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Testy Tuesday – Still Waiting for the Dow to Show Some Strength

What's wrong with the Dow?

Weighed down by Transports, the Dow is our only index unable to break over the Must Hold line – the same Must Hold line, at 13,600, that we've been using all year to see if a rally is real or not.  In March and April, it was decidedly not and the Dow was our canary in the coal mine, letting us know the broad markets were not as strong as we thought.  Now, with the help of QE3 and the anticipation leading up to it, the Dow is making a really good attempt at the 13,600 line but, so far, no closes over the line

This is not even our Dollar-adjusted levels – that's a very big concern.  With Dollar-adjusted levels (up 5%) then all of our indexes are in trouble as we're barely hanging on to those +5% lines on our Big Chart.  

At the moment, the Dow is acting like an anchor and the other indices are going to have a very hard time moving more than 7.5% away from the Dow so it's a good idea to look at the components to see if we have any room to run.  CVX and XOM, for example, are major components in the price-weighted index, accounting for $210 out of $1,765 (12%) and we think oil is toppy here so no help from those two.  

AXP, BAC, GE, JPM and TRV represent the Financials at $199 for 11% and those should have room to grow under QE3 so let's say a conservative 20% for $40 more in that group.  AA, BA, CAT, DD, and UTX actually make stuff for $301 (17%) and you would think the weak Dollar would be great for them but CAT just warned this morning and lowered guidance so we'll call this group neutral at best.  

Tech is well represented with CSCO, HPQ, IBM, INTC, MSFT, T and VZ (better than separate Telco category) at $378 (21.5%) and they have been mixed this year and should have room to run if Q3 earnings aren't terrible – call it 10% for $38 there.   That leaves consumerish stocks like DIS, HD, JNJ, KO, MCD, MMM, PG and WMT at $482 (27%) who have little room to improve and, finally, health care stocks: JNJ, MRK, PFE & UNH with $194 (11%) who are not likely to do anything ahead of the elections.  

So, we're just finding $78 of likely improvements in the near future and that's just 4.4% – not exactly rally fuel is it?  No wonder the Dow is having so much trouble getting over the Must Hold line – it's already exhausted!  But, on the other hand, we don't have any particular reason to short it at the moment so we'll just have to watch earnings very, very closely in the weeks ahead.  

Click to ViewEurope and Asia were flat this morning but our Futures got a pop as the Dollar was smacked back below the 79.40 line at just about 8:30 – whatever it takes to boost the market, I guess…  

Credit card data highlight the uneven nature of the recovery as flat usage nationwide masks continued shrinkage in areas where the housing bust hit worst, according to data from Equifax. Total credit card debt of $585.3B is 22% off from the October peak. "We are seeing the trend of the 'disciplined consumer.'" says Trey Loughran.  We're short V and, as noted above, this does not bode well for our consumer sector ALTHOUGH an optimist would say consumers have a lot of spending power saved up for the holidays

ICSC Retail Store Sales are up 0.6% this week after dropping 2.5% last week and, although that's still down net 1.9% – it does seem to be helping the futures just a bit (8:55).  As you can see by the chart – attempts by consumers to cut their gas bills by driving less are being negated by the relentless rise in fuel prices – contrary to all laws of supply and demand.  In fact, Despite a drop in crude prices from near $100 /bbl three weeks ago to ~$92, AAA's daily report shows the U.S. average price for regular is $3.810/gallon, down a bit from last week but up from $3.748 a month ago.  

International regulators have withdrawn proposals for tougher oversight of the physical oil market after opposition from the IEA, OPEC and major oil companies, the FT reports. Regulators had wanted to use only completed deals to set benchmarks and enforce mandatory reporting of transaction data, but will settle for the current system of bids and offers despite acknowledging the potential for manipulation.  Think about this – the IEA objects to properly reporting oil prices and lobbies to maintain the current corrupt, manipulated system (see last week's commentary).  

Who lobbies on behalf of the people?  No one.  This planet is like an Old West town that has been taken over by bandits…  

Nonetheless, we can't beat them so we join them and we have been adding some bullish plays to our Income Portfolio (updated for Members yesterday), maintaining TZA ($13.88) as our primary hedge but are still fairly balanced in our $25,000 Portfolio – taking advantage of the dip in the Qs yesterday to go long on them as well as AAPL (as planned in the morning post).  

After all, as I pointed out to Members in yesterday's chat – the Fed plans to spend $85Bn a month for the next 3 months boosting the economy.  That's a pace of $1.02Tn a year in a $15Tn Appleconomy – a fitting 6.66% from the evil Central Banksters.  Even if you think QE3 is a poor program and is only 25% effective – it's still a 1.5% pop in GDP – not something we can ignore.  

Sure the data still sucks but we have plenty of fuel now for a Santa Clause Rally.  Last year we sold off in October and made it all back in November/December and that rally ran from S&P 1,100 to 1,400 (27%) and that was just on Operation Twist.  Now we have QE3 and the S&P ran up from 1,300 to 1,450 in anticipation but that's only 10% – it's not unreasonable to expect another 10% before we're done.  All we have to do is hope Europe or China or Japan don't blow up too soon.  

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  1. FU VXX!!!!!!!!

  2. Oil Lines

    R3 – 94.07
    R2 – 93.23
    R1 – 92.73
    PP – 91.89
    S1 – 91.39
    S2 – 90.55
    S3 – 90.05

    Oh, and good morning Jabo!

  3. Good Morning!

  4. Phil: DOW
    What a great way to analyze future prospects vs the typical nonsense of projections that don't look at the individual companies in the index.  Thx

  5. PLX/jro – no news either.  I thought it may be due to stock offering (maybe still)…so we will have to see.

    PPHM/hextra – small amount of shares.  There is nothing we can do right now except for wait.  Flip the coin, but for a small amount of money, and some very interesting science….it could pay off.

  6. good morning!!!!

  7. Phil/ Yeah, great post today and very helpful Income Port update yesterday. If Phil were a stock I'd be gobbling up the callers. Thanks.

  8. GM Everyone

  9. Income Portfolio / Phil – If I read your comments from last evening correctly, we need to:

    1. Ditch the TZA October calls
    2. Close the Dec SQQQ spread
    3. Roll the TZA Jan 15 calls to the Apr 15 calls. The Jan 22 short calls stay as is. And this will be our only hedge.

    I also added a note on GT that we might want to take the money and run if we hit $1.05 (50%) in the near future.

     im more worried that every fund manager in the world is long…likely significantly overweight in the stock…and thinks it can only go higher no matter what…i still like it to outperform over intermediate-term, but i doubt serious appreciation next year.

  11. Hi stjeanluc,
    Just a note of appreciation for all the charts, etc.  I am interested also in your insights and comments. Do you have a link to your charts on the virtual portfolios with explanations? Do your charts tie into Excel?  Do you have the date and time of stock/ETF price at recommendation or anything else, ie volatility?  I am trying to update my trading journal and keep it more accurate.  Best Regards, Ron

  12. Phil,
    Any AAPL trade with this weakness

  13. FU AMZN and PCLN!

  14. The MoMo portfolio is in cash now with about $31K

  15. Charts / Ronnewton – Go to this link:

    You will see all the portfolios transactions from day one. But there are no comments or explanation. You would need to check the date of transaction and go back to the corresponding post and search for the trade recommendation. 

    Actually, it's an idea, I should look into adding a link to Phil's comments to the portfolio sheet so that we could go back… 

    In any case, I hope this is what you are looking for. Let me know otherwise.

  16. Good morning! 

    Dollar trying to get back over 79.50 – if it does, we will likely turn red.  

    To get the Dollar lower the Euro ($1.2944) needs to crack $1.30 again and that's a hard sell.

    TSLA's quick dip today (lowered guidance) drove the 2014 $15 puts to $2.70 and that's net $12.30 on the $28 stock so a nice way to drop $2,700 into your portfolio against $1,675 in net ordinary margin.  

    Thanks Aaron – I'm listed on all the finest exchanges.  ;) 

    TZA/Income Portfolio, StJ – Yep, that's the only hedge left now.  Don't forget to add TASR from yesterday and CLF from Friday.  

    IPhone/Angel – Seems so ridiculous for people to say something is wrong with the 5's numbers.   Just hyenas – nothing real.  What happens next (IPad Mini, new IPad) is what matters.

    AAPL/Jasu – Just our plan to open the short puts up a bit.  Weakness should not last and I am pretty sure Oct 15th will be the last time you will ever be able to buy AAPL for under $700 (if it stays down through earnings in the first place).  The 5 will give them a stunning Q4 and then they will announce the new IPad and the Christmas numbers will come in…

  17. Let's see if the RUT futures (/TF) can hold that 850 line, about 853 on the index.  

    Dollar 79.48.

    Income Portfolio – No changes

    $25KPs – Stop on FAS at $6.  Stop on short SQQQ calls at .45.  

  18. AAPL BCS;  I have a jan 635/685-  thinking of buying the caller back and selling a higher strike.  Is this a good idea?

