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Monday Market Movement – Spain Fixed, PMI’s Improving – What’s Not to Like?

EWP WEEKLY Spain is fixed again.

In a report that surprised no one, Spanish banks passed their stress tests with flying colors on Friday but Europe was closed at the time so they weren't able to rally until this morning and the markets over there are up over 1% (7:30 – not reflected in Dave's chart).  Sure the banks are short about $76Bn in capital but that doesn't even seem like a big number these days and sure the tests assume GDP growth of 0.7% next year and 1.2% in 2014 and sure their most adverse scenario only has the market down 5% in 2013 and then flat in 2014 but – hey – they passed!  

Even better for this morning, Global PMI Reports are coming in and, other than a few stragglers (notably France at a disastrous 42.7 and Australia at 44.1), we have improvements across the board or, at least, a flattening of the downturn.  We were discussing over the weekend how the drought was probably giving us a bad string of numbers as greatly reduced crop production has been a factor in taking down the Transports, bringing down inventory levels and lowering orders for Durables – notably farm equipment.  

Keep in mind that all the PMI does is ask Purchasing Managers whether conditions are worse, the same or better than previous months and the percentage of managers who report "better" (with some weightings) is the PMI number, this is why it's a highly cyclical indicator – good times give tough comps, bad times give easy comps – so it's the trends that matter and improvement in the PMI (not there yet) is a great early indicator of some economic recovery.  

File:Purchasing Managers Index.png

Deutsche Bank thinks things are good enough to package several Commercial Mortgage Bonds that are rated BBB- (the lowest investment-grade ranking) together and rate the bundle at "A" for resale.  Isn't that BRILLIANT?  The bank plans to offer investors 4% debt for this A-rated paper and, before you say "Hey, isn't that what destroyed the economy in 2008?" – I will remind you that it's now 2012 and this time it's sure to be different.  

The fact that this is even still legal is appalling.  The logic behind it is that, by spreading your risk across several bad loans, you have less risk than if you just make a single bad loan.  Richard Hill, a debt strategist at Royal Bank of Scotland Group Plc said in an e-mail. “This methodology wasn’t particularly successful in older vintage CDOs as the performance of bonds proved to be highly correlated despite the perceived diversity.”  Uh – ya think?!?

Of course, with the Fed driving Treasury rates below inflation – investors have little choice but to seek out risky investments (or malinvestments as Hyek would say) following the script laid out by Ludwid von Mises in the 40s:  

"The popularity of inflation and credit expansion, the ultimate source of the repeated attempts to render people prosperous by credit expansion, and thus the cause of the cyclical fluctuations of business, manifests itself clearly in the customary terminology. The boom is called good business, prosperity, and upswing. Its unavoidable aftermath, the readjustment of conditions to the real data of the market, is called crisis, slump, bad business, depression. People rebel against the insight that the disturbing element is to be seen in the malinvestment and the overconsumption of the boom period and that such an artificially induced boom is doomed. They are looking for the philosophers' stone to make it last."

See, this is not complicated folks – we've been making these mistakes for centuries now… 

The best part about a Federally funded mistake is we can enjoy them while we can.  What Mises and Hyek are saying is not that adrenaline doesn't work – just that it's not a cure.  The Fed, the ECB, the PBOC, the BOE and the BOJ have all recently given the Global economy a fix of monetary stimulus and it will be enough to do SOMETHING but I certainly wouldn't use the word "boom" to describe it – more like a mid-bust correction, more likely.  

A lot of what happens next depends on whether or not we can throw the "Conservatives" out of Global Government so they can stop wasting our resources on the top 1% and get back to economic reality of using Government to improve the base (the bottom 99%) in order to put the economy on solid ground.  

People need to work – that should be pretty obvious.  Jobs must be created, whether by mythical "job creators" or actual jobs sponsored by the Government and the jobs that produce assets that ALL of the people can benefit from – like infrastructure – are the best jobs of all.  Inflation is a fine solution for Global Debt but only if the inflation is bottom up – coming from wage increases that allow the lower and middle classes to pay their bills and look forward to a better future – not this top-down foolishness we have now that constantly erodes consumer spending power and confidence.  

So, while we will be enjoying this rally, we will read our boarding cards very carefully and always be aware of the location of the nearest emergency exit and, of course, we will always have our Stock Market Parachutes ready to deploy – just in case things are not as fixed as we think…

China is closed this week so it's all about Europe and the US and we get our own PMI report at 10 am along with Construction Spending.  The Fed's Williams (dove) speaks at noon followed by his boss, Big Ben, at 12:30, who will address Butler University on monetary policy.  Williams is teeing off the Value Investing Congress, which I'm skipping this year because we can still just buy AAPL for under $700 or CHK for $18.87 or BTU for $22.29 or X for $19.36 – but picks from the likes of Bill Ackman, Whitney Tilson and others will move the markets all day.  

DIA WEEKLY Tomorrow we get Auto Sales and probable easing from the Aussie Central Bank along with New York's ISM report and another day of the Value Investing Congress.  Wednesday is ADP and non-manufacturing PMI from around the World that will hopefully confirm today's improvements and, later that day, should be the last time anyone seriously believes Mitt Romney can win this election as he has to spend 90 minutes discussing Domestic Policy without pissing off over half the people who actually live here.  

Thursday we get rate decisions from the BOE and the ECB but it's the press conferences that will move the markets early morning and then we have bond auctions for France and Spain – probably the most exciting day of the week, capped off by a speech from the Fed's Bullard (hawk).  Friday is the Big Kahuna – Non-Farm Payrolls and it would be truly horrible for Romney if we get a good number.  Obama will know what that number is on Wednesday – Romney will not.  At 3pm we also get a look at Consumer Credit and, this close to the holidays – that's a very important number.  

It's going to be an interesting week.  Things can turn ugly after Wednesday as Romney is sure to come out telling us how bad things are and this is not an economy that will stand up to a lot of questioning.  ADP on Thursday and NFP on Friday can really panic people if we get bad numbers but the upward revision in employment (+386,000 jobs created) announced last week still hasn't been digested yet and may ripple through some other data.  

On top of all that, we have the beginnings of earnings season – let the games begin!  

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  1. Morning Phil and friends!

  2. Good morning Everyone

  3. Morning Phil and PSW crew.

  4. Wow, look at /si go.

  5. Dollar is getting smashed truly remarkable

  6. Ron:

    Alexion (ALXN) – very good company, with exciting things in the pipeline.  Very expensive, but if you have cash to deploy, I like them, but with a $20B market cap, and only 110 P/E….they better get a move on with their pipeline.

    Swedish Orphan Biovitrium (SWTUY) – never heard of them.  Interesting set of items they have….but no options to hedge, and finding info about them is very hard (at least for me).  I would hard pressed to do anything in them.

    Myriad Genetics (MYGN) – love these guys, and they remain under fire with their patent issues.  This area is one of the hottest going, as pharma (Roche, NVS) is trying to buy this space, proving their drugs are working in more ways than one.  Merck did this many years ago, and were ahead of their time (Rosetta Genomics)…and now we have come full circle.  Again, much of their movement is due to patents…so it may continue to be a rocky ride.

