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Wednesday Wheeee – Our W’s Are Shaping Up Nicely!

Wheeeeeeeeeeee! 

Here we go again.  We made it through our "Testy Tuesday" and, as you can see from our Big Chart, we hit our goals with 4 of our 5 indexes coming right up to their resistance lines – not bad for support lines we first drew in April of 2009!  

As I often say: I am neither Bullish nor Bearish – just Rangeish.  Rangeish has been the winning play for us for quite a while.  I was on TV August 2nd, where I laid out our plan for the month (20% drop) and we were VERY HAPPY to do our bottom fishing at those -10% lines for the last few weeks and now we are back in a zone of relative uncertainty where we must hold our Must Hold lines.

On Friday, the 19th, we were confident enough in our bottom call (I led the post off with: "We are now officially getting silly" as the futures tanked that morning) that we shorted EWG puts in the morning post and shorted the VIX at $42.50 with a VXX spread that’s already up 1,433% but well on track to double that.   

Also in that morning post (and this is just the free stuff!) I put up a bullish trade idea on XOM at $70 that is obviously doing very well (XOM $74 yesterday) as well as calling for longs on the Futures at Russell (/TF) at 650, Nasdaq (/NQ) at 2,050 and Oil (/CL) at $80.  If you didn’t play those bullish, don’t look now because you might cry…  

Once the market opened that day, we added an aggressive play on HPQ in our $25,000 virtual portfolio, buying 20 Sept $26 calls for .60 (now .93, up 55%) and paying for them by selling 5 Sept $23 puts for $1.57 (now .20, up 87%).  That trade was net $415 and is currently worth $1,760 – up 324% in two weeks.  

We are able to do that when we take advantage of the very high VIX (which we expected to go down) as well as taking specific advantage of HPQ coming off disappointing earnings but it’s not the charts — it can NEVER be the charts that tell you to buy a stock that is plummeting – it’s FUNDAMENTALS!  

We also picked up TIE that afternoon and an aggressive upside play on the Russell with a TNA (at $36 that day) Sept $35/39 bull call spread at $2, paying for it with the sale of the Sept $26 puts at $1.60 for net .40 on the $4 spread.  TNA is now $49.25 (up 36%) and the spread is $3.60 and the short puts are .15 for net $3.45, which is up 762% – also in two weeks.  

That’s a great example of how you can use options to pick up tremendous leverage on index movements although 36% in the index itself is not too shabby…  

As you can see from the Big Chart of August 19th (above) – there was nothing in the TA telling us to go bullish that day.  Indeed we finished at the day’s lows and we were, in fact, expecting to possibly re-test the lows but our FUNDAMENTAL analysis of the data, the newsflow, earnings reports, etc. made us comfortable getting a little bullish that day.  This is the pay-off from maintaining a "Cashy and Cautious" stance for most of the month – we were ready, willing AND able to act when the opportunity presented itself.   

I say this now because we’re back in the middle of our range and we NEED to realize that our certainty level can not be the same as it was when we were at the bottom of our range.  Calling movements at the bottom or tops of ranges is much easier than calling the middle and we need to go back to being cautious (cautiously bullish at the moment because of QE3) as we move through this critical zone.  Fundamentals only take you so far – I can tell you that the Dow SHOULD be at 11,590 (our Must Hold level) and if you say – "is 10,500 too low", I can easily say yes and if you say "is 13,000 too high", I can easily say yes but is 11,300 or 11,700 too high or too low?  No, that’s silly, it’s close enough and, as I said yesterday – in absence of news or data to the contrary, we can expect a gravitational drift back towards those must hold lines which are, more or less, the "right" price for our indexes at the moment.  

The above charts on Market Psychology are not just about how YOU feel.  While you are very, VERY important, to be sure, roughly $500,000,000,000 worth of stocks and commodities and another $4Tn of Forex are traded every day and they are not all waiting to see how you feel in the morning.  While we need to recognize these feelings in ourselves, we also need to try to gauge the mood of the market and that’s why, every morning, we discuss what’s going on in Asia and Europe as well as the USA.  

We have been so focused on Europe and all their troubles recently that we tend to forget how dangerous Asia is looking.  Japan is hopelessly mired in debt that is over 200% of their GDP, that means if they were forced to borrow money at 5%, like the PIIGs are, 10% of their GDP would go towards debt service, which would be like the US having to cough up $1.5 TRILLION a year in interest alone!  Both China and India have inflation rates that are out of control and all over Asia, companies are being forced to give workers huge wage increases to keep up with inflation – this can cause some dangerous margin squeezes down the road.  

Even mighty Canada’s GDP is DECLINING – down 0.1% last Q on falling oil prices.  China is keeping Australia afloat for now but a combination of rising input costs and rising wages has sent the Shanghai Composite down 8.6% this year, adding to last year’s 14% drop and, as I mentioned the other day, the PBOC is currently DRAINING liquidity to the tune of 10% of the GDP ($600Bn) to try to reign in food inflation that is causing riots all over the Nation.  

China is still stockpiling copper, with the Government betting on a turnaround, even if investors in China are not.  What investors in China are buying is GOLD!  According to a report in Yangcheng Evening News last Wednesday, just one city in Guangdong province – Guangzhou – has 2,000 underground investment companies dealing in gold and foreign currencies. Investors can leverage up to 100 times their principal with such black- market brokers, the daily said. The regular market for gold in China sees $1Bn of daily trading volume with another $500M a day traded on black markets.  The growth of these black markets is leading to Global instability in the gold market and that’s leading to the exchanges needing to raise margin requirements as it’s the only way they can control the flow from illegal operations.  

ALWAYS be aware of who your counterparties are when you are trading.  Since the "Arab Spring" revolutions began, we’ve had Billions of dollars pouring into gold markets as nervous despots and their toadies looked for places to park their cash and in Asia it’s the metal of choice for inflation fighers, despite the fact that gold has, historically, been a poor overall hedge against inflation.  

I have a simple system for knowing which way to go on gold.  Are more commercials on TV asking you to sell them gold or trying to sell you gold?  If most of the commercials on CNBC are people who are spending money to tell you what a great investment gold is and that you should be buying it from them – THAT is probably a good time to sell gold.  When people are spending their money on TV telling you to melt down all your jewelry and send it to them for cash – THAT is when it is time to buy.  This morning, I’ve seen 10 commercials looking to sell me gold and no buyers…. 

Fundamentally, we could go either way at this point so let’s watch those technicals and, of course – let’s be careful out there!  

 


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  1. Oil Lines:
    R3 – 92.37
    R2 – 90.80
    R1 – 89.62
    PP – 88.04
    S1 – 86.87
    S2 – 85.29
    S3 – 84.12
    Yesterday’s high and low – 89.21 / 86.46
    Breakout lines – 93.65 / 79.26
    We have inventories today at 10:30 AM and we expect them to be bearish for oil following the hurricane… 


  2.  Did the Sept Dozen ever get finished?  The last I can find is HPQ….


  3. haschade, September Bakers Dozen: BRK.B and INTC were added on Tuesday.


  4. Phil, GE
    Yesterday I wanted to enter a BW on GE. It seemed the price I wanted on the 2013 sales were not what I wanted so I placed my limit trade to see if it would hit, it did at the end of the day buy too late to buy the stock. Now up pre mkt. Should I get in at first opportunity or wait for better price? I think I know your answer (buy now you idiot before it gets away) but wanted to make sure. Thanks


  5. FAS Money Recap
    Long Strangle –Jan 12 Puts (3.01 average now 1.99) and 15 Calls (2.75 average cost now 3.57). 
     
    Weekly – 1/2 September 14 Puts (1.24 now 0.73 – 41%) and 1/2 September 13 Puts (1.61 now 0.52 – 68%)
    Monthly –1/2 September 14 Puts (1.24 now 0.73 – 41%) and 1/2 September 13 Puts (1.61 now 0.52 – 68%)
     
    We currently have a stop at $0.90 for the 13 Puts which needs to be adjusted I am guessing as we have large gains in both puts to protect.


  6. Phil – Two quick questions:

    -What are your thoughts on buying IMAX Jan’13 $15 (or $20) calls and then selling OTM calls against them for the next 16 months?   Based on the premium being offered for the upcoming monthly calls, it seems like I’d be able to pay off the Jan’13 calls easily and might even be able to pocket some money on top of that.

    -When rolling calls to a lower strike price, I should look for a 1:1 or higher ratio in terms of the additional price vs. additional delta right?  For example, I own TZA Sept $47 calls (.434 delta) and am considering rolling them down to $43 calls (.518 delta).  Since the difference in delta is about 20%,   I should not pay more than 120% of the value of the $47 calls FOR the $43 calls, should I?


  7. Phil,
     
    Do you know anything about this guy?  He makes a compelling argument.
     
    Is he credible or just another marketing scam?


  8. Stoking the fire Phil!
    http://www.cnbc.com/id/44337105 


  9. exec – I read the article above. Sounds like a scam. This Shia and Sunni thing has been talked abt for centuries.



  10. Taking taxes to a different level:

    Berlin – Germany’s first “sex tax meters,” from which prostitutes can purchase a ticket for 6 euros (5.31 pounds) per night, will ensure the tax system is fairly implemented, a city spokeswoman said. “Inspectors will monitor compliance — not every evening but frequently,” the spokeswoman told Reuters. If caught without a valid ticket, offenders will first be reprimanded, then face fines and later even a ban. 

    I wonder what the reprimand will be when first caught! Is it left at the inspector’s discretion?


  11. stj – lol on the reprimand.


  12. @ Phil, for the rest of the week we will still have data, most likely shitty data….do you expect the markets to continue to go up just as easy? or maybe we will gap down in the morning and recover during the day? Thanks!


  13. CLSP/SGYP  (GS) – I thought I knew these companies, and they are the poor man’s version of Ironwood.  The drug’s mechanism of aciton is the same as Ironwood, but they are years behind.  Some think this version (Plecanatide) is better than (IRWD’s linaclotide), but the data remain to be seen.  As a flier that one could sit on and just let things play out, they would be fine.  The bet is in the right direction as the MOA is validated.  It remains to be seen IF it is better, and then IF it makes it to market, and then IF they can overcome IRWD’s head start.   So, I like them for a stow away for a few years for a small gamble.


  14. Good morning!  

    Very simple goals today, we have levels to be retaken on each index so we want to see them hold up all day in the very least:  Dow 11,590, S&P 1,235, Nas 2,603, NYSE 7,473 and Russell 735.  Rejections should not be happening if we are going to make that next leg up as they should act as only minor resistance, not major.  

    Note the RUT is on the fence so we will watch them closely, especially as they are still lagging and only looking at -5% lines, not Must Hold lines so far.  The Dollar is just under 74 and we need it to stay there.  Oil is back to $88.50 and will make a nice short into inventory and gold is still silly at $1,828 but, as noted above, that market has gotten out of control so you can’t look for it to obey fundamentals at this point (not that oil does very much).  

