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?
roll and DD now?
VRTX – July 35/40 BCS, selling the 33s for 2.50 for a free trade and 20% off from here (roughly).
yeah…kellen – 25c, although mine are not getting filled.
Does anyone have the quote from the Fed about creating risk appetite and the unintended consequences?
Nice — MM were messing around with VRTX options, cause I was putting in different orders and every one I put in they moved it 10-15c. And something is up with VRTX….
Closed right at the trend line as I said at 1.44 !! 😎
Phil – do you like holding long /DX here? Im long from 78.91 about a day or two ago…
UNG/StJ – Slightly bigger drawdown than expected on inventory but mainly it's just a bit oversold (both CHK and UNG), which is why I picked them this morning.
DCTH/Msf – Is that saying they were cured? Can't be – just means the procedure didn't kill them.
Dollar/Jrom – I'd say yes over 78.85 it's a good risk but get the hell out if they fail. Easier to just play up calls and not have all the risk when you sleep.
That was a crazy low-volume close – 114M total on the Dow, least of the week.
Dollar / Jrom – Keep in mind, jobs tomorrow morning. Could go either way and the dollar is usually impacted. I would be very careful!
JRW – THis one – “These policies are still relatively unfamiliar to the public,” he said. “Consequently, their effects on the public’s inflation expectations, appetite for risk, and so forth are difficult to predict. This adds an element of uncertainty and raises concern about unintended consequences.” John Williams
Today didn't close like the last 2. Only 2 big blocks in last minute but but 2 mininutes after the close some big numbers. Is this the new twist or is this the end of the run? Again we closed on that trend line, no it could never be a program. Can we lock up computers for inside trading? 100,000 4:11 PM WTF!
bobhu./ 3:36 post/ You know, sometimes I can't really explain what takes me into a trade. I study the charts, of course, but I'm not a highly sophisticated technical trader. I just look at several things and draw a conclusion. On AMZN I saw the markets rising, AMZN rising, and put this together with the recent big drop in AMZN. It's like something inside me says "This sucker is going up!". And when I'm convinced, I pull the trigger. Have you read the book "BLINK"? It's sort of about how we draw conclusions, among other things. Fascinating book that talks about intuition and the fact that intuition is just our subconscious telling us things that our conscious mind can't sort out and explain. By the way, what the hell is a stochastic? 🙂
UNG / Phil – Speaking of them, they were reset last year in March when they reached $5 and change. I am guessing it could happen again soon and the "old" options are going to become illiquid quickly! Basically, it can't be played a long trade I think. And like USO, they get hit by the contract rollover cost and all. Selling calls against it would have been a great strategy the last 3 years!
Hard to believe that UNG was a $58 (split adjusted) in November 2008. We must be swimming in Nat Gas!
I'm not sure if anyone would find this useful, but I have my account mentally segregated into 3 parts: 15% devoted to aggressive short term trading, looking for 100% returns or so, 20% devoted to longer-term 10%-15% returns, and the balance (65%) in cash and bonds where any return is nice, but safety is the goal here. I once had the "safe" portion down to 50%, but that's about as far as I go.
This approach was designed for my precise circumstances – good asset base, no job (retired). It does not produce overly impressive total return on assets, but that doesn't matter.
Sounds good Phil… Actually, I dont lose much sleep over it. Kabul is 9 1/2 hours ahead of you guys so it works out quite well. I try and go into my barracks for lunch 1230 our time and catch your 3 AM trades. So ive been here a month and developed a wicked cough… I just found out today why – we literally breathe sh!t here! http://www.demotix.com/news/burning-faeces-kabul-peril-nato-troops Besides the air and not trusting ANY afghani it isnt too bad here though…
Thanks for the warning St Jean… Ill be careful…I just closed out my long calls of CSCO…Im have almost no stock now except some of Pharm's plays… Just trying to scalp some $$$ from Phil's daytrades, this market is ridiculous…
Hoening for you JRW…
When folks around these parts stopped saying "Happy Groundhog Day" … 🙂
Non Sequitur by Wiley Miller
I have been on this site for about 20 months now and have learnt a lot.