  7. Good morning!  First day of 4Q, don't forget.  Probably some realignment buying….just sayin…..
    Got 2/3 of my AAPL moved to Nov 690s on Friday.  Will look to close out the rest and book profits in the event buying dries up later this week.  My Nov are covered up by short Nov 700s, so I can begin looking to work the Nov spreads down.  Maybe buy back the covers(nice profits from Fridays drop) and move them down to like Nov 685s and use the cash to roll the 690s down…….
    Pharm, thanks for the AAPL bear chart Thursday night.  That convinced me to cover everything up on the open Friday and that did very well.  I love the collaboration on this board, thanks.  

  8. Good Morning!

  9. Good Morning!  My posittions are long GOOG, FB and AAPL.  

  10. Lflan
    What position on FB. Thx.

  11. dclark…..long the stock.   That is rare for me.  I almost never buy stock.  But in this case I bought FB at 21.45 last week and will take profits on some at +5%.  

  12. Lflantheman,
    I entered Oct 2012 BTO 670 Call on AAPL on friday at 19.55….for a quick flip….had to leave for an appointment and did not make it back till after market close….
    Any adjustment you recommend at this time….Thanks for your input inadvance…..

  13. Good morning!  

    Lots of good stuff at the end of Friday's post from weekend chat and early this morning – in case anyone's interested.

    I had a nice weekend but still no new IPhone as I'm really not happy enough with the new screen size (not even 20% bigger) to feel the need and I never wanted Siri, which is why I still have my 4 and not the 4s.  AAPL will be a big drag on the Nas if they can't get some better press but I'm still not finding a way not to be bullish on them – earnings-wise.  

    The Dollar is down 0.4% at 79.73 so I shouldn't even have to tell you how the Futures are doing – we'll see if we can hold the gap up at the open.  Evans was the big helper this morning that sent commodities flying and the Dollar diving at about 8:45: 

    S&P 500 futures move to session highs, +0.5% as the Chicago Fed's Evans makes clear on CNBC that QE∞ is not just some editor's idea of being clever. In addition to QE, Evans wants to extend Operation Twist – currently slated to end in 3 months – through 2013. The euro also moves to its high of the day, +0.5% to $1.2919.

    Chicago Fed President Charles Evans – the man whose ideas about QE∞ won the day on the FOMC – tells CNBC he expects unemployment in the 7% range for at least another 2 years. As 7% is unacceptable to Evans, the statement means he expects a minimum 2 years of continued $40B/month or more of asset purchases. Gold and silver erase early losses. GLD +0.3%SLV +2% premarket.

    It's hard to trust an obviously well-timed pop like this so let's watch out for volume selling off this move up and keep in mind we have our strong and weak bounce levels to keep an eye on.  

    • Strong bounce levels are:  Dow 13,494, S&P 1,457, Nasdaq 3,128, NYSE 8,264 and Russell 843
    • At the open, we're at:  Dow 13,482, S&P 1,447, Nasdaq 3,131, NYSE 8,297 and Russell 841
    • Weak bounce levels are:  Dow 13,447, S&P 1,443, Nasdaq 3,104, NYSE 8,220 and Russell 838

    So the Nasdaq and the NYSE are over already and we can stay bullish until ANY of the weak bounces fail and then we'd better get serious about protection again.  Watch the Russell, they're very close and, of course, the S&P means the most when it crosses lines.   

    We'll keep a close eye on our short AAPL and QQQ callers that we took for crash protection over the weekend.  I'm inclined to buy the AAPL $655 calls back for $25.80 in the $25KP but let's see what sticks first and call it a stop at $27 with a $2 trail as we head lower.  

    For the QQQ $68 calls – if AAPL stops out we should kill them too. 

  14. jasu1….I'm afraid that trade could sting you.  Expiration less than 3 weeks away and  the options rapidly losing value even with no movement on the stock.  I would try to get out now and move the call options to a further month out.

  15. V – Net $1.42
    QQQ – Net $0.52
    AMZN – Net $9.17

  16. Lflan,
    thanks for the quick reply. 
    Phil,  Sorry…committed a cardinal sin buying a call instead of selling premium….
    Thanks..lesson learned

  17. Oil Lines

    R3 – 94.05
    R2 – 93.38
    R1 – 92.74
    PP – 92.07
    S1 – 91.43
    S2 – 90.76
    S3 – 90.12

    Friday's high and low – 92.71 / 91.40. These should also be considered lines as well.

  18. Madness in the metals – Silver hit $35.44 and then slammed back to $34.70 and now back over $35.  Gold topped at $1,794 and re-tested good support at $1,783 and is now $1,788 and copper tagged $3.80 but back to $3.785 for now.  

    AAPL stopped out already, should have taken the $1 profit while it was there!  OK, so now we're very bullish and I sense TZA's in our future – let's keep an eye on the weekly $13.50s, now $1.12 which is just .05 premium on the 3x mover.  I think, if we get worried, we can grab 30 or 40 of these to protect the $25KP as they can swing .60 on a 1% drop so that's $1,800 to $2,400 of protection against, for example, taking a .15 loss on 40 for $600 so a good risk/reward if we get nervous – especially if construction spending is a disaster (our PMI wasn't so bad): 

    US Sep PMI Manufacturing fell to 51.1 vs consensus of 51.5, 51.5 in Aug. Output 50.6 vs. 51.9 in Aug. New Orders 52.3 vs. 51.9 in Aug. Employment 51.9 vs. 52.4 in Aug. (PR)

    Canada's September Manufacturing PMI slides to 52.4 from 53.0 previously, the slowest rate of expansion in 6 months. The average PMI read for Q3 foots to 52.8 from 54.3 in Q2. "All things considered … the fact that the Canada's manufacturing sector continues to expand is noteworthy," says RBC economist Craig Wright. The loonie remains marginally higher vs. the greenback. FXC+0.1%

    U.K. September Manufacturing PMI falls to 48.4 from 49.6 (revised) previously, the 5th consecutive month in contraction territory. The print was modestly below expectations, but offset by August's revision higher. Purchase prices, meanwhile, rose to a 6-month high, giving the economy a stagflationary double-whammy. Sterling -0.2%and buying $1.6135.

    More on Manufacturing PMI: This is the Markit release, not the better-known and longer-running series published by ISM (due for release at 10 AM ET). At 51.1, the Markit print is the lowest in 3 years. The modest gain in New Orders was offset by a big drop in Backlogs (48.4 vs. 51.4). That the final number worsened from the flash print suggests business conditions worsened towards the end of the month.

    Brazil's September Manufacturing PMI rises to 49.8 from 49.3 previously, the slowest rate of contraction in 6 months. Though New Orders continued to fall, Production rose into expansion territory for the first time since March. "(It) reinforces perceptions that Brazil's manufacturing sector experienced a modest rebound at the end of Q3," says Markit.

    FAS Money – Tempting to sell calls but I want to give us a chance to rally. 

    Lessons/Jasu – As long as you learn something, it's worth it. 

    Damn it – quickly deteriorating activity.  DIA weekly $136 calls looking interesting too at $1.50 with DIA at $134.75 so .25 premium not very much on a Dow that can drop 100 points very fast.  These are just watch notes – not actions but, if our levels fail – THEN they are actions.  

