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!
If 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?
8:03 AM MasterCard (MA): Q4 EPS of $4.03 beats by $0.10. Revenue of $1.7B (+20.20% Y/Y) misses by $30M. Shares -0.5% premarket.
Probably won't help the 330 puts in the 25KP from yesterday.
Some Shocking Honestly Out Of Juncker Sends EURUSD Below 1.31
Eurogroup muppet and Luxembourg Prime Minister Jean Claude Juncker, whose comments to in an interview with Deutchslandfunk were shockingly open and realistic. Among these were that the measures from the January 30 summit were "largely insufficient" and that Greek PSI talks were "ultra difficult."
so the Greek hard deadline of March 20 is now less than 50 days away, with the full exchange offer needing at least two months to be concluded, and there is still absolutely nothing on the table.
http://www.zerohedge.com/news/some-shocking-honestly-out-juncker-sends-eurusd-below-131
Oil Lines
R3 – 101.35
R2 – 100.42
R1 – 98.93
PP – 98
S1 – 96.51
S2 – 95.58
S3 – 94.09
Yesterday's high and low – 99.49 / 97.07
Breakout lines – 100.40 / 90.73
S1 has held so far this morning!
The pot calling the kettle black: The U.S. Treasury Department criticized Japan in a December report for unilaterally selling its currency in August and October, saying the Asian nation should focus on steps to “increase the dynamism of the domestic economy.”
Wow, MA went from down 4 after earnings to up 10 now.
@Felipe
"…… welfare (Ibanksters, etc.) people spending the Government's money ….."
I think this perhaps where the redistributionists veers off into la-la land. The government doesn't have any money. The money that is spent in strip clubs comes from, usually, the taxpayer, or the printing press in theBernank's basement.
FAS Strangle / Kongen – Sorry I didn't answer your question last night. I agree that by selling a FAS ATM straddle you could technically collect a lot more premium each week as one of the side will certainly be a loser and you can roll the other sides. The problem for me would be that sometimes you can get buried and the roll will be tough. For example, on Monday, we could have sold a 78 straddle – the put side has gone from 2.85 to 0.25 so a great win there. But in the meantime, the call side has gone from 1.80 to now 5.66 so not so good. And as of now you can only roll it even to the Feb 80 which is far from out of danger right now (the 81 calls we sold can be rolled to the Feb 85 which at least is OTM for now). Unless you are willing to go 2x or 3x but quite costly with FAS. You could of course plan for the 2x or 3x rolls by starting a smaller position, but then you collect less premium on the wins so I guess it evens out.
Now, if you want to make directional bets using some TA, selling ATM puts or calls, it would make a lot more sense as the greeks work in your favor. But that's another trade altogether. That is something else I would like to try as well, but the problem is that it involves a lot more timely trading (like JRW's system) and it is harder for others to follow as a couple of minutes can make a big difference.
Phil/Buffet
I tried to tell you…:-)
You need to start watching Fox 24/7 (there totally fair and balanced) and apologize for the chastising you directed at me for having the nerve to ask if Buffet had a hidden agenda.
I think that we had a chart for that yesterday, but here is even more details on similarities between 2011 and 2012!
http://www.bespokeinvest.com/thinkbig/2012/2/1/2012-2011-redux.html
And how that turned out!
And markets are running hot around the world… All the international ETFs are overbought now:
http://www.bespokeinvest.com/thinkbig/2012/2/1/country-and-international-market-etfs-overbought.html
Of course, we can remain overbought for a while but it makes the correction even harder!
Chart / StJ – Can it be so simple? We just follow the chart?
EXEC//once you have 50 billion you can afford to be a populist…I don't care for Romney at all but he gives more money to his church in % terms than anyone I know…it would be interesting to see how much money Buffett gives away that isn't related to a tax scheme…lot's of big talkers not many large givers..
I don't understand what people see in mornings. Damnably bright, inane birds cheeping, lawnmowers, lots of unwarranted optimism about a "new day" — reminds me of dogs — brainless, happy, tongues wagging. Night is like deep space.
Chart / dpas – I have the strange feeling that the future will be different… but somewhat similar as well!
But Angel, Romney doesn't care about poor people!
Cramer says CMG is a buy…
FU Cramer!!!
Phil- Having trouble getting my credit card to go through for my membership renewal- is there someone I can contact and way to do so? Thanks
Angel/Rich
I'm not a big fan of Romney either. Come to think of it…..I'm not crazy about any of them.
there goes the dollar to goose the markets at the open.
