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Thank GDP it’s Friday – Reality Check?

SPY WEEKLYWill the GDP be bad enough to be good?

As I said yesterday, bad news is now good news as Bernanke promised to crank up the presses if the economy stumbles and yesterday we had terrible jobs numbers and an absolutely awful Kansas City Fed Manufacturing Survey and Eurozone Economic Confidence continued to decline and that was capped off with an S&P downgrade of Spain.  

RALLY TIME – of course!  The markets broke right over our 50% lines, forcing us to add a few bullish positions for purely technical reasons while we wait and see when or if the madness will end.  

We've already had a few hours of extensive conversation about the economic situation in Member Chat so let's just focus on how we can play the next half of the retrace back to our highs at Dow 13,300, S&P 1,420, Nas 3,200, NYSE 8,300 and Russell 850.  We'll still be watching those 50% lines (see yesterday's post for levels and chart) but it was easy money this morning grabbing Nikkei Futures (/NKD) off the 9,500 line in Member Chat and already (8:23) the index is back to 9,550 and, at $5 per point per contract – the Egg McMuffins are paid for. 

EWJ WEEKLYThe BOJ dropped 10,000,000,000,000 Yen on the economy this morning, expanding their asset purchase program to 40Tn Yen and it DISAPPOINTED the market and the Nikkei fell from 9,700 to 9,500 but we were up nice and early and, since the other Global Indexes seemed happy enough to ignore Spain's double downgrade (in fact, Spain is up 1% this morning on the bad news), we figured it would only be a matter of time before the Nikkei futures came off the floor to join them.   

As you can see from David Fry's charts, the Nikkei has been tracking the S&P very closely and the divergence was a bit silly.  What's actually silly is the way the S&P is going but we'll take the quick 50 points and run ahead of the GDP, where we HOPE the markets get a cold slap in the face from a GDP report that I predicted would be a miss from 2.9% expectations.  

8:30 Update:  2.2%!  That is TERRIBLE!!!  Not just a little terrible but TERRIBLE!!!  Business investment is crashing, structures are down 12%, Government spending down another 3%…  Damn, there is NOTHING good in this report.  What a delusional market we have rallying against this data.  Still, now the question is – is this news so bad it will be GOOD?  Will 2.2% GDP be anemic enough to spur Ben into action just 2 days after he told us the economy is improving and inflation is under control and unemployment is going down and gas prices are only temporarily high?   

ROFL!  Did people really believe that crap?  Oh yeah, that's right, I put up this image as a warning on Wednesday but what do we know with our silly Fundamental view of the market?  Of course, part of the reality we have to embrace is that there are, in fact, many, many suckers in this World and it's one thing to be ahead of the curve but quite another to fight the tide.  Our general strategy this week has been to make quick money off our bullish momentum plays and use that money to press our bearish bets

This is a good system as we end up with some huge bearish bets right at the top of a market but only IF it ever normalizes.  

Otherwise we're treading water like idiots and missing the rally.  The strategy is based on the belief that EVENTUALLY the fundamentals will catch up with the market and price discovery will occur and the huge drop we catch will more than make up for the rally we missed.

As you can see from our Big Chart, the Dow is back near the top of our expected trading range and that's why it became our focus short while the Russell has been lagging (along with the Financials) and those became or focus longs.  

Due to the crazy move in the Nasdaq yesterday, we also added a nice SQQQ (ultra-bearish Nasadaq) spread that will pay back 333% in our small portfolios if the ETF simply holds $11 through options expiration.  If you're not going to take advantage of cheap leverage like that when the market is running to the top of the range – when will you make your plays?  You can't buy low and sell high unless you are actually willing to buy when things are low and sell when they are high – our Big Chart is a very useful guide for tracking those trading ranges and – if the range breaks – we stop out and wait for the next one.   This is not a complicated strategy, folks….

Still we must fear the Fed so we went long on BAC ($8.27) as well as TNA ($59), also in our two small, virtual portfolios as we wanted to make sure all of our bases were covered.  While we expected a miss in GDP (not a 24% miss, though), we also expected exactly the reaction we're getting from the markets which is – EVEN MORE BULLISH! – as the Dollar dives to 78.75, down almost 1% off it's morning highs as everyone is rushing in to bet on MORE FREE MONEY from the Fed.

So we'll ride this wave while it lasts but we KNOW there are plenty of rocks ahead so look for us to bail early and get back on the bear track.  Our Big Chart lines are slightly higher than our 50% levels so we'll now be using 3 of 5 of those to determine when to flip the switch back to bear.  

The Euro shot up to $1.325 and the Pound is at $1.625 and the Yen is all the way down to 80.60 so they should be buying Dollars but the Swiss Franc is down to 1.201 to the Euro and that means they'll be cranking up the presses to buy Euros which my 10-year old daughter yesterday commented was stupid, because they gave away their strategy.  Maybe the SNB needs a take your daughter to work day to straighten them out!

My daughter also said yesterday that, based on her first lesson in identifying MACD and RSI patterns, that the indexes looked a couple of days from a big sell-off, which means what we have now is likely to be the blow-off top.  In Carny speak, the Blow Off is the rush of customers out of an exhibition after the big finish – last Friday we jammed to ELP as we took our bearish profits off the table and prepared for the big show this week:  "Come inside, the show's about to start, guaranteed to blow your head apart…"  I mentioned some of our bullish trade ideas in that morning's post – here's a detailed look at one of our bullish trade ideas from Thursday's Member Chat (when we were getting towards the bottom of our range):

Bullish/Samz – See above CHK but, shorter-term, I like selling FAS May $80 puts for $1.45 as that's down 21% which is down 7% on XLF ($15.30) to $14.23 and that's a reasonable place to go long on XLF since we love them at $13.50 anyway.  Using that base, you can grab the TNA May $50/55 bull call spread at $3.20 for net $1.75 on the $5 spread that's 110% in the money (TNA now $55.85) so you can't lose unless TNA drops 10%, which is 3.3% back on the RUT, which is 772.8 and 775 was our target anyway.   If you only want a HEDGE, just in case the RUT breaks 3.3% up, then it only costs $2.40 for the TNA $55/60 bull call spread and then your insurance cost is net .95 but you can see why I'd rather spend the extra .80 to have $5 better position, I'm sure… 

As of yesterday's close, the FAS May $80 puts were .45 (up 68%) and the TNA May $50/55 bull call spread is already at $4 for net $3.55 off the net $1.75 entry so up 102% in a week is not a bad way to hedge a bull run.  We just added a similar trade in yesterday's chat and that let's us put very tight stops on this layer so we can get right out with no regrets.  Even playing the straight $2.40 (and option we also used yesterday), the straight bull call spread is up 66.6% in a week – and that's a number that makes Lloyd Blankfein very happy!  

As I said, our longer-term strategy is to take SOME of the profits from these aggressive upside momentum plays and put them into longer-term bearish positions – like PCLN July $600 puts at $8.  It's not that we think PCLN will drop $150 but the July $650 puts are $16 so it's reasonable to assume that a $50 pullback in PCLN, back to $700, will give us a 100% gain on the July $600s.  If it only ends up being 50% – we'll take it!  

We'll be taking some of the money and running this morning on the bull side because this market is simply ridiculous.  If we're wrong on Monday morning and the market isn't down 200 points – then we'll rethink our bearish positions and add more bullish ones but, at some point, you do need to put your foot down and stop the madness!  

Have a great weekend, 

- Phil

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  1. 2.2% on GDP not good enough to be good but maybe not bad enough to be good either…

    Oh, and Rick Santelli and Joe Kernen are jackasses!

  2. Wasn’t even close! 2.2%

  3. Oil lines

    R3 – 105.82
    R2 – 105.38
    R1 – 104.73
    PP – 104.29
    S1 – 103.66
    S2 – 103.21
    S3 – 102.58

  4. Morning. So Spain rally’s 2% as it goes off a cliff? Tue worse things get, the better they get. Things that make you say “hmmmm”.

  5. Government spending down 3% in the GDP report. And business investment down as well. That can't be helping…

  6. PCLN is up over 60 points since Tuesday's close? That is more than AAPL? WTF???

  7. 10T yen, was not used to support the dollar…that is a fact…..

    Lines for today……

  8. /DX has to hold here, otherwise it will be 78, which is 1% more, and thus we hit the highs of April 2…..whoops, there it goes.

  9. STJ don't spook the market it's up 4 pt pre market !!!

  10. Lflan and StJ – Please tell me what you think about the following ongoing plan for how to play AAPL.  Here's what we know: every cycle leading up to earnings, they correct seriously, something like 10%, followed by a ramp up either before or just after earnings.  Usually the correction is in the middle month, say six weeks after earnings report.  But sometimes, like this cycle, the correction almost does not happen until the last day or two before earnings.  I have gotten burned trying to play short term movements (1 to 10 days), but it occurs to me it could work over the intermediate term to buy both puts and calls (or spreads) for the month after earnings.  For example, now that AAPL has just reported, it would make sense to buy both Aug puts (to play the correction, whenever it comes) and Aug calls for the nearly inevitable ramp-up, both of which occur sometime during the three month earning cycle.  So, the idea is that every three months, as AAPL goes through its cycle, it should be possible to profit from both the down portion and the up portion – what do you think?  Obviously, this could be played (and maybe should be) by using bull call spreads and bear put spreads, rather than naked calls…and this could be in addition to long term (one year plus) long positions in AAPL…what do you think?

  11. This might sounds like an ignorant comment, since there are so many very smart people here, but I think this is one of those times where abandoning reasoning and common sense is the best play.  Instead of trading fundamentals, or looking at economic data and being bewildered as to how we can keep rising, or why we aren't falling off a cliff, Greece, Spain, blah blah, etc etc etc.
    How about just trading Momentum?  If the futures are green in the morning, fine…. trade long on the day.  If the futures are red, fine… trade short for the day.  Then into cash at night.  
    It feels to me like recently that the markets are so disconnected from the analysis, why complicate it?  Have some "disaster puts" in place in case that global panic hits, and trade momentum until the markets become somewhat rational?  

  12. WikiInvest
    I looked at this a while back. There is NO WAY that I would EVER give my brokerage info to ANYBODY.

  13. Market Movement / RUT / TZA / TNA
    Free money for all PSW members……….
    Everybody get market short!
    OK, here's some free money for everybody, I'll expect a cut of the profits. Just send the checks to phil and he can forward them to me.  Friday or Monday (or Tuesday or Wednesday or Thursday or Friday or whenever)  I am going to TRY to sell half my TZA and buy TNA. I figure that way I'll at least STOP LOOSING money.  I'm throwing in the towel on my now 3 month old TZA, which is a major sin that I have now repeated twice (holding TZA that long). It goes aginst all my own Self Developed Rules but I fell into the Hold and Hope mode. Major blunder! ( it's only down 2%, it'll come back in a day or two). Extrapolate that long enough and it becomes a problem!!
    The first time I held TZA for months (more than a year ago), I sold for a 50% loss. Of course, a few months later it came back so that I would have gained back 80% of the loss if I had continued to hold it for that rebound-would have had only a 20% loss which would have been a little easier to swallow.
    So, I'll announce when I make the TNA purchase, and the entire market should start going down a few minutes after, and should keep going down for the next three months. Be sure I get the credit.
    I'm tired of trying to fight the irrational rocket ship, so if you can't beat 'em, join 'em.
    You heard it here first.

  14. Phil,
    Is Jackie available for doing sub-contracting work on the SWW?

  15. Burrben – seems logical, but most of the large movements come b'f the open.  I bought SPY Calls yesterday and was stopped out.  Those calls ended up, but the time premium eroded away, that to me is the game they are playing.

  16. SQQQ –  anybody know what this play was?  I can't find it.  Thx.  "nice SQQQ (ultra-bearish Nasadaq) spread that will pay back 333% in our small portfolios if the ETF simply holds $11 through options expiration"

  17. The markets can remain irrational longer than you (I) can remain solvent just became true…I am at a loss (literally) all I can say is WTF.

  18. Compared to Europe the US looks pretty good.

  19. terr – May 11/12 bull call spread, sale of the 11 puts for a net 30c credit it believe.  Wednesday I think.

  20. Terrapin, here it is

    SQQQ May $11/12 bull call spread at .30 – 10 in the $5KP, 30 in $25KP.  In $25KP, add sale of 10 $11 puts at .45 to offset.  