    RUT tested weak bounce (838) but held so far – that's going to be the key.  

  19. Sorry, that was on the Futures, RUT testing 838 – was 840 on the index but let's watch that line.  

  20. Wow – moving on up now.  Sept ISM 51.5 blows away estimates of 49.2 and better than last month 49.6 so happy days and thank goodness we got naked long again!  

    Construction spending down 0.6% but that's not as important and still better than down 0.9% last month.  

  21. Iflan __ AAPL — I never got feb filled at 53.3 — should wait for pulled back or scale in now hopefully get price as closed as your thx

  22. gucci…scale in…

  23. Lflan, Phil….
    Thanks got out with some egg mcmuffins….

  24. Hi Flan- Could you remind me about selling weekly calls against these longs (great strat)? Is it best to initiate on a Monday- since the prems were mediocre on Thurs/Fri of last week and or wait until Thurs of this week and sell for 2 days? How about strikes? Premium dropping fast then rising….. Thanks

  25. Thanks for those levels, Phil.  I was just about to go bearish and you saved me!   Are we watching the the strong bounce lines now?  

  26. newt…..I use the sale of weekly calls  against further-out long calls to protect the long calls a bit and to pull in some extra $ .  I try not to sell more than 1/2 covers.  This allows you to continue to gain on the position if the stock moves upward on past your covers.  If the stock pulls back, then often I'll buy the covers back for +50% gain or so, then wait for the rise and fall of the stock to do it again. 

  27. Flan- Thanks.  I have the longs covered with shorts (BCS) and just looking for some extra $.

  28. newt…if you already have a BCSpread then the technique doesn't apply, because you are already fully covered.
    jasu1….did you get back in AAPL with a later month call option? 

  29. lflantheman,

    Please suggest a later month AAPL trade…
    Thank you 

  30. Just realized we don't have BA in the Income Portfolio.  Let's fix that!  Selling 2014 $65 puts for $6.50 pays for the $65/80 bull call spread at $6.80 for net .30 on the $15 spread.  Figure if BA heads lower, we roll the 2014 $65 puts to the 2015 $50 puts (not out yet) and, since we're thrilled to own BA at $50, we can allocate 15 of these spreads.  If BA hits $80, we can sell some calls too.  

    Volume very low on this rally – just 29M on the Dow at 10:26 so hard to say anything we see is significant – maybe just short-covering on that ISM report so let's grab 30 DIA weekly $137 puts for $1.60 in the $25KPs while they're cheap with a stop at $1.40.  

  31. jasu1…..The virtual MoMo is holding February 665 calls in AAPL.  These are still OK.   If trading today I might go to the April 670s, where the spread is narrower and the option volume higher. 

  32. Also selling 4 AAPL weekly $675 calls for $8.10 in the $25KPs with a stop at $10. 

  33. And, in $25KPs, selling 1/2 our QQQ Oct $70s at .50 because that's break-even and that's what we're supposed to do when we DD!  

  34. MoMo trade:   Let's cover 5 of the AAPL calls in the portfolio with Phil's weekly 675 calls at 8.10

  35. Phil
    Why stop there. Why not cover the FAS $104's?

  36. Note to StJ – When you book a sale like that I'd prefer you book it as a profit on the new set (bought at .30) so we're left with the old set (bought at .73) and have a more pessimistic view of our open position – otherwise we're left with 20 at .30 and we think we have a profit at .40.  Thanks,  

    Good job Jasu!  

    You're welcome Bruce.  Yes, we don't want to blow any of the strong bounces and the next spot is 50% lines (making up half the drop) which is 50% of the difference between the weak (20%) and strong (40%) bounces added to the strongs.  

    Meanwhile, we are looking very strong now and if the Dow pops 13,600, we'll give up on the $137 puts in the $25KP (still $1.60) but I figured we'd have trouble there at least.  

    IBM up at new highs ($211) and adding 30 points to the Dow by itself.  

    FAS/DC – Because FAS can really burn you to the upside.  I believe I mentioned it was tempting to cover but I really want to see $16 tested and there's no reason it shouldn't be after Evans' comments.  We have two more doves coming – then I'll want to cover.  As a day-trade – it's not a bad play but I'm not trying to day-trade the FAS Money.  

  37. By the way, those DIA puts were probably holding $1.60 longer than they should only because we were buying them – keep that in mind when you see things like that on plays we're actively moving in and out of.  

  38. Profit / Phil – It's what I do usually when we DD to show the point of the strategy.

  39. Morning All – saw this chart of PMI numbers and thought it was interesting.

  40. MoMo portfolio:  I bought the 5 AAPL weekly  675 calls back for 7.00

  41. Interesting, how you can win the presidency with only 22% of the vote:

  42. PMI / lnk – It's a scary list… I was looking at France and the Sept. PMI is at 42.7. It's Greece territory… The largest countries except the US are contracting. Tough to be optimistic!

  43. ISM report details:

    There are some positive numbers in there as opposed to the global PMI!

  44. Here are the countries PMI from Inkarri's link:

  45. CHK – What's going on  + 3%?? Thanks 

  46. Ok, closed out the Oct AAPL play and moved to Nov.  sold the cover on initial dip this am and moved to Nov 675/690 spread for net $4.50.  Also rolled my nov 690s down to 675 and left them naked.  Just waiting things out now…….
    Phil, what's your take on AAPL if they miss?  

  47. StJ….My guess is that PMI in the US will be in contraction mode come Dec 2012 or early 2013…..The Empire and Philly Indexes are pointing that way, no?

  48. Sam NatGas stocks are flying.  XCO!!!!!!!!!!

  49. IWM has been held below the decending resistance line. It doesn't make sense that Bernanke will have anything good enough to push the markets up.
    Love the tail watching Phil!

  50. PMI / Pharm – Look at it that way, we are swimming upstream  now and that can only last so long. We need someone else to help pull the world economy and China is not it!

  51. Hoss/ Appl:  Are your 675's calls?

  52. If I recall correctly, the regional Fed mfg numbers have been getting worse over the last few months yet the US PMI number reads a bit different.  Does anyone know why the numbers are disconnected from each other?  Are the survey groups just that much different or the methodologies?  TIA

  53. Yea…long 4 Nov 675 calls, 1/2 covered by 690 calls.  

  54. Hoss- Thanks

  55. Nov 690s, sry.

  56. Interesting chart:

  57. Profits/StJ – Thanks, just checking. 

    Good summary Ink.

    22%/Rustle – Hell, I could get that! 

    ISM/StJ – Also turning around.  I feel the same about the PMI, due to the methodology.  People have to actively choose "better" to get a PMI point so the "sames" are as bad as the "worses" and that's why they turn so sharply back up – to me, this seems bottomy on PMI.  

    CHK/Samz – I did mention them in the morning post.  I don't see any special news about them.  X had a big pop too, as did BTU, which is why I'm careful these days not to mention things we're fishing for in the morning post!  

    AAPL/Hoss – If they miss, it will probably be a very negative reaction at first, maybe back to $600 but still a good reason to buy if it happens unless there's some sort of dire production warning on IPhones.  