  19. Or even selling Weeklies against the long…

  20. Income / Phil – I am guessing you meant the TIVO 7/12 BCS selling the $10 puts from yesterday not TASR! The spreadsheet is now up to date. I also corrected the SBUX quote. I had the 2015 prices.

  21. Phil, on AAPL
    So Buy Oct 2012 680 call for 23.75 and Sell Jan 2012 650 PUT for 25.85….Does this make sense to you…..or please suggest a trade? thanks

  22. Phil, if i don't have any aapl. is it a good time to initiate a naked long or a bull call spread? thanks,

  23. AAPL/ ehtan:  I went long $690 Oct. and sold a weekly $705 to cover.  I did the long yesterday and covered this AM.

  24. Momos are flying and those RUT futures bounced right off the 850 line, 854 already.   

    Oil just under $93, Dollar 79.44.  

    AAPL/Newt – Kind of a bird in the hand thing.  How about take the Jan $635s ($75) and roll them to 2x the 2014 $700/800 bull call spread at $36 ($72) so you put $3 in your pocket and you have a year to roll your $685 callers with $200 of upside headroom.  The Jan $685 caller is $44 and almost all premium and they can be rolled up to the Apr $725s even but you can let the premium burn on earnings and then see what a good roll is and, of course, you can always make a 2x roll and still have $100 in long coverage.  

    TIVO/StJ – Yes, thanks!

    AAPL/Jasu, Ethan – So risky with earnings to buy Oct $680 call.   I like the set-up Newt has but you can do 1x the long 2014 $700/800 bull call spread for $36 and sell the Nov $710 call for $20 for net $16 on the $100 spread.  On the put side, I think it should be safe enough to sell the Jan $600 puts for $12.85 but keep in mind if AAPL disappoints, it can drop 10% very fast and you'll be down about 150% on the short puts but they'd still be all premium.  If something like that would stop you out – it's not a smart play to get into – as with all short put plays – it's a terrible idea to do that with any stock you do not fully intend to own at the net strike.  This trade has margin through January but then, if all goes well, you have a free $100 AAPL spread for 2014 and THEN you can sell calls against it for income or just let it ride (if AAPL looks strong) and get a nice payday.  

  25. Virtual short strangle portfolios/OK, I'm back on land after a weekend cruise.  Whee for the September shorts that expired out of the money.  For RUT, since we have 7 short Oct putters, let's sell 7 callers as well today:
    - Sell 7 RUT Oct 910 calls for $0.45.
    For SPX, sell 5 Oct 1300 puts for $1 and sell 5 Oct 1530 calls for $0.625.

  26. Peter D
    I haven't implemented any of your trades to date – but I am interested in starting. The 2 trades you just mentioned, should I buy these, or are there other trades I need to implement as well to be balanced?

  27. Welcome back Peter… And good stuff in September despite that run up!

  28. As a friend of all a warning.
    Today has some unusual BOT activity. They are clearing all limit and stop orders with wide ranges in both directions. This could go either way, the stronger side is up, and that could be the head fake. FWIW.

  29. Phil,
    For an sht term AAPL lunch money play, what about selling a next week put in the 650 (.48) to 675 (1.77) range, despite low Vix ? Suggested more as a way to own AAPl than a revenue source.

  30. AAPL/ Phil: Thanks.. I don't understand this part of the suggestion (In bold)-— The Jan $685 caller is $44 and almost all premium and they can be rolled up to the Apr $725s even but you can let the premium burn on earnings and then see what a good roll is and, of course, you can always make a 2x roll and still have $100 in long coverage. 

  31. “No other Western industrialized nation would’ve elected a black president. I’m proud of this country for having elected Obama in 2008. But from the beginning of his term, I noticed a particular heat to conversations that wouldn’t ordinarily generate that kind of passion: The budget, appointments, health care.” He continues, “I think there are a lot of people who find it jarring to have a black man in the White House and they want him out. They just can’t believe that there’s not a more qualified white man. You won’t get anyone, and I do mean anyone, to admit it."  Randy Newman

  32. Re-Made in America: 5M Jobs Are Coming Back, Report Says
    Headline tells it all but 5 mil jobs in 7 years is slow.

  33. Peter/Strangle – Hi Peter. I'm starting to follow too. On the OCT SPX short strangles, are you talking about the weekly, monthly or quarterly? I'm guessing the weeklys? 

  34. PCLN / Phil,
    Any adjustments? Thanks.

  35. The PSW board giveth and VXX taketh away.

  36. All:  Peter's SPX strangles….those are monthlies.

  37. Phil
    AAPL below 700.   Aapl may have trouble running till the new year.  I know some doctors who say they are planning to sell if Obama wins to get the LT cap rate.  Could be that way for the whole market.  I kinda doubt it but these men were smart enough to get into aapl cheap a long time ago. 

  38. Strangles/Peter – I'm very impressed with how well they held up this last period.  Kudos.  

    Ranges/Shadow – It seems to me they are shaking out weak hands prior to a move up.  It would have to be a hell of a head fake to run the Momos up like this into a takedown…

    At the open: Dow +0.24% to 13592. S&P +0.28% to 1461. Nasdaq +0.33% to 3171.
    Treasurys: 30-year +0.08%. 10-yr 0%. 5-yr -0.03%.
    Commodities: Crude +0.79% to $92.66. Gold +0.51% to $1773.55.
    Currencies: Euro +0.1% vs. dollar. Yen -0.09%. Pound -0.14%.

    Market preview: Stocks futures remain positive after Case-Shiller data showed home prices edged higher but not as much as expected. S&P futures +0.2%. European shares are flat ahead of a Merkel-Draghi meeting, and speculation continues over whether Spain will accept a full bailout. Still ahead: consumer confidence, FHFA home price index, Richmond Fed. 

    10:00 AM On the hour: Dow +0.26%. 10-yr -0.06%. Euro +0.15% vs. dollar. Crude +1.06% to $92.9. Gold +0.61% to $1775.45.

    11:00 AM On the hour: Dow +0.41%. 10-yr -0.17%. Euro +0.27% vs. dollar. Crude +1.02% to $92.87. Gold +0.54% to $1774.05.

    11:39 AM European shares rebound from early losses to close with moderate gains. Stoxx 50 +0.5%, Germany +0.1%, France +0.4%, Italy +0.4%, Spain +0.4%, U.K. +0.4%. The euro +0.2% to $1.2957.

    John Hussman takes on the Fed's cherished wealth effect, arguing propped-up asset prices today create no aggregate new wealth and instead simply assure lower returns going forward. "Economic wealth is only created by the generation of additional goods and services that actually emerge in the future. Security prices are a place-holder until the expected future goods, services, and cash flows actually arrive." 

    Fleckenstein: Fed pulls out the bazooka (MSN Money)

    Brace Yourself: 3rd Quarter Earnings Could Fizzle (Fiscal Times)

    July FHFA Housing Price Index: +0.2% M/M vs. consensus of +0.8% and June's +0.7%.

    July S&P Case-Shiller Home Price Index: +0.4% M/Mvs. +0.9% expected, +0.9% prior. +1.2% Y/Y in-line with expectations,+0.5% prior

    More on Case-Shiller: For the 3rd consecutive month, all 20 tracked cities posted monthly price gains. Not seasonally adjusted, prices rose 1.6% in July from June, following a 2.3% gain in June from May. On a Y/Y basis, Atlanta remains the outlier – by a wide margin – on the downside, with prices off 9.9%. Phoenix leads the gainers, up 16.6% Y/Y. (full report, .pdf) 

    A group of homebuilders gets a downgrade from previously bullish Barclays, which says a lack of large cap ways of playing the sector has driven prices on the stocks to overvalued levels. Getting touched: TOLLENDHI. Homebuilder ETF: XHB -1.1% premarket.

    Redbook Chain Store Sales: +2.0% Y/Y vs. +2.4% last week.

    ICSC Retail Store Sales: +0.6% W/W, vs. -2.5% last week.+2.9% Y/Y, vs. +2.1% last week. Cool weather drove sales for fall merchandise

    The junk bond sector gets downgraded by Morgan Stanly, with its analysts saying the "risk/reward … is less attractive today than at any other point this year." Spreads to Treasurys could tighten further, they say, but this would probably happen in a rising rate environment, which would wipe out any benefits. 

    September Richmond Fed Mfg. Survey:  +4, vs. -6 expected, -9 previous.

    Perfect for more QE despite business picking up:  More on Richmond Fed: The unexpected gain is led by New Orders, which soared 27 points to +7. Backlogs jumped 16 points to -9. Supplier deliveries up 3 points to -1. The Fed mandarins tell us we're going to have to keep a closer eye on employment, and that sub-index showed no improvement, remaining at -5. 

    Wow, everything is fixed!  Sep Consumer Confidence: 70.3 vs. 64.8 expected, 61.3 (revised from 60.6) prior. Expectations 83.7 vs. 70.5 prior. Present Situation 50.2 vs. 45.8 prior. 

