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Thrill A Minute Thursday – Will the Bernanke Bounce Hold?

SPY DAILYNot much happening overnight.

Dollar at 80.30 as we wait on Bernanke at 9:30.  The Euro is still dead at $1.296, Pound up to $1.615 as BOE holds rates steady (easing was expected). 79.65 Yen to the Dollar and 1.201 EUR/CHF shows those guys are still serious about supporting the Euro at all costs – and it must be costing them a fortune to do this.

I would say anyone who is holding large Euro positions and isn't taking advantage of the fact that the Swiss are backstopping it to get out is very foolish. The Euro is closer to dissolving now than it was last year. Greece will default on $500Bn in debt, Portugal will either default or need a huge bailout, as will Spain and just because Italy and France and Ireland are quiet at the moment, doesn't mean they are fixed either.

Clearly the only reason the Euro is holding $1.29 is because the Swiss are buying it – this is certainly not a reason to be holding the currency. If the Dollar were only staying over 80 because Canada was buying them to keep the Loonie from going to $1.20 – would that mean you should stay in or get out before the game falls apart?

If the Euro is artificially strong, then the Dollar is artificially weak and if the Dollar begins to rise (and the BOJ would love to see that) then we know there will be a dip in the price of dollar-denominated equities and commodities. So we need to continue to tread carefully because much of what we currently see is based on this artificial construct of a relatively weak Dollar and a relatively strong Euro – and that's distorting reality in many ways.

Also keep in mind that these little CB money-printing schemes can go on much longer than one would think logical so it's more of a big-picture sort of observation than an actionable item other than I sure wouldn't want to tie up too much money in Euros – just in case the SNB does run out of money one day

The S&P did put in a solid show of holding around 1,360 and that's all it takes sometimes – just one of our majors to hold their 5% lines can give the others reason rally back to theirs.

As to the gaps – it's not about those or the intraday, it's about where we close each day. We got a blow-off top on May 1st and, since then, it's been down every day, now 1,354 so 56 point drop is 4%, which is where a 5% drop would bounce to (20% retrace) and 95% of 1,410 is 1,339.50 and that's close enough to 1,340 so it's natural that we should slow down as we enter this zone where some bots will be buying the 5% dip.

The strong bounce (40% retrace) from here goes to 1,366 and that's what we'll need to see now to call a reversal – anything between 1,340 and 1,366 is just noise in a downtrending channel. So it doesn't matter whether the S&P goes up or down – the only thing that matters is which side it breaks to but, in absence of new data – I'd say this is the pullback we've been looking for and I'm more apt to buy the F'ing dip here and I'll be looking to make bearish covers IF we fail 1,340 but, otherwise, I'll treat this as the bottom of the range until it proves otherwise. 

XLF WEEKLYWe've been bottom-fishing with lots of bullish trade ideas this week as we unwind our short positions along the bottom of our expected range.  We haven't gone aggressively bullish yet – just doing our usual bottom-fishing at what we HOPE (not a valid investing strategy) is a bottom because – if it's not – it's a long, long way down to our next set of supports.  

The Futures are up this morning (as we expected) in anticipation of Bernanke waving the QE wand at 9:30.  That's not going to happen and what we really care about is watching how the markets handle that afterwords.  

I think the quick trade of the morning will be shorting the S&P (/ES) below the 1,360 line (with very tight stops, of course) in the Futures as it SHOULD be a tough nut to crack on the way up and gives us a clear exit signal.  We flipped bullish on oil Futures yesterday off the $95 line (now $97.22) and of course we like playing XLF to bounce off $15.   It's amazing how fast the market went from nothing worth buying to a shopper's paradise in just the first 10 days of May!  My comment to Members in yesterday's morning Alert was the most bullish since March:  

Meanwhile, this is early-stage panic and it's a good opportunity to go long on a few things like CHK, CSCO, AAPL, GLW, GNW, FTR, FCX, AA, BA, BAC, GMCR (yes, I said it!), HOV, HPQ, OIH, SVU, WFR…  You get the idea.  It's a good time to sell puts against stocks you REALLY want to own if they drop another 20% – just in case they don't!  

Woops, 10:30 already.  Big build in oil – 3.7Mb but gasoline down 2.6Mb and distillates down 3.3Mb so a net draw is bullish for oil – game on for long /CL plays and that should give us a bit of a bottom overall! 

That was pretty good timing as we pretty much were off to the races at 10:30 as we put in a firm bottom and headed higher most of the day but, as I mentioned above – these are just the weak bounces we expected so far and not a signal of a true trend reversal, nor will there be until our major Global indexes prove to us they can get back over their falling 20 dmas (50% retrace lines in blue):

Not a pretty picture overall.  Keep in mind we are doing our early bottom-fishing only because we THINK we're bouncy here and we THINK Bernanke and Co may hint at more QE and spark a rally but we're very skeptical until we are firmly back over those 50% lines and we'll be adding some nicely aggressive bearish plays if we fail to hold our current levels.

775 was my prediction for the Russell bottom back from early March and that lined up with Dow 12,700 and S&P 1,350 (who knows what the Nas will do with AAPL and all those crazy Momo stocks?) and that was based on the DATA of PMI and ISM that was coming in at the time.  In the intervening period, the trends we identified early on have held steady so we have no reason to change our bottom target. 

Mostly we are watching and waiting today.  Waiting on The Bernanke as well as the 1pm 30-year note auction, where the Treasury hawks off another $16Bn in debt to throw on the pile.  As you can see from this DoubleLine chart, we are are running out of things to try but we've dragged our first dozen options out over the past 4 years so we probably have another 3 before we become Greece to the 10th power – so let's enjoy this golden age – we may never see another!  

Pre-market we are looking good, with the S&P over that 1,362 line so we'll have a very clear bearish indicator if the markets open and the selling begins and we push back below that critical 1,360 mark.  Oil (/CL) topped out at $97.50 and that's back to where we'd rather be short than long so it's going to be a tricky morning overall so let's be careful out there.  

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  1. Good Morning!

  2. Phil, I know you like WFR for the long term and they just posted an ugly quarter, can there be anything to help the solar industry from consolidating at lower levels as more companies go BK?….

  3. Not much happening…so no title, eh Phil? No Triumphant Thursday, Tickle Me Trite Thursay, or Thursday’s Trump Time

    PP for today:

  4. Phil you forgot to write a title for the article..

  5. Oil Lines

    R3 – 98.90
    R2 – 97.91
    R1 – 97.15
    PP – 96.16
    S1 – 95.40
    S2 – 94.41
    S3 – 93.65

  6. "Tickle me Trite Thursday"? 

  7. "Tickle me Trite Thursday – Bernanke won't Tickle?

  8. Income Portfolio: When is a good time to initiate these holdings?  I recall a mention of a new one starting sometime soon….
    I also guess that the holdings you mentioned in yesterday's member chat would make a good foundation…..

  9. China Trade Balance / $18.42 Bn ($7.93 Bn expected – slight 200% miss there)
    China Export / 4.9% (9.1% expected)
    China Import / 0.4% (12.5% expected – another 10,000% miss)
    Japan Eco Watchers Survey Outlook / 50.9 (that's bullish, previously bearish)
    France Industrial Production (MoM) / -0.9% (-0.6% expected)
    France Industrial Production (YoY) / -0.9% (-1.3% expected)
    Italy Industrial Production (MoM) / 0.5% (0.1% expected)
    Italy Industrial Production (YoY) / -5.8% (-6.2% expected)
    Great Britain Manufacturing Production (YoY) / -0.9% (-1.30% expected)
    Great Britain Industrial Production (YoY) / -2.6% (-2.6% expected)
    Great Britain BoE Rate / 0.50% (0.50% expected)
    US Trade Balance / -$51.8 Bn (-$50 Bn expected)
    Initial Jobless Claim / 367K (368K expected)
    Conitnuing Claims / 3229K (3275K expected)

    More green than red today but the import/export numbers from China are worrisome!

  10. "Therapy Thursday – A Visit With Dr.Ben"

  11. "The Euro can be kept buoyant longer than one can remain solvent", amen, Phil.   A Euro plunge would derail a lot of carefully maintained schemes.  Still, it's definitely a Wizard of Oz maneuver.

  12. PCLN / StJ – Yes indeed i jumped in, although quite cautiously (OTM Call).  I owed to myself to learn this trade after blowing the AAPL strangle.  I liberated funds for margin and i was mentally prepared for any outcome.  From the looks of it, its easy ka ching!

  13. $37M Warhol Elvis.  Art may not pay a dividend, but it's an island of certainty in a manipulated money world.

  14. Hi Phil
    Any opinion on Aussie Dollars with respect  to USD. I hold quite a bit of AUD as I am currently working in Australia and I would like to convert them to USD before AUD falls down too much. What might be a good time to do that?

  15. dpast….well that changes the title to: Thuferin' Thuckitash Thursday!  A Pile of Gold.

  16. Good morning!  

    Bernanke makes upbeat comments about economy and that, of course, is bad news as it's not QE-Friendly so watch out for a possible sell-off that will begin to cause some real technical damage.  1,360 is the key to all.

  17. Phil/Stjeanluc: Margin
    Not sure why my comment re: margin in the 25k was misconstrued. It's not a portfolio I've been following because I know I'm not suited for that pace of trading.   I make use of my margin in very different manner and don't have have margin problems.  I was simply commenting that it appeared others had to bail on trades in the 25k because they didn't anticipate how much margin was going to be required possibly.  The point I was trying to make was simply that a heads up re: margin requirements before starting the trades would probably be helpful.  Also, learning how price changes of various options will impact margin requirements, (ie 3X etfs), would be a part of the "learning experience".

  18. Pharm – at what point would you re-enter PLX? I  was lookking at the Nov $6 puts for $1.

  19. stjeanluc,
    just a reminder phil suggested "For the $5KP, let's take advantage of CHK and buy 5 June $15/17 bull call spreads at $1.30. " after midday yesterday.   Thanks and thanks for all you're doing.

  20. Zero / art — As was real estate.

  21. Thanks rudycharlie…. I'll correct that!

  22. rudy – did you get in to the CHK spread? I was out to lunch (no comments, plz) and later in the day was too late. I was wondering if anyone got it.

  23. Phil: Sam Antar?
    I remember last year you referenced his opinion on GMCR, wow was he on to something.  Haven't seen him get much credit for that call but his research did keep me from bailing on those short calls when the stock was at $115 last fall.

  24. Still seems to be a lot of weakness in this run up.  McClellan Oscillator which even in light volume has been very accurate was showing -133 this morning which still shows plenty of room left for a drop and if this gain holds, Oscillator should be -90 by EOD.

  25. morxIntway,
    Got in for 1.36.

  26. PLX/morx – sounds like a plan.  Why not buy the stock and sell the June $7 Calls……as well.

  27. FWIW The volume is flowing out. When is Bernanke done?

  28. 8:17 AM European shares move to session highs amidst chatter of some sort of coalition government agreement in Greece. Stoxx 50+1%, led by Spain's best day in months, +3%. Euro +0.3% to $1.2965

    Pasok chief Venizelos receives a mandate to try and form a government in Greece. The 2 leading parties from last weekend's election – New Democracy and Syriza – have already tried and failed at same. Venizelos is making some noise about renegotiating the bailout agreement in the attempt to bring aboard anti-bailout votes.