  21. Phil / Chomsky — I like reading and listening to Chomsky (actually, he's hard to listen to but always has a great message).  I often wonder how many more people's eyes he could open if his specialty wasn't linguistics. Highly recommended!

  22. jerconn….generally not a good idea to buy both calls and puts on a stock hoping to catch the up and the down wave.  Hard to make money with that technique.  Better is to sell premium on both ends (short strangle) then roll the calls or the puts as needed, if needed.  For AAPL  I would do neither.  I would just scale in with far out bull call spreads.  I'm buying some Jan 13 550/650s over the past few days.  
    Burrben…not ignorant at all.  That's why we are working on starting a MoMo portfolio.  This market is ready-made for momentum type trading. 

  23. TNA – did anyone get a fill on the spread yesterday afternoon? i almost pushed it a nickel but then held off.

  24. stjean – I took your AMZN strangle, fortunately just on paper. I'm sure it will be a good learning experience. Any suggestions on how to roll out of the today 215 call? I have a feeling it's going to suck…

  25. Morx, got it filled at suggested price.

  26. This market is just plain dumb, I am waiting for the headline… JPM upgrades themselves beleving/knowing this market is so f-ing rigged they can't lose! market jumps 100 points

  27. Lflantheman / Momo Port  -  I like the idea, but I don't like how it isn't setup to use margin.  I would venture a guess that most people on this site, at least the premium members, are using Reg-T at a minimum, and most using portfolio margin.  I'd rather see the portfolio structured with that in mind.

  28. kurtww/stjeanluc….Those short earnings strangles will work 90% of the time.  But when they don't work (when the stock moves more than expected) they can burn a hole in your account.  And caution rolling this up and out.  AMZN may continue UP, and burn you even more.  I'll be interested to see how you manage this question stj……

  29. Burrben…We are setting this MoMo account up specifically NOT to have to use margin, so that literally everyone can participate, regardless of their asset class.  You will recall that is how I set up the AAPL account.  I did it specifically with no margin, so that anyone could participate.  

  30. morx:
    I got it filled. Took a little bit of time.

  31. AMZN / Kurtww – I'll finish the portfolio update and get back to you!

  32. MoMo Portfolio / Burr & Iflan – I agree with Burr.  Can we take an approach similar to the $5k and $25k portfolios, so that those with PM can put on some less restrictive MoMo trades?

  33. 600 AAPL, if they defend we should get bouncy..

  34. Phil/AMZN, "selling 5 May $210 calls for $2.15 ($1,075) and buying 3 July $220s for $4 ($1,200) to cover for net $125 out ", the trade is down about $3500.  I think AMZN may run to $240s.  What is your ideas to roll the $210 short calls and when to take profit on long $220 Calls?  TIA.

  35. PCLN……I sold my one (1) PCLN May 4 725  call for$ 35.00 for an 80% gain overnight.  Now THAT's how you play the MoMos.   What's our next play stj ?

  36. I feel like I'm in a bizarro market, what's good is bad and what's bad is good.  And Phil, to continue your comparisons to 1999, today on CNBC they had more 20 something year olds with their websites that make no money but they were already calling them our next billionaires and wowed that so many kids are just starting a web site and becoming billionaires.  If that is not reminiscent of 1999, I don't know what is.

  37. Uh-oh – Not sustaining this rally too well.  Be careful with those longs – nothing wrong with taking profits and then buying different longs later.  

    AMZN May $220 calls can be sold for $9, that's a fun play.  Stop at $12 risks $3 to make $9 – wish I caught it right at the open!  

  38. Lflan – so basically you're saying not a good idea to play both short and long side by buying premium, but by selling premium it could work?  That's why I mentioned spreads, so that the premium is under control…interesting tho regarding AAPL that you wouldn't do this…Why are you uninterested in playing the down side of AAPL?  There always seems to be a significant correction sometimes during the earning cycle…

  39. iflan:
    Did you get blessed at the beginning of the year! Find a million four leaf clovers! All kidding aside, nice job with your unemotional trading style.

  40. RUT down hard so far

  41. Wow, IMAX just dropped 1.3 in seconds

  42. dpastramas/photo
    That gave me the huge laugh of the day, awesome pic.

  43. Thanks dpast if only we could be so lucky and be sedated whilst we watch this…may have to move to Pharms remedy after all it is Friday!
    oh and the consumers just received their Q1 statments and their happy so I guess we go higher?? (Hey maybe I am starting to get this…if I rub 2 nickles they become Quarters!)

  44. jerconn….I AM playing the downside with the Jan 13  550650 spread.  It has a long component (550) and a short component (650).   If AAPL pulls back significantly I will buy back some of the covers (the 650s) with plans to resell them later at a higher price.  You won't see this technique discussed much.  It's better understood if you mentally ignore the 550s and figure what you would do if you sold some Jan 650 calls on AAPL for $60, then AAPL pulled back to 540 and the 650 calls dropped to $40. How would you profit from that, if you knew AAPL was going to go back up?  You'd buy back the 650s then resell them later.   I call that massaging the spread.  If you know the stock you can make more money that way than by just buying and holding the spread.  So, yes, I am playing both the upside and the downside with my spreads. 

  45. dpast..LMFAO..looks like a person in a bear suit..anyone from here?

  46. Let me know if I missed anything, I just had some business phone calls that put me behind and I am making lots of adjustments!

  47. Interesting, no video showing Ben Bernanke pulling the trigger from behind some shrubs….

  48. Kustomz…how did you know, it's me

  49. 1020 — Good one! :)

  50. I knew you would enjoy this guys.  Probably this is how most of us feel these days.  But one day…

  51. Phil or Iflan
    What are your thoughts on the Jan 2013 AAPL 590/620 Bull Call Spread?

  52. dclark41…….unemotional trading style.    That's how you make money!    I keep trying to teach you guys….quit getting 'pissed off' at these equities.  Just PLAY them.   PCLN doesn't love or hate you.  So why do you have emotions about PCLN?   It's a stock, not your girlfriend!   Doesn't matter they go up or down.  Who gives a rat's arse.  Just get on for the ride and profit…..

  53. F really dumped .25 in about 10 minutes

  54. lflan / girlfriend — "Just get on for the ride" — That IS my girlfriend!

  55. Bobhu/AMZN — I had the same trade on….sold the July 220s for $16 (+$3495), then rolled the 5 May 4 210s to 7 May 220s (that Phil just mentioned) for about $8…

  56. Can we start a movement to lock up the Fed for violating its mandate – for F*s – they have publicly stated they want to jack up asset prices – last time I checked this was called market manipulation and is not in their mandate.
    I am a bit crazed right now but its making it impossible to invest in any rational way – having too hard a time drinking the cool aid. 
    Stupid post but please could we get back to our self-off. I am about to capitulate so that's good news for everyone else.

  57. No, that's my girlfriend!

  58. Once again, lots of adjustments… Let me know if I missed anything!

  59. They are trying to rally here…lets see if they can get it rolling

  60. Phil – When in May are you headed to Vegas?  Money Expo?

  61. iflan
    I hear you about being emotional. There is a strong need to be right that sometimes interferes with our ability to trade what's in front of us. It is difficult to put aside. I admire your ability to enter and exit trades especially with the likes of PCLN. I will continue to watch from the sidelines on those. Thankfully, I still own a business that does make money! :)

  62. OK, where are we?  

    Dollar 78.84 is bullish and we'll watch that 79 line for a turn signal.

    Euro $1.3244 is rejected at $1.325 but not really bearish over $1.32.

    Pound $1.6248 is rejected at $1.625 but not really bearish over $1.62.  

    Yen down to 80.43 (strong) and the BOJ will spend all 10 Trillion Yen today to stop 80 from failing and clearly, since the Yen is strong while the Euro and Pound are super-strong, the BOJ must be trying to buy Dollars.  EUR/CHF is also falling to $1.2010 and they have said over and over that they won't let $1.20 go.  The Swiss only care about the Euro being strong (stronger than them) but what's happening right now is that the Dollar is so weak it's boosting Francs along with Euros and Pounds which shows you that the Swiss policy of buying Euros, which weakens the Dollar – is wrong.  

    Oil is $104.27 after popping back up to $104.75 – what a joke!  Gold hit $1,668 and is now $1,663 and that's not going to calm down until people realize that the Fed can't ease because, right in our weak GDP report, it says this:  


    The price index for gross domestic purchases, which measures prices paid by U.S. residents,
    increased 2.4 percent in the first quarter, compared with an increase of 1.1 percent in the fourth.
    Excluding food and energy prices, the price index for gross domestic purchases increased 2.2 percent in
    the first quarter, compared with an increase of 1.2 percent in the fourth.

    That is almost a 100% increase in the rate of inflation AT THE CORE!!!  The whole Fed/Treasury Ponzi scheme falls apart if people start thinking there's inflation and the US has to start paying 5% to borrow money like the 3rd World country it's rapidly becoming.  

    Oh yeah, and my favorite part of the GDP report is how growing inventories are considered a positive.  Unfortunately, last Quarter we had a bigger build:


    The change in real private inventories added 0.59 percentage point to the first-quarter change in
    real GDP after adding 1.81 percentage points to the fourth-quarter change.  Private businesses increased
    inventories $69.5 billion in the first quarter, following an increase of $52.2 billion in the fourth quarter
    and a decrease of $2.0 billion in the third.

    So 2.4% of the last two quarter's GDP growth has been based on the assumption that inventory will be sold.  Also:  


    Personal saving -- disposable personal income less personal outlays -- was $466.0 billion in the first quarter, compared with $530.8 billion in the fourth.
    The personal saving rate -- saving as a percentage of disposable personal income -- was 3.9 percent in
    the first quarter, compared with 4.5 percent in the fourth.

    Disposable income/savings going down – gas prices going up.  Nat gas at all-time lows might go up too.  Copper back to $3.81, gasoline $3.14…  This is not likely to end well…

    Consumer Sentiment was BTE and that halted the downturn but, really?  This is a final estimate so all this is is an adjustment – it's not a new report – we've already rallied off the first two estimates!  

    Apr. Reuters/UofM Consumer Sentiment76.4 vs. 75.8 expected and 75.7 prior.

    Is the trend really our friend here? 

    I am sorry to come across all doom and gloomy but the MSM is all sunshine and lollipops and I do feel an obligation to be the voice of reason here.  I don't like being bearish but I also don't like having my account wiped out in a downturn or a "flash crash" that "no one could have seen coming."  As I've said, I very much regret NOT being a broken record when I didn't like the market in 2007 and 2008 – the Fundamentals sucked but everyone was ignoring them – until they didn't anymore.  By so many measures – we are heading right off that same cliff again.  

    At the open: Dow +0.21% to 13233. S&P +0.31% to 1404. Nasdaq +0.28% to 3059.

    Treasurys: 30-year -0.08%. 10-yr -0.05%. 5-yr -0.03%.

    Commodities: Crude -0.15% to $104.39. Gold +0.34% to $1666.15.

    Currencies: Euro +0.22% vs. dollar. Yen -0.53%. Pound -0.36%.

    Market preview: Stocks' premarket gains ease after GDP data show economic growth cooling more than expected; S&P -0.3%. Encouraging earnings news from AmazonFord and Merck provide a boost. Italy's decent bond auction blunted S&P's downgrade of Spain, sending European markets higher.

    "I do not believe economic conditions are likely to warrant an exceptionally low federal funds rate (until 2014)," says the Richmond Fed's Jeff Lacker, commenting on his FOMC dissent. The leading hawk of those now voting on policy, he expects inflationary pressures are likely to require a bump in rates by mid-2013.

    Sterling hits its highest level vs. the greenback since September and the highest vs. the euro since June 2010. The meme in the currency markets has the BoE marginally more hawkish than the Fed, thanks to uber-dove Adam Posen ending his call for more QE. The U.K. economy, however, remains stagnant to down. Part of this equation isn't adding upFXB +4.1% YTD.

    Dude, where's my weaker currency? After the BOJ gives the market what it wanted in the form of a 33% bigger QE program, the yen gets even stronger, the greenback off 0.4% to ¥80.67. "The leopard doesn't change its spots," says Tim Condon, "(The BOJ) doesn't view monetary accommodation as a cure capable of reversing Japan's deflation."

    Maybe most disappointing in the weak GDP print may be real final sales, up just 1.6% (2.1% forecast). Economists had hoped this report would provide a better "mix" than Q4, with more sales and less inventory driving the number. While the inventory build of 0.6% was less than Q4's 1.8%, it was higher than the whisper 0.2%.