    Damn, should have gone with those TZA's as the RUT is falling faster than the Dow, which is still up 1.15%.  On the other hand, the RUT is now only up 0.44% so if the Dow follows – we will be happy campers.  RUT testing 840 again and I do not like how easily it gave up all the gains from that test to the highs this morning.  

    Regional Feds/Ink – The regionals are forward-looking while the PMIs are for the current month.  Regionals ask questions geared towards determining the direction of change in overall business activity so it's not apples to apples.  

    Chart/Pharm – I like the simple notion that the Fed was created in 1913 and, by 1933, the Global economy had been destroyed…


  58. Phil / Nice call on the AAPL puts!!!

  59. AAPL Virtual Port Trade:   STO 10 this weekly 670 calls for 8.00

  60. Bernanke – the Fed is not monetizing the Federal debt, the Fed's pledge to keep rates low until 2015 was not a forecast of a weak economy for the next three years. 

  61. He also said the Fed helps reduce the national debt.

  62. NFLX – could be a '10-bagger' over the next 10 yrs…LOL….CNBC..were they not saying that when the stock was $300?

  63. Phil and all, Good Morning! Any recommendations on doing some BCSs on inverse ETFs as a hedge? Would like to buy some protection in this strength. Thanks! 

  64. Ben – The Fed's price stability record is excellent. 

  65. MoMo virtual port trade:   Bought to close the 10 this weekly AAPL 670 calls for 7.00

  66. At the open: Dow +0.4% to 13491. S&P +0.37% to 1446. Nasdaq +0.44% to 3130.

    Treasurys: 30-year +0.08%. 10-yr +0.01%. 5-yr -0.02%.

    Commodities: Crude +0.78% to $92.91. Gold +0.65% to $1785.45.

    Currencies: Euro +0.44% vs. dollar. Yen +0.06%. Pound +0.03%.

    Market preview: Stock futures point higher following better-than-expected factory output data from China and the eurozone. S&P futures +0.5%. European bourses are higher after Friday's reading on the health of Spanish banks was not as dire as feared. Gold rallies as the Fed's Charles Evans promotes continued QE on CNBC. Still ahead: ISM manufacturing, construction spending. 

    10:00 AM On the hour: Dow +0.95%. 10-yr -0.02%. Euro +0.56%vs. dollar. Crude +1.16% to $93.26. Gold +1.01% to $1791.85.

    11:00 AM On the hour: Dow +1.1%. 10-yr -0.01%. Euro +0.40% vs. dollar. Crude +0.54% to $92.69. Gold +0.26% to $1778.45.

    European markets close with sharp gains as record eurozone unemployment is an invitation to hit those offers. Stoxx 50+1.8%, Germany +1.5%, France (where the PMI fell to a Greece-like 42.7) +2.4%, Italy +2.7%, Spain +0.9%, U.K. +1.4%. The euro +0.4%to $1.2908

    12:00 PM On the hour: Dow +1.03%. 10-yr +0.07%. Euro +0.33%vs. dollar. Crude +0.16% to $92.34. Gold +0.27% to $1778.75.

    "This is the most uncelebrated bull market in history," says researcher Tony Ferreira, noting data showing retail investors havemostly sat out the doubling in stock prices since 2009. Of the large amount of money pulled out of equity mutual funds in the past few years, a disproportionate amount has been withdrawn just since last October's bottom as the S&P has gained 28%.

    A Bernanke Bump or Fed Fallacy: Can QE3 Juice Stocks? (WSJ)

    Covering familiar territory, Ben Bernanke defends the Fed's QE∞ policy, and reiterates to an Indiana audience that a strengthening economy will not be enough to trigger higher policy rates. The Fed, he says, is shooting for a stronger employment picture.

    August Construction Spending: -0.6%, vs. +0.6% expected, -0.4% prior (revised).

    The September Global Manufacturing PMI rises to 48.9 from 48.1 previously, remaining in contraction territory for the 4th straight month. The average Q3 read of 48.5 compares to 50.4 in Q2, and is the weakest outcome since 2009 Q2. Of 50 global PMI measures, just 9 are in expansion mode.

    Sep ISM Manufacturing Index: 51.5 vs. 49.7 consensus and 49.6 prior. Prices index 58.0 vs. 54.0 prior. Employment 54.7 vs. 51.6. Inventories 50.5 vs. 53.0. New orders 52.3 vs. 47.1.

    More on ISM: The 51.5 print is the highest since May's 53.5, and just slightly below the 12-month average of 52.2. Thoughts of QE∞ transposed on an economy that's hanging in there send stocks to session highs, the S&P 500 +1.1%. The long bond instantly shedsabout two-thirds of a point. TLT -0.4%. (full report) 

    Macro Advisers lowers its estimate for Q3 GDP by 20 bps to 1.7% after digesting what it calls a "weak" construction report. Moody's economist Ryan Sweet sounds equally worried, saying the U.S. economy will need to lean on another sector with construction stumbling.

    Hussman: We are already in a Recession (Hussman Funds)

    Here’s The Biggest Problem In The American Economy (Business Insider)

    The US Economy Is Much Weaker Than We Thought(graphs)

    Five Looming Dangers That Could Tear The Eurozone Apart.

    Thousands march in Paris against austerity.

    France to Propose EU4b-EU5b in Tax Increases Tomorrow. Proposed increases to be disclosed include doubling levy on beer and raising tax on bank salaries.

    Another domino falls as Hollande pushes France into depressionIf French President François Hollande thinks he can assuage the bond markets by dishing out tax-heavy austerity instead of genuine reform, he has been given very bad advice.  

    Thousands in Germany Protest for Wealth TaxThousands of people across Germany have protested for the introduction of taxes on wealth and financial transactions. Organizers said Saturday around 40,000 people took to the streets in 40 cities to demand a more equal society.

    Germany told to 'come clean’ over GreeceGerman Chancellor Angela Merkel must “come clean at long last” and admit that Greece will need help for another seven or eight years, the German opposition leader said over the weekend.

    Merkel to Propose Common EU Budget at October Summit. The proposal would replace existing structural cohesion funds with a common budget to enable aid to stricken member states, citing European Union sources. The budget is the first priority for Chancellor Angela Merkel at Oct. 18-19 EU summit in Brussels. Funds could flow from national budgets and transaction taxes. France and Spain may see the proposal as a diversion tactic. Germany wants to end the debate over common euro bonds with the proposal.

    As Europe’s South Spirals, North Fiddles and Chaos LoomsAnyone who thought the euro crisis was coming under control might want to think again. Only three weeks after the European Central Bank calmed markets with its open-ended promise to support sovereign bonds and hold down borrowing rates throughout the euro area, harsh reality is reasserting itself: Greece, Spain and other struggling governments are being compelled to stick to austerity measures that are thwarting their economies, while Germany and other core euro countries remain unwilling to do what’s needed to prevent the euro area from breaking up.