One thing that consistently surprises me is how smart the members are and I am amazed everyday, both at Phil's morning posts, commentary and how he comes up with ideas for everyone ALL the time…and then Lflan goes and makes short work of a 50k portfolio.
I am doing quite well trading Appl and a few select stocks, but mostly, I read every post and absorb.
No, I do not want to necessarily turn 100k into 500k, but wondered, given the combined brain power on this site if something like that might be fun to play with….yes its a little bit of money, so how about a 5k portfolio into 25K in a year?
But I do understand the logic behind small 'sure play' trades and thats what I do all the time myself….just looking for some benign excitement, and not looking to lose anyone's last shirt.
BUt appreciate the sentiments expressed by all!
16:13 PM, 361,285 and 3,180,000 sell at 11 cents over ask in the same second! Plus lots of 4 figure numbers in blocks when during the day its 3 digit numbers, a few in the thousands. Who trades $29,610,000,000, thats billion, after the close?
barfinger // are you using the excess margin from your more conservative and cash portfolio parts to trade with in the aggressive part?
Damn, VRTX rocked it…..
lflantheman/AMZN, great explaination, I need to read "BLANK" I guess. I am basic a fundamental guy, I was thinking… AMZN missed, with over 100PE, up from $172 to almost $180 in two days and slowdown growth, so it should going down. lol, stupid me.
BTW, stochastic or Stochastic Oscillator is a technical analysis that shows overbought/oversold, over 80 is overbought and below 20 is oversold(I hope I am correct on this one).
Thanks again and have a great night.
I have a lot of unused margin credit. Have not had to figure out where, exactly, it comes from.
FWIW: we have had two "noticeable" down days this year, one down 4 points (SPX) and one down 6. I guess by those standards a flat day counts as a "pullback".
My simplistic take on the repeal of Glass – Steagall is it gave the high leverage, high bonus, high roller brokerage crowd, access to the conservatively invested bank customers money. The high rollers just did what they do and when the dice came up wrong when the real estate bubble burst it was game over.
Been away for awhile.
Am I reading St Jeanluc's post on the apple virtual portfolio correctly?
Started with 50k port, profit so far is 54,505, so total port balance is 104,505 ie a 100% gain? If so, when was this portfolio started?
jromeha – Sounds like my son is coming home soon. It seems I know more than he does given the amount of communication the military has with me – LOL. He told me that somebody said if you jog 5 miles over there it's like smoking 50 cigarettes. I told him to try and get the stink out of his clothes before he gets back.
Ongba – Oh, about a month ago…
so it is 100% gain in a month? That is impressive!
Well, maybe a little more than a month. But not much more…ask Iflan
ongba – lflantheman started the AAPL 50K portfolio on 12/6/2011.
You can see the complete history at this link.
February 2nd, 2012 at 2:04 pm | PermalinkIgnore this user
I live near Cancun Mex. Like to hear your opinion about Belize and where did you go in Belize?
Grenowoods – it's really bad. I stay inside almost all day… I worst part is it is a little colder here (usually btw 15-35 all day) and one doesnt smell anything different in the cool, crisp air…You just start coughing badly after a few minutes. Im glad your son is coming home soon, hopefully he was able to save quite a bit over here.
I had been short GMCR calls (jan13, 125s) on a 4th roll of a busted position last year. I bought them back yesterday, even though I was still confident they would expire in 11 months. My intention was to re-enter that short at the right time. Phil? do you have a feeling about where the current excitement will take them in the short term?
I guess things are getting calmer…
…certain there are more but a hundred sounds nice and round:
Personal/Consumer Taxes & Fees
Business Taxes & Fees
Wonder how many of these Germany has? Or Sweden? Norway? And other mostly homogenous countries.
This like Gulliver being pinned down by a thousand Lilliputians.
I too am scaling back into short calls and I bet we don't have to roll all the way to 125 this time. They may not go too much lower, but also shouldn't repeat that crazy move up they did last year. scaling and patient FWIW
I remember that you play SPX strangles? Are those trades considered as part of your short-term 15% portfolio? They take lots of margins.
GILD is on a tear….wow oh wow…..
VERY IMPRESSIVE… BUT, Very "depressing"…… looks like it's time to get out of Dodge… It's not going to change…..
