Oil shot up to $110.55 yesterday.
The news was that a pipeline in Saudi Arabia had been attacked and oil had been running up all day into this "news," which, funnily enough, turned out to be fake. We caught the news at 3:05 in Member Chat (thanks Kustomz) and we had been waiting for oil to stop going up so we could short it. The turn came at the $110.50 in the Futures (/CL) and we caught a nice run down to $109 and I reiterated, at 3:36, with oil still at $109.88 my love for the USO April $40 puts, which were $1.08 at the time and finished the day at $1.15.
As Malsg pointed out in Member Chat: "The pictures of the fire are taken in daylight … but Saudi sunset was several hours ago … the oil market only stared going nuts after the close." A very good observation that gave us the resolve to stay short on oil – which is working out fantastically this morning as well.
We also grabbed an aggressive short spread on BNO, as it seemed the whole day's run had been BS, with traders in the know stocking up ahead of the fake news so they could unload barrels into the retail suckers who bought into the spike. Don't worry though – no one who bought oil up from $105 on Thursday to $109 ahead of the news will be arrested or even questioned – we'll just keep pretending the total farce of oil trading is a legitimate pricing mechanism, even though it costs people around the world hundreds of Billions of Dollars each year in excess charges (see "Goldman's Global Oil Scam Passes the 50 Madoff Mark").
Now, this is the part where I would usually point out how the economy is weaker than we think etc. but I'm not going to do that this morning because the S&P still over 1,360 and, if a stronger Dollar isn't going to stop this rally – nothing will. Even yesterday, I joked to Members that I wasn't going to highlight negative news items in red anymore as there was no such thing as bad news in this market.
As you can see from David Fry's SPY chart, we''re back testing the bottom of that channel today and, if we don't break down here, then we can go another week at least on the bull run. Just last Friday I was pretty sure we'd break under and we didn't and, as Dave says – it's just like 1999 – but 1999 was a great year to be in the markets, it was 2000 that sucked.
Last Wednesday we poked over 1,360 and I laid out 10 trade ideas with the goal of adding "one more bullish trade each day that we're over the line" as 1,360 and our other Big Chart lines made for excellent signals to take profits off the table. Before we buy, we hedge, of course and our two hedge plays were:
- SQQQ April $13/17 bull call spread at .70, now .50 – down 28%
- DXD April $13/15 bull call spread at .55, now .50 – down 10%
As I pointed out in the post, both of these hedges have strong upsides on their own and don't NEED bullish offsets but I did suggest the AAPL 2014 $300 puts (selling to raise cash), which are still $15, despite the fact that there are now 2,300 open contracts ($3.45M) – that funds a lot of bearish spreads! Another offset for DXD was the FDX April $80 puts at $1.10, those are down to .75 already (up 32%) and would have completely offset the loss of either hedge so far. T was another 2014 offset with the $25 puts sold for $2.15 and those are still $2.15 as we don't get much movement out of 2-year options. Our last offset was SKX, with the Oct $12 puts selling for $1.55 – the same price they are now.
So you can get better prices for the spreads and 3 of our 4 bullish offsets are the same price as last week – that's pretty good for a start. Now let's see how our 10 bullish trade ideas are looking after 7 trading days (see original post for logic on each trade):
- SKX Oct $10/14 bull call spread at $2.20, selling $12 puts for $1.55 for net .65 – still .65
- SU 2014 $25/37 bull call spread at $6, selling XOM 2014 $65 puts for $5 for net $1, now $1.86 – up 86%
- USO June $40/46 bull call spread at $2, selling SCO Oct $26 puts for $3 for net $1 credit, now .82 credit – up 18%. I like this one because you are long and short oil at the same time.
- AA 2014 $10 puts sold for $2, still $2 – even
- X Jan $25/2014 $20 buy write at $17.04/18.52, now $17.57 – up 3%
- PEG Sept $30 buy/write at $27.07/28.53, now $27.20 – up 1%
- HOV 2014 $2 puts sold for .90, now .85 – up 5%
- BAC 2014 $3/7 bull call spread at $2.75, selling $10 puts for $3.30 for net .55 credit, not .35 credit – up 36%. 36% seems like a lot but it's just .20 out of $5.10 (927%) of potential gains so still very playable.
