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Thursday, March 30, 2023


TGI Fed(s) – Promises, Promises


You made me promises promises

You knew you'd never keep

Promises promises

Why do I believe

All of your promises

You knew you'd never keep – Naked Eyes

Wow – what a party!  

The former Vice-Chairman of Goldman Sachs (Draghi) says everything is fixed and the global markets go flying – what's not to trust?  Would anyone form GS ever lie to us?  Would GS be involved in manipulating the Global Markets – of course not!  

Now that I've fulfilled my obligation to get my mother back unharmed – let's get real.  Draghi said the violent spike in bond yields in recent days was hampering "the functioning of the monetary policy transmission channels" – the EXACT expression used to justify each of the ECB's previous market interventions.  

Yields on Spanish two-year debt plunged 72 basis points to 5.47% in barely an hour, with comparable moves on Italian debt – easing the pressure before a string of debt auctions in Rome over coming days. The MIB index of stocks in Milan surged by 5.6%. Madrid's IBEX rose 6%, the biggest jump in two years, led by an explosive rise in bank shares.  Mr Draghi's comments came as Spain claimed backing from France and Germany for activation of the eurozone's rescue fund (EFSF) to buy Spanish bonds, though this would require calling the Bundestag's finance committee back from holiday for a vote. Action by the EFSF would provide "political cover" for the ECB to join the fray in a two-pronged attack.  "We're firing on all cylinders: that is what has ignited the markets," said Hans Redeker, currency chief at Morgan Stanley.

Joint statements from Madrid, Paris and Berlin said market turbulence "does not reflect the fundamentals of the Spanish economy, or the sustainability of its public debt".  According to Ambrose Pritchard, "the wording seems scripted to clear the way for intervention."  Of course, now it's time to put up or shut up as the Fed meets next week and the ECB has their pre-holiday meeting next week as well so it's going to be action by next Friday or none until September.  Marc Ostwald from Monument Securities said Mr Draghi's words were "cheerleading bluster", while Gary Jenkins from Swordfish called them "a bluff to get through the summer".  

As far as bluffs go, it's a good one.  And why not, if this were a poker table, Draghi has the second biggest stack of chips at the table, next to Bernanke and then there's the BOJ, the BOE and the PBOC – and you – and Draghi just put the bears all in on the ante – he doesn't even need to bet yet!  

Needless to say, the bears quickly folded yesterday and the Global Markets took off, bringing us right back to the highs we had when we had that ridiculous rally at the end of June – that was also based on promises of more QE from our Central Banksters.  The fact that we then fell right back to the lows of July in the first 10 days of the month doesn't seem to worry traders (not "investors" at all!), who went into such a buying frenzy that EVEN JIM CRAMER thought it was overdone.  

"Mario Draghi may have given us the perfect opportunity to cash in on some gains," said Cramer.   "Every asset that investors had just given up on was suddenly roaring. But move fast, Cramer warns, because this kind of optimism never lasts. Germany’s “iron chancellor,” Angela Merkel, will always be there to “pull the rug from underneath.”"  While I find it very disturbing to have to agree with Cramer – he's making perfect sense here.  

To that end, we added a bullish spread on the Russell to take advantage of possible ACTUAL stimulus over the weekend or next week.  We're using a very aggressive bull call spread on TNA and tempering it with the sale of short puts in stocks we would like to buy anyway – my trade idea from Member Chat was:  

With the S&P over 1,360, it's time to go bullish on the RUT (playing it to catch up).  I think the Futures can be played over the 775 line (now 773.30 on /TF) but the fun play on stimulus is the TNA Aug $49/54 bull call spread at $2.20, selling something you want to own in a downturn like CHK Sept $17 puts for $1.28 for net .92 on the $5 spread.  

  • SBUX might make some good put sales today – we'll have to see.  
  • DMND is back down where we like to sell puts, the Sept $15 puts can be sold for $1.35.  
  • MCD came down nicely, Jan $85 puts can be sold for $3.05 or 2014 $80 puts can be sold for $6.  Also odd on MCD, who were around $100 until March – is the March 2013 $92.50 calls at $2.75 – that's not a bad risk for a call position, especially if you pair it with the long put sale.  