    Greece's unemployment rose to 21.7% in February from 21.3% previously. Youth unemployment jumped to a record 54%. Just 3.87M citizens are employed out of a population of 11.4M. Industrial production shrank 8.5% in March vs. 8.3% the previous month

    longer-term chart of Greek industrial production shows 47 consecutive months of contraction. It's time for the European political elite to let these people have their country back. (earlier, today's IP report).

    At the open: Dow +0.43% to 12890. S&P +0.74% to 1365. Nasdaq +0.5% to 2949.

    Treasurys: 30-year -0.43%. 10-yr -0.17%. 5-yr -0.05%.

    Commodities: Crude +0.56% to $97.36. Gold +0.22% to $1597.75.

    Currencies: Euro +0.32% vs. dollar. Yen +0.28%. Pound -0.3%.

    10:00 AM On the hour: Dow +0.63%. 10-yr -0.2%. Euro +0.31% vs. dollar. Crude +0.47% to $97.27. Gold +0.35% to $1599.85.

    Market preview: U.S. stock futures follow much of Europe higher on Spain's moves to alleviate its banking crisis and speculation that Greece might actually form a government against all expectations. The S&P benchmark is +0.7%, while the Dow is +0.4 and looking set to break its six-day losing streak. That's despite Cisco falling 7.9%following its downbeat outlook. Later: Bernanke and Kocherlakota

    Investors vacated the bullish camp in the week ended yesterday, the percentage of bulls falling 10 points to 25.4% in theAAII Investor Sentiment Survey. The bearish camp rose 13.6 points to 42.1%. Bullish sentiment hasn't been this low since summer 2010, and bearish not this high since Oct. 6, 2011

    Sell in May… but come back in June? Tom McClellan has devised the Democratic Presidential Cycle Pattern, which considers stocks' performance during election years in which a Democrat is in office. The pattern, he says, suggests stocks are poised to bottom on Monday before rallying come June. "The S&P 500′s dance steps have been right on schedule."

    The Dow's six-session losing streak is coinciding with a pickup in trading volume. More than 4B shares have exchanged hands in NYSE composite trading volume during each of the last two days, the largest back-to-back amounts since March. Volume – and thus conviction – has picked up during selloffs, a trend over the last few months that shows no signs of abating. 

    The Dow's current 6-session losing streak is the first since last July - which was just an overture to early August's collapse. One interesting pattern – then and now – was a market rally in the last hour of trade, a sell-off overnight (as Europe opened), and another attempted rally into and just after the European close.

    The similarity of the performance of the S&P over the last 2 years vs. the 2 years leading up to May 11, 1987.

    While not asking for mortgage lending to return to its pre-crisis ways, Ben Bernanke suggests current standards are preventing lending to creditworthy buyers. A Fed survey found banks – now worried about "putback risk" – are less-willing than may have been thought to lend to borrowers with solid credit scores and a 20% down payment.

    "He's for the gold standard now," jokes Ron Paul after breaking bread with Ben Bernanke. The private meal came a day after Paul chaired a hearing on proposals to abolish or vastly reform the central bank.

    Ben Bernanke has warned of a federal budget facing a "massive fiscal cliff" at year's end, but equity investors are betting politicians will be able to hit the brakes before the economy falls off of it. The economic hit posed by the expiring tax cuts and spending restrictions would equal ~4% of GDP, upending forecasts for corporate revenue rising slightly faster in 2013 than this year

    Freddie Mac reports the nation's 30-year fixed mortgage set a new record low again, as the national average shed a bp to land at 3.83%. The 15-year variety averages 3.05%.

    International Trade: The U.S. international trade deficit in goods and services increased to $51.8B in March from $45.5B (revised) in February, as exports increased 2.9% and imports grew 5.2%.

    China's trade data showed surprising weakness, with its trade surplus widening to $18.4B in April from $5.4B in March. Exports were up 4.9% (vs. 8.5% consensus) and imports were up just 0.3% (vs. 11% consensus). It's "a wake-up call for policy makers to do more to stimulate domestic demand, and is likely to lead to further elevated fiscal spending and monetary easing," according to a Credit Agricole note.

    Initial Jobless Claims: 367K vs. 366K consensus (prior week revised to 368K from 365K). Continuing claims -61K to 3.22M.

    Australia's unemployment rate unexpectedly fell to 4.9% in April from 5.2% in March, vs. expectations of a rise to 5.3%. The surprise move makes it difficult to predict the RBA's future interest-rate policy, but underscores the relative robustness of Australia's economy. The Aussie dollar rebounded after the data (+0.7% vs. USD). 

    Bloomberg's Consumer Comfort Index slides to -40.4 last week vs. a previous -37.6, continuing a decline that began in late March.

    Already taking my advice:  CIC, China's sovereign wealth fund, says it has stopped buying European government debt because of concerns about the economic crisis in the region. 

    Mastercard (MA) exec Tim Murphy warns that consumer spending on luxury items fell back – providing a "cause for concern" for the company as it actively seeks more affluent customers. After consumers showed a healthy 11.7% increase in spending for high-end items in February, the pace slowed in March and April to 1.8% and 5.5%, respectively.

    "Relief for pensioners," reads a headline as no change to BOE policy means the asset purchases stop this month. QE has driven Gilt yields to record lows and helped send inflation up to 3.5%, and just possibly may have hurt the economy. 10-year Gilt yields are rallying post-decision, +7 bps to 1.98%.

    German finmin Schaeuble is furious at overnight reports that Germany would let inflation rise, tweets ZeroHedge. "The Bundesbank would resist with indignation the interpretation that it would accept higher inflation."

    While German finmin Schaeuble is apparently aghast at the thought of letting inflation rise, just 72 hours ago, he seems to have been in favor of faster price pressure. "It is fine if wages in Germany currently rise faster than in other EU countries. These wage increases also serve to reduce the imbalances within Europe," Schaeuble said.

    As the EU periphery remains mired in a "slow motion train wreck," it's worthwhile to check in on the road not taken - default, devaluation, quick collapse, recovery. Iceland last week returned to the international bond markets, selling $1B in debt. GDP – which dove 7% in 2009 – is expected to rise 2.4% this year, cutting the unemployment rate to 6%.

    Goodbye TBTF? The FDIC's Martin Gruenberg is expected to outline today that the next time a major financial firm is brought to its knees, the FDIC will seize the parent company and unwind it while allowing its global subsidiaries to keep operating. Equity stakeholders will be wiped out and bondholders will face losses as their holdings are swapped for equity in a new entity.

    OPEC says it is pumping enough oil to satisfy world oil markets, and maintains oil prices have been high mostly due to political risk. OPEC production rose in April to 31.62M bbl/day as Iraq ramped up and Libya's oil industry recovered. It expects world oil demand to grow by 900K bbl/day in 2012, up slightly from its earlier 860K forecast. 

  29. ArcelorMittal (MT):
     Q1 EPS of $0.01 misses by $0.04. Revenue of $22.7B (+2.3% Y/Y) beats by $0.3M. Shares +0.9%premarket. (PR

    More on Tesla Motors (TSLA): Q1 misses across the board, despite a 10% jump in deliveries in its European and Asian markets. The company notes initial deliveries of its Model S to customers in the United States will begin in June, one month ahead of schedule and ups FY12 guidance, now expecting to earn between $560M – $600M. Street estimates are for $561M. Shares +8% AH. 

    MEMC Electronic Materials (WFR): Q1 EPS of -$0.26misses by $0.10. Revenue of $524M (-29.4% Y/Y) beats by $28M. (PR)

    Universal Display (PANL): Q1 EPS of -$0.03 misses by $0.07. Revenue of $12.6M (+31% Y/Y) misses by $3.8M. Company blames shortfall on lack of Samsung licensing revenue, which it says will be recognized in Q2 and Q4. Maintains 2012 revenue guidance of $90M-$110M. Shares -17% AH. (PR

    Sony (SNE) reports a record annual loss of $5.7B in its fourth consecutive year of red ink, hurt by losses at its TV business. Consolidated sales -9.6% on currency impact, macroeconomic weakness. Sony expects to to post an operating profit of ¥180B this year, with FY net profit of ¥30B. (PR

    More on Cisco's call: Commentary is downbeat, with Cisco noting weak Euro and public sector spending. Service provider orders +5% Y/Y, but enterprise orders -1%. Longer sales cycles and smaller deal sizes are being seen. FQ3 switch sales +5%, but router and collaboration (VoIP, telepresence, etc.) sales were flat. Asia-Pac is an area of strength, but China orders -8% Y/Y. Wireless and servers are growing quickly, but are still only 6% of sales. CSCO -9.2% AH. (more) (webcast)

    U.S. officials are wary of China Mobile's (CHL) international-service license application, saying it could help China spy on the U.S. more easily and could enable theft of intellectual property from U.S. companies, according to a McClatchy-Tribune report.

    After talking with several phone OEMs at CTIA 2012, Citi thinks Q2 phone sales are improving after a weak Q1, with demand particularly strong in Asia. The firm adds it was surprised by the strongcarrier interest shown for Windows Phone (MSFT) as an iOS/Android alternative. Meanwhile, BMO and Piper struck a bullish tone on F5 Networks (FFIV) after meeting with management at CTIA. F5's mobile infrastructure sales have been growing quickly. 

    Facebook (FB) has filed an amendment to its S-1 in which it reaffirms its need to improve mobile monetization. Facebook's ad growth is no longer keeping up with its daily active user growth (+41% Y/Y in March), and the massive increase seen in Facebook's mobile user base has much to do with that, given it has only begun sellingmobile ads. The fact much of the user growth now comes from emerging markets where Facebook's ad sales are limited is also likely part of the problem.

    As Facebook warns about its mobile monetization issues, Google (GOOG) CFO Patrick Pichette argues his company's low mobile ad rates, which have contributed to its cost-per-click declines, will inevitably improve, and should eventually be higher than PC rates. The combo of location-based ads and mobile payments make mobile devices an especially valuable ad platform, in Pichette's view, and Google now has plenty of mobile experience to work with. (also)

  30. There goes 1,360 in the Futures!  

  31. Updated $5KP portfolio

  32. Gold is at $1600 Phil – do we wait on the GLL positions in the portfolios? 1600 is actually R1 in my charts so we might still not cross it!

  33. newbie – whee on the upside!  Who are gaining big on this relief rally?  Front month put sellers like ourselves; PLCN out of the money put and call sellers (for a change); big funds for unloading now, especially if we get to the 50 MA on SP500 at 1384 or so.  We'll be selling OTM calls if it gets over 1384.

  34. bloomy weekly consumer comfort index in freefall…especially the "personal finances" component which has dropped from +7.1 to -11 in 3 weeks.

