.15.  The Euro is $1.435 and the Pound is $1.627.  The Yen has to stay below 77 for the Dollar to get back below 74 and the Euro needs to break $1.44 and $1.64 would be our goal on the Pound so lots of work to do today if we are going to shove the Dollar down 1% and get a 2.5% follow-through rally today.

    Oil is $82.29, gasoline $2.74, nat gas is back at $4.01 and matching copper again ($4.04) with silver at $37.88 and gold back at $1,752.  

    The Hang Seng gained 3% but also traded down from the open and could not hold 20,000, finishing at 19,899.  The Shaghai gained just 1%, also with a 1% sell-off into the close and the BSE was up 2% but still sad at 17,170.  

    Europe Had a nice open but the UK has pulled back VERY sharply.  The FTSE opened up 4% and is now up 1.89%, the DAX seems happy with their up 2.3% open so far and the CAC is up 1% but that’s 1% down from their open (20 minutes ago).  

    It’s possible that EU investors are selling stocks over there and looking to park money back in the US now that we seem more stable but it’s more likely we’re simply settling into our new range and we’re not going to get a magical recovery that puts us back to our Must Hold levels (the new, lower ones).  

    Nothing exciting to trade at the moment – we just have to watch the Dollar and hope it can get below that 74 line as that’s about the only way I see us having a bullish day as the news is mixed at best:

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    10:00 Wholesale Trade
    10:30 EIA Petroleum Inventories
    2:00 PM Treasury Budget 

    Notable earnings before Wednesday’s open: AVTCSCM

    Notable earnings after Wednesday’s close: AAPCSCO,IAGKGCNWSAPAAS

    What have I been saying:  The U.S. actually is closer to junk bond status than AAA if it were judged as a private company, Dick Bove says: "You’ve got a company which is losing about $1.4T this year [and] owes $14.4T… There’s no likelihood whatsoever that this particular company is able to pay down from its own resources the amount of debt that it has… If that was a real company, of course, that would be a junk bond."

    “All that had changed was people’s opinion of the place” (World Beta)

    Today’s FOMC announcement shows the Fed has drastically underestimated the severity of the coming economic downturn, according to Marc Faber. To make matters worse, they’ve exhausted the treasury on a failed QE1/2. QE3 will come regardless, he says, but it won’t help. The best action they could take at this point would be "to collectively resign."

    Fed Pledges Low Rates Through 2013 (WSJ)

    S&P may have more to worry about than just the U.S. Senate investigating its credit downgrade decision. There’s mounting evidence that the ratings agency leaked the pending action to a select group of banks and hedge funds prior to its public announcement, which is a clear violation of SEC rules. 

    Long-Term Investors Can Relax (a Little)  (Five Thirty Eight)

     How Obama Disappointed the World (Spiegel Online)

    NHS among developed world’s most efficient health systems, says study (Guardian)

  404. Phil  can you explain your thought process on todays TLT trade     Entry and Exit points   What caused that spike around 3 pm?
    Sept 104 Puts     and August 110 Calls

  405.  Morning Phil,
    Oil has made huge moves…. Do you think we might have a big move back down if today is soft?  If so, where level would you look for a short?

  406. You’re welcome Dennis! 

    Real Estate/Dsheara – That’s still iffy too.  Now you know why I keep saying CASH – it’s a crazy market to trade.  You can make nice money if you are quick but it’s not for everyone when the regular markets move as fast as the futures.  You are not supposed to be able to make (or lose) 60% in one hour with index options – that’s just insane!  At least with real estate it takes years to get wiped out, right?  8-)

    Germany getting happier, up 2.7%.  BOE seems to have QE rumors of their own, that’s keeping the Pound down.  

    TBT/$25KP, Pat – For sure we have to get 1/2 back off the table tomorrow.  Avg entry was .75 and, unless there’s a big pullback, we should get a double.  I think if we’re above $1.50 it’s 1/2 out with a .25 trailing stop and, below $1.50 it’s just a cash out.  In the $25KP, we added the longer (all the way to next Friday) TLT puts so it’s not like we’ll miss anything if we get a really nice pullback.  

    Note to all – notice in the $25KP, I did not risk trading all day UNTIL after the Fed when I saw an opportunity to make what I thought was an obvious trade.  That trade made 100% in less than an hour so it was worth waiting for rather than messing around and throwing cash here and there and chewing up buying power trying to chase the latest 30-second trend.  Impatience will kill you as a trader – there will ALWAYS be something good to trade if you have CASH and PATIENCE.  