    September State Street Investor Confidence Index86.9, down from a reading of 90.9 in August

    Do Taxes Affect Economic Growth? (Neighborhood Effects)

    Responding to indicators "paint(ing) a bleak picture" for the region, S&P slashes its 2013 GDP growth forecast for the eurozone to flat from +0.3% previously. The 2012 outlook (not really an outlook any more) is cut to -0.8% from -0.7%

    The eurozone inches closer to "fiscal union" as talks have begun between governments about creating a centralized budget for the currency zone, according to officials. Berlin is pleased as this would help give it the control it seeks over member state reforms.

    Faust and the German aversion to debt (FT Alphaville)

    The SNB hits the wires, attacking as "unfounded" an S&Preport laying part of the blame for widening European credit spreads on the bank. The report suggests the SNB – as part of its efforts to prop up the euro – bought €80B of core EU debt, driving down yields, and setting of a self-reinforcing cycle of a mad rush out of peripheral bonds. 

    Italy, Spain to Shun Aid Unless Yields Jump, Polillo Says (Bloomberg)

    "When things go wrong, they really go wrong," writes Ambrose Evans-Pritchard, worried about the Spanish military stirringas chatter builds about Catalan secession. "The attitude of the Catalan government and members of its parliament is inadmissible," says a group of retired officers, threatening military tribunals against civilians. Thus far, no denial has been heard from PM Rajoy or King Juan Carlos.

    Container-shipping giant Maersk plans another round of capacity reduction as it attempts to boost rates back to profitable levels, says CEO Nils Andersen. "It's loss-generating to sail Asia-Europe at the moment … it is only natural that we consider reducing the capacity."

    The thirst for yield helps California pull off a successful bond auction, with the size of the sale increased from $1.55B to about $1.75B. The 30-year paper in the deal was priced to yield 3.72%, the lowest in state history. 

    A study of radiation risks in the Kara Sea will clear the wayfor ExxonMobil (XOM) and Rosneft (OGZPY.PK) to begin drilling in the Arctic site. The partners have sidestepped environmental groups’ calls for a clean-up prior to exploration of the area off Russia's northern coast where Soviet ships dumped worn-out reactors and 17K containers of radioactive waste.

    Russia suspends the import and sales of Monsanto's (MON) genetically modified NK603 corn until the country gets further information on the safety of the products. Scientists at Russia’s Institute of Nutrition are asked to review the French study which raised questions about the long-term effect of MON’s NK 603 corn on rats.

    Casino stock trade higher as enthusiasm builds that next week's Golden Week holiday in China that could see increased travel to Macau and more voices are heard backing the idea that casino operators should consider breaking off shopping malls and hotel properties to unlock value. It's been a fairly consistent drumbeat from investors eager to see solid real investment trusts emerge out of the pitfalls from betting on growth in Vegas and Macau. Advancers: LVS+4.2%WYNN +1.9%MPEL +3.5%MGM +1.8%. 

    Caution seems to be the word of choice heading into Nike's (NKE +0.3%) FQ1 report slated for later this week. Theoverriding theme is that the retailing giant faces macro pressure in China that will be hard to overcome. Traders will also be looking for more clarity on the company's potential sale of the Cole Haan and Umbro brands and what that could bring in to the coffers. (earnings preview) 

    Shares of Deckers Outdoor (DECKfall 3.9% premarket after another report emerges tipping off that sales of Ugg boots are weak. Sterne Agee notes distribution is "getting ugly" as the once red-hot boots are now ending up at formerly unacceptable retail chains.

    Odyssey Marine Exploration (OMEX -24.9%) shares plunge on news its Gairsoppa and Mantola shipwreck recovery projects in the Atlantic Ocean will be deferred until Q2 2013, citing current weather conditions and a previous commitment to another charter.

    It may look good on paper, but the 60% upswing in Perigrine Pharmaceuticals (PPHM +50%) this morning is a paltry move compared to yesterdays 75% cratering the shares took after reporting that previously released results from a midstage cancer drug study aren't reliable because of a third-party error. The big relative move off the bottom is largely a "dead cat bounce" when you consider that it still remains down 67% from Friday's close.

    Maxim is out with a defense on Tesla Motors (TSLA -6.9%), noting that it sees the company meeting its 2013 production goal of 20K vehicles despite today's hiccup. The firm remain a Tesla believer for the long run, keeping shares slotted at Buy with a lofty $50 price target.

    TiVo (TIVO +3.1%) rallies on an upgrade to Buy from Lazard: the firm thinks TiVo's settlement with Verizon raises the odds of a deal with a Motorola Mobility, which probably would be more lucrative. Also, Jefferies is reiterating a Buy, arguing (like Janney) that the Verizon deal raises the odds of favorable outcomes in TiVo's other legal battles.

    Shares of RadioShack (RSH -9.3%) open lower with reports out that the retailer was only given a limited supply of iPhones from Apple that didn't even match the number of pre-orders it took down. Also contributing to the negative sentiment on the name is a stinging boot from the S&P MidCap 400 Index.

    Shares of Barnes & Noble (BKS) trade 2.9% higherpremarket after the company sticks its toe into the streaming pool. The plan from the company includes the ability for customers to view Nook Video content purchased on non-Nook devices using digital rights stored in the cloud. It also appears that Nook Video will include content from HBO and Starz, as well as integrate with UltraViolet to give customers access to their physical and Blu-ray movies.

    Enthusiasm over Barnes & Noble's (BKS +3.7%) new Nook streaming service helps shares break out of a narrow trading range to reach monthly highs. Though the initiative will clearly help Nook products try to keep pace with Amazon's line of Kindles, Forrester Research analyst James McQuivey says that in the end the company will have to "sell everything" with their devices to stay in the game. 

  39. Google (
    GOOG +1.9%) is making new highs once again as Capstone becomes the latest firm to pound the table for the search giant, lifting its target to a lofty $910. Capstone sees new big data (analytics?) products giving Google's ad business a lift. (previous: III)

    Google's (GOOG) Eric Schmidt says his company hasn't made any move to provide a Google Maps app for the App Store, in spite of the backlash to Apple's (AAPL) iOS 6 Maps. Schmidt hints, but doesn't overtly state, that Apple hasn't signaled it will approve a Google Maps app. He also refuses to guarantee Google will remain the default search option for iOS - that arrangement has produced huge revenue-sharing payments for Apple, and cemented Google's mobile search dominance.

    What have I been saying?  Economics is Broken (Chron)

  40. Peter Strangles
    Peter or StJ – just to confirm.  These are very margin heavy?  Are there any tricks to reduce the margin demand other than making each side a spread?  7 contracts of the RUT Oct 910/710 strangle requires about $86k or margin.  Your account about the same?  Spreads will reduce the margin … as well as the income.  TIA

  41. Gingbaum,
    Yup, you can start with those two.  The RUT short calls are part of the 2nd leg of a short strangle.  The first leg was 7 RUT Oct 770 short puts that we sold previously, i.e. the RUT short strangle is Oct 770/910 and SPX short strangle is Oct 1300/1530.  Keep in mind that this is a $500k virtual portfolio.

  42. Phil/Economics is broken – I think it was also the Fed's Williams who said yesterday that no one at the Fed truly understands why the US economy has not recovered.

  43. aaronc & Pharm,  Yup, those are monthly, thanks Pharm!
    Thanks, stjeanluc & Phil!  We had to work some magic to make a profit in September.  It was a crazy run up and not easy to handle.  A good learning opportunity for all!

  44. AAPL/8800 – If you're just poking around for a good price, it's fine but, even with PM, there are better ways to make $1.  

    AAPL/Newt – You have 2 long $100 bull call spreads.  They combine to give you $200 of upside protection against a 1x sale of short calls but, if you roll the short calls to 2x (because the stock pops on you) then each 1x of the new position would only have 1x of the $100 bull call spreads backing it up.  

    Newman/1020 – So he just noticed Obama is black?  

    5M jobs/Shadow – We need to add 1.8M jobs a year to stay even with population growth.  That's pointless.  

    PCLN/$25KP, Sank – Not yet.  I don't want to throw good money after bad if we're really popping but let's see if the Dow can hold 13,600 for 2 days first.  Yesterday I thought we'd go up after Europe but we went down – today it's happening again.  If we keep selling off into the close – things can start to get ugly.  

    VXX/Aaron – It's a dead issue.  At this point we have learned not to play it anymore (or most of us have!).  

    AAPL/Willie – The LTCG may go from 15% to 20% or MAYBE 25% (doubtful) – do you really think people will alter their investments based on that?  Still beats 35%.  Of course, if they have big profits, may make sense to take them now and get back in once it's wash safe but, again, saving 5% and missing a 10% run is a pretty stupid way to avoid paying takes (kind of like when you never pay them and then try to run for President – it just doesn't go well).  

    Fruit Flies/Pharm – Now how the hell do you know of a fruit fly is going senile?  

