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Tuesday, February 7, 2023

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Tempting Tuesday – Again

SPY DAILYWell here we go again.  

Once again it's Tuesday and once again it's a primary and once again we are meant to believe everything is right in America as the Futures take the markets back to levels not seen since last August.  As we discussed last week and as noted by David Fry this morning

 Throughout the week Fed governors will be making speeches: Dennis Lockhart (2 speeches), Charles Evans (2 speeches), Esther George, John Williams, Charles Plosser and Jeffrey Lacker. This is part of their transparency mission and/or a campaign to pump-up investor confidence. You choose.

Yesterday we made our breakfast money shorting the Dow off the 12,350 line and today we already had a double dip at the Dow off the 12,450 line but, on the whole, it would have been easier to drink the Kool-Aid and go long.  

Unfortunately, I'm a Fundamental Investor and not a TA guy so, impressive as this run may seem, it doesn't match up with the data and, so far, it's neither matching up with Q4 earnings or Q1 outlooks.  We HOPE the Fed will go for QE3 (Friday's Fed speak indicated that and more today) and we HOPE Europe is fixed and we HOPE China doesn't implode – is this a sound investing premise?  Let's see how things have been going in the last Quarter:  

Up 15% in all of our indexes and led by the Transports, which are up 21% – even with oil up 25% over the same period which once again proves our theory that trucks and airplanes must poop oil when they run – which explains the non-inverse correlation between Transports and Fuel Costs that those of us who took Econ 101 may be familiar with.  

VIXThe most interesting thing about the above chart set is the uniformity of the moves up in the majors but I think it's the NYSE and the Russell which PROVE beyond a shadow of a doubt, that this market is traded by robots.  Look at those two charts – they are practically tick by tick matching – even to the point where the Russell is almost exactly 1/10th of the NYSE.  Sure, you could assume some similarities in two broad indexes but this is 6 full months of daily moves that are in lockstep.  That's just not natural on the order of maybe a Billion to one vs. two independently traded indexes.  

So the theory is that the broad indexes are difficult to manipulate and so they have underperformed by about 5% over the past 6 months but they were both part of the BuyBot express that has jammed this market higher since early October and lulled investors back into a state of complacency that usually comes right before the rug is pulled out from under them.

First of all, let's keep in mind that we bottomed out on the 28th at 12,150 on the Dow and the next morning we gapped up to 12,200 in a futures move that Retail Investors were unable to follow.  We went up to 12,300 on Thursday and closed back at 12,200 on the last day of 2011 and then the poor Retail Traders woke up last Tuesday with the Dow at 12,450 and we flopped to 12,300 again on Friday and yesterday we closed at 12,400 and today we should open around 12,500 (keep in mind Futures don't match the Dow, about 50 points lower).  So, of the 350 points added to the Dow since December 28th, 400 of those points were added pre-market and all the Retail Traders got to do was buy into a 50-point loss.  

This is, of course, a gold mine for the Banksters, who KNOW they are going to jack up the Futures so they just wait for a nice dip, buy from the Retailers (using the money we lend them for free through the Fed) and then they jack up the Futures and dump it on the suckers who chase the rally in the morning.  It's nothing more than a 3-Card Monty game where EVERYONE is in on the scam except the mark – and that mark is the retail investor!  

See, it's not just about having a card game you can't win – if that's all it was then eventually even Retail Traders would wise up – it's about creating the impression that you CAN win and getting you to commit your money and THEN making the loss seem like a fluke so that you are encouraged to go back to work, save up your money and gamble it again because "it could never happen twice," right?  As the great George Bush used to say: "Fool me once, shame on you, fool me you can't get fooled again." 

Speaking of getting fooled again, NFLX is back to $100 up about 60% since Thanksgiving and it's already tempting but I want to see if they can fill that gap to $120 from the last time they had earnings and fell from $120 to $75 overnight as reality is a very ugly experience for NFLX bulls.  Earnings are on Jan 25th so we have a couple of weeks to see how this little run plays out but, with a market cap back over $5Bn on less than $250M in profits, NFLX is priced for healthy growth and they'd better deliver or they will de-lever VERY quickly.  