- HCBK Jan $7 buy/write at $5.14/6.07, now $5.23 – up 2%
- FTR 2014 $5 buy/write at $2.43/3.71, now $2.50 – up 3%
Not much was missed so far if you didn't participate. "Unfortunately" nothing got cheaper, other than our hedges and, as expected, only our energy plays did much in the past week as we're still at the same top we were iffy about at the time. Still – we're over our mark on the S&P and especially if the Dow is over 13,000 and for sure if the Nas breaks over 3,000, we'd BETTER have bullish plays in our portfolio and these are my 10 favorites for a breakout.
Of course, during chat in the past week, we put up another 20 bullish trade ideas and we'll continue to do so whenever there is a good opportunity – these just make a good benchmark list we can keep an eye on but clearly, so far, there has been nothing wrong with remaining cashy and cautious as we test these major range-tops.
I am most worried about the Russell, as they have shown weakness this week and we've had some horrific dips that sure don't make it look like there's a whole lot of support above that 775 line. Also, on Dave's chart, you can see RSI and MACD curving over – that's not usually a good sign either but I'm not much of a Technical guy, just an old-fashioned Fundamentalist who thinks things are horribly overvalued at the moment but clearly, like 1999, the Fundamentals are out the window for now so we'll run with the herd and play the technicals until they fail us and THEN we'll party like it's January 2000 – or October 2008…
If you want reasons to be cautious, I'm not going to give them to you (been working hard to get myself more bullish) but there's a great presentation by Jason Leach of Cravens Brothers called "Sleepwalking Toward a Precipice" that gives a great overview of where we are and how we got here.
Even now, oil just spiked back to our shorting spot at $108.50 (as noted most recently in yesterday's post) on another ridiculous spike up from $107.60 and that's one bearish bet we will keep making. Our other bearish note going into the weekend is that, once again, our Treasury has another $140Bn worth of debt to pawn off next week in 4 days worth of auctions and we already got another nice entry on TLT, as they tested $115.50 yesterday – as that has probably been the easiest money of the year so far – betting TLT to go up when we're selling our notes.
Next week, now that Greece is fixed, we should be hearing more about Spain, who are missing their 2012 budget goals by a mile, with a 5.8% deficit now forecast this year and -1.7% GDP projected to go with their now 23% unemployment. Phil Coggan is not worried about Spain – well, not when "the entire European Ponzi scheme is running out of suckers" and if you need to get gloomy this weekend – try his new book "Paper Promises."
“The massive debts accumulated over the last 40 years can’t be paid in full, and they won’t be paid,” Coggan says. “The debt crises of Greece, Ireland and Portugal are just the start.”
Coggan, the Economist’s Buttonwood columnist, is too levelheaded to predict a financial Armageddon. He does foresee a tipping point as wrenching as the collapse of Lehman Brothers Holdings Inc. (LEHMQ), complete with plunging markets, plummeting industrial output and corporate bankruptcies. No wonder it has taken $1 trillion in cheap money from the European Central Bank to get lenders to buy Italian and Spanish debt.
Have a great weekend,
That fake news oil spike is doing some damage to the lines…
R3 – 114.52
R2 – 112.52
R1 – 110.52
PP – 108.53
S1 – 106.52
S2 – 104.53
S3 – 102.52
Yesterday's high and low – 110.55 / 106.55
Seems that the 0.50 lines are in play!
R3 – 1756
R2 – 1741
R1 – 1732
PP – 1717
S1 – 1708
S2 – 1693
S3 – 1683
R3 – 79.38 (we are here now so be careful)
R2 – 79.18
R1 – 79.07
PP – 78.88
S1 – 18.77
S2 – 78.57
S3 – 78.46
Someone is super bullish on Microsoft:
There are some positive things over the next couple of years – new version of Windows, tablets, a new Xbox. That might be driving revenues aggressively. Now, if Ballmer could also retire, who knows…
re: AAPL put
Couldn't spot the 2014 Put on AAPL in yesterday's stream.
As a hedge, you are suggesting BUYING the 2014 300 puts?