    Economy/Ink – He seriously said that?  They don't have a clue?  We are truly lost….

  45. Hi Phil – I joined your site several weeks ago.  I have been slowly scaling into some Income portfolio trades.  However, I did buy several AAPL OCT 700 calls (MoMo Trade).  I know the IFlantheman sold his at 12.50.  Any suggestions on what I can do to salvage these calls (or should I just sell them for a loss now)?  Do you think AAPL will recover in the next couple of weeks?  Thanks!

  46. Pharm
    Are you still in the SGEN
    Dec. 25/30 BCS
    Mar 25/30 BCS
    Any adjustments?

  47. ccsincsd, yes, these are margin intensive.  We can do spreads too, but we choose to take more risk due to the QE program and go for a quicker decay.  With spreads, we need to wait longer for the decay compared with naked shorts.  In a couple of weeks, we can cover up by buying long puts and calls, and converting them to a spread if needed.

  48. " So he just noticed Obama is black? "
    I guess I should've posted this after 4pm……

  49. Market moving down, AMZN moving up.  That one has been a dog…with fleas…

  50. ccsincsd, one more thing – you can get Portfolio Margin that can reduce the margin to about $20k.  However, the PM margin is variable, but shouldn't get over $70k for 7 RUT short strangles.  This margin does not include the value of the shorts, which needs to be added to calculate the total cash/margin committed to the trade.

  51. This really is a POS market.

  52. AAPL/ Phil:  Nice- thanks for the explanation.  I was wondering how I would be covered on the $685 shorts and what keeps the caller from exercising..  Just to recap- and to make sure I am tracking on this- my long BCS's are covering my short calls and in the event of being exercised against me I can use the long leg of the BCS to cover and then handle the caller from the BCS afterward….
    So many strategies/ tools.

  53. Phil
    I agree LTCG are relatively stupid reason to panic out of a Position in AAPL but like I said they're doctors listening to republican brokers.  LOL

  54. Phil
    I missed the flag but now it is down, only looking at the 1 min chart is at best a be alert signal.

  55. So ummm,  anyone but me notice the market dropping like a rock?

  56. rdn4ever/ markets
    Actually the market is not falling! If you turn your screen upside down you'll see what I mean!

  57. PPHM – dead cat bounce….careful in here. 

  58. Scottmi – did you cover the 690's in AAPL?

  59. Thanks L4, I'm sure it's just a temporary glitch caused by a TOS upgrade!

  60. Falling
    IWM bounced off the 84.50 line but instaed of showing reversal it showed a sell signal. The pos. is 84 to 84.40 is a retrace to pre QE. Below that would look bad.

  61. Thanks Shadow.  never fear, we'll be back to 85.20 in no time.

  62. Wow, dropping like a rock now.  

    Welcome Farside!  A trade is not a "Momo" trade because you say it is.  If you are going to play a trade on momentum – it means you should be getting in when it's going your way and getting out when it's not.  Also, you can't just pick any old strike and assume it will work – those $700 calls are all premium and not much use.  AAPL has earnings on Monday the 15th and will likely range between $680 and $700 between now and then, it's all a matter of timing but, when you buy $700 calls (now $11.50) with 24 days to expiration – they lost .50 a day no matter what AAPL does – that's why we sell those kind of calls (we sold the $695s) to other suckers who think they are smarter than the market.  What we try to teach you to do here is to BE THE HOUSE – not the gambler.  

    Newman/1020 – I'm just saying I don't think race is currently the big campaign issue.  

    TNA weekly $63 calls at $2 have .50 of premium – fun to grab 10 of those in the $25KPs with a stop at $1.50 or if the RUT futures (/TF) fail to hold $645.  

    Exercise/Newt – That's not very likely unless they go way in the money and there's almost no premium left.  Up to you to roll before that happens. 

    Republicans/Willie – Oh, say no more!  

    Flags/Shadow – Now it's really crazy, just wild gyrations on no volume and no news.  

    Rock/Rdn – 13,500 on the Dow is the bottom of the top of the range.  1,450 on the S&P, 3,150 on the Nas, 8,320 on NYSE and 847 on the RUT – if those start failing, THEN we're in trouble but, otherwise, just the same range under the breakout levels.  

    Upside down screens/L4 – Good way to get perspective.  Have to use my IPad – I'm surprised there's no popular charting software that lets you flip charts upside down.  

  63. Dollar 79.53, by the way – as I said earlier, that would turn us red.  

  64. Don't look but VXX is green now…

  65. AAPL/$25KP – I am worried we'll never get to $12 so let's buy back 2 more $695 callers for $13 which leaves us with 10 long $685s and 6 short $695s.  

  66. QCOR – Nov 10 Ps.  STO.  If they make it that far, I would load up.

  67. AAPL/Phil – according to, earnings are out on the 23rd, after options expiry. 

  68. AAPL / Nicha – Other sites have 10/15 for earnings. I checked in a couple of places and some have 10/15 and others 10/23 (probably a cue from Earningwhispers). I think that 10/15 is more likely.

  69. 12:00 PM On the hour: Dow +0.26%. 10-yr -0.11%. Euro +0.10%vs. dollar. Crude +0.77% to $92.64. Gold +0.34% to $1770.55.

    1:00 PM On the hour: Dow -0.1%. 10-yr flat. Euro +0.16% vs. dollar. Crude -0.27% to $91.68. Gold +0.11% to $1766.55.

    1:04 PM The Treasury sells $35B in two-year notes at 0.273%, same as last month. Bid-to-cover ratio of 3.6, vs. a recent average of 3.78; indirect bidders take 27.2%, vs. last month's 22.3%. Direct bidders take 17.5%

    The Fed's latest QE program poses risks to the bank's credibility, says Philadelphia Fed President Plosser, as the policy will likely fail to deliver a substantive impact on employment. What will Bernanke and crew do then? One editor's guess: Double down.

    Bundesbank castigates IMF for saving EuropeGermany's central bank has launched a blistering attack on the International Monetary Fund, accusing officials of spraying around money like confetti and overstepping their legal mandate.

    Patience snaps in Portugal.

    Nigel Farage: The Euro Crisis Is Entering The End Game.

    Low rates create a bull market for hedge fund consultants as two more return-grasping pension plans – these from San Jose -plan to deploy $730M (about 15% of AUM) across a number of hedge funds over the coming months.

    In nearly every instance during the last 50 years when stocks rallied in the face of deteriorating economic statistics (represented by the PMI), writes tradefast, it was stocks being proven right, as subsequent months saw stocks continue higher while PMIs reversed course.

    What happens to housing and rental prices when (if) this group comes back on the market? The number of 26 year-olds living with parents has jumped nearly 46% since 2007, according to Census Bureau data. About 25% of those aged 18-30 now live with parents, bringing multigenerational households to the highest level since the 1950s, according to Pew Research.

    New Wave of Workers Tries Novel Approach: Save MoreAs older Americans lose jobs, lose homes and delay retirement, their children are watching and reacting. Growing numbers of young Americans are boosting savings, cutting spending and planning for retirement

    Copper Stockpiles in Bonded Shanghai Warehouses Seen at Record. Copper inventories at bonded warehouses in Shanghai probably climbed to a record as import premiums dropped to a four-month low, signaling demand in China may not be improving as much as expected after a summer lull. Reserves were 650,000 metric tons, according to the median of nine estimates from traders, analysts and warehouse managers, compiled by Bloomberg. Five said that this was a record. The amount compared with an estimate of 550,000 tons by Macquarie Group Ltd. on Aug. 20

    The improved margins U.S. airlines showed in Q2 is partially attributable to the higher fees the industry now charges. For the quarter, it raked in $931B in baggage fees and another $661M from reservation fee changes. Southwest Airlines (LUV +0.1%), of Bags-Fly-Free fame, showed the most rapid pace of baggage revenue growth during the quarter of major carriers.

    Buffalo Wild Wings (BWLD +2.7%) trades higher after RBC Capital upgrades it to Outperform from Sector Perform with an improved price target of $95. Analysts cite the improved outlook for chicken wing costs in jumping back on the BWLD bandwagon.

    Toys R Us Chairman Jerry Storch makes the case onSquawk Box that brick-and-mortar stores won't go away anytime soon, but will morph into mini-distribution centers. The line of thought follows a recent trend by retail players of using existing stores as fulfillment centers and showcasing more extensive pick up options to online buyers. The end game: Retail stores see a competitive advantage over Amazon if they can deliver products faster as they still dream about ultimately offering the holy grail of online shopping – same-day delivery.

    Pandora (P -2.5%) slips after Nomura's Brian Nowack starts coverage with a Reduce and $8.50 target. Oddly, Nowack expects Pandora to grow its share of U.S. Internet radio listening time to 89% in 2016 from a current 78% and last year's 64%, but is nonethelessworried about competition from more personalized services offering stronger social networking ties. Spotify, Slacker, and Clear Channel's iHeartRadio are named. (yesterday)

    H-P (HPQ) has brought together several disparate unitswithin a single division meant to offer cloud products and services, according to an internal memo. The division is formed as H-P tries toplay catch-up with Amazon and Rackspace in cloud infrastructure services, and with IBM in cloud management services. Will H-P's reorg bear fruit, or is this life imitating the The Onion (video)?

