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Wednesday, February 8, 2023

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Still Thinking On Thursday – Can’t Get Bullish

I am trying!

I watched Fox news for hours last night and I did learn that Warren Buffett is an evil, criminal mastermind who must be stopped and that Obama is soft on the Taliban so following through on his pledge to end the war is nothing more than an insidious plot to garner votes by…. uh…. doing what he was elected to do – THE FIEND!!! 

Damn, see – it's not working.  I'm hardly any dumber (but I am much less tolerant of poor people and minorities) and I still can't get behind this market rally.  Oh wait, before we get off the Fox topic, I want to point out another "big" news story they featured.  It seems that we're finally cracking down on welfare recipients who spend their money at strip clubs.  The House passed a bill yesterday as bill sponsor Charlie Boustany (R-LA) pointed out that, with all these welfare people spending the Government's money at the strip clubs, he had to wait over a half hour to get a VIP table so he could spend the Government's money at the strip club.  Outraged Congressmen passed the bill 395 to 26 (women) as this was an issue that really hit home for them!  

DejavucreditequityIf we finally hold our chart levels, my mission this weekend is to kill as many brain cells as possible so I can stop understanding the news and just buy the f'ing dips, which will be our game plan until the levels are blown again and it's safe to switch our brains back on.  On the right, we have a Rorschach Test for the day to see if you can be oblivious enough to go bullish at the top of our range.  

If this chart doesn't bother you – you may be ready to rally!  You are also ready to brush off the OWS movement as "squatters" – something else I learned on Fox last night.  That's right, they are not protesting – thousands of people are actually gathering in parks to get "free rent" as they can't possibly have a legitimate complaint against the rampant abuses of Capitalism that are tearing this country apart.  

Well maybe not this country but Japan is sure about to break as Finance Minister Azumi calls out the Fed's "pledge" to keep rates microscopic through 2014 as giving an invitation to traders to sell greenbacks.

 “Speculative moves are increasing in the market and we can’t overlook them,” Azumi told reporters in Tokyo today as the yen heads for its biggest six-day jump since mid-August against the dollar. Against the “backdrop” of the Fed’s plan to keep interest rates exceptionally low until 2014, “short- term speculative buying” has increased, contributing to the yen’s gain, he said in parliament today

Azumi’s comments may indicate Japan is closer to resuming foreign-exchange intervention after a record round of yen sales late last year. The admonition comes a day after Sharp Corp, Japan’s largest maker of LCD panels, forecast its worst annual loss since its founding a century ago, with its president saying exporting is “nearly impossible” with the strong yen.

Yen-selling is still in the cards, but it’s becoming harder for Japan to do it because of external pressure,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. At the same time, “speculative trading could get out of control” and accelerate yen gains if investors think Japan won’t intervene," he said.

 

So our remaining bearish premise is that the BOJ will finally put their foot down at 76 Yen to the Dollar and that should put a floor under the Dollar at 78.85 and a top on the Euro at $1.32 (TRADDR chart above).  If we're going to pop the top of our range, we can expect those levels to break first.  Once we get over 12.750 on the Dow (assuming the other indexes hold up) – we're officially in orbit and no longer bound by the gravity of fundamental reality.  This is a perfect set-up for a technical rally that can take us up and up and up as sideline money (including ours) rushes to get back into the markets

What can we do to profit from a move higher?  Well, that's pretty easy.  Here's a few examples of bullish plays you can take that will do very well IF this rally continues:  

  • FAS Feb $77/80 bull call spread at $2, selling $75 puts for $1.50 is net .50 on the $3 spread.  Note that you can simply take the bull call spread which makes 50% in 15 days if FAS simply holds $80 (now $83), which is roughly XLF $14.  
  • FAS March $75/80 bull call spread at $3.05, selling $70 puts for $3 is .05 on the $5 spread.  That's about 18% down in FAS before this trade costs you more than a nickel.  That's a 6% drop in XLF to about $13.  If you don't think XLF can hold $13 for 6 weeks – you're not bullish!  Also, don't forget these are trades we pull if our levels don't hold.  

Alternate offsets (bullish) to selling aggressive short FAS puts are:

  • CHK Jan $17.50 puts can be sold for $2.05
  • GE 2014 $17.50 puts can be sold for $2.50
  • GOOG June $450 puts can be sold for $4
  • ISRG Jan $310 puts can be sold for $10
  • KO Jan $62.50 puts can be sold for $3
  • MO 2014 $23 puts can be sold for $2.15
  • PFE 2014 $20 puts can be sold for $2.65
  • XOM Jan $65 puts can be sold for $2.50 

A good short put is a stock you REALLY want to own if the market drops 20%.  These are all solid companies that won't be immune from a major market sell-off but should do fine in a long-term portfolio beginning with these initial entries.  Also keep in mind these things do not have to be all or nothing – The second FAS trade, for example, makes 66% on the bull call spread.  If you sell one $4 GOOG put for each four of the FAS calls, assuming the GOOG puts expire worthless, you lower the basis on the $5 FAS spread to $2 and, rather than netting 66% cash, you net 150% on cash – that's how easy it is to goose your cash returns.  