Wow, folks are chattie this early a.m.! PP:
Speaking of the dollar, the PP this morning is 79.13 and since we are there now, we go up or down from here!
Good morning,
IWM 77.96, 78.34, 78.76, 79.10, 79.53, 79.81, 80.47 and 80.99
I also have an ascending trend line now at 80.12; good hunting !!
Didn't Buffet team up with Gates Foundation with his money?? I think that trumps Romeny. Not that I am keeping tabs!
OK, MELI is breaking out….on what news? GOOG? According to David's Chart (All about the Trends), it is time to short, but according to Opts methods, it is time to go long…What to do, what to do?
Yahoo! Yesterday, just before close, I followed David Ristau's rec on GMCR: buying both put spread 52.5/50 and call spread 57.5/60 expiring tomorrow, betting that GMCR would go either way > 10%.
I was so confident that I entered ONE contract! Barely enough to buy some of their coffee! 🙂
ARRY is at the top of the channel from their previous high. Time to sell 1/2 to get out even…whew!
Phil – great post! Only wish you had reserved it for member chat. I really like the very clear trade ideas – I know you post them all the time but something about how concise they were helped my otherwise slow brain. Thanks!
Low volume open. Thanks for the lines JRW 80.12 should read 81.12
every day CMG hits a new all-time high.
unreal.
OK, want to a starter position in INFI. Selling a few April $5Ps for 50c or better. I just tested them and they move for 40c in a jiffy, so need to move the bar up a bit.
BSX is hitting all time lows. Any thoughts ?
This should be our positions right now. I booked the trades that could be had at the end of day yesterday like the MA trade. But for example, the BKS put could not be bought back for $0.10. I also sold the DIA puts as they were even as instructed by Phil. The rest should be accurate. I think that I am missing one trade in the closed ones, but I'll fix that today. Let me know if you see discrepancies!
Chipotle Mexican Grill Inc: * UBS raises Chipotle Mexican Grill Inc price target to $365 from $345
USO bouncing off PP as well as 200d MA. Going long here. Feb 38 Cs.
FAS Strangle – Can't fight the tape… Selling the 81 puts now to create a straddle. Something has to give now!
5 – count 'em – 5 bullish trade ideas in the morning post. Scaling in means you can buy one today and one tomorrow and one on Monday and one on Tuesday because, if we are over our lines for the next 5 days – I'm going to have to say we're actually bullish.
I'm not there yet but I see that some people are way too bearish and – rather than capitulate at the top – how about just picking a high-return bullish trade and hanging tough over the weekend as a strategy? Watching yet another morning of relentless market pushing – I feel kind of the way I felt during the OJ trial – I can't believe it but I'm going to have to accept it (OJ was my boyhood hero)….
As with the OJ trial – it doesn't matter what the "so called facts" are – what matters is what you can convince a dozen people (or a million investors) to latch onto as their driving belief. If we can convince people that the EU crisis boils down to whether or not Greece gets a loan – then that becomes the rallying point. It doesn't matter what kind of crap condition THE ENTIRE REST OF THE WORLD is in because, didn't you hear? – they "fixed" Greece.
This is a classic MSM propaganda technique as first, Greece is scapegoated (#5 on the list) and then the issues are confused (#8) to make the very simple concept of Europe's Trillions of Sov debts seem to pale in comparison to Greece's $500Bn and that is accomplished with saturation on the Greek issue (#11) to divert your attention away from the actual crisis (#14). So now, when Greece is "fixed" – investors will feel like there's nothing to worry about – until the Media tells them what the next thing they should worry about is.
Our problem is we read too much and think too much and once you realize there is no Santa Clause (spoiler alert!), then you begin to question the Easter Bunny as well. We're not likely to be able to recapture that childlike sense of innocence again but PT Barnum was able to make a very nice career out of betting on what the common man would be doing and it's up to us to step back and let go of our feelings (when and if our technicals break) and simply join in with the manipulators and take the suckers for all they're worth because – someone is going to do it anyway, so we may as well get our share.
For now, though, I'm still not getting my Dow 12,749 but NYSE is holding up at the moment (7,926) and I care more about them than I do the Dow, which was running ahead of the pack anyway.
MA went $20 the wrong way on us this morning. $20 down and we'd be having a party but we knew that was super-risky. I still like shorts better than longs but let's see how Bernanke's Congressional Testimony goes today.