  35. Phil – any tips on WFR? I got stopped out of my sold puts a while back, luckily, but still holding shares and sold JAN13 $5 calls. Buy them back? At $.16, they aren't much protection. 

  36. PCLN $620 puts at $18.50 – very important lesson in keeping realistic expectations on earnings plays!

    WFR/1020 – Yes, there are now dozens of well-funded companies that install solar panels on the roof for free and you sign a 20-year contract to buy electricity from them (but at a flat, current price).  It's a good deal for people who can't afford to lay out $50-$100,000 and wait for state rebates that take the costs down to $25,000-$50,000 and then have to wait another 10 years to recoup the investment anyway.  This is similar to the suggestion I had for the US Government to do and they already have one of the resellers working in Home Depot so I think we'll see a big uptick in this sort of thing by the year's end.  

    WFR down to $2.96 and you can sell the 2014 $3 puts and calls for $1.85 for a net $1.11/2.06 entry and you can sell 1/2 June $3 calls for .24.  Pick up .10 per share 6 times this year and your net is down to .51/1.76!  

    Title/Pharm, Dpast – Forgot it, thanks.

    Income Portfolio/Newt – We start a new one in June, that might be a good time.  The idea is to have a watch list like the one I put up yesterday and then, when some go on sale, like CSCO and WFR today – then it's a good time to sell a put for an initial entry like:

    CSCO Jan $16 puts can be sold for $1.20 for a net $14.80 entry.   TOS says Net ordinary margin is $2,327 so huge 50% return on margin in just 8 months with worst case being another 15% off the entry in CSCO.  

    1,357!  That's some nice Futures money!  

    AUD/Gandhjo – I like CDN better at the moment.  Australia is too dependent on China and India and those guys are shaky at best.  Canada has their own oil which the US needs all of and the same mineral resources as Australia (and just as close for them to ship to China) and only 200 people in the whole country so they haven't got the same kind of long-term liability issues we do.  

    Margin/Lincoln – I thought you wanted us to change it to suite low-margin, that's all.  I do think we need to make it clear in the title that it's margin intensive so people don't get confused but, other than that, I'm not looking to make changes.  

    CHK/$5KP, Rudy – Good catch, thanks!  

    Sam/Lincoln – Sam is amazing!  His instincts are fantastic and he's like a pit bull once he's onto something.  

    Oil $97 and failing it as we have yet another build in nat gas.  

    McClellan/Rustle – Good point:  




    Gold/StJ – 20 minutes over the line to confirm (really 2 consecutive 10-minute candles should form entirely above the line).  That's the rule of thumb UNLESS the bottom of the 2nd candle forms above the body of the first – then you can give up earlier.  Also we need to take into account Dollar at 80.10 masking weakness so as long as Dollar holds 80 we can expect it to bounce back at some point and knock gold lower.  Also, oil not confirming the move up nor is gasoline or nat gas and copper was rejected at $3.70 and silver at $29.50 so we have those lines to watch as well.  

    WFR/Kurt – See above.  I still like them but it's a long-term thing, this is a terrible part of the cycle for Solar.  I don't see why waste .16, which is 5% of the stock, to buy back Jan $5s – You should be thrilled if you get called away at $5 and, if not, then happy to get .16 more.  

  37. StJeanLuc
    The 5KP CHK BCS Jun 15/17 BCS never filled at $1.30.  Should it be in the 5KP at $1.36?

  38. Phil, regarding the 2 consecutive 10-minute candles above the line, do you have a rule of thumb if it were to blow through the stop in that 20 minutes to avoid it being, for example, $1620 before you stop out? 

  39. PCLN / Phil – What would be a good play to profit from the potential spanking of PCLN to the downside? An even more OTM put? I see the 620$ are quite pricey.  e

  40. Hi phil and psw….just wanted to share this trade and comments welcome:
    bought HOV yesterday $1.72  
    Today sold JAN2013 1.50 PUTS (.300  and $2.00 Calls (.30) for .60 cents for a net entry of 1.12/1.20
    Am i getting close…should i have sold the $1.50 calls? Also, did I calculate the 1.12/1.20 entry correct!

  41. $5KP / Hemas – I have it at $1.33 which is where both options traded at when Phil posted his suggestions. That's really the best I can do as everybody will get different prices for every trade. 

  42. The PCLN weekly puts only go to 675… might there today!

  43. stjean, I understand, just being patient…

  44. Plil
    Do you think the dip is done? Looks a little like a turn or gasping for air.

  45. Looking pretty weak – same BS as usual, pump up the Futures, put Cramer in a suit and tell people to BUYBUYBUY at the open and then dump shares into all the retail suckers.  This is not looking good at all for the bulls. 

    WFR $2.77!  

    FAS Money – When we go up 3% in a day it might be time to go to cash!  Well, our premise was that Bernanke may say something bullish but he didn't so I think we'd better sell 2 FAS May $95 calls at $3.90 because $3.90 is a lot of money and we like money.  

    IWM Money – Much more balanced.  But up 10% today so go figure…  Probably not up 10% now but TNA is at 52.79 with RUT at 785 and I think we have a good chance of closing around here and that threads the needle quite nicely so no changes.  

    $5KP – Up $475 is good!  GLL stop should be $2 but I would really hate to lose them.  EDZ seems good to me, TNA I know we said take the money and run at some point but not sure when or what.  It is June though and I don't yet believe we'll be staying down too long.  CHK I love it more every time I look at it – this is like when we got BP for $30 – nothing we've heard about, even if all true and worst-case, has any impact on the company's long-term ability to make money, does it?  We only get chances to make investments like this about once a year – you have to learn to identify mispriced stocks that are down over manufactured panics.  

    $25KP – That balance makes more sense than yesterday.  

    • DMND – $23.66, looking good!  Spread only valued at $2.52 even though it's $3.66 in the money – funny how that works…
    • XRT – $59.76 is looking good.  
    • BBY – $20!  Holy crap, $20?  $50Bn in sales, $1.2Bn in profits (one-time charge in FY2012) and a $6.8Bn market cap is a buy to me.  That's a p/e of about 5 vs WMT at 13 but WMT drops a better percent to the bottom line.  
    • BBY pays a .64 dividend (3.2%) so worth owning the stock at $19.96 and selling the 2014 $18 calls for $4.70 and the $15 puts for $2.35 for net $12.91/13.96.  That makes the .64 dividend 5%!   This is not for the $25KP – just "while we were on the subject."

    • FAS – Like FAS Money above – it's a shame not to take $3.90 for the May $95 calls so let's sell 4 of those for $1,560
    • GLL – I want to see $1,500.  Might get there by June.  
    • CHK – LOVE THEM! 
    • LNKD – Hopefully they test $100 again.  

  46. $5KP TNA / Phil – We took the money on the short May calls (almost 100%) but you said to keep the long calls as a hedge if I remember correctly.

  47. Phil PCL for the income port. 

  48. BBY/Phil
    I'm still in the anti BBY camp like I was with RIMM for last 18 months.  I still don't see how they are going to compete.  They have not made any changes in the last couple years while competition has ramped up.  They are a last choice for people.  Internet seems to be first, then clubs like Costco, BJ's and Sam's Club second, Walmart and then Best Buy and some others.  And even in NJ, I know some people who like Electronic Expo way better than Best Buy.  Their product line is limited, their prices are high compared to others and you have state tax which is hurting a lot of brick and mortar stores especially when you're buying a high ticket item and many internet venues are providing free shipping and no state tax.  I don't think a p/e matters that much if the business is in decline.  I'm still shocked that Barnes and Noble stores are closing as quickly as they are, don't see Best Buy bucking the trend.  Now of course I can be wrong but that's just my opinion.

  49. A little help for a brother?????
    Is there ANYBODY around who knows the ropes who can tell me where in the entire PSW web universe I might be able to find an explanation of how all the "Lines" work?
    Numerous people have asked this question in Chat over the months, and I'm not sure if I'v ever seen an explanation.
    I've searched the Education section until I'm blue in the face, and I've found nothing. I'm sure it's gotta be there some place, but I've lucked out.
    Anybody? Buehler?

  50. Phil
    I have a rookie question. You suggested selling May $95 FAS calls. Everything I read about selling calls is that it is quite risky in the sense that loss is huge if the value keeps going up. FAS is already around $95, so wouldn't you get called to sell the stock @ $95. Something I really don't understand – can you please give it to me in layman terms.

  51. so for those of us who were "out to lunch" would the ChK June 16/18 for 1.20 be a next best entry?

  52. Gasoline price in Minneapolis today = $3.51,  down about 15 cents over the last couple days.

  53. SGEN – more data from their flagship….and it keeps getting better.  Adding to the Sept 20/25 BCS…very aggressive play that is OTM…and it goes against our rules here FWIW.

  54. Newbie – 5% rule is here, and this explains the lines….

  55. ARCO- Phil, would be interested in your opinion.

  56. never mind CHK. looks like the 15/17 might be coming back around.

  57. Puked up my solar holdings, including WFR.
    Where's my Listerine?  I need to rinse…… :(

  58. Newbie
    Go to WIKI and look under Book Project Tools   5% Rule

    Lots of other basic info in the Book Project

  59. WFR- I need help understanding the mechanics- so I initiate the straddle  get filled  then sell against 1/2 your position (10) for the June $3 calls?
    "WFR down to $2.96 and you can sell the 2014 $3 puts and calls for $1.85 for a net $1.11/2.06 entry and you can sell 1/2 June $3 calls for .24.  Pick up .10 per share 6 times this year and your net is down to .51/1.76! 

  60. Anybody reading that Dbag Feurestien's live blog for ARNA today? I cant get on it wiht this Gov't computer and will be working until midnight so I wont be able to find out how things are going…

  61. Yep, that about sums it up…

  62. And for perspective….it started at $80.  Let's just day that is much, much more than any Momo decline.

  63. The confirmation of change may have gone by.

  64. ARNA/jro – seems to be going well for ARNA….but it is the vote that counts…

  65. "Growth through structural reforms is sensible, important and necessary. Growth on credit would just push us right back to the beginning of the crisis, and that is why we should not and will not do it," said Merkel, who is expected to get a visit from Hollande next week on his first foreign trip as president.

  66. newbe
    If you take the line numbers and go back 3 years on a daily chart you will see it in history.

  67. 1,354 on /ES.  80.25 on the Dollar.  

    CHK/Hemas – 5% is my rule of thumb for overpaying on an entry although with all those gyrations in CHK, it really should have filled.  

    Rule of thumb/Jrod – Yes, rule is to use your common sense!  If something actually happens in the news that drives the trade – like yesterday when we had a net draw in oil, we didn't need to wait 20 minutes to know that a bottom was put in on that report = then of course you just get the hell out.  If you see the entire market moving up in lockstep then you know your bet is going with it and you don't need to wait to confirm but, if the movement is slowing to consolidate AROUND your stop line – THEN you should be waiting for a proper breakout.   