    More signs of a spring slump in economic growth emerge inGDP and jobless claims data, but a WSJ analysis shows the problem isn’t that companies aren’t hiring, they’re just not hiring enough in the U.S. While 35 big U.S.-based multinationals added jobs much faster than other employers in the past two years, nearly three-fourths of the slots were overseas.

    No wonder they won't hire Americans:  Q1 Employment Cost Index: +0.4% for the past three months. Year-on-year, civilian worker costs +1.9% vs. a 1.5% increase among government employees.

    Spain's unemployment rate rose to 24.4% in Q1 from 22.9% the previous quarter, marking the highest unemployment in 18 years.

    Also down 20% today:  The April EU Retail PMI plunges to 41.3 (49.1 previous), the fastest decline in sales since the depths of the financial crisis. "Ominously, German retail sales declined," says Markit's Trevor Balchin, who notes other survey indicators such as margin compression and staff reductions corroborate the headline number.


    Jim Chanos shorts the clearest symbol of the rise of China and resultant iron ore gold rush in Australia - Fortescue, whose shares have risen more than 560X over the last decade. Against his short, he's long BHP, also heavily exposed to China, but better diversified and a with far less-leveraged balance sheet.

    Ford (F): Q1 EPS of $0.39 beats by $0.03. Revenue of $32.4B beats by $1B. Shares +2.8% premarket. (PR)

    Honda (HMC) FQ4: Net profit +60% to ¥71.59B ($887M), operating profit +142% to ¥111.98B vs. consensus of ¥123.2B. Guidance: FY 2012/2013 op profit ¥620B vs. ¥231.36B and consensus of ¥645B; global car sales +38% to 4.3M units, motorbikes +10% to 16.6M. (PR

     IMAX (IMAX): Q1 EPS of $0.06 misses by $0.02. Revenue of $55.6M (+23.1% Y/Y) in-line. Shares +0.6% premarket. (PR)

    Coinstar (CSTR -4.1%) trades lower after posting revenue growth above the estimates of analysts in Q1 but disappointing investors with guidance for full-year 2012 a touch on the light side. With shares of CSTR up 42.8% YTD, trader sentiment is split on if the dip is worth buying.

    Canaccord downgrades Deckers Outdoor (DECK) to Hold from Buy on concerns over growing sales in European and tough international comparables. Analysts with the firm chop the price target on shares to $73 from $105 after Deckers fell 18.7% AH yesterday following its Q1 dud

  63. More cowbell!
      Amazon's (AMZNhigh-flying Q1 report catches the eyes of Goldman Sachs' Heather Bellini who upgrades shares to Conviction Buy from Neutral and boosts her price target to $300. In addition, BofA and SunTrust upgrade to Buy, but JMP Securities doesn't join the party – calling valuation "unattractive." AMZN +16.4% premarket.

  64. Phil, what do you think about buying the Sep SPXU as a hedge and some summer protection. Say the 9c for 1.30.
    second question how many for each 500K portfolio. Thanks

  65. LFlan –  Do you have any trades on now?  PS: Glad to have you back, the little write up on Massaging Spreads isn't rocket science, but it worth it's weight in gold.  People don't think about spreads like that enough… 

  66. escohen5/AMZN, Thanks, that was a great move, I just try to see if Phil get some other ideas.

  67. Lflan – Okay, thanks for the clarification! 

  68. AMZN / Kurtww – The way to go for the AMZN strangle will depend on how much margin you have and once again, the deal is that you start small (1 contract or 2 at the most) so that you can roll to better positions. 

    If you have a spare margin, I would go 2x the May1 (next week) 225 calls but I would wait toward the end of the day as this week's 215 still have about $0.30 of premium. It's not even, it's a debit but I would not want to commit that much to the trade. If not, you could go to May 220 straight for a small credit and hope for some sanity back in the market. You could also go for 2x the May 225 for a $2.00 credit. 

    Like lflan says, AMZN could really take off and bury you so you need a lot of firepower to stay ahead. Just ask Jabo! The reason I say you need to keep the positions very small is because the smartest thing to do might to take you lump on that one trade and close it for a loss and move on to the next one. Some will work – this week the first 3 produced good wins, some will need some patience (CTXS is an example – it ran away yesterday but is getting better) and some will bury you. These are supposed to be fun play not your income plays!

  69. Phil,
    In that TLT has held up well during this advance in equities, what do you think of using call TLT options (2-3pt spread) as a short term hedge? Granted a surprise QE3 announcement would tank TLT but how likely is that short term – risk/reward probability-wise?

  70. rainman/girlfriend….lol.

  71. Government spending/StJ – Behold the wisdom of austerity!  I was just watching Paul Ryan yesterday yammering on about how the only way to save America is to cut Government Spending by $1Tn a year, which is $200Bn more than their total discretionary spending cost, rather than raise taxes – it's completely insane that the Reps are in contention but they are!  Maybe we can get Le Pen to come over here and give us an alternative – at least here she'd be considered a moderate compared to our political "Conservatives"!

    CHK whacked back down to $17 despite big move in nat gas back to $2.16.   I like the Jan $12.50/17.50 bull call spread at $2.95, selling the $14 puts for $1.80 for net $1.15 on the $5 spread that's $4.50 in the money. 

  72. PCLN / lflan – Good move cashing in the long calls. My play right now is to wait. I still have a longer time frame uptrend but the shorter time frame is now down. 

    Actually, it's another point to make about trading that most people ignore – you should always trade with 2 time frames in mind. The longer time frame will indicate the direction of the potential plays and the shorter time frame can be used for signals. Being contrarian can be fun, but you need some luck and patience. Going with the flow require a lot less luck! If you have a long term uptrend you should look at long plays, they might not work, but statistically they have a better chance. Same thing with short plays, only with a long term down trend. But it's just me – I like to odds on my side and I don't like losing money!

  73. $ headed for 78.60s where it should bounce..QE3 2 months away I would think playing the $ for a bounce is an easy play.

  74. MDRX     Big strangle in 11c's & 8p's .. net around $7.20

  75. CHK / Phil – What would help the stock now is for the CEO to step down… Markets don't like controversies and this guy is walking a thin line. He might be completely right, but that's not the point right now!

  76. For emotional detachment while trading I'd recommend everyone read Dr. Brett Steenbarger's Enhancing Trader Performance. Lflan is right. There's no point in getting pissed off at these MoMos (or anything else) when it goes against you. It can easily lead to "revenge trading".
    His follow-up book about trading psychology published in 2009 is probably also a good resource. Seriously, buy the book and read it over the weekend. I even provided a link to eliminate the excuse of not having the time to find it :)

  77. Austerity / Phil – The most galling part of the GOP austerity plan is that it's only austerity for the bottom 90% of this country. It would be more palatable (but still wrong) if it applied to everybody… And the crazy part is that 50% of the bottom 90% are actually OK about being screwed for the benefit of the top 10%. Goebbels would be proud!

  78. AAPL/Jerconn – I am not to fond of plans where you buy lots of premium and wait.  Why not patiently wait for a move that seems too far up or two far down and THEN take up the positions?   I did call a top (as did Lflan) at $640 and my target to buy back in was $550 and I think we bottomed out at $555 so it's not impossible to call a range without having to play both sides.  Now we are in the lower middle of the $550/700 range I expect for AAPL but I still expect the overall market to be a drag on them and I'd really rather see $550 tested again or see $600 hold next week before establishing longs.  Of course I'm always a fan of selling the 2014 $450 puts (now $46) as $404 is a good price to buy in – even if we do have a big sell-off.  

    I'm surprised AAPL isn't down more with the Samsung news – those guys are doing very well in the smartphone and tablet space and, logically, if one can do it, then more can do it or maybe they end up being Coke and Pepsi but that still means no more 90% market share for AAPL down the road – as well as pricing pressure.  

    Playing momentum/Burr – That's what we should be doing.  You can't be all one thing and nothing else, you need to have some long-term bullish plays, some long-term puts, some short-term bullish and short-term bearish and, when one side does well, you cash them out and use some of that cash to roll the "wrong" side and then add back more "right" side positions if we keep going.  That's trading momentum.  Even if we do keep going up now – we certainly paused at those 2.5% lines and that's a good time for us to re-position – as are all our major crosses.  The key is you have to have some sort of a plan with well-defined levels at which you take action – you can't just be swayed by day-to-day moves in the market unless you are a totally pro day-trader.  

    Jackie/Newbie – Make her an offer.  

    SQQQ/Terra – It was the $11/12 bull call spread (now .20), not the $10/11 (now .50), my mistake on the top.  

    Speaking of tops,  the PCLN $580 puts are now $7 and can be rolled up to the $600 puts at $9 for $2 – we like rolling up $20 for $2!   That's for the $25KP and the Long Put List.  

  79.  this market gives new meaning to the word inefficient
    largest companies in the world move like illiquid small-cap yoyos

  80. Samsung/Phil check out the Note smartphone from them..I love it! Trust me, you'll ditch your IPhone.

    IWM 82.06.. What happened to JRW?


  81. UUP/5KP – Phil, down about 50%. Close, DD or roll?

  82. Irrational/Sage – If at any point you are in positions that you cannot comfortably afford to roll AND double down at least once – then you need to set very tight stops and give up because you have no escape otherwise.  So, following a simple 20% rule – you have $1,000 and allocate $100 to a position and you buy $25 and it drops to $20 so you DD and net $22.50 and then it drops to $16 and you DD and net $19.25 x 4 = $77 so you still (if it's an option) have $23 left on the side to pay for a roll to a longer date.  

    If you do spend that $23, then you are in for the whole 10% position and your stock is down $3.25 x 4 or 13% of your full position so, unless you are willing to go through that whole cycle again, your stop can still be set at 20% and you get out.  If you didn't spend $23 on the roll and you just have the 4x position at $16 that you spent $19.25 for – then it's the same thing, you just set your stop at a $20 loss, which would be about $14 x 4 ($56) plus the $23 you didn't spend is $89 and – simply because you managed your entry and scaled in – you don't lose 20% of your allocation until the stock/option has dropped 44% on you.  

    If you are wrong on something by 44% – maybe it is time to rethink your position anyway….

    Also of note – because you have a PLAN, then you know BEFORE you spend $32 to DD at $16 (36% off) that your stop is going to be $14 so – unless you are, based on newer and hopefully better information, fairly certain that the stock or option will not fall 14% more down to $14 and stop you out – then you would just take the 2x loss at $16 off your $22.50 basis and you're down 13% on your $100 and you walk away.  You don't just mindlessly double down – each 20% loss should force you to seriously rethink your position in light of the new information.  

  83. Phil…I appreciate it…talking me off the ledge so to speak, the last time I was this wrong and the market was this right was when Greenspan opened his new conference with " this irrational exuberence cannot last" I thought I was flat, carded up wrong and was long…lost my shorts, and then some.

  84. stjean – thanks for the suggestions. I put a $.50 trailing stop on the calls and they just closed out. It obviously improved a lot already, and for a 90% play the downside has not been that bad (hope to gain $800 on 5 contracts, lost $2800, though it could have been as much as $5k). Anyway, on paper I made a lot on AAPL earlier in the week, so it all works out. I wish I could be as objective with "real" trades, that's the part I know I need work on. 
    Kwan, thanks for the book suggestion. I'm also getting a lot out of Alexander Elder's books and I've enjoyed Van Tharp's as well (though he gets a little mystical and touchy-feely for my tastes — but maybe I need more of that in my life). 

  85. PCLN up 25???
    FU ME!!!

  86. Jabo you hit the nail on the head…not sure but you may be as bull headed (and broke, now) as me:)

  87. For those of you as bored by this market as I am, thinking that long is wrong, and short is [for the moment] suicidal, here's an excellent diversion -

  88. @Felipe
    re: How's everyone doing? from yesterday, maybe things aren't as bad as we make them out to be here:
    Last night I stopped at a place called Anthony's Coal Fired Pizza, to try theirs.
    The pizza w/two toppings was $21.00, the small glass of Zinny was $10.00  (TEN DOLLARS!!) and we each had one after digesting that smack on the head.  Fortunately, this was on an expense account with a $60.00 limit on dinner.
    Why am I writing this?  Because the place was packed with a 10 minute wait.  The bar was full too.
    If people are hurting, it sure ain't the Middle class in Pgh.
    ..and the pizza was worth about $2.00.

