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April 30th and All is Well – ROFL!

Is this time going to be different?

Sure, why not?  Don't let the fact that we had pretty nasty sell-offs the last 4 Mays dissuade you from being gung-ho bullish into this one – after all – it takes bulls and bears to make a market, doesn't it?  

We've been prone to focusing on the negative lately – mostly because the positive is pretty much all you hear in the Corporate Media and we like to have balance.  If they were too bearish, I'd make a bullish case but this weekend we focused on "Money, Power and Wall Street," and the deteriorating Global situation, which got no better this morning with Spain's -0.3% GDP Report, Eurozone Inflation above forecasts at 2.6%, the S&P downgrading 16 Spanish Banks, California's Tax Collections are running 26% behind schedule, gasoline is hitting record highs in Europe while Business Investment in Europe drops BELOW the 2008 lows:

SPY DAILYShould we be concerned?  Why should we be – look how high the market is!   Doesn't that prove that everything is OK?  It sure proved it in October of 2007, when the Dow was at 14,000 and it was still proving it on Monday, May 19th, 2008 – when the Dow was at 13,028 for the last time until March 13th of this year, when 200-point one-day pop sent us all the way to 13,177.  We topped out around and fell all the way to 12,700 a month later but now we're back and THIS TIME IS DIFFERENT, right?  

For one thing, the SNB spent $4.1Bn propping up the Euro in Q1 – that's a lot of money for a country whose entire GDP is just $500Bn!  Fortunately for the Swiss, their insane money printing did cause their gold holdings to rise by $1.2Bn so their net loss in manipulating the Global economy was "only" $2.8Bn so I'm sure they can sustain this farce for another quarter or two if they wish.  

Farce is too kind a description for the fraud being perpetrated by the Central Banksters, according to the Economic Policy Journal's Bob Wenzel, what had this to say in his speech to the NY Fed last week (the whole speech is a must read):  

Under Chairman Bernanke there have been significant changes in direction of the money supply growth FIVE different times. Thus, for me, I am not at all surprised at the current stop and go economy.

It is my belief  that from start to finish  the Fed is a failure. I believe faulty methodology is used, I believe that  the justification for the Fed, to bring price and economic stability, has never been a success. I repeat, prices since the start of the Fed have climbed by 2,241% and there have been over the same period 18 recessions. No one seems to care at the Fed about the gold supposedly backing up the gold certificates on the Fed balance sheet. The emperor has no clothes.

The noose is tightening on your organization, vast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or,  if you stop printing, another massive economic crash will occur. There is no other way out.

Jim Grant stopped by the Fed as well and got in a few licks of his own but we KNOW America is a mess – don't we?  Hugh Hendry argues that China is a far bigger mess than America where Hendry sees a Weimar-like situation where Chinese leaders thought they could get away with fiscal profligacy on the back of strong exports, but the weakness abroad means it might not happen.  "The Chinese market is a casino, pure and simple. It only benefits insiders.  There's no reason for anyone to invest in it" is his very clear outlook on that Nation.  

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China doesn't hold a candle to the disaster that is forming up in Japan, according to Hendry, who calls Japan "The Tranquility That Could Rock the World."  Ultimately, he thinks we'll see one more washout in the market, with 30-year Treasury yields hitting 2.5% (they're currently at 3.125%) and the VIX surging to 80, at which point we'll have a truly 'generational' opportunity to buy risk assets.  Hendry points to the absurdities that abound in the current economic climate:

Why did ten year treasuries yield 14% under the vice like grip of iron-man Volker but yield just 1.8% under the bookish and most definitely Weimar-like Bernanke? Why does France in 2012 flirt with the notion of electing a socialist president intent on reducing the retirement age, imposing a top rate of tax of 75% and increasing the size of the public sector? Why do we hang on the every word of elected politicians when Luxembourg’s prime minister Jean Claude Junker openly admits, "When it becomes serious, you have to lie"?

