7.4 C
New York
Monday, February 6, 2023

Subscribe

Thursday Thrust – Enough to Break on Through?

 

I've listened to preachers

I've listened to fools
I've watched all the dropouts
Who make their own rules
One person conditioned to rule and control
The media sells it and you live the role
Mental wounds still screaming
Driving me insane
I'm going off the rails on a crazy train – Ozzy

Wheeeee, that was fun!  

SPY 5 MINUTEWe called for a "Whipsaw Wednesday" and it doesn't come much more whipsawed that that.  Fortunately we stuck with the plan from my morning post to take the money and run on our short plays and we even pulled the hedges off our $25,000 Portfolio, leaving it 100% bullish at 11:11 in Member Chat.

That left us a little nervous for the next hour but, of course, we had a plan for that too and, at 12:27, I put up a chart of the our indexes over the last 5 days saying: "Note our lows of last Friday – Those are the lines we need to give up at if we fail them!"

That's a very important point about aggressively trading – it's OK to pick a bottom and flip bullish, but ONLY IF YOUR BOTTOM HOLDS!  The biggest problem traders have is they guess a bottom (1,300 on the S&P was ours) but then, when their premise fails – they FAIL to give up on the position.  This is much like saying in the morning that you don't think it's going to rain – then having breakfast and seeing it pouring with rain outside – and refusing to take an umbrella because you didn't think it was going to rain (see "The Microwave Oven Theory of Behavior" for more on this subject).  

Here was the chart we looked at at 12:27 in chat:  

Things were not looking good, were they?  Remember, we had gone bullish on that first pause and failed to hold that line so the first thing we had to do was make a new plan — just in case.  If you don't know EXACTLY what you are going to do "just in case," you are going to let yourself get shoved around by these crazy markets.  We had laid out our Just in Case plays in the Morning Alert at 9:57 with three aggressive hedges to play for the Dollar over 82 (still valid today if we don't hold our weak bounces!) – we had a great ride down early in the morning and – as planned pre-market in the morning post – we took the money and ran on a 1% drop (a nice 10% profit on those SQQQs, as planned) and then we rode out the next little drop but we were PREPARED to re-cover.   

"Plan the trade and trade the plan" is a message we often use in our Virtual Portfolio section, where we discuss portfolio management techniques.  The more short-term and aggressive your trading, the more you need to have a plan.  Fortunately for us, our timing was pretty good and that same chart finished the day looking like this:  

I do so love it when a plan comes together!  Still, we are not out of the woods yet by any means as we've only succeeded in getting back to the weak bounce levels that we expected to give us trouble in Tuesday's post.  In the same way watching the channel on the bottom kept us from getting too bearish – watching the channel on top keeps us from "listening to fools" in the media and BUYBUYBUYing when we should be, once again, taking the quick profits and running.  

We had a quick primer on Stock Market Physics in yesterday's morning Alert to Members so I won't get back into it here but we simply don't have the thrust yet to break over our strong bounce levels and I'm not even sure we can hold our weak ones (Dow 12,540, S&P 1,319, Nas 2,840, NYSE 7,560 and RUT 765) without FIRM announcements of more QE, which is still the entirety of the bullish premise for the broad market.  

That, of course, does not stop us from making selective bullish picks – as there are plenty of very good stocks trading too low for the SLIGHTLY improving conditions we're seeing in the US.  In addition to the stocks I mentioned on BNN Tuesday and in addition to our Twice in a Lifetime List, we were able to identify a few additional bullish trades as we flew down yesterday including this gem at 10:29:

 

HPQ down another 4.5% today and they have earnings later.  Gonna be fun for a bullish play, I think.  At this point, all they have to do is not suck as much as DELL did.  

HPQ June $20/21 bull call spread is .55 and IF they have bad earnings, THEN we can sell July puts for .55 to cover them but, for now, there's 81% of upside and HPQ is at $20.80 despite the sell-off and the June $20 calls are $1.30 so they have to lose more than 50% of their value before you can't pull .55 back off the table anyway (leaving naked long calls on presumed bad earnings or general market collapse).  