  89. Trades / Kurtww – Even with paper money, you should play these trades with 1 contract to begin with (or less than 5K of margin) because unless you have a huge account with tons of margin, I would not risk 5 contracts on an earning play… That way it gives you a chance to learn to adjust the position without involving too much money…

    And remember what Phil says (that's my philosophy as well) – $200/day is $50K per year. That pays for a lot of McMuffins! You don't need to overextend yourself to make more than the average American!

  90. So I guess I cannot imagine what would have happened if GDP came in at say 3.0! would we have crashed?? up is down right?

  91. StJ: CHK: Multiple stories out about McClendon including an open letter from Whitney Tilson calling for removal of him and board chair – I can't believe its going to happen, he runs the company like its still private and isn't likely to go now – probably will announce a new art collection for the office -LOL.

  92. Phil / Samsung – I switched from the Iphone to the Note when it first came out in Feb.  Love it!  I get a lot of questions from people wondering what the heck it is since it's so big.   

  93. Too long, took profits on TNA..IWM having a hard time

  94. Sage – No, I believe down leads to up and up leads to an even greater up move. 

  95. Dollar testing 78.75 again.  QE 4, 5 and 6 now being discussed by "experts" to whip the markets into a frenzy.  This is EXACTLY how they do it at the carny!  Step right up and see the show folks….

    Guy on CNBC says European people have sent a message that they are tired of austerity and want growth and so the markets are rallying.  Do I even have to say on how many levels that's ridiculous?  Did they even make it 60 days through austerity?  Does that mean that the CBs of the World will simply just keep printing money forever (or until the economy is all better)?  If so – then why pick on the Dollar – our GDP may suck but we're NOT in a recession and we certainly haven't tried any austerity to turn away from.  XLF isn't buying this story – why are the indexes?  

    Volume in this mess just 29M at 11 on the Dow.   

    Chomsky/Rain – That book is great.  

    TNA/Morx – You couldn't fill that this morning?  They were way lower this morning than yesterday.   RUT is still the biggest underperformer.  

    I love AXP but $60?  Seems reasonable compared to MA at $460 though.  

    JPM/Sage – Could happen.  

    AMZN/Bob –  trade from yesterday was selling 5 May $210s for $2.15 and buying 3 July $220s for $4 for a net $125 credit.   The July $220s opened at $17 and that's $5,1000 reward for selling into the excitement and that's not too bad against the $210s, which are now $15 ($7,500) and you have to be patient with the short calls but they can be rolled to June $215s, which are $14 for $500.  If you still have the 3 long calls, now $15, then I'd roll to the Oct $235s ($16) for $300 and then DD for $4,800 to 6 longs at net $4,975 and roll the callers to 7 June $220 calls at $11.50 ($8,050) for a net $550 credit which makes the net on the 6 Oct $235/7 June $220 spread $4,425.  Not what we hoped for but not a terrible spread to hold.  ZH had some good notes on AMZN that there was some accounting nonsense in the numbers and they are, in the best case, a very thin-margin operation and logically should not be holding a p/e of 163 but, in this irrational market – who knows?

    We did AMZN as a focus short last time they got this expensive but people did end up capitulating before they topped.  It's like PCLN, once you have the Cramer crowd on board, you can't stop the train so you just try to ride it and be there for the crash when they finally run out of tracks.  

    PCLN/Iflan – Great job!  

    Web kids/Rustle – Hey I'm raising one of those so that's not a trend I'm going to fight.  Maddie already has her first web business selling virtual things to virtual people in virtual worlds and leveling those virtual people up, which is kind of like paying someone else to go exercise for you and then you come home and get to use the buffed body.  Amazingly, these idiots pay her in real money – although maybe it doesn't seem real to them as it's Pay Pal….

    Bear/Dpast – Now that is strange. 

    AAPL/L4 – I'd hold off until next week.  This week had very little data, next year we have some important data points:  


    Thursday May 3

    Chicago PMI
    9:45 AM ET

    Farm Prices
    3:00 PM ET

    8:55 AM ET

    ISM Mfg Index
    10:00 AM ET

    Factory Orders
    10:00 AM ET

    Weekly Bill Settlement

    Jobless Claims
    8:30 AM ET

    ISM Non-Mfg Index
    10:00 AM ET

    Money Supply
    4:30 PM ET

    Treasury STRIPS
    3:00 PM ET


    Notice no Fed speak scheduled – that's very interesting as they are usually so chatty.  I think they gave the impression they wanted to and now, without actually doing anything, they have stimulated the markets.  BRILLIANT!  

  96. Friday, April 27, 11:44 AM Expedia (EXPE +29%) is off to the races following its huge Q1 beat, driven by strong hotel bookings, and is lifting other online travel firms in the process: PCLN +3.8%. OWW +9.1%. TRIP +7.7%. TZOO +3.6%. JPMorgan is upgrading Expedia in response, while Deutsche (Hold) thinks management's reiteration of its 2012 EBITDA forecast is "conservative in light of building momentum." Benchmark (Hold) agrees, though it expects growth to decelerate in Q2. (transcript)

  97. Hi…checking in after taking a trading break.  Just wanted to add an additional note of caution to phil's comments to sage on managing a position that is going the wrong way.  I started with a small -5 CMG short 350C late last year and successfully managed rolling and DD to a -30 Jun 400C at about 18 in premium credit.  My plan was to hold through earnings last week and and "planned" on needing perhaps needing one more roll after that to recover this trade that relentlessly moved against me.
    HOWEVER, what I didn't plan on was my broker adjusting the margin requirement one week before earnings and CMG flying up to 440 at the same time, forcing me with a same day margin call in my trading account.  The point here is regardless how much you plan your margin requirements in advance due to adverse position movements, there is always a tail risk of a surge of volatility causing an margin requirement increase at the worst possible time and destroying your plan.  
    In my case, I had to decide whether to meet the margin call or liquidate the position, and I decided the latter option.  One week and a day later, CMG was at 402 where my trade would have been profitable on paper.  So hit with a perfect storm of an irrational constantly moving stock (in the wrong direction) and increased margin rqts to support rolling 80pts AND then a blowoff surge along with a margin rate increase (with PM), my boat hit the shoals.  Of course, then I watch CMG a few days later drop 38pts to what I expected to be the price in the first place.
    Anyway, fortunately my trading account is firewalled from my other investment accounts and the effect is more like restricted playground time rather than expulsion from school.   Just wanted to chime in to always remember that something crazy can manifest in 24 or 48 hours with these momos, and your broker can pull the punchbowl on a moments notice with margin rate increase at the worst time.

  98. Phil,
    I notice the futures for the Dow, S&P, NAS & RUT are always less than actual. Is there a formula or rule of thumb for these differences?

  99. Trading in the Zone by Mark Douglas is  a quick read with some good basic principles/techniques to work on.

  100. Morning All – I keep seeing these headlines that austerity is killing GDP here in the US.  I would hardly call running a $1T+ deficit austerity. 

  101. lvmoda
    Thanks for sharing that experience! Those type of lessons tend to stick with you and add to your personal growth as a trader IMO.

  102. Phil— without ripping my head off please..
    Is there any hope tthat PCLN will drop back today? There seems to be constant buyers without any drop?

  103. Is this time going to be different? 

  104. I want to short this sh!t.  Anyone else??

  105. Pharm / PLX – take profits or wait for the news?  when is the announcement?

  106. its looking like the BOJ is losing the battle with SNB

  107. …ohhh peedle BE CAREFUL you don't want to end up looking like me…I can't even buy back my shorts and refuse to deposit more cash at this point because I know I'll continue to do just what your suggesting.

  108. AMZN – Cash strapped state governments are going to look to extract their pounds of flesh sooner or later and AMZN will be collecting tax for California as soon as September.   I am sure pressure by employers like BBY could result in some action and could see Obama supporting a tax if elected.  If the tax kicks in and they are working on 1.5% margins then there could be some pressure on the stock.  By the way AMZN has promised lots of jobs to defer tax collections in many states.  I wonder if they will deliver on all those warehouse jobs.  How many more commitments can they make.  

  109. peed, not yet. Watch AAPL you want to see it breakdown n test 600… if the markets are serious then 606 gets taken out headed for 610 and the whole market goes gang busters.. volume is lower than yest as well..

  110. CHK / Oknoman – Read the Rolling Stone article about CHK and you will understand why the guy has to be reined in. I was thinking the same yesterday – he runs the place with complete disregard for shareholders. Once you go public, your mindset has to change. I went through an IPO myself in the 90's and I saw first hand what happens when people go from being private to being public and how it's tough to change your mindset on what you can do and can't. It's tough to switch especially if you are a cowboy to begin with… It was a good lesson for me. I actually learned what NOT to do in many cases!

  111. Stuman/AMZN
    how would taxing purchases reduce AMZN's margins, it is a pass through, right? Perhaps lower sales but people are lazy and would rather have things shipped to them, look at Zappos I could have never (and still cannot) imagine buying shoes via the internet but I was as dead wrong about them (thanfully did not short) as I am with this market. Would really like to here why you think that though?

  112. so, as long as the promise of QE is kept alive, the market can't go down… but with the market high, the Fed has no reasonto actually DO qe.  They're smarter than I thought. (or dumber.  take your pick)

  113. PLX – I am 1/2 out of stock. Have the bull call spreads.  Now, I am waiting.  This one is going to make or break me.

  114. Talk about QE, the fed has an open widow at 0.   Borrow at 0, and yank the markets around.  If you are wrong….then get bailed out.

  115. sagemm1/AMZN taxing, you are correct about pass through on tax and lazy people but I think the better pricing(without tax) is very important to a bit part of their customers.  I bet if their start to collect tax, the growth will sharply slow down and they are NOT a growth company to have 100+ p/e anymore.  There is a big reason why they are so against it. 

  116. Is this time different?
    Yes, be my guess because so many savvys are focused like a laser on every blip down unlike 2008-9.

  117. bobhu / AMZN — I think the free shipping is more important than tax anymore. Shipping is often more than the tax you pay. I do most of my shopping online and I'm finding that the stores that offer better pricing then Amazon also charge more for shipping.  In the end, even though I get taxed by Amzn (WA resident), they are still cheaper than most to get the item to the door. Even with if I'm not being charged tax on the other sites. Most of my purchases outside of amazon are 1) items that amazon doesn't carry 2) sites offering free shipping or 3) generous sale. I'm not an Amazon fan but I am bottom line conscious. Amazon is also expanding their free shipping by fulfilling other merchant's orders from their warehouses. That's likely to attract more merchants as shipping heads higher.

  118. Stuman – absolutely agree.  I think even b'f that article, several of mine said the same thing…..I have not been pumping them for my own good!  Since they are in bed with PFE, my premise is PLX changes its letters to PFE.  $12 would be a good price.  It is not so much the Gaucher's treatment, but the technology and it use across many applications (anemia, mAbs, etc).  And COG is way down.  There are a few competitors that I am watching, but it is too early to give them any traction.


    XRT – at the top of their BB on the chart.  They have pulled back every time it touches.  I am rolling up my puts and DD.  Volume has been a tinkle since the 'sell off' a few days ago.

  119. rainman/AMZN, great point, it's my bad, how can I forgot the free shipping(I am not a prime member). I am going to sell some AMZN short term puts with tight stop.

  120. PLX – Pharm, thanks, I am in this position with you and look forward to some good news from the FDA.  

  121. Zero / bored — Did you get your Axe-FX II?  They just released new firmware this week that allows you to tone match a guitar track.  Results seem impressive so far.  Even on some difficult ones like EVH or Boston.  Cliff evidently reworked all the amps and cabs to be tone matched to his collection of physicial amps as well.  I installed the firmware but haven't tone matched or spent much time on it.  What I can say is that it definitely sounds different in a better way to me. The low end seems to have more punch to it than it did before and there seems to be a sort of higher sensitivity in the sustain and bends.  I don't get bored often but when I put on a nice set of cans and jam with the Axe FX, time slides right on by in some time warp sort of way.  Nothing like watching this market.

  122. just FYI – maybe i would have bought TNA this morning had it been somewhat normal. My computer froze last night and i was still trying to get it going. Watched the market with one eye from phone & wifie's pc but had the impression we were headed down. Got the error message, "logon process has failed to create the security options dialog". According to forums there doesn'[t seem to be one solution. A program conflict of some kind. After disabling Superfetch, running chkdsk (all in safe mode), uninstalling virus checkers, etc i got explorer to work again. Still freezes if i try mozilla. Anyway, that's been my morning. I'm sure you all are glad to know the details.

