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Monday Morning’s Miraculous Movement Masks Momentum

It's a miracle

Despite Asia continuing their downhill slide, despite the Bank of Korea lowering their Economic Outlook, despite Swiss PPI showing DEflation, despite Spain's 10-year bonds rising to 6.07%, despite India's inflation at 6.89%, despite the 5-year CDS spread on Spanish debt hitting new records, despite James Galbraith warning that the EU periphery will collapse, despite the Saudi TASI Index dropping 4% in the last two days, despite the biggest weekly drop in Copper Futures of the year, despite Credit Suisse cutting 5,000 jobs and Best Buy closing 42 stores and even BMW sales off 30% in Brazil…. 

Despite ALL these weekend news items and DESPITE our very Depressing Weekend Reading – the bears, as Steve Martin says in the above clip, still have DOUBT in their heart and are allowing the Futures to rise this morning (7:30) as Europe bounces up 1% from their 30-day lows in this traveling revival show known as the stock market. 

Faith is a wonderful thing and we all like to believe in miracles but a good investor demands PROOF – much the way many of our biblical heroes required signs from the Lord before making their own commitments.  We don't need a burning bush but we do need more than vague promises of EU action before we believe their 5 loaves and 2 fish will be enough to bail out the entire continent, right?   

On the chart above, I drew a blue line across the 50% levels between the tops of the last 6 days and the bottom.  Not reflected on these charts is the fact that the Nikkei FELL another 1.74% this morning or that the Hang Seng dropped 0.44% – pushing them further from their goals.  

As I mentioned above, the EU markets are off to the races on rumors that US Retail Sales will save the World at 8:30 with an upside surprise off very low expectations.  Even if we do get a bump – so what?  Retail sales were anemic last month except Gasoline, which was up 3.3% while General Merchandise was DOWN 0.1%.  Gasoline was up 10% in March so YAY!, I guess – but is that really what we're going to base a rally on?

How many times will the bulls be sucked in by the same empty promises?  How many times will they reach into their pockets and BUYBUYBUY the snake oil valuations sold by the Reverend James Cramer at the Church of "Whatever is Working Now" – as the late, great Mark Haines used to call him (before he mysteriously died just days after Cramer got him to taste test Soda Stream!).  

You may have noticed the recent LACK of miracles from our Central Banksters – who used to be able to rain money from heaven at the drop of a hat but now rely on hot air from their speeches to keep this market balloon inflated.  Has the monetary well run dry already or is it just that we have reached the promised land of our 2007 highs and now it's the faith of the bulls that is being tested by the self-appointed economic Gods of the Global Economy? 

6.5% and 7.5% are the key, preaches JPMorgan's Pawan Wadhwa. If the Spanish 10-year yield hits 6.5% (this week if momentum holds), look for the ECB to restart its bond-purchase program. If (when) it hits 7.5%, get ready for LTRO 3.  In other words – look for the signs and expect miraculous things.  Bad (6.5% yields on debt) shall be good and, if things get worse – expect divine intervention in the form of another multi-Trillion Dollar bailout – Hallelujah!

Speaking of bailing out the rich.  Grover Norquist was on CNBC this morning and he claims A) the top 1% pay 40% of all Income Taxes and B) that the Buffett Rule, which would take the average tax rate paid by the top 1% from 16% to 35% would only generate $40Bn a year in taxes.  This would lead anyone with a calculator to believe that EITHER A) The Federal Government only collects $100Bn in taxes or that B) Since 40% of $2.2Tn actuallly collected is $880Bn and since Norquist himself says we are unfairly doubling the tax rate of the top 1% – that 2 times $880Bn = $40Bn – IT'S A MIRACLE!!!

No wonder the GOP keeps voting to cut education – anyone getting past 5th grade math can see right through their BS…  

8:30: Retail Sales up 0.8%!  WOW!!! Forget the fact that that's down from 1.1% last month and forget the fact that it's the same as last March and forget the fact that the March before that we were up 2.2% and forget the fact that Gasoline Sales, as we expected, were up 10.3% and please, please, PLEASE forget the FACT that, Electronics and Appliances FELL 0.6% – let's just focus on the fact that expectations were for 0.3% DESPITE the exceptionally warm month that historically leads to more sales.  

And, whatever we do, let us not be tempted to look at the April (more recent) Empire State Manufacturing Survey as that one MISSED by 60% with a 6.6 reading vs 18 expected and 20.21 prior.  The general business conditions index dropped fourteen points, suggesting that while growth continued, the pace slowed over the month. The new orders index was little changed at 6.5, indicating a modest increase in orders, and the shipments index fell twelve points to 6.4, indicating a slower pace of growth for shipments. The un?lled orders index fell six points to -7.2.  

Input price increases remained significant. After rising sharply last month, the prices paid index fell five points to 45.8. Though somewhat lower than in March, this reading was well above the index’s level in the preceding several months. Selling prices also rose noticeably, with the prices received index climbing six points to 19.3.  Ah, inflation – I wonder if that might have been a factor in increased retail sales as well?  For instance – we're buying 20% less gas than last year, but we're paying 30% more for it:

Nonetheless, the Bulls have the sign they were looking for (there's always a sign if you look for one and are willing to accept whatever you see as a sign) but you'll have to forgive me if I demand my PROOF!  I want to see 3 of our 5 major indexes over those 50% lines and hold them for a day.  

If we do catch our 3 of 5 lines, then we can add a few upside hedges like DDM (ultra-Dow) May $67/70 bull call spreads at $1, selling something like BTU May $26 puts for .90.  That puts you in the $3 spread for net .10 with a 2,900% upside if DDM gets back to just $70 (it topped out at $71.43 in March).  We don't need a lot of faith to risk a dime to make $3 – other than our faith in owning BTU at it's 2009 lows as a long-term hold.  

Another bullish play that can generate huge returns is the TNA (ultra-Russell) May $56/61 bull call spread at $2 – that one pays 150% all by itself if TNA just makes it part of the way back to it's highs of $66.66 (that was a good sign to get out at the time!) or you can offset half the cost by selling BTU or you can bet on our fine Banking sector to hold up by selling the FAS (ultra-Financial) May $77 puts for $1.90 and again we're down to net .10 on the trade with a 4,900% potential upside in 32 days.  

FAS is currently at $97 so it would take a $20 (21%) drop before you had to own FAS (and you can roll, of course) and that would take roughly a 7% drop in XLF from $15.25 to $14.18, which is a spot we wouldn't mind stepping in anyway.   So there's a couple of nice ways to play the upside for the truly faithful. 

Me, I'm still waiting for a sign.  

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  1.  @Felipe
    Why are you making this so darned complicated?   Stop making SENSE! and….
    J B T M F D,  like flips does.

  2. Oil Lines

    R3 – 104.48
    R2 – 104.06
    R1 – 103.45
    PP – 103.03
    S1 – 102.42
    S2 – 102
    S3 – 101.39

  3. Chill Phil… know the deal!

  4. I have updated my volatility spreadsheet to add this week's study and add Friday's prices to the monthly volatility sheet in view of Friday's expiration.

    I have also added a spreadsheet with the daily volatility of the stocks for people interested in day trading the most volatile stocks. It shows daily volatility over 5, 10, 50 and 100 days.

  5. Earnings calendar for the week:

    As expected C beat on earnings and revenues and are going to open higher. 

  6. Apparently the market likes the retail sales number… for now!

  7. So bad it's good….The Empire State index for April dropped markedly to a reading of 6.56 from 20.21 in March. Economists polled by MarketWatch had anticipated a reading of 18.0

  8. PP's…..

  9. The market loves the fact that the Secret Service guys are getting some strange.

  10. Iflan,
    Is AAPL expected to spike higher this week before earnings next week.

  11. Nice…..

    The retail sales data, which aren’t adjusted for prices, may have also reflected higher gasoline receipts at service stations. Filling-station sales increased 1.1 percent. Regular fuel in March averaged $3.84 a gallon, or 28 cents more than in February, according to AAA, the nation’s biggest auto group.

    Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales climbed 0.4 percent after a 0.5 percent increase in the previous month.

  12. Good Morning!
    Seeing Larry Kudlow on CNBS this morning reminded me where I was on Friday…..

  13. We have 5 positions that expire this week! FAS is borderline today but could give us a good boost with a weak finish. XRT might need to be rolled and SCO is looking good for now.

  14. dollars up euro down pound down…oil up?, markets up?

  15. Monday – 4-16-2012
    Dr. John L. Faessel
    Commentary and Insights
    Quote of the Day
    “If you don't read the newspaper you are uninformed, if you do read the newspaper you are misinformed.”
    ~ Mark Twain ~
    Never been truer!
    The Bond Market is in Spain continues to be the pulsating danger
    China officials dramatically increase Yuan’s trading band suggesting official confidence in their economy
    Channel low trend-line holds
    Spain's high bond yields and a lower GPP in China had investors in the distress mode last week. Friday’s volume was higher and just at average in the NYSE and it was slightly lower and below average in the Nasdaq. Bullish investor sentiment* has collapsed and now it’s decidedly Bearish yet the key lower band of December March channel has held.
    Last Friday’s McClellan Oscillator was a minus 140 – so we remain in neutral just above what would be Oversold at a minus 150. This suggests – that there are just slight “oversold” strains now in the stock markets. Recall that last Wednesday the McClellan recorded a near record OVERSOLDNESS at minus 314.
    After Q4’s 9.2% earnings expansion profits look to be cooling off. Estimates are for a 3 to 5% increase from last year's Q1. But, so far of the 32 companies that have reported 75% have topped earnings estimates and 81% have beaten revenue estimates. Key is that on average EPS has been up 9.3%, three times what analysts have estimated.
    Its nasty out there, but my opinion is that we are in a “back and fill” mode digesting some record gains and NOT in a correction. I.e. correction defined classically at 10%. 
    A little perspective; French stocks trade at a 9.5 expected earnings. In Germany it’s 10.1 and in the UK it’s 10.4. In the USA the PE in the S&P 500 is at 15.76 off from 16.08 the previous week. Obviously the worries about the debt bomb have kept a lid on stocks in Euroland and many analysts are suggesting “buy” Europe because of the discount. And the European Central Bank’s printing press is running hot. Likewise, speaking of discounts, the Chinese stock market fell nearly 40% from August 2009 to January 2012 yet there may be a soft landing. The chairman of Goldman Sachs (GS) Asset Management in London thinks it will indeed be a soft landing. China's central bank has just doubled their currencies (yuan) trading band suggesting official confidence in the strength of their economy. The World Bank sees China growing at 8.2% this year.
    We just experienced the best first quarter for the broad market in 14 years. Importantly the Financials were up 22% while the USA GDP expanded at 3% from 1.8% in Q3. And the vital manufacturing index [ISM] posted 53.4 the 32nd consecutive month of expansion.
    EuroLand Bond Yields remain well off highs, but are advancing again
    Greek 10-year yields 20.18%
    Italy 10-year (gross) bond yield – 5.55% – off from highs of 7.26% on 11-24.
    Spanish 10-year (generic) bond yield – 6.04% – off from highs of 6.7% on 11/24.
    The S&P 500 (SPX) closed Friday at 1370 26
    Important channel support i.e. the trend line off the December and March lows has held – currently at (SPX) 1366
    Short term ‘price’ support in the (SPX) is at 1367and 1357
    Longer out it’s at 1331 and 1330
    The 200-day moving average support is at (SPX) 1271
    50-day moving average resistance is at 1375.
    Short term ‘price’ resistance is at Thursdays high of (SPX) 1378 and 1388.
    Then it’s at 1401 and 1414.
    Stiffer resistance is at the recently posted cycle highs of 1422
    Let’s recall that the pivot point Breakout that occurred on March 16 was at 1369.
    Friday’s key indicators and metrics:
    ·           McClellan Oscillator is Neutral at minus 140
    ·           Natural Gas (Globex) 1.981
    ·           Copper – 3.6270
    ·           The Treasury 10-year yield 2.00%
    ·           VIX – 19.55

  16. Doug Kass part 1

    Market Forecast: Bound and Bumpy

    Apr 16, 2012 | 8:41 AM EDT

    • Growing uncertainties point to a trendless, range-bound and volatile market.