That one should be well on-track for the full 81% gain this month (and maybe enough today to just take it and run on a quick day's gain) after HPQ did, indeed, manage not to suck as much as DELL.  It was a simple premise for a bullish earnings play and, as I often say to Members: "If you're not going to buy low – when will you buy?"

8:30 Update – When I said SLIGHTLY improving conditions in the US, I may have been a tad optimistic as April Durable Goods came in up just 0.2% (0.5% expected by leading Economorons) and, ex-Transport, it was a MISERABLE -0.6% vs +0.7% expected by the clueless people who they poll to get these pointless estimates.  

370,000 Americans lost their jobs last week and that is in-line with expectations but not at all a good thing as we still need to knock that number down 20-30% in order to get back to job GROWTH, something we haven't had in this country since the '90s:

We get Consumer Sentiment tomorrow as our last major data-point for the week and that's not going to be good with the market crashing and gasoline still $4 but what's the difference if it's 76 or 66 – it's a far, far cry from 116 we had WHEN WE USED TO HIRE PEOPLE!

When did we develop the fantasy in this country that you can have economic prosperity with high unemployment?   What whack-jobs came up with this joke of a concept and spun it to the masses by taking over Television stations and the Wall Street Journal and brainwashing the weak-willed masses with trickle-down BS that passes for policy these days?  Gosh, if only we knew, maybe we could stop them…

At least someone is trying to stop JPM from cornering another commodity market as US Manufacturers are getting together to tell the SEC that JPM's planned copper ETF (which will suck up 27% of the LME's copper supplies the way they do with GLD and USO etc, etc…) would "grossly and artificially inflate prices and wreak havoc on the US and Global economy."  Er, duh!  That's kind of the whole point to doing it, but thank goodness someone besides me is finally complaining.

In the letter to the SEC, lawyers representing copper consumers argue that the ETF would result in a “substantial artificially induced rise in near-term copper prices … simulating the effects of an artificial squeeze or corner being financed by unsuspecting investors in JPM’s ETF.”  FINALLY people are catching on to this scam – let's hope the SEC listens this time and, maybe next time we can get retroactive and take away the many, many other ETFs that cost Global Consumers Trillions of Dollars in excess commodity costs to support each year.  

Meanwhile, let's watch our levels and let's be very careful out there!  

183 COMMENTS

Subscribe
Notify of
183 Comments
Inline Feedbacks
View all comments

PHil – I had the June $60 QQQ puts in at .66 and out at .86, more like 30%, but yeah had the brains to get out…I didn't see it go higher than .86…

Phil – really, you don’t have a billion?

Phil, I must have missed the lesson on how to know to day trade the 25kp. What potentially characterizes it as a day trade versus all the other 25kp trades you post?

Phil
Thank you for the explanation on dollar rising/falling. In my opinion the dollar, today,is more about what’s happenning elsewhere rather than indicating US strength. Hence, I believe this is not the type of dollar increase that will support and sustain rising equities. I have been wrong before! On the other hand, I can’t argue with the possibility that the dollar’s rise is due to the US being recognized as the best of the worst.

Thanks for the confirmation on EDZ. I didn’t do that trade because I wanted to mull over the risk of buying the October spread you suggested. I am always anxious holding those triples for anything greater than three months because of the decay that inevitably occurs. I did pretty well layering those last month taking 20% or more profits when they occurred and initiating a new spread at a higher strike but matching the dynamics of the original trade until it stops working. Fantastic reading over the past three days! Thank you for all you do.

Phil / Hedging – Can you explain the proper hedging techniques?  Please go into when to lean short and by how much (how to determine amount), lean long by so much. When to peel off to change portfolio hedge direction.  I see hedging on the board a lot.  I understand the concept but am unsure how to determine the proper amount based on portfolio size, beta, etc.  I would appreciate hedging 101 and your explanation can be put on WIKI. TIA.

rainman – thanks for the link. all those function keys… i use F2 in excel, F5 for phil and mute the speaker occasionally and that's  about all.

MORX / Laptop jack
 
By "jack" do you mean where you plug the power cable in? Is that what "came loose" inside the computer? Or do you mean the Ethernet port?
 