    PCLN/Dpast – News is already in, they'll just track the Qs now so you are better off betting the index.  If they zoom up, THEN you might get good deals on a short but I've lost all interest in them at this point. If the market is breaking down further, in addition to IYR, I like AMZN as a short play now.  They go up every time they announce they are going to spend more money – all it takes is one negative outcome and people will run for the exits.  The June $235 calls can be sold for $4 and that pays for a good portion of the July $205 puts ($6) for net $2 on the short play.  

    HOV/Star – I think keeping a stop in mind, like $1.60 to sell $1.50 calls is a reasonable way to go.  You could have sold the 2014 $1.50 puts and calls for $1.35 and been in at .37/94 and bought twice as many and then you make $2.26 at $1.50 vs .88 at $2 on your spread.  We think HOV is way too cheap at $1.83 but, if they run into trouble at $2 again or if they fail to hold $1.60 – then we have to evaluate a cover more seriously.  

    Dip/Shadow – Still a lot of sellers out there so I think we need a proper capitulation day still. 

    TNA/StJ – Thanks, I lost my place on those.  

    PCL/Yodi – Too many foreclosures to make them a good play over the next 12 months.  

    BBY/Rustle – They have very little debt and are kind of like SHLD when Lampert took over.  There's a lot to mine out of the operation and you can't say BBY is limited in merchandise compared to Electronics Expo (not a big competitor anyway) but then say that WMT, COST, BJ etc. is viable competition with their SEVERELY limited selections.  I could turn BBY around in 18 months or less and I'm sure when they get over the debacle with their CEO, the next guy will do some of the very obvious things that need to be done to re-tool them.

    Lines/Newbie – What lines?  There are several posts about the 5% Rule in the Education Section and the Portfolio Section and I'm sure it's in the Wiki too (or it should be).  The only other lines I can think of (that are not on your mirror!) are the ones on today's chart and they are simply 50% lines between the top and bottom of the 2-month moves.  I guess we could write a post on how to average two numbers if it would help you…. ;)  

    Calls/Gand – Well you'll notice we already have long positions that more than cover the upside on those short sales so we actually WANT FAS to go up but, since we think it won't, we also want to sell enough calls to cover some of the downside damage that will occur if FAS does not hold $95.  Selling covered calls is not risky – selling naked calls or poorly covered calls is very risky.  Learning the difference is what will ultimately make a trader out of you!  

    CHK/Morx – I don't know that they will resolve their issues that quickly or that the market may not fall and take them lower so I would not chase the higher entry.  So far, CHK has hit $17 about 6 times in the last dozen sessions so patience is likely to be rewarding here.  

    ARCO/Pstas – They are still in a growth phase and spending a lot to open new restaurants and their net income took a hit in the recent report due to that and other factors including exchange rates and higher taxes – which are not going to go away.  I suppose a Nov $15 buy/write at net $10.39/12.70 is not too terribly risky and they pay a sightly irregular dividend of .06, which is another 2.5% and sure, I think it's smart to own the biggest MCD franchiser in South America long-term.  

    Straddle/Newt – You buy the stock, sell the straddle and sell the calls (1/2 of your position).  

    $2.60 on WFR! 

    Oil bounce rejected at $97.  

    Newt WFR say you sold 2 Jan14 Straddles than you sell 1x Jun 12 3c 

  69. Phil/BBY
    If you were running BBY, seriously, I would buy them because I do think you have the ideas that can turn it around.  But don't see it as of now.  They're getting to be like radio shack, which is emergency purchases or can't wait a couple days for a product.  Radio shack makes money because they charge you $10 for a AA battery, lol.

  70. Pharm – With SPWR, it helps that they are 75% owned by oil biggie, Total. I think other energy companies might step in to pick over the rubble when the time is right….
    Other thoughts:

  71. WFR: Thanks guys.

  72. Phil Dip
    I do believe we need the capitulation. I was refering to today, the Ben disappointment dip. Sorry I wasn't clear.

  73. Phil/Movie Theatres
    By the way, I do think about the movie theatre ideas you told me every time I'm in the theatre and can't believe they don't do special late night showings and thought they should also come around before the movie and during previews with food items considering they make almost all their profit from them and very little from the actual ticket.

  74. When or high high does the Buck go before it blows the market? 80 didn't do it.

  75. rustle123
    This is tim buck 2 land! They have first runs after midnight enough people 2AM also.

  76. movies/shadowfax
    New movies or old?  On a new movie, 1st week the theatre only gets 10% of ticket price, 2nd week it goes to 20% and so on till it gets to 50% where it's capped.  So better to show a cult film like Rocky Horror than a first run.  BTW, that was Phil's idea, not mine, don't want to take credit.

  77. aapl is propping up entire market again more than people realize last few days

  78. Sad story – Sukhoi would be a SELL….

    People – Think twice before driving a russian car or boarding a russian aircraft.

  79. BBY/ 25K:  Can someone explain the naked June $25 put – it being in the money and all I just dont get it….?

  80. rustle First run, Harry Potter always gets the lines on the late news. I don't go too far too late but I have wondered if drunks sober up at the movies then drive home.

  81. newt – it was a hedge for a run to the up side.  Most likely it will be rolled down and out (for instance, Sept $20s for ~ 2X).

  82. Very little premium in the QQQ weekly 63 calls if you want to play for a stick today, stop loss at 20%.

  83. mrmocha
    What makes you think of a stick? I'm still hopeing someone understanding the dollar more than me can explain why over 80 doesn't crash the market this time?

  84. CHK – Did anyone else read the Reuters article about their supposed $15B funding gap over the next 18 months that they will have to fill by monetizing assets?  Any thoughts?  TIA  

  85. BBY/Rustle – I understand they are already making a deal with Square so they can process sales on the floor like the AAPL store and there's one of the first things I would do right there.  It's very easy to believe mail-order will put everything out of business but that's not the problem, it's convenience.  Look at AAPL stores – does mail order put them out of business or are they they highest-grossing retail operation in history?  AAPL proves the retail model is still viable and to write off a company with $50Bn in sales and $1.2Bn in profits because you don't believe they can move to a working model is simply an emotional play – not a fundamental one.  

    SPWR/1020 – They are in the toilet along with the rest of the solar sector.  I like them too but one disaster (WFR) at a time is my limit. 

    Movies/Rustle – I freak out when I'm on a movie line to buy food as all I am able to do is count the money that is walking away from them.  There is no logic to their system, they make you whip out your CC and wait on multiple lines when they could easily have candy on the ticket line that you could pick up and then do it yourself soda machines like 7/11 that can triple the speed of the lines, take a load off the people behind the counter AND give customers something to do while they wait.  Also, for Mall locations, I'd move the concessions in front of the tickets or combine them so people passing by can get popcorn and candy – why not?  

    And we're back to 1,360 (and shortable again on /ES).  So funny that the VIX goes down on a day when we swing up and down 7 points in 3 hours of trading.  

  86. FAS Money - Can I just ask an opinion?  
    -I'm still in the FAS May 100 Calls, sold for $1.60, now 1.83.  Net loss of 0.23 now.  I know these were closed out in the real FAS money.
    -Phil suggested selling the FAS May 95 Calls today, which are now priced at $4.15.  He doesn't expect FAS to hold 95.  
    Would you roll the 100's down to the 95's for a credit of $3.92, or just hold the 100 calls short, and also sell the 95's?

  87. Concerning WFR, solar etc… whenever I go to some of the more rural areas of Japan, on almost every house that I pass by, I notice solar panels on their roofs.  OTOH, while in the more urban areas,  I never see panels on houses.  I am not sure why there is a discrepancy — possibly because of the difference in incomes between the city dwellers and the countryfolk as well as energy costs out in the boonies.

    Anyway, this is changing.  Japan has stopped all nuclear reactors and they have no choice but to turn to the rooftop solar panels that are so ubiquitous out in the country and start installing them in the cities as well.  After looking at my latest energy bill — I am beginning to think maybe this is going to catch on in the States as well along with all the other trends and innovations that start out in Japan and migrate here to the U.S.
    WFR's SunEdison division has plans on building a $4.6 billion solar farm and is waiting on the implementation of a feed-in tariff to fund the project that are being enacted this July.

  88. shadowfax / stick - Just based on reading last night – Cobra and others – that a little bounce is likely in the absence of dramatic news.

  89. Phil/BBY  Can't BBY be our kids Radio Shack?
    Apple stores are cool - Selling only cool products.
    Starbucks are cool as well – Selling crappy coffee but very convenient.
    Frys  is a place like BBY but with so much more.
    Big blue has lost it's "cool"…..

  90. BBY / Phil – I would agree with Rustle on this one. I have not been in one of their stores for a long time for multiple reasons:

    1. They are usually understaffed and it takes too long to get answers
    2. They don't always have the stuff I want for the price I want.

    The problem I think is that they face competition from every angle in their product offerings. The low end stuff (like TV's up to 60", Blu-Ray players, etc..) can be bought cheaper at Wal-Mart, BJ's and others. My local BJ's has about 50 TVs on display and unless you are looking for 84" 3D TV, you'll find what you need cheaper there. As for the high end stuff, BBY doesn't usually have the latest. For that more people will go online or to more specialized stores – I can find out more about new stuff by reading 10 reviews on Amazon than spending 2 hours at Best Buy. BBY also has a lot of space for CD and DVD and that's a dying model as they compete against iTune, NFLX and others. They also sell games, but the kids I know would rather go to GameStop to get their gaming stuff. Selling cell phone plans can't be that profitable… 

    It's not like BBY has a huge moat for protection! And the Apple store is a bad comparison I think because they have a loyal following that cannot be bought by BBY! Now, is BBY going to die tomorrow, no! But I don't see them as a long term investment.

  91. BBY/Newt – Er, we thought BBY would be higher than $25 by June expirations and the put would expire worthless…

    TLT spiking – someone is worried about something. $118.10

    $15Bn/Ink – Do you have any kind of link to that?  It's a hell of a thing to say about a company.  I know there is a gap but it's really about $10Bn of senior notes that simply have to be rolled over, not suddenly repaid with an emergency asset sale. Of course, all the bearish extrapolations assume nat gas will never recover and CHK, who have always brilliantly hedged in the past – are no almost completely unhedged because they think $2 for nat gas is too cheap so they refuse to lock in sales at that price.  Their oil output (yes they have that too) is 60% hedged at $103 because they thought that was plenty to get for oil.  Is that foolish or brilliant?  

    Obviously, if you think Nat gas is going to zero and will be free forever (despite $100 oil) – then stay away from CHK but, if you think that maybe Nat gas at 1/6th the BTU price of oil isn't going to last very long – then CHK is a fantastic way to play nat gas.  

    For the rest of 2012, CHK is projecting a $2Bn cash flow surplus and they currently supply 9% of the US nat gas supply and their reserves are expanding.  If you don't think natural gas is a viable fuel source – CHK does look like a poor investment as that's all they have.  But boy do they have a lot of it and, currently, they are buying more and more every day at 20-year lows.  