    Last Tuesday I increased my calculation of the S&P 500's fair market value from 1335 to 1360.
    With the S&P cash index closing at 1370 on Friday, the market appears muddle-valued.
    In my calculation of fair market value, I recently increased the terminal P/E ratios attached to my four economic outcomes by half a multiple (0.5), reflecting my expectation of a more benign inflation rate and a slightly lower interest rate assumption for the year relative to my prior projections. In addition, I lowered to zero the probability of a reacceleration to above-consensus growth (3.0% real GDP or more), I slightly increased the possibility of sub-1.5% real GDP and raised the likelihood of my baseline, muddle-through economic scenario (of 2012 real GDP growth of between 1.5% and 2.0%).
    Scenario No. 1 — Economic Reacceleration Above Consensus (probability goes from 10% to 0%): The pace of U.S. economic recovery reaccelerates to above-consensus forecasts (3%-plus real GDP growth) based on pro-growth fiscal policies geared toward generating job growth; corporate profit margins being preserved (with low inflation and contained wage growth); interest rates remaining low; and housing recovering sharply, owing to the adoption of aggressive plans by the government to enact a massive home refinancing effort and deplete the excess inventory of unsold homes. Europe stabilizes (and experiences only a shallow recession), and China has a soft landing. S&P 500 profit estimates for 2012 are raised modestly to $106 to $110 per share. Stocks, valued at 15x under this outcome, have 17% upside over the next nine months. S&P target is 1620.
    Scenario No. 2 — Recession (probability stays at 0%): The U.S. enters a recession precipitated by a loss of business and consumer confidence, producing a fall in manufacturing output and personal consumption expenditures. A series of bank failures and sovereign debt defaults in the eurozone contribute to a deep European recession and a hard landing in China and India. S&P 500 earnings estimates for 2012 are materially slashed to $75 to $80 per share. Stocks, valued at 11.x under this outcome, have 38% downside risk over the next nine months. S&P target is 855.
    Scenario No. 3 — Below-Consensus Economic Growth (probability goes from 30% to 35%): The U.S. experiences a disappointing sub-1.5% real GDP growth rate, and Europe experiences a medium-scale recession. S&P 500 profit forecasts for 2012 are cut back to $98 to $100 a share (only slightly above 2011's levels). Stocks, valued at 12.5x under this outcome, have 11% downside risk over the next nine months. S&P target is 1235.

  17. Kass part 2
    Scenario No. 4 — Muddle Through (probability goes from 60% to 65%): The U.S. muddles through, with 1.5%-2.0% real GDP growth, and the European economies suffer a modest (but contained) business downturn. S&P 500 profits for 2012 trend toward a range of $103-$105 a share as some margin slippage occurs. Stocks, valued at 13.75x under this outcome, have 3% upside over the next nine months. S&P target is 1430.
    My base case of muddle through, with a 65% probability, yields an S&P 500 price target of 1430, 4% higher than S&P's current cash level (1370). Below-consensus economic growth, which is accorded about a one-third probability, yields an S&P target of 1235, which is well below both the current level of S&P cash of 1370 and my 1360 fair market value estimate.
    While there could be overshoots, in all likelihood, I expect the S&P 500 to be contained within the upper range of these two likely outcomes of between 1235 and 1430 for the remainder of the year. My guess is that 1300-1430 represents a reasonable trading range for the balance of 2012. (Remember the 1235 target has been assigned only about a one-third probability, so I adjust my trading range higher.) This yields about 70 S&P points of risk from the current S&P cash index and only about 60 points to the upside, for an uninspiring risk/reward. (It should be noted, however, that in its extreme and not adjusting for the melded outcome probabilities, a much broader trading range (1235-1430) is represented, with a far more unattractive risk/reward ratio of nearly 135 S&P points down to only about 60 points up from Friday's closing S&P cash of 1370.)
    In terms of the economy, the domestic economy was not as strong as portrayed over the last six months. Fourth-quarter 2011 economic growth benefited disproportionately from an inventory build and the termination of the 100% tax credit for capital expenditures (which was reduced by half on Jan. 1, 2012). First-quarter 2012 activity was elevated by unseasonably warm weather that pulled forward and buoyed retail spending.
    The domestic economic outlook is less certain over the remainder of 2012, with the pull forward in activity over the last two quarters yielding to an undefined payback in the immediate period.

    • Economic growth outside of the U.S. is slowing, and with it, U.S. export growth will moderate.
    • Government spending (local, state and national) is retrenching.
    • The residential real estate market is slowly coming out of its funk.
    • Banks are liquid but cautious.
    • Financing for the largest corporations is cheap and available — but less so for small businesses and consumers.
    • Debt-laden households are still deleveraging, and real disposable incomes are still flat-lining. (Savings rates are being drawn down which is likely to restrain retail spending.)

    In the fullness of time, pent-up demand will be unleashed (as is currently the case in the automobile industry), but the timing is uncertain (particularly with elevated gasoline prices). On the other hand, the reduction in the price of natural gas has led to lower energy usage, and recent signs of slowing growth suggest that inflationary pressures will be easing.
    If the domestic economy falls further than consensus forecasts, moderating inflation lays the groundwork for more Fed easing. In this case, the June-end monetary cliff would be less dangerous.
    At the same time, the fiscal cliff at year-end poses much risk to the markets and to the U.S. economy. Currently, the constitutionality of the health care law is being decided by the courts. But even more important is the political gridlock and paralysis in Washington, D.C., which puts a pause on spending and tax decisions until after the November election (at the earliest). Even if there is some smooth solution to the vexing year-end tax and government spending issues (that will potentially result in more than a 3% hit to GDP and could trigger a recession), the structural deficit will grow ever larger, and a confrontation regarding the federal debt ceiling lies ahead.
    It should not be surprising that the business community, facing numerous economic, tax and political uncertainties (after having already experienced a halving in the business tax credit on Jan. 1, 2012), is tentative and restrained in making meaningful and effusive capital spending and hiring decisions.
    Then there is the long tail of the European debt crisis. Though, to some, 2012 doesn't feel as bad as 2011, Spain's woes likely represent the greatest systemic challenge to the eurozone since the contagion began, and it is hard to see the market making much headway until there is some meaningful resolution. (The next data point for Spain is Tuesday morning's remarks by Mario Draghi, in which we might receive hints regarding ECB policy options involving more LTROs or even an activation of the SMP).
    The consensus is that Spain muddles through with an ECB firewall. We'll see.
    Over there, the first round of the French elections takes place this Sunday. François Hollande continues as a favorite over Nicolas Sarkozy, which would be an unfriendly development for the French economy and could even upset policy aimed at firewalling the debt problem.

  18. Kass part 3

    Finally, China's landing (soft or hard?) remains in doubt and is still subject to interpretation.
    Reflecting the growing ambiguity of the domestic economic recovery's trajectory and some of the other concerns (above), the S&P 500 is now off by nearly 4% from its high of 1422, but it is still up 9% year-to-date. The market indices have dropped for two consecutive weeks, something that hasn't happened since February as investors have grown skittish. Volatility appears to be on the ascent, with 1% daily moves in the S&P 500 last Monday, Tuesday, Thursday and Friday indicative of a lack of overall conviction on the part of market participants.
    In summary, growing uncertainties point to a trendless market contained in a range between 1300 and 1430 on the S&P 500, with plenty of volatility and opportunities for traders but with more limited fortune likely presented to longer-term investors.
    The skies are still not clear and will likely remain cloudy as incertitude remains on the front burner.

    Position: None


  19. aapl taking a beat down

  20. Good morning!  

    Let's keep our eye on those Multi-Chart lines to see if we have enough winners to flip a bit more bullish.  Dow 13,000, S&P 1,395, Nas 3,075, NYSE 8,050 and RUT 815.  The Dow is close and the RUT not too far and the NYSE is just 70 points out so we're not asking too much here, are we?

    The RUT popped 800 this morning so that's 3 of 5 greens on the Big Chart's Must Hold levels but, of course, they must hold it for them to be valid.  I hope I managed to get across my subtle skepticism regarding today's action and ROFL – it's 9:40 and Jim Cramer just said that when the Retail Sales report came out he said —- "Hallelujah"!  How funny is that? 

    I put up two new aggressive upside trade ideas in the morning post but I'm not looking to pull the trigger unless we HAVE to.  I'm much more excited this morning about having another opportunity to short oil (/CL) off the $103 line as Brent is down below $120 for the first time since early February, when WTIC was under $100 ($95 at the beginning of the month!).  

    We already rolled our short oil contracts to May so so no worries this morning – we thought this might happen after the weekend and we'd love to see them hit $103.50 or even $104 to give us better short entries before this farce comes to an end. 

    The Dollar, by the way, has fallen from 80.25 pre-market to 80.10 – not a big move but breaking 80 would be good for the bulls.  Bad for the bulls would be the Euro failing $1.30 (now $1.305) or the Pound failing $1.58 (now $1.5837) and the Yen is strong at 80.57 so the BOJ has an interest in keeping the Dollar over 80 that overrides the SNBs interest in keeping the Euro over $1.30 – should be a good dynamic to follow.  

    There's no volume at all to this morning pop, nor is there any substance so we'll watch and wait – unless you don't already have some bear plays – in which case this is an excellent time to grab a few with easy stops if our levels trigger. 

    In our $5KP, I want to DD on the DIA $124 puts at $1 but we can hold off in the $25KP as we're plenty bearish already but let's take this opportunity to get out of DDM as we like the spread (if we ever do it) better than the naked calls so better to take a loss and have the cash for that if we do turn more bullish.  

    At the open: Dow +0.74% to 12945. S&P +0.53% to 1378. Nasdaq +0.42% to 3024.

    Treasurys: 30-year -0.11%. 10-yr -0.03%. 5-yr -0.01%.

    Commodities: Crude +0.05% to $103.38. Gold -0.36% to $1654.25.