If it is the power jack,  then YES, you can probably fix it yourself, if you are very careful,  you know your way around a soldering iron, and if you can take the bottom cover off the computer without breaking anything. Use a small glass or a shot glass to keep the little screws in. If you have a skinny mechanics' magnet (hardware store, $5), that helps immensely. There may very well be one or more paper thin "flexible printed circuit " ribbons that slide into microscopic connectors. Be VERY careful with those.
The Power Jack connector is known for coming loose. I've repaired two of them myself (it's the business I'm in).
 
Once you get good access (be sure to remove the battery before doing ANYTHING else), you'll find the connector is soldered to a board, probably the logic board, or a small power filter board.
 
The connector will probably have 4 to 6 metal "legs". Only two of those are for the electrical, one for ground, one for the positive voltage. The other "legs" are solely for physical and mechanical support. Try to identify which are which.
 
Solder one of the mechanical legs first, just to hold the whole thing in place. Then go around and solder all the other connections. You might have to adjust the legs with a small needle nose pliers, if it has been "wobbling around" in there for long. On the mechanical legs you can be fairly liberal with solder, but on the two signal legs use just enough to get a good connection. Be VERY careful not to overheat any components on the board. You have to solder "quickly". Get it very hot very fast, get the solder on, and back off. If the solder cools "cloudy",  it is not a good joint, and you have to re-heat it.
 
When you are done, you can consider possibly using some two part adhesive from the hardware store, like some Devcon or Loctite, to use in extremely small amounts to "strengthen" or backup the solder connections, basically bonding the "plastic" part of the jack to the "plastic" part of the case, or even part of the circuit board. I've done that. If there is enough spare room, it's worth doing. It's maybe 4 bucks at the store. Make sure you mix it very thoroughly. There are generally two types, a "5 minute", and a "30 minute" (sometimes called "two ton"). Do not use superglue or any other one part glue. You need two part adhesive. The 30 minute is going to be thinner, for longer, it will give you way more working time then you need, and you'd have to make sure not to drip any excess in places you don't want it to go. The 5 minute is much better from that point of view, but 5 minutes means 5 minutes, so you spend about three minutes mixing and then you have two minutes to apply. Both are equally strong. When it starts to cure, it will go in about 10 seconds. It can get quite hot (thermal reaction). Once it starts to go, you're done with that batch.. Don't try to use it once it gets thick, it won't work. If necessary, mix a second batch. Toothpicks or similar very small disposable picks or straws or whatever work well for applying. Tongue depressors and a paper plate work ok for mixing. Be careful not to get it on your clothes or anyplace else. It's a bi**h to clean up.
 
If you do all that successfully, and you get good electrical connections (joints) on the + and ground, the computer should work fine. It'd be tragic to throw away a computer because of a simple soldering issue. Make sure there is no "solder bridge" between the + and ground or you WILL have a computer that is worthless, and possibly a smoking (if not flaming) power supply brick as well.
 
The hardest part of the whole thing will be the disassembly of the case. There are more little tiny screws hiding in places you can't imagine (including possibly in the battery compartment). DON'T force anything. If you think you've got all the screws out but the "center" or one "end" of the case won't budge, you've almost positively missed a screw. You might need to look under the keyboard also. You should allocate at least three or four hours for the whole project. Try to do it all in one evening, because if you only do half, by the next night you'll have a tough time remembering the exact process of putting it back together. When you have all the screws out and start taking the case apart, go VERY slow, and look inside as you do it, to make sure you're not pulling any thin wires or flex ribbons apart. Small flashlight helps.
 
Good luck. Let us know how it works out. And if you get frustrated and decide to throw it in the dumpster, you can give it to me and I'll pay the postage -plus a gift certificate for McDonalds! (I'm a BIG spender!)
-newbie

Jordan,
 
I'm not positive (Phil or somebody else probably knows) but I believe there are some HUGE tax implications whether you are identified as a "professional" investor/trader or not. You might want to look into that. I remember reading some fairly important stuff about that when I was helping my mother with her taxes this spring.