    FAS/Burr – FAS is not at $100 so why worry about what the PRICE of the short May calls are?  If you have the backing of the long play, then it's prudent to protect it with a deeper sale but if you are simply speculating and selling naked calls, then it's a bit more prudent to just sell the $100s although I will point out that my logic is that at $102, I have a $2 loss on the short $95s and you have a .40 loss on the short $100s so I risk $1.60 more BUT – at $95 – I make $5 and you make $1.60.  So, since I am protecting my 10 long calls AND I have 2 offsetting shorts that will pay me another $1.40 anyway – it's kind of a no-brainer to sell 3x more premium to protect my overall interest.  

    Solar/Kinki – Check out Home Depot's Solar Sales – they are getting to the point where it's hard to ignore the savings.  I live in NJ and they will actually put in a system for $0 here.  It's a fully covered system for 20 years (you don't own the panels) and you can knock about 25-35% off your monthly electric payments now and lock in the current rates for 20 years.  If you want to kick in $10K or $20K up front, they save you a lot more on the bills.  I like that it goes through HD as it's a little more stable than buying from local roofing companies.  Good point on Japan too – should be a long-term process there too.  

    BBY/1020 – They could go the wrong way and turn into a disaster – I just don't think they will.   AAPL has given a blueprint for a better retail operation and it could easily be modified for BBY.  Also, their competition is wiped out for the most part – that's nice for them as well.  They are taking huge charges closing 50 underperforming big stores and opening 100 Mobile stores this year and next.  TV sales and games dove for everyone last year but they were way up in tablet sales and appliances.  Most importantly, their market share is up overall.  China growth was 22% with 8% same-store sales increases underlying – maybe CHINA!!! hasn't heard that retail is dead?  Also strange about BBY – Q4 EPS was $2.47 with $3.64 for the year and their guidance was $3.35 to $3.65 and estimates for this year are $3.74 on the $20 stock.  Oh, and they do have on-line sales that were up 18% last year after having been up 12% the year before.   I think they have $1.5Bn allocated to share buy-backs as well – at the current price, that's about 1/4 of their stock!  

    So I'm not really going to sit here and defend them – feel free to stay away from BBY and CHK and we'll have a chat next year and see how it all works out for everyone. 

  92. Phil – as a new position – would you enter WFR here – for a 1 year out play ? If so – what would it look like ..

  93. Phil – sorry nevermind – I saw your earlier post on buy/write 

  94. One last thing on solar.
    Look out for the power companies billing residential solar customers a "network use charge"

    SDG&E is owned by Sempra energy

  95. Thought this would make everyone laugh – "MarketWatch healdine "BREAKING:  US posts first budget surplus since 2008".  It only took them two days to post that headline.  By the way, I do like CHK and went long when it was in the mid $16s.  Thanks Phil as always.

  96. 1020 -
    This attempt was squashed by the California PUC for now.  
    i'm sure it will be back…

  97. Anybody know why CRM is getting pounded today?

  98. BBY/ Pharm & Phil: Capisce. Thanks.

  99. edro00 – Yes it will, in one form or another….

  100. You can knock 20% off your electric bill by installing a Nest thermostat. (I love mine.)

  101. Phil / FAS-Yes I'm arithmetic challenged…
    I'm confused on your math, sorry.  If you're short 2 Mat 95's at 3.90, then aren't you protected up to 98.90, not 102?  At 102, wouldn't you have a $7 intrinsic value – $3.90 collected = $3.10 loss?  Maybe you're including the sold put credits?  

  102. PHIL  HOV
    THANKS.  IT is hard to shed the day trading clothes for long term/planting trees ……which i see now is reflected in the trade i made.  (trying to get the extra .50 on the $2 call rather than taking 2x the shares in 2014 which is clearly far more profitable way to go ……and other than scanning it, requires no real maintenance unless things go real bad…..but then i got the exit plan already!

  103. Phil
    What do you think of the Europe close today?

  104. sundevils- as my boss used to say- more sellers than buyers. Actually it displayed it's first weakness the other day when there was a session on Fox Business about GOOG and others getting into cloud storage. I poured through the annual and quarterluies several monts ago- actually being run pretty poorly- huge stock bonuses which are not being accounted for properly and they recently bought a 24 acre site outside San Fran to build their monument to themselves. They will never survive in a world of competition without servere changes.

  105. WFR/Partha – It would look exactly like the position I liked at 10:45 only a little cheaper now.  Clearly you only want a small position as they may go to $2 or less and you'll want plenty of firepower to DD.  

    CHK/Ink – I see where the $15Bn comes from but that's over 2 years and again assumes $2 gas.  Also, the expected costs are because they are aggressively expanding by buying $2 gas from others – if they can't get the funding, they won't spend $23Bn – this is kind of silly logic assuming they spend the max and raise the minimum and that would cause them to have a large gap….

    When AAPL was $85 and I tried to explain how they were still a solid company and worth much more.  I got nothing all day long but people showing me articles that "proved" AAPL was finished so I've learned to move on – if you guys don't like CHK – don't buy it but this is nothing but what we call a hyena attack – where all the Fund managers have their little Cramer attack dogs plant articles in the press and they get on TV and they point out all these horrible things to chase all the retailers out of the stock at what is actually the buying opportunity of a lifetime.  I'm not saying CHK can't go lower – I'm just saying that I'd be happy to DD at $8 and again at $4 for an average of 4x at $8 and then I'll be happy to stick it under my mattress for 20 years and be one of those old folks who ends up with $5M worth of some company he forgot he owned….

    CRM/Sun – Business slowing down and that's a no-no for a company with a p/e of 65.  

    11:37 AM European shares close higher, led by a big surge in Spain,+3.6%, reversing yesterday's 3.1% dive. Stoxx 50 +0.9%, Germany+0.7% France +0.3%, Italy +1.5%. The U.K. – where QE is (for the moment) scheduled to end at May's close - gained 0.2%. The euro+0.3% to $1.2962

    12:00 PM On the hour: Dow +0.36%. 10-yr -0.17%. Euro +0.24%vs. dollar. Crude +0.22% to $97.03. Gold +0.08% to $1595.55.

    1:00 PM On the hour: Dow +0.56%. 10-yr -0.25%. Euro +0.27% vs. dollar. Crude +0.43% to $97.22. Gold +0.11% to $1595.95.

    2:00 PM On the hour: Dow +0.37%. 10-yr -0.08%. Euro +0.22% vs. dollar. Crude +0.46% to $97.25. Gold +0.11% to $1595.95.

    The Treasury sells $16B in 30-year bonds at 3.09%, strength in the week's last major auction. Bid-to-cover ratio of 2.73, vs. a recent average of 2.35; indirect bidders take 33.8%, vs. a recent 25.7%. Direct bidders take 15.4%, vs. a recent 14.7%.

    Treasurys trim losses across the board after a strong auction that saw the record-low sale yield for newly issued 30-year bonds. The 30-year yield now just +0.04 to 3.07%; 10-year +0.04 to 1.89%; five-year +0.02 to 0.77%.

    Gross Talks His Books, Says (Asks for) QE3 Getting Closer (Bloomberg)

    Amidst the debate over whether Germany will or won't tolerate higher inflation to assist the struggling Club Med nations of the EU, Scotty Barber shows things are already in near-unprecedented territory. German inflation stands more than 100 bps higher than the overnight rate – a serious no-no when the Buba was in charge.

    More on yesterday's rumors of €5.2B in "rescue" funds to Greece being withheld: Sources confirm several finmins calling for a freeze, dropping objections only when it was pointed out Greece had to write a €4B check to the ECB. With no bonds maturing in July and August, expect the crew to take a hard line again. Farce doesn't begin to describe this.

    "Explain to me why there would be an economic catastrophe," asks Marc Faber regarding Greece leaving the euro. He notes many countries have given up pegs and lived (prosperously) to tell the tale. "The public has been brainwashed that the breakup of the euro would be a complete disaster, when in fact, it may be a solution." Are the Greeks figuring this out?

    "Plucked out of thin air," writes Ambrose Evans-Pritchard of ideas the Greek economy would collapse and inflation sky should it pull out of EMU. In fact, there is little historical backing for these sorts of predictions. The Greeks are beginning to realize this and the German political establishment better pay attention, because the rest of the Club Med states certainly will.

    While Ambrose Evans-Pritchard and Mark Faber are highly skeptical (III) that Greece leaving the euro would lead to doomsday, BNP's Paul Mortimer-Lee reckons that GDP would probably fall another 20%, inflation would rise to 40-50%, and debt would surge to over 200% of GDP. And then there's the fallout as capital flees the peripheral banks. 

    Greeks May Hold $510 Billion Trump Card in Renegotiation (Bloomberg)

    U.K. gamblers seem convinced that Greece's exit from the euro is a foregone conclusion to the point that bookmakers have had to suspend betting on it. This follows a surge in bets that had pushed the odds down to 1/4 at William Hill, for example. The company has also closed betting on the euro still existing by the end of 2015.

    Spain nationalises Bankia as euro crisis escalates (The Telegraph)

    "Renminbi depreciation is no longer such an unlikely idea," writes Robert Cookson, noting even Tim Geithner is softening his robotic calls for the yuan to rise further. HSBC's Paul Mackel, formerly a big bull on the currency, speaks of a "new phase … a future in which the currency is no longer structurally undervalued."

    Governor Brown's administration in California has notified state employee union leaders of its intent to cut payroll costs by at least 5% as a hoped-for $9.2B budget deficit looks to be considerably higher. Brown has the authority for layoffs, but not to adjust pay and benefits, which have been targeted for years without success. (earlier)

    The big splash you hear is the sound of California sliding into the Pacific Ocean under the weight of its pension obligations, as the number of retired government workers receiving annual pensions in excess of $100K hits 12,199 – a 25% Y/Y increase.

    Occupy London Tour Shows Bankers Profiting Amid Poverty (Bloomberg)

    Goldman puts together a list of firms with the most exposure to government spending and so would be in danger of falling off of Ben Bernanke's fiscal cliff if the "sequestrations" kick in. Among those that could be "government agencies," as Business Insider would have it, are Lockheed Martin (LMT) with 97% exposure, Northrop Grumman (NOC) with 90% and Raytheon (RTN) with 86%. 

    The Nevada Gaming Board reports gambling revenue in the state fell off 11% to $854.6M, although on a fiscal YTD basis revenue in 2012 still outpaces 2011. Casino stocks trade in-line with market indexes, BJK +0.4%.

    Forecasts for auto sales keep trickling higher, with estimates now ranging as high as 14M-14.6M after starting the year in a tighter 13.4M-13.7M range. Driving sales higher on unleashed pent-up demand is a slowly-improving economy combined with the increasing age of U.S. cars and trucks on the road. Automakers plan to ramp up production in response, with Chrysler (FIATY.PK) and Ford (F +0.9%) shortening their summer shutdown, while Honda (HMC +1.0%) adds overtime shifts. (CRM -9.4%) has been getting hammered since coming out of the gate this morning on cautious comments out of Macquarie and William Blair ahead of its quarterly results. William Blair says the company's U.S. enterprise business is coming in below plan, while Macquarie notes a possible slowdown in activity in its SDFC business.