    Oil should climb into the inventories at 10:30 and $89 is where we want to short them but we can go with 10 Sept $34 puts at .85 in the $25KP and a plan to DD if they get to .65 or lower ahead of inventory and we stop out if they get over $90 – which I very much doubt.  

    NOW is a very good time to revisit some Disaster Hedges as well as some of our Long Put ideas because, if we fail to make these Must Hold levels – then it’s going to be very easy for us to drop right back down 10% on any sort of bad news.  As a rule of thumb, it’s good to put about 20% of your gains on the way up into hedges.  Only if we FAIL to make our levels, of course…

    Hey CNBC showing Paterson, NJ floods – that’s the town below us!  My town is a total mess, roads closed all over the place.

    Losses from Hurricane Irene are likely to be material but manageable for U.S. insurers and reinsurers, Fitch says, noting that AIR Worldwide has made an estimate of $3B-$6B. As a result, Fitch doesn’t anticipate any ratings changes tied solely to losses from the storm. 

    Data coming in pretty good (as in: not terrible) this morning – now the focus shifts to jobs to close out the week:  

    At the open: Dow +0.58% to 11627. S&P +0.6% to 1220. Nasdaq +0.51% to 2249.
    Treasurys: 30-year +0.12%. 10-yr +0.15%. 5-yr +0.09%.
    Commodities: Crude -0.48% to $88.39. Gold -0.18% to $1824.25.
    Currencies: Euro -0.03% vs. dollar. Yen -0.17%. Pound -0.13%.

    Market preview: S&P futures +1% and tracking Europe higher as the ADP report and eurozone inflation and jobs data sustain investors’ faith that more monetary stimulus is on its way, especially after the FOMC minutes from yesterday. Joy Global +5% and Vera Bradley +6.3% following earnings, but DryShips -8.5%Later: Chicago PMI, factory orders.

    August Chicago PMI: 56.5 vs. 53 expected, 58.8 prior. Employment 52.1 vs. 51.5 prior. New orders 56.9 vs. 59.4 prior. Prices paid 68.6 vs. 71.7 prior.

    August ISM New York Business Index: 47.8 down from 57.2 in July. Despite weak current activity, "future optimism remained in positive territory," the report said. The six-month outlook index fell to 59.9 in August from 63.2 in July.

    August Challenger Job-Cut Report: 51,114, much below 66,414 prior, a decline after 3 consecutive increases. "In August, the private sector once again took a backseat to the government sector, which saw job cuts surge to the second highest monthly total this year".

    August ADP Jobs Report: +91K vs. +100K expected and +109K prior (revised from +114K). The data "suggests that the trend in employment moderated somewhat in August at a pace below what would be consistent with a stable unemployment rate." - Perfect for QE3! 

    MBA Mortgage Applications: -9.6% vs. -2.4% last week. Thirty-year fixed mortgage rate decreased to 4.32% from 4.39%.

    Canada Q2 GDP declines 0.1%, an annualized drop of 0.4% vs. expectations of flat. The overall decline – the first since 2009 Q2 – is the result of a sharp drop in exports, while domestic demand continues to solidly expand. The loonie is up a hair vs. the dollar at $1.0241.

    Eurozone July unemployment is unchanged at 10%. Economists had forecast a drop to 9.9%. Neither the euro nor shares show much reaction, but the data will do little to dissuade those who think the ECB’s next move will be a rate cut. (PR

    Eurozone inflation for August comes in unchanged at 2.5%, in line with forecasts. (PR)

    The swiss franc is sharply higher vs. both the dollar and the euro even as risk is on and Switzerland announces a $1.1B stimulus package to fight the impact of "massive overvaluation." The dollar and the euro -2.1% vs the franc. FXF +2.1% premarket.

    Japan spent $58.8B on currency intervention this month, double its previous record for such activity, which occurred last September. Like that move, this month’s intervention looks to have caused no more than a short minor blip in the upward movement of the yen’s value.

    Jon Hilsenrath believes most of the debate within the FOMC is over how, not whether, to provide additional stimulus. Short of a significant reversal in the data between now and Sept. 21, expect a least some policy action at that meeting. It will be interesting to see if the sharp stock rally in anticipation of QE3 could be enough to derail it. 

    Bearish on Treasury prices when the 10 year was yielding well north of 3%, Bill Gross turns bull with the yield close to 2%? Itsounds like capitulation, writes Brett Arends. "They say the time to sell is when the last bear turns bullish." 

    The EU’s bank regulator is reportedly considering ways to assist banks that are having problems accessing credit markets for medium- and long-term funding. One option is to guarantee bank bonds, which would mean giving even more new powers to the eurozone’s €440B ($635B) rescue fund.

    Having been bailed out by ECB bond purchases, Italy appears to be backing away from its austerity promises. "Berlusconi and his (coalition) have torn up (the austerity plan) beyond recognition," writes a German editorial board. "The house is burning and nobody is picking up the fire extinguisher."

    25 of the 100 top-paid U.S. CEOs earned more than their firms paid in federal income tax, a report from the Institute for Policy Studies shows. Many companies also spent more on lobbying than they did on taxes, although the survey ignored foreign, state and local levies, and deferred taxes. 

    Tyson Slocum, a member of a CFTC advisory panel, plans to release a letter to Congress calling for commodities investors toregularly disclose their trading positions, arguing it would ensure transparency. Those opposed say it would unfairly expose trading strategies.

    As China’s mobile subscriber base soars to 930M, Tero Kuittinen thinks the Middle Kingdom’s insatiable demand for mobile phones is offsetting European weakness, and bolstering chipmakers such as QCOM and RFMD. However, if U.S. consumer demand falters this holiday season, Kuittinen believes "all bets are off." (previously)

    BP says a raid in Moscow on one of its offices has no legal basis, warning the action ordered by a Siberian court could set adangerous precedent. The raid adds to a tough week in Russia for the oil major after ExxonMobile (XOM) and Rosneft finalized a deal to explore offshore Artic fields, shutting out BP. Shares -0.8%premarket.


  15.  Dollar is trying to reclaim 74


  16. Pharm – Thanks.  What bio/pharm stocks are you holding at this time?  There are about 30 names I’d like to own but if I bought all of them (SNSS, AEZS, CLSN, CYTX, etc) but if I bought all of them, I’d only have about 100 shares of each :) .
    I owe 90% of my profits over the last three years to biotech stocks, mainly AMRN and HGSI both of which I nailed for huge gains.  That’s despite losing big on PLX, DEPO and FCSC.


  17. /DX stick!


  18. That’s interesting, TBT flew up from $24.40 to $25 again but not as big a move down on TLT yet.   I still like our shorts of course!  

    GE/Jomp – Well you don’t want to buy into the initial excitement if it can be helped but you need to set a stop for yourself, maybe at $16.55, where you must act.  

    FAS Money/StJ – Speaking of ALWAYS selling into the initial excitement – Those $15 calls are now .98 BUT now FAS is at $15.66 so that’s no fun, is it?  Europe is up almost 3% so let’s play this by ear but I’d rather not cover the call side if we don’t have to as we’re closing in on a double on the long calls.  We’re up over 10% from the bottom on XLF so a 2% pullback is VERY possible though but $15 should hold on FAS and that just makes selling calls very dangerous. 


  19. FAS Money / Phil – Not fun indeed! Premium does evaporate quickly with these weeklies! Still a lot of data to come for the week – mostly on the job side. I would think that the best plan would be to protect the gains on the put side for now – we have over 70 and 50% gains on these 2 puts sales.   


  20. Thanks Phil on GE but I bought at 16.23 when it went down for a bit earlier – lucky


  21. How can I BTFD when there is no F’ing D?!?


  22. These are big margins…
    http://www.ritholtz.com/blog/2011/08/apple-iphone-components-by-mfr/
    Amazingly enough, they pay Foxconn only $7.00 for labor and Foxconn has a $7.00 margin. Not as good as Apple, but I would take that in my business! I still find it amazing that these large corporations are looking at shifting labor to other countries like Vietnam because China is getting expensive! The labor cost is only 2.5% of the cost including Foxconn margin. Apple’s take is over 65%… 


  23.  HOLI taking off!


  24. RUT is bucking the dollar again.


  25. Inventories added 5.3M…

    They were predicting a drop…no move.

    I hate being an economics major.


  26. I meant a drop in inventories…an add of that level should demolish the price.


  27. Dollar up market up?


  28.  ironically if O’s fed lapdog evans gets his way with way more aggressive easing it ensures O will get blown out in next election…i am dumbfounded no one see the potential dleterious impact on food…oil..ahhh they BASICS


  29. Clark,
     
    I’m seeing that.  This just feels like a BOT induced rally with the help of the spin artist at CNBC and the like.


  30. meanwhile i hope they do it


  31.   if energy/food see another big spike from current levels…we get hard landings in key emerging markets


  32. Matt
     
    What is the logic that your program is based on?


  33. st luke…speaking of a sex tax..and a ban for not paying it..do you suppose the enforcement division would clamp a french boot on th eoffending prossies twinkie til the fine is paid..or impound the unit central?


  34. also if we had such a tax here..gs jpm ms would be paying massive taxes…


  35. Dollar dropping market dropping.
     
    It’s almost as if the BOTs have discovered that traders use the dollar as an indicator to market direction and have modified the program to mess with the traders.


  36. aapl not participating last theree days not usually a good sign


  37. WTF?  Shadow bar to 127.1 on SPY.  F’in bots.


  38. Angel, looks like you should apply for the sex tax inspector job! 


  39. stjeanluc:
    I would like to submit my resume too. :)


  40. Oil?


  41. Someone asked for a dip? This may be all you get!


  42. Phil -

    What are you doing with those Oct FAZ puts? I got out some earlier and trying to see what to do with rest.


  43. IMAX/GS – Don’t forget the VIX is high and the premium may not last.  Also, it is very dangerous to sell front-month premium on undervalued stocks.  If I ran SNE or NWS or TWX, I would have snapped IMAX up last week and now, 20% off the bottom, they are still underpriced at $17.63 so I would favor the 2013 $10/20 bull call spread at $5.20, selling the $15 puts for $3.20 for net $2 on the $10 spread.  Worst case is you have them assigned at net $17 but the $10 calls mean your break-even is $13.50 and, since you make $8 at $20, you can sell some front-month calls if you want.  If you do a half sale of the Oct $21s at .70, you pick up .35 per net $2 long, which is a very nice 17.5% in 2 months while you wait.  

    Rolling/GS – Gee I wish there were some mindless rule like that but the idea is to have an actual target for the month of the strike and try to get as close to it as possible while trying to sell as much premium as possible.  So, for TZA as an example – where do you think it will be?  They are at $38.66 now and were at $30 in July so rolling to the $43 calls is "a start" but what are you spending the money to accomplish?  Don’t forget both deltas will fall apart very quickly if the VIX goes down and then you have the small issue that there are just 12 trading days to expiration (Monday Holiday) and then POOF!, all your money is gone.  If that’s the plan, then great – buy more premium…

    If, on the other hand, I were stuck with TZA $47 calls (now $1.50), I would figure it’s not that likely the RUT falls 5% so 15% up from $38 is $43.70 so I’d sell the $43 calls to some other sucker for $2.35 and (assuming I still want to use TZA as a long-term hedge), I would roll out to the Oct $43 calls at $4.60 (+$3.10) for net .75 out of pocket with, obviously, the intention to sell another Oct call once the Sept caller expires.  