    Take that low expectations!  Research In Motion (RIMM +4.7%) rallies as CEO Thorsten Heins tries to rally the faithful at RIM's developer conference. Heins promises carrier testing for BlackBerry 10 devices will begin next month (sales are due to begin in Q1), and shows off a feature called BlackBerry Hub, which aggregates e-mail, social networking content, and other time-sensitive data. He also claims RIM's subscriber base has risen by 2M in recent months to 80M (no doubt thanks toemerging markets) – analysts have been forecasting a decline. (live blog)

    S&P downgrades its rating on Sony (SNE -0.7%) to triple-B to go along with a negative outlook as the company seems to running out of long-term revenue drivers. After missing out for the most part on the explosion growth in the smartphone and tablet markets without any smash product hits, analysts say the company needs to retrench to make its TV business profitable again. (S&P report log-in required)

    The 16GB and 32GB versions of the iPhone 5 (AAPL) respectively carry manufacturing costs of $207 and $217, estimates iSuppli after conducting teardowns. Apple's total cost is higher, after factoring expenses such as R&D, marketing, royalties, and investments in securing component supplies, but with unsubsidized prices starting at $650, expect Apple's iPhone gross margins to remain enormous. (prior teardowns)

    According to iSuppli's teardown of the iPhone 5, Qualcomm (QCOM) is getting $34/unit for the phone's baseband and RF transceiver chips, up from $23.50 for the 4S. Qualcomm is also probably getting a few dollars more for a power management chip. SanDisk (SNDK), meanwhile, has been officially spotted as a NAND flash memory supplier - previous teardowns detected NAND flash from rivals. A Wi-Fi/Bluetooth/GPS module containing a Broadcom (BRCM) combo chip is believed to cost $5. 

    Three lunchtime reads:

    1) China speeds up approvals of foreign investors

    2) What excessive bullishness?

    3) Fear vs. greed: Greed is winning

  70. Rumors that MSFT is going to buy NOK….windows phone….as MSFT is now building their own tablet.

  71. That's a lot of computing power…

    Built around IBM's BlueGene technology, Mira is powered by 768,000 cores spread across 48 blade racks. (This thing is big! Just like other supercomputers!) It has 8 petaflops of processing power, and at its peak theoretical performance, is able to perform 10 quadrillion floating point operations per second. Oh, and it has nearly a petabyte of RAM.

    I understand it can run an infinite loop in about 15 seconds! 

  72. 1020, I really like those TED presentations, thanks. Try this…
    Click Here for: "How to Get to Mars. Very Cool!

  73. Not helping the stock Pharm….

  74. Whenever earnings come out be prepared for not very good numbers, everything is in prespective of furure outlook.
    Another watch out is Toy industries that make huge trucks and stuff for mining are expecting slow sales through 2013 while coal exports are increasing. Natural gas is about to take a bigger chunk out of coal in US. These companies like CAT are not going to be big takers of QE money when their plan is to cut back.
    Like AAPL oversupply is not in their best interest when the world is on the edge.

  75. NOK / Pharm – Where did you read it? I am expecting this for some months now (even have a small 3/3.5 Oct BC).  Cheers

  76. Hey all,

    If you are looking for a hedge for your options trades:


    $IWM – Added bear call spread for hedge at 87/88 level. Market looking toppy and IWM broke through 10-day MA today. Max gain of 25%.



  77. That's not a bullish sign and it makes you wonder what numbers the Chinese are manipulating to keep pretending their economy is still growing at 7% when no one is buying their stuff (or anyone else's stuff for that matter):


    The below chart comes from Morgan Stanley's latest Strategy Forum deck, and though it's simple, we suspect a lot of people haven't seen it yet, or really haven't made the connection between the chart and other big economic stories of the day.

    This is the chart that's causing warnings from FedEx.
    This is the chart that's contributed to the collapse of the Shanghai Composite.
    his is the why the Baltic Dry Index is down 60% this year.
    It's why US manufacturing indices are giving off the weakest signs of the economy.
    If the US goes into a recession in the next year, this will almost certainly be why.

    Global Growth

  78. Cash flow seems to be helping GOOG now:


    This year, Google should generate at least $12 billion.

    That's well ahead of where most people imagined they would be by now.

    To put the $12 billion in context, it's more than twice Facebook's revenue (let alone cash flow).

    It's also more than all but a handful of companies on earth. And it comes despite Google investing in a bizarre array of projects that have nothing to do with its core business, including self-driving cars and wind power.

  79. Rumors….are rumors….Talked with a MS friend.  They are looking….just don't know when.  I have bought the Jan 15 $3 calls for $1.  Figure MS overpays, so looking for $6 or more.

  80. Gotta work on your "moving the market" skills Pharm….

  81. stjeanluc – RE: AAPL earnings …
    The ONLY time in recent memory that I know AAPL had their earning call before OPEX was in January 2011 when they moved it up and released the news that Steve Jobs was stepping aside (again). AAPL usually schedules their earnings call AFTER OPEX (on a Tuesday). January 15th is before OPEX and it is on a Monday. So, most likely, January 23rd is the correct date, however, AAPL has not yet officially stated any date.

  82. RMM
    Never discount the depressed market indicators. As reported Blackberry sales were up and Iphone, Verizon is the main carrier, down locally. It is hard to see that on the coasts, mostly east. Not selling many Samsung smart phones but the big sell here is Samsung basic units. FWIW

  83. TNA not looking good ($1.90 at the moment but RUT futures failed 845) – I'm holding out for S&P 1,446 (/ES) which is 1,452 on the index as a last chance for a bounce.  I really feel like we're being pushed out – not that the selling has any proper conviction to it.  

    AAPL earnings/Nicha – That would be a very big deal.  Let's see if we can find something official.  Actually, the last 3 earnings were on the 23rd BUT last Oct was the 18th.  YHOO finance seems to think it's firm.  

    SAT reading scores at 40-year lows.  Nice….

    LOL StJ!   How silly though – they want to see if the simulation supports the research yet they used the research to program the simulation (how else?) so what do they think is going to happen?  I'm just waiting for them to turn one of these things on and it becomes self-aware – we're probably about a decade away from that…  Human brains are probably about 1M core processors worth but run parallel so would take way more than 768,000 cores – maybe 10x…

    Mars/Rpme – Yep, TED rocks.  

    IWM/David – Interesting timing, we just took TNA, looking for improvement into the close.  Our long hedges are TZA though…

    Growth/StJ – Nasty chart – we're near the bottom of the 2001-2002 cycle and they're not even calling a recession yet.    GOOG making excellent use of their cash to be hi-tech VCs.  Thank God someone is doing it…

  84. S&P downgrades themselves two (2) notches to junk status after a hedge fund paid them to do so. Story developing … ;-)

  85. LOL StJ…..I am just a lowly Pharmboy from Kansas.  What do I know about tech? 

  86. TRIN is at 2….VIX barely moving.  Probably selling calls….instead of buying puts.  Masking what they are doing.

  87. FAS oct 108 call is less than 6 now should we closed it or too late thx

  88. Now the 38.2% fib goes down after loosing all recent trend lines, the next lower line 83.78 is followed by the 50% fib at 83.67 and that is the last strong support for a while.

  89. Good Afternoon!   Just watching AAPL lose further ground and sitting on the sidelines with cash.  I did sell a few GOOG October puts, just for fun (not a MoMo trade).    I looked at the AAPL maps today on a friend's new iPhone  5 ( I haven't gotten one yet)  it doesn't look that shabby to me, but I haven't fully checked it out.  I know the satellites are much more current, as my home, built 7 years ago, is not on Google maps but is on AAPL maps, to include a new truck I have had for less than 6 months!   Anyway, I'll just watch this one for awhile.  I am beginning to think it could make a significant pullback with this quarter's earnings.  When I get back in it will be with January or later options. 

  90. AAPL/ Iflan – I rolled the 700's down to 690's yesterday. What wud u suggest now?

  91. Brain power / Phil – These super computers are still far behind:

    The best estimate I have seen, by Dharmendra Modha (… ) who is the head of the SyNAPSE project, is that the brain has 38 petaflops (thousand trillion operations per second) of processing power.

    That's still about 5 times more than the one I posted about! Getting there though… Still gives you an idea of what "most" people (with some notable exception) are playing with in their head! 

  92. lflantheman – I think AAPL will announce a mini iPad sometime in early October that will move the stock …

  93. Growth / Phil – At the same time, we plunged to similar levels in the 90's and recovered but I think that the macro environment was much more favorable then so I think that this resembles more the 2001-2002 scenario. But then again, plenty of FREE MONEY!