 

You cannot make stuff like this up. It is simply too absurd.

undefinedThe flip side of the China coin is presented by Frank Holmes of US Global Investments (I just figure we need something bullish to balance things out).  Frank, who is a commodities fan, relies mainly on demographics and mega-trends like 3rd World Industrialization but I would point out that he could have done the same slide show in September of 1929, when the US was an "emerging market" to "prove" stocks were not overvalued.  Sure, almost 100 years later, we wish we had bought GE for .02 in the crash but that didn't stop the crash from happening, did it?  

Nonetheless, we are over the levels that force us to be technically bullish (and we're hating every moment of it as we remain fundamentally bearish) and, if we fail to move back down tomorrow (the deadline I gave to Members lest week) then it's time for another 10 Bullish Trade Ideas to get us through the next silly move up.  I already put up two new Natural Gas plays in the weekend chat and we'll add one a day, just like we did in March, until we have a new set to take advantage of a move up from here.  Trades at that time (some still playable) were:  

 

  • SKX Oct $10/14 bull call spread at $2.20, selling $12 puts for $1.55 for net .65, now $3.17 – up 387%
  • SU 2014 $25/37 bull call spread at $6, selling XOM 2014 $65 puts for $5 for net $1, now $5.69 – up 469%
  • USO June $40/46 bull call spread at $2, selling SCO Oct $26 puts for $3 for net $1 credit, now .20 – up 80%. I liked this one because you were long and short oil at the same time.
  • AA 2014 $10 puts sold for $2, still $2 – even
  • X Jan $25/2014 $20 buy write at $17.04/18.52, now $18.97 – up 11%
  • PEG Sept $30 buy/write at $27.07/28.53, now $27.59 – up 2%
  • HOV 2014 $2 puts sold for .90, still .90 – even
  • BAC 2014 $3/7 bull call spread at $2.75, selling $10 puts for $3.30 for net .55 credit, now $1.80 – up 427%
  • HCBK Jan $7 buy/write at $5.14/6.07, now $5.71 – up 11%
  • FTR 2014 $5 buy/write at $2.43/3.71, now $2.06 – down 15%

We had an update on those trades on 3/2 and my comment on the BAC trade, which was up "just" 36% at the time at .35 was: "36% seems like a lot but it's just .20 out of $5.10 (927%) of potential gains so still very playable."  Now up 427% – it's still only halfway to goal but no longer something I'd enter from scratch.  

We have no reason to fear a continued move higher – it's easy to put together bullish lists like this to take advantage of mindless move up.  At the moment, we have our short-term bullish trades because we aren't quite believers yet and Europe is unsettled to say the least with France's elections on Sunday and riots in Athens and Spain – the situation is iffy at best.  As I said to Members on Friday:  

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.  

We did add bullish trade ideas for BAC, HOV and FAS on Friday – already going back to the well on some of our 10 favorites and we already discussed CHK when it hit $17 last week and Friday we got another chance to make an aggressive entry as they spiked down again.  We also added ECA, as it was a bit more stable (so far).  

So we already have 5 of our 10 upside plays lined up (as long as we're over 3 of 5 of our 50% lines).  As it's the last day of April, we'll watch and wait until tomorrow and we'll be very nervous longs until at least half or May is behind us.  We're by no means giving up our bearish positions – just balancing a bit more bullish and pushing our bear bets back in time as we're pretty sure they are in the right place – we just have to wait for it to be the right time.  

Be careful out there!

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Nice big, fat red candle formed on XRT, but not quite engulfing but could it be a double top??…..For the love of yours truly….please follow through….

so sorry about your friend jromeha

Phil
I was just thinking why doesn't everyone go home, its all bots anyway. I am still waiting for oil to fade, dollar to rise, and weeeeeeeeeeeeee!

Another BS day, but reducing positions and increasing oil short (SCO calls). 