    Currencies: Euro -0.21% vs. dollar. Yen -0.29%. Pound +0.06%.

    Monday's economic calendar:

    8:30 Retail Sales

    8:30 Empire State Mfg Survey

    10:00 Business Inventories

    10:00 NAHB Housing Market Index

    3:30 PM Fed's Bullard: 'U.S. Economy and Monetary Policy'

    Market preview: European shares are rebounding from four consecutive weeks of losses and U.S. stock futures build on earlier gains following strong March retail sales. S&P Benchmark futures +0.6%. Spanish bond yields had spooked investors after surging past 6%, but they're now way down from earlier highs. Citigroup +1.9% following its earnings but Mattel -5.65%.

    Speaking of suckers:  Net foreign purchases of U.S.securities jumped $107.7B in February, reports the Treasury, a big number against expectations of $30B and a Y/Y change of just $364.5B. Chinese holdings rose about $12B to $1.1789T.

    The ECB held out for at least another week, reporting no purchases of sovereign debt under its SMP for the 7 days ended April 13. That makes it nearly 3 months of inactivity for the bond buy program.

  21. 5K USO Put Strike/stjeanluc
    Aren't the USO Puts 39, not 40 Strike?
    Again, thanks for all of your recaps!

  22. Naz…GOO+AAPL= hammered


  23. $5KP / Laddoo – Correct… The prices are for the 39 strikes so the portfolio is OK. Thanks!

  24. where is Jabobeast?- Take that FU market- LOL!

  25. Looks like a better entry point for lflan's AAPL portfolio soon….

  26. added more May DIA 127 puts this morning on the open.  This smells like a contrived pop to start the week and RUT and Nasdaq aren't taking part.  Dow should drag back down.

  27. Spain is really in a free fall now…

  28. Apparently AAPL is also a big component of XRT – LOL look at it go down. Might not need to roll our $25KP put after all.

  29. And a better entry point for Ristau's AAPL spread that's down to $4 from $12……  uggh…

  30. $25KP Alert - The PCLN puts are now over $10.00 for a 44% win!

  31. Out of PCLN for nice gain. Thanks Phil.

  32. Pharmboy, bought 3 ECYT options off your recommendation 2 months back. Sold one when it was at 6$ and LOVING what's happening today! GREAT CALL buddy!!!!!!!!!!!!!!

  33. someone got tired of MOMO's today!

  34. jthoma—4pm is when i breath ;-)
    but it is a lot nicer to see things this way than the other way…

    congrats to the put players (great call Phil)

  35. And the fun continues this week, WHEEEEEE.  Love the RUT action.

  36. Wheeeee – Look at those Qs drop!  

    I forgot to mention, I spent some time playing with various IPad twos in the AAPL store and they are, in fact, HOT!  Not burning hot but I'd say 85-100 degrees and who the hell wants to hold that on the couch (maybe in the winter).  While AAPL will get their initial buyers even if they release a flaming bag of turd – they need word of mouth to bring in the next round and I don't think the "New IPad" will hit the optimistic numbers we're hearing.  The competition is fierce and I noticed places like BBY mobile (small mall stores) and various phone stores do encourage you to buy Androids, as they make better margins.  All sorts of tricks like not having live displays or not having web connections on the IPads – all to get you to look at other tablets.  I know all these tricks – I used to manage a stereo store where they "featured" store brands.  

    PCLN $715!  

    Dips/Flips – Nope, I'm done with that game.  I think the dip buyers have gotten burned badly enough at the top that they are either wising up or are just out of money and we're going to have to have more than just empty promises before we get the downward momentum to change gears for more than a pre-market pop.  

    Earnings/StJ – That's a pretty good mix.  I'm very excited about CMG on Thursday!   Nothing like the reality of earnings to finally put a knife in a Momo stock.  

    TLT $117 – smells like a little panic to me.  

    Blowhole/1020 – You went out there?  I flew over in a helicopter but never made it back for a closer look. 

    Good Twain quote Rustle.  As to Kass, does he really not see how interdependent the Global economy is.  We're not going to hit those earnings numbers with Europe this weak.  At least he's smart enough to be in cash.  

    OMG – AAPL failed $600?!?  All is not well….

    Spain/StJ – But Cramer was just doing a victory dance telling us he told us not to worry about them.  

    AAPL Spread/Burr – I told you I didn't like that one.  Our puts are doing fantastic though.  

    PCLN/DC – Congrats but I'd keep at least 1/4 in – could be a huge winner.  

  37. JABO- I hope you get to take a big breath- no one deserves it more than you. If you do I will have a drink to toast you- a man of conviction!

  38. st.jean/FYI
    You have the DIA's listed as calls not puts in the the 25k and 5k portfolios.

  39. That was a quick $1.3 drop in /CL

  40. Phil we are still 2X in the May USO puts – is it 1/2 out or wait now that we bought another month?

  41. Phil,
    1/2 out of PCLN puts at a 50% gain.  Looking for the huge winner on a further collapse.- THANKS!

  42. Phil—learning--in and out of /CL --already paid for my muffins —Thanks

  43. thanks Jthoma!
    I still can't understand how CMG or PCLN could be up every week.
    Phil's rolling strategy makes a ton of sense, but tweaking it and applying it to the MoMos is a mind altering experience ;-)
    I wish it was 4pm already!!!

  44. Thanks Dclark! The portfolios are fixed now… 

  45. Phil:
    My targeted exit was hit on PCLN. Besides, I still have CMG, XRT, and SQQQ. Thanks again.

  46. Looks like the $25KP is now over $10K… All the short positions are looking very good. FAS is helping, SCO is green, PCLN is a big winner. Good stuff!

  47. I there some issue with the chat today? I can't see Phil's comments though I did get his email alert.

  48. Out of PCLN at 10.80…thanks Phil!  Also LVS looking good.

  49.  there is a guy on cnbc saying its a win win situation in europe…hahaha

  50. he just said spain is already priced in…we'll see about that

  51. Jabo- Had I not lived through the tech bubble of 2000 I would not understand either- learned then that we can throw all rational thought to the wind and buy strictly out of greed and total disregard for fundamentals. It always ends badly but generally much later than a rational mind can imagine.As Phil says- sometimes it is a disadvantage to read or to think!

  52. Phil: LULU
    Thanks for the reply to yesterdays question.  You gave my confidence a boost since I had already sold 65 puts as an offset to my short calls.  The long puts I'm thinking for a more aggressive play or perhaps I should just concentrate on working the position I'm behind on?  It's just my experience last year with GMCR/NFLX/OPEN was that when they finally broke down they broke hard and fast and adding a little more risk could have paid off with big rewards.

  53. Phil/blowhole  Yes, you can drive around the island of Oahu in a little more than a half day with a few stops.
    Honolulu seems to have it's mojo back and Waikiki was very busy – many tourists, most from the far east. Waikiki has gone upscale with lots of shopping and good places to eat. After 28 years, I barely recognized it…..

    Westin came in and renovated the hotel we spent our honeymoon.

    Easter at Pearl Harbor was sobering – my 12 y.o. daughter said it was the most depressing Easter ever. It was the perfect occasion.
    Once you visit the Arizona, then visit the Missouri where the formal surrender of Japan took place, you felt a sense of renewal.
    Remember – Honor – Understand

  54.  i knew major averages were masking some underlying weakness but wow… vgy index is down -11.2% since May 2 of last year…spx +2.7% during that period  naz 100 +12.3% since then

  55. Hi Phil RIMM I see you have closed the same putters in the income port. I am still holding 2 Jan13 25p short sold at 8.10 now 12.52 and 2x Jan13 22.5p sold at 8.35 now 10.15 what you say just write it off now or wait for a miracle and roll to 14.Thanks

  56. USO/Yshen – I do have faith in that one but, if it's in any way a stretch for you (all $25KP plays are meant to be fun gambles) then of course take 1/2 off when you get a nice break.  

    PCLN/Button – That's exactly the way to play it.  Now we have plenty of cash to pay for more rolls and another DD.  PCLN is what we call a focus put position – one we will keep at through thick and thin until the market realizes we're right and gives us at least a double!  

    Muffins/Savi – Good going!  

    Rolling Momos/Jabob – The trick is to wait until other bears are capitulating and THEN you initiate your short position.  

    Good mix DC.  

    Chat Yshen – Well you might not see this then but there's no reason you shouldn't.  

    Congrats Esco – Vegas looking good to me too.  I'll be out there scouting locations in a couple of weeks.  

    Win-win/Angel – Whuck?  

    LULU/Lincoln – Yes, I'm for concentrating on what you have and not adding complexity – and risk – to an existing position where it can be avoided.  While you are right, we do hit them and hit them big – it's a matter of luck, not skill to time it right and, when you are unlucky – be glad to just get back out even and that lets you have plenty of money to make the next few plays you might get lucky on.  Leave yourself more room to be wrong early on and you'll be much happier too. 

    Oil bouncing off $102 – congrats to the Futures players!  

    Dollar still down at 80.05 with 40 mins to EU close.  Yen moving up (weaker) with Euro and Pound so looks like BOJ switched back to buying Euros today and that means Dollar will get a real test at 80. 

    Nice on Hawaii 1020 – I think 12 is about the right age to take my youngest in a couple of years (on the way to Japan).  

    Miracle/Yodi – $14 is not too much of a miracle for RIMM.  I have to believe they break-up or get sold at $17 but, if you do that and they fail $12.50 – I'd go for some shorts.  Because they would require more active strategies – they were no longer appropriate for the Income Portfolio. 

  57.  tlt overbought short-term…just depends on spain…if spain is in early stages of unraveling…tlt goes much higher…if eurozone can find another can kicker then it probably wont go much higher for awhile.

  58. phil i am sure you could write a musical based around the can kicker theme with the lead song 'can kicker' sung to the tune of "matchmaker"

  59. Hey Guys
    I had a quick question I wanted to see if anybody knew the answer to. When you buy a option and it expires worthless at year end what is the income tax implications. Can you write off a certain amount of capital losses as you can with stocks or is it different.

  60. FAS Money – Boy I love this portfolio!  $98.22 this morning with C doing a bit better than I thought but it's a good target ($90-$100) for the week.  

    IWM Money – Yep, too bullish on the back end.  We'll just have to sell more calls if we can't hold $78.50 on IWM (now 79.38).  

    $5KP – May's getting kind of close for DMND.  I think the basis on the USO May $39 puts is $1.46 which means we'd like to DD around $1.04 for a $1.25 average but, otherwise, fine all around after the DD on DIA.  


    • DMND better with protection.  
    • XRT looking better
    • BBY still sucking 
    • SCO on track 
    • SQQQ looking better 
    • FAS loving the balance there 
    • GLL patience
    • PCLN – Wish we had DD'd on that one as I'd love to get 1/2 out but not on just 5
    • DDM – done with those 
    • USO – got a good feeling
    • DIA – By taking out DDM we did effectively DD on DIA (unhedged them) so we'll see how it plays out. 