Outside of the Financials, we can look at a few other plays that can do well in a bullish economy:  

  • CHK ($20.97) is a play on natural gas coming back.  The 2014 $15/20 bull call spread is $2.65 with almost 100% upside if they hold $20 for 2 years.  Again, it is GREED when you think making 100% in two years is not enough but you can knock that net $2.65 down to .30 by selling the 2014 $15 puts for $2.35.  So if, for example, I am willing to own $15,000 worth of CHK, I sell 10 of the puts and buy 10 of the spreads and if CHK holds $20, I'm up $4,700 and between $20 and $15, I'm down $300 and below $15, I end up owning 1,000 shares of CHK at net $15,300 ($15.30 a share).  That's 27% below the current price and TOS says you only need $1,600 of ordinary net margin on the put side.  
  • AA ($10.20) is down from $17 last spring and it's hard to have a Global recovery without tin.  If you're willing to own them for $9.30, you can sell the 2014 $10 puts for $2.10 and buy the July $8/10 bull call spread for $1.40 for a free crack at a $2 spread that's 100% in the money and your worst case is getting a 10% discount on an entry. 
  • AMZN ($179.30) has good puts to sell because of yesterday's sell-off.  You can sell the 2013 $110 puts for $4.15 and if you don't want to own AMZN for $110 – you are more bearish than I am!  AMZN is a pretty reliable rallyer in the Fall and the Jan $170/180 bull call spread is just $5.20 so net $1.20 on the $10 spread that's $9 in the money to start.  

Well, out of time for now but, as I keep saying, it's very easy to get bullish and set up for very nice profits – SO WHAT'S THE HURRY?  Let's just make sure these levels are real and, once we feel good about them holding, we can find trades like this every day because – if the Government is going to insist on making everyone rich by jacking up the markets – who are we to object?  

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StJ,
You are truly impressive! 3rd order polynomial!?  Which software or web site did you use to get those charts?

four-week average volume on the NYSE has dropped to levels not seen since, yes you guessed it, 1999.
(graph in link) – I think even the HFT's are getting lonely . . .
http://www.zerohedge.com/news/market-stoned-its-1999