  123. Good this is what you want to see, the $ get manhandled. Needs to be stretched, this way we get a bounce instead of the drift sideways..

  124. Lflan  MoMo I must say I prefer your boring Ideas like TKR from 4/10/12 Sep bull spread 40/45 and sell 45p now up 280.00 per contract. Good play 

  125. Phil, do you have a volume on this stuff?

  126. GDP – I always look at Consumer Metrics GDP assessment when it comes out.  More fun this time with the GDP deflator which keeps real final sales from being negative.  Real final per capital disposable income fell during the quarter.  Anybody hear that in the MSM today

  127. dow looks like 44mm

  128. The House of Crooks (er, Reps) voted to curb the student debt debacle by removing funding from the Obama's Healthcare discretionary furnd for mammograms and cervical cancer screening.    Brilliant!

  129. adding DIA May 129 puts and SCO May 35 calls one at a time.. been placing a buy at a penny or two (DIA) or dime (SCO) below the bid and they just keep filling.  when one fills, i enter another order.

  130. Phil/QE forever  If this market is fueled by bad is good due to the anticipation of the Bernanke bazooka, then logically should financials be going crazy to the upside??

  131. Capitulation/Samz – It's a good sign when people start feeling that way but, unfortunately, these CBs are so crazy we don't know what kind of nonsense will happen over the weekend.  Maybe Merkel capitulates and offers up another Trillion – that could be good for another 10% move up – it's just nuts and all you can do is ride it out.  

    Now the builders are fying.  HOV still cheap at $2 and you can buy the Jan $1/2 bull call spread for .60 and sell the Jan $2 puts for .60 for a free shot at making $1 and your b/e is down at $1.50 because of the $1 calls.  I also like selling the Jan $2 puts and buying the 2014 $2 calls for .65 for .05 on the $2 calls with no limit to the upside.  

    Vegas/1020 – Wednesday next week.  Just out for fun and a few meetings.  

    SPXU/Yodi – Don't forget it's going to decay on you over time.  Why would you pay 15% premium to be in it?  Check out the 3-month chart – S&P up 5% and SPXU down 20% – that's 5% decay in 3 months!  So you go out 6 months you're already giving them $8 and then you're paying up $1.30 – not a good idea.  If you want to head $500,000 against a 20% drop then why not something like the TZA ($17.85) Oct $15/21 bull call spread at $2.  A 20% drop in the indexes should send it up 60% and even with 10% decay that's about $25.  So you put $20K into that with a stop at $10K and you're pretty well protected against a $100,000 loss and the cost of your insurance is $10,000 for 6 months.  When it drops to $10K, that will mean either the market is up and you made much more than $10K on the $500,000 invested or that time is moving along and you're flat (because you are $2.85 in the money to start!) and that means for another $10K you can roll out to the March whatevers for your next round of insurance.  That's not too hard, is it? 

    Of course, you could offset $10K if there were something you REALLY wanted to buy on a dip, like CHK Jan $15 puts at $2 so 50 of those are $10,000 and your worst case is having to buy $75,000 worth of CHK for $15 but then you'll probably have $120,000 from your bull spread.  I also still like HPQ more than the market seems to and you can sell the Jan $23 puts for $1.85.  IMAX Jan $20 puts can be sold for $2, that's nice with the stock at $24. 

    Good AMZN plan StJ! 

    TLT/8800 – That thing is just insanely manipulated!  The only thing we like at the moment is going long at $112 – I have no opinion as to their upper limit.  They are dead in the center of their $109/123 range – not at all a good place to play them.  

    CHK/StJ – He went through a very similar thing in 2008, they survived.  He owns about 5% of the float directly and who knows what through corporations and trusts plus he's got a Billion or more tied up in well projects – why would he sell and lose control of all that – especially if he didn't do anything wrong.  This is just a bunch of jackals trying to tear down CHK while nat gas is cheap so they can panic out the retailers and scoop up the shares.  

    Austerity/StJ – I think it all sounds good in theory.  Greeks and Spanish all rolled over for it but, as soon as the realize these things actually affect their daily lives – RIOT!  I remember NYC's austerity back in the 70s – when they were saved by the teacher's union, who put $150M of their pension fund money into city bonds and refinanced $3Bn of NYC debt (but of course, no Republicans in NYC remember this ever happening and just blame the unions for everything).  The problem was that all the cutbacks turned the city into a wreck and crime shot up and neighborhoods turned to crap etc. and it took YEARS to turn it around.  That's the real problem with austerity, once you let your infrastucture fall apart, it cost 3x more to fix it than it would have cost to maintain it in the first place.  

    AAPL sneaking down to $603 while the Momos fly up.  

    Note/Kustomz – You underestimate my loyalty.  However, I did mention on my last trip to Florida, that the guy next to me had a Galaxy and I was very envious of the screen size.  The one thing I want is a bigger IPhone – if my IPad had a phone, I'd bring that around instead but something in between would be great.  I think a screen the size of the average paperback would be perfect for reading and I'm sure people would quickly make pants and jackets with bigger pockets to accommodate them. 

    UUP/Scott – Next week we make those decisions.  We're only at $21.81 so a twitch the other way and we're in the money. 2.5% is 54 cents to $22.35 and that would be 80.78 on the Dollar, which was the March high so not out of reach yet but, at this point, we'll be happy to get out even. 

    You're welcome Sage and I'm sure you're not the only one by a long shot.  

    VVUS going nuts.  

    Pizza/Flips – I know, a lot of people are eating out but, from the Durable Goods report, that's because they aren't buying sofas or washing machines etc.  Not buying a $600 refrigerator lets you go out 10 or 20 more times – that kind of thing.  You can see disposable income shrinking and CC debt piling up – I think people are fatalistic at this point and just enjoying what they can.   Also, for a lot of people, the pressure for saving for retirement is no longer an issue because they are 45 years old with $100,000 in debt and not even $100K put away for retirement and it's HOPELESS – so screw it and just buy an IPad and sit on the couch and play distracting games – it's the American way!  

    We were talking last week about how the IPad is actually a great value because, for a young person – it's a computer, it's a TV, it's a stereo, it's video games…  When we went to college we had a whole car-full of stuff to perform those functions.  That means you need less space for less stuff and it certainly is cheaper than a computer was when we went to school.  So I think you have this new class of consumer who are perfectly happy living on a couch with their IPad in a tiny little apartment and sure they are going to have more money to eat out and such but that doesn't mean they'll ever be buying homes or cars or washing machines or any of the other things that create good jobs in America – it's a long-term structural problem that we're creating by impoverishing our youth, which is what happened in Japan already as kids don't even move out of the house until their 30s over there.  

    GDP/Sage – That's right, 3.0 would probably have been a disaster! 

    CMG/LV – Thanks, great example and I'll be out there next week so let's chat on the weekend.  

    Futures/Chas – That's because they are for certain dates, like options, so there's a premium or a discount based on where people think the index will end up.  There's no formula but they usually lag the index by varying degrees.  

    $1Tn/Ink – I know, that's very funny.  People don't realize (or realize and don't admit) that a $1Tn annual deficit IS A STIMULUS – what else is it when the Government puts more money into the economy than it takes out?  If I go $1M in debt every year, the standard of living for my family would look like it significantly improved – we could go on more vacations and buy more stuff and overpay for stocks and commodities and just generally consume way more than we need and it would all be great as I run up my annual deficits to $2M, $5M, $10M, $20M – why would I ever stop?  I only want to give my daughters the best and, as Fernando says "It is better to look good than to feel good" so, as long as no one LOOKS at my debts – we will all FEEL great about all the spending.   That's what the global economy is – on gigantic bailout after another while all of us pretend not to worry about anyone else's debts.   Maybe the bulls are right – maybe these debts will never have to be paid – too bad that doesn't work for us consumers….. 

    PCLN/Jabob – Today?  Er, no, pretty much no hope at all that they drop more than a bit into the close.  EXPE is up 27%, PCLN is "only" up 4% – Wonderland logic dictates PCLN is cheap now.  As we discussed a long time ago, EXPE was miles too cheap compared to PCLN but no one is going to look at them like that until the excitement wears off.  Meanwhile, I'll be happy to spend $2 to roll up $20 5 more times and get to the July $700 puts if they want to keep pushing it to $800+ because I do think that sometime between here and June, they pull back 5% or more – and that's all we need.  

  132. Rain:  I'm out of the country, and shipping it overseas would be high risk, but I'm back in the U.S. Monday, and I've been notified it's ready for shipping, so with any luck I'll see it then – which is good, because that's where most of my guitars are located, so I can mess with the Strat/Gibby tones and see what I've got.  I'm not very tekky, but I can read a manual and am sometimes amazed at the sounds you can make with the right attack and the right setup, octave harmonics and other phenomena — and that's just with a Klon.  Which is such a great box that, when I substituted a new Tube Screamer a few months ago I almost threw the Ibanez in the garbage, so I really look forward to plugging in the Axe FX to see how it stacks up.  I downloaded 20 backing tracks from the Guitar Center Battle of the Blues website last night, which I'll take with me.  The house is up in the mountains, so I can make all the noise I like — only the bluejays complain.

  133. StJ: CHK: Good stuff in RS, agreed that so many founders struggle when going public to realize that their personal fiefdoms are no longer theirs – look at GPN – I mean c'mon –  the list is long and corporate governance is almost non-existent. Still, as Tilson (and Phil) points out, CHK is deep in fantastic assets, I still like them.

  134. 78.73!   Yen down to 80.39 and EUR/CHF still $1.201.   It's amazing.  All a fund has to do is keep dumping Francs, which is not very expensive as they already told you they'd support $1.20 so you can sell them in bulk and won't lose more than a penny.  That then keep the SNB buying Euros – which no single fund could afford to support on their own and the Euros cause the Dollar to fall and that's how you can lose maybe $10M dumping $1Bn worth of Swiss Francs and cause the World's 2nd largest currency to move up 1% in a day while the World's largest currency drops 1% where either move can turn another Billion into $1.2Bn easy.  

  135. Did I  forget to say zzzzzzzzzzzzzzzzzzzzzzzzzzzzz?

  136. Phil / HOV
    Just a Fyi that there was a trade a few weeks back.  Buy the Jan 1.5/2.5 Bull CS for 0.60 and sell the Jan 2 puts for 0.44.  The spread is worth about 0.45 now, and the puts are up to 0.55.  
    I'm probably going to leave it alone for now, since the comissions get really expensive on these low dollar trades.  

  137. 46M on the Dow at 1:25.  

    AMZN/Rain – I agree.  Tina has a Prime account and it's cut my mall trips in half.  I no longer go to the mall for single items unless I just so happen to decide to buy it on a Saturday or Sunday when I have time to go.  Otherwise, if I decide I need something Mon-Thurs – if I order from AMZN it's no tax, no shipping and I'll probably have it by Saturday morning or sooner.  Add that to no lines and no hassle returns plus the fact that the kids love to get AMZN packages – it's definitely the future.  The only issue I have is they don't have and won't ever have the margins to justify being valued at 1/2 of WMT, who sell $450Bn worth of stuff and make $16Bn (3%) while AMZN Sells $48Bn worth of stuff and makes $600M – 1.25%.  Yet AMZN is capped at $100Bn, WMT $200Bn –  MADNESS!  

    Oil making a big move back to $105 – gasoline (/RB) at $3.1269 and I like them over $3.125 for a pop into the close (2:30).

  138. Phil / Vegas — Coincidently, I'm headed to Vegas Thursday. Pretty booked up for, I'm guessing, the WSOP. Many hotels on the strip are full.
    iPhone screen — I have a Samsung Infuse (4.5" 480×800) and often reach for the 7" nook color (1024 x 600) for surfing on the couch. I don't think I'd want to carry it in a pocket though. I can get by on the Infuse but some websites don't like to play well with it and the larger screen becomes necessary.
    Looks like another bot pump day.  Dang, I've got an SPX 1405/1410 bear call spread expiring today.  Might be close.

  139. Phil/AAPL
    I'm thinking about starting to sell some Jan14 AAPL 390 puts for 28.25.  The puts have been as high as 40.00, but I figured I'd scale in.  It's a take off on your idea of selling the 450's.  I like selling the 390's though because I feel that 400 will be one of those psychlogical levels that AAPL will have trouble going below.  Thoughts?  

  140. /TF at 1:18 traded 22 contracts! They had to punch it higher..think about that, 22 contracts from 0 trades…amazing.

