That was easy!
Only 3 days of panic and we're back to manic already – I'd say that was a record but our last panic only lasted two days, on August 18th and 19th, when we dropped 600 points before bouncing back 800 points the next week so this last 3-day, 600-point drop was gentle by comparison. That, of course, did not stop the usual round of Doomcasters from declaring the end of the World (especially the European section) as we know it but that was all so yesterday morning and now it's 24 hours later and the Dow is up 300 from that bottom in the pre-markets.
Pre-market yesterday we were bullish but cautious, going long on Dow (/YM) futures at 11,000 (now 11,227 – up $1,135 per contract) and Russell (/TF) Futures at 666 (now 688, up $2,200 per contract) and our bullish EWG spread from the morning post should be going gangbusters already as the DAX pops 3% this morning!
We also laid out new hedge ideas on EDZ and GLD but the point of those was, wisely, to take the money and run on our old hedges as they bottomed out in the morning (max profit), trading in our well-ridden horses for fresh ones that have more time to expiration and lower deltas to snap back on a bounce is all part of our range-trading strategy – we may need those hedges again, just not now….
By the time the market opened, things looked too good not to play bullish and we ended up picking 19 bullish plays in yesterday's Member Chat with not one bearish one. My comment to Members in the 9:44 Alert, where we took a very aggressive upside play on the Dow was: "Damn, and I said I wasn’t going to get too bullish. Oh well, what can you do?" As I have been pointing out in our Range Trading posts – sometimes you just have to go with the flow…
Just 18 minutes later, I put up 6 long-term trade ideas on CAT, DIS, HOV, JPM, SKX and T as we took advantage of low prices, a probable bottom and a high VIX. The nice thing about our buy/writes is that they have a built-in 20% discount (see "How to Buy a Stock for a 15-20% Discount") and can usually be scaled in to ride out a 40% drop – so we have all the time in the world to add some protection if we do end up failing our range bottom. We also, of course, had our September's Dozen list of 13 (as with donuts, you get a bonus) aggressive upside plays that we finally got a chance to fill in on this dip.
So our day was busy to say the least. Today, I already warned Members in an early Alert that we have a ton of profits to protect so we'll be looking out for shorting opportunities other than TLT (which is working already) and GLD (which stopped working). Perhaps we will turn our attention back to oil if the scam artists at the NYMEX are going to pretend to want to pay more than $87.50 a barrel when, in fact, they have 678 MILLION Barrels of oil scheduled for delivery between now and the end of the year to Cushing, OK – a facility that can only handle 40M barrels a month!
Click for
Chart |
Current Session | Prior Day | Opt's | ||||||||
Open | High | Low | Last | Time | Set | Chg | Vol | Set | Op Int | ||
Oct'11 | 86.50 | 87.42 | 86.15 | 87.10 |
08:07 Sep 07 |
– |
1.08 | 30981 | 86.02 | 274510 | Call Put |
Nov'11 | 86.73 | 87.68 | 86.45 | 87.34 |
08:07 Sep 07 |
– |
1.03 | 8870 | 86.31 | 195265 | Call Put |
Dec'11 | 87.11 | 88.05 | 86.85 | 87.70 |
08:07 Sep 07 |
– |
1.00 | 6757 | 86.70 | 209213 | Call Put |
Jan'12 | 87.41 | 88.21 | 87.21 | 88.14 |
08:07 Sep 07 |
– |
1.09 | 1081 | 87.05 | 94826 | Call Put |
These are the opportunities we look for in shorting oil because those October contracts (/CLV1) were $83.20 in pre-market trading yesterday and have been jammed up 3.8% already and we'll be looking for 5% over $83.20, or $87.36 as a good line in the sand to begin shorting this contract again so PUMP IT UP boys (when you don't really need it) – we'll be waiting for you!
Yesterday morning I said we could remain bullish if the Dow finished over 11,000 and the Nasdaq held 2,473, which is our -5% line on the Big Chart. The Dow finished at 11,139 and the Nasdaq finished at EXACTLY 2,473. While we do use charts to illustrate our 5% rule, Members know I could care less about the squiggly lines on the graph. These are the same levels we have been using since the Spring of 2009 and that's where we get our ranges from. Our goal for today is to get the Russell over 697 and hold it – 700 has been an upside line in the sand for the RUT and, frankly, it's where we intend to start buying TZA hedges as they've performed so miserably at that spot in late August.
There has been no major news, no data and no new announcement to turn this market around – we are simply bouncing around in a trading range as we wait on the Beige Book this afternoon at 2pm (probably bearish) and then a speech from Bernanke at 1pm tomorrow and, of course, Obama's not very exciting jobs speech tomorrow night – which may end up disappointing investors again and send us back into panic mode.