  61. What is pushing the Dow up?  Nas down is understood: AAPL and PCLN down, Nas down, but why is the Dow up?

  62. Phil/LVS — Actually, I meant the bear put spread you recommended last week for LVS, May 65/60, and selling the May 65 call.  Also, my 2 cents on Vegas, while 3-day weekends are nice, I really enjoyed the futures on Sunday afternoon and the live trading on Monday morning (early!).

  63. Phil RIMM What do you mean with go for some shorts Sell nacked call ??
    Miracle/Yodi – $14 is not too much of a miracle for RIMM.  I have to believe they break-up or get sold at $17 but, if you do that and they fail $12.50 – I'd go for some shorts

  64. Danny- You take a short term capital loss of the entire amount.

  65. Thanks Jt

  66. If you look at Sunday's Parade Magazine in the Sunday Newspaper, it shows what people earned as much as 15 years ago and what they earn now and it's amazing how many people in the same job make less now.

  67. almost all the Dow stocks are up..

  68. Phil/Pearl Harbor  We all had the audio tour (Jamie Lee Curtis) I am confident what the kids learned/experienced on that day, will be a big help in what they will study next year. (WW2 in seventh grade)

  69. Musical/Angel – After seeing Spider Man yesterday I'm pretty sure I can write a musical based on the adventure on the back of a Captain Crunch box!  A couple of songs were decent but some just sucked and that's ridiculous with almost 50 years worth of people growing up with Spider Man – surely they could have distributed a plot summary to 100 different rock bands and asked them to each submit songs rather than have U2 make that mish-mosh.  They didn't even include the original Spider Man song!  

    Speaking of can kicking – incredible that Moody's put off rating the EU banks for a whole month.  I'd love to know where that pressure came from. 

    Taxes/Danny – Look into electing trader status for yourself.  That simplifies things a bit.  Losing money on an option is the same as a stock loss in general but check with an account – I sure do!  

    Dow/Jerconn – Almost all components are green, no major losers, IBM up $1.25, PG up .79, XOM up .76 CAT up $1.29 on an upgrade – partially a flight to safety I think as tech turns sour.  This is why to Long Put List likes to switch to fresh horses – on sector takes a hit and another might actually go up – for a while.  

    And what Jabob said. 

    LVS/Esco – I know that!  I'm just excited about going to Vegas in May…  We're certainly going to do the same format this year – I think everyone loved it last year.  2 days of play and 2 days of work works for me.  

    RIMM/Yodi – Just some sort of momentum play to take the sting out of a move below $12.50 as you don't want to DD and then watch RIMM fall to $10 – do you?  Just make sure you know what you will do to cover if $12.50 doesn't hold. 

    Parade/Rustle – The fact that it's in Parade indicates that this is now firmly getting into the National Conversation.  This is step one towards labor unrest and eventual wage inflation – which is a good thing, really.  

  70. Phil/EXC, What is your opinion of a B/W at 37.86 selling the 2013 35 puts for 1.68 and 40 calls for .90? An old favorite at about crash lows and yield over 5 1/2%. Thanks

  71. That's pretty scary…


    In March, 32.96% of US equities trading was executed away from registered exchanges.

    While dark pools and internalized flow are even mysterious to the professional trader, 32.96% of equity trading being executed outside the exchange framework is enormous.

    While we instinctively think of non-exchange orders as flow being diverted to dark pools, we estimate dark pools themselves make up only about 13% of US equities volume, and the balance and larger portion of this off exchange trading is executed via internalization.

    Internalization is the practice of brokers matching orders internally on their trading desk – before orders are either sent to dark pools or exchanges.

    In 2008, the internalized and dark pool figure was 15%. Today, nearly 33%. The million dollar question is why is such a large amount of US equity trading now making its way outside of traditional exchanges?

  72. Parade/Phil
    They didn't really use that angle but if you read the captions, people taking the biggest losses in salary were people who owned businesses.  If anyone thinks the economy is improving, they just have to read the blurb on most people.  It's brutal across the US still.

  73. New PSW Vegas trip in the planning?  Details please, i would love to make this one.
    IFLAN, when are you looking to start scaling into AAPL?

  74. Iflan / PCLN
    Are you content to continue to hold the PCLN April 670 short puts?
    Thank you.

  75. Phil/All,
    When's the shindig in Vegas….you are probably going to get a big crowd. Future's oil and indexes are a must on your agenda…Please and thank you.

  76. Phil, yeah I know, I just didn't believe that AAPL could drop so far so fast right before earnings.  Dumb Dumb Dumb.  I read your comment, but I don't like to have short naked calls on stocks like AAPL (or cmg,pcln).  Took the loss.
    But hey my DIA puts are doing great…NOT.  Of course it's the only index that's positive…
    I'm cashing out my winners and starting over.

  77. Wow, chat is active today! UR welcome on ECTY J….that was a nice one! I stepped out a bit too early, but I have a ton of pinto beans right now riding on PLX.

  78. Good charts about Europe:

    Interestingly enough the high tax, big safety net, socialist countries in Scandinavia are doing the best:

    Luxembourg is an exception as it is basically a bank disguised as a country!

  79. Gey guys, is anyone else having trouble updating the comments in RSS Owl today? Thanks

  80. PCLN $705!!!! 

    10:00 AM On the hour: Dow +0.75%. 10-yr +0.06%. Euro -0.29%vs. dollar. Crude +0.35% to $103.68. Gold -0.35% to $1654.35.

    11:00 AM On the hour: Dow +0.48%. 10-yr +0.18%. Euro -0.12%vs. dollar. Crude -0.55% to $102.75. Gold -0.57% to $1650.75.

    11:39 AM European shares stage a meek rally following Friday's tumble. Stoxx 50 +0.4%, Germany +0.7%, France +0.4%, Italy +0.1%, U.K. +0.3%. Spain adds to last weeks 5% loss, -0.6% as its 10-year yield climbs to 6.07%. The euro -0.1% at $1.3064 after briefly sinking below $1.30 for the first time in 2 months.

    12:00 PM On the hour: Dow +0.37%. 10-yr +0.21%. Euro -0.08%vs. dollar. Crude -0.74% to $102.56. Gold -0.53% to $1651.35.

    China continued to be Uncle Sam's largest foreign creditorin February, boosting its net purchases of long-term Treasurys by $14.3B to $1.18T. However, second-placed Japan is catching up, increasing its holdings by $13B to a record $1.1T. Still, the largest overall owner of Treasurys remains Uncle Ben's Fed with $1.665T.

    April. Empire State Survey: Manufacturing 6.6 vs. 18.0 expected, 20.21 prior. Employment 19.28 vs. 13.58 prior. New orders6.48 vs. 6.84 prior. Prices 45.80 vs. 50.62 prior.

    Mar. Retail Sales: +0.8% vs. +0.3% expected, +1.1% prior. Ex-auto +0.8% vs. +0.6% expected, +0.9% prior.

    NAHB Housing Market Index: 25, down from 28 in March, vs. 28 expected. 

    "Our members are realigning their expectations somewhat until they see more actual signed sales contracts," says NAHB Chairman Barry Rutenberg of the first decline in the builder confidence index in 7 months. "Interest expressed by buyers has yet to translate into expected sales activity," says the group's chief economist. (PR)

    Canada's home sales rose 2.5% in March, and 1.6% Y/Y, the smallest increase in a year, reports the Canadian Real Estate Association. The sales to new listings ratio stands at 55.1%, a number – according to the CREA – showing the market remains "firmly balanced."

    Hot money from abroad (China, ME, LatAm) is behind a property bubble in Toronto, writes Diane Francis. There are 3 times more condo high-rises being built in Toronto than NYC, almost 7X more than in Chicago – and this in a "moribund" economy. Kicked out of numerous other countries, this money has hit "Toronto with a vengeance."

    Feb. Business Inventories: +0.6% to $1,577.8B in-line with expectations and +0.7% last month. Sales +0.7% to $1,236.7B. Inventory/sales ratio rise to 1.28 from 1.27 prior.

    In serious trouble ahead of elections, French President Sarkozy breaks with Germany, calling to expand the ECB's role from that of price stability to also promoting growth (a la the Fed). Germany quickly fires back: "The German position on the ECB and its independent role is known and is also known in Paris," says a spokesman for Angela Merkel. 

    In addition to Spain's 10-year bond yield rising over 6% for the first time since Dec. 1, prices to insure against a government default rise to another record – the 5-year CDS spread widens to 523 basis points from Friday's 499 close. The IBEX is the only major EU market in the red, -0.2%.

    As Spanish yields and CDS spreads rise, and an official calls for the ECB to restart bond purchases, Bridgewater's Ray Dalio declares Spain to be worse off than it was before the ECB's December LTROs. The ability of the Spanish government and national banks to prop each either up is diminishing, Dalio argues, and that makes "extraordinary moves" likely. However, he doesn't expect a private sector restructuring similar to Greece's to occur. (previous).

    Spain's central government may need to bailout at least one of the country's strapped regional governments this year, says a senior official. "There are regions with no access to funding, no way to pay the bills." Spain's regions control a far greater share of overall government spending than, say, states in the U.S.

    Maybe "insurmountable," is Goldman's conclusion of Spain being able to right itself through austerity alone. The issue is competitiveness, and Goldman figures Spain needs a depreciation of nearly 20% without a currency with which to do it. Thus, the country finds itself in a "Catch22," where additional austerity only worsens its debt issues. 

    Moody's moves to quash speculation in the French press of an "impending" change to France's AAA rating, saying that the country's "negative outlook" – which the agency assigned in February – is an indication of the "likely evolution" of the relevant factors rather than of an imminent change. (Moody's statement in French

    Citigroup (C +1.8%) shares rise in early trading after the bank posted Q1 results Nomura's Glenn Schorr calls a “well-rounded quarter" highlighted by continued loan and deposit growth as well as strong expense control. "We think Citi’s executing according to plan and the stock is cheap,” Schorr writes, adding he will revisit his estimates and $47 price target that go along with his Buy rating.

    More on Citigroup (C): Earnings were $1.11/share without negative DVA of $1.3B in Q1 (better financial conditions bring spreads down, causing negative DVA). Allowance for loan loss reserves is $29B (4.5% of all loans) vs. $36.6B (5.8% of loans) one year ago. Tangible BV/share of $50.90 is up 9% Y/Y. Shares +0.8%premarket. - So a $7.6Bn reduction in loan loss reserves accounts for all the profits.  

    Iranian Foreign Minister Ali Akbar Salehi hints the countrymay compromise over a key Western demand to stop its uranium enrichment, saying "we can negotiate on how we obtain uranium with different enrichment levels." But Iran wants the West to start lifting sanctions. The sides are due to meet in Baghdad next month.

    Cheniere Energy Partners (CQP +1.6%) says it has lined up 8 financial institutions to create a $4B debt facility. The facility will be used to fund the construction of CEP's Sabine Pass LNG liquefaction plant, and its acquisition of the Creole Trail Pipeline from parent Cheniere Energy (LNG +3.5%). CEP recently received a $2B investment from Blackstone related to its Sabine Pass project. (PR)

  81. Solar stocks run red hot after a report tips off that CNOOC plans to acquire Canadian Solar (CSIQ). Premarket advancers: CSIQ +20.4%, JASO +6.7%, TRINA +7.5%LDK +3.5%YGE +7.6%.