Interesting trade deconstruction – how to trade an opening gap down (on AAPL)
Up January and February is Bullish Omen for $DJIA, $SPX, $COMPQ, $RUT – Stock Trader's Almanac Blog
LFlantheman – Thanks for the comments yesterday night. My internet just came back online.
PP for today:
MSFT could be the new AAPL? I have been trading it in very much the same manner as Lflantheman with AAPL, only making a fraction of the money, but with a lot less volatility, of course. I like to hold the January '13 $20s, which have almost no premium and cover them on peaks and uncover again on troughs. As I've said before, a lot of people whine about MSFT as a stock that has gone nowhere for years, but if you can find a stock that is 100% guaranteed not to go down (much) , then untold wealth is yours. Of course there is no such stock, but MSFT might be a contender.
Phil, following up on Burr's post in the other thread on lost comments – if you are using our editor there's a plugin for the editor we use to post comments (CKEditor) that will autosave your text. It has multiple autosave options. Have Matt look into it as it's silly for any of you to be losing (still) entire posts.
Nevermind just found it.
stjeanluc, thank you for posting that excellent video. Members trading AAPL…this post of stj at 8:47 is a must read for all of you trading this stock. This is how you do it. He describes moving into AAPL at a pullback, and as the stock goes up placing trailing stops and taking partial profits. This is exactly how you do it. This is required reading for any and all of you wanting to maximize your trading profits on AAPL.
Anyone see this?
The Credit Card for the .001%
The card itself is actually made with palladium and 23-karat gold — reportedly putting its cost in materials alone at about $1,000 — giving it real heft when you hold it in your hand.
Good morning, still nothing new
IWM 79.80, 80.17, 80.46, 80.76, 81.06, 81.26, 81.41, 81.69, 82.00, 82.41, 82.66, 82.86 and 83.12
MSFT / Jmm – I know they always get knocked in comparison to AAPL, but that's a bad comparison. They do compare OK with INTC, CSCO or ORCL who make more appropriate comparisons. You won't get the $5 daily swing with them, but they do pay a dividend which puts a floor under the price, they still have a 90% share of the OS market, they are kicking butts with their gaming division and their search engine seems to be doing better (I don't use it). And they have piles of cash as well. What's not to like!
jmm/MSFT – maybe it's worth conducting a similar experiment on MSFT like lflan's been doing on AAPL?
I'm actually pretty impressed with the look of Windows 8, which is saying a lot from someone who switched 8-9 years ago. I remember even dismissing Apple's OS X circa 2001 because it looked too candy-like to me. I haven't spent the time playing with Windows 8 yet, but I agree at least on the surface it looks like Microsoft is at least trying again, and that may be enough to suggest the stock at least won't go down. (Which leaves us with two other options – trading flat or trading up.)
MSFT / Kwan – And trading flat is good for whoever is selling options…
Video / Lflan – Thanks for the post… What I also find interesting is how he uses the first 3 bars of the trading to guide his day as far as support and resistance are concerned. I want to check into it this weekend. I know that Tom DeMark has some ideas on that as well and I'll have to dig up his books again.
stj – I've also started using Bing as my search engine on my phone because I've noticed google (sometimes) seems to redirect back to google when you click a link from their search results. I'm in places sometimes where the cell phone reception isn't great (AT&T) and that extra delay is enough to piss me off after a few searches!
So no, Bing isn't a complete joke of a substitute for Google.
The Short FAS 85 calls have to be rolled today. Also, the short puts are now over 80% profitable. Phil, would it make sense to roll them to a higher strike – for example, the Mar 90 puts can be sold for $2.00. The 85 puts (safer!) are over $1.00.
This one has played out perfectly. The short TNA calls should expire worthless but have to be watched in case we get a late stick!
All 20 AAPL calls sold for 52.50.
Gee Lflan, great timing….
Don't like the looks of the morning. In cash in the AAPL portfolio.
The DMND vertical sold for 0.65 is now worth $1.03 so up close to 60%.
Dollar has pushed above the R3 line that held for the last 3 hours.