  141. Same as yesterday, slow melt up to 1:30 and then bang, off to the races.

  142. Pharm, somebody is buying your new friend GWRE today, did you enter that one yet?

  143. $1Tn Deficit / Phil – True, deficit are stimulus but going back to previous discussions, the finer point is "Where does the $1 Tn go". The GOP is complaining about the big deficit, but most of that money goes into the pocket of the top 1% through tax cuts and loopholes so it's not a very stimulative deficit. If we cancelled all the Bush tax cuts (let's say 3% of GDP since when he was in charge taxes brought in 19% of GDP and they bring in only 15% now and we have a crisis), we could still have a $1Tn deficit but with putting another $500 Bn in the infrastructure instead of Mitt's pockets. The same deficit would be a lot more stimulative. But idiots in Congress don't want to hear that as they are too busy reading Ayn Rand or arguing with the Catholic bishops that Jesus never said anything about helping the poor and was more concerned about contraception and stoning gay people!

  144. ARNA!!!!!!!!!! Sold 1/4 of my position at 2.88 and thankful to get back SOME of my gains!

  145. Zero / Axe  — It has a pretty decent interface but the Windows interface is more convenient. It's relatively intuitive. I'm looking forward to what you think. I still giggle like a little girl sometimes while drinking around on it. I still can't believe that little black box packs so much tone goodness. Tube Screamer – check, pitch shifter – check, Marshall's, fenders, orange — check, check, check and many, many, more. There's very little it doesn't have and all in a 2 space rack!

  146. Is it still prudent to buy uso may 39 between .51 and .54 or safer to buy june

  147. AMZN / Phil – The difference between WMT and AMZN in the long run is also the technology bets that AMZN is making. eCommerce is one thing, but the tech backend that they are building for cloud services (NFLX uses it for example) is a big bet on the future and if things work out well, they'll be reaping the profits on that for years to come. That's expensive to build up though!

  148. Go RUT go!  Coming up on 825 and that's almost $61 on TNA.     That makes 825 the new stop out (or take 1/2 off and let the rest ride) for the TNA longs as this is more than we expected so silly to let it go. 

    XRT/Pharm – Good idea.  IYR getting crazy too. 

    PC problems/Morx – Next time, maybe get an IMac.  You turn them on and they just work and, when they don't, you get to go to the AAPL store!  

    Metrics/Stu – Thanks, very useful:


      (1) A projection of our basic year-over-year data into an aggregate absolute demand, reflecting the compounding impact of extended expansions or contractions. The daily data is normalized such that the year-long average for 2005 would be at 100 in the chart.

  149. Zero / zzzz  — btw — here are the manuals if you're that bored.

  150. Pharm / GDX - have you been following Springheel Jack lately, I haven't had the time?  He charted last month that a break of GDX support at 48 would take it to 32, but it's already bouncing back, I'm curious what his current take is, if you know…

  151. FWIW IWM is failing at the upper trendline resistance. Dollar is turning up. This should be the top!

  152. StJeanLuc / FAS Money — in your recap, both in chat above and in the spreadsheet, you show two May calls (FAS) at the $100 strike, but I don't see the trades in the spreadsheet.  What were the dates on those?
    I just started playing along this week, and have thus far only initiated the XLF bull call spread.  For those of us who have not yet sold the FAS premium — sometimes better to be lucky than good! — would you recommend selling a put or two at this point, and, if so, at what strike?

  153. Phil, Anyone:

    Can someone explain to me why AMZN is around $220!? EPS with growth is around $1.6 per share. Even at $2 they’d have a multiple of over 100! Am I missing something? If not, when can we buy some long dated puts?

  154. Rain:  Thanks, I was getting so bored I looked up VVUS.  Oh, no, that's what it sells? A 15 minute erection instead of waiting for 30 minutes?  Maybe high schools should include kissing in their curricula.

  155. mrm – GWRE – I am only rolling my puts  up and have a few longs (RIG, TOT, and biotechs).  Painful, but RIG has been a savior for me.  I really am not buying anything, as I think things are brewing, but needs to get flushed out.  Watching Money, Power and Wall St. on NPR reminded me that this took a while to work out in 2008 (when I joined PSW). 


    GDXmrm – Is in for a bounce, and SHJ has not really updated lately.  I think the bounce (according to Tim Knight at Slope is in this range.  Could be as high as $48).  I am reading a ton of TA'ers that say gold is due to run like the wind (up), but I don't see it until this baby collapses.  Tim K. notes 325 on the HUI index.


    So all the bad news the past few days is now out, market is up ALMOST 5%….so a retrace is due….just how much?

    From Pretzel

  156. sorry forgot to say puts for uso question.

  157. Jap – I also believe their profit margin was 1.5%. Someone please correct me if I am wrong.

  158. japarikh / AMZN — that's why I don't play them. Their 5 year average PE is 73 and trailing 12 month 161!

  159. phil, I have USO May 39 Puts at .68 (now .54).  I was wondering where to DD hear or roll to next month and possibly DD?  Any thoughts at this point in the Month

  160. japarikh / AMZN -- but I wouldn't bet against them either!

  161. 52M @ 2pm. Pathetic.

  162. zero – VVUS's ED pill is another Viagra.  There are 3 on the market (Viagra (PFE), Cialis (LLY), Levitra (GSK))…what makes theirs different?  Nothing.  Everyone is betting on Qnexa, their obesity pill.  I still think the FDA rejects them, and I am going against the grain of a majority of those out there, but it is a 50/50 roll.

  163. Zero / VVUS — You didn't look at that website for more than 15 minutes did you? :)

  164. Pharm / ED — I wonder when we'll start seeing children with the names Cialis, Levitra and Qnexa :)

  165. NYMO / Can anyone please tell me what's the $NYSO currently (Mclellan Oscillator) currently? I dont have a subscripition to stockcharts and can only see EOD.  If its approaching 60 maybe just maybe we are due for a correction.  Thanks guys

  166. Found this interesting courtesy of Burning Platform:
    -Real GDP(2005 dollars) has increased by $200B from Q2 2008 to Q12012 from $13.3T to $13.5T, a 1.4% increase.
    -The national debt has increased by 64% in that same time period
    -Real GDP was up $73B in Q1 2012 of which 70% was due to durable goods purchased by consumers via sub-prime auto loans.

  167. FAS Money / Bolt – Thanks for catching that in the spreadsheet. It's up to date now… We added the FAS 100 calls Monday and Tuesday. Good thing I keep all the recap on my system going back to the beginning so that I can reconstruct the portfolio if needed!

    As far as new strikes, Burrben was asking the same thing yesterday and Phil and I had different views I think. You could obviously sell the May 100 to be in sync with us (and actually collect a lot more premium) but personally I would look at 2 other options:

    1. Do nothing until we roll the current position
    2. Sell higher strikes like the May 105 which are over $5.00 now and roll these when we roll our positions. Or if you get lucky and FAS breaks down, collect your profits before expiration and roll down to where we are.

    Up to you and your risk tolerance level.

  168. Phil, for an initial entry on FCX, stock at $38, sell Jan 38c/33p for $7.51.

  169. USO moving now, UP…on top of R1.  Looks like they are going for $40.

  170. StJeanLuc / FAS Money — regarding above question, oops, I meant to ask if this might be a good time to sell a call or two, not a put or two.  When you have a moment…thanks.

  171. GLL from Wave Trader

  172. anyone in the know
    i wish to buy uso puts at this level but i dont know if it smartest to still buy may 39 puts around .51 currently or to buy june instead and also best to  stay with 39 strike or go 40 instead.

  173. tommy – I would by the May 39s.  The May 40s are 45c away.  June, next week we may have to roll.  I am in the 40s, but I did it a bit too soon.

  174. Guess we are getting a stick into the weekend!?!?!?! No one wants to take a little profit of the table after this ridiculous runup?!?!

  175. Amazon
    FWIW Even Phil likes buying from them. Too many people buy from them and the enemployment # goes up. Bad margin doesn't matter if the people with money think it is great. Don't short them but like Apple earning  $12.30 is not taking them to the moon either and with a sell off they will be back to $550 in a heartbeat.

  176. StjeanLuc — thanks.  You replied as I was posting my clarification.  I was thinking selling calls after the run-up of the last five days would make most sense, and wait for a correction to initiate the puts.  Flawed logic?  What says you?

  177. tommy, for what's it's worth I rolled my may 39's to June39's and added.  But I was in already and down 0.14

  178. FAS Money / Bolt – Definitely calls… I didn't specify everywhere but I did mean calls. I would not sell puts now.

  179. jromeha
    Was that a 1:30 stick or a flush? I called it a top, not because I'm trading today but It hit the assending trend line and stopped. Backup was R3, JRW's 82.34 line, and a change in money flow. Be careful, we are in this together.

  180. japarikh/AMZN, Phil's trade at 9:46am today "AMZN May $220 calls can be sold for $9, that's a fun play.  Stop at $12 risks $3 to make $9 – wish I caught it right at the open!" still playable IMO.

  181. Sorry that was R2, and that is why I'm doing nothing until I recover more.

  182. Reps/Pharm – Don't get me started!  

    Good filling Scott but, the way things are going, you can almost use nickel spacing.  

    Financials/Sage – Yes, that's how we know something is really wrong.  I like BAC as a hedge (play yesterday) or the FAS spread because, if we do get QE, then XLF can go to $20 so why should I bet anything else when I can turn      with the FAS 10 July $109/119 bull call spreads at $4 ($4,000) against the 5 short FAS Oct $65 puts at $4 ($2,000) into $10,000 if XLF just goes up 5% to $16.25?  That's 400% profit.  AMZN isn't going to give me that, PCLN isn't going to give me that, the RUT isn't going to give me that…  

    So no reason to fear QE, just have a play or two that makes a very nice pay-off if it happens.  

    HOV/Burr – They move up and down a lot.  It's the same QE logic – if we get QE3, $2.50 is not going to be a problem.  As it is, net .16 on that one and I see minus another dime to get out but why would you at $2 because if they finish at $2, then you get .50, which is a huge gain.  It's all premium against you, not position and premium goes away as long as your position stays on track.  

    For a .10 credit I do like that as a new play:  HOV Jan $1.50/2.50 bull call spread at .45, selling $2 puts for .55 for .10 credit on a $1 spread that's .50 in the money to start.  

    Vegas/Rain – I'll be at Caesar's Thursday, Four Seasons Monday – in between I'm booked solid.  

    AAPL/Burrben – I like that as long as you REALLY want to own AAPL for net whatever.  The fact that you think they'll hold $400 doesn't mean crap if you freak out between now and Jan 2014 if AAPL drops $200 and the $390s that you sold for $28 rise to the price of the $590s, now $109.  So if you are apt to go insane between here and a 400% loss and buy back your short putter, even though after a $200 drop, he's still be $50 away from breaking even – then it's a pretty dangerous play.  If AAPL drops to $410 and you will be thinking "I can't believe I'm actually going to be able to buy AAPL for net $362 if they drop another $50" – then it's a fantastic trade to be in as you get paid $28 even if that never happens.  

    Deficits/StJ – Sure, it matters a lot what you do with it and where it goes but of course the $1Tn deficit we run is nothing more than a $1Tn stimulus delivered almost in it's entirety to the top 1% in the form of tax cuts.  That is, in a very twittable nutshell – the entire problem.  Stop that, stop the silly $1Tn annual military spending and suddenly we're balanced and, if we turn those swords back into plowshares, I'm sure the jobs will follow anyway as money gets spent on durable goods and infrastructure once again instead of disposable bullets, bombs and troops.  

    By the way, do you know that a soldier with less than 2 years experience only makes $18,000?  I kid you not!  A sergeant with 6 years of experience makes $32,000.  So the military doesn't create jobs – it creates more minimum wage jobs – you take 3 Million capable guys who could produce goods and services in the US and add to our economy to benefit everyone and you spend $200,000 a year equipping him and feeding him and pay him 10% of that money – sickness!  How about spend $50,000 a year to put 12M kids through college instead?   That's still only 2/3 of the army's budget!  

    USO/Tommy – I'd go June (and that goes for any new bear positions).  