    Homebuilders are mixed following a late-in-the-gameupgrade of a quintet of stocks in the sector by Raymond James and a disappointing NAHB reportTOL +2.3%SPF +1.8%KBH flat, PHM-0.5%RYL -1.1%. Homebuilders ETF: XHB -0.2%.

    The 3D printing space heats up after a merger between Stratasys (SSYS) and Object points to stronger growth in the sector. Forecaster Terry Wohlers sees $3.1B in industry-wide global sales by 2016 and $5.2B by 2020. SSYS +21.1%DDD +11.9%.

    NFLX under attack: Netflix's (NFLX) Reed Hastings takes to Facebook to blast Comcast's (CMCSAXbox streaming deal for allegedly violating net neutrality principles. Like others, Hastings doesn't like how Comcast's Xfinity On Demand service is exempt from the ISP's bandwidth cap, while Netflix and other streaming services aren't. Of interest is the fact Comcast is among the pay-TV firms that has said it's not interested in reselling Netflix. 

    MGM says it's partnering with YouTube and Google Play to add more than 600 titles for rent to users in the U.S. and Canada. The studio joins five of the six majors, and over ten independent movie studios currently offering movies for rent on YouTube and Google Play.

    Best Buy's (BBY -1.5%store closings may just be the tip of the iceberg, thinks UBS. The lack of a clear geographic or demographic pattern to the closings leads the firm to believe "all the company’s remaining big box stores could be future candidates for consolidation." UBS, which rates Best Buy a Neutral, has already called on the retailer to more aggressively slash its footprint.

    Top location check-in service Foursquare announces it now has 20M users (up from 10M in June), and that it has seen over 2B check-ins. Facebook (FB), about to be free of the SEC's 500-shareholder rule and apparently willing to shell out to acquire a market-leading rival, might be playing close attention. Foursquare obtained $50M in funding in June at a $600M valuation. (also)

    Google (GOOG) co-founder Sergey Brin warns of "very powerful forces that have lined up against the open internet on all sides and around the world," citing governments increasingly trying to control access and communication by their citizens, and the rise of "walled gardens" such as Facebook and Apple, which tightly control what software can be released on their platforms.

    Samsung (SSNLF.PK) plans to unveil the third version of its Galaxy S flagship smartphone on May 3 in London. Samsung is an IOC sponsor, and having doubled its market share in China after the 2008 Beijing Olympics, the company hopes that this year's games will also have a big effect.

    Apple (AAPL -2.5%) will begin selling the new iPad in South Korea and 11 other countries this Friday, raising the number of countries in which the device is available to 47. The device will go on sale in another 9 countries, including India, on April 27. Ironically, no ETA has yet been given for a Chinese launch, though a regulatorcleared the Wi-Fi-only models for sale in the country last month.

    Three breakfast reads: 

    1) Best Buy: New CEO Has A Daunting Task Ahead

    2) Analyzing Bank Exposure To The GIIPS

    3) 9 IPOs Scheduled For This Week

  82. been pouncing on that 12900 mark and 1368 on spx.  So far holding around those levels but starting to look tired.

  83. rustle123
    I feel the bounce has been weak but since 12:00 money has slowly moved into everything except a few MOMO's

  84. Kill ($)Bill vol.3

  85. Springheel Jack here today?  I made a note in mid-March that he said if GDX breaks long term support around 48 it would go to 32.  Anybody know if this recent down move qualifies as that break?

  86. I have a question for anyone here, every once in a while I will buy far OTM puts, I know it is not a sound strategy but I feel that over time I do better than BE and once in a while do really well. My question is this say a put is trading .10-.50 it may stay that way for hours then I put in a bid to buy say 20 at .15 and immediately all of the .10 bids are now equal to my bid even though nothing has changed. Is there some kindof program that automatically jumps to the highest bid or what is happening here?  TIA

  87. GDX – I would say that it qualifies mrm…..

  88. sage – yes, the mm and bots are watching.  I have noticed as well that the brokers (TOS is mine) sometimes front runs you, so be careful with OTM puts. I usually stagger them.

  89. FXE June 126 Ps are 97c.  I am in them for 1.04.  Good risk reward for the Euro to bread south, real quickly.

  90. sagemm1
    By it's own name BID is what you want to pay, your now the highest bidder @.20, the .10 are below. The seller wants the ASK say .40 so if the stock price goes down your order will fill, if it goes up or stays the same it won't fill unless you raise to tthe ask.

  91. Tradegirl's FXE chart..

  92. Another point to remember is if more trades sell at BID than are bought at ASK the stock price will go down and the reverse for prices rising.

  93. EXC/Jomp – I like them long-term and they are already cheaper than they were in 2009 but not cheaper than the flash-crash ($28.38) and subsequent sell-off in 2010 ($34.40) so I wouldn't go too wild early on.  

    Oil heading back to $103 again with Dollar failing 80. 

    Vegas/Robert, Jasu – Too early for details but we're probably doing a trip in November. 

    Short naked calls/Burr – I don't like them on Momos too much but that's why we like our long puts as the best way to play 'em.  Good idea on the reset.  

    Thanks for link Diamond!

    GDX/Mr. M – We already broke below, retested $48, failed it and now if we go back below the low $46, I'd say we're well on the way.  

    Puts/Sage – Yes it is a game played by Bots and the MM, especially on thinly traded contracts.  The bid and ask you see aren't real but the Market Maker or trade bot will take those prices since they are confident they can turn around and sell for a profit to someone else somewhere in the middle.  Once you put in a real offer – you change the equation and they quickly adjust the strikes.  Pharm makes a good point – always scale into orders so you don't get whacked all at once on a bad price.   Also, you should be aware of the strikes around yours and what the most recent sales were so you can have some idea of what's realistic for your strike.  

    Wow, there goes $103 on oil again.  Dollar diving to 79.80 is the whole story here as the Euro flies to $1.311 and the Pound is testing $1.59.  Neither the Yen (80.43) or the EUR/CHF ($1.202) are particularly happy about it so this is really strange action.  I don't see any news that justifies it. 

  94. The pain in Spain is going to get worse….


    Let's put that into perspective. The GDP of the United States is $15 trillion. So 5.5% of GDP would be $820 billion. This means that Spain's two-year target would be the equivalent of the United States cutting its annual budget by $410 billion. No one — literally no one, not even Paul Ryan — has suggested budget cuts anywhere remotely near those levels. Even though the U.S. economy is in much better shape than Spain's, everyone believes that budget cuts of that magnitude would wreck our fragile recovery.

    And yet, in Spain, which currently has unemployment levels about the same as ours during the Great Depression, that's the plan. It's barely short of insane.

    So I'm not sure what to say about this, aside from writing interminable blog posts about how crazy it is. But if you want an analytic thought, here it is: Our titans of global finance usuallytalk like fiscal conservatives. They want low inflation, balanced budgets, and a restrained central bank. But during an economic downturn their actions speak differently. When they actually get all the stuff they say they like, they panic. In their guts they may be tea party conservatives, but when it comes time to actually risk their wealth, they make Paul Krugman look like some kind of milksop Austrian.

  95. Bonds are holding gains, so I am in the la la land that this move is not real.  SHJ noted today could be mildly positive, b'f the downtrend resumes.

  96. Phil – do you like shorting Oil or YM into the close?
    Pharm – can ECYT go much higher or would you just sell here?

  97. if the Dow is so strong shouldn't tlt be be moving down??

  98. Volume is almost perfectly inverse to market direction.  Dow currently at 59M (1:45) and less trading in past 2 hours combined (up since EU close) than either of the first two hours of selling.  

    Oh well, nothing to do but grab the QQQ $64 calls at $1.75, which have just .15 of premium at QQQ $65.60 as a momentum play over the $65.50 line, with a tight stop there – just in case the Nas pops 3,000 again and goes off to the races.  It's a good defensive cover that you can use while looking at re-shorting the Dow or the RUT, which should test 800 in the futures (/TF) and will make a nice short if rejected.  

    On the Qs, if AAPL fails to hold $585 – that's a good exit signal too!  

  99. PCLN/$25KP – OK, now I decided we're being greedy not taking $11.70 and running in the $25KP.  Hopefully they bounce off $700 and we get another nice entry.  

  100. Hello All – Anyone have any idea as to waht caused the spike?

  101. Spain/StJ – I love that last paragraph. 

    La la land/Pharm – Good point.  Sage too – you can't trust a rally that isn't confirmed by bonds calming down.  This is mainly about the Dollar dive.  

    Oil/Jrom -= I liked re-shorting the futures (/CL) at $103 of course and yes, I still like the USO May $39 puts, which are back to $1.20 off a high of $1.42 today.  

    Spike/Ink – Just the Dollar drop (now 79.73).  

  102. Spike
    Besides the dollar drop money has be coming into most evrything except the MOMOs since 12:00!

  103. wow, really takes conviction to be bearish this year thus far!

  104. sagemm1
    Conviction in either direction is wrong no matter what you do. I have made and lost money in both directions today, net is up but now in cash even though I was sure this latest drop was coming because the MOMOs weren't agreeing. I have expected more up since 11:00  and maybe it will mostly be a stick.

  105. 12:00 PM On the hour: Dow +0.37%. 10-yr +0.21%. Euro -0.08%vs. dollar. Crude -0.74% to $102.56. Gold -0.53% to $1651.35.

    1:00 PM On the hour: Dow +0.67%. 10-yr +0.21%. Euro +0.09% vs. dollar. Crude -0.24% to $103.08. Gold -0.61% to $1650.15.

    2:00 PM On the hour: Dow +1%. 10-yr +0.14%. Euro +0.46% vs. dollar. Crude +0.09% to $103.41. Gold -0.46% to $1652.55.

    Retail sales are up 6.5% Y/Y and at an annualized rate of 10.4% in Q1, writes Brian Wesbury, taking a closer look at this morning's report. Excluding autos, gas, and building materials, annualized sales are up 8.1% in Q1, showing the gains are broad-based. It can't all just be about the weather? 

    We know Spain's Repsol (REPYY.PK -4.1%) is a 57% owner of about-to-be nationalized YPF, but who owns Repsol? Three of its 4 largest holders are already struggling Spanish banks, led by Caixabank with a 12.8% stake. Also in the top 4 is Mexico's state-owned oil giant, Pemex.

    Shares of United Continental (UAL +4.1%) show strength in advance of the carrier's Q1 earnings report slated for release later today. Analyst Wolfe Trahan analyst Hunter Keay thinks UAL will see continued underperformance through the summer while a new reservation system is adapted by the company, but finds shares undervalued compared to peers when taking a longer view and factoring in its free cash flow potential. 

    Reliance Steel (RS +3.8%) gains after raising its Q1 earnings outlook on stronger-than-expected demand and pricing. The company anticipates earnings to be around $1.50 per share, up sharply from its earlier projection of $1.15 – $1.25.