    USO/Pat – Those should be long gone!  The USO (Aug I assume) $30 puts were $1.40 at the NYMEX close and finished the Day at .80 – at some point you have to stop out!  GMCR is just as bad, with the Sept $92.50 puts falling from $8 into the Fed statement (and $10 on Monday) to $5 at the day’s end.  If you do not have the discipline to take winners off the table, you will end up with nothing but losers – that should be obvious!  I don’t understand how you can still have those positions when your comment right above this question clearly shows you know how to set a trailing stop.  

    20% is a nice win.  40% is a huge win.  50% is more than you should expect.  75% is too much and over 100% is ridiculous!  If you take $1 and make 100% once a week for a year, you end up with $1,125,899,906,842,624 – consider that next time you’re up 100% because, unless you are expecting to make more than a Quadrillion dollars this year – you are probably running at an unsustainable rate of return! 

    DFlam trades:  

    PFE – You are in for net $13.83/16.92 and PFE is at $17.60.  You have to understand how these trades work.  It doesn’t matter what gyrations your portfolio value has, all that matters is whether or not you are on track for a win, which is anything above $16.92.  The stock market fell 20% and PFE fell 15%.  Does that make PFE a bad stock?  Should you take losses out of panic on a trade with 5 months left.  If you are scaling into the position, you should be THRILLED if PFE goes to $10 because you get to buy more as you are in round two (2,000 shares) at $16.92 and another round at $10 drops your net to $13.46 on 4,000 shares, almost 20% below your original entry!  If this is not your attitude, then you are not scaling in properly and that pretty much wrecks the whole concept of buy/writes as you are over-committing to long-term positions and selling puts you don’t REALLY want to buy.  That then causes you to have margin issues when the market sells off – RIGHT WHEN YOU SHOULD BE THRILLED WITH THE OPPORTUNITY – a very bad practice.  

    Anyway, the Jan $20 puts ($3) can be rolled to the 2013 $17.50 puts at $2.85 and that changes your net to $13.98/15.74 and, if you want to be a total wimp, you can roll the caller to the 2013 $17.50 calls and pick up another $1.70) and that drops your net to $12.28/14.89 but, if you hate Pfizer (and their 5% dividend) that much – why not just get out now with your net $1.16 profit (up 8%) and cash out?  

    Note to all – Contrary to popular belief, markets go up AND DOWN.  When you buy a stock, if you don’t EXPECT it to drop 20% over the long-term at some point, you are simply a fool and have no business wasting your money trading.  If you are going to pretend to be a long-term investor, at least have the sense to study what markets do over the long term (see chart above or better yet, see the career of Warren Buffett).  Try to buy stocks you actually believe in AND understand because – if all a stock is to you is a line on a chart and a balance in your portfolio – you will never know why those lines and numbers move up or down and you will pretty much have nothing but ulcers as you spend your whole life worrying about things you do not understand.  

    PNC – Net $56.87.  Banks are tricky right now but if it’s your only one and you like them, then it’s a good time to sell puts and you can get $6 for the 2013 $40 puts and $7 for the 2013 $50 calls and that drops your net to $43.87/41.94 but, again, this is what you do when you REALLY WANT to establish a long-term position.  This is a very expensive stock and if you are worried about a $14,000 initial allocation in PFE that’s PROFITABLE, then I don’t even know why you’d want to have a $25,000 allocation of PNC as an initial entry.  Unless you have $100,000 blocks to trade, you are better off taking the $3,775 loss and moving on.  You COULD sell the stock and sell the puts naked for $3,500 to get most of the money back and then your worst case is you are back in at net $33 – THAT’s a position you can work with. 

    It is VITAL that you KNOW what your allocations should be.  If you have just $50,000 to allocate to a 4x position then you are not going to pick anything that costs you more than net $12,500 to get into.  Again – if you do not ASSUME that you will be wrong with your initial entry then you are dangerously arrogant and will very likely learn your lesson the hard way down the line.  Go back to the Income Potfolio – our goal was to make $4,000 a month with $500,000 and we allocated less than $250,000 of our $1M margin to positions ($125K cash) and made our first year goal in just a few months.  NOW we have a nice buying opportunity and we will add more positions as our patience is rewarded.  