BOT close with the winner being sell bot.My guess is tomorrow we continue down. Is JRW answering Phil? Soon we need new lines and he is by far better than me.

TVIX at (cough cough)….  6.66.

New $100 bill – while y'all listen to Ron Paul and that sicko Krugman, have fun with Hidden Meanings in the New $100 Bill.

Really sorry to hear about your friend Jrom

jromeha – condolences on the loss of your friend. I look forward to getting the link.

Jrom,
Sorry about your friend

jromeha – very sorry to hear about the loss. Please post the link when you can.

Whilst I like some of Ron Paul's thoughts, the 'free market' does not work…..Glass/Segal's removal showed just that….he has also never offered what he would do to 'stimulate' those jobs back.  If defense is such a large portion of our budget, and much of that is 'manufacturing', cutting defense to not police the world would cause even more problems.  After WWII, there was a labor force ready to go into manufacturing and other high paying/based jobs.  Those no longer exist here.  What would he do?

All – Thanks, I appreciate it.  He wasn't actually a friend, just an acquaintance. I only spent a couple weeks training with him and one day last week for our inspection of his office.  I ve lost a couple people much closer to me than him during this "Global War on Terror" but this individual's death is much harder to deal with. He didnt have much time left until his retirement… And I guess the big thing for me is I have a soon to be 4 year old daughter and anything to do with anyone's daughter/s tugs on my heart a little more than other tragedies. We were swapping stories about cute things our daughters do/did last week and now they will be growing up without their father.  That's what I cant get out of my head.  Anyways, Ill post the info when I'm allowed. Thank you all for your time.
Elias 

That was a lot of closing volume.

Phil/KGC ($8.95),
buy/write Jan 13 $9 p&c for $2.70, acb $6.25/7.62, with a 44% return in nine months if called away, or is there a better place to put your money in this sector?

http://www.bloomberg.com/news/2012-04-29/analysts-see-record-s-p-500-as-2012-advance-over-for-barclays.html

Individual price forecasts for stocks show the combined projection for the benchmark gauge has climbed to 1,569.74, according to more than 10,000 analyst estimates compiled by Bloomberg. That compares with the October 2007 high of 1,565.15. At the same time, strategists who base their predictions on assessments of the economy say this year’s 12 percent rally represents all the gains investors will see.

Phil, how about some May statistics, maybe its time to short the sh*t out of this thing. I am saying this in my best Spock voice, cannot get emotional…right Iflan.

Some important numbers between now and tomorrow's open – Chinese Manufacturing PMI, Australian rate decision, Great Britain PMI and at 10:00 USA ISM Manufacturing. Could be a fun morning if you like roller coaster rides!

These 2.5% lines are getting a workout…

Hi Phil,
What is your opinion on BA at the moment?  Is the breakout above $75 is for real, on its way to $90+ (Jan) or still stuck in $70-80 range and earnings pop will dissipate soon?  Already short BA Jan 65P (up about 40% and keeping'em), looking to ADD a debit spread (Jan 65/75) for about $7.  Appreciate your opinion.  Thanks.

Phil
I don't understand what the chart or graph actually mean. I see flat a bump and flat at the end and maybe optomistic expectations in the chart. Please explain.

Iflan
Some of us are in your PCLN 760/765 weekly. Please keep us posted on how you are playing it. Thanks

Spain cut again

PHIL, Sorry I was out all day playing golf in 30 MPH winds and rain, So MUCH FUN! NOT. I did see your post, thanks. My thoughts are. These markets are driving me Crazy! LOL. I believe you are RIGHT ON THE MONEY, with your thoughts on the Markets and all the Money Printing BS! YOU ARE DOING A FANTASTIC JOB!!! I am mostly in cash, So I look forward to the NEW Income Port, as I need Income, since I am between opportunities. I love the thought of selling premuim, although I have not really done much. Its crazy this market goes up in 2012 when we are looking at the abyss. So I love the PUT list. I have not really jumped into any portfolios, but I should have on the $25K when it was down, and you made the comment about now would be a good time to start. I have learned more in a month as a voyeur member, and now about a month or so as a BASIC member, than I have in 25 years or trading. Going to start a Futures account, just need to fund it, and then follow you. I want to make some dollars for my morning McMuffins (LOL). PHIL keep doing what you do, so people like me have a CHANCE to survive whats happening to the US. Thanks. 