    Citigroup ups Freeport McMoRan (FCX -0.1%) and Alpha Natural Resources (ANR -1%) to Buy today, citing an attractive relative valuation to copper prices and expectations for a rebound in gold and copper shipments. The firm adds that ANR is also likely generate positive cash flow due to rising thermal coal demand and declining nat gas prices.

    Chesapeake Energy (CHK -4.2%) falls on a downgrade to Hold from Morgan Stanley, which is worried about plunging natural gas prices. Though MS recently lowered its 2012 natural gas composite spot forecast to $2.40/MMBtu, the firm still thinks there's more downside than upside risk to its estimate. The same goes for its 2013 forecast of $3.85/MMBtu, given strong domestic production.

    Shares of Westport Innovations (WPRT -9.7%) fall off sharply on heavy volume as they hit levels not seen since January. SA author RulingTheMarkets makes the long-term bull case for WPRT if the right entry point is found, finding the company poised to benefit from macro economic events unfolding in the natural gas market. 

    As expected, Exxon Mobil (XOM) CEO Rex Tillerson signs a strategic cooperation agreement with Rosneft counterpart Eduard Khudainatov at Vladimir Putin's residence outside Moscow. Under the partnership, Rosneft will receive 30% stakes in three Exxon projects in North America, while Exxon gets to explore the Arctic.

    ConocoPhillips (COP +0.6%) CEO Ryan Lance say the company expects to fund $5B in buybacks in the first half of the year using proceeds from planned asset sales. The company forecasts cash flow will rise to $22B by 2016 from a level of $16B this year and wants to spend about 20%-25% of its annual cash flow on dividends.

    The price of Brent crude (BNO -2.4%) is off sharply today even as WTI crude (USO -0.1%) holds its own. Perhaps real progress has been made in talks between Iran and Western powers towards the lifting of oil sanctions in exchange for a compromise on uranium enrichment.

    Vornado Realty Trust (VNO +3.6%) shares jump as Chairman Steven Roth tells shareholders the company will put “everything” on the table to raise performance, considering share buybacks or splitting into smaller firms that would focus on different types of properties. Keefe Bruyette upgrades shares to Outperform from Market Perform.

    Shares of Gannett (GCI -9.3%) sell off after the firm reported its Q1 results earlier. Though EPS beat estimates by $0.02 and revenue came in roughly in-line, the publisher's repeated warnings that its turnaround will take time and ongoing downward revenue spiral is spooking investors.

    Linsanity subsides: Madison Square Garden (MSG -1.5%) slips after Susquehanna downgraded the shares to Negative on valuation earler today. The firm raised its price target however, to $28 from $26.

    There's no clear trigger behind the latest selloff in Apple (AAPL -3.4%); shares are now down 9% from their Tuesday high. Some speculate Texas Instruments' (TXNaddition to the NASDAQ 100 (QQQ) is playing a role, as index funds will need to sell some Apple to rebalance, but that can't explain why fellow large-cap index members Microsoft (MSFT +0.9%) and Intel (INTC +1%) are up. With Apple still up 43% YTD, perhaps a breather was inevitable.

  106. Three lunchtime reads:

    1) Can you make some dough on a REIT IPO?

    2) Housing: What's wrong with Spain?

    3) TFC Financial: Have I missed the rally?

    And, from Barry:  


    The past two weeks, we looked at the Housing Recovery theme, in 5 parts. We sought to  challenge the arguments and assumptions of many of the Residential Real Estate bulls.

    Here are the distinct parts:

    1.  Shadow Inventory.

    2. Can Buyers Afford Homes.

    3. Problem With Home Prices.

    4. Foreclosures: A Decade Long Overhang.

    5. Fear of Buying: The Psychology of Renting.


    Its a broad topic, and this series lays out my views

  107. Nas stopped dead at 3,000, RUT stuck at 800, NYSE not over 8,000 – this is why I prefer to take one bullish momentum play rather than ditch a dozen short positions – this is not a very impressive move up – especially with the dead volume (now 63.8M on the Dow at 2:15).  

    Dollar at 79.73, Euro finally stopped at $1.315 and Pound stuck right at the $1.59 line.  

  108. TZA / Phil – which puts would buy here? 

  109. There might still be growth in the world:

    So far, there has been very little indication that the global upswing is losing momentum. Unlike the early part of last year, when higher oil prices triggered a sharp downturn in all of the leading indicators, economic activity has not yet shown any signs of heading in the wrong direction. The global growth rate is still rather anaemic, and remains heavily dependent on emergency support from the central banks. But at least it is not slowing down.

  110. Dilbert 0412 Monday links:  upsides, downsides

  111. Oh no, now the S&P is struggling to hold 1,372!  

    PCLN/Diamond – OH, I think it's totally ridiculous over $500 but we have to take those interim profits in a small portfolio.  

    TZA/Dpast – Well I wouldn't buy puts on them because I'm bearish.  If you meant sell, I do like selling the May $19 puts for $1.52 and buying the $16/20 bull call spread for $2.05 for net .53 on the $4 spread that's $3.45 in the money at RUT 800.  

    Growth/StJ – But when was LTRO and Twist pumped in?  I don't know if I call it a trend at all if it's entirely based on outside stimulus.  

    That's what spiked oil – They got that pipeline going to suck oil out of Cushing!  That's good news for bullish oil manipulators everywhere…

  112. On the private sector side, the recovery has been on pace with recent recoveries:

    We are on pace with the 1991 recovery and ahead of the 2001 recovery that were fueled by huge tax cuts! The problem has been the public sector that has cut over 600,000 jobs at the same time. So much for the Bush boom! It was all based on huge public sector increases.

  113. Growth / Phil – Maybe, but as I point out in the post above, recoveries in the last 10 years have been fueled one way or another by outside stimulus. Could have been tax cuts, cheap money and public spending before 2008 or Twist, cheap money, LTRO (actually mitigated by spending cuts) in 2010. I would actually argue that the stimulus in 2001 was just as bad as today since it was also accompanied by a big expansion of the public sector. Our conservative friend would probably like to forget that… And that means that any plans that they have for tax cuts and spending cuts would probably produce unsatisfactory results.

    In essence, growth of the last 10 years has been fuel by outside stimulus and we might just be addicted to it now…

  114. Cool, now the Nas is breaking up while the other indexes hold back – perfect.  About time we remembered to play the Nas bullish for the bounce!  

  115. ECYT – I would talk off another half, no.  then it becomes a free trade.  I would also initiate another buy write on them for a lower price.  October $7.5/5 C/P for 2.05 or so.

  116. From Barry:  


    Within the past 24 hours, the Pacific “Ring of Fire” – the region of the world where 90% of the world’s earthquakes occur and 75% of the world’s volcanoes are located – has been hammered with earthquakes:

    Click here to see the United States Geological Survey’s recent earthquake tracker.

    The spent fuel cooling system at Fukushima reactor number 4 has been suspended for the time being. However, this occurred prior to the earthquake, and – hopefully – will be started back up soon.

  117. Phil
    I have used the QQQ for overnight options because of small premium for ITM positions delta .9 ish. I feel the AM will gap but up or down has me confused by AAPL, PCLN, and CMG being down. If that weren't the case I would short. Anything to make sense out of today?

  118. As a DD on RIGL, selling the June $7.5 Puts. 

  119. Phil…School me here please…….TZA down 1.78%   But looking at July contracts…..$13 -$17 calls up puts down?  Just in that month, in that range?  What am I missing…or reading wrong…

  120. Into the fire…

  121. Not only the July contracts and range…actually.  Kind of all over the map…

  122. BAC getting attractive again at $8.80.

    I'm just not feeling bullish into this close.   


    12 Predictions by Michael Pettis on China; Non-Food Commodity Prices Will Collapse Over Next Three to Four Years; Nails in the Hard Landing Coffin

    Four easy countries to file taxes in.  

    "Murder, Inequality, Corporate Profits, and Free Trade Go Together"

    Oops, doesn't do any good to say I'm not bullish if I don't post the comment!  

  123. This is happening WITHOUT the Dollar coming back (79.74).  Not even volume yet – that run-up was total BS.  

    Jobs/StJ – Yes but remember the drastic drop in the quality of jobs.  We've cut people with reasonable salaries with bennies and pensions and replaced them with fry cooks.  

    QQQ/Shadow – I think today made perfect sense.  We got pumped up into the open on no volume, then sold off on volume, then pumped up again on no volume, now sold off on volume into the close.  They are just suckering in all the remaining dip buyers near as I can tell.  

    TZA/Living – During the day, prices are driven by sentiment.  Like my trade idea above on TZA, I'm sure lots of funds are setting it up for a hedge and driving the prices up.  Maybe unwinding puts too.  Keep in mind you're looking at a few thousand open contracts – you or I could drastically affect the price by moving a few hundred.  

    AAPL failing $585 was a good signal as is always S&P 1,372. 

  124. Um….DMND….um….DMND….

  125. DMND/Pharm – I wasn't worried…

  126. Oh, never mind.  That move was from March 19….

  127. Look at TOS…they say it is bogus and PR says no updates coming.  THAT IS MANIPULATION…..

  128. DMND June $21/25 bull call spread at $1, selling $17.50 puts for .85 is net .15 on the $4 spread that's .50 in the money.  

  129. Down oil…..down….

    Down gold…down…


    Up SGEN, up

    Up PLX, up.


    OK, I am gone.  Be around later.

  130. Thank you on many levles Phil.  Last Wed I put simple collars on the minority stocks I have held and it is really nice to see total account value go up when the markets tank.  Nothing fancy but I learned it here.  Yeah I took 2/3 rds of the profits from the collars off the table and bought some offsetting DIA calls as well.  Just keep chipping away and re balancing.  Thanks again.  Having fun.

  131. TZA / Phil – Thanks for your proposal (i always get confused with the inverse ETFs).  I was just wondering, instead of a Bull Call Spread, how about if i did a virtual future: sell 17 PUT and buy the 17 Call (May) to take advantage of the upside. Whats your take on this play? Thanks!!

  132. Phil – what do you think of simply buying the FTR 2014 $5 calls for .30? I know we arent collecting dividends but betting small $ that FTR will be over $5.30 in the next 2 years doesnt seem like a completely terrible bet…

  133. Bogus/Pharm – Too funny with this stock but there are so many shorts, it doesn't take much.  I like the spread as a flyer – you never know… 

    That's great Living, nicely played!  

    3:00 PM On the hour: Dow +0.85%. 10-yr +0.06%. Euro +0.44% vs. dollar. Crude +0.09% to $103.41. Gold -0.5% to $1651.95.

    Taking stock of the interesting Suez Canal Traffic indicator shows that the gauge has turned lower and now stands only slightly better than flat when compared to last year's measure. A chart of the total tonnage passing through the Suez Canal overlaid over global GDP growth tends to correlate pretty closely.