    WAG – There is no such thing as not selling calls to wait for a better price in a buy/write.  The idea is to buy a stock and give yourself 20% downside protection on the entry.  Buying a stock and selling puts with no calls is the opposite of the strategy, where we usually initiate a position with the sale of naked puts and THEN sell calls and more puts to lower the basis even further AFTER we are assigned our stock at a discount.   From your allocations, you are trading like a guy with at least a $2M portfolio (more like $4M) – I hope that’s the case!  So I assume you JUST bought this because if you were waiting for a better price from the last time they were at $38.35 (March) and didn’t think $45 was a better price in May or June, then it’s pretty hopeless.  

    If, on the other hand, you just bought them – WHERE THE HELL IS YOUR CONVICTION?  Did you seriously buy these last week and now they dropped $2 more on this ridiculous, panic sell-off and now you are going to abandon your plan already?  SCALE IN!!!!  What you SHOULD have done is JUST sold a 1x allocation of puts, without buying the stock and now you would be ready to go 2x on the puts so you’d have 4 short puts at an average of $3.35 for a net entry (if they keep falling) at net $34.65.  When you buy long stock AND sell puts you are making a 2x bet in the same direction.  That’s fine if you are gung-ho bullish and ready to ride out a storm but not if one week later you are bailing on the position because it’s down 5% with the broader market. 

    At this point, you should probably stick to your plan and wait.  Always know what your back-up plan would be and that’s something like rolling the puts to 15 short 2013 $30 puts at $3.20 and selling 15 2013 $35 calls for $5.40 and then you are in 1,500 at about net $29.65/28.83 which isn’t very exciting as it’s just 20% if called away but buy/writes aren’t meant to be exciting, just stable!  

    Just like making 100% on $1 50 times in a row gives you a Quadrillion Dollars, making 10% on $2M 20 years in a row gives you $13.45M – GREED is the only reason people try to make more than a solid 10% annual return and that greed leads to risk-taking and risk-taking leads to losses and losses lead to you not making anything like $11M over 20 years, which is ridiculous because most people who are investing $2M probably took at least 10 years just to make that so making an average of $550,000 PER YEAR for the next 20 years (and that’s just 10% compounded) should be THRILLING – not boring!  The problem is it all starts with "just" making $200,000 in year one…  

    I hope everyone has read "How to Buy Stocks for a 15-20% Discount" – that’s our Buy/Write Strategy in a nutshell.  

    WIN – I don’t know why you like these guys but you sure bought right at the top!  Same problem as WAG, you were so gung-ho bullish on the buy in that you got screwed on a sell-off.  I assume you only recently sold the puts as a DD in Jan at the lower strike (net $9.84) and that puts you in 3,000 shares at an average of $11.49 so right about where the stock is now.  If they keep falling, you can sell Jan $10 calls (now $1.40) to drop your basis to about $10 but then you’re out of options other than hoping and praying.  As long as the dividend is intact it’s not so bad but they are growing through acquisitions and one misstep will sink them fast. 

  407. PHil, I suspect that after a day or two of consolidation, we’ll have another test of the bottoms – can you recommend a couple of disaster hedges to protect two 200k portfolios, one centered around the NYSE and the other more Nas and American stock exchange oriented?  thanks muchly!

  408.  Phil,
    Thinking about taking a stab at  short gold here.  How would you play it?

  409. Bottom/Asaenz – we need to get to our new must hold levels and hold all 5 through the end of the week (and expiration day next week). The faster we go back up, the more I’d be looking to get short again although, as I said yesterday, we had MASSIVE outflows and it’s going to take many days for those guys to get back in so we could get another squeeze day today or tomorrow but the Dollar is pretty low so I doubt more than one more big day.  

    Bullish/Tusca – No, I’m not bullish but that doesn’t mean I don’t trade with the market, does it?  As I said ALL DAY, if the Fed didn’t have QE3 right in the statement, we would drop.  At 1:30 the Dow was at 11,000 and at 2:30 we were at 10,600 – that’s a 3.6% drop in an hour.  I don’t know what it is you expect the markets to do but you need to radically alter your expectations if you see a drop of more than 2.5% in one hour and then expect to see more without a bounce.  We fell VERY hard after the Fed but then, around 2:30, A LOT of buyers stepped in.  THAT IS BULLISH.  It doesn’t matter what you THINK about the Fed’s announcement with your $10M account, what matters is what the guys who are trading $1Bn an hour think and they clearly had a different opinion.  Their opinion isn’t necessarily correct – just as a Mack Truck may not be correct when it’s coming down the road, heading towards you on your side of the road but that certainly isn’t the time to not swerve just because you know you are right, is it?  