At the open: Dow +0.11% to 12731. S&P +0.19% to 1327. Nasdaq +0.23% to 2494.
Treasurys: 30-year -0.17%. 10-yr -0.03%. 5-yr -0.02%.
Commodities: Crude -0.78% to $96.84. Gold +0.03% to $1749.95.
Currencies: Euro -0.17% vs. dollar. Yen -0.12%. Pound +0.06%.
10:00 AM On the hour: Dow +0.04%. 10-yr -0.07%. Euro -0.11% vs. dollar. Crude -0.91% to $96.72. Gold +0.21% to $1753.25.
Market preview: Stock futures erase losses to turn positive after data showed new claims for unemployment benefits fell last week. S&P +0.1%. European bourses mostly higher as Greece's debt talks drag on. Retailers ANF and ANN down sharply after lowering guidance. Commodities markets struggle amid a modestly stronger dollar. Still ahead: Bernanke testifies.
Things are getting back in Iran and they are getting rough on the currency speculator:
http://www.washingtonpost.com/world/iran-unable-to-stabilize-its-plunging-currency/2012/02/01/gIQAJ175hQ_story.html?hpid=z3
Let that be an example….
Phil, Lflan – what do you guys think of OPEN (Open Table). Played the puts last earnings and did well. What's your take on this time around?
Pharm / MELI — long if it breaks out above the all time high. short if it fails and then fails $92. That'd be my take. I was watching that long ago and it slipped off my radar.
jabo – I feel your pain. I got on the wrong side of another momo stock short call (CRM) and learned a hard lesson. Promise us you're not going to run screaming into a Chipotle restaurant some day and trash the place.
Phil
Great post! Your keen and often accurate observations with the corresponding game plans are greatly appreciated!
Government/Flips – Yes, when you write a check to the IRS, that isn't money. When the Government sells $140Bn worth of TBills, they don't get money. In fact, there is no Government at all – it's a work of pure fiction that only the Democrats still believe in…
Buffett/Exec – Yes, it's all so clear now. Thank goodness for blessed Fox and the clarity they bring to these issues.
Similarities/StJ – Yeah but we don't want to wait another couple of weeks to see a turn! Those World markets are on quite a tear.
Buffett/Angel – Wow, I love these completely off the cuff attacks that are backed by no facts whatsoever. Buffett has already pledge most of his estate to the Gates Foundation (another blatant tax dodge, I'm sure) and ALL of the rest goes to various charities but he still managed to scratch out about $100M last year to various charities in addition to the various trusts he himself has set up over the years. What a snake! Conservatives are lucky that people like Buffett and Gates are genuine givers and don't form some kind of liberal SuperPac to change the message in America instead. How do you even have the balls to disparage someone like that? Every dollar he earns for his Berkshire shares is earmarked to charities so he essentially just works for them and that relatively tiny paycheck he lives on each year is just that – the tiny paycheck he lives on.
Wow ZZ – get up on the wrong side of bed today?
CC/Jthom – Sure, contact admin at philstockworld dot com – that's Greg, he'll help you.
Thx. Rain. I am already short from hitting a target I was looking at….
JRW: What is your target for IWM?
Oil / Phil, Your running commentary on your oil trades last nght was excellent. Best of all you didn't get any big win or loss. Much more instructive that way. Looks like at first glance you turned several moves that turned against you into small wins and smaller losses. Can't wait to go back and match your comments to the charts, minute by minute. And thanks to Lncoln Bertll and pacdog for their comments too.
Phil,
WIth all this anticipation about Greece, It looks like the market is setting up for a "sell the news" type event when the deal actually comes, regardless of how good or bad that deal is. Your thoughts on that please.
Phil,
Re: OJ
Professors at Stevens Insitute of Technology created software that supposedly is better at detecting lies than polygraph.
O.J. Simpson, in his memoir I Want to Tell You about the murder of his wife
I am 100 percent not guilty. … When asked at my arraignment, where the charges against me were first formally stated in court, I said, ‘I am 100 percent not guilty.’ I said it again in Judge Ito’s chambers, and I say it again here.
The Software Says: Truth
Read the full text here: http://www.mentalfloss.com/blogs/archives/85297#ixzz1lErcnjz7
–brought to you by mental_floss!
Pak–I promise you that I will NEVER eat at Chiptole!!!
But beware of flying rocks 😉