Type 1 Juvenile diabetes:
 
anyone have any experience with this condition?  My 6 year old stepson was just diagnosed the other week.  We are a bit overwhelmed at the moment.

China PMI manufacturing looks like it came in lower than estimates – 53.3 as opposed to 53.6.

Canuck….Yes, we in the medical field are quite familiar with Type 1 Juvenile diabetes, and you are likely to find much expertise in your nearest medium to large city.  The treatment methodology is very well honed and i'm sure he will do well. 

RE: Laptops – I am currently traveling, again!  My 5 yr old Vaio just acquired a memory problem so I purchased a ASUS U46E-2640M Platinum 14" Laptop. i7 Processor/ 8G Ram / 720G HDD, $700 at Office Depot.  A very fast machine! As with many, TOS and PSW are always open as well as spreadsheets, etc.

Roma \ May day.  We don't have an official holiday, but it is celebrated by some:
"Hoorray, hooray, the first of May,
Outdoor f**king starts today!"

Not quite sure I understand why the Aussie cuts rates more than expected and their dollar is UP against ours!?!?!?

Phil / Parking Cash  – buy long term strangle, sell short term strangle
 
Phil, this is one of your ideas from a while back. You mentioned finding a low volatile, dividend paying stock (e.g. IBM and BAC I think were the examples you used) and then buying a long dated strangle. The difference in strike prices was a guaranteed return, and to pay off the remaining bought premium you showed how to sell short term OTM strangles each month to gradually reduce the outstanding premium. All going well, you end up with a 'free' long strangle which would be turned into a 20% a year return through the continued sale of OTM strangles. I do not know whether your views on this strategy have changed. Looking for suitable candidates I came up with XOM and the following trades:
 
XOM Jan 14 80C/90P bought strangle costs $24.08 (a debit trade)
XOM Jun 12 82.5P/87.5C sold strangle for $1.05 (should give an indication of the monthly possibilities
 
So, the long dated strangle guarantees a payout of $10 (the difference in strikes) and that leaves $14.08 to pay off, which could be theoretically done in just over 13 months (lets say for 5 of those months one needs to roll, so a conservative 18 months to pay off). Then you get 6 months of selling strangles and pocketing the premium. I have difficulty seeing the downside exposure to this strategy, but I am sure it exists.
 
Your views appreciated, thanks.

From WSJ:

The U.K. parliamentary committee probing illicit voicemail interception by News Corp.'s shuttered News of the World tabloid released a final report Tuesday concluding that News Corp. Chief Executive Rupert Murdoch is "not a fit person to exercise the stewardship of a major international company" and accusing several former company executives of misleading parliament.
 
The report says Mr. Murdoch and his son, News Corp. Deputy Chief Operating Officer James Murdoch, presided over a culture of "willful blindness" at News Corp. It also singles out James Murdoch for displaying a "lack of curiosity," even "willful ignorance," when handling fallout from the phone-hacking scandal as the manager overseeing News Corp.'s British newspaper unit, News International, from late 2007 to 2012.

Is /cl still playable?

Canuck, I have type 1 diabtetes it is surely something your child can learn to adapt to, in the end what  a diabetic needs to do is the same thing that any doctor would tell any patient everything in moderation, get good sleep and exercise. really it is that simple. There are things like insulin pumps that work very well or like myself smallish penlike dispensewrs that are easy to caryy around, make sure you monitor but understand your kid is a person with diabetes not a person defined by diabetes. Good luck..you can handle it.

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