    So, am I bullish?  I don’t know how I could have been more clear about the fact that I EXPECTED a 4% bounce off our 20% drop.  We fell almost exactly 20% and bounced almost exactly 4%.  Is that bullish or is that physics?  So, yes, at the 20% lines, I became "bullish", as we planned last Tuesday.  Now we are at our 4% bounce and I’m not very bullish – hence my saying to take all short-term directional calls off the table into yesterday’s close at 3:41.  Now I am very content to wait and see because CASH lets us do that.  It is nice and flexible and, if we don’t find any stocks to buy, we can always go to the mall instead!  

    Jackson Hole/Rain – That’s at the end of the month and the Fed left the door open between now and then so I doubt we get a big sell-off until the bulls abandon hope if no QE3 then.  Of course, there’s lots of things that can blow up between now and then so we’ll just have to see but maybe it’s a good idea to be in CASH this month.   I know this is the first time that many people are hearing this because I have said it less than 100 times in the past two weeks but I’ll say it again.  CASH – CASH – CASH!!!   That doesn’t mean you can’t trade (although when was the last time you visited your Mom?) but there are plenty of small, fun trades to make EVERY DAY so why feel compelled to "be in the market" – if you are not a fund manager who is paid to be fully invested – what is the point of taking risks in uncertain times?

    Costanza/Dsheara – I love that idea.  If it works out, we’ll celebrate at Festivus!  Actually, Mr.M used to have that problem but it’s actually a GOOD thing.  It means that you are seeing the inflection points very well but just drawing the wrong conclusions from them.  It’s like learning how to see when a pitcher is throwing a curveball but not knowing that you have to flatten your swing – it doesn’t help until you master step 2!  

    Wow, Futures flat to down 1% as the Dollar wiggles around the 74 line.  Still scary volatility.  

    CSCO/Lol – Tonight. 

    Regular folks/Troy – Most of the people I talked to on Sunday (party) were being told by their financial managers on Friday to cash 100% out.  Cramer was telling his sheeple the same thing.  Monday probably convinced them to do it and yesterday was certainly WTF.  They are just destroying retail investors, much as they did last summer ahead of Jackson Hole.  Keep in mind that the Fed and the Governors meet with GS and JPM etc. on a regular basis – they KNOW what’s going to happen and they engineer a crisis ahead of "game changing" news to shake out retailers and give them better entries.  If they manage to bust a few competing funds along the way – so much the better, right?  

    Don’t worry JJ – plenty of opportunity to catch more craziness this year.  

    Good job Flips, congrats!  

    Japan/Russell – They were very sorry that they sent the Global markets off a cliff last Thursday so I think they will be gun-shy now down to 76 Yen (now 76.57) but they also may be more subdued in their buying of dollars to avoid a replay of last week.   This is a new BOJ with a new Government and they failed to understand that boosting the Dollar kills our markets and killing our markets kills their market, no matter where the Yen is.  

    Hunter/Flips – I prefer shepherd:

  410. Big Chart – Keep in mind that the +5% line was our old "Must Hold" level and we’ve dropped it 5% due to poor earnings and the Debt Downgrade but I’m feeling pretty good about that line if we can get there by the end of the week and hold it.  That’s going to be a lot of work for the RUT (10% to 770) and we must get 3 of 5 otherwise, next week, that must hold line would be just as likely to become a new top and we would have to drop our range even lower next time we violate the -5% lines (3 of 5).  Without QE3, that’s probably going to happen but, between now and the end of the month – it shouldn’t take much "good" news to lift us as high at 5% over the new Must Hold – back to retesting our old middle.  So that’s a good possibility of a 10% move up between now and Jackson Hole but any kind of failure along the way is very bearish so we will watch these -5% lines VERY CAREFULLY.  

    Day trading/Shadow – If you have to walk away from your screens, you should not be day-trading.  That’s very simple.  You are doing the exact opposite of what you should be doing – you are chasing moves and paying massive premiums on short-term gambles.  It’s not good.  

    DIA/Nicha – The good thing about the verticals is you DON’T have to panic out of them as they don’t take too much damage on a quick move against them. Do not try to win both sides of a trade – you often end up losing both.  You were very right to slap on the protective IWMs as we headed lower but then you just let the protection do it’s work.  A 10% move down (to trigger the DIA $98 puts) would have put you up a few bucks on the IWM puts so the goal is just to try to keep the DIA loss to .16.  It’s OK to lose .16 on a bet that pays $2 once in a while – it only takes one full winner to make up for 12 losses…

    Fed/Angel – It’s allowing the punditocracy to spin that QE3 is on the way and that seems good enough for the sheeple to stampede back in.   I have overestimated investors and assumed they would want something more substantial than the same old BS to stop them from getting to cash but they are as gullible as ever it seems, even WHILE they are getting burned.  