BSX
I recommend against. 
Yes, 5 bucks sounds cheap, but look at the financials . And the Management (if there is any). They've lost something like 8$B in what, 6 years? That's a crude guess and could be way off, I merely glanced at the numbers for 20 seconds earlier today after seeing one or two people here mention the company. For old time's sake I went back and took a few seconds to look at the last few years results. I was curious how a $55 stock becomes a $5 stock. That takes skill. I might be off on the $55 part, I'm going from memory at the time of the merger, and I don't see anyplace to quickly find a stock chart of the period, going back that far, around 1996.
I was 7 years as an Engineering R+D Technician with Scimed Life Systems, Maple Grove Minnesota, in the early to mid '90's. Best company I ever worked for in my entire life. The leadership, the integrity, the "team" feeling, the massive growth rate, and the fact that my own career spurted faster than at any other time………I'll remember it forever. You'll find me on patent #5382234. I started working there as a temporary assembler, through a "work to hire" type temp place, $6.00 an hour. I left 7 years later as a Senior Engineering Technician and Lab Instructor for new technicians, with my name on a patent. They were just starting to nibble around the edges to see if I could handle any type of informal leadership position, I think. I had reached the top of the Technician Pay scale, so they had to create something new to slot me in.
Leaving was a minor mistake…….I should have stayed about another year or so…..I left to go to a start-up med company locally here, which flamed out, and was for me a personal disaster……..long story. On the other hand, if I had not left, I never would have gotten into the next phase of my career, as the Macintosh Systems Administrator for a publishing company (the second greatest job I ever had-and which paid a lot more :).
I worked harder there than any other job I've ever had. I don't mean they pushed me, they did. But 98% of it was me pushing myself. MANY long hours. But it was awesome. If you want to have some fun, go back (if you can find it, might not be easy) and look at the share price for SMLS from the late 1980's through the time that Boston Scientific bought them (I think around 1996?). That's a chart of beauty.
When you read the books and the articles about the valley start-ups of the 70's and 80's, that is what Scimed was here, locally. That FEEL, that Excitement. Everybody working together, everybody helping each other. We got a lot of investors because they would come and visit the campus and they could feel the energy, the fact that nearly everybody they saw was smiling and happy. The Scimed leadership team went out of their way to treat EVERYBODY at the company as being a critical asset. We had clean room's full of people making $6.50 an hour, doing micro-bonding of catheters. If even one of those bonds, or the other manufacturing steps were performed improperly, it meant somebody's life was at risk while they laid on the table during an angioplasty procedure. And you have to train them very , very well to concentrate on quality beyond any other consideration. So, you have to keep all those assemblers very happy. And Scimed did. Pizza practically weekly. Christmas parties. Exec management doing rap songs dressed as rastafarians in body paint. God, it brings back memories. I feel like laughing AND crying. Very important time in my life. Sorry to get personal and off the topic…….I guess you can feel that I was pretty passionate about it…..the reason I bring all this up is to contrast what happened after Boston Scientific came onto the scene. What I'm describing is not something you'll ever see or learn by reading the Analyst Reports, or the business press of the time. This is what is was REALLY like.
I used to work in the lab into the evening hours, and I would always catch the business report, and many nights they would report new highs (shares). And I'd be sitting there in the lab, saying "It's ME, It's ME"…………What song is that from?…..oh yeah, one of Patti Smith's…….Birdland…."I'll go up, I'll go up, go up,go go up, up, up up, up, up…….
Funny-I thought of the "It's ME" bit because I used to be sitting in the lab building prototypes with the Rock and Roll cranking (I convinced management to buy a wall shattering stereo for the lab – 4 foot JBL's) while listening to the business press talking about us. But the rest of the lyrics fit as well.  Weird, but cool.
There were several of us who would often still be working at 8pm or later. The engineer's offices were on the other side of the wall from the R+D lab. One night we had the walls shaking with the music pounding out. The next day one engineer who happened to be there that late (very rare) complained to the R+D VP about the noise. The VP basically told him "if you've got Techs who are working until 8pm of their own volition, and it takes loud music to keep 'em happy, then that's how it's going to be".
Back to Boston Scientific. They bought Scimed, and ruined it. What Dale Spencer and the others there built was slowly but inexorably folded into the stuffed shirt blue blood bull crap that was Boston Scientific. Just before the merger (takeover was more like it), a few of the managers from Boston came to check us out, and I just totally got the creeps from all of them. VERY cold and icy, just the exact opposite of what we were all about. I knew then for sure what everybody had been saying, that once Boston took us over, that things would go downhill fast, was true. They did. Fortunately I got out not long after that.
Scimed was the only coronary angioplasty company (Cordis, ACS, Bard, etc) to never have had any significant quality issues with it's products. All the other companies did.  I'm damn proud of that, personally. I'm also very proud that I spent 7 years of my life helping develop products that were designed to, and did, literally save peoples lives. All the other angioplasty company's had periods of very significant quality issues, and it did not take long for Scimed to get dragged into the same laundry hamper, once BSX had them. For years after wards I was hearing business press stories of the product quality issues at their coronary angio division. So sad.
I went back to visit about 5 years ago, and Oh My God……what a nightmare. None of the old heroes were there.
Anyway, I guess BSX looks attractive to some people, at this price. I looked at them when I started trading a couple years ago, and couldn't believe my eyes. Boston Scientific is a $5 stock? What the hell happened? So, I don't know what the poster's intent above was, Short term trading, Options, longer term investment, etc.
But I don't see much margin of safety in owning outright long shares. The founders of BSX cashed out over the last couple years, I think. They were literally Billionaires (Abele and Nicholas). If I remember correctly, the President of Scimed, Dale Spencer, had about 50 Million dollars of stock when he left the company. Not bad. And he is one of the very rare mega rich that I would say deserved it. So what did he do, at the age of probably 58 or 60, with 50 mil in the bank? Go start a bunch of new ventures, of course. I personally would have gone fishing, but he was the most driven man I've ever known.
If you want to buy BSX, go ahead, but I'm trying to put a human face on a tradable security for ya all.
 
Sorry for the long post, but I thought I'd throw in my few cents about one of the rare things  here that  I know anything about. On the other hand, I've only been here three days, so we'll see.

Chart / Cwan – Amibroker with some customs charts.

Speaking of charts, here is another bullish one…

And yet another one…

For what it's worth!

I think Bespoke has something about NFP days as well  if opens up the highs are early in the day and if opens down the highs are end of day , however in this market the unexpected should now be expected.

Newbie: Nice story, very interesting.  The ending made me smile.   I, too, cashed out of my last company, one of nearly a dozen I founded, in my middle age.  I would unequivocally consider myself driven, but also have a low boredom threshold and dislike repeating myself.  I was persuaded to try something really different that I had never considered — raising children. Hardest and most challenging damned job I've ever had — but it pays at least as well, if you can adapt to a new unit of measurement!