For now though, fear is subsiding, gold is falling and the bears will be squeezed once again as it turns out the EU didn't fall apart overnight and still no major banks have failed and, of course – the IPhone 5 is coming!!!
This should be a great day for the bulls – let's have some fun.
Dow held 11,300 as well – maybe this day will be interesting after all…
PGH/ITrade – PGH has lower premiums to sell as they only run to April. As a buy/write entry, I’d sell the April $10 puts and calls for $2.65 against the $11.04 entry for net $8.39/9.20, which is pretty nice.
You’re welcome Dennis! Keep in mind we’re just playing the range but that range is unique to us, as I invented the 5% Rule, that’s why no one else seems to play what looks like an obvious level to us. The 5% rule could care less about moving averages or Head and Shoulders patterns or Elliot Waves or short-term support and resistance lines yet it’s more accurate than any of them for short or long-term predictions. Actually, I would have to say I didn’t so much "invent" the 5% rule as discover it – as it developed out of what I observed over years of consulting on various trading systems, kind of like Fibonacci discovered his series. I think that’s why it works, it’s not an invention I’m forcing on the market – merely an observation of how the market actually behaves…
Cats/Shadow – She’s very impressed, says that’s the good show. Good luck.
Lots of good charts at Russell.com (thanks Elliott). Notice jobs picture really not terrible but it will take forever to put 14M people back to work:
QE Next/ZZ – You have to be realistic about what the Fed can actually do. Bernanke has been generally conservative in his interpretation of what they can and cannot buy (and why shouldn’t he as it favors the banks to run all the money through them first?). It would be nice if they purchased non-commodity equities while letting rates rise (the BOJ does this but rated don’t rise anyway due to deflation) or the derivative markets but that kind of market floor intervention would have people screaming murder and it does set up a very artificial market (but it also allows retail customers to participate more safely – good for pension funds etc, bad for IBanks). Realistically, they could lend money CONDITIONALLY this time – in other words, the money must translate into loan growth, not just short-term market gambling or rate swapping. The Fed, as a bit of a stretch, could buy Municipal securities and bail out local Government – that would create a lot of jobs. They could set a HIGHER inflation target. Right now Core CPI is around 1.6%, if they decide 2.5% is healthy, then they are setting policy to print money under that level and that right there would peg the dollar quite a bit lower for quite a while but then we’re back to commodity inflation and I’m not sure how they can selectively avoid that. Outside Bernanke’s comfort zone would be possibly lending directly to small businesses or local banks or reinstating TALF through the Fed. That about sums it up, I think. Anything like a WPA HAS to come from the President and his always-cooperative Congress, not the Fed….
More to come/Rpme – I meant hurricane related guidance adjustments.
Small business/Angel – I agree. I’d even go with tariffs at this point. We are, generally, a self-sustaining economy – there’s not much from abroad that we really need (nothing a good energy program couldn’t fix, anyway) and if we close the loop, we can bring 40M jobs home in short order. Multinationals would make less but, if they want to have a temper tantrum and move out – good riddance because there would be millions of small businesses, where the CEOs don’t make 1,500 times more than the average worker, and don’t pay only 12% of their income in taxes – that would be THRILLED to pick up the slack. That’s the emptiness to these Corporations saying they will move their ops overseas if we tax them or regulate them – it’s not like we don’t know how to make a car, or a jet engine or an MRI machine or drugs or – WHATEVER, right here in the USA but keep up these moronic policies for another decade or two and maybe we won’t be able to anymore.
TLT/GS – Here’s what you need to consider. We CAN’T hold them over the weekend. If we end up out of position on Monday, there’s no time to recover. The $110 puts are now $1.14 and the Oct $108 puts are $2.30 with a bigger delta so you don’t lose anything by rolling sooner rather than later. Mechanically, I like rolling them now (Wednesday before expiration, before your premium is burned – and those $110 puts were $1.32 in the morning) and, if no drop in TLT, then selling the Oct $107 puts for $1.95 and spending 1/2 of it to roll up to the $111 puts and then you are in a $111/107 bear put spread for about net $2. Since you need to make $1.78 back, the key is you need to execute the vertical before it goes below net $1.80 but, other than that, you can afford to hold the naked put for a little while. Congrats on breaking even on the silver – that’s a good exit! Gold also a good escape for our shorts…
Vegas/Lincoln – Oh please no politics, we only have 2 days. I had enough of that crap watching last night’s debate to last me through the election already!
NYB/JMM – A bank with an actual plan – isn’t that amazing!
Bachmann/Diamond – That’s why Mishy’s my gal! Who says promising a chicken in every pot doesn’t work with modern voters. They still sell hair tonic in the stores, don’t they?