Setting ourselves up for a potential 400% winner if the markets do move higher (and we simply stop out of the spread if the S&P fails it's Must Hold line at 1,360), which then provides an upside hedge for the bearish bets we intend to make and press into any rally that isn't backed by at least $500Bn in actual cash from the Central Banksters.    

8:30 Update: GDP came in at 1.5% vs. 1.2% expected and down from 2% last Q.  We expected more of a slowdown but prices up 2% gave us a nice APPARENT boost (same goods and services produced but at 2% higher prices is a $320Bn pop to GDP, which is the entire GDP of all but the top 30 Nations on Earth!).  Q4 2011 has been revised UP to 4.1% from 3% so we are slowing drastically but it doesn't seem as bad because, instead of being down 2.6% from 3% to 0.4% – the magic of the revision has us starting from a 1.1% higher base so we "soft land" at 1.5% – isn't math fun?

Of course, with an established 1.1% margin of error between revisions, it's very possible that our actual GDP is 0.4%.  Residential fixed investments (durables) were weak and Federal, State and Local Government spending were once again negatives as even our Government begins to run out of money.  As we expected, inventories increased substantially and added 0.32% to the GDP as the calculation is based on the assumption that everything in a warehouse eventually gets sold at the full price.  This is the kind of thinking that leads to nasty downward revisions in GDP later on! 

Today, however, the futures are loving it, as well as more positive noises about potential stimulus from the G20 so hopefully another nice rally this morning to add some shorts into but, as I said to our Members yesterday – you have to have a good mix of upside plays as well since this market can move 5% in either direction very quickly. 

So be careful out there and have a great weekend. 

– Phil


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Sorry for the late post on this trade.  I moved to another area and found myself on a slow slow computer.  Anyway, the PCLN trade is very small for this momo portfolio.  It either doubles or loses us little.  Let me know if any Q's on the portfolio stjeanluc.  Have a great weekend everyone!

Phil: Thanks much for help on adjusting the TZA trade!  The longer I am here on the site (2 1/2 years now), reading your suggestions to everyone, the easier this is getting. It seems that there is an ebb and flow to all of this, and if you can catch onto that, then the battle is half won.

Have a good weekend everyone!

Happy w/e all!

lflan / PCLN – Whoops, reading the day's posts I see that I did the anti-play of your PCLN trade. Oh well, the way that thing bounces, we'll probably both make money if we time our sells!

oooooo….  It's Mr. Mocha vs. LFlantheman!!!
We should make markets on which spread will win!  
Wow, I just returned to my PC to see this market blow up.  Wow, even with the losses on the shorts I had, my port is up today.  Yeah!

ZH – Treasury officials says no announcements expected after meeting between Timmay and Draghi/Schauble.

Or play the weekly strangle and they could both be right…

Pretty good week for stranglers…. 

"The house the guitars were kept in."  Mostly flatlined.  Maybe up 25% since 2002, i.e., 10 years.  Less in real terms, I should think. 

Mitt Romney being compared to Sarah Palin over in England. The British have such a great sense of humor. If we could only get him to pick her as his VP….Saturday Night Live skits for a generation.

Good recovery in the put sold but with the last couple of days, the hedges are dragging us down.

Romney / Rpme – The scary thing is that this guy has been running for president for the last 8 years basically and he still seems to be so unprepared when he is unscripted. For all the fun they make about Obama and the teleprompters, Romney probably need teleprompters, flash cards and some in-ear help.

Was trying to get more into cash this week, but my ebb and flow were out of balance.  Even with some really nice gains on CMG, DECK, etc, I managed to end the week down slightly.  The damage was strictly mental, but man, how frustrating!  Reading everything over, I see where I went wrong.
So, FU, Rkyroma!  
Thanks for letting me vent.  Off to hit the heavy bag for an hour, then back to work with a good attitude.

How long do you think they will let me use TOS if I don't fund my account at TDA?

What bullsh*t.  4:49 PM posting in Financial Times already has senior eurozone officials cautioning against market hopes that the ECB was preparing to restart its long-dormant bond-buying programme as soon as next week, when the ECB’s governing council meets in Frankfurt. Such believers "were likely to be disappointed."   And Wolfgang repeated his pray type mantra that preconditions exist for any ECB action, i.e. committments in writing for more austerity measures by Spain, Greece and Italy.  It;s the same old, same old – we just added 200 points to make our coming fall that much steeper.