    Euro Leaders Face October of Unrest After ECB’s September RallyEurope faces a month that may decide the success of the European Central Bank’s bid to end the debt crisis as leaders navigate a tougher approach from creditor countries, unrest in Spain and a looming report on Greece. With the first of three summit meetings that European Union President Herman Van Rompuy has called “crucial” taking place in Brussels on Oct. 18-19, investor sentiment toward the euro area that surged in September is on the wane. “People are beginning to look at this in a more sober way” after the ECB bond-buying plan and a German high-court decision releasing bailout financing spurred optimism over the past month, Clemens Fuest, an economist at Oxford University’s Said Business School, said in an interview yesterday.October, which marks the third anniversary of the debt crisis, will showcase euro-area leaders fighting out their differences. The discord underscores the inadequacy so far of ECB President Mario Draghi’s bid to calm the crisis through a pledge on sovereign-debt purchases

    Recent news out of Spain – the budget announcement, the bank stress tests - are neutral for the country's BBB/Negative Outlook credit rating, says Fitch, which has no illusions about the government hitting its deficit target or the economy growing as fast the state estimates. Slippage from even these pessimistic assumptions, however, could trigger a downgrade.

    Poll Shows 55% of Catalans Back Independence. Opinion poll shows 55% support for Catalan independence. Poll shows 84% backing for referendum on independence. Poll shows 43% support for CiU party vs 38.4% won in 2010 regional elections.

    Spain to Borrow $267 Billion of Debt Amid Rescue PressureSpain plans to borrow 207.2 billion euros ($266.5 billion) next year, the Budget Ministry said today, as pressure builds for Prime Minister Mariano Rajoy to tap the European rescue fund instead of financial markets. 

    Greek Bad Loans Climb To Record 25% Of Total.

    India Economy Teeters at "Fiscal Precipice" – Government PanelIndia is on the edge of a "fiscal precipice" and should urgently slash fuel, food and fertilizer subsidies to curb a budget deficit that could hit 6.1 percent of gross domestic product this fiscal year, a government panel warned

    Iraq’s oil minister says September crude oil exports likely hit their highest level in more than two decades, topping 2.6M bbl/day, helped by renewed flows from Kurdistan. Iraq has surpassed Iran as OPEC’s no. 2 oil producer since July, but a new wave of deadly violence in the country may add a new dimension to the fear premium in oil prices amid Middle East unrest.

    Transocean (RIG+3.3% premarket after last night's announcement that a Brazilian court had partially suspended the preliminary injunction order that required RIG to stop operating in Brazil within 30 days. RIG is permitted to continue to operate its rigs in all fields offshore Brazil except the Campo de Frade field.

    Goldman Sachs (GS) gaps higher 2% premarket after it gets the Barron's treatment in a good way over the weekend.

    Federal Reserve ♥♥♥ Goldman Sachs (FT’s Money Supply)

    Anworth Mortgage (ANH -3%) slides after it announced a dividend cut from $0.18 to $0.15 on Friday evening. With MBS yields tumbling, expect dividend cuts to be the norm for the mREITs (absent increasing leverage). The flip-side, however, will be higher MBS prices and increasing book values for the sector. 

    New York's Ultraluxury Office Vacancy Rate Jumps To Two Year High As Financial Firms Brace For Impact

    Discounting retailers are on watch after Gordman Stores (GMANguides its sales forecast for H2 lower. Caution has been the overriding theme in the sector with the space seemingly crowded with bulk stores, closeout stores, deal sites, and even supermarket chainsfighting for every square inch of market share with promotions on top of promotions. FREDFDOFIVEDLTRDG, BIG. 

    J.C. Penney (JCP +4.1%) is on watch for volatility with theValue Investing Congress kicking off in New York City today and Bill Ackman set for a CNBC appearance tomorrow morning. Traders are attributing today's gain to some nervous shorts heading to the sidelines in front of what could be a wild ride if the retailer gets teed up by hedge fund managers or is vigorously defended by Ackman.

    Macy's (Mannounces it will hire 80K seasonal workers for its Macy's and Bloomingdale's stores, marking a 2.5% increase from last year's levels. Though the level of hiring by retailers in front of the holiday season has been solid, analysts are eager to see a breakdown of how many of those workers are hitting stores and how many are being added on to help move online orders.

    Wendy's (WEN -5.6%) trades lower after taking on a downgrade from Janney Capital to Neutral from Buy as channel checks tip off the North American same-store sales are slowing. Slumping revenue for the company would be a double-whammy with higher beef prices starting to pressure margins.

    Citi sees some bumps in the road for the growth plans of Yum Brands (YUM +1.8%) with its KFC chain in China. The company's advantage of being one of the first QSR players in the nation is starting diminish with McDonald's and other rivals stepping up

  67. Citi sees some 
    bumps in the road for the growth plans of Yum Brands (YUM +1.8%) with its KFC chain in China. The company's advantage of being one of the first QSR players in the nation is starting diminish with McDonald's and other rivals stepping up their game, while a weakened Chinese consumer is also having a material effect on store traffic. Important to note, in China KFC is more of a step-up restaurant than a step-down choice.

    Diamond Foods (DMND -0.6%) racks up a gain after Litespeed Management discloses holding a 7.7% stake in the company in a SEC filing (13G). It's a move that intrigues dealReporter on the premise that a cleaned up Diamond Foods with some serious investors behind the scenes could look enticing to any number of food companies looking for a tasty buy.

    Synta Pharmaceuticals (SNTA +11.6%) pops after reporting encouraging results from its Phase 2b Galaxy trial of ganetespib – the company's lead Hsp90 inhibitor – as second-line treatment for advanced non-small cell lung cancer. The company says test results showed good tolerability for the combination of ganetespib and docetaxel as well as meaningful improvements in overall survival in adenocarcinoma patients receiving the drug combination.

    ARIAD Pharmaceuticals (ARIA +0.4%) trades up after announcing initial clinical results from Phase 1/2 tests on its investigational, tyrosine-kinase inhibitor, AP26113, in patients with advanced non-small cell lung cancer. The company says there was "compelling clinical evidence" of anti-tumor activity at multiple dose levels. The results are being presented this morning at the 2012 Congress of the European Society for Medical Oncology being held in Vienna, Austria. 

    Shares of Apricus Biosciences (APRIsoar 11.1%premarket after the company announces that it will file a new drug submission in Canada for MycoVa in Q4 of 2013. In advanced testing, MycoVa has shown an ability to kill nail fungus and improve the appearance of nails.

    IBM (IBM +1.8%) outperforms after Deutsche lifts its estimates and raises its target to $240. The firm predicts IBM, which recently announced a mainframe refresh and is expanding its PureSystems line, will see hardware growth re-accelerate. (ResCap bid) 

    MEMC (WFR +4%) opens higher after announcing it has closed on a $200M term loan, secured by nearly all of the company's assets. The loan carries a steep interest rate of LIBOR (minimum of 1.5%) + 9.25%, and features mandatory repayment provisions in the event of certain asset sales or new financing moves. MEMC had $1.8B in debt as of June 29, and has seen its cash flow situationdeteriorate in tandem with its solar wafer sales. (S&P downgrade- I don't like this loan at all.  