  94. nicha….Here's the deal on AAPL.  Over the weekend I decided to get out of AAPL 700s on Monday.  Of course I did, but not before the contracts had lost significant value.   I think they pull back even more, and I very much doubt that earnings will push them much above 700.  So I think the 690s are playing it too close to the vest.  As I said above, I would be in 'AAPL cash' right now, then come in with Jan 13 or later calls as the stock pulls back further.  As Phil noted, the NEXT quarter will be the blowout quarter, so holding early 2013 or later calls or spreads seems to me the way to go on AAPL.  Right now, I don't like what I'm seeing.

  95. GOOG / Phil – I think that GOOG and IBM are actually working to try to solve some of the world problems (alternative energy being one of them) with their spare cash. These guys are no angels though and plenty competitive, and maybe they are less profitable than AAPL for example, but still admirable in some ways. 

  96. Dollar pushed up to 79.60 on Euro falling to $1.293 on Spanish protests.  

    S&P right on that 1,452 line and not looking bouncy so far.  

    FAS/$25KP, Gucci – Was $6 around lunch, was just considering going back in at $4.50 but waiting to see how we finish.  If you missed the exit, may as well wait now – we still think QE3 will lift the Financials – just apparently not today.  

    Damn, selling getting worse.  Where was this action last week when we were more bearish?

    S&P failed  so that's it for the TNA in the $25KP  but let's give the naked AAPLs a chance for the moment.  

  97. Cops and protestors now fighting in Spain

  98. Most people/StJ – Apparently there's more to it than raw processing power.  

    Free money/StJ – I don't really know what's got things going down this afternoon.  Dollar not even that strong.  If QE3 can't support us at these levels – we are very screwed.  I agree on GOOG and IBM – this is what America used to be good at (R&D), now you have to search for examples.  

    Oh man, even LULU going down today – it really is the end of the World.  PCLN and AMZN too!  

    Oh no, 1,450 just went on the S&P – that's going to trigger some technical selling.  Watch 13,500 on the Dow to confirm a snap but hopefully we hold the line here.  

    Remember it was: 

    13,500 on the Dow is the bottom of the top of the range.  1,450 on the S&P, 3,150 on the Nas, 8,320 on NYSE and 847 on the RUT 

    So we have all the signs now but volume just 64M on the Dow at 3 so very stickable.  

  99. QCOR is my only green stock for the day!
    Pharm – were you selling $10 puts today or saying you will when it hits $10?
    Thank you

  100. AAPL/Nicha – i was half covered with 695s which i've been buying back on this last plunge down to S1.  

  101. Amazingly, the VIX is barely moving – still $15.09. 

    TLT back at $123.34.  

    Spain turning into a riot according to CNBC but doesn't look too violent to me.  

    Dollar 79.69

    Time to buy back 2 more AAPL Oct $695 calls for $10 in $25KPs but also need to be ready to sell 3 $675 calls, now $19.50 for no less than $18.50 if we keep going down.    

  102. TOS – What's with the daily upgrades?  I don't know about anyone else, but mine is running extremely slow.  Takes a few minutes just to load option chains.

  103. Supercomputers vs human brain
    Ask anyone working on computers and they will tell you they are not the same. Computers will always be predictable just like math. No matter how many computations per nano sec they can't be abstract because it would cause short circuts. More or less like mechanical things, made to go up and down OK, sideways broken parts. In simple terms computers would have to malfunction and the tricky part is, some of the time. Not posable! Computers have always been faster at math and a little faster they can be, even that is limited to conduction speed. How about forget electricity and consider field energy similar to magnetics pushing and pulling at the same time with varriable levels from infinate directions. Remember, ha ha, the tangle of interconnections and ability to create new ones as needed. There is a Trillion dollar idea!

  104. QCOR/Morx – sold them today already for 45c.  I would buy the stock at 10, so why not sell the puts.  10 was about where we bought many many eons ago.

  105. I have S3 for /ES at 1436 and we touched that briefly. Maybe we bounce from here but it's looking a bit panicky right now!

  106. BOTs/shadow – i'm with you. tiny volume, the bots are snatching at every order placed even a bit OTM in the direction of movement. maybe it's the fed turning on their new QE program?.

  107. Scott – what's ur next move?

  108. IWM selling is accelerating and a few big dumps!

  109. On the other hand VXX at $9.00….  The Oct 14 calls in the 25KP are up 25%, all the way to $0.08!

  110. AAPL, AMZN, LNKD all went to S1, now lifting..

  111. $25KP:

    • SQQQ Oct $40 calls gone at .45
    • V Oct $125 puts can be doubled down at .25. 
    • FAS $108 calls stopped out at $6 – let's get back into 5 Oct $104 calls at $6
    • AAPL currently 10 long $685 calls ($15.50 and 6 short $695 calls at $11.20) that's fine for overnight.
    • No change on QQQ or others.   
    • Let's add 10 TNA (again) $60 calls at $3 with a stop at $2.50.  


  112. Our goal on the TNAs is just to get back the .50 we lost on the first set!  

  113. scottmi
    For about 5 minutes some dips have been buying small lots and a BOT is selling. I can only see an anti-stick, the best that could happen is just a bad day.

  114. AAPL/Nicha – next move.. pin up a sign "HEED LFLAN RE AAPL!"

  115. scott – AMEN to that!

  116. Phil
    buy the FAS  108 calls  ?

  117. Computer brains/Shadow – I think if they hook up enough processing power with some fuzzy logic, you'll get a pretty good facsimilie of a human brain.  We like to think we're special but I'm not so sure…

    Dollar rejected at 79.70 so this is not panic.  TLT stopped at $123.50, which is not that high.  VIX 15.01 – no panic.  

    XLF Jan $15/16 bull call spread at .58, selling $15 puts for .45 is net .13 on the $1 spread.  TOS says margin for selling 20 puts is net $4,930 so let's do 20 sets in the $25KPs. 

    Not enough change in XLF 2014s to merit a change in FAS Money but a good time to get in if you haven't been.  

    FAS/QC – That was buying 5 FAS Oct $104 calls (now 6.15) in the $25KP to replace the 10 $108s we sold.  

  118. VXX – Nice breakout on the hourly chart with plenty of volume. If we close here it will be the first outside reversal day on volume since 8/21, although that turned out to be a head fake.

  119. Phil- Thanks.

  120. S&P futures touching S3 again…

  121. I keep a small list of stocks sorted by their earnings dates.  Currently use Yahoo! Finance to look up dates.  Is there a better place?  In the past I have found some dates have changed.  Does this happen often?

  122. Sure wanted this action LAST its making me feel like a monkey on a string. !

  123. Phil
    Humans are not special in my book and in most ways computers out do us. Try reconsidering programs can't change other than conditional to set points. My idea involves you can hear stars that won't be seen for billions of years, radio telescopes detect changes in magnetics, the theories of black matter, and the power of push like a helper engine behind a train, progress is in front of the power. Then magnetic fields efect each other without crashes into each other, electricity can't do that and that means computers can't do it as they are now, MRIs use interacting megnetics to form images and why couldn't that turn into thoughts instead of computations.

  124. Does not look like we're getting a stick, does it?  

    In $25KP, we have to take the loss on the TNA $60s (now $2.65) and cover with 3 AAPL $675 calls (now $19) as it's not worth the risk overnight. 

  125. PCLN is surprisingly holding!

  126. That was all it took to erase all of September's gains! 

  127. Been a good day for shorting ES fish in the futures barrel…… :)

  128. I guess QE really stands for Quick Evaporation.

  129. Huge blocks below bid after the bell, balancing funds don't do that.

  130. minus 101 one can not leave you guys alone for a day. looks like a lot of rats were leaving the ship 

  131. grant – RE: earnings dates …
    Earnings Whispers: Earnings Calendar

  132. Not quite all of September gains Phil, but a nice chunk….

  133. Wasting more time:

    Realistically, voluntary taxation is not a viable alternative to broad-based taxes. Those who oppose raising taxes on the wealthy and are concerned about the number of people exempt from federal income taxes ought to consider a national sales tax, as every other major country has. As Alexander Hamilton explained in Federalist 21, one virtue of consumption taxes is that they are to some extent voluntary.

  134. Volume kicked up to 138M after the close – about "normal" but came very late.  Overall, indexes held flat on the volume.  

    Rats/Yodi – Yep, they are messing with us again.  Right in time for the Bond auction tomorrow too – what a coincidence!  

    September/StJ – Oops, my chart was only going back 20 days – missed the big pop.  That 1,440 line is going to be key as is 840 on the RUT (already blown).  

    Voluntary taxes/StJ – Are those people on drugs?  I do favor a VAT tax though – stops most cheating. 