    AMZN/StJ – Sorry but I've been to Armonk and IBM will just flip a switch at some point and take all that business away from people.  AMZN has the same advantage cable companies had in the early days – brute force using the best available tech.  The problem with that is the best available tech this year is completely obsolete in 5 years and if you figure 10 years gives you 10x performance at 1/10th the price – then the guys fighting it out right now will never recoup their expenses before a better, faster, cheaper challenger eats them for lunch.   The cloud has not stickiness so business will always go to the low-cost providers as long as they are reliable.  I'm a lot more excited about AMZN serving out an outsource distribution and warehousing center than I am about the cloud stuff – that's just part of the reason they have a ridiculously pumped-up value.  I've been to many VC meetings where the conversation went that way – "Can you do something hi-tech with it to goose the valuation?"  It's a game, that's all it is. 

    AMZN/Japar – See above.  People are easily confused.  I like the Oct $165 puts at $4 and the roll up to $175 puts is $1.40 so I'd like that for $1 and figure AMZN might hit $260 so maybe 3 of those rolls and a DD at the $195 puts when they are about $4-5 would be the sequence if you want to play it that way.  So, essentially, you put $11 aside and the goal is to get to the $185 or $195 puts when they are around $4 ($195 puts now $10) and then you'd be down a few bucks and need a $20 drop to get even.    

    USO/JJ – I think if we don't crash by Tuesday, then we'll have to roll.  We may crash Monday or we may have another big open on some bailout news but, either way, I think that will be the end of it.  We may drift into the end of month like last year but look what happened when 4/29 was a Friday.  Clearly the whole run-up into the end of April last year was BS and it just so happened to look just like this rally but that does mean we may get a big fat pop next week before they are done with us so I'm in no hurry to spend money on short plays at the moment.  

    NYMO/Dpast – Here you go.  Up more today of course:


    Autos/Ink – Oh yeah, I forgot to mention that.  It's ALL autos.  Same thing we noted each month on all the bull reports – auto, Autos, AUTOS because they are giving cheap loans to anyone with a pulse and so many people have put off buying a new car since 2008, there's a ton of backed up demand.  Unlike a new home, it's hard to push off a car purchase for 4 years. 

    FCX/Rpme – I'm a little worried about China inventories but I've been worried about that for years now.  I think I'd start with just a short put sale – you can sell the Jan $35 puts for $3.70 for a net $31.30 entry and, logically, your trade puts you into 2x at net $31.75 anyway but you do miss the $1.25 dividend.  Still, I'd just go 1x on the short puts at the moment and, if FCX goes up and all looks well, then you've already sold the puts for an extra $1 and you'll get $1 more for selling the calls so really, you only have to worry about buying in at $40 and selling the $38 calls for about $5.50 and then you're in for net $30.80/32.90 so you risk $1 more on the assignment but get a lower entry basis with the stock already at $40 if you are patient and wait before entering the full positions.  If you sell 1x the puts and FCX drops back to $25 on a big crash, then you can do a 2x roll to 2014 (the $25 puts are $2.50) so a lot more flexible without giving up much of the upside.  

    Charts/Kustomz – Stop showing me stuff like that, I'm trying to get bullish!  8)  

    USO/Tommy – I'd go June.  If we don't get a sell-off next week, we can't risk holding Mays any longer.  The USO June $38 puts are .69 and they have a big .29 delta so you make almost 50% on a $1 drop in USO – that's very nice.  So rather than spend $1 on the $39 puts or $1.50 on the $40 puts, you can start with these and roll them up for .20-.25 per $1 IF it moves against you and, if it goes your way – well the $40 puts cost $1.50 and have a delta of .52 so they make less (35%) than you do (42%) on the same $1 move down.   Always go into a position assuming you are wrong and you will be a lot happier.  

  183. GLL/Pharm – is it useful at all to look at the chart of GLL, which is removed by 2 or three times from gold ltself? check out /YG on a weekly chart. is ocnsolidating just above Point of Control (using TPO Profile for POC).  and who knows what worth or impact the dollar will or won't have these days.  If you think gold is going down again sell premium via OTM puts. It may leap up.   

  184. Army / Phil – I read somewhere that 1/2 our lower rank servicemen actually qualify for food stamps and these jackasses in congress want to cut that program. So much for supporting the troops! Cut food stamps, cut VA programs but keep a flag on your lapel to make yourself feel better. Insane!

  185. AMZN / Phil – In their case, there is more to the cloud than just the hardware. They compete on the software level with MSFT and others. This is not just another data center… But we'll see.

    On the other hand, I have been puzzled for years by their valuation – even with the tech. Say what you want about Steve Jobs, that Bezos guy is one heck of a sales guy when it comes to his stock price. AAPL would be worth about 1/2 the USA GDP using the same valuation!

  186. ARMY My freind last out of Iraq now out, lives whith his 75 year old mother and borrows her car. Wife divorced him while serving and totally broke. Oh do we support our troops!

  187. We get housing, food, commissary shopping, health care, dental, etc… Most of the young soldiers are straight out of high school so when benefits are added they don't do too bad. What is sickening is how much contractors and civilians make over here. Contractors usually make anywhere from 200-400K a year, Civilians get 170% of their salary + overtime. There are TONS of GS-15s making 300-450K a year b/c of all the "overtime" they work.

  188. Dow volume 60M at 3pm – lighter than usual. 

    FAS Money – Still $7,995 – no wonder I didn't feel like doing anything!  

    IWM Money – $3,583 and was $3,447 on Tuesday.  Lord let us play this "wrong" all the time!    See, this is why I sent out that Alert saying "don't just do something, stand there" – there's no reason to panic in and out of things – if you are BALANCED then a little stormy weather won't bother you. 

    $5KP – NOT BALANCED!  The only long we had until we added TNA was DMND and they aren't helping.  So we're way too bearish.  GLL I want to give until Mon, USO Mon, UUP Mon, EDZ very annoying.  DIA terrible.  SQQQ not good.  TNA is at $60.83 and that spread is $1.70 so we have $850 more to gain if TNA keeps going up and that should offset more losses if we gap up Monday so let's wait.

    $25KP – same deal, I'm not inclined to do anything until next week.  

    • DMND – fine. 
    • XRT – I hate them.  
    • BBY – Arrrg. 
    • SCO – At $34 with oil at $105 so no worried yet.  
    • SQQQ – June 
    • FAS – Fine overall 
    • GLL – Roll to June $16s is just .30, silly not to make it now in case we decay next week. We can DD on those at $1.20.  
    • DIA – Now .75 and I lost track of the basis but the $131 puts are $1.27 so if we gap down Monday we'll be happy enough with the 20 we have and if we go the other way, we'll be glad we waited.  
    • CHK – I hope 3 weeks is long enough for them to work things out.  
    • PCLN – Those should be rolled up to the $600 puts for +$2.  
    • EDZ – We'll see next week.  
    • USO – Now .52 is very tempting to DD but have to have discipline and wait.  
    • SQQQ – I still like that spread.  
    • TNA – Same as $5KP but it's a $1,700 potential gain to offset getting burned on other positions next week. 

    Clearly too bearish here too but had we stuck to our guns instead of wimping out at the beginning of the month, we'd have doubles in the $5KP and $25KP so we're going to stick with our plan and see what happens Monday and Tuesday is our drop-dead date to make our adjustments as we're still up 40% in 4 months and we don't want to start back at scratch. 

  189. @Felipe
    "….you spend $200,000 a year equipping him and feeding him and pay him 10% of that money – sickness! How about spend $50,000 a year to put 12M kids through college instead?"
    If we can't employ the college graduates we have now, how is this going to help?  12mm new college graduates with no jobs requiring a college degree.
    I'm not trying to justify the expense of $200,000 a year but that money ALSO employs people in the 'production of goods and servicees'.
    I fail to see the merit here without a Federal, National jobs program FIRST, because clearly the private sector has no use for them now.   

  190. Gold/Pharm – selling the GLD June 156 Puts @ 1.36 uses a ton of margin however, yikes!

  191. RUT has moved almost 2% today…

  192. Housing and food/Jrom – Good point on that but still, the money doesn't go back to US economy and that's bad and don't even get me started with contractors – that's where the other $400Bn goes!   As you know, I'm not anti-army but I am anti spending 1/2 the entire planet's military budget.  If we spent half – I'm sure everyone else would be happy to cut back too!  Who knows, keep cutting back by half every once in a while and we might accidentally get peace!  

  193. flip
    If you could do a little economic history you would see what causes real economic growth and why now we have only wealth accumulation. That way you don't understand creates jobs that produce and expand the ecomony. Spending money on the military only creats wealth in the industrial military complex. And wealth transfer has failed for a very long time, if you study up you will see that it causes recessions, poverty, and depressions. History is only repeating itself and those that refuse to except the past are condemed to repeat it!

  194. Hang in there Phil. There just isn't any volume to trust the direction. We could turn either way with significant volume don't you think?

  195. one week till the Oaks and 8 days till the Kentucky Derby….anyone else going?

  196. where will that Bucky go next?

  197. scott:
    It ought to up for a while!

  198. scott I would be surprised if we dont get some short covering into the weekend on the $..over 80 next week, remember Europe.

  199. Profits/Jromeha – i'd love to be taking some out.. except all my longs are comatose and my shorts are pending doubledowns…and i don't know if anyone else has any profits to take, either.

  200. Flip:  The military does in fact act as a "job stimulus"  program.  I know a number of healthy, well-qualified young men in high unemployment states [NV] who tried to join the Army reserve program over the last six months just to feed their families — and were turned down, having been told "We are laying off people left and right now."  Phil is of course correct about the futility of U.S. military spending, which is a giant sinkhole fiscally.
     Even worse, the existence of this oversized military has given new meaning to the old saw "when all you have is a hammer, every problem looks like a nail," and has inspired adventures like Afghanistan, which has been defeating foreign armies since Alexander's time.  I'll be polite enough not to comment on Iraq, which a gazillion dollars of military might ended up finding no WMD and shoving the country into the Iranian sphere of influence. But the Army has been providing jobs over the last number of years to people who would not otherwise have one — expensively, and there's probably a better way [send them to school all expenses paid instead] but it's water over the dam now that the cutbacks are here.

  201. Phil – yes, Im aware we spend WAY too much on military. However, we also get paid better than the Chinese, Russians, etc. Our retirements (while they last) are sick. An average career officer will retire as a Lt Col. They get 40-50K a year for life after 20 years and free health care. Often they step right into a GS-12 or higher job where they can work another 20 or so there and get another good retirement. Plus, they are collecting on their military retirement the whole time.. Personnel costs are much higher with our military than other countries. For instance, Greece officers get paid decently but they have to work 35 years before they can retire…

  202. I feel very guilty today. I sent Dollars to Isreal to purcase extremey rare Tamura SUT 83S moving coil step up transformers. Only sold in Japan for $13,470 in todays conversion. They will never be built again because retail would be at least $50,000 today, can only be wound by hand because of a circular core with tiny wire. 99% effecient probably a month to build. Had to have them, the best to extremes! And super deal.

  203. Scott right with you my longs are losing and my shorts…well they are lacking to say the least

  204. Yes, the Army will have major drawdowns coming and next year will be my 3rd year of (of the 7 Ive been in the AF) going through boards to determine if my records are good enough to allow me to stay in. 
    On a stock note, can we PLEASE get a little sell off into close!
    Scott – Im right there with you, all my positions have been destroyed. I was way too heavily into ARNA and had all the profits in them wiped out. Im only getting 25% of them back today….

  205. jro – whilst I cannot argue the specifics on retirement for the military, when they put their life (regardless of whether I agree or not) before mine, I am happy to pay them – for life.  Living in San Diego, and knowing many marines who are in or come back from Afghan and Iraq, their families are torn apart.   I think that the CEOs, CFOs, CIOs, ect, from the defense industry can all afford to pay a bit more in taxes to offset these…I am sure it would be more than enough!

  206. Oh, and jro – I know you are one of them…..

  207. WHy the hell is the RUT hanging so tough!!! Dow gave back half its gains.

  208. $25KP / Phil – CHK reports on Tuesday… that could be interesting!

  209. stjeanluc….After close I'll confess to trade I made today on one of the MoMos, but not wanting to bias everyone……..:)

  210. jromeha
    Hang in there RUT had heavy selling after the close. Gravity higher plus Axceration = Hard Landing!!!!

  211. lflan / confess — Stop messing with Jabo's girlfriend! :)

  212. Wow, only 108M for the day.

  213. Jobs/Flips – Well I'm all for that too and you can spend the same $50,000 putting 12M people to work.  We certainly have enough infrastructure repairs that need to be made to last us for a decade.  I did a whole post on that once, something like $3.5Tn worth of projects out of $8Tn are "urgent" like dams and bridges that need to be repaired.  Then if we upgrade our electric grid for $1Tn it would cut about 40% of our energy use because the current system leaks half of it, as do our old aquifers and waterways – not spending money to repair these things costs us more money each year than it would cost to take out a loan and just fix them.  Unfortunately, the Koch brothers don't want a better energy grid because if our current grid didn't lose 50% of it's energy in transmission – then they'd only sell half as much energy – see the dilemma?  