    Guy/Exec – Oh come on – this is not the first guy to worry about war in the Middle East.   You want to make 9,900% on that predicted oil crisis?  Just buy the USO 2013 $35/45 bull call spread at $2.20 and sell the $25 puts for $2.10 and that’s net .10 on the $10 spread.  Since you don’t lose unless USO drop 30% and you figure that will save you about $1,000 on energy spending, let’s say you risk owning 500 shares USO at net $25.10 ($12,550) and you pull the plug if USO falls below $25 with hopefully less than a 20% loss.  Then you buy 5 contacts and, for net $50 out of pocket, you collect $5,000 if Mr. Doom and Gloom is right.  That’s about 30 times better than he did making the same bets on stocks last time and your cash commitment is a lot less than he’s asking for to reveal his "secrets".  

    Corporate Taxes/StJ – It’s so funny because they "wonder" why Corporate Profits are skyrocketing and CEOs make more money than the corporations pay in taxes while worker pay stagnates or declines as if it’s not simply because the Workers have no power.  If the workers had rights and power – this would never happen but Unionism is now associated with Communism in this country and, as we all know, Communism is no longer an alternate economic philosophy but, simply, PURE EVIL and any politician who even mentions that maybe the Workers should have more say in what goes on in a company is effectively throwing his career out the window – even in most Democratic states.  It is truly Orwellian the way our media and our politicians talk about problems without ever addressing the actual causes…

    Reprimand/StJ -LOL!  

    Data/Asaenz – I think we pull back because we’re up 10% and hitting many resistance lines at once.  You can blame whatever you want for it but, at this point, if we pull back 2% – it’s no big deal and should be an opportunity to fish in the September’s Dozen (assuming we hold the middle of those Ws).  

    Dollar flew up to 74.12 but now back to 74.05.  73.90 was the bottom so we’re right in the middle now.  

    Oil inventories were a huge build, as expected and the $34 puts are back at .90 after hitting .80 and now it’s a holiday driving weekend so if we don’t get a nice sell-off today, I think we’ll have to bail on them but let’s wait for the 2:30 NYMEX close.  Also, I’d like to see the details at 1pm. 

    FAS Money – We’re not comfortable selling the calls but let’s buy back the 1/2 Sept $14 puts at .65 because that leaves us open to sell $15 puts (now .95) if we go higher or maybe do 1/2 the $16 puts and calls at $2.40 for a nice amount collected on a 1/2 sale.  So, for now, let’s make ourselves flexible by taking out the 1/2 $14 puts at .65 which leaves the short $13 puts (which seem very safe) at .45.

    GE/Jomp – Good move, that was the right way to play – better safe than sorry.  

    No dip/Chuck – That’s what my morning lecture was about.  You have to make a stand at the bottom of the range.  Just a couple of small, aggressive plays like the TNAs get you off to a nice start and then you can layer in as we make progress.  Don’t try to "make up for it" here as now we are in a much more dangerous spot.  It will become less so if we consolidate around the Must Holds and then move higher but, right now – after a 10% move up – it’s a very iffy place to go long. 


  44. Crude stockpiles at Cushing lowest since Nov 12-EIA

        NEW YORK, Aug 31 (Reuters) – U.S. crude oil stockpiles at
    the Cushing, Oklahoma hub have fallen to their lowest level
    since Nov. 12, 2010, weekly data from the U.S. Energy
    Information Administration showed.
     


  45. Good morning,

     

    IWM   69.70,  70.28,  70.66,  70.98,  71.33,  71.53,  71.87,  72.09,  72.69,  73.14,  73.56,  74.00  and  74.49

    I posted this on Monday, still valid until SPX 1260 is taken !!


  46. GS – well, your losers are the same as ours. I still like DEPO and PLX, and CRIS, IMGN, SGEN, ARIA, ARRY, CLSN, MITI, BPAX, TRGT, UTHR (in moderation for a takeover by GILD), NSPH, RNN, YMI (small position).  The bold ones I have larger positions in, PLX, ARRY and CRIS being my largest.


  47. FAS Money – Short 14 Puts bought back for $0.68. We had sold these for $1.24 so a nice 45% win there! 
     
    Long Strangle –Jan 12 Puts (3.01 average now 1.88) and 15 Calls (2.75 average cost now 3.57). 
     
    Weekly –1/2 September 13 Puts (1.61 now 0.46 – 71%)
    Monthly –1/2 September 13 Puts (1.61 now 0.46 – 71%)


  48. Apparently, the ATT merger with T-Mobile just hit a small bump!
    http://www.engadget.com/2011/08/31/us-government-files-to-block-propsed-atandt-t-mobile-merger/ 


  49. And of course, ATT is taking a nice 4% loss on the news as there is a $3 billion breakup fee! 


  50. i am sure that break up fee does not include doj anti trust actions..


  51. Some good charts:
    http://www.advisorperspectives.com/dshort/updates/Household-Income-Distribution.php
    I always hear that the top 10% pay 60% of the taxes but based on these charts, the top 20% earn 50% of the income so that sounds pretty fair to me. Actually, this should be the basis for tax calculations! 


  52. I think a bot hit the top of that butterfly JR……game over.


  53. Labor costs/StJ – Hey, those CEO bonuses don’t pay for themselves, you know!  8)  

    HOLI/Enni – About time!  Another silly, cheap stock.  We have 3,000 at net $2.90 with a $7.50 call away in a Jan spread that was a bit aggressive for the Income Portfolio – if we hit that, it’s up $13,800 – a pretty nice trade for a conservative play – enough for a nice cruise!  

    Economics/David – That’s why they call it the dismal science…

    Meanwhile/Angel – Isn’t that the funny part?  We know it’s stupid but it beats the alternative. 

    Dollar/Exec – I wouldn’t draw any conclusions from one day but very strange action today.  

    AAPL/Angel – Nice catch, very interesting flat-line.  I just think someone huge is getting out – was bound to happen.  No panic, just selling to anyone who wants to pay $390.  I’d like to see the gap fill back to $382 and then see if there are buyers.  

    FAZ/David – That was 5 Oct $43 in the $25KP at $2.10?  They are $2.80 now and we need the downside hedge in the $25KP so no change yet.  

    Cushing/Lol – That’s because they cancelled all the delivery contracts for the past two months.  Has nothing to do with US inventories on the whole but it does sound good and gets suckers to buy oil.  

    Dollar holding 74 – not good.  Also, we are not holding yesterday’s highs – just the RUT so far but the Dow is right on the line and let’s call 11,600 a bad fail.  The DIA Sept $115 puts are $2.22, 10 in the $25KP with a stop at $2.  


  54. st luke..i would go with a meter..reading them remotely


  55. T Merger/StJ – About time someone put a stop to that nonsense!  


  56. speaking of utilities…i think housing is still a much bigger problem than people understand…buffett better hope O is still in the whitehouse when bac needs another bailout


  57. Weren’t they bought FAZ puts…so they are an upside position?


  58. Phil / stop — That AT&T chart looks a lot like the big oil split and remerge.


  59. yeah and another thing…it would piss me off even if i were a brk shareholder…even if i agreed with him…that he has been so overtly political..puts the company at future risk


  60. Phil / T — while we’re at it, your take on T? Buying opportunity after the downgrade police? Pretty juicy dividend and backward PE of 8.5. Any special strategy you like on the big dividend payers?


  61. Angel, I was in Berlin during the soccer European Championship finals and you didn’t need a remote to check them. I understand that they had brought a ton of girls from Eastern Europe just for the event (and the potential clients). They were everywhere… 


  62. angelcur / housing — don’t worry, QE3 will inflate commodities high enough that houses will be torn down for their recycling value (that’s why the banks are holding them) and we’ll put millions to work doing it! Long SWK! :)


  63. exec, the underlying strategy is to follow the trend.  But it also looks for momo plays at the open and volume surges throughout the day.  But perhaps what it does best is what it doesnt’ do.  It doesn’t make a play at the open if it doesn’t fit the strategy and it doesn’t follow the trend if it looks like a headfake.  Basically it does all the things I do when trading only with no deliberation, whining, gut wrenching or screwups.  I’m pretty good at identifying trades.  I just have terrible execution.  What I wrote overcomes my shortcomings.


  64. Europe had a nice stick into their close.  Hope the same happens here today.


  65. Greece Met With Lawyers Earlier This Year To Consider Leaving The Euro

    Read more: http://www.businessinsider.com/greece-has-strongly-considered-leaving-the-euro-2011-9#ixzz1WcdRY4ZY


  66. Phil, 
    GLD Sept 173 Puts went down sharply now on the market giving up this mornings gains. Was hoping to get out at 2.75 and missed my order by .06. Anyway hold these or consider a roll before they start losing more premium? (net is 2.40 btw)
    Thanks


  67. Phil – T, Would this be agood time to sell some puts? Or a BW? Or wait for heads to talk it down more? Thanks


  68.  i cant believe we have come to a point where we have to worry about MONTH-end.


  69. The Bot’s test spike did not bode well, I guess !!


  70. Breakup/Angel – I doubt TMobile would have no breakup fee on anti-trust.  They still have their business tied up and T damn well knows that it’s a questionable transaction so I would not be at all surprised if there’s still $1Bn+ to be paid on an anti-trust stop as well.  It’s just like an engagement ring – if you want to take a girl off the market then you pay with a rock that’s about 2 month’s salary – for T, that’s $1Bn!  

    Incomes/StJ – Those charts are means, not averages and grossly distort the picture.  The top 20% earn 80% of the money because the amount of money made by just our nation’s 400 Billionaires last year was $100Bn and if you assume that all 20M households in the bottom 40-20% made the median $29,257 – that’s only $585Bn for 19,999,600 more people to live on.   So the average person in the top 400 makes about 8,500 times more than a family in the bottom 60%.  If you said, OK, those people DESERVE to make 1,000 times more than the median family income of 60M of their fellow Americans – then you still would need to take them 88% of their income to bring things "down" to that level!  

    And don’t even get me started on disposable income comparisons!  

    Looks like we’re keeping it together with a minor pullback so far. 

    FAZ/David – Oops, my bad!  You are right, they are bullish plays on XLF so we should have stopped out in the $25KP as they topped out at $3 this morning.  Still, looking at the current action and, since they are October – let’s give them a chance but not let $2.50 get away from us.  

    T/Rain – At $27.50 they get interesting again.  At the moment, I’d look to sell 2013 puts to establish a cheap entry, maybe the $27.50 puts, now $4, perhaps for $4.50 for a net $23 entry and that makes the $4.50 in your pocket a 20% dividend right there.   