  135. And, for those of you "shocked" by Spain – same old, same old…


    1. BBC News - Spain protests: 'This has never happened before'


      May 21, 2011
      Some 25000 Spanish protesters have defied a government ban and camped out overnight in a square in the 

    2. Spain protests: Over a million march against harsh austerity – YouTube

      Jul 20, 2012 - 1 min - Uploaded by RussiaToday
      Over a million of government workers and trade union members marched in Barcelona, Madrid and dozens of 

  136. Drugs / Phil – Not on drug but severe cases of epistemic closure:

    Reality is defined by a multimedia array of interconnected and cross promoting conservative blogs, radio programs, magazines, and of course, Fox News. Whatever conflicts with that reality can be dismissed out of hand because it comes from the liberal media, and is therefore ipso facto not to be trusted. (How do you know they’re liberal? Well, they disagree with the conservative media!) This epistemic closure …

  137. StJ – Send me your email at if you don't mind I'd like to ask you a question or two !

  138. Never tried to link a picture before but I thought this was an interesting chart using Fibonacci time sequences from the March 2009 lows.

  139. Good morning (not in Asia or Europe)!  

    Asia's a bit strange because they are following us down from yesterday but mostly about 90 of the Nikkei 225 went ex-dividend today so an exaggerated drop there (2%).  The Hang Seng tested 20,500 and barely held it and the Shanghai tested 2,000 and barely held that.   Mostly the Shangai was taken down by material stocks, including steel but, of course, the China/Japan island issue is still simmering and making everyone nervous:

    Toyota (TM) and Nissan (NSANY.OB) are cutting production in China due to a decline in demand that comes amid simmering tensions between Japan and China over a territorial dispute. Toyota and its Lexus brand are adjusting production down while Nissan's Chinese joint venture will stop making passenger vehicles through Oct. 7. Just another effect of the skirmish, one strategist says: "The market could be stuck with this for months to come."

    The Euro fell to $1.2865 on Spanish protests but the Pound is weak too at $1.618.  They Yen is super-strong at 77.61 but don't blame the Buck – it's up to 79.85 so it's a general flight out of Euros and Pounds to anything else.  

    Europe had a nasty open with Spain at the 2.5% line (the most an index usually falls in a single day) and Italy is down 2% but just had a decent bond auction and may improve and France is down 1.75%, Germany 1.3% and UK – even though not on the Euro but still in the EU – down 1%.  

    There's a general strike in Greece, which means all 30 people who still have jobs are refusing to come to work.  

  140. This is freaking hilarious – Good for RIMM having a sense of humor delivering a message at the same time:

  141. Forgot to mention – my conclusion is we have follow-through selling to our dip from yesterday but, on the whole, no major reason for us to go lower other than that we have about $70Bn worth of notes to sell today and tomorrow. 

    News you can use: 

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    10:00 New Home Sales

    10:30 EIA Petroleum Inventories

    1:00 PM Results of $35B, 5-Year Note Auction

    1:15 PM Fed's Evans: 'Perspectives on Current Economic Issues'

    6:00 AM Overseas: Japan -2.0%. Hong Kong -0.8%. China -1.2%. India -0.4%. London -0.9%. Paris -1.9%. Frankfurt -1.4%.

    Bernanke needs to learn two crucial lessons of the 1970sbefore it's too late, says Volcker biographer William Silber: "First, we can’t get a permanent reduction in unemployment by inflating… Second, we’ve got to worry about inflation even with unemployed resources." But after five rough years, U.S. citizens "may not tolerate a central bank that acts pre-emptively, as it must, to prevent inflation."

    UBS chairman sees risks in QE programs: reportWidespread central bank action to support economies by printing money is distorting market prices and may create asset bubbles, said UBS Chairman Axel Weber, according to a report in the Australian Financial Review.

    Seriously?  NOW people are starting to realize this?  I've been saying this since last Q – it's old news:  Despite the optimism of market pundits over the outlook for 2013, a growing number have begun to worry about the near term. Quarterly corporate profits are falling, and the number of companies cutting their expectations for the current quarter has risen to four times the number raising theirs. This is the weakest ratio in 11 years. Earnings are the first to react when the economic climate is changing, so, like the proverbial canary in a coal mine, the alarms are sounding that the overall economy may soon decline as well. 

    Another "I told you so" item:  SEC Says New York Firm Allowed High-Speed Stock ManipulationA New York-based brokerage allowed overseas clients to run a scheme aimed at distorting stock prices by rapidly canceling orders, according to the U.S. Securities and Exchange Commission. Clients of Hold Brothers On-Line Investment Services were “repeatedly manipulating publicly traded stocks” by placing and erasing orders in an illegal strategy designed to trick others into buying or selling, the SEC said today in a release

    There's Another Imminent 'Cliff' You Should Know About, And It's $1.6 Trillion Tall.

    Spanish austerity measures coming Thursday will includerestrictions on early retirement, PM Mariano Rajoy tells the WSJ, and a new tax authority – including taxes on stock transactions? – as well as job-training programs. They'll still resist a bailout, but if debt interest rates were "too high for too long" the chances of a bailout rise to "100%."

    Rajoy Nemesis Opens Catalonia Front in Europe Debt-Crisis FightSpanish Prime Minister Mariano Rajoy’s dispute with the leader of his country’s richest region erupted into the newest front of Europe’s effort to extinguish the financial crisis. Catalan President Artur Mas yesterday called early elections, with greater autonomy at stake, five days after Rajoy rejected his bid for increased control of his region’s tax revenue. Mas set the vote for Nov. 25, saying the time has come to seek “self-determination.” The move risks plunging Rajoy into a constitutional crisis amid a recession that has sent unemployment to 25 percent.

    Rajoy Bets Italian Woes May Ease Spain Rescue Terms: Euro Credit. Spanish Prime Minister Mariano Rajoy may be delaying a bailout request on a bet that renewed market tension will also force Italy to seek aid, strengthening his bargaining power and giving political cover. Spain will have more leverage if it can fend off a rescue until Italy joins it in needing ECB help to bring down the cost of servicing its debt, said Raphael Gallardo, head of macroeconomics at Rothschild Asset Management in Paris.

    Spanish Leader Outlines Fresh OverhaulsRajoy, in Interview, Pledges to Limit Early Retirement, Set Budget Monitor. The Spanish government will restrict programs that allow people to take early retirement as part of overhauls to rein in the country's debt and shore up its shrinking economy, Prime Minister Mariano Rajoy said on Tuesday. In an interview with editors and reporters of The Wall Street Journal, Mr. Rajoy said measures to be unveiled Thursday would also include the creation of an independent agency to monitor compliance with budget targets, new job-training programs and legislation to sweep away many onerous government regulations.

    Crazy Video Of Spanish Protesters Dropkicking A Cop.

    Spanish austerity protest turns violent: in pictures.

    General Strike to Shut Down Greece on Wednesday.

    ECB’s Bond Buying May Hinder Reforms, Weidmann Tells ZuercherThe European Central Bank’s bond purchasing program could hinder a recovery in the euro zone if it eases pressure on governments to implement reforms, German Bundesbank President Jens Weidmann said in an interview with Swiss newspaper Neue Zuercher Zeitung. Weidmann questioned whether bond-purchase programs are the appropriate mechanism for solving structural problems, such as the lack of competitiveness and loss of trust in an individual country’s fiscal policies, according to the interview. Weidmann was the only member of the ECB Governing Council to oppose the so-called Outright Monetary Transactions program. Weidmann said the ECB’s fiscal policy seeks to keep risk low and buying back bonds causes the opposite. Maintaining price stability is the bank’s primary purpose, he said.  

    China-Japan Foreign Ministers Meet as Island Tensions Hurt Trade. The foreign ministers of China and Japan met in New York in an attempt to ease rising tensions over a territorial dispute that is hurting trade between Asia’s two biggest economies. China’s Yang Jiechi held talks with Japanese counterpart Koichiro Gemba on the sidelines of the United Nations General Assembly. Yang reiterated China’s “solemn position” over claims to islands in the East China Sea, the official Xinhua News Agency said. Gemba told reporters that the atmosphere in the meeting was “severe,” Japan’s Kyodo News reported.   

    Chinese Government Publishes Paper Calling Itself The 'Indisputable Owner' Of The Diaoyu Islands 

    China’s Stocks Fall, Poised for Biggest Quarterly Loss in Year

    Iron Ore Unlikely to Rebound as China Slows, Shale-Inland Says.

    CMBS Selling Like It's 2007 in Pre-Crisis Spirit: Credit Markets. Commercial-mortgage bond sales are surging to the most in almost five years with yields at record lows, fueling a lending boom. Banks have arranged $6.9 billion this month in sales of bonds linked to skyscrapers, shopping malls and hotels, the most since December 2007, according to data from Bank of America Corp. Securities in the Barclays Investment Grade CMBS index yield 2.15%, the lowest since the index started in 1997. Property owners are benefiting as investors chase riskier assets with Federal Reserve Chairman Ben S. Bernanke saying this month that interest rates will likely hold near zero at least through mid-2015.

    Genworth Financial (GNW -6.8%) finished the day as the S&P 500's worst performer, apparently weighed by Philly Fed's Charles Plosser's view that short-term rates may need to be raised"well before" the mid-2015 target. GNW already has the dubious distinction of being one of the lowest-rated stocks in the insurance industry. Investors also are wary of a potential Moody's downgrade.