    General Growth Properties (GGP +1.6%) is upgraded to Buy from Neutral at UBS, with a $20 target price up from $17, following solid Q1 results. After the Rouse spinoff and through continued dispositions of non-core assets, the firm thinks GGP is "successfully transforming into one of the leading Class A mall REITs," expecting the perception to be reflected in the valuation over time. 

  106. wow, Cramer said on CNBC "Hundreds of people told me every week that they made too much money in the market". 

  107. Phil / NAK – at one point you liked these guys.  Looks like they are following WFR into the abyss. 

  108. Yum Brands (
    YUM +1.7%plans to open 150 KFC and Pizza Hut restaurants inside stores of electronics seller Suning Appliance in China over the next 5 years. The deal should give Yum Brands a surefire way to stay on its projected growth path of 600 new restaurants per year in the nation. (Earlier: How McDonald's plans to keep with Yum Brands in China

    The CEO of McDonald's China (MCD +0.3%tips off how the restaurant chain plans to cut into rival Yum Brands (YUM +1.1%) market share lead in the nation – saying drive-thrus, dessert kiosks and extended hours will be added to help increase same-store sales. He also says the company's franchise program – less popular in China than elsewhere – will be stepped up to help spur growth.

    MEMC Electronic (WFR -12.3%) shares near a 10-year low following Q1 results that showed widening losses on weaker revenue in both major segments due to softer pricing and volumes. WFR says its semi wafer business appears to have bottomed in Q1 and margins should return to positive by H2, but falling solar prices likely will extend losses well into 2013. 

    There's more downside ahead for MEMC Electronic (WFR-24%) after its latest quarterly miss, Wunderlich says: "We have serious reservations about the future of MEMC given that there is still a tremendous oversupply of polysilicon worldwide, its vertically integrated solar business has no barriers to entry, and the solar gold rush is over as subsidies and stimulus run out."

    Microsoft (MSFT) is unveiling its massive overhaul of Bing, promising to improve searches by tapping into Facebook and other social networks. "A fundamentally different way to look at search," says Qi Lu, president of Microsoft's online services division. Watch live here.

    Facebook IPO: Investors should wait (Market Watch)

    You Hate Taxes, but You Ain’t Moving to Nashville (Bloomberg)

    Three lunchtime reads:

    1) Kass: Buy in May and go away

    2) The commodity megatrend

    3) How a radical Greek rescue plan fell short

  109. Phil/Chk – Thank you for the thoughts/insight.  Much appreciated.

  110. Hi Phil!  Back in town for two weeks.  wow a lot of chatter about BBY and CHK!  I sold the Jan 13 15 puts on CHK for $2.30.  I personally would love to own them long term at $12.80.  Hoping I can do that again in another dip.  Just one man's opinion.
    BBY stores are packed with shoppers here in Southern California. My daughter works for them and sales are really picking up here.  The California stores are looking at a good spring season so far.  
    for what it's worth… 

  111. Nest/Kwan – That looks nice. 

    FAS/Burr – Silly me, I thought they were $4.90.  Anyway, point is to get better downside protection and, as we have 10 longs – I have no worries about rolling them up to 2x the next month and we can always sell more puts if we get so gung-ho bullish.  It's really not the kind of trade where you try to win every entry – the goal is to sell lots of premium on both sides and, over time, statistics will be on your side.  There's no "system" here – it's me making an educated guess for my XLF target over the period we're looking at and deciding what's the largest amount of premium I am comfortable selling.  As we're up 500% in 5 months – there may be something to this strategy but you have to learn to just go with the flow.

    HOV/Star – Up a nice 6% today.  These are what I call "set and forget" trades.  Unless a catastrophe happens, you really shouldn't have to touch it until July 2013ish.  

    Europe/Streth – I think it was a weak bounce.  

    Cramer/Bob – I guess that's why he's on a mission to help people lose money in the markets…

    NAK/Terra – The preliminary results of their environmental impact study did not look good so people are bailing.  This is around the price I usually do like them but I still think gold is going off a cliff and China has all that copper to dump so not a good part of the cycle for speculative NAK.  If the project ends up being a no-go – these guys are BK – they bet everything on it – I'd rather catch them when they cross back over $6 again or maybe speculate if they go to $2 but now it's like picking a biotech and waiting for FDA approval. 

    You're welcome Ink. 

    Welcome back Living!  Good news on BBY, earnings are May 22 but everyone is an expert beforehand…

  112. IMAX is moving down steadily and could be a nice play if they continue to go down.  Avengers will definitely have a nice impact on their next quarter and then you have the 1, 2 punch of Spiderman and Batman.  I'm waiting to do a BCS when July options are out since Spiderman opens July 3rd.

  113. tsipras said he will play high stakes game of chicken with germany and win – cnbc
    classy guy greasing his opponent up in the press…always a great prelude to a confused assessment about who be the schtupor and who be the schtupee

  114. Thursday, May 10, 2:43 PM With Priceline (PCLN -4.4%) reporting mixed Q1 results, analysts think there's still room to negotiate a higher stock price. BofA sees "potential for 50%+ ex-FX bookings growth in 2Q… and bookings upside in 3Q (vs. our 37% ex-FX est.) on easier [Y/Y] comps." Morgan Stanley says the outlook for international bookings should alleviate some of the worries about Europe.

  115. rustle – looking forward to ur IMAX play. Thanks.

  116. 5% Rule
    Pharmboy, shadowfax, txchili
    A HUGE THANK YOU to each of you. With your help, I finally found what I was looking for. Only took 4 months. Thanks!!

  117. There might be some explanation for the low volume:

    The exchange is also going on a PR offensive, with Leibowitz and Chief Executive Officer Duncan Niederauer warning regulators and the public about the dangers of off-exchange trading and urging regulators to take a closer look at dark pools. “After the financial crisis, we wanted to create a market with more transparency,” says Leibowitz. “Instead, it’s gotten darker and more opaque.”

  118. ARNA looking good so far! :-)

  119. Phil,
    Since I can calculate 3 standard deviations in my head, I'm fairly sure that I can do the "averaging of two numbers thing" as long as I have access to a portable supercomputer, but thanks for the offer!
    I could probably write a 47 page article for the WIKI on how to average 2 numbers, though, if you feel it's needed  :)

  120. Hey somebody forgot to flip on the buy program switch…must be out eating a CMG burrito:)

  121. FU CMG!!!!

  122. Sorry Jabo, just looking at the lunacy, You have my pledge, I do not buy their burritos, I prefer to buy mine from the authetic places!

  123. ARNA
    adam feuerstein: 
    at this point, the debate is not whether the final vote will be positive, but by what margin

  124. Jabo
    I have never seen a CMG burrito barn!

  125. ARNA – Adam Feuerstein: i have not heard a single panel member voice a strong opinion against recommending approval

  126. Once again selling off into the close – not a healthy sign at all. 

    IMAX/Rustle – I think it's prudent to treat this like 2008  - we don't know where things are going to bottom out yet so let's not get too excited about bargain-hunting until we know there's a floor. 

    Averaging/Newbie – We'll be sure to let you know (ie. don't call us, we'll call you!). 

    Wow, major anti-stick!  

  127. PHil, can you recommend a disaster play that's good thru to Sept?  EDZ?

  128. not much of an attempt to break 1360!

  129. volume buy goose in final 10 seconds..haha

  130. Strange close…

  131. The 3:55 stick, up after close mostly at bid.

  132. ARNA!!

  133. adam feuerstein: 
    vote 18 yes 4 no 1 abstain

  134. FDA advisory panel votes to RECOMMEND approval of lorcaserin. that's your headline for today

  135. How long after the bell do open option orders keep "working" before they expire?

  136. Disaster/Jerconn – Well, EDZ is up a lot this month but it's nothing compared to what could happen in a real sell-off.  Oct $12/18 bull call spread is $2 and you can sell a $1 offset on something else to knock it down to $1 and you're $2.71 in the money or you can be aggressive and sell the Oct $11 puts for $1 on the premise that even if EDZ does go down to $10 and it's put to you at net $12, you would be happy to DD and have 2x at net $11 especially as, for example, you can currently sell the Jan $14 puts and calls at $8 and knock another 50% off the net so figure at $11 you can probably sell the 2014 $10s for $5 and knock your net down to $6/8 and then you still have a good hedge for another year.

    TZA is always a fun hedge too.  Still laying around $20, at $19.77, a 5% drop in the RUT is a 15% pop in TZA to $23 and think of it this way, you don't need to protect yourself against a 5% drop, do you?  So why not just pick up the TZA July $23/32 bull call spread at $1 and sell VLO Jan $17.50 puts for $1.25 for a net .25 credit.  If it all hits the fan, you have a $9 upside to go towards your potential net $17.25 purchase of VLO, which would be a 23% discount to the current price. 

    An alternate fun offset is the CHK July $14 puts at .92, which makes the spread net .08.

  137. Imax/Phil
    Very true, that's why I didn't write any puts on them even this month, if market goes down hard, no longs are safe.  BTW, one rip off IMAX has which you mentioned if they ever had this technology (they do) is IMAX in a digital format.  Normally IMAX film is 70mm with 15 sprocket holes per frame.  You obviously need a special projector to show this, the screen is enormous (IMAX stands for Image Maximum) and to film in IMAX you need a special camera.  Imax does have a digital format which they blow up the movie to fit on a screen but clarity and colors are not as good though and in Digital Imax theatres the screen is about 1/3 to 1/2 the size.  Usually in multiplexes that have IMAX. 

    The thing is that IMAX still charges the same amount of money per ticket for a digital IMAX which is basically just a little bigger than a reg movie screen and the resolution isn't the same as they do for true IMAX which is a much different experience.  Actually is very bogus.  When you look at showtimes at an IMAX on line, if it says IMAX digital then you know it is not a true IMAX.  You are basically getting ripped.

  138. Thanks Phil for the disaster plays!  

  139. Now we have a big move up after the close – these markets are getting stranger and stranger.  Cash is king folks!  

    Options/2can – On indexes, I think you often get 15 mins.  

    At the close: Dow -0.02% to 12833. S&P +0.05% to 1355. Nasdaq 0% to 2946.

    Treasurys: 30-year -0.16%. 10-yr -0.09%. 5-yr -0.02%.

    Commodities: Crude -0.12% to $96.69. Gold 0% to $1594.15.

    Currencies: Euro +0.12% vs. dollar. Yen +0.37%. Pound -0.15%.

    Market recap: Stocks faded late to close mixed, but the Dow still snapped its six-day losing streak amid hopes Greek leaders could form a coalition government. Utility and telecom stocks led gainers, while techs lost ground on Cisco's downbeat outlook. Treasurys pared losses after a solid bond auction. NYSE advancing issues led decliners nearly three to two.

    Citing higher inflation than would otherwise be expected, Minneapolis Fed President Kocherlakota suggests the country iscloser to full employment than labor market gauges indicate (has the man never heard of stagflation?). He reiterates his view the Fed should consider exiting ZIRP in 6-9 months.