    Political/Angel – Does that means you write nasty letters to Conservative CEOs who lobby for tax breaks or kiss Republican ass?  Just want to understand what the rules are to make you a happy shareholder…  The only thing unique about what Buffett is doing is that it’s slightly Liberal as opposed to what 99.9% of other CEOs do.  

    AAPL must have hear me, they are racing right into their gap.  

    Housing/Morx – I’m not sure they are up enough to be shorted.  

    Greece/Rain – I’m sure they consulted with many people on every possible thing they could do.  I wouldn’t read much into it. The country bent over backwards and then some to stay in. 

    GLD/Amatta – I’m still for holding on as Europe closed up 2.5% so we are just having a little pullback and if we keep going up and Asia gets bullish – then stocks will look more attractive than gold again.  Meanwhile, by Friday, you don’t want to be in Sept anymore so we would have to roll before the weekend. 

    T/Jomp – See above.  I would rather not catch a knife but sure, with the high VIX and the dip, it’s a good combination for selling long puts.  

    Test spike/JRW – Were they trying to trigger sell orders or was that how far they went before they found a seller?  If so, then we are looking at the next leg up.


  71. Hi JRW
    are you even considering a tza play at one of your levels?
    tia


  72.  Phil:  Do we still like AA?  I’m in, thanks, would add to position if reasonable.


  73. Cool economic data graphing tool from the Fed. I seem to recall it’s on the chopping block for cutbacks (keep america stupid!): FRED Graph


  74. angry letter wrting campaign (sticks and stones 19.0)of course i do!! ..he just reminds me of
    http://images.wikia.com/starwars/images/d/d4/Palpycropped.jpg


  75. Phil, GLD ok thanks. 
    When you are saying we are on our W pattern are you thinking we get rejected back where we are now or a little higher and test the lows before going back up? Because that is the only way I see a W developing…


  76. (now phil youre getting a clue of what it takes to make me a happy shareholder btw)


  77. german bank group head "we are against the EFSF injecting capital into banks"


  78. that eruo crap is so over


  79. Speaking of economics: What Caused the Financial Crisis? Don’t Ask An Economist
    "It was the banks, the Fed, too much regulation, too little regulation, Fannie and Freddie, moral hazard from too-big-to-fail banks, bad and intentionally misleading accounting, irrational exuberance, faulty models, and the ratings agencies. In addition, factors I view as important contributors to the crisis, such as the conditions that allowed troublesome runs on the shadow banking system after regulators let Lehman fail, were hardly mentioned".
     
    Yawn…


  80. the germans want the frigging debt issue fixed they are done with worrying about the fools who bought the bedt i a ve been saying that for three months…put a short euro in your ira and go away it will be worth 150 k in no time


  81. debt*


  82. Pharm/APRI: Hello Pharm, What is your opinion about APRI? They got 3 approvals from FDA for their OTC drugs in the past 2 weeks (the last one today).


  83. Phil--on the IYR and DIA short sept puts(in the income portfolio) should we buy them back if you think the market will be down?
    Thanks


  84. the pres wants an (fdr) moment for a joint session announcement of his jobs plan..it will be interesting to see what happens..those tea partiers will be very mean about it i am sure…


  85. Phil AMZN In April I sold Jan 155p for 11 and OCT 200 c for 9.29 the put is now down to 4.70 but the call is up against me 22.00 I am some what concern about the caller any good suggestions. thks



  86. JR,
     
    How are you positioned?


  87. AA/ZZ – Sure, those are all good long-term picks in the Sept Dozen.  They were just ones I expected would get a nice pop sooner rather than later.  

    Tools/Rain – They are eliminating most Government Statistics.  Soon they’ll be burning books to make sure we don’t look at old numbers.  And you already know GOOG will cooperate and redact all the old pages that the Government doesn’t like.  After all, they did it for China.  

    Just making sure you are fair and balanced Angel.  

    W/Amatta – Where we are now (the top of the middle of the W) is an inflection point and if we go lower, then the whole W was just a weak bounce off the 20% drop but, if we go higher, then we look to complete the longer leg of the W but, we also need to complete it in roughly the same amount of time (and volume) as we fell or it’s another house of cards recovery – especially if the volume is light – as it has been so far.  

    Good one Rain! 

    Euro/Angel – Are you saying a single short Euro will be worth $150K?   That would be a very steep drop!  

    Income Portfolio/Savi – I do not think we go down.  We got our nice minor pullback and now we are, hopefully, resuming our uptrend.  If we fail to hold the levels I mentioned first thing this morning – THEN I will get worried but not yet.  

    AMZN/Yodi – Well, they are only at $213 so that’s 50% premium you are looking at.  You are lucky that’s all you lost off that $35 move since April.  The Oct $200 call can be rolled to the Jan $215s about even and, if you roll up the $155 puts to the $180 puts (now $9.15) you can put that $4.50 into rolling the caller up to the Jan $225s or $230s and that covers you to the year’s highs so, as long as the relationship with the roll doesn’t get away from you, it’s not worth rushing to pay the premium.   If AMZN goes over $215, you can just cover with anything that has a .50 delta (currently the Sept $215 calls at $6.55) to prevent further damage or you can add 1x the Apr $270s at $8 (now $7.80) as that sets you up to roll the Oct $200s to 2x the Jan $240s if they keep going up and that’s 15% higher than here.  

    Thanks Rain:

    The Utilities sector currently has the strongest breadth with 85% of its stocks trading above their 50-days.  The Consumer Discretionary and Consumer Staples sectors have the 2nd and 3rd highest readings at 41% and 46%, respectively.  The Materials sector has the weakest reading at just 13%, while Technology, Industrials and Energy are all in the teens as well.  In the Financial sector, 21% of stocks are now trading above their 50-days. 


  88.  Phil: T income trade
    I have 20 long T Jan 13 27.5 C’s I’ve been selling weekly or near month calls for an income play.  So in the case where I’m now in SEpt 29′s with w .35 premium would it make sense to roll down to the weeklie 28′s with .25 premium now with an eye to sell two more weeklies (9?9 &9/17) to max premium sales?  I guess I’m wondering about this type of situation in general, that is rolling down and closer, or is that just a mistake due to lack of patience?  TIA


  89.  Phil: TBT
    Is it possible to have an extended rally without money coming out of bonds, or is that dependent on what the FED ?
    TIA


  90. 12:00 PM On the hour: Dow +0.43%. 10-yr -0.07%. Euro -0.24% vs. dollar. Crude +0.23% to $89.02. Gold +0.46% to $1835.95.

    01:00 PM On the hour: Dow +0.96%. 10-yr -0.19%. Euro -0.23% vs. dollar. Crude +0.65% to $89.39. Gold +0.42% to $1835.25.

    EIA Petroleum Inventories: Crude +5.3M vs. consensus of +0.2M. Gasoline -2.8M vs. consensus of -1M. Distillates +0.4M vs. consensus of +0.7M. Futures +0.28% to $89.06.

    July Factory Orders: +2.4% ($10.5B) vs. consensus of +1.9%. Factory orders had decreased 0.4% (revised) in June. Ex-transport, +0.9%. Shipments +1% vs. +0.2% prior. Inventories +0.9%.

    Online labor demand pulled back again in August, according to The Conference Board. After falling 100K in June and 217K in July, August saw a loss of 164K online advertised vacancies. Labor demand for construction and production workers were the hardest hit in Q2 according to the report.

    European shares finish sharply higher to close out a desultory month. Stoxx 50 +2.9%, Germany +2.8%, France +2.9%, Italy +2.6%, Spain +2.9%, U.K. +2.4%. For the month: Stoxx 50 -13.7%, Germany -19%, Italy -16%, France -11.4%, Spain -9.7%, U.K. -7.3%.

    1,292 – that’s where the S&P 500 closed July. Around 1,100 at the August 9 low, the index had fallen nearly 15%. At the current level of 1,229, the S&P will end the month with a decline of less than 5%, and the day isn’t over yet.

    The CBOE Volatility Index trades down 7% today, as it eases closer to 30 – a mark seen by traders as a signal of market anxiety. The VIX has returned to just a hair below where it stood before S&P downgraded U.S. debt, when an August rollercoaster ride for investors was set off. 

    Ratcheting up expectations a notch, the President requests to address a Joint Session of Congress on September 7 to outline his latest fiscal stimulus program. – With any luck, THIS is his actual plan.  

    Cumberland’s David Kotok thinks the surge in lagging industrial and financial stocks signals that the broader market hasfinally found a bottom: “I do not see the recession risk evolving, which means manufacturing recovers… It is also good for banks." Kotok believes financial stocks are cheap and sees a “big move” up in the sector lasting several years.

    Foreclosure timelines continue to climb, as LPS reports that payments have not been made on the average loan in foreclosure in a record 599 days. Of the nearly 1.9M loans 90 or more days delinquent but not yet in foreclosure, 42% have not made a payment in more than a year, with an average delinquency of 397 days, also a new record. 

    Chinese Premier Wen Jiabao doesn’t signal the shift towards easier monetary policy some had been hoping for. In comments on the government’s web site, Wen calls slowing economic growth reasonable and desirable, and maintains controlling inflation is the nation’s top task. FXI -11% YTD.

    Having run out of collateral with which to borrow funds from the ECB, Greece’s Piraeus Bank (the country’s 4th largest) is forced to tap the Bank of Greece’s emergency loan facility (ELA). The ELA funds come at a rate of 3.5% vs. ECB lending at 1.5%.

    Portugal braces for demonstrations as the government isset to announce "historic" measures to eliminate its budget deficit in 4 years. Look for cuts and promotion freezes for public sector workers as well as a plan for major reductions in spending for the national health service. 

    The Justice Department files suit, seeking to block the merger between AT&T (T -4.1%) and T-Mobile (DTEGY.PK -6.4%). "AT&T’s elimination of T-Mobile as an independent low-priced rival would remove a significant competitive force from the market," reads the complaint. Sprint (S +6.6%) spikes on the news.

    Still my favorite individual Financial:  On track to generate $30B in excess capital over the next year and a half, JPMorgan (JPM) may seek early approval from the Fed to bump its $0.25 quarterly dividend or increase its $8B share buyback program, CFO Doug Braunstein tells analysts.

    McKinsey sees the ROE for the world’s largest banksdropping from a recent average of  20% to 7% unless proposed capital and liquidity standards are mitigated. The BIS (from where the regulations originated) is a bit more optimistic, believing the figure will end up at 11-12%, but says bank investors must scale back profit expectations.

    Three lunchtime reads:
    1) Stocks that shine for profit and stability in any market
    2) Italy living on borrowed time
    3) Struggling with a great contraction


  91.  Any interest in Nat. Gas?  Hurricane Irene actually caused prices to fall due to widespread power outages / lower consumption.  It is expected that any number of tropical storms will come hurtling across the Atlantic over the next two months.  Seems cheap.