    Facebook (FB +2.2%) is rallying today even though Oppenheimer lowered its target to $27 from $41, citing mobile concerns. A CNBC appearance by COO Sheryl Sandberg could be helping. Sandberg touted the effectiveness of Facebook's Promoted Posts product, as well as studies indicating healthy ROIs for ad campaigns. Regarding the company's display ad network plans, she claimed Facebook's ability to target narrow demographic groups would help it stand out. 

    The ambitious tentacles of Amazon (AMZN +0.5%) will soon reach into California vineyards to make wine available directly to consumers off its website. The company is hosting reps from close to 100 wineries in California today to outline details of its upcoming program where sellers will be charged 15% commissions on sales. After an initial foray into wine crashed and burned in 2009, this time around Amazon won't be involved with the shipping end of the transaction.

    Amazon (AMZN) faces a bit of a firestorm in the U.K, after a survey finds that consumers frequently pay more for bestselling titles for e-books than the same books in hardcover. The information hits with the company already embroiled with allegations it conspired with other publishers to set the prices for ebooks higher.

    Barnes & Noble (BKScuts the price on its Nook SimpleTouch with GlowLight from $139 to $119 in order to match the cost of Amazon's new illuminated e-reader entry. With the Glowlight-enabled Nook now at pricing parity with the Kindle Paperwhite, the company hopes it can win over consumers on its merits in front of the holiday shopping season.

    "Oracle wants to be the Salesforce, Heroku, and Google, Microsoft, Amazon and HP of the cloud," says Jack Clark after taking in Larry Ellison's Oracle OpenWorld keynote, in which he promoted a soup-to-nuts cloud solution that features infrastructure and app development platforms to go with cloud apps, supporting both public and private cloud environments and running on Oracle's high-end hardware. Don't expect many Internet startups to abandon Amazon for Oracle (ORCL), but some enterprises looking to keep things simple could come knocking. (previous)

    Baidu (BIDU -3.1%) slides after receiving a downgrade to Hold from Jefferies' Cynthia Meng. Like many other analysts, Meng is worried about Qihoo's (QIHU -1.1%) search engine: she thinks Baidu's Q3 results will be at the low end of its guidance range, and that its numbers for Q4 and later could miss Street estimates. Meng also expects Baidu's traffic acquisition costs to rise as a % of sales. Baidu has already significantly underperformed the NASDAQ since Qihoo's search engine launched.  (more)

    Google's (GOOG +0.6%) market cap has surpassed Microsoft's (MSFT -0.8%) for the first time, Bloomberg reports. The search giant is making new highs once again as it follows the market higher, while Mister Softee is suffering from a downgrade to Sector Perform from RBC. Apple surpassed Microsoft in May 2010.

    Marissa Mayer has given birth to a boy, her husband tweets. Mayer, who took over as Yahoo's (YHOO) CEO in July, has said she'll take a maternity leave of only a few weeks, and plans to "work throughout it."  

    U.K. regulators have signed off on a network-sharing deal between Vodafone (VOD) and Telefonica's (TEF) O2 unit . The carriers plan to pool their infrastructure assets to create a "national grid" that promises to offer indoor 2G/3G coverage to 98% of Brits by 2015, and a similar amount of 4G LTE coverage by 2017. The news arrives as rival Everything Everywhere (FTE, [[DTEGY.PK) gets a head-start in rolling out LTE.

    Nokia (NOK +5.2%) has reached a deal with Oracle (ORCL) to have it mapping and location services integrated with Oracle's business apps and data. Similar deals could be on the way, as corporate apps become more consumer-oriented and migrate to mobile devices. Nokia's Location & Commerce unit posted 4% Y/Y revenue growth in Q2, even as the phone division saw a 26% drop. But it still makes up only 4% of sales. (other maps deals: III)

    Why Do America’s Super-Rich Feel Victimized by Obama? : (New Yorker)

    I am a job creator: A manifesto for the entitled  (WaPo)

    Your taxes are going higher regardless: Romney or Obama Win Means No Escape From Fiscal Crisis of Debt (Bloomberg)


    Quarterly Quota

  68. $25KP – Let's buy those AAPL $675 callers back for $5 – if AAPL goes any lower – we need better protection anyway.  

  69. RUT testing 838 (weak bounce), Nas not too far off theirs at 3,104 but Dow, S&P and NYSE seem safe enough.  Still, we really don't want to blow ANY of those levels.  

    Weak bounce levels are:  Dow 13,447, S&P 1,443, Nasdaq 3,104, NYSE 8,220 and Russell 838

  70. Lflan / Beautiful. AAPL

  71. Bernanke/Ink – In danger of losing his credibility at this point.  

    NFLX/Pharm – Happy to see them run them up so we can short them again.  

    Ultra-hedges/Bdon – My favorite is still TZA, back at $14.81 now (and those $13.50 calls are $1.35 already).  Figure a 5% drop in the RUT is a 15% gain to $17 and you can pick up the Nov $13/16 bull call spread at $1.25 so it's $1.81 in the money to start and you only lose if the market goes up (and we assume your longs do well) and it pays a nice 140% profit at $16.  If I were to use that, I'd buy $6K worth of protection for $2,500 and if the spread drops below $1 – I'd look to roll the calls back to Jan (the $14s are about an even roll) and that gets you another couple of months of protection.  

    Wow, there goes the Dow – RUT still hasn't failed yet but Nas, Transports and SOX are now red.  

  72. Ow, AAPL hitting $666 – so we have to be careful but they usually hold it (and, if not, then $660).  Back to selling 5 Oct $650 calls for $26 (now $26.80) in the $25KPs – if they go that low with a stop at $28 but, clearly, I'd rather not sell them at all.  

  73. Thought you might like to see the latest edifying comments on TCNET:
    <trdr> Friends I have in the Police think BHO will prob be looks that way to me..They think there will be a big backlash of avg working..X-military etc guys..that feel the Country has been "stolen" , savaged..and will no longer follow the old Laws or rules…some are buying their own AR 15s etc…..I AM one of those guys they mentioned….So you lovers of the likely will get him again….but this time it may not be what you bargained for…Three is always another way.
    [10/1/2012 12:24:45 PM] <trdr> There is*
    [10/1/2012 12:25:01 PM] <trdr> Plan B
    [10/1/2012 12:25:52 PM] <Mikon> trdr, if they form a hit team, we will get a more competent POTUS… the brilliant BIDEN.

  74. We're going to take the money and run on the DIA $137 puts at $2.05 as that's up $1,350 in the $25KP (5%) as there's not enough volume on this sell-off to worry me yet.  We can always flip to something else.  AAPL short calls triggered – we'll watch those closely.  

  75. Damn, I'm not liking the short AAPL calls – let's get out at $27 in the $25KP.  

  76. Do we have 2 AAPL portfolios now?

  77. Edifying/Kongen – Well that's just lovely but please don't print that here as I'd like to avoid a visit from HomeSec (and I'll give you up pretty much immediately – not a big fan of torture…).  ;)  

  78. AAPL / StJ – LOL :-) Everybody just loves trading aapl.  It must be the most liquid stock ever, on any instrument (even on Vegas betting platforms)

  79. stjeanluc….We just all love to trade AAPL and can't help putting it in every portfolio.   Sometimes in large quantitiies.    :)  

  80. All right, Bernanke has shut up – now hopefully the markets will stop freaking out about how totally unsure of himself he sounds when "clarifying" his positions. 