Phil
The Gotomeeting idea would be great for Vegas for those of us that can’t physically get there. Hope you can implement that.
Stabilization/Sparky – Obviously you don’t understand the dynamics of New York real estate so I won’t even get into it with you. Just consider the fact that you need your maids and street sweepers and cops and teachers to live SOMEWHERE and if you allowed all housing in Manhattan to rise to the unregulated $50 per square foot ($50,000 per year for a 1,000 sq ft apartment) – you’d be pushing anyone with a salary of less than $100,000 out about 20 miles (2 hours commute at least) from the city and the tolls are $10 a day or $2,400 a year to move away plus parking and the car, etc). So the rent stabilization is what makes it possible for New Yorkers to actually live in the city without paying taxes that would allow teachers, cops, firemen, etc to actually live in the same place.
Holiday/Cap – I can fast in Vegas.
Gas/Cap – So you think Mishy’s plan is to have a financial crisis? That’s pretty likely if she’s elected – you may be on to something…
Vegas/LV – I don’t see how go to meeting can work. We need at least 2 laptops with projectors plus several other live screens to replicate even part of a trading set-up and I very much doubt there’s anything that can be accomplished across multiple PCs with go to meeting but maybe a web cam would be interesting for people. Whoever is in charge of planning the actual thing on Sunday/Monday MUST make sure we have 2 laptops with fast web connections and some way to hook up a few more along with at least 2 projectors (and screens, of course). It would also be good if there was a drawing board for me to use. As far as people on-line participating – I’m not planning on sitting at a desk reading comments – that would be kind of silly when the whole point is to do something different where we can directly interact. Also, if you are going to start with webcasting, you’ll need to deal with lights, mikes etc. – I don’t care as I have nothing to do with setting it up but it seems like a recipe for disaster if you are going to try to turn this into some kind of show vs. the intimate seminar it was meant to be. Actually I do care as my name is associated with it, regardless…
Why penalize the people who are coming to Vegas to actually sit and take a day to get some live training by trying to cater to 500 people who didn’t want to go? If I were putting this on as a professional seminar, I wouldn’t even consider it.
As to poker rooms – I would have thought that setting up a private tournament is a normal thing out there. I don’t need a limo – just one of those golden chairs with 4 guys to carry me around would do fine… 😎
Go to meeting/Seer – See above. It’s not like there’s some one-screen presentation. The idea is to discuss how we look at stocks, charts, options chains, etc. during a trading day and the idea is to do it live, not sit there typing on a screen. There’s a reason people still go to conferences, there are still a lot of things that can’t be conveyed on a computer.
Poker/LV – I see Station Casinos advertises private tournaments can be arranged. Maybe the big boys can’t be bothered – especially on a Saturday night. Golden Nugget says they have private tables available and I hear they have a good steak place too (although I still want to go to Nobu if people are into it).
By the way, for you East Coast people, Barry’s conference is on the Tuesday I get back from Vegas, otherwise I would have been there myself. You can still get tickets for $495.
Phil – Yes, I agree that the live meeting is for the participants, and the thought was that it’s not that easy to see screens projected from a distance versus everyone having the screen on their own screen, locally. Opening up to online participants would likely bog the whole meeting down. The software I’m looking at is called join.me, and it shares multiple monitors. I have a dual-monitor desktop that I can bring in for the meeting. We’ll get a flipchart board, and we can broadcast the screens on a big-screen tv. If we only have 10-20 participants, we should be able to set up tables in a U-format and see each other and the screen well. And, I think everyone has the same expectations ( I hope): live, informal, intimate, fun and dynamic.
From a poker dealer: "…While we cannot arrange a "private" game for you and your party, we may be able to arrange a tournament/sit n’ go style game or spread a new cash game if you have a group of players. Give our Poker Director, Rob Moore a call at 702-891-7407 or 1-877-757-0007 so we can discuss if we are able to set something up for you and your group at the MGM Grand." I’ll check with a friend at Caesar’s also. Again, if someone is comp’ed their host can probably arrange something. I’m not a poker guy myself so I don’t have all the details firsthand but I start calling my contacts.
go with 8 guys til your knee heals..plus its more regal!
that beloved euro getting mighty heavy lately near big technical support…even with equity rally and our govt doing everything they can to hurt dollar….maybe the china msb..(magical slopppy buyer) stepping away finally
For those going to Vegas who have not booked hotel arrangements yet, Would anyone be interested in splitting One of These Bella Suites at the Venetian with me for Saturday and Sunday night? I have 1 extra bed and a pull out sleeper sofa of some sort. If you pick up the bed it would be $75 a night, the sofa would be $50 a night. Any takers?