Click to View1,297 was our +5% line on the S&P and we're not there yet, nor have we hit our 2,733 target on the Nasdaq and we're still miles below 774 on the Russell and 7,866 on the NYSE – all levels we discussed last Tuesday and even the Dow needs another 250 points to hit it's 10% line at 12,749 and it's a wide swing in the range between there and the +5% line at 12,170 so, essentially, meaningless moves in the Dow should not be the basis for bullish investing (see last Wednesday's post).  

AA certainly didn't report numbers that justify it being higher than last year (when it opened at $16) and we're long on them at $9 but that doesn't mean we feel the rest of the Dow components should be off to the races.  We'll stay Cashy and Cautious while we wait for either the other indexes to get over their Big Chart lines or for the Dow earnings to come in and somehow justify a 10% move up from last year and a 20% move up from last quarter.  

Just trying not to get fooled, AGAIN…  

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I keep hearing this sound-it's like air coming out of a baloon.

And…. Boom!

JR,

 
What's the definition of a black candle?

WTR – down at channel lows.. good boring dividend paying utility to consider for initial entry, esp for IRA accts..  can sell 22.5 calls against it.. seems like forever. Water is the next gold some say, and some don't.

OJ futures trade at all time high (back to 1977) on concerns that the presence of a fungicide in samples from Brazil could crimp supplies. Oil and OJ.   I live on those two liquids…along with crushed grapes and fermented rye….

Mine are red and green, some guys go black and white.

Gmarts,
 
I think a black has something to do with engulfing.

JRW / black — if /DX can break 81.25 I think there is a good possibility.

Green filled (rather than green hollow) is the same as black.  Just means the candle started high and finished at the low, although all above the previous finish.  Not a good sign. 

exec, I got no engulfment on that candle, just high velocity (big dump) continuation

, I took a look wtr for the Ira portfolio, unfortunately the options have a huge bid ask spread which makes it unsuitable for covered calls.

exec / Black candle

Reversal indicator !!

scottmi / water — The article in that link seems pretty shallow to me (pun in tended) not to mention that the writer is obviously biased. It might not be the next gold, but there's something up when a bottle of water costs more than soda which has the same base water. Thanks for the heads up, somehow WTR slipped from my alert list.

, woopsy, posting from my iPhone in newzealand! I am trying to get Siri to post my comment for me with little success. But after using her for a while I don’t think I can ever go back!

exec,

Traditionally, candlesticks have not been different colors. If the close was less than the open, you get a filled candlestick and if the close was higher than the open, you get a hollow (white) candlestick.

If the previous day's closing value is less than or equal to the closing value for the current day, draw the current day's candlestick in black.

If the previous day's closing value is more than the closing value for the current day, draw the current day's candlestick in red

OK, so you were talking about the current daily candle then, not the intraday

We should get clear direction in the next 10 minutes or so. Coming up on 200, EMA, trendline resistance !!

where do I find the Income Portfolio?
got out of AAPL weeklies this am that I bought yesterday at close;  nice move and just got out of SPY short on today's market. Life is good.
  Love the AAPL plays we are doing:  are there any stocks like this that some knowledgeable person will run for us  as  in the AAPL plays???
turtle1755

Phil – Above chart does not account for the fact that with many pass-throughs some portion of earnings is treated as a return of capital so you don't have to pay taxes on it until you sell the underlying asset – applies to MLPs and others.

Phil/SQQ BCS
 
Would you consider covering our short side at a profit and just letting the longs run or would you wait for them to expire worthless? I guess considering I feel we may have already hit our weeks high

Heres an interesting bit of news:  IBM is buying 35,000 HAMP Loans from BAC.
 
"More than 35,000 mortgages in Home Affordable Modification Program trials transferred to the IBM (IBM: 181.64 +0.03%) servicing arm Seterus from Bank of America (BAC: 6.535 +4.23%), according to Treasury Department data released Monday.



The transfer of 35,000 HAMP trials to Seterus would put it near the top 10 largest servicers in the program. American Home Mortgage Servicing extended 42,000 HAMP trials, the 10th most of any other servicer."

 
Looks like Big Iron is getting into the subprime biz.