Why is GILD up so much? I got out of GILD at 40. Of course, I have nothing to complain, as I got 50% profits after selling puts and covered calls for months. But still, could have sold more puts…
Taxes / Flip – Many if not all of these fees/taxes (and sometimes more – you have not listed the VAT which is not technically a sales tax as it is collected at every step and reimbursed later to business in one of the worst cases of bureaucracy lunacy I know) can be found in all the Western Europe countries.
And your list is a bit deceiving as some are fees meant to cover administrative expenses. But we get the gist… there are a lot of taxes. And I guess it takes a lot of work to manage, serve, protect and educate a country of 300 millions people. And also of course "save" the world!
And Flip, there are few places in the OECD world where taxes are lower as a percentage of GDP than the USA. I guess there is always Australia. And these numbers are from 2009. Tax receipts have actually gone down as a percentage of GDP since then. And these number are all inclusive, not just income taxes!
what are your thoughts about the NFP, and how the print may affect the equity indexes?
there is also the B/D adjustment calculated into tomorrow's release, and Jan is historically a weak number, correct?
i pulled up a 4 and 8 hour chart for the Dow and both have a H&S look with 12,750 (real) 12,700 (futures) putting up significant resistance since Jan 20th. the neckline at about 12,625ish (real) also converges with the still rising 50 MA .
NFP the catalyst for a break higher or correction lower, odds?………….all opinions welcome……..weak number then justifaction for more FED stimulus and Bernanke seems to be making the case for it stressing riskd for growth at practically every opportunity ….
also wondered about your thinking re the divergence with OIL as in US dollar down, OIL down and equities and commodity currencies AUD CAD NZD all up.
the OIL pretty much bounced off support at approx 95.50/75 along the bottom of the descending channel from 103.65.
the thought that crossed my mind being if OIL can be manipulated up when it serves the purpose then by logic it can also be manipulated down to serve another purpose as in the FED being able to f/c an outlook for lower inflation, ie., point to a lower oil/gasoline price
And while we are talking about taxes, I found this handy little chart:
Oh well, so much for what we hear these days!
NFP / Roro – I was trying to go back and see what we did on job releases the last couple of months but I don't have the dates! I think that there are a couple of factors at play now:
1. This market is in such a upward trend that it seems difficult to stop it. Momentum is hard to fight!
2. As Phil mentioned, bad numbers = more QE and good numbers = good numbers. So no way to lose there!
3. On the other hand, this has been relentless since the open on 12/20 (SPX is up 125 points or more than 10%) and possibly some big players are looking for an opportunity to cash these profits.
So we shall see….
thanks for your input stjeanluc……….i was thinking more or less along the same lines and although there is the appearance of a HS formation on the 4 and 8 hr charts the MAs are all very clearly in upward slopes.
on the day charts i use 2 standard deviation for BB settings (so 4 channels) and the NAS100 has NOT been outside of the upper channel since the gap up open on jan 3………pretty much the same for the Dow and the S&P with exception of monday and tuesday when there was some selling.
same for the Australian dollar, and the DAX
I've had it with what the "market expects" from the Fed! THERE WILL BE LOW RATES AND QE FOREVER!!!! Why is any of this a surprise??? How many times will CNBC act surprised when a clown pops out of the same box when the same lever is cranked?!?!?
There will ALWAYS be another excuse for "accommodation". So let's get busy pricing in years of malinvestment and the status quo being protected over any other consideration… no matter how stupid and corrupt it is.
I'm sick of it.
February 2nd, 2012 at 2:04 pm | PermalinkIgnore this user
I live near Cancun Mex. Like to hear your opinion about Belize and where did you go in Belize?
Hi you so busy with your taxes Like to know what you think about Belize if you still on line thanks
Charts / Roro – Here is a chart I have of a regression channel on SPX with 2 standard deviations plotted. This ones goes back 200 days. It could be read multiple ways obviously. But we are clearly approaching the upper channel now!
Going back 500 days, we have a different picture:
And using a 3rd order Polynomial fit over 500 days with the same 2 standard deviation channel, here is what get…
Tough to tell where we are going now….