  92. ban2 / TZA

    I was in TZA for a while this morning, but I’m in cash now as it’s breakfast time and I’m on holiday !!

    Bulls target is SPX 1228 or better; so there should be a Stick or a fall after 2:30,  imho  8-)


  93. So Phil- on a quick break did your Sept USO put reco earlier, are you going to dd or get out and maybe jump back in EOD Friday after these pricks jack it up into the weekend…


  94. BA/informational….I laid out a BCS at Oct 65/70 strikes a few days ago which is doing quite well. Looks to me like more room to run.  Just informational. 
    AAPL:    Leading the pack on a pullback?   I’m holding only Oct 360/375 BCS.  I would be a buyer of more below 380. 


  95. Great times, no power, telephone, internet or cable since Sunday. The power inverter in my truck did give us light and some TV off the old antenna the only issue was it shut off trying to power the refrigerator, start up amps.


  96. JRW
    thanx for respones. happy h. we’ll all need one after this f’n aug.


  97. We are in an ascending wedge, so I will short below IWM 72.60 or go long to 73.90 if the bottom holds.

    These resolve to the downside 70 % of the time !! (We sould know by 3:00)


  98.  Phil, What do you make of the YRCW Sep .5 straddle being .53 bid? Is that just a sale against all of my short Jan 2.5 puts?


  99.  JRW: personal question
    What is it in your background that makes you so good at what you’re doing now?


  100. I’ll answer that for JRW:   Excellent DNA from his parents. 


  101. lflantheman / DNA


  102. T/Lincoln – The problem with chasing the stock down by selling calls is you can lock in your loss on the Dip.  If anything, you may want to take out the caller with the early win (although he will be cheaper tomorrow if T stays flat to down as the internal VIX of T will drop down) and wait to sell something else on a bounce.  If you do want to do an aggressive sale, I’d take advantage of the $1.50 roll down to the 2013 $25 calls and sell the Nov $28s at $1.30 so you pay net .20 for the roll and have a better spread ($3) than you had before ($1.50) and you are well-protected (31%) on your long position.  

    TBT/Lincoln – The Fed is a non-factor until their meeting so TLT is going to be driven by rumors and speculations on what MIGHT happen in Sept.  We have had plenty of rallies without money coming out of bonds so yes, it’s not an absolute requirement but it sure does help!

    1,200 TONS of gold in the GLD warehouse.  What a scam – it’s off the market, creating its own artificial shortage…

    Nat Gas/ZZ – It always seems like such a logical trade but then it burns us every time so I’ve lost interest.  Best to just build up a long-term position in CHK, who are not cheap now at $32.50 but were $27 earlier in the months so under $30 is good.  

    USO/Jrom – Good question.  We didn’t hit our DD target and I do expect a sell-off into the close but we’ll likely hold up into the holiday weekend so no point in burning premium if we don’t have to.  Let’s see where we are in 45 mins.  Once again they short-shipped the barrels but a lot less oil (4.8Mb) came out of the SPR than last week and they still had a massive build.  The Fundies are super-weak in oil and I’m trying to catch what I expect to be a drop back to $82.50 during this NYMEX cycle (through 9/20). 

    AAPL/Iflan – Just filling that gap from Friday’s close, unless they fail $382 I don’t think much of it.  

    Power/Shadow – It’s always something!  

    Dollar flying to 75.15 – not damaging us too much so far but we need a rejection at 75.20 or we’ll fail our day’s lows.  

    YRWC/JMM – They are doing a massive dilution so be careful with that kind of play.  Of course it SEEMS good if you can get it.  


  103. Phil- I liked our last AGQ trade so much that I jumped into the $180 Sept puts when they came back down to $4.50 again a couple days back. Down big on those and even bigger on BNO which I bought 40 puts on…yeah, overdid it. Would you roll to October on those two now or wait?

    Thanks for the advice on TZA also…I’ll roll the TZA calls out to Oct to avoid watching them turn to zero.


  104. All in TZA !!


  105. JRW
    I started a Swab account, they gave me street smart edge. Didn’t  you say you use SSPRO on your 3 min? trying to set it up since Friday night but storm prep Sat. and down Sun until noon today. I will review your notes later but wondered about edge. Thanks!



  106. APRI – going to have to look a the info on the generics.  Sorry, don’t know much about them.


  107. jrw you beat me to the draw…after seeing those beach pic you may have the fastest draws in town! get rid of winkler tho have you seen th eguy today he looks like an old rabbi


  108.  I must of woke up on the wrong planet again. Shoudn’t subprime loans be sub AAA by definition? WTF?


  109.  from the creators of TOS:
     https://www.tastytrade.com


  110.  Angel, there’s a point at which everyone looks like an old rabbi!


  111. angelcur Some people just don’t age well. I was never great looking but now nobody believes I am over 40.


  112. xlf keeping us from a cascade…o wants to talk to the folks fomr the well on the same night as the goppers debate..lets see if boner gives him the mic


  113. hey shadow! where are you sounds like here in vt!…aging well ha! i use viagra to keep from falling out of bed!


  114.  Hi Phil, 
    I have a large position in UUP, Sept $21 calls (currently $0.18, bought at $0.96, down about $6k), that I would like to roll, to recovery.  What would be a good roll?
    - Jan $20/21 Calls (debit spread), as well as selling Jan $22 OR $21 Puts, as UUP might move slowly up, likely bottoming here around $21 (?)?
    - Would you prefer another (Jan 2013?) spread OR walkaway from trading UUP, to pick something else?
    Thanks.


  115. angelcur VT floods!
    I am 1.5 miles from the Atlantic in the mafia hideout RI where 40 MPH winds takes 80 % of power out, but we don’t need to fix as the power company is, "National Grid". It’s better to cut taxes and spending. BTW in Wyoming we call this breezy, it takes 60mph to shut down ski lifts!


  116.  Nice slide.  Counting on you to get me out on time, JRW!!


  117. @ Phil, those Dia Puts you recomended are starting to look good. I expect further downside (not a lot) the rest of the week, would you let them roll for a few days? Thanks


  118. skf volume picking up



  119. shadow i am from maine orgiinally..probably only true mainer on the site..yes at augarloaf 60 mph about shut down th espillway chair..my biz was in north stonington ct..have second home in vt..rhody v nice..my in laws at weekapaug..no mafia there..maybe th ewasp mafia…love j-hole love it!


  120. Phil NLY Holding the stock at 17.83 no short calls div end of Sept do you still see value in selling any Jan 13 17.5 calls for 1.15 to 1.20 with a premium of .60 obviously could called in Sept. thks


  121. what is weed?


  122.  Bailed TZA/QID with a decent gain.  Piggish behaviour = bad karma.


  123. Pharm, are you still in GNBT?  It’s still getting some good reviews but has been on a relentless downtrend for a year.


  124. IWM 71.87, careful !!


  125. AGQ/GS – I think that and the BNO both have a good chance of coming back down.  AGQ we expect to be volatile but BNO has been a lot stronger than expected.  With both, I would wait until Friday to roll out to Oct (if necessary).  

    Good call on TZA JRW!  Good headline too.  

    74.15/Angel – That’s right but maybe it’s a prediction as the Dollar is going higher – DANGER!  

    Tastytrade/Ed – That’s strange. 

    UUP/DrMtV – Hard to stick with with the Fed being loose.  Not much to do but hope to cash out for .25 on a move up this week (we’re having one now so maybe .20 is it) and then move to a March $20/21 bull call spread at .55, which would be adding .35 just to make .45 back so a long, long road to getting even sticking with a Dollar up trade and the Fed is against you.  Not sure it’s worth it.  I think walk away is the answer as we do think the Dollar could drop 10% more but THEN I’d be interested – just like we were liking UUP last time we were down around 72. 

    DIA/$25KP, Asaenz – I was hoping they would be a quick trade but we’re looking kind of weak but let’s sell 10 DIA $114 puts for $2.10+ so we knock our exposure down to .12 on the $1 spread so we pick up $1,000 if the Dow drops while risking just $120.  Hopefully, they drop to $2.32 so we can book a small profit and keep a $1 spread.

    Weed/Rain – Clearly there would be a good market for a national brand!  

    NLY/Yodi – Dividen is .65 per Q so makes a lot of sense to sell the $17.50 calls for $1.20 as that’s a definite in your pocket now…

    Dollar did not break 74.20 so that’s what I’m watching but RUT and Nas went negative and SOX and Transports are down about 1% so would not be surprised if the Dow goes lower but I’m still not too bearish on the small pullback.  


  126. Phil, hard to believe that you actually say "Dollar flying to 74.15….". It was over 77 on July 12! I can already see August 31, 2015 comments – "Dollar flying to 32.15… that’s going to be trouble!". Sad! But real….


  127. angel
    Jackson hole, over 100 mph winds at least 1 per year doesn’t even make the local news. Last winter over 50mph at my house? Didn’t count maybe 20 or so 78 mph is what I remember, the rest is breezy. I lived south of Burington in 1972.


  128. Pharm, are you still playing GNBT? It’s still getting some good reviews but has been on a downward slide for a year…


  129. Phil
    What do you see for oil the rest of today and tomorrow? Thanks


  130.  Rain/Shadow – I just confiscated about 8-10 oz. from a client’s room.  I have to "properly" dispose of it.


  131. angel
    Worked at Simmons Precision Products on gages and auto-pilots for military aircraft, better than Viet Nam.


  132. Out with $ 1.75, or 4+ % !!


  133. I guess there is something to this chart:
    http://www.bespokeinvest.com/thinkbig/2011/8/31/sp-2010-vs-2011.html
    Maybe history will repeat itself, but there are different macro expectations though! 


  134. ROTFLMAO angel…..


  135. Could the people who supply the Weed pricing perhaps be the same people that rate Sub Prime?


  136. magical sloopy buyer crankking up for gianni poulos (john paulson)


  137. revtod
    Disposal, hope that is not what you do all the time. I have only walked away from some friends and the cops treated me like I was the criminal!


  138. TLT coming down nicely.   TBT $25.25.  Heads up on TLT if you had too many puts and need to lighten up!  

    Looks like Mr. Stick time into the close.  Make sure those DIA puts are covered up in $25KP and anything else you are short on as that was the dip we expected, nothing more.  This could indicate that all this was nothing more than window dressing for end of month or it may just be panic ahead of unemployment but I don’t see any real news to justify a big sell-off nor any reason to expect the Dollar to keep going up.  

    FAS Money –  Let’s take the opportunity to sell 1/2 the Sept $15 puts at $1.08 and put a stop on the $13 puts at .65 (now .50).   


  139. We still have to take and hold SPX 1260 !!


  140.  Thanks, Phil/JRW ! Great call on the broken support! Small victory for me! out of TZA w/ 1.16% Gotta get my workout in before ny daughter gets home from school!


  141. rev / disposal — those maps should give you and idea what the bid and ask are. You can hedge with CMG or a salty snack company :)


  142.  this market feels like it is broken…meaning…something isnt’ functioning properly..i guess it is the hft bullshit or ultra etfs…not sure which is worse


  143. revtod rainman
    Now I’m confused with what you 2 are refering to.