Phil / Oil/ SCO – I'm in the Jan '12 35/38 bull call spread.  looked great back on 12/30.  now down about 30%.  now with the Iran war rumor mill continuing to roll on, i'm not sure oil will turn down in next 10 days.  roll out to Feb?  

Dear iflantheman,
I have from a few weeks ago 10 AAPL Apr 2012 405/430 bull call spreads.  With respect to your 425/450 BSC suggestion this morning, do you think it makes more sense to put on 10 new 425/450 BCS or buy back my short 430 calls or roll those up to a higher strike or some other trade to avoid getting called away on the short 430s or do nothing now and wait until we get closer to April?
Thank you!

Took the money from the DOW shorts, and sell orders back at this mornings highs in the event of a runn up to the close.
 
Nothing like the 1% a day in/out trades. Thx for the HUs, Phil.

Cost of Education – side topic, commentary by David Platt about the changing nature of higher education (the bubble is about to burst): Lowering Higher Education.

Craigzooka/Wednesday:
 
can you tell us if the mkts dropped tomorrow?

The pronounced correlation of these markets makes tape watching almost painful when NOTHING is moving except a few lazy HFT bots.

Canuck / Wed — F*ck that, give me the lotto numbers!

market at a 5 month high but instead of going general market protection like SPY/DIA, I decided to beat an old drum with CMG. A reasonable P/E of 15 puts them under 100 per share, so not a bad bet. 
 
New data includes pumping by Cramer which is an automatic boost to put positions. I remember him beating the NFLX war drums in July with the stock at 300 immediately before heading down 220 points in colossal fashion (and to a respectable sub 20 P/E that is…). I'm not big into conspiracy theories but what's good for the goose … I mean seriously, it's not a stretch he's lining up suckers for the Boyz to dump to before the inevitable market hammer commeth (and seriously, a burrito place?? it's not like they sell iPhones for crying out loud)

Phil,
SCO/Terra: I followed your advice to Terra about the SCO Jan 35/38 BCS. Was wondering about some SCO offset puts I sold around the same time. I' short 10 Jan $33 puts and 5 35s. Let the lie and see how it goes?
Thanks

SGEN & ARIA volume has dried up.  Both are 1/4 of normal shares traded. ARIA: Big blocks of 10, 9 and 6 Puts in May. 

BDC: CMG 
I'm with you on that one, just be prepared to scale in and roll along because now that europe is fixed and china will be soon the demand for expensive burritos will surely go up.

Hello Pharmboy – Have you ever looked at CYAN?

CYAN/aldo – no, sorry.  Never heard of them.  Not my area, as they are more of an additive/nutraceutical.

The Oxen Group got our clients into a long on $HOG today at 40.22. We are looking for Harley to move higher this week and into earnings as the company is expected to see significant growth in earnings YoY. First target is 41.00.

Natural gas glut:  cui bono?   I wouldn't think utilities would rocket, since they're rate-regulated.  Which companies win big with cheap gas getting cheaper?

This board has dried up on comments just like buyers in the market…..or is everyone dumbstruck?

Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz.

Like the levitating man, you just have to wonder in awe as to what's holding it up. Voila'…. its the stick. 

Phil, today XLF popped over $13.50 and I had been waiting for that to happen I order to attempt the left over short call FAS 72 from the WCP as per your earlier reco:
. “FAS/Zip – Oh, we shut those down a while ago.  Now you have to ride it out as FAS popped.  At  $69.74, there’s no reason to give up time if you don’t have to.  You need XLF to stay below $13.50 and, if they go over, you can buy something like the Jan $12s (now $1.45) to cover but keep in mind you need 3x to fully cover but 15 would moderate your delta loss on FAS by 50% while you wait out the rest of the premium expiration (down to 25% of current price) and THEN you can roll using the profits from the 15 XLF calls to pay to shove the Jan calls to higher Feb calls (right now the Feb $80s are an even roll at $3.25 and that’s up another 15% on FAS which is another 5% on XLF to about $14”
Still a good way to go or simply rolling to the feb 79 or 80 ? I get the impression we are at x road here, so not sure what to now. Thanks in advance.

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