    WTF? Bernanke Gets 75% Approval From Investors in Global Poll (Bloomberg)

    "Madoff taught us something," says Kyle Bass speaking of Japan at the SALT conference, "You can make promises for a long time as long as you don't have to keep them." He remains short JGBs (10-years yielding 0.87%) and thinks the trigger for their implosion will be Europe. "Greece will circle the drain and be ungovernable in 90 days."

    Here's who's still buying EEM:  China's sovereign wealth fund – earlier disclosing it hadstopped investing in European debt (truth is, it was never a serious buyer of the paper) – is interested in moving capital into emerging economies. "We have patience and we don't mind turbulence … it's a natural shift," says CIO Gao Xiqing.

    Gold Losing Its Luster (WSJ)

    See how this story is kicking around?  Chesapeake Energy (CHK) is saddled with $1.4B of previously unreported liabilities due over coming years from off-balance sheet deals, reports the WSJ. The company has commitments to banks requiring delivery of specific amounts of oil and gas. These so called VPPs are essentially debts, with payments due in fuel rather than cash. Shares take a tumble, -1.7%.

    Solar Installers Offer Deals, Gaining Converts (NYT)

    Rio Tinto (RIO +1.2%) tells shareholders it has "adopted a cautious approach," shoring up capital and focusing on a narrow range of expansion projects in the face of global uncertainty, though it's slightly more upbeat about the outlook than six months ago. Rising costs are the key challenge, but RIO says it would not be deterred from expanding its profitable Australian iron ore operations.

  140. Wow, ARNA made it….and they should be the best in play with the addition of phentermine….VVUS is done.

  141. Congrats to all those that stuck with them as well as got in on the bottom ropes.  Should pay off handsomely.

  142. ARNA!!!!!!!!!!!!!!!!!!!!!!!!! I only have 100 shares but I have some 6$ may call options, if ARNA gets the valuation of VVUS it should go to 13ish right?

  143. jro – very well could, but doubt it.

  144. JPM ouch!

  145. How long does it take to unhalt trading on the stock!?!?! Im getting anxious! lol

  146. So glad we sold those FAS calls!  

  147. JPM – The rats on fast money say they will be fleeing the USS Financials….. :)

  148. Phil – looks like your "Cash. is Good." drumbeat is the BEST advice  :)

  149. Maybe, I can eventually have one share of BAC for one share of WFR….. :)

  150. hard to imagine- the banks have stepped in their poop one more time- no problem- just another bail out if needed by Ben and the taxpayer. Will we ever let incompetence be punished?

  151. and by the way- could not happen to a nicer guy than Jamie Diamond- arrogant prick!!!!

  152. FAS / Phil – I guess we'll roll the puts then… Still one week to go though – CB still have plenty of paper and ink! But that's going to hurt the 25KP pretty badly tomorrow with these long Oct calls. 

  153. Good day to go back into my bearish positions, wheeeee for tomorrow!

  154. Jthoma – completely agree! Dimon is such a prick… Hate is a strong word…..and I hate them (Dimon, Blankfien, et al)..

  155. JPM – I am guessing these guys were long PCLN! 

  156. everyone wants to find all kinds of reasons for the 2008 crisis- the problems of the economy, etc. etc- it actually is very simple- the greed and corruption of the banks and the brokerage firms and their ability to spend our money and  affect legislation- and then they go untouched when they get caught- a true sin!

  157. To repeat yesterday's note at the close, the big banks/financials will no longer be leading or propping up Mr Market.

  158. and Jamie was nice enough on the cal;l to just tell us how sucessful he has been!!!!

  159. Lefty Gomez: "I'd rather be lucky than good."
    Phil: "I'd rather be lucky AND good."
    GREAT call!!! :-)
    May 10th, 2012 at 11:14 am:
    "… so I think we'd better sell 2 FAS May $95 calls at $3.90 because $3.90 is a lot of money and we like money."

  160. Congrats to Pharm and to all the ARNA homies!

  161. WHEEEE!!!  Brilliant calls Phil.  I'm well hedged for tomorrow, and am very happy.  

  162. Wow, went to a few meetings with builders about our home, and I find FAS at 89.81.  I think this deserves a:

  163. So how long before the cascade of margin calls? Where did that pesky rip cord go???

  164. Pharm – why is ARNA only at 7$ here? I mean they were at 7 last year BEFORE they went to the meeting….Now they have an approval recommendation and only 7$?

  165. Peter D or other Stranglers- if you are around- do you ever sell short strangles on FAS? 

  166. Phil – I now have 5,000 shares of ARNA at net $0.00 after I bought back  the covers (prior to today). Given that PM is NOT a problem, what is your suggestion of how to maximize profits now; still capture some future gains if the stock continues to rise; but also reduce risks going forward? 
    What a GREAT day! :-)

  167. jromeha/pharm—have some shares of ARNA—trying to decide whether to sell ah or wait for the morning open—Phil always says sell into the excitement— now or tomorrow?--dilemma —any opinions?

  168. Does anyone use "The Fly on the Wall" website for breaking news?  Is it worth it?

  169. I'm not thinking JPM is a big deal.  It is for them but it's isolated as near as I can tell.  Shouldn't be a big deal tomorrow but, coming into the weekend – who wants to be long anyway?  

    Congrats to all the ARNA players (and for Pharmboy's excellent pick) – looks like a double after hours.  

    FAS Money/StJ – I think the short puts are fine.  $91 puts should be about right by expiration and, of course, we get the call money, which is even better.  In the $25KP, we sold $1,600 worth of calls against $23K in longs so a bit less than 10% covered but enough to pay for half a roll to a lower strike while it's cheap tomorrow.  

    JPM – Good example of what's wrong with the system.  They have huge money riding on a bullish bet on the economy yet their words move the markets so they go out and push the bullish case by upgrading key companies and raising guidance, etc – that's how we end up with such a massive wall of BS thrown at us by the Banksters – it's exactly what I keep saying – they will do ANYTHING to talk people into taking over their positions at the top of the market.  Usually it works for them, this time it didn't.  Meanwhile, JPM makes $6Bn a quarter and this quarter they'll only make $4Bn on a massive screw-up – I hope they get good and cheap so we can buy them again! 

    Lucky and good/Diamon – Keep working hard at being in the right place and, eventually, it will be the right time and people will say how lucky you were.  

    Thanks Palotay and congrats!  

    ARNA/Diamond – ALWAYS sell into the initial excitement.  Remind me in the morning and I'll try to find a top but, generally, you want to sell a July $7 or $8 call for $2-3 into the pop and then put a tight stop on your stock and, when the stock is gone, you look to cover with either a long call or maybe a bull call spread if you have the margin for it.  Keep in mind when I say stop out – if they top out at $7.50, then you can stop 2,000 at $7.25 and 1,500 at $7 and 1,500 at $6.75 – you don't have to be all on or off.  When your stop levels get crossed back to the upside, then it's time to make your long cover.  

    Fly on wall/Burr – I used to try to trade rumors but they really aren't worth a damn overall.  I find it much more useful to keep an eye on the Hi/Low ticker and, when I see a burst of activity in a stock – THEN I look to see what the rumor is and then I try to figure out if it's actionable.  For the occasional thrill I miss out on catching a rumor that leads to a big move – I miss the annoyance of losing money on a dozen more that end up being false or misleading and, even worse, wasting my time.  

  170. 6:00 PM On the hour: S&P -0.83%. 10-yr +0.11%. Euro -0.03% vs. dollar. Crude -0.37% to $96.56. Gold -0.11% to $1593.55.

    The European Central Bank will have to devalue the euro at some point, says Wharton's Jeremy Siegel. Faced with a sovereign debt crisis that just won't go away despite aggressive efforts to shore up the problem, the ECB has been unable to find the right formula to assuage fears of further contagion. The one obvious solution to helping the troubled nations, Siegel says – a devaluation of the euro.

    Still have the itch to gamble on European debt? Take a look at buying Portuguese bonds and shorting Irish bonds, says Man Group's Pierre Lagrance. Portuguese bonds are trading at attractive levels right now, pricing in a worse scenario than Greece. "Even if there's a default, we think the recovery will be above Greece's 20 percent," Lagrance says, and the Irish economy is really suffering. There you have it, contrarians take note. 

    How do you blow up a (London) whale? In the case of JPMorgan Chase (JPM) – which sees $2B in mark-to-market losses and counting - apparently by trying to "hedge" against credit stress bywriting protection, and get the whole market playing against you. Despite uncertainty about further losses, Doug Kass is buying the dipthough many are more cautious. And don't bet against a resurgence in the Volcker Rule and bank breakup talk, and more downgrades ahead. 

    Dimon on CIO activities: JPM has suffered a $2B loss in the synthetic credit portfolio. "The strategy was flawed … There were many errors, sloppiness, and bad judgment … risk managers are fully engaged in helping to monitor the current portfolio." He goes on to say volatility could remain high over coming quarters and could cost the bank another $1B. 

    More on JPMorgan (JPM): The conference call is underway. Listen live here. The CIO office and its chief trader, Bruno Iksil, recently made headlines for being the whale in credit-derivatives trading. The bank assured investors his activities were part of anormal hedging process and presented little risk. (previous)

    More Dimon (JPM): He reiterates the loss "could easily get worse this quarter." The reason for a "fortress" balance sheet is to handle situations like this. He says the bank's Basel III ratio will be amended down to 8.2% from 8.4% and JPM will still earn $4B in Q2. Shares -5.3% AH. 

    Jamie Dimon (JPMFeb. 15 on regulators: "They make trading sound like someone's sitting there, guessing." Today: "Just because we're stupid doesn't mean everyone else was … We have egg on our faces … We deserve any criticism we get." Shares -6.8%.

    More on JPMorgan (JPM): S&P has downgraded the bank's servicing unit to Average from Above Average. "The downgrades reflect several internal audits that were not considered satisfactory and identified issue that we consider to be material." Shares -5.2%AH. 

    Ow my wrist!  Deutsche Bank agrees to pay $202M to settle a casebrought by the U.S. last spring that charged the bank with recklessly lying about mortgage loan quality to keep access to federal financing. A fourth notch for the U.S. under the False Claims Act; DB -2.7% AH.

    The U.S. government in April enjoyed its first monthly budget surplus since Sept. 2008, with income tax-fueled revenue helping offset below-normal spending. It's mostly a quirk in the calendar: April 1 was on a Sunday, so payments scheduled for that day were pushed into March. The $59B surplus might buy the government a few extra days until it hits the $16.394T debt ceiling. 

    New Jersey Governor Chris Christie brought down the hammer on his state’s effort to create a health-insurance exchange - as required under the Affordable Care Act – saying it should wait until the Supreme Court decides whether to uphold the landmark federal law. Christie noted "It would be imprudent for New Jersey now to create an exchange before these critical threshold issues are decided with finality by the Court.”

    I know, let's pretend it isn't real – that's the smart play!  If Canada proceeds in exploiting its vast oil sands reserves, it's "game over for the climate," James Hansen writes. Canada’s tar sands contain twice the amount of CO2 emitted by global oil use in all of history, he says; full exploitation plus continuing use of conventional energy sources "would assure that the disintegration of the ice sheets would accelerate out of control… Civilization would be at risk."