    Citigroup (C +2.5%) plans to resubmit its rejected capital distribution plan to the Fed by mid-June, says CEO Pandit. Given the Fed has 75 days to review the plan, investors may have to wait until Q3 to hear any details. By that point, a plan for 2013 will be nearly due, meaning it might pay for the bank to forget about 2012 and just worry about next year. 

    Bulls strike back against Barry's Housing Points:  Doug Kass tells CNBC (video) he sees housing beginning a "multi-year recovery" that could last the decade. Kass views major banks as the best way to play the recovery, expecting them to benefit from rising rates as the economy improves. His top pick is Berkshire Hathaway (BRK.ABRK.B), which he thinks trades at a "30% discount to intrinsic value." He also likes WFC and BAC. (more)

    BuildFax's home remodeling index climbed to 2.89M projects in February data, up 3% M/M and 23% Y/Y, marking a post-recession high and coinciding with Piper Jaffray's survey suggestingpent-up consumer demand for home improvements. The index is based on construction permits for residential remodeling projects filed with local building departments. HD +1.7%LOW +1.2%.

    Raymond James upgrades its view on home builders, saying realtor reports lead it to believe March new home sales showed surprising strength and point to a spring selling season that will mark the start of an actual housing recovery cycle. The firm upgrades TOL +1.8%MDC +1.2% and SPF +5.7%, as buyers of these shares ignore today's NAHB report.

    Hard to finance a home? Just 32% of residential home purchases in February were reported as being made with a down payment of 20% or more, according to the NAR. About 64% of purchasers made a down payment of 11% or less to obtain their mortgage. 

    Tata Motors (TTM +3.3%), India's largest auto maker by revenue, says its global sales jumped 26% in March to 139,655 vehicles. Strong demand for Jaguar and Land Rover vehicles helped TTM post a 41% gain in global passenger car and SUV sales to 75,864 units.

    Shares of Diamond Foods (DMND +3.3%) spike higher on high volume off of chatter that the firm plans to provide an update shortly. With short interest on DMND huge, all eyes will be all on what the scandal-tainted firm has to say.

    Don't blame CEO Stephen Elop for Nokia's (NOKwoes, says Juuso Myllyrinne. The problem lies in an ancient engineer-dominated culture that obsessed over hardware while failing to appreciate the need for an appealing, unified software ecosystem that consumers and developers could get behind. It's worth noting many of those engineers aren't happy with Elop.

    VIX is up for the day despite indexes all green (other than Nas) – need we say more?

  134. David Ristau / AAPL Bull Call  -  Wondering how you played the 600/615 spread you recommended?  My stops were hit.

  135. TZA/Dpast – That's fine as long as you REALLY want to be ultra-short on the RUT, even if they pop 820 again (and, of course, there's always rolling). 

    FTR/Jrom – The problem with FTR is they give away so much of their profits as dividends so not much accrues back to stock value BUT, at this point in their cycle – I do like that bet.  

  136. Nice calculator that lets you compare your tax rate to Mitt Romney's.  

    CMG May $470 calls are almost 10% out of the money and can be sold for $5.30.  Those pay for a good part of the May $465/455 bear put spread at $7.20 for net $1.90 on the $10 spread that's $23 in the money to start.  

    Dow volume 78M at 3:43.  

  137. PCLN, AAPL and CMG finishing at day's lows!  

  138. Phil – Do you like WM?  If so, any recs?  Thank you very much.

  139. This is one of the craziest 100 point advances I have ever seen.  The leaders are getting killed and AAPL will close at the lows for the day.  This cannot bode well for tomorrow's open.

  140. PCLN broke through $700!

  141. looks like a war to keep the dow from dropping further…

  142. WM/Ink – I like them but not at $35.50.  Wait for a sell-off.  BTU and CHK 2009 lows – THOSE I LIKE!  

    PCLN $1,000/Jabob – I certainly hope so, we would love a nice entry to re-short.  

    AAPL barely holding $580, PCLN down 5% on the day, RIMM coming back strong into the close – it's just one of those days…

  143. Gotta run to a meeting – back later.  

  144. HFC has been on the Sabrient strong buy list recently. If they haven't changed their minds it's a lot stronger after today. Maybe they meant puts?

  145. In the news from Australia: Big Brother at work?
    "Alleged member of hacktivist group Anonymous busted after GPS coordinates in an iPhone image led authorities to his Australian girlfriend."

    And on the lighter side…
    "The FBI affidavit says the picture appears to be of the same woman as the first, though given her face was concealed, it is unclear how they made the connection."
    I'm sure they had to study the photo/s for some time to make the connection… :)

  146. AAPL in CASH! Lflan in Florida (vacation). PCLN/ ros…….hold’em, and if you need to on Friday, roll ‘em. Don’t expect many posts from me this week and don’t expect me to go long AAPL until she’s ready to go up! :) .

  147. gs before open, spain auction

  148. Jabobeast- I am toasting your day sir- well deserved and long overdue- may you have many more like today- congrats and a big FU to the MOMO’s

  149. Iflan / PCLN
    Thank you.  Have a great vacation!

  150. Gasoline price Monday April 16 in Minneapolis

  151. 3.999 in Portland, OR

  152. Phil / BTU – Never buy a stock at retail (learned this from the best).  To scale in when these stocks are at their lows and you are selling premium, do you stay front month or go further out?  Trying to understand the proper way to enter a position.  TIA.

  153. To clear up the previous post, I was inquiring on selling PUTS to enter the position.

  154. Surprising lack of news or even rhetoric supporting the markets.  Very interesting.  

    Futures flat pretty much – Dollar 79.85.   Asia pretty flat. 

    Big Chart illustrating the weak bounces so far.  Must holds did a triple rejection today.  If the S&P fails 1,360, things can get very ugly.  

    Big brother/Aussie – Get used to it, privacy is out the window in modern society.  

    BTU/Jfaw – In this case (declining market, poor fundies for coal prices due to crashing nat gas), I'd start off just selling puts.  You can sell the BTU 2014 $25 puts for $5.25 and that's good money, even at full margin but ordinary margin on that sale is just net $2.70 so we're looking at almost 200% return on margin in two years for the short put sale.  Worst case is you own them for net $19.75 in that case and, if things turn back up and BTU breaks over $30, then you can sell the Jan $30 calls for about $5 and, if you have to cover with the stock at $32, then you end up in a net $22/23.50 buy write with the stock already at $32.  So many ways to win! 

    By the way, I look at many months but the June $25 puts are $1.10 so no comparison whatsoever and the Jan $25 puts are $3.15 but what if the VIX goes back down and you don't get another chance to sell a $3 put for the next year?  So $5.25 is very fair for 2014 and, if all goes well, you'll never see BTU this low again so may as well sell as much premium as you can.  

  155. Phil / BTU – Thanks for the education.  As with all the postings, I will study to ensure I have a full understanding.

  156. I think Phil already posted this, but it's right on — Soros, on the Euro:  Excerpt: "Soros said the crux of the problem was that debt reduction was coming at a bad time for the European economy. 'You can grow out of excessive debt, you cannot shrink out of excessive debt.'  And he warned that the euro zone fiscal compact, an agreement by 25 EU leaders to prevent another debt crisis and restore confidence, was pushing in the wrong direction because it obliged governments to balance budgets and reduce indebtedness at a time of inadequate demand.  He said that because fiscal stimulus was ruled out, monetary policy remained the only tool available."
     That means printing money and buying Eurobonds, right?  While Europe pushes tight fiscal policies, large scale public service layoffs, and the rather nebulous category  "austerity."  As everyone on PSW has been commenting, this doesn't seem likely to end well.  Could we see a soaring dollar, plummeting Euro, weakening Renminbi, and falling basic materials?  Does oil drop into the $70s?  2012-2013 may be the years that the rolling global recession goes overtly deflationary, despite the best efforts of central banks everywhere to convince citizens that the currency they print has more than a passing value.  

  157. Phil
    what do you think of STX May 27/28 BCS at $.55, selling the May $26 Put for $1.00 for net credit of $.35

  158. Phil
    what do you think of STX May 27/28 BCS at $.55, selling the May $26 Put for $1.00 for net credit of $.45

  159. interesting points from Biderman

  160. PCLN/Trade Anatomy : I posted my efforts to try and make money on PCLN, with what ended up as classical artificial buy write further financed by a 2X short term short call sale –
    Phil's advice – rather contrary to my own ideas, was to roll up the existing BCS (which I had previously rolled down in strike, and was planning to roll in to Jan 2013 from Jan 2014). See Phil's advice here - Upon reflection, I had no arguments to negate Phil's advice – so I went for the roll from Jan 14 650/800 BCS to Jan 14 750/850 BCS. The advice included adding another 1X Jan 14 750/850 BCS to provide cover for rolling the short term short calls. Those rolls did not execute as planned – only the roll of the Jan 14 650 C to Jan 14 750 C filled. The additional 1X BCS did not fill either. At least I picked up $53.40 per contract for moving to the  750 C. This gives me a total of around $67 of credit premium for the entire trades placed.
    I also felt compelled to roll the 2X short May 12 750 C (as PCLN back then was still moving strongly higher) to the July 12 780 C – I was the sucker selling the premium for 5 minutes until the trade completed and I sold the 780 C to another bag holder. The roll was a scratch.
    Now I get to heed Phil's advice – BE PATIENT. Let's see what July brings

  161. Phil & Iflan/AAPL
    I have 2013 610/700 BCS and sold 520 puts. I entered these at the wrong time separately. Bought 2 calls for 69.80 now 61.20; sold 2 calls for 24.08 now 32.07: sold 3 puts for 37.42 now 48.83. I entered the short calls 1st then lost, then entered the calls later, short puts entered just before AAPL crashed. Thanks for your patience on this one

  162. Short CLM2 on the cross down $104

  163. Good morning! 

    Futures up about 0.4% on Dollar dive to 79.60.  Pound flying up ($1.595) on high UK inflation (no more QE from QE2) and the Euro is following in lock-step ($1.315) and it's making the Yen happy (80.61) so the BOJ is obviously back on the Euro bandwagon too.  EUR/CHF is at $1.2016 and they need to boost the Euro at $1.20 so we could test $1.32 and $1.60 today and that's going to be maybe 79.20 on the Dollar in a best-case for the bulls.  

    Asia was mixed with Hang Seng and Nikkei flat while Shanghai fell 1% and BSE rose 1%.  

    Spanish auction (3-month) was not a disaster so Europe is happy about that at the moment.  Europe up about 1% at the day's highs and now our futures are up half a point, back to yesterday's highs except the Nas, more like the bottom of the morning sell-off.  

    Oil flew up to $103.69 and I'm worried that pipeline sucking oil out of Cushing could be a game-changer.  How that would be a positive for our economy ($4.50 gas), I have no idea…

    Lots of happy talk from analysts again is bringing in the dip buyers – we'll see if we get our 50% retraces today and maybe we'll join them but hopefully we stop about here in the Futures and get back to our normal sell-off after the bell.