    Oh no!  Whitney is the 8am guest on CNBC!  Tempting to short the futures based on that alone but they are too crazy to play at the moment.  

    Headfakes/Matt – Well good job keeping yours intact.  

    Trucks/QC – Nice.  

    HFT/Lori – I doubt it. Those guys are big lobbyists.  

    Vacation/Burr – Very wise week to skip – enjoy yourself, we’ll keep the markets warm. 

    Margin/Scott – You need to only sell puts in stocks you REALLY want to have assigned to you at the net price.  When you sell a long-term put, you have to allocate at least 1/2 the net cost of the assignment and not use that margin for other things, other than perhaps, selling short-term puts with tight stops.  

    Bottom/RP – I think the best indicator that we are at a bottom is Pentax’s chart of the S&P priced in global currencies.  We are near the 2009 panic lows again – that’s kind of crazy and it’s hard to believe this isn’t a good time to buy – as long as nothing else catastrophic happens (what’s left?).   Without QE3, we may sink back to that level but that is a buy zone for sure.   

    Thanks Peedle!  

    Poll/StJ – LOL!  

     But new data from a CNN poll showsthat there’s been a difference in the minds of many Americans: the Democratic Party is getting a split on approval/disapproval at 47 – 47, but the Republican Party disapproval rating is all the way up to 59%, against a 33% approval.

    The Tea Party itself actually has a lower disapproval rating at 51% than the Republican Party, and only a slightly lower approval rating at 31%.

    Only 41 percent of people questioned say the lawmaker in their district in the U.S. House of Representatives deserves to be re-elected - the first time ever in CNN polling that that figure has dropped below 50 percent. Forty-nine percent say their representative doesn’t deserve to be re-elected in 2012. And with ten percent unsure, it’s the first time that a majority has indicated that they would boot their representative out of office if they had the chance today.

    Presto Chango and the Dems are back in charge!  GOP now 5 points lower approval than in Nov 2006, when the Dems took over Congress.  

  411. Phil,
    My bad. I do not have any positions in them. Actually I missed your trade idea yesterday on USO Sep 30 Put and was asking whether it is a good time to enter again. Same with GMCR. I had position in GMCR 97.5 Put which I sqaured off for 50% gain last week.

  412. Globe/Shadow et al – It seems the cool globe is slowing things down, I have asked Matt to take it off the chat pages.  Probably will be done this weekend.  

    Too Liberal/Angel – If you are not an extremist, you’re only going to piss everybody off.  

    Bremmer/StJ – That is dead on.  So is Salmon.  Bernanke just killed bonds and now there is simply nowhere else to put money but US Equities. 

    Thanks Angel.

    Those spending numbers are surprising StJ!  

    Clothes/Peedle – I hope so because we can’t afford an economic collapse right now.  That’s why I don’t "get" bears.  The only way they are going to "win" from this level is for our country to hurtle into a Depression and that’s just not a good outcome.  I don’t WANT the markets to head lower.  I’m not going to put my head in the sand but if people want me to go gung-ho bearish, that’s just not going to happen – as I said in yesterday’s post:  "IF we break down here, our last support before Hell is 1,014 but let’s not think about that as it’s sad."  Fortunately – we didn’t (so far) and I don’t really think things are so dire that they should but, if we do visit the bottom of Pentax’s adjusted lows on the S&P, I will get very bullish indeed for the same reasons I got very bullish in March of ’09 (see review).  

  413. Phil
    Thanks in advance for getting rid of the globe. It was causing me lots of refresh problems, too.

  414. SP futures just went up 10 pts in 19 minutes…sitting at 1138.   In another few hours…we can just skip Wednesday as if it didn’t happen…

  415. 1130 to 1138 in 19 minutes…my mistake…only 8 pts in 19 minutes…:D

  416. Phil - "If you take $1 and make 100% once a week for a year, you end up with $1,125,899,906,842,624" <—You added two weeks of vacation…SLACKER! =0

  417. 5 more SP points in 10 minutes!!!  Hmmm, might be at 1370 at open at this pace….