  144. Dollar/StJ – Well it’s been in a tight band so that move is dramatic.  With QE3, I expect a 10% devaluation so 67ish is about right down the road.  

    This looks to me like the same guy that sold the crap out of the market into the close yesterday, just starting earlier.  Selling is not uniform so not a general bot sell-off, much more like a fund lightening up but you never know if these things will spread.  So far, no BuyBots are countering the move but clearly money is moving out of Bonds at the same time (rates are rising) and it’s not going into gold or oil so I’m just not feeling this as anything more than the 2% pullback off the 10% run-up so far. 


  145. Well, I may well have gotten out too soon, but, $1.60 this morning and $ 1.75 this afternoon………………….9 %

    I have to avoid some rocks right now, good hunting !!


  146. FAS Money – Sold September 15 Puts for $1.14. Stop on the 13 Puts at $0.65
     
    Long Strangle –Jan 12 Puts (3.01 average now 2.01) and 15 Calls (2.75 average cost now 3.45). 
     
    Weekly –1/2 September 13 Puts (1.61 now 0.53 – 67%) and 1/2 September 15 Puts (1.14)
    Monthly – 1/2 September 13 Puts (1.61 now 0.53 – 67%) and 1/2 September 15 Puts (1.14)


  147. Pharm - you still accumulating GNBT?  It’s been going down for a year now..


  148. Oil/Champ – Very strange action to hold around $89 today, especially against a strong Dollar.  I think we may flatline into the weekend but I would be amazed if we go 3 more weeks over $85.  

    8-10 oz/Rev – Well that should solve your funding problem!  Can you legally take it to a medical place and let them sell it? 

    Thanks StJ – that’s the chart I was attempting to make last week: 

    Good discipline L4real – those little gains add up!  

    Broken/Angel – Volume very low, makes everything a bit off.  

    Nicely done JRW, got it both ways.  


  149. GNBT/mrm – no.  Out a while ago when things really started going south. 

    Nicely done JRW, got it both ways.  (so many interpretations for this….it is too funny, or sick minded, depending upon which way you read it!)

    Ok, I am done laughing now.


  150. Hello Phil, Do you have an opinion about CVV? Would you recommend buying on the dip (caused by the information about insider selling)? Pros: CVV is the current leader in graphene; earning beats; rapidly growing backlog of orders; Cons: a scary chart and a growing competition including even such an unlikely name as NOK


  151. We just need to close above IWM 71.87 to confirm the floor ( and set up the execution of my poor butterfly)


  152. Feels like end of quarter action.


  153. Short USO / long UNG is working pretty well, initiated this AM.


  154. I forgot the rule - first day of the month is historically an up day, right?


  155. Yep, feeling better about it now.  Dow bottomed out at around 10,700, ran up to 11,700 pretty much on the nose this morning and just pulled back to a bit over 11,500 (20% pullback).  S&P 1,120 to 1,232 is 112 points and we pulled back to 1,210, which is 22 points back (24 would be 20%).  RUT 648 to 738 is 90 and 18 back would be 720 – where did we stop?  720 on the dot.  Nas 2,340 to 2,610 was 270 points so 54 back would be 2,556 and we just bottomed out at 2,559.  NYSE 6,925 to 7,575 is 650 up and 130 back is 7,445 and we didn’t get there either.  All good I guess! 


  156.  Shadow – it was the weed map.  
    Rain -ROFL!  The bid-ask spread is pretty close here in New York.  We are well supplied from the First Nation lands in Canada who have used their sovereign land/free enterprise zones to team up with Mexican business interests.  They also have a superior distribution network through the Hell’s Angels.  I don’t mess around with CMG.  My favorite hedge around here is the Louisville slugger behind my desk.  Fortunately I’ve never needed it.


  157.  Phil,
    is it a good time to go short on oil ??


  158. Phil
    OK you get to pound your chest, right again thank whoever you want, you are truly a leader to salvation of money. Now if only the masses will listen to you?


  159. Look at the dailies on SLW and note the dramatic peaks. Lately when SLW goes up a dollar in a day, I sell weekly calls, wait for it to come down (usually same day or next day) and then buy them back. This has become a very profitable trading pattern.


  160.  Phil – medical uses.  That is a great idea!  I could probably supply a few gerontologists and oncologists through channels.  My folks don’t mess around with poor quality.


  161. revtod
    Thanks, what a relief, I walked out on chemicals!


  162. Oh, and if I feel really gutsy, I take the profits when I close the SLW sold calls and use it to buy some calls for the round trip up, with tight stops.  Working like magic today…


  163. Thanks Phil and JRW.  I cleaned up today with those nice back and forth calls.  


  164. CHK – don’t forget as a way of raising capital to finance Buy/Writes; a sale of the CHK 2013 17.5 PUTS will net you $1.38.
    If put to, you are in at $16.12.


  165. CVV/Alik – Not one I follow closely as they are almost a penny stock at $109M.  They do sound cool but I don’t know enough about specialty conductors to know if their stuff is worth it or hard to produce or whatever.  As it seems to be a carbon-based conductor with a special process – I think they are damned interesting and I would have loved them at $3 as a gamble last year but $18 is starting to be real money and they don’t have options for hedges so it’s not for me, but I would not be shocked if they turn out to be some great deal, even at this price.  If they have competition making the same stuff with the same process – then I don’t like them.  

    Wow, what a recovery!  

    First day/Mr M – I believe it’s usually good. 

    Oil/Rehat – I think they are unlikely to get back over $90 and likely to go back to $85 so I like them short but QE is always a monkey-wrench so a tough time to short any commodity.  

    You’re welcome Chaser!  

    Dollar booster:  "Out of control," is an independent Greek parliamentary committee’s conclusion about its country’s debt. "Despite gigantic effort for fiscal adjustment, no primary surplus has been achieved, on the contrary, the primary deficit widens." EU Commissioner Rehn’s take: Greece’s debt is on a "durable declining path." Right. 

    Gold closes the day session about flat at $1,828.50/oz, giving the yellow metal a $200, or 12.3% gain for the month of August – the best performance since November 2009. Gold is higher by 29%

    The flip side of gold, economically sensitive copper had its worst month since May 2010, falling 6.4%. Of more interest than the final result is the volatility. The metal plunged 16.5% in the first 9 days of the month, with a strong rally for the remainder to end at the final result. 


  166. Pharm, VIAP went up a penny today – that’s 25% – wohoo! 8)


  167. LOL mrm…..a blast from my very distant past…!!


  168. This is an interesting last minute stick – done without the dollar manipulation. Unusual.


  169. well this markets are a complete joke, we now have lost half of the stick…


  170. Selling the Sept 121 SPY weeklies.  Buying Sept 121 puts.  volatility crush.


  171. BRK/B: another good looking put sale are the BRK/B Jan 12 75 Puts for $6.12. BRK/B is currently at $72.85. In at net $68.88 is put to.


  172. puts.


  173.  Apple bumped hard at the close.  What was all that about?


  174. Phil/YRCW:  Please spot the inevitable mistake in my logic with this trade setup, as it looks like dilution/bankruptcy doesn’t matter?  Thanks!
     
    Sell Oct 1P @ $0.87
    Sell Oct .50/1 Call Spread @ $0.19
    Net credit $1.06
     
    Share price at Oct expiration:
    1) <$0.50:  Stock is put to us at $1, call spread expires worthless.  Profit = $0.06 + share price!
    2) $0.50< share price < $1:  Stock put to us at $1, called away at $0.50, Long 1C expire worthless.  Profit = $0.56!
    3) >$1:  Put expires worthless, short call spread at -$0.50.  Profit = $0.56!


  175.  Chinese naval vessel stops Indian naval vessel after it leaves scheduled stop in Vietnam on grounds that South China Sea is 100% Chinese territory.


  176. I expect a big move tomorrow; (of course the market doesn’t listen to me), but we either break lower out of the wedge, or………………………….you know:


  177. CHK/Winston – Good call.  

    On the whole, we’re right back to yesterday’s highs, which no one should be upset about.  What a sloppy way to get here though…

    AAPL/ZZ – Just filling their gap and finding buyers I think.  

    Very good that we did this while the Dollar moved up.  74.23 now and we were 73.60  yesterday morning so that’s a huge swing down the pumpers can use if they need it.  It’s great when they are on our side, isn’t it?  

    YRCW/Chuck – Actually that seems to work if you get those fills.  The only bug in the system is what happens if they reverse-split or something but not likely between now and then.  


  178.  rice now up 34% in 8 weeks…new multiyear high..you know how sad that is for millions?


  179. But maybe my butterfly will be just fine…………………………………………………………………………

    The Euro, shamelessly stolen from email our good friend Serge


  180.  chuckerd
    very interesting YRCW play – I agree, seems to work.  TOS says it requires $355 of BP to make the trade (10 contracts).


  181. Wow, they just canceled the first week of school in my town!  Too much flooding to fix by next week.

    Rice/Angel – That’s very bad.  Corn out of control too.  In 2008 rice was the straw that broke the camel’s back and sent the Asian markets off a cliff.  

    At the close: Dow +0.48% to 11615. S&P +0.4% to 1218. Nasdaq +0.1% to 2240.
    Treasurys: 30-year -1.01%. 10-yr -0.36%. 5-yr -0.537%.
    Commodities: Crude +0.08% to $88.89. Gold -0.14% to $1824.95.
    Currencies: Euro -0.54% vs. dollar. Yen -0.22%. Pound +0.39%.

    Market recap: Stocks extended their winning streak but pared gains as the U.S. government’s lawsuit to block AT&T’s purchase of T-Mobile drove down tech and telecom shares. Treasurys fell and copper rose amid faster-than-expected growth in factory orders and business activity. NYSE advancers and decliners finished roughly even. 

    House Speaker Boehner asks the President to move his jobs speech before a joint session of Congress from September 7th to the 8th, "when we can ensure there will be no parliamentary or logistical impediments."

    Like Chicago Fed chief Charles Evans yesterday, Atlanta chief Dennis Lockhart strongly hints at the arrival of further stimulus measures in prepared remarks today. Given weak economic data and rising growth concerns, Lockhart doesn’t think "any policy option can be ruled out at the moment."

    The Keynesian "spend till it mends" approach has limits, writes John Carney, when that spending is accomplished by the government incurring more debt. Not being brain dead, economic actors "respond by saving, rather than consuming or investing," suggesting additional fiscal stimulus would be ineffective. 

    After a one-week respite, individual investors pulled a net $2.6B from U.S. stock funds and $610M from foreign funds in the week ended Aug. 24, according to the Investment Company Institute. The outflow was nowhere near the frenetic selling seen earlier this month; still, the renewed selling pressure underscores the skittishness among small investors. 