    Tuesday's economic calendar:

    7:45 ICSC Retail Store Sales

    8:30 Housing Starts

    8:55 Redbook Chain Store Sales

    9:15 Industrial Production 

     Notable earnings before Tuesday's open: AMTDCMA,EDUFRXGSGWWJNJKONTRSOMCSTTUSBUSG

    Notable earnings after Tuesday's close: CREECSX,EWBCFULTIBMINTCLLTCSTXSYKURIYHOO

    Adding to Dollar weakness:  With a 51-45 vote, Senate Republicans block the "Buffett Rule's" raised federal taxes on millionaires (30% on income for those making $2M annually).

    The US Has the Highest Share of Employees in Low Wage Work (Economist’s View)

    U.K. inflation accelerated to 3.5% in March from 3.4% the month before. The Bank of England's inflation target is 2%

    The Reserve Bank of India lowers its repo rate by 50 bps to 8%, confounding expectations for a 25 bps cut and marking the first cut in three years. An uncertain inflation outlook leaves little room for further cuts. (RBI statements: rate cuteconomic outlook

    The stage is set for a rate cut in Australia as minutes from the RBA's April 3 meeting show the board acknowledging softening economic conditions at home and in China. Only a wicked April 24 inflation report could seemingly prevent policymakers from lowering the 4.25% benchmark rate at their May 1 meeting. The aussie -0.2%at $1.0335. Shares in Sydney are flat.

    Japan confirms it will make a $60B contribution to the IMF, becoming the largest donor yet (excluding crisis-hit Europe) to contribute to the IMF campaign to bolster its resources for the second time in three years. 

    Christine Lagarde says she hopes the IMF will reach "critical mass" this week in raising more than $400B from contributing governments. That's down from the $600M the IMF said it would need three months ago. 

    John Paulson tells his investors he's shorting European sovereign debt and buying CDS on same, according to a source. The position shouldn't be too much of a surprise as his views on the euro – "structurally flawed" and destined to fall apart – were made clear earlier this year.

    George Soros: eurozone crisis has entered a ‘more lethal phase’(Guardian)

    Why the Smart Money Looks Dumb (Barron’s)

    Foreign direct investment into China fell 6.1% in March from the previous year to $11.76B. For Q1, FDI stands at $29.5B, down 2.8% Y/Y. 

    If China grows "only" 7.5% this year, Latin America will likelyfeel the pain, as China has become one of the largest trading partners for many Lat.Am. countries and has helped open Asia as an export market. In Brazil, exports to China have increased more than forty fold since 2000, growth that is likely unsustainable as China slows.

    Is Brazil ready to break out of the "middle income trap" or have its issues been masked by a China-led resource boom and a massive property bubble? "Prices are crazy," says Rio's mayor. Bulls counter that mortgage debt is low, but 100% financing schemes have widespread use, giving "a strong whiff of Fannie, Freddie, and America's subprime."

    Longtime bull Jim O'Neill is suddenly worried about the U.S. economy: While sticking with his 2.5% GDP growth forecast for 2012, "weekly job claims are not to be ignored. While hoping last week's [number] would decline again… it rose to 380,000, providing support to those who argue the apparent economic strength of the winter was artificially helped by the weather."

    Uh-Oh: Subprime Lending Comes Roaring Back (Time)

    We may see some positive earnings growth in the the energy sector this quarter, says Goldman's Abby Joseph Cohen. Global crude demand and prices have steadily risen, but shares of the major U.S. oil companies – which normally track global crude prices – have not. The gap between the two is largest its been in quite some time, which may mean there's still room for the share prices to run. (video

    Barclays is bullish on big industrial conglomerates ahead of the release of Q1 earnings, expecting "meaningful beats on both the top and bottom line, driven by continued strength in U.S. industrial and price/cost shifting to a tailwind." GEMMMHONEMRDHR and TYCare "unusually cheap vs. smaller peers," the firm says. 

    Valero Energy gives its Q1 interim update, saying its EPS coming will be around $0.25 – $0.35, above Street estimates of $0.20. On an adjusted basis, the company says its decision to temporarily shut down an Aruba refinery will push it into the red for the quarter. The refinery was shut down last month due to inadequate margins as the industry struggles with major shifts in fuel demand and production. Shares +1% AH. 

    Chesapeake Energy (CHK -3.6%) shares hit a 52-week low after Citigroup cuts its rating to Neutral from Buy and its price target to $22 from $28, citing near-term natural gas headwinds. The firm says the risk to filling such large funding gaps "in a downside scenario over the next two years is growing and by far greater for CHK than for any other company in our coverage group." (also)

    The spread between Brent crude and Nymex WTI crude fell to its lowest point since February today after Enbridge (ENB) and Enterprise Partners (EPD), owners of the Seaway pipeline which is slated to carry crude from the oversupplied Midwest to the Gulf of Mexico, asked federal authorities to fast-forward the project by about two weeks. 

  164. Research in Motion (
    RIMM +4.1%) pops going into the close on reports that the company is in discussions to hire investment bankers to examine strategic options.

    Better-than-expected Q1 PC shipment data bodes well for chip stocks, argues Sterne Agee. The firm expects chipmakers to deliver Q1 results in-line with or slightly above expectations, while lifting Q2 guidance. It adds AMD is likely to deliver more upside to estimates than Intel (INTC) due to low expectations, and that the latter could be hurt by weak early sales for ultrabooks, as consumers balk at high prices. (Barclays) (Needham)

    Following Apple's (AAPL -4.2%) latest selloff, Raymond James' Tavis McCourt is starting coverage with a Strong Buy and $800 PT.  McCourt, previously with Morgan Keegan, calls iOS "the dominant computing ecosystem for the post-PC world" (some Android fans might disagree a bit), and notes Apple's dividend yield is comparable to that of other large-cap tech names, though its growth is much stronger. (earlier)

    Liberals and conservatives don’t just vote differently. They think differently. (Washington Post)

    Why Everyone Believes in Magic (Even You) (Live Science)

    Truth or Consequences: George W. Bush & the National Guard (Texas Monthly)

  165. Number of homeless in Japan drops under 10,000 from 25,000 in 2003, as reported by Ministry of Labor and Welfare.
    Quarter of century of recession, but they must be doing something right over there.

  166. You're welcome Jfaw!  

    Soros/ZZ – He's right, there's really no escape.

    STX/Crussell – I think they are a bit expensive at $28.50 although they do look like they're going to break up.   Earnings are today and if they miss, it will be ugly as huge growth projections are now built in and your position doesn't have any outs – you're simply stuck on a miss so make sure you are a big long-term fan of STX, in case they test the 200 dma at $18.

    Biderman/Joel – I'm so glad someone with clout is starting to point this out.  It's one of my pet peeves:

    The US Census Bureau mails surveys to a mere 5,000 retailers and from the responses mailed back guesses at the fraction of a percent change in month to month retail activity. Wow! One would think that the Census people never heard of credit, debit and cash cards. Actual cash is much less than 10% of sales these days and I would rather have all the credit and debit card data than a survey of 5,000 outfits, wouldn’t you? Believe it or not, Master Card and Visa sell their data to the public and I am sure all would give summary data to the government, if asked.

    The Wall Street Journal online today reported that March retail sales were up in part due to car sales. Car sales? March car sales were reported to be running at just over 14 million annualized, down around 6% from a February sales rate of 15 million. Yet the advanced census bureau estimate showed auto sales rose 1.1% in March? One would think that someone would have said, wait a second, how can the actual new car sales rate be down while the Census Bureau is reporting higher revenues from new vehicle sales?


    The government reports garbage and the morons in the financial media report that garbage as hard facts! The fault is not really with the reporters. Rather it is their editors who are to blame.  The globe is in a real time mess. Global trading is in real time. Yet, the financial markets trade in real time data on the US economy that is based upon surveys and guesses. Am I missing something, or is this just plain nuts?

    PCLN/Winston – If you only have a 1x backstop, you should be OK but, if 2x – just be careful as the danger in this spread was PCLN dropping so far that your covers aren't enough.  Notice how PATIENCE could have left you in the May $750 short calls, which you'd be pretty pleased with right now.  That's why we don't generally roll until we REALLY HAVE TO.   A key piece of my comment you may have missed:  

    If you roll those May $750 calls now, then YOU are the sucker paying $35.50 in premium (5%) that we all laugh at with PCLN not even at $730.  If the margin is your issue, take the $10 loss on one of the $750 callers and chalk it up to experience and wait for the other $35.50 to expire and you'll net about $15 anyway on your May short sales and hopefully you'll do better on the next sale.

    Still, on the whole, it looks like you rolled with the punches very well and of course I understand how you lost faith as PCLN ran up to $775 – it takes a ton of experience dealing with these to learn to trust premium decay to do it's job.  

    AAPL/Jomp – Don't worry about that stuff, what's the bottom line?  You're in the Jan $610/700 bull call spread at net $45.72 ($91.44) less the short puts at $37.42 ($112.26) is a net credit of $20.82 or about $7 per put for a net $513 entry.  Do you think AAPL will fail $513 in Jan?  If so, and if you don't REALLY want to own 300 shares of AAPL at $513 ($153,900) then you should be THRILLED to get out with a $5,900 loss, which is just 4% of your committed position after AAPL has dropped 7.5%.  If you REALLY want to own AAPL long-term, then why worry about it?   The Jan $520 puts ($48.83) can be rolled to the 2014 $430 puts ($50.51) and, of course, I'm not saying you should do it  now but always be aware of your roll and then the question is do you REALLY want to own 300 shares of AAPL for net $423 in 2014 ($126,900)?  See how easy it is to save $27,000?  

    If you don't have the money to buy AAPL and you don't have the margin to ride out another $100 dip in AAPL then you are simply trading over your head with this stock because things like this happen all the time – you should be more surprised when it doesn't.  Notice we don't play AAPL in our Income Portfolio – we sell puts in stocks we REALLY want to own at the net strike.  That way, our fallback position is always ownership and we are not forced out of things very often (RIMM was the first in a year because we lost faith in their ability to fully recover but we're still partly in it).  

    Trading like that we never panic, we hardly ever even make adjustments – we just check in once a month to see how much we made – wouldn't you rather do that than sit there staring at AAPL's 1-minute chart with your fingers crossed all day?  

    Oil/Lionel – Certainly I like shorting that $104 cross on (/CL) – or $103.50.  

    Dollar held 79.60 (Euro rejected at $1.315, Pound right on $1.595 line) and that may be all for the Futures rally.

  167. That is one bad-ass crow!  

    On the Japan homeless – that's very nice.  I just read NYC added 100,000 people to the official poverty index – a new record.  

  168. phil
     "Gasoline was up 10% in March so YAY!"
    is that in volume or in revenues?  or just general retail price action?,

  169. That was revenues, as in more bottom line retail sales.  See volume chart from yesterday to get the real picture of how badly we are being screwed over. 

  170. per above
    isn't genuine deflation good for joe sizpack? cheaper food, gas, etc.  IF he has money and a job.

  171. p
    when you sleep (not that you ever do) do you dream about option spreads?

  172. Obama to announce plan on 'manipulation' of oil markets
    This could be huge.  Phil your thoughts?