Thank you, stjeanluc, for the portfolio update.  Whee, the short strangles portfolio got pass the $10k profit mark.  I just got back in town and missed all the downs and ups this week!  Looking at the charts, that was some serious fun.  Well, not fun if you got caught in the short squeeze.  Have a good weekend!

I love the short side. But there is the great challenge that you are fighting The Establishment. They wield an awful lot of power. I found that out as a Civil Rights activist in the 60's. You can have the truth on your side, sometimes it doesn't mean a thing –  maybe for a long time. "You listenin' to me, boy?!". Some lessons you learn the hard way. It's not a game to them.

This shows just how systemic the corruption is:
All paths lead to Goldman Sachs.

Income / Phil – I was thinking that either TZA or SQQQ have to go. It seemed to me that the TZA spreads did the job earlier this week so the SQQQ 10K seems too much especially since most the other positions are already self-hedged.

Holy schmoly…what a complete and utter squeeze!  Rolling up my puts and GLTA.  I have to agree with Biderman here….

Despite Mario Draghi’s reassurance that the ECB will do everything in its power to save the euro zone, Europe is not going to do anything meaningful and central bank action will not save the equity markets – on the contrary, they’ll “implode”, Charles Biderman, Chief Executive and Founder of TrimTabs Investment Research, told CNBC.

Birdman, TOS – I don't think they'll kick you out of Papertrading but unless you fund the minimum, say $2,000, you'll be on a 20 minute delay.

StarDawg / Mr. Mocha / Birdman
Just got done reading last nights dialogue, and I wanted to thank you all for sharing.  My town lost power for the last 48+ hours, so I just got a chance to read it.  Thanks again!

Bird / short side: I've struggled to find a trading "style" that works, and I've [finally, going on two years] reached some preliminary conclusions, which I offer for the very little they are worth.  
Phil tenet #1: Trading is not investing.  Phil also has an approach to investing, but trading is about having a premise, which should include a time frame, adjusting the position while the premise holds, bailing out if it's blown,  taking profits or minimizing losses, and finding a fresh horse.   
Phil tenet "2:  "Balance". Markets don't go straight up or straight down for more than a small percentage of the time. Convincing yourself that you know which way the overall market will go is the quickest way to going broke, which I have proven to myself enough times to be considered clinically insane.  Shorting the weak and going long the stronger plays works [understanding that nothing works every day.]  Take some profits on the winners, double down or bail out on the losers, depending on your premise [blown, not blown]. You can change your balance ratio, depending on your outlook or the last direction of oscillation, but overloading one side of the boat is a good way to flip over and drown.
Environment:  This is a bit more abstract, but I believe it matters.  At any given point in time, markets reflect a particular overall dynamic.  The current market, for example, is largely being driven by government action or inaction.  Monetary policy, fiscal policy, tax incentives, industry bailouts, yield curve manipulation, and incessant jawboning by policy makers and politicians in the U.S., the EU, Japan, China, Switzerland et. al. dominate short term trends.  The underlying global economic fundamentals worldwide are terrible, but governments are committed to supporting markets while having a limited ability to do so in a sustained manner.
 In practice, this means the market lurches between hope and fear with tedious regularity, and this requires traders to pay closer attention to political rhythms than to the microeconomics of the various industries.  At other times in history, the opposite has been true.  In short, horses for courses —  you have to decide where you think a given market can go given its current dynamic.  Straight up is very unlikely right now.  Straight down, equally unlikely, although that could change in a hurry, so you have to watch closely.  But then no one ever said that successful trading was easy.  My two cents, or possibly one cent.

Style/zero – Thank you!

Great words.  Really made me think about mine. 

Style/zero – thanks for that. Now I have to think what my style is and stick to it. I am a little haphazard now in my trading. 

style/00 -well done! this is why I enjoy PSW. Great input from everyone.