    When Greenspan said something – he at least gave the impression he knew what he was talking about.  If Bernanke was a guy I asked for directions and he sounded like that – I'd ask someone else…

  81. my head is swimming on AAPL—I think I will start my happy hour early that way everything will look great  ;-0

  82. Bernanke / Phil – Sounds like he Apple Maps of economists…

  83. Phil: clarification
    Since I’m not participating in the active trading you all are doing I’m tending to my slower moving sold premium positions and going back over past notes. In re-reading the following; “No one ever went broke taking a profit. Rule of thumb for short-term options is if you are up 50% with more than 2 weeks to go, you take it off the table. If you are up 70% in the 2nd week before, you take it off the table and if you are up 85% in the last week (expiration week) then you take it off the table – UNLESS you are over 90% sure they will expire worthless (or 100% in the money on spreads). “  
     I understand that “rule of thumb” doesn’t mean in every instance, but I’m not clear how a position would ever get to 70% or 85% if I always take them off at 50% with 2 weeks to go to expiry, which is when the premium really burns off?  TIA

  84. I'm with you on NFLX Phil.    I want them to get pushed up higher so I can't short them again.  Morons at the helm of that ship.   

  85. At 660 I "back up the truck" on more AAPL calls. 

  86. Anyone like selling the AA 2015 $7 puts for $1.05?  The net on that would be $5.95 or about a 34% discount to today's price. 

  87. Phil, thanks for the DIA puts!!!

  88. AAPL/StJ – ???  Well if you mean this hyper-active position, it's a pretty unique opportunity to take advantage of what we hope is a good price ahead of earnings so no reason not to.   Very good for teaching day-trading a volatile position.  

    TNA weekly $62.50 calls are fun for a buck as long as the RUT holds 837. 

  89. AA / Ink – If I weren't in the 2014 $10 already, I would be interested! You get $1000 for $750 of margin. What's not to like!

  90. Looking at X, the 2015 $10 puts are selling for $1.95…those look interesting too. 

  91. Stj:  France's bond yields haven't matched their true economic state for at least a year. French governments are a short.  And, speaking of bond shorts, I find Phil's note on the German commercial mortgage bond packaging somewhere between horrifying and hilarious — I look forward to Michael Lewis's sequel, Die Grosse Kurtze.

  92. When/Lincoln – Well that would be because you were 90% sure at 50% that you'd get 100% and then at 70%, you were 90% sure you'd get to 100% and at 85% you were 100% sure you'd get to 100%.  Just like stopping out with a 20% loss – the point is to take a good, hard look at your position and make a decision at a critical inflection point.  The discipline is more about learning to pull back and take a dispassionate look at the position than it is about creating some thoughtless process where you take action.  This is why I am constantly telling people there is no "system" here – it's about learning how to think about options and your positions and learning to make good decisions (like killing those Dow puts) and not being greedy.  Think about the nature of your question – "I make 50% but then I'm not happy" – why then, should you be happy with 100%, surely you can double or triple your leverage to make 300%?  Why not take 10x positions so 50% gives you 500%?  It's very simple, if you learn to take 50% quickly and you learn to consistently make 50% then you can make 50% 3 or 4 times before the first position gets to 70%, right?  Singles vs. swinging for the fences – Stan Musial was one of the all-time RBI leaders and he had 11,000 at-bats and got out (with a loss) 7,400 times.  His 3,600 hits had just 475 home runs but he had 1,951 runs batted in – you don't have to swing for the fences to be great…  Ty Cobb had 1,937 RBIs and just 117 home runs.  For Cobb, the home runs were accidents as he went for 3rd and saw he could beat the ball home – he almost never hit it over the fence and despised people who tried to…

    AA/Ink – I like that entry.  X is good too – I'm sure they'll use steel for something in 2015.  

    You're welcome Jyoti.  

    LOL ZZ but I think they're doing those in the US.  German investors aren't that stupid…

  93. X / Ink – Same as AA, you get 2x your margin requirements for an entry point 50% lower. What's not to like. It requires some patience, that's it!

  94. Thanks StJ

  95. 25kp AMZN / Phil,
    Thoughts? Roll to the 250 or 255 puts? Thanks.

  96. IMAX poking back over $20 with Frankenweenie on deck but then a big gap to The Hobbit in Dec so not too interested until they bottom back out in Jan/Feb (hopefully) and then there's a new Star Trek in May to kick off the summer and a new Hunger Games at Thanksgiving so they should have a good year.  

    AAPL not moving and markets stopped going up.  

    1:00 PM On the hour: Dow +0.9%. 10-yr +0.07%. Euro +0.28% vs. dollar. Crude +0.26% to $92.43. Gold +0.37% to $1780.55.

    2:00 PM On the hour: Dow +0.91%. 10-yr +0.07%. Euro +0.31% vs. dollar. Crude +0.3% to $92.47. Gold +0.49% to $1782.55

    Taking questions after his boilerplate speech defending the Fed, Ben Bernanke says Milton Friedman would have supported the central bank's actions. With the great opponent of central planning not around to speak for himself, we'll have to take the chairman's word for it. Watch a lively Q&A here. 

    BAML's sell-side indicator – measuring the attitudes of sell-side strategists – continues to flash a major contrarian buy signal for stocks as the Fed's QE is unable to budge the record-high bearish tilt of the group. (previous)

    WTF?  After receiving personal assurances from the White House that the Pentagon will not cut contracts in January, Lockheed Martin (LMT +0.3%) says it won't issue layoff notices to employees before the election, as it had threatened to do. The decision ends a stand-off with the administration over deep automatic cuts set to hit defense spending if Congress can't find a budget solution, and the layoff notices were set to go out to hundreds of thousands of LMTemployees in Northern Virginia – a key electoral state.

    Brazil has decided to postpone its decision on whether to buy 36 next-generation fighters until next year, adding that there's currently no favorite among those competing for the business. Boeing's (BA +1.2%)F/A-18 Super Hornet fighter planes is one of three rivals in the contest, going head-to-head with Dassault's Rafale fighter and Saab's Gripen. But it faces a big hurdle over concerns about technology transfer restrictions that could be imposed by the U.S.

    Delta Air Lines (DAL +4.7%) outperforms fellow carriers as options activity picks up steam on the bullish side. One school of thought is that DAL will decouple directionally from the sector with its new oil refinery providing traders a fresh angle to play. The word on the street is that Delta's execs have done a good job explaining (webcast) how so-called crack spreads – the difference between crude oil and jet fuel – can be moderated with a Delta refinery in operation.

    Green Mountain Coffee Roasters (GMCR -1.4%) slips lower with at least a few traders worried that the stock could get mentioned adversely by a hedge fund manager at the Value Investing Congressin NYC. Why is the confab of hedge fund biggies important? About a year ago, David Einhorn unveiled his GMCR thesis at the event with shares percolating in triple digits.