    As other research desks talk of gold hitting $2,400 or even higher, Citi predicts $1,800/oz. likely will be tested this quarter thanks to global central bank stimulus. The firm sees gradual economic improvement in 2013, "suggesting that sustained investor upside moves should be difficult to maintain." Citi ups its 2013 gold price forecast to $1,749, but note: The price is now $1,763.

    Are the U.S. and Europe headed for a trade war over airline carbon fees? It's not so far-fetched after the Senate passed a bill to try to block the EU's plan to cap carbon emissions on flights in and out of Europe. Brad Plumer notes an obscure law which could allow the U.S. to impose fines on European airlines in retaliation; Europe has similar laws, which could spark a tit-for-tat over trans-Atlantic fees and fines.

    Total (TOTwarns energy companies against drilling for crude in Arctic waters, the first time an oil major has publicly spoken out against offshore oil exploration in the region. The risk of an oil spill in such an environmentally sensitive area is too high, CEO Christophe de Margerie says: “A leak would do too much damage to the image of the company."

    The China Development Bank has lent Venezuela $42.5Bcollateralized by revenue from the world's largest oil reserves – far more than the U.S. spent during 2003-09 in rebuilding Iraq – and is effectively bankrolling Hugo Chavez's re-election bid, according to a Bloomberg analysis. Among the top Chinese beneficiaries: Sinopec (SNP) and PetroChina (PTR).

    Buffett-Backed BYD Tumbles as CLSA Cuts Share-Price Target 94%

    Deckers Outdoors (DECK -5.8%) continues to slide lower as shares have now lopped off close to 30% of their trading value in a month. NBG's Brian Sozzi wants to make a case that valuation is juicy for the company with the iconic boots, but says reality forces his hand. In a nutshell, the outlook looks dicey for Deckers Outdoors with it needing to sell higher-priced Ugg boots during the holiday season to strapped consumers with trendier alternative popping up right and left.

    JNJ promoted illegal marketing of its antipsychotic drug Risperdal by paying physicians to give favorable speeches, subsidizing golf trips and even having sales staff “butter up doctors” with bags of “Risperdal Popcorn,” according to one of its managers in court testimony today. The testimony casts a pall over the company's marketing tactics, which, in addition to the 420 suits currently filed against the company by individuals claiming to have been injured by the drug, are the subject of government probes and Medicare fraud lawsuits filed by state officials.

    Tumbling Tesla Motors (TSLA -9.6%) triggered Nasdaq's short-sale circuit breakers after investors dumped shares following the electric car maker's reduction of its 2012 sales target and news of asecondary offering of 4.34M common shares.

    European solar firms have filed another complaint with the E.C. accusing their Chinese rivals of benefiting from illegal subsidies. Germany's SolarWorld claims the subsidies amount to 20x Chinese consumption and 2x global demand. The complaint comes a day the China Development Bank renewed its pledge to support 12 local vendors, including Suntech (STP -8.9%), Trina (TSL +1.8%), and Yingli (YGE +2.4%). (previous) 

    MEMC (WFR -4.7%rises 2.8% AH, winning back some of the day's losses, after announcing it has terminated a 10--year solar wafer supply agreement with Germany's Conergy. The agreement, signed in '07, featured pre-set prices. Since then, wafer prices have crashed, something MEMC says "created challenges" for the Conergy deal. MEMC will receive a $21.2M payoff as part of the termination, and will take over Conergy's operations/maintenance contracts for solar power plants.

    Green Mountain Coffee Roasters (GMCR -5.5%) moves lower after a $50 rebate on Keurig brewers catches the eyes of traders. Though it's not the first company in the world to move products with a discount, the timing from GMCR comes at the end of its quarter with competitive pressure from a host of companies already unsettling investors.

    AMD (AMD -4.6%), no stranger to bearish Street commentary, is getting hit today by a critical report from FBR's Craig Berger. Berger lowered his target on the chipmaker to $6 from $7.50 while airing the usual assortment of concerns related to PC demand (macro, back-to-school weakness, tablets/smartphones, Windows 8 anticipation, etc.). (yesterday)

    Here's something Microsoft (MSFT) doesn't want to hear: Intel (INTC) CEO Paul Otellini reportedly told employees in Taiwan Windows 8 is still plagued with bugs, and is being rolled out before it's ready. JMP's Alex Gauna recently aired similar comments. Microsoft, which is also reportedly scrambling to get Windows Phone 8 out on time, badly needs Windows 8 to provide a holiday season lift to PC sales, and turn the company into a worthy challenger to Apple in the tablet market.

    EBay's (EBAY) mobile apps have been downloaded 100M times and have been used to list 100M Marketplaces items, the company boasts. An eBay exec also claims the average mobile app transaction tends to run in the $30-$45 range, well above what many Marketplaces items go for. Those figures, along with PayPal's strong mobile presence, explain why eBay expects 16% of its 2012 revenue to be mobile-related. (Nielsen data)

    Marissa Mayer reportedly told Yahoo (YHOO) employees at today's all-hands meeting the company will have a strong mobile position by 2015 (mobile is a clear weak sp

  142. Marissa Mayer reportedly told Yahoo (
    YHOO) employees at today's all-hands meeting the company will have a strong mobile position by 2015 (mobile is a clear weak spot right now), and will only approve projects capable of obtaining 100M users or $100M in revenue. She also claimed Yahoo, which just agreed to return $3.65Bto shareholders, will make more "acqui-hires" to reel in engineering talent. Few details were apparently given about individual products, and none about layoff plans. (CFO changeUpdate: Kara Swisherhas more details.

    Though Eric Schmidt didn't sound enthusiastic about Google's relationship with Apple earlier today, he declared Google (GOOG) "would love" to replace Microsoft (MSFT) as Yahoo's (YHOO) search provider. Yahoo is dissatisfied with results of the Microsoft partnership, and has reportedly been in talks with Google about a deal. But regulators might stand in the way.

    California Gov. Jerry Brown has signed a bill legalizing theself-driving cars Google (GOOG) is developing. The cars can now be tested on public roads, as long as there's a human driver behind the wheel to take over in case something goes wrong. Sergey Brin is confident self-driven vehicles, which GM and others are also working on, will eventually be safer than the normal alternative. Nevadaapproved road tests in May. - The key here is what happens when there is an accident.  It will take many years for the legal/insurance side of this to be worked out and probably a whole generation before people get comfortable enough to let the cars drive themselves.  I think Total Recall had it right - you need a robot driver to make it seem less weird.  

    "I think we have a clear shot at being the No. 3 mobile ecosystem in the world," proclaims Research In Motion (RIMM +4.8%) CEO Thorsten Heins following his developer conference remarks. That's not exactly what RIM was shooting for a few years ago, but at this point, outpacing Windows Phone would be enough to satisfy Wall Street. Some think BlackBerry 10 gives RIM a chance, but far more are skeptical. Twitter had a field day mocking a YouTube video aimed at developers.

    Apple iPhone 5’s Thin Display Drives Supply Shortfall (Bloomberg)

    Great example of Republican reality – check out how lame these "gaffes" are:  Bet You Don't Know About These Obama Gaffes.

    EconoTrolls: An Illustrated Bestiary (Noahpinion Blog)

     Transportation Stocks Flash Hazards (WSJ)

  143. Great summary of Global Economy by Zero Hedge:


    Downside Risks:


    Upside Risks:

  144. Good chart Deano, Aaron:

  145. Very intense video, Deano – makes you realize what a wimp country we live in…  

  146. Good Morning

  147. Phil:   Immediately after Q3 was announced you discussed the possibility of a 3 to 4 percent drop before the Q3 injection would make its impact felt via rising indexes.  Could this be what we are experiencing at present?

  148. Drop/Den – Yes, this is not unexpected at all.  QE takes time to hit, even if the Fed started acting the day Bernanke announced it (not likely).  It's also possible they are tanking us into the end of Quarter to make Q4 even more spectacular.  Q3 is already a big winner – up from 1,360 on the S&P to start July is 5% as long as we hold 1,428 and that was up 5% from June's 1,300 – and January, for that matter as that's about where we began the year.  Actually it was 1,250 but we popped almost 100 points in Jan.  

    So it's a good year already and, as we've been hearing, hedge funds are underperfoming the index and the solution for that is to knock the index down and then get ahead of it into the year's end.  

    This is why we didn't let ourselves get forced out of our October shorts last week – we broke out of our range but the Dow never confirmed it.  

    Meanwhile, riots in Greece now and Europe going even lower has finally killed our Futures (Dollar at 80!) with Spain down 3.3% and Italy down 3%, France down 2%, Germany down 1.6% and UK still kind of avoiding it, down 1.1%. 

    Euro failing $1.285, Pound $1.615 – Dollar rising fast enough to take Yen down (up) to 77.75.