Phil, Anyone / Re: TWIL List and Hedge
 
I was talking to one of the Quants at my old HF about hedging today, and he brought up a good point.  The way they do hedging is by % correlation to a index or contract.  Therefore the SQQQ overall hedge will be more applicable for some stocks than for others.  Anyone know how to take a basket of stocks, like the TWIL list and run a correlation matrix on them against various ETF's, or Index's?
Disclaimer:  I know this isn't exactly what the list was for, I'm just running with an idea…

Phil I see you have mentioned twice WFR in your comments today once poor WFR and once in the twice in a life time buy list to sell the Jan14 3p. Well I am the lucky owner of 500 stk at some 12$ 2x Jul 5p 10x Jan 13 7.5p and 5x Jan13 5p all are just within the ATM situation the Jul is actually ITM and no one even clams it yet. I am looking at an assignment of aprox 11200.00 $ in payment for stocks due. less if I would sell the bunch 2200stk for 1.56 showing a net loss of some 7768.00 Some time you have to pay the piper. My question is only do you sincerely think this stock has still any chance at all. In this case one could hold the stock and sell calls till doomsday. By the way rolling this complete bunch of puts to Jan14 3p would cost as well just about 11k.
TIA

Phil P.S. the above obviously does not include the loss of stock value from 12.00 to 1.56.

WFR reminds me of RIMM.  I love Phil and how much he's helped me take control of my financial life…
But sometimes he just won't admit to a loser being a loser.  Luckily I stayed away from WFR and RIMM.

Burrben Actually I see much more hope for RIMM as it could be bought up by FB but WFR I have serious thoughts there off.

Phil / Hedging – Thanks.  I did read that post (Original TWIL) on hedging and simply did not put t together.  I'll continue the reading (Strategy) and place a reminder on the board over the weekend.

GE/continuous monitoring and managing: I am long GE, although a relatively small position, and after a slight period of excitement when it dropped down to $15/16 last year it is a bit of a sleeper in my portfolio. But that is no reason not to try and squeeze some more out of my inventory. How about this idea, which I think makes eminent sense if you are long, but could be another play for those looking for a cheap entry on the longer term horizon:
 
GE: current stock price $19.25. Sell the 2014 15/25 strangle (short the 15 put and short the 25 call) for a net credit of $2.20 against a buying power impact of $0.925 – so selling 10 contracts of this strangle drops $2,000 cash into your account and reduces your buying power by $925. It would appear to be a good use of spare margin.
 
If you are long, and the trade goes to the downside, you get to pick up more GE for net $12.80 (15-2.20) and if GE turns into a momo stock then you get called away in Jan 2014 with your longs making +25% increase from today's price. If you try this trade uncovered then it is a good hedge for your other longs – if your current longs don't make more than GE on an up day then you must be in T-bills. You could also roll the 2014 $25 calls to the new series of 2015 strikes when they are available.

ok well we held those levels 1310… i don't see losing that level into the week end..goldminers look great..abx gdx 

Phil- glad I listened to you with not buying /RB futures a couple of days ago. What about today?

Lol, yes, as in now. Sorry, in Kabul it’s almost 12 in the afternoon….

@Felipe
 
"……….EUR/CHF back to 1.2014 – so close! What a joke – it's like free money…"
I don't understand this statement. How are you playing it, if it essentially has flatlined for the last 6 months.

Phil thanks for WFR possible just hold the stock as there is not very much more to loose.

just read the wiki. the articles are partly helpful but they are 5 years out of date, incase anybody wants take on the task of updating the reference materials with 2012 data instead of 2007 data.
 
freshening up tax law policies, we outt'a have at least a dozen people around here who think that would be great fun! and a real hoot! h
Specifically researching current law concerning tax requirements for professional trades versus the little people.

@felipe
Thx, so you would short the trade, at a move above 1.2015?

Phil – Thanks for the refresher on the "basics"  🙂

Stay Connected

159,282FansLike
406,851FollowersFollow
2,160SubscribersSubscribe

Latest Articles

183
0
Would love your thoughts, please comment.x
()
x