    Microsoft (MSFT), which just unloaded its 50% stake in MSNBC, is creating a news operation to support a revamped, touchscreen-centric The news division will primarily aggregate news from third parties, says a Microsoft exec, but it will also produce some original material. Microsoft's move comes as its Online Services division continues posting big losses, and MSN, the default home page for Internet Explorer, sees its traffic pressured by IE's share losses. - So now MSNBC is 100% owned by Comcast…  Interesting.  

    Press invitations for an iPad Mini (AAPL) event will be sent out on Oct. 10, according to a "major Apple investor" speaking to CNNMoney and claiming he heard the news from "multiple sources." AllThingsD reported last month that the Mini would be launched in October. The device is expected to sport a 7.85" display, and be thinner than the regular iPad thanks to its use of new touchscreen tech.

  97. Phil/WFR  Someone else doesn't like that loan (shark) deal……-4%

  98. AMZN/Sank – Not yet.  Next move will more likely be to back up a month.  

  99. "FrankenWeenie" huh?  You just wait, in no time "FrankenFracker" will be at an IMAX near you…. :)

  100. Yeah, the studios learned long ago, that snickering children means big $$$$……

  101. Inflan,
    Were AAPL to journey down to 660, would you still opt for the Feb strike and/or go shorter with the this weeklies – to miss the effects of this Qs earnings?

  102. WFR/1020 – It's the fact that they had to take it that bothers me.  Obviously in trouble to accept a deal like that and those things can blow up in your face when rates rise and if that's the best deal they could get now, not likely anyone will refi them for better if the rate starts getting away so betting on them is kind of like giving life insurance to a guy who just told you one of his favorite hobbies is Russian Roulette.  

    Dow volume at 2:43 is 65M – about usual (70M at 3pm) after all that.  

    Dollar 79.91 creeping up, Yen right at 78, Euro $1.288, Pound $1.612.  Silver just under $35, gold $1,780, copper $3.78, nat gas wants $3.50 really bad but no sale so far and I missed that when someone asked about CHK earlier as that's up 3% from $3.30 on Friday.  

    We're holding our weaks now but rejection at strongs is big concern:  

    Weak bounce levels are:  Dow 13,447, S&P 1,443, Nasdaq 3,104, NYSE 8,220 and Russell 838

    Strong bounce levels are:  Dow 13,494, S&P 1,457, Nasdaq 3,128, NYSE 8,264 and Russell 843

    Frankenweenie/1020 – Hey, that's Tim Burton.  Nightmare Before Christmas still one of my all-time favorites.  

  103. i'll take some aapl crisp, appl fritters, appl donut holes and a lot of appl calls…..

  104. Phil, 2 things. I have a large position (well, large for my meager portfolio) in WFR – I bought in when it was in the 1.70-1.80 range. I have lowered the cost basis by selling lots of covered calls that expired worthless. With today's news would you sell half?
    Also, what is your feeling on the direction the rest of the week. Do you think we drift higher? Thx

  105. 8800/AAPL….I can't get it out of my head that it should not be played with close calls/puts right now, except day-trading.  

  106. Phil, what is the link to that House poll?

  107. Phil, Lflan,
    They are really fracking Apple today….What gives?

  108. Iflan,
    That still small voice probably should be obeyed – at least yours should on AAPl.

  109. Rolled AAPL Nov 675/690 down to 665/680 for $1.14…..

  110. What the hell?  

    AAPL really dove – hitting $658.  Nothing to do but ride that out.  

    No volume on the sell-off but it is relentless. 

    VIX only 16.50, TLT not over 125 but 13,500 just failed and we're testing the Dow's strong bounce with the NYSE but the others have failed already.  S&P failed weak, Nas right on it and RUT failed.  

    On the whole, this is where you play for the turn up – not to chase down….

  111. I am sorry, but using Opts methods and the chart here from Cobra….I would wait on AAPL….just my 2 c….

    Sorry…stock charts is aggravating….

  112. AAPL/Phil and Lflan:  I'm certainly not an AAPL expert, but it sure looks like they are trying to drive it to the 650 level. What do you think ?

  113. Oct Bradley turn is Wed. +/- a few days….so could be a bit more down until we ascent into heaven…then hell….

  114. The BOTS are putting up the minimum to stop the sell off. I was thinking we may get a stick until 7 minutes ago now it looks anti-stick, just like last week, no buyers.

  115. AAPL /      /   Nothing is wrong with AAPL that I know about.   /  The stock is down 1.4%, hardly time for panic.   /   I see this as a buying opportunity.   But, and I'm not going to say thiis again.   Don't buy any October 700 calls or some such foolishness.  Get calls several months out near the money.  Back up the truck baby!  

  116. Iflan do you add more now feb 660 call below 50 or wait

  117. Read my 3:39 post.  

  118. Oct low / Pharm – Indeed many chartists are quoting the low sometime this week (Wed, Thur) towards 1415-20.  And then moooooon.  
    Also, QE2 announcment followed 3 weeks of weakness.  This is week 3 for QEternity. Lets see if the script plays out the same..

  119. Dow volume at 3:30 is 73M so 8M in 45 mins is not a confirming move.  More likely someone is shaking the tree to get rid of weak hands.  

    WFR/Jrom – I'd get out.  That was a very weak move they made and shame on you for not taking profits at $3.35 or $3.25 or $3.15 or $3.05 or $2.95 or $2.85 anyway…  The 50 dma is $2.65 so, for God's sake – at least respect that…

    Poll/Jet – That was WaPo

    And what StJ linked. 

    AAPL/Jasu – Not sure what that's about other than it's a great way to tank the markets.   Dropped the Nas 40 points from the open and AMZN, GOOG, PCKN, RIMM, WYNN, SHLD, PCLN, NFLX and other 4-letter stocks holding up just fine so drop in AAPL is masking buying on other stocks and forcing QQQ index holders to sell all those stocks along with AAPL to fundies who get to snap them up at month lows.  BRILLIANT!  

    Good roll Hoss.  

    Waiting/Pharm – I agree.  

    AAPL/Jbur – At $657, I'd have to agree with that assessment.  Now the Question is:  Will they be successful?   And this is the day IPad mini news broke – how is this bad news?  The IPod mini (Nano) was huge so it's not like it's untested waters.  


    Topeka Capital Market‘s Brian White today is among those trumpeting strong numbers for Apple‘s (AAPLiPhone sales following two weeks of retail sales and pre-orders for the newest model, the iPhone 5.

    White, who has a Buy rating on Apple shares and a $1,111 price target, writes that “October has been the strongest month of the year for Apple’s stock,” and he thinks the 2 million units pre-ordered for the iPhone 5 two weeks ago presage a strong December quarter.

    Looking back over the past nine years (i.e., 2003 through 2011), October has proven to be the best month of the year to own Apple’s stock. This is no minor statement, as Apple has generally delivered healthy stock performance over this period. Over the past nine Octobers, the stock has risen by an average of 10% MoM and had only one down October (i.e., in 2008). In fact, no other month has experienced a higher number of up years compared to October. Taking into consideration the October seasonality, the attractive valuation (10.7x ex-cash), the overwhelming demand for the iPhone 5, the growing cash payout potential and other new opportunities on the horizon such as the iPad Mini; we continue to believe it will be difficult for investors