    Locked into contracts obliging it to pay $200K/day for vessels to haul iron ore (vs. current rate of $10K/day), Chinese state-owned shipping giant Cosco posts a $420M H1 loss. It’s not the only area of Chinese overcapacity – the aluminum industry is capable of producing 23M tons/year vs. demand of 16M. The country is growing fast, but maybe not fast enough.

    Regional bank stocks (KRE +2.2%) are up today after a round of not-so-terrible economic reports, although it won’t be enough to wipe away August from going down as the sector’s worst month in 18 months. Top gainers: BOP +6.9%MSL +4.1%HBHC +3.6%,ASBC +3.3%.

    The deputy governor of Russia’s central bank resigns "for health reasons" after failing to get a handle on the opaque world of Russian banking. The most recent scandal was the $14B bailout of Bank of Moscow, after which it was found 1/3 of the lender’s assets were loans to firms connected to the bank’s management. 

    Pimco launches a new fund with a "go-anywhere" investment style that will mimic the strategies hedge funds use to boost returns. According to a manager, the Pimco Credit Absolute Return Fund can go short and buy CDS as it looks to fare better than well-known sister fund – Total Return Fund – which ranks 155th out of 179 in its category after misfiring on Treasurys.

    With nearly all S&P 500 companies reporting Q2 earnings,EPS has grown 19.1% Y/Y, excluding writedowns. However, earnings have topped analysts’ forecasts by 5.7%, the second smallest beat since 2009. Companies are still expected to grow by double-digits, but the expected Q3 growth rate is now 15.2%, down from expectations of 16.9% as of mid-July.

    UBS calls the bottom of the new-home market, as it upgrades D.R. Horton (DHI -0.5%), Lennar (LEN +0.7%) and Meritage Homes (MTH -0.2%). "Sales and prices will be relatively stable as we head through the back half of this year," UBS says. But while data indicates a bottom for sales and prices, "very little suggests that conditions are likely to improve in the near term."

    A strong day all around for food markets, high-end and low-end, after Fresh Market (TFM +10%) posted strong sales and margins in its latest quarter, and Dollar General (DG +1.4%hiked its 2011 forecast yesterday. Also: FDO +4.1%SVU +2.7%WFM +3%.

    The Greek finance ministry hits the wires denying a report the law firm of Cleary Gottlieb – known for advising Uruguay, Argentina, and Iceland on their restructuring – has been hired to do the same for Greece. The law firm has been retained, but to advise on implementing the July 21 bailout agreement.

    The Bundesnetzagentur warns of increased risk of large-scale blackouts, especially in the winter months – the result of the permanent closure of 8 nuclear reactors in Germany. The agency’s chief, Matthias Kurth, calls on the industry to get moving with investment in new infrastructure.

    Told you so!  According to terms of their merger contract, AT&T (Tmay be obligated to pay T-Mobile parent Deutsche Telekom (DTEGY.PK) $3B in cash if the deal is spiked “because of the failure to obtain regulatory approval." AT&T also may be forced to enter into a roaming deal on “terms favorable to both parties” and transfer some wireless spectrum, givebacks valued at another $3B.

    The Justice Department’s decision is a “victory” for Sprint(S +7.9%) that could allow it to merge with T-Mobile (DTEGY.PK -6.6%) if the AT&T (T -4.6%) deal is barred, Pacific Crest’s Steve Clement says. “They’re both sub-scale relative to the big guys, so it makes sense to find a way to get together and extract the synergies you’d get longer-term."

    Is AT&T’s (Tdeal for T-Mobile (DTEGY.PK) dead? Sanford Bernstein says yes, and now AT&T faces a spectrum shortfall, loses a “key driver of synergies," and may need to hike capital spending. But Wells Fargo thinks it’s not over, looking at an expedited hearing in 10 days or so, and BTIG hears echoes of how Oracle (ORCL) fought in court in 2004 to win its deal to acquire Peoplesoft.

    Solar company Solyndra files for bankruptcy just months after receiving a federal loan guarantee to expand its plant. About 1.1K employees will be immediately laid off. The company said it was unable to complete with larger (also subsidized) overseas manufacturers, and a global glut of panels leading to a 25% drop in prices.

    Amazon’s web services business (AWS) is becoming a real growth engine for Amazon (AMZN), and Netflix’s (NFLX) Adrian Cockcroft sees it maintaining a dominant position in spite of competition from the formidable OpenStack alliance. Cockcroft estimates AWS doubled in size over the past year, and doesn’t see a viable alternative arriving for 2-3 years.

    Flurry Analytics claims U.S. ad inventory for mobile apps has grown at such a rapid pace that its value could match the value of all U.S. display ad spending in 2011. This is unlikely, since much mobile inventory goes unsold, but it does demonstrate the growth potential of the mobile market for ad companies such as GOOG,VELT, and MOTR

    So, an Apple employee and his iPhone walk into a bar … In a repeat of an incident from last July, Apple’s yet-to-be-released iPhone 5 


  182. Speaker of the House John Boehner responded to President Barack Obama’s request for a Joint Session of Congress next Wednesday by inviting Obama to speak for the next day.

    Citing the fact that the House is just returning from its August recess on September 7th, with the first votes not scheduled until 6:30 pm, Boehner said in a letter to Obama that it is his "recommendation" that the speech be held the following evening.
    Boehner added that the 3-hour security sweep required before Obama’s address, combined with the need to formally vote to convene a Joint Session, would create parliamentary and/or logistical distractions to his speech.


  183. My appologies if this has already been posted… and I would think it has since it’s about an article in the NY Times but… this really sounds like feasible approach to QE3.  It’s complicated.. and I haven’t wrapped my head around it enough to figure out who the losers are besides the MBS bond holders-
     
    http://brucekrasting.blogspot.com/2011/08/feds-plan-rumors-of-news.html


  184. This is why my kids’ school is closed:

    Aerial photos of Fairfield-area flooding following Hurricane Irene


  185.  Mortgages/QE3  - Interesting take on a recent NY Times article
     
    http://brucekrasting.blogspot.com/2011/08/feds-plan-rumors-of-news.html


  186. FYI – Tropical disturbance #35 is about to disrupt central GOM assets


  187. Phil
    That pic is ugly.  Maybe you will have to home school them and we can look forward to the next generation of PSW 20 yrs from now.


  188.  JRW,
     
    What is the butterfly?  Is there a post I can read?


  189. Phil, regardiing your post about AWS (Amazon Web Services), which we’ve discussed before, I read your comment while I’m sitting here designing a very large application for a corporate client that we will build and host on AWS, my second in a year.  Their infrastructure, and ROI, are stellar and it makes AMZN stock look interesting if it were to ever drop to a ‘reasonable’ level, which I keep waiting for.  Bezos is not mentioned enough when the tech giants are discussed, IMHO….


  190. Phil,
     
    I entered into 2 of the September trades that you listed, and i have a couple of questions.  First off, here’s the details.
     
    1x AA OCT 12/13 call spread with 11 put offset @ $0.10
    1x HPQ OCT 24/25 call spread with 22 put offset @ $0.13
     
    First off, I am not really sure how to tell if these are ‘on track’, but they seem to be.  The AA spread is $0.83 in the money, and the HPQ’s are 100% in the money.  Our levels are holding and it looks like there will be a tomorrow :) .  Is that a fair assessment of on track, or is it more analytical than that?
     
    Assuming I am on track, I should have a hedge.  I am trying to get the DXD OCT 23/27 spread (mentioned in the hedging article) at around $0.15 (without an offset).  Unfortunately i let it get away from me when things started trending down this afternoon. It was around $0.10 this morning, now $0.20 or more.
     
    Please let me know if this is correct for hedging my 2 positions.  My full gains if everything worked out exactly as planned is ~$180, so, 20% of that would be ~$36.  So, I would be looking to buy 2 of the DXD spreads for about $30.  If this is correct, the only thing that I am not really sure about is how you picked the values for the spread (23/27).
     
    If i didn’t have your hedging article, and I wanted to protect my 2 Dow trades with the DXD, what would be my thought process for choosing the 2 strike prices?
     
    thanks in advance,
     
    scot.


  191. Oh, and I am not really sure what I should be looking for in terms of an exit.  I know that if it’s 50% or more towards goal, I start risking more than I gain, and would be looking for any excuse to sell.  But, before that, what is it that I should be looking for to SELL SELL SELL.  For example, if we go down into the weekend (still a long way to expiration), do I worry about it, or start looking to get out even? 
     
    As i sit here and think about it, having a hedge makes that decision less pressing on a day to day basis.  I would still be interesting in any input. Thanks again.


  192. Hey Phil!
     
    It’s hard to see that your kid’s school will be open for the next several weeks and I be very concerned about the big nasty that comes with flooding – MOLD. 
     
    Besides, I can see the new "PhilTina Acadamy" as a great solution…. :)  


  193. peedlew99 / Butterfly
     


  194. Dear Mr Peesident,,
    You have ABSOLUTELY no clue what to do, do you?
    If you did, you would have said something by now, laid out ‘some’ kind of plan…but no, you want to keep playing politics.
    Forget congress…what do YOU want to do?
    Oops, I forget. You have no clue!
    Millions unemployed, economy down the tubes…oh, I forget! Congress is on break! Sorry!
    All I see are pictures of you getting in and out of the airplane!
    Have never heard anything of substance from you!
    One thing I am thankful for: and that is that at least I can write all this, with only a small chance of reprisal. Where I came from, this opinion would not have been tolerated… And the author would mysteriously ‘disappear’.
    Thank god for freedoms! For now!


  195. Good morning!  

    Futures were up but now flattening out.  Dollar at 74.23, oil $88.99 (someone is playing games), gold at $1,824.

    The Hang Seng is up 1%, Shanghai down 0.4%, BSE up 1.5% and Nikkei up 1% and EU futures are up about half a point with an hour to the open.  

    Notice that we are hitting significant resistance at, of course, our resistance lines on the Big Chart.  Part of that is due to the low volume – it’s hard to break a line without volume.  It’s fine to consolidate below a line if you eventually get over it but not at all good if you consolidate on a line and then pull back so, as I said the other day – we simply can’t afford to have a down day at this particular point.  The only bright light we have is the NYSE over their -5% line yesterday and holding it (7,473).  That’s going to be our "do not fail" line for tomorrow.  

    To some extent, then, we don’t want oil or gold to fail as they would drag down their sectors and possibly break our patterns.  Let’s just make sure we don’t let what we WANT to happen cloud our ability to see what is actually happening into the end of the week.  

    The market can survive a pullback in gold, as gold pricing is based on fear more than anything else but oil prices have a strong demand component and if oil prices get realistic – many traders will consider that a sign of a weak economy and sell first and ask questions later.  

    Good article from the NYT:  "How to Deflate a Gold Bubble"  

    Boehner/Angel – I’m thinking that’s a bit of a power play.   Obama’s logic was that Congress is convening anyway so why not take some time to make a speech.  Whether it’s a half hour or an hour, Boehner is only turning it into an issue by adding 3 hours for security and this BS procedural nonsense.  Essentially, it’s a total lack of respect for the President, who is supposed to be in charge and really shouldn’t have to negotiate over appointment times.  Just another way American politics is being taken down to the level of the average playground.  