    History/Shadow – Yes, I'm well aware of the problem. So was Eisenhower when he warned the nation in 1961.  

    Turn/DC – Sure we could.  I'm not worried.  I simply can't see how people are going to sit down this weekend, digest this data and come to work bullish on Monday.  There's no scheduled meeting/action by the EU and this is not their thing anyway – they already gave Spain all the money it needs and the downgrade is meaningless if the ECB keeps buying their paper anyway so it's not like they need to take new action.   Japan just eased so the ball is in our court and how can the Fed step in when inflation is so high and jobs are looking up and housing is looking up and the market is near all-time highs – that would be beyond insane.  So it's all anticipation of an event that isn't going to happen and the longer it doesn't happen – the more regrets I think the bulls will have.  

    Derby/Jim – I'd like to do that one day.  I did Ascot once, that was a blast. 

    Dollar sneaking up to 79.84 – someone wants a few over the weekend.  

    Water over the dam and the cutbacks are here/ZZ – And that was the plan all along

     Paul Krugman summarized the strategy in February 2010: "Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit." He wrote that the "…beast is starving, as planned…" and that "Republicans insist that the deficit must be eliminated, but they’re not willing either to raise taxes or to support cuts in any major government programs. And they’re not willing to participate in serious bipartisan discussions, either, because that might force them to explain their plan—and there isn’t any plan, except to regain power."[22]

    Military/Jrom – Essentially it's the same deal as teachers.  Typical Government deal – I think soldiers should get a little more on the whole, maybe not on the retirement end but while they are working.  Heck, maybe they can turn the army into a Peace Cops-type operation that does work at home and build infrastructure and then, when we need them – they are ready and trained.   Anything other than our current system would be an improvement. 

    Tamura/Shadow – What are you doing, building a fusion reactor or a laser?  It better be something very cool for $13,470!  

    RUT/Jrom – Yeah, very impressive but they were the laggers – That's why we picked them for our longs.  

    CHK/StJ – Oh that will be fun.  I don't think they're going to have a great Q though – gas so cheap.  But, on the other hand, they have started doing a lot more oil and one barrel of oil is a lot more than nat gas!  

    Super low-volume day.  We'll have to see what Monday brings. 

    Have a great weekend, 

    - Phil

  214. Yes Pharm – I agree with you and thank you for your excellent picks contributing to my retirement :) , I just compare us to other industries and it doesnt seem fair

  215. Congratulations to Novicetrader, by the way, who won the passes to the Bersksire annual meeting – have fun.

    Thanks so much to Pstas for providing them! 

  216. Trades / lflan – Actually I was really busy today with other work so could not keep on top of trades just answered quick questions, but PCLN gave some nice entry signals today that could have been acted on… 

  217. Now this will not be a welcome notion to the commies among us, but my circumstances bring me into contact with a very wide range of income levels, and I can you assure it's true.  That doesn't imply causality per se, but working harder doesn't hurt, either.

  218. PCLN up 87+ in 3 days..
    ruined my 2012.
    FU PCLN!!!

  219. The plan all along / Phil – The GOP plan from the actual day one was to wreck the economy for Obama:


    As President Barack Obama was celebrating his inauguration at various balls, top Republican lawmakers and strategists were conjuring up ways to submarine his presidency at a private dinner in Washington.

    The event — which provides a telling revelation for how quickly the post-election climate soured — serves as the prologue of Robert Draper's much-discussed and heavily-reported new book, "Do Not Ask What Good We Do: Inside the U.S. House of Representatives."

    There was never any compromise possible… After 9/11 most of us stood together even though we didn't care that much for Bush. After the worst recession in the last 90 years where millions are suffering because of their policies, they plot to make it worse! There is a word for that but I just can't remember it!

  220. As a footnote, I believe it was Sir Mick Jagger who wrote "Hanging onto you money is a full time job [I don't need the aggravation I'm a lazy slob"], Hang  Fire, Tattoo You album, 1981

  221. For the Games of Throne fans out there (another great series from HBO) a nice mental break for the day:

  222. Hello,
    ABX was supposed to report today?  Etrade has them reporting today before market open, but I did not see any report.  
    Thanks for update and all.

  223. That's quite the apples and oranges study ZZ!  

    Of course, some of the decline is due to non-educated people being unemployed or under-employed. Some of their leisure time is simply “not being able to work” time.

    The study was education level vs. leisure time, not income level or, more importantly, net worth level, which I am pretty sure would skew drastically the other way.  Also, a guy punching a clock at Wendy's "works" exactly 37.5 hours a week and, therefore has many hours of "leisure" where he can spend that $240 after-tax paycheck!  A lawyer making $350 an hour might have a good reason not to watch American Idol and generate a few more hours of billables (or at least pretend that's what they did).  

    If you ask a low-wage person how many hours they worked – they'll tell you pretty much the exact number that's on their time card.  If you ask a boss who just came back from the golf course how many hours they worked that day they'll say "It was brutal – I had to get up at 6am and be at the club for a breakfast meeting at 7:15 and then I played a round of golf with the clients until 12:30 and we had to wait a half hour for a table and I barely got back to the office at 3 where I have two more hours of work to do so this is an 11-hour day at least!" 

  224. drmtv10 / ABX — has them reporting 5/2 (confirmed).

  225. ROFL StJ – I love that show.  One of the few shows that is never backed up on my Tivo as I can't wait for the next one.  

    ABX/DrM – Seems unlikely as their last earnings was 2/16 so they don't seem likely to rush out with them in April.  Certainly I don't see any today.   Ah, earningswhispers (good site for this) says 5/2.  

  226. Quite the little run we have now..

  227. It's tough to ignore that latest run because OBV seems to support it.

    We have broken out of the down channel and made a new higher high. Confirmation would be a higher low next time we have a down day.

  228. Site will be down – hopefully for just an hour – at 11pm EST.  They are working on speeding things up.  

  229. STJ/Phil: HBO has done a great job of adapting Game of Thrones – which is no easy job if you've read the books! Love it! 

  230. drmtv – I have 5/2 in TOS.

  231. Not only is he wrong, but he is also a liar…

    In 2005, Rep. Paul Ryan (R-WI) heaped praise on Ayn Rand, a 20th-century libertarian novelist best known for her philosophy that centered on the idea that selfishness is “virtue”. The New Republicwrote:


    The reason I got involved in public service, by and large, if I had to credit one thinker, one person, it would be Ayn Rand,” Ryan said at a D.C. gathering four years ago honoring the author of “Atlas Shrugged” and “The Fountainhead.”

    Ryan also noted in a 2003 interview with the Weekly Standard, “I give out ‘Atlas Shrugged’ as Christmas presents, and I make all my interns read it. Well… I try to make my interns read it.”

    But today, Ryan is singing a far different tune.

    From an interview with National Review’s Bob Costa this week:

    I reject her philosophy,” Ryan says firmly. “It’s an atheist philosophy. It reduces human interactions down to mere contracts and it is antithetical to my worldview. If somebody is going to try to paste a person’s view on epistemology to me, then give me Thomas Aquinas,” who believed that man needs divine help in the pursuit of knowledge. “Don’t give me Ayn Rand,” he says.

    It’s understandable why Ryan would back off his former political muse. She described altruism as “evil,” condemned Christianity for advocating compassion for the poor, viewed the feminist movement as “phony,” and called Arabs “almost totally primitive savages.”

  232. Thanks every one for update on ABX.

  233. Phil / work ethic:   Sorry, I had a dull day, so I couldn't resist a little amiable provocation.  Actually, I have thought about who works and why, having observed a remarkable spread in working habits among cultures and their strata.  I've concluded that — given the ready availability of work —  people will work to the level of their marginal materialism, more or less, circumscribed by the societal norms of their peers.  I'll call that "cost-push", in which they are pushed to work the number of hours required to pay the cost of their particular consumption curve.  
    Greater wealth, however, changes this preference curve in requiring the owner of capital to work to the level required to maintain this wealth in existence.  Since, in a capitalist economy, what is considered to has "value" is rather amorphous when compared to hunter/gatherer or agricultural societies, this turns out to be quite a labor intensive process. 
    I have seen very little evidence that wealth and happiness are correlated in any absolute sense.  It's obvious to everyone that perceptions of wealth are inextricably bound to a particular cultural context.   A Masai with a few hundred head of cattle, an apartment in Arusha, $250k in the bank and a few beautiful wives is at least as cheerful as any half-dozen of the self-satisfied stuffed shirts who fly their G5s into Davos every year.  All but the poorest Americans are probably richer, in income earned and resources expended, than 80% of the denizens of our planet.  
    I won't rummage around in the pop psychology bin to explain why that might be.  I will say that having wealth creates a kind of "demand-pull" in which the wealthier are forced, at the risk of having their capital disappear, and quickly, to spend a very substantial number of hours navigating the shoals of business and markets.  They feel compelled to preserve its "value" and must devote the hours required quite apart from their personal work/consumption preference, to a greater extent than is the case with people who offer only labor, in a normally-functioning economy.  And, despite its occasional charms, this does impose its own kind of slavery.   PSW works, because it comes close to turning it into a form of recreation, for which we thank you.

  234. I read this guy every day and I love his style. I am sure Phil will appreciate the references to the Classics:


    I loved this summarizing tease for David Brooks's column this morning: "Government doesn’t profit from experience…. It should try learning the way businesses do."

    You know, such as the way U.S. business learned from the Depression of 1807, the 1815-1821 Depression, the 1830s Depression, the 1870s Depression, the 1890s Depression, the Depression of 1920-21, the Great Depression of the 1930s, the 1970s recession, the 1980s recession, and now the Great Recession of 2008-?, which was propelled--as were preceding recessions/depressions and other assorted financial panics--almost entirely by business's limitless greed.

    Yet Brooks's Great Befuddlement hardly stopped there. In the column's conclusion, Brooks advances the Socratic observation that "The first step to wisdom is admitting how little we know and constructing a trial-and-error process on the basis of our own ignorance." That's good advice. And it's a damn shame that Brooks doesn't follow it, as evidenced earlier in his column: "Nearly 80 years later, it’s hard to know if the New Deal did much to end the Great Depression."

    No it is not. Heaps of empirical economic data demonstrate unequivocally that the Roosevelt administration's rather tepid Keynesian interventions at least alleviated the depression to the measurable extent of those interventions; later, it was the forced, massive Keynesianism of the Second World War that decisively ended the wretched thing.

    This academic consensus is as solid among economic historians as global warming is among climatologists. Yet "nearly 80 years later," soft ideologues continue to advance the political agnosticism that "it’s hard to know if the New Deal did much to end the Great Depression." The hard ideologues deny Keynesianism's benefits altogether.

    Again, it's instructive to note Brooks' Socratic underpinning: "The first step to wisdom is admitting how little we know …" Why instructive? Because one might further note that in Plato's 'Dialogues,' most of Socrates's deliberations ended in an inconclusive fog, while the rest finished in a wholly predetermined fanfare. In Brooks's dialectical case, he feigns the former--"admitting how little we know"--but ends with the wholly predetermined latter--"it's hard to know."

    Well, it is if one refuses to know.

  235. The problem when you have been raised in a top 1% family and live in another top 1% family is that you are completely detached from reality….


    Mitt Romney, at Ohio's Otterbein University:

    We've always encouraged young people: Take a shot, go for it. Take a risk. Get the education. Borrow money if you have to from your parents.

    And indulging my love of understatements is CBS News:

    The average cost of attending a four-year public university is about $20,000 a year, an amount exceeding the cash-on-hand of many American family budgets.

  236. Iflan / Profit taking – Your suggestion on using GTC profit target oders and ‘fugedaboudit’ Wednesday, you also mentioned the use of stop-loss orders. If you get a chance this weekend can you elaborate? TIF

  237. Pharm – something for your new home…..

    With the new models out, this is an Awesome price for these and on the 12's as well (I have both)
    Martin Logan is headquartered in Lawrence, Kansas.  :)

  238. ….and the $80 dollar promo is off the discounted price of $199….

  239. Phil Good morning, Left you a comment on the recent Inc PORT Blog. Any thoughts?