A magnificent opening to the Olympics last night. The Brits know how to put on a good show!
I wonder if Draghi will allow these next 16 days to be peaceful ones for PM Cameron……

Nowhere man – Mitt the Twit. As seen in the English tabloids…… 🙂

Income portfolio/Phil:  Maybe a 50/50 combo of Sept GLW $12 and DMND $15 puts to cover the SQQQ hedge? 

Nice short term picture of the S&P500.  If that upward channel holds the market might be short term Overbought:

I still can't access Stock World Weekly. Never was able to last week and you emailed it to me. I'm really interested in reading it as I have a growing sense that next week might be an inflection point. Please help if you can. Thanks!

Phil / SWW – The issue emailed out tonight (9:50p Pacific Standard) was July 15th's SWW.

Current issue arrived this morning.

Hi Phil,
I have several long term positions in AA (400 share purchased at $16! and x12 Jan 7.5C purchased at $1.91).  After various premium sales, I have realized loss of about $700 and unrealized losses of about $3500 ($3k on 400 shares and rest on options). With current position(s), I need AA to be at $11.5 to get to out about even.  If I add 50x Jan 7.5/9 BCS at $4.2k, this trade can allow me to close all AA positions by Jan, if AA remains over $9.  Additional $cash committment to AA options BCS at this point would be a stretch for my portfolio and limit my ability to react if trade does not work.  Therefore, I am highly unlikely to enact Jan 7.5/9 BCS trade or any such single, large position to recover from current loss.
I have many such positions in my portfolio, with deep losses.  
I guess my retirement investment premise has always been that markets will work over long term.  However, now I am looking at 10-15 years to retirement and reminded of famous PSW cartoon "I haven't saved a dime and I retire tomorrow.  (Phil,) here is your chance to become an investment (trading) legend!" 
Appreciate the discussion related to investment style here and would like to hear Phil's (and everyone's) comments about to repair portfolio or attitude, in context of this position and in general.

Phil: balancing
My portfolio is now almost exclusively made up of sold premium.  sold puts on stocks I would like to own,  sold calls on stocks I feel are "toppy" and am willing to ride til they fail to keep going up.  Since I am currently weighted much more on the side of the sold calls I also have sold calls on TLT as an offset in case the market moves much higher.  My thinking is there is an upper limit to TLT,  the calls are easily rollable and should be profitable if stocks move up.   Over the last five years it looks like TLT and SPY are mirror images but I'm wondering if in fact there is a scenario where both go up?  TIA

drmtv10,  my take is to scrape the position.  Look out to jan2014, since it is an IRA account you can't sell naked puts but you can still sell a 3-8 bull put spread for around 1250 @ 10 (I don't know who you trade with but you'll still hve to margin a little, but it should be a reasonable small amount).  Match it with a 5-8 bull call @ about 1999.  Then I Would buy a hand full jan14 10's and sell front month 10's against it to collect cash.  

Joel / drmtv / Naked Puts – In IRA accounts held by TDAmeritrade I am holding short puts on HPQ, F, X, JRCC, and ABX per the income port plays.  If I am not mistaken, you must have the funds available to purchase if they are Put to you.  When I make the trades, I know what is available (in case Put to you) just in case so margin is used (I think????).

jfawcett, you can't sell the put naked, but you can still do the bull put spread in an IRA, where it becomes covered and subject to standard margin 20%, you will sacrafice the lower put premium  but give your self more room to operate.  

Lincoln: I am but a wretch saved by God. I discovered the virtue of selling premium a decade ago, joined this site to see if there was something I was missing, and there were several things. However, you are very close to the ultimate understanding. Do not concern yourself with direction. If you sell premium on both sides, you will most of the time cash regular checks, just like if you worked for it. Think about it. You don't really have to understand the market, you don't really have to understand the macro factors, and Lord God above, you dont need to pick stocks.
Sell premium, my son, and you shall be rewarded.
Otherwise, I am not religious.
I have strangled (betting both sides) of TLT for a year now. I have no clue what the upper limit of TLT is. I remember Phil saying 124 was the upper limit, short like crazy. Well, it was true at the moment, and it isn't now. I sell puts if TLT backs off, and I sell calls into whatever panic drives things on the given day.

Do we have a mechanism for email to members without a public request?

Pharm: how long does it take before you become an official perma-bear? Not that there's anything wrong with that…
Keep in mind there's early, and there's wrong.

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