Government charts are usually biased. Phil has been playing the pre market. for some time. Now the big action is post market instead or also. Why is this happening? I can't think of one good answer. There is a reason.

Ditto on the raising children.  hardest job I ever had, or should I say undertaking; but by far the most rewarding.

zero
thanks-i don't have children, probably too old now-i can barely take care of myself-i don't know how people do it, but yeah, i've heard this same sort of thing before-hardest "job" but very rewarding

newbie
Your not the only one who never had children. I liked your long post, reminded me of times when we made a difference. I spent years working long hours at a few companies that today I would rather not admit to. It is such a shame that this has happened everywhere. The only good companies do most work off shore. The problem was incentive went away, people had no value, all became disposable, and it was less expensive to do it over there. What will bring it back? Start by ending free trade, then free profit, and last get rid of the people that live here but think the only thing that matters is being the richest dead man. They just don't understand you can't take it with you!

Phil
What platform do you recommend for futures trading and what would be reasonable trade commissions? Also, thanks for your great comments last night on futures trading.

stjeanluc and jomayo……….thanks again for the inputs. always smart to look at the same thing from different angles.
 
this boring steady march up structure which seems to fly in the face of common sense and fundamentals is more or less identical to the periods from;
 
– 02/08/10 to 04/26/10 and then the flash crash
 
– 08/31/10 to 11/08/10 and then a consolidation
 
– 03/01/12 gap up day to start the year and has not looked back
 
when the reversals come off these un-natural advancing structures the turns have been hard and violent, and then another intervention to stabalize and correct back higher
 
The Dow was at 11,800 mid to late August 2008 down from 13,000 mid May 2008 up from 11,800 mid Amrch same yr and down form the H&S peaks of 14,150 and 13,500 from late 2007.
 
13,000 looks like the next target up if that is the number our central planners want next
 
Europe looks so calm ahead of today's print……….not a care in the world.
 
peedlew……weren't you trying to short this thing only a few weeks back or am i mistaken about that?

I remember the last time we had a long slow grind up with low volume it cost me ALOT of money because I was short the whole way up saying the fundamentals don't support this move, but it kept going up and it can go up longer than I had  /have funds to fight it. I am 60/40 bear leaning and if it doesn't flip today I'm going to have to flip.  

Many things amaze me about this board.  But a new one is how folks can continue to talk about the same things over and over.  Perusing the comments here it sounds exactly like it did during the last QE driven rally.  No one, including myself, could believe it was happening.  Volume was low and indices defied gravity/logic.  In USAToday they had an article on Bernanke's testimony to congress.  The headline was Bernanke warns against cutting deficit too quickly.  The last line of the article was many economists believe a new round of quantitative easing will be announced at the Fed's next meeting in March.  A U Penn dean at Warton was saying stocks were in some ways at historically low levels.  Yesterday really felt like Groundhog Day.. the movie.  Everyone is working together to try and sell people on this thing.  Whether we recognize it or not we've seen it all before.  There is no fighting it.  Just turn off your brain. 
 
Phil / JRW / Pharm or anyone else with pic posting powers I suggest capturing the image from the link below and posting everyday to help as a reminder:
 
http://en.wikipedia.org/wiki/File:Kool_Aid_Man.jpeg

Daily Mail reports this morning on a research study of 15,000 Brits over several decades that found (shockingly) that  conservatives are less intelligent that liberals. Sorry can't post the link on crappy hotel computer.
 
Next up–which are more intelligent sheep vs dogs, premium sellers vs premium buyers?

79.00 looks like a critical support/resistance number for the Dollar Index. back to March 2011………about half way between the high and low for that period.

matt.………i agree, and this is the 3rd time since the market bottomed in Mar 2009.
 
the second one came Aug 31 2010 and it was tipped with a buy of several hundred thousand ES contracts at the close that day. i was just smart enough to close shorts but not smart enough to realize it was also a signal to get long big.
 
live and learn i guess, or at least try……..

Matt/Deja Vu

 
Nice to see you posting again.
 
You're absolutely right.  This is identical to last years and the year before manipulated rally's.  No volume….steady climb upward. 
 
It's funny watching the how the Bots work.  They are methodical.  BTFD's.

Phil……….OIL testing that descending channel support  95.50ish so if it breaks lower there is another channel under it with a support line all the way down at around 87/87.50.
 
the technicals look OB on a day chart…….CCI all the way down at -190 and last 2 times that indicator was this low there were rallies

 Yep. Not really a fun time for premium sellers, so nice time to pursue hobbies, focus on work, smell a rose etc..

Wow. Were the job numbers that good?

roro/CCI
My chart has CCI @ +102, (not -190) indicating a possible OB sell-off historically.
FWIW

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