Lflan – Funny, but this morning is starting to look like the video I posted….
bullet-proof Nas refusing to budge again
.50 lines/StJ – Yep, that's what I saw forming up the past few days. See, you don't need those pivot points – you can "feel" the resistance if you pay attention. By the way, that S1 line on the Dollar is a bitch of a drop! 😉
MSFT/StJ – And they are another huge multi-index driver, almost as heavy as AAPL in tech indexes and, with a $270Bn market cap, no slouch in the major indexes either. Getting rid of Ballmer would sure get me to buy – look how good AAPL's done since the got rid of Jobs…
AAPL/Flips – That was a bullish offset (sell the puts to raise cash to pay for bearish hedges).
Good video StJ.
Nice charts Diamond – does look like things are in our favor (technically). Unfortunately, Fundamentally, I think we're in that 1931 mode – where all those stimulus gains vanished in a puff of smoke. But, I am trying to stay bullish so – LOOKING GOOD!
Big Chart (well Medium Chart) – We got 813 back and now we need 8,259 on the NYSE to confirm we're back on track. Dow 13,000 or S&P 3,000 should be good enough for us as well. It's messy but it's certainly bullish.
MSFT/JMM – Just be aware that the only time the do reliably go down is when they are 10% over their 200 dma (like they are now). If something happens that causes AAPL, MSFT and IBM to sell off – the indexes can lose 20% so fast your head will spin.
Plug-in/Kwan – Thanks. My loss was comments today but I still wouldn't mind protecting my posts. My computer just went nutty right before I was going to hit submit. I wasted 1/2 hour trying to save the text but it was gone. Too bad because I was very insightful.. 😉
Palladium Card/Burr – I already worry when I give my black card to waiters in foreign countries and they disappear for 10 minutes – how can you part with one that's actually made of gold? I've never actually seen one, surprised it's been out for 3 years and no one I know has whipped one out…
stj…..the video demonstrated a rising stock price intraday, which I've not seen yet today. I'm really hoping for an AAPL pullback today. I'm thinking about how to play next week's EVENT. I don't think holding long calls into this iPad announcement is the safest thing to be doing. I'm considering selling weekly puts, perhaps in combination with some weekly bull call spreads. If AAPL would come down today we could get into these nicely. But cash right now seems safest. It's Friday, the markets are weak, and AAPL seems weak at the moment.
I will be switching to a new format this weekend that will emphasize more the potential gains and how to pick exits as it is almost impossible for Phil or I to pick the ideal exit. So I'll be listing various target prices and indicate if they have been reached or not. It will be more educational we think as everybody's pain and greed threshold can get exercised! Which doesn't mean that it will be hands-off, but definitely less stressful. I'll try to post a sample spreadsheet this weekend for feedback.
There is a new type of bug that gets into your internet program and I also have lost lots of work. 407 people and I have reported it. Sorry that is all I know and you can't open explorer or safari to delete it.
NDAA – good article from Naomi Wolf on this tragedy.
Dollar S1 / Phil – Sorry, I was reading from my 2020 dollar extrapolation chart! I have S1 for the Dow at 54,250 that day.
Don’t stop me now, I’m having such a good time…
Phil: maybe we don’t have to go all the way back to 1931, I think 1987 will do it, as after a little crash inflation will do it’s magic job…
WHY CANT EDZ EVER GO UP???
Phil – Trader chatter picks up that Green Mountain Coffee Roasters (GMCR +0.8%) could be in line to be added to the S&P 500 Index in March. — Seeking Alpha
FAS Money – Rolling the FAS Mar1 85 calls (now 9.70) to the Mar 87 Calls (now 8.90). Buying back the 79 puts (now 0.51)
IWM Money – Putting a stop at 0.25 on the TNA Mar1 61 Calls (now 0.15) and selling 1 TNA Mar 60 calls (now 2.70)
I think the bug came through an Adobe Flash update. I uninstalled the flash player and restored system to before the problem. Fixed it!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Yodi, looks like the FAS 92 calls still roll nicely to next week's 94! Or the Mar 97.
EDZ is up 0.5% today Jabo….
What do Palladium or Black AMEX cards do that green ones don't? I've always had a green one, and never noticed a deficiency.
I just bought April 77.50 calls on SINA. Phil, any thougts on these?
You on the ball rolled with a credit of .10
Sold only 1/2 the apples kept the rest for breakfast ??