    Major precious metals producers are evolving into value plays attractive to yield-seeking investors, many for the first time, Dahlman Rose writes. Average dividend yield for the eight dividend payers the firm covers is 1.8%, but the group has capacity to increase average yield to 4%-plus by 2014. It sees ABX with the most yield capacity; it also likes NEMAEMPAAS.

    Arena Pharmaceuticals (ARNA) resumes trading, shares are currently +89% AH.

    More on Nordstrom (JWN): Q1 EPS misses despite higher revenues and a jump in same-store sales, as margins were pressured by lower-priced offerings. The company reaffirmed its full-year earnings guidance. Shares -5% AH.

    Rick's Cabaret International (RICK): FQ2 EPS of $0.22beats by $0.01. Revenue of $25.4M (+17.6% Y/Y) beats by $0.9M

    Facebook's (FB) IPO is generating disappointing demand from institutional investors, according to sources, with yesterday's admission that advertising growth isn't keeping up with user growth of particular concern. The offering is expected to price on the 17th, giving the company and its underwriters another week to turn things around.

    Weakish demand for the Facebook (FB) IPO isn't a surprise for Minyanville's Conor Sen, who says the public markets are doing a great job sifting through new share offerings. The revenue growth isn't there, he tweets. If Facebook grows revenues at 20-25% in 2012, give it an 8X sales multiple and call it generous … that's $40B.

  171. Phil – Thanks!

  172. Newly discovered Mayan calendar goes way past 2012 –
    Oh no!  Now I will have to change my investment strategy going forward … ;-)

  173. @Felipe
    re: the short futures on the S & P has gone green and I am up $1,500.
    Would you advise closing position or holding thru the night?
    Or setting a limit to close it at x dollars lower?

  174. Tar sands and global warming / Phil – This is truly scary! I just don't understand anyone who has children and grand-children and doesn't accept the fact that they might face a potential catastrophe of an unprecedented scale. Even if it's only a 50% chance (and I am sure it's more). I know, a lot of denial is driven by money, but what kind of person puts money (or ideology, not sure what is worse) ahead of their own family?

  175. ARNA all – why is it not higher?…well, that is the advisory committee….not the FDA, so don't get your knickers in a twist.  Sell into the excitement folks, either cover your stock with the front calls or sell the stock and have a nice weekend.  Look at PLX.  I noted to sell the $7.5 and $9 May calls to cover the stock…and lookie there!  Could ARNA go higher?  Of course.  R U up on the stock?  Yes.  How high can they go?  I don't know…..but I sure has hell would not hold the stock naked.  Will they go as high as VVUS?  No – well unless VVUS falls to $10.  First, their efficacy is ok, but not nearly as much as VVUS's combo drug (don't forget, VVUS is trying to sell their ED drug).  Now, I don't like VVUS drug combo at all, but who am I but a lowly investor!  The FDA will have the last word, and it is still my belief that VVUS will be denied.  ARNA, most likely will sneak through with lots of baggage. OREX…well, their drug is pigeon fodder to me.

  176. Forget ARNA…..think SGEN and BMRN….the July $40 calls on BMRN are now 1.20.  We bought them for 40c.  I know, I know, ARNA was at 1.2X, yada yada..well, they are back to where many of us started to GET OUT!

    Someone is betting big in SGEN.  The June 20/25 BCS is moving like hot cakes.  Right at the open, someone bought the 20s for $1….and sold the $25s for 20c. 

  177. YMI -  looks like someone is also accumulating the stock there as well.  Big block went thru at the close to pop the stock up.  I have the July $2.5 puts sold, as well as the stock, and I continue to add to the position FWIW.


    OK, done tonight.  The kids are down, the wife is gone, and I can actually do some research. 

  178. Block trades going through on RIGL as well.  2500 Dec 10 calls on Apr 24, now the May and June 7.5 puts.   I think someone likes this company……

  179. pstas,
    I do sell FAS and TNA calls from time to time, but much less now after TOS hiked the margin 3x on the 3x Ultras, making the risk/reward unattractive.

  180. Good morning!

    S&P/Flips – I would never go to sleep with an open futures position unless it was a sensible hedge to market positions.  The low for the Futures was 1,343 on the JPM news but then back  to 1,352 at 9pm and then back to 1,345 at 2am and back to 1,354 at 4:30 and now back to 1,349 at the moment.  Futures are crazy things but you can make a lot more money taking a 5-point profit 3 or 4 times than trying to catch one big move – you just have to learn to be happy to catch the small gains and go back to cash.   You'll sleep better and there's always a new opportunity to enter another when you wake up.  

    Speaking of Futures, oil failing $96, Gold $1,580, silver $28.50 finally getting realistic, copper $3.61 is a big .12 drop in one day, nat gas $2.48 is holding up and gasoline back down to $2.98 is tempting but not with this mess.  

    Dollar at 80.40 is not helping anyone and the Futures are down about 0.6% overall.  

    6:00 AM Overseas: Japan -0.6%. Hong Kong -1.3%. China -0.6%. India -0.8%. London -0.5%. Paris -0.9%. Frankfurt -0.5%

    7:00 AM On the hour: S&P -0.61%. 10-yr +0.19%. Euro -0.01% vs. dollar. Crude -1.17% to $95.94. Gold -0.95% to $1580.35.

    Friday's economic calendar:

    8:30 Producer Price Index

    9:15 Fed's Fisher: 'Texas Banking Conditions'

    9:55 Reuters/UofM Consumer Sentiment 

    JPMorgan (JPM) has reportedly held discussions with U.K. regulators about its $2B in trading losses, though sources say the talks don't represent a formal inquiry and may not lead to one. In particular, the FSA is trying to establish how the losses occurred and what measures are being put in place to avoid a repeat.

    Sen. Carl Levin (who co-authored the language establishing the Volcker Rule): "(JPM's loss) is just the latest evidence that what banks call "hedges" are often risky bets that so-called TBTF banks have no business making … a stark reminder of the need for regulators to establish tough, effective standards." Shares -6.9% premarket.

    "An event like this also gives regulators more firepower in arguing their case for tighter banking regulations," writes Deutsche Bank's Jim Reid of JPMorgan (JPM), maybe partly explaining why the other big banks are dropping in concert. "Questions around internal risk controls, risk management and strategy will arise," and then there's the ratings agencies. (see also)

    Kid Dynamite draws on his career in an internal hedge fund to provide outstanding perspective. The issue is JPM has TRILLIONS in exposure, too complicated for even the most seasoned professionals to understand. If this could happen to the best-in-class, what might we think about the rest of the banks? 2008 is not that long ago and the loss in "trust" is of far more import than the $2B.

    Good thing we're distracted from this:  The EU is in a "mild recession," says the European Commission, with a recovery "forecast to set in slowly from the second half of the year on." Eurozone GDP will contract 0.3% this year, and expand 1% in 2013. The eurozone deficit is expected to be 3.2% of GDP in 2012, 2.9% in 2013.

    In contrast to John Chambers' pessimism on Europe, Intel (INTC) yesterday gave a rosier outlook at its annual meeting, saying it hasn't observed a slowdown in the region. "I don't see what he's seeing," said CEO Paul Otellini of Chambers' remarks. Intel was also fairly upbeat about PC sales, especially to emerging markets. 

    The EU will let Spain delay its 2013 deficit target by a year, the FT reports, but in return the government will have to allow an independent audit of the bank sector's restructuring – which is set to be approved today – and ensure more fiscal control over the country's spend-happy regions.

    Germany's Bafin financial regulator is monitoring how the country's banks are using the ECB's cheap 3-year loans as it looks to prevent "a new bubble" occurring. Although Bafin can’t stop banks from making certain investments, it can use capital surcharges, demand continuous reporting and start special audits to try to keep things from heating up.

    The Bank of Japan pledges to use its forex assets as part of any international emergency response to the eruption of turmoil in financial markets. Masaaki Kanno, JPM's chief Japan economist, says the "decision is likely to promote a risk-off mode among investors especially when there seems to be no real improvement in Greece."

     Sony's (SNE) Japan-listed shares get a chance to react to yesterday's earnings debacle, closing down 6.4%. Shares had fallen more than 7% earlier in the day to a near 32-year low. Says one blunt trader: "There is really nothing in there that can justify buying the stock."

    China's industrial production rises a less-than expected 9.3% Y/Y in April, the slowest since 2009. Retail sales +14.1%, also the least since 2009, vs. estimates of +15.1% and March's +15.2%. Fiscal revenue +6.9% vs. +18.7% in March. The calls for easing get louder.

    China's consumer inflation rose 3.4% Y/Y in April and contracted 0.1% M/M, broadly in-line with expectations but slowing from March's +3.6% Y/Y. Producer prices fell 0.7% Y/Y vs. forecasts of a 0.5% decline. PPI was +0.2% M/M.

    India's industrial production unexpectedly contracted in 3.5% in March as domestic demand weakened and exports slid, raising concerns the country's outlook has deteriorated because of trade and fiscal deficits, political wrangling, persistent inflation and an uncertain global outlook. Production had gained 4.1% in February, and economists had expected a 1.7% gain for March.

    As we discussed yesterday:  Credit Suisse and Goldman Sachs sharply lower their outlook for the Aussie dollar in the face of slower economic data and weakening demand for Australian debt. Goldman now expects the Aussie to return to parity against the greenback before slipping to $0.9800 six months out and settling there. CS sees it at $0.9600 in 12 months. Currently: AUD -0.32% to $1.0019. 

    Telefonica (TEF): Q1 net profit -54% Y/Y to €748M vs. consensus of €1.31B. Revenue rose 0.5% to €15.5B. Latin American operations made a strong contribution, but couldn't compensate for weakness in European markets. (PR .pdf)

    You Bastards!  Credit Suisse downgrades Best Buy (BBY) to Neutral from Outperform on its view that management will continue to stay distracted by stories not related to operations. Analysts slashed their price target on shares to $20 from $32. 

    Panasonic (PC): FQ4 loss balloons more than tenfold to ¥438.4B ($5.5B). Sales -8% to ¥1.88T. Full-year record net loss of ¥772.1B ($9.67B) on TV unit woes. For the current year to March, Panasonic expects to return to a modest profit: net profit of ¥50B, operating profit of ¥260B and revenue of ¥8.1T. (PR - .pdf

    Starbucks (SBUXwins a battle in a U.S. appeal court in New York to limit its baristas to wearing only one pro-union button or pin on their uniforms. The court ruled the NLRB overstepped its legal bounds in challenging the company's internal rules.

    Despite numerous reports about soft institutional demand for Facebook's (FB) IPO, sources say the offering is already oversubscribed. If demand is strong enough, Facebook may raise its price range from the current $28-35 spread.

  181. Wild one, optomistic, 100 shares IWM asking 92.65

  182. Phil/BBY  Exactly how, can management be "distracted" by "stories not related to operations"?
    What's not to understand?…..