    Kasting/Matt, Rev – That’s an excellent analysis of what is rumored to be planned as well as why the plan makes sense on several levels.  The key is automating the refi process.  If they really mean it, they should just automatically knock 2% off all existing loans – including 4% loans without fees or paperwork.  The banks seem very capable of raising your rates on adjustable loans, credit cards etc, without asking permission so I’m sure they can figure out how to lower them the same way!  Not only does $1Tn go back to the Fed on this plan but several Trillion more go to the MBS Bondholders who are then forced to reinvest in something – good for TBills, good for the Market, good for MBS as more money chases less loans (and the refi market dies for a whole year – not so good for banks).  

    #35/Dshear – There’s always plenty of those each year.  

    Home school/Seer – I already have to spend an hour a day re-educating those kids after school!  Both my kids are in the advanced classes but still I am very dissatisfied with the way they are taught some things and boy, do they get a lot of homework!  

    AMZN/MrM – I don’t bet against them anymore because I have great respect for their cloud operation.  They also are getting a lot of business providing warehouse infrastructure for other retail operations.  When you consider their market cap is $97Bn but VMW is $40Bn – they don’t seem as crazy as they grow their new business lines.  In 3 years, they have only spent about 2 weeks below the 200 dma (now $190) other than last summer, when they slumped to $105.  I wouldn’t chase them as their forward p/e is 66 at  $215 but if they pull back to the 200 and you can sell perhaps long-term $150 puts – I think that’s a good level for them.  

    On track/Scott – Well, AA is at $12.85 so you are .15 away from a full pay-out with 50 days to expiration.  If you think AA can gain .15 in 50 days, then you are on track!  With HPQ, they are at $26 so the same thing except there you can already say, as long as they don’t lose $1 over 50 days, then you are on track.  That’s it, not too complicated.  

    The same thing would apply to a GOOG Jan $580/600 bull call spread at $8.  GOOG is at $540 so you need to gain $60 over 140 days or .42 per day.  So, question #1 is: CAN GOOG gain .42 per day.  That would be a yes, of course.  Being on track though, depends on them stringing more plus days together than minus days to net .42 per day, $2.94 per week and $12.60 per month from now through Jan 21st.  So "on track" means you need to be at $552.50 at the end of Sept, $565 at the end of Oct, $577.50 at the end of Nov, $590 at the end of Dec and $600 in Jan.  If it helps, you can make a little graph and plot your stock on it every day.  

    So what constitutes being "off track"?  It’s a function of how far off you are, how far your stock can likely move in the given period, what the data suggests it will do during the period (taking the broad market into account, of course) and how much time there is left.  So if GOOG finished Sept at $532 instead of $552.50 I would not be terribly concerned (as long as nothing fundamental had changed) because clearly GOOG can jump $20 in a single day and there would still be many, many days left.  On the other hand, if GOOG was the same $30 off in Dec at $560 instead of $590 – I’d be EXTREMELY concerned because a $20 move the other way (just as likely) would put them seriously out of reach.  

    If you want a rule of thumb for tracking – if you are two months ahead of schedule, you should consider taking the profit and if you are two months off schedule, you should consider taking the loss.  Of course, if you have a shorter time-frame, then it would be two weeks or even two days – as with anything else, there should be at least 5 portions to work with.  The same logic can be applied to day-trading targets as well – it’s always good to enter a trade with specific goalS (big S) not just a single target you wish for.  

    DXD/Scot – You could try to time into it, buying the $23s on a downturn and then asking for your price on the $27s.  That’s essentially what we did with the DIA spread in the $25KP this morning. It wasn’t our original intention but it ended up being a nice $1,000 insurance policy that cost us $100.  As we’re generally bullish in that portfolio, it’s nice to have an offset that has a fixed loss like that.  As to how I picked the values for DXD – it’s based on where the Dow is and how far it’s likely to fall if things go badly.  The Dow could easily fall 5% and that’s 10% on DXD but now DXD is $18.50 so 10% up is $20.35 so you aren’t really getting adequate protection with the $23/27 spread.  

    The thing is – what are you trying to protect?  You have a risk of having 100 shares of AA assigned at net $12.10 ($1,210) and 100 shares of HPQ being assigned at net $24.13 ($2,413) and the Dow would probably have to fall at least 5% for that to happen (DXD $20.35).  But that’s break-even so there’s nothing to protect there.  If the Dow drops ANOTHER 10%, that would pop DXD 20% to $24.42 and cost you about $360 (10% down on your two stocks).  If you want to guard against that, then you can pick up the DXD Oct $21/24 bull call spread for $30 and that pays $300 at $24.  That’s the insurance.  It doesn’t prevent you from a worse loss if the Dow were to fall 20% or more so you would need to slap on more insurance if we fall 5%, 10% etc to keep up but better to only spend another $30 or so IF you have to.  If you think the Dow will fall more than 15% between now and October – why would you take the bullish plays in the first place?  

    Dollar just spiked up to 74.37 at EU open.   Yen working hard to hold 77.  Euro dropped hard, down to $1.433.  Pound at $1.623.  That’s going to whack the markets.  Oil (/CL) is a nice short now off the $90 mark with very tight stops above. 

    Selling/Scott – That goes back to being on track or off.  


  196. Boehner/Phil
     
    The day Boehner wants the speech changed would coincide with the first day of football.  How many football fans would be pissed at Obama if he interrupted that.


  197. Phil- What is your opinion of a BRCM $34/$36 bull call spread at $1.27? BRCM is at $35.65 so I’m estimating there is $0.38 in premium to be had. Yes I got the idea from your Dozen post. Thanks in advance.


  198. *Sept expiration (10 trading days to go after Thur)


  199. Oil had a nice run but stopped out now and back over $88.50.  Dollar 74.60.  

    Maya – It’s nice that you feel free to criticize the President but you are also free to educate yourself so you can understand the process and not just become a tool of the Right-wing propaganda machine of this country – or did you leave your country just so you can become a mindless Republican drone (aka Ditto-head) in ours?  I don’t have the time or inclination to deal with your rant but how about you take a few minutes to read what the President said in his remarks to the Republican caucus in January, as he tried yet again to reach out and get them to conduct the business they were elected for.  Unfortunately, Obama is not a dictator and, since the Republicans were chosen to take over Congress – nothing has gotten done.  As noted here:  

    Republicans in the Congress united to obstruct any and all actions taken by Democrats. This complete refusal of an entire party to participate in the process of government is without precedent. Is there really any moral justification for self-serving obstructionism?

    The only action taken by the Congress that enjoyed widespread Republican support was the Troubled Assets Relief Program (TARP), which was initiated under President Bush and served mostly to save the Wall Street banks and protect the profits of the very wealthy. But once Obama took the helm, regardless of the fact that unemployment was already at 7.6% and climbing, the Republicans, to the person, decided that their chances for reelection and a return to power were better served by blocking or at least stalling any legislation to promote economic recovery.

    The Stimulus was the first major effort of the Congress to help middle and working class Americans. With 3.6 million jobs already lost in the recession, the Democrats were quick to assemble some form of relief. The legislation could certainly have been better formed, but instead of offering thoughtful amendment, instead of participating in the process of government they were elected to serve, the Republicans sat on the sidelines and used the media to launch every form of unsubstantiated ridicule and criticism they could muster. Even to this date, and in spite of the widespread acknowledgment of positive impact by economists, Republicans still attack the stimulus without substance.

    But this was just the beginning. On and on the story went, with Republicans in both chambers working against anything that might prove beneficial to the average American. With 47 million people not covered with health insurance, the Republicans fought healthcare reform, and arguably prevented a system that could have reduced costs from being implemented. With the financial system that created the collapse of the economy still intact, Republicans fought against legislation to plug the holes and prevent a similar crash from occurring in the future.

    Republicans in Congress fought against job aid to the states. They blocked lifting of the cap on liability for BP’s Gulf oil disaster. They obstructed the closing of loopholes to prevent further offshoring of American jobs; they filibustered small business stimulus; they’ve even set records for the blocking of presidential appointments. There really is no doubt that the Republican agenda, as set when President Obama was elected, is to do everything in their power to ensure that the President fails — no matter what the cost to average Americans…

    Football/Rustle – This is just ridiculous.  I can’t remember EVER hearing of Congress telling the President to reschedule an address.  

    BRCM/GS – The Sept spread?  It’s a very different play without the offset because all you are doing is betting on BRCM with a lot of leverage.  That’s fine if you keep it in perspective and of course it’s a good deal since BRCM is at $35.65 so you get a discount but you are also locked in the trade with just a .10 delta differential so, other than expiring at your target, you won’t see much gains even if BRCM goes up $1 or even $2 ahead of time.  Not being able to take advantage of a move up is a huge handicap to a bull call spread – selling the naked puts changes the formula, as the naked puts make gains so even if you shut down the bull spread with just a 20% profit, you still have your short puts that would be performing very well.  When you do JUST the bull call spread, you are taking a very risky, very targeted play.  Keep that in mind.  

    What I would prefer on BRCM is something like the Oct $30/32 bull call spread at $1.60, selling the $30 puts for .62 for net .98 on the $2 spread that’s $5.65 in the money.  That trade has a built-in 13% downside protection and you make money even if BRCM falls 10%.  With the Sept spread, you lose money if BRCM falls .40 (1%).  So roughly 10x more risk in just the bull spread where you risk $1.27 to make .73 with 1% protection vs. the Oct spread where you risk .98 to make $1.02 with 13% protection.  


  200. Rustle-Football,
    good point, if they make him change it to the 1st day of football, would not be good for Obama. I would not put it past the Repubs., they are good at strategy and the Dems are lame.


  201. Phil/Obama- He scheduled his speech at the same date and  time as a major republican televised debate. Who’s playing politics?   Obama is making a joke of the Presidency. One thing is certain, Subscribers to your site won’t be see the slogan "fair and balanced" on your "home page".  At least we can count on you to provide half the real story (the liberal half). Thanks


  202. Wow Jake, are you really this uninformed or do you just choose to ignore the facts?  The President was SUPPOSED to speak to Congress when they reconvened and Congress scheduled to reconvene on the 7th.  The date of the debate has been changed 3 times AND normally the debates begin at 9pm, 8 the earliest and Obama would be long done by then.  Perhaps you should denounce the Republicans for scheduling the opening of Congress on the Day of the debates instead.  


  203. Sorry Phil.
     
    No matter how one views President Obama, his performance as the LEADER of the free world has been pathetic at best, and I for one, am tired of the finger pointing and excuses…..
     
    :(  


  204. Here is a nifty site that does a good job defining "leadership".
     
    http://www.nwlink.com/~donclark/leader/leadcon.html
     
     
    Notice that there is no mention of "actions based on polling" or "cowtow to the opposition"…..
     
    :)


  205. Lastly, a leader knows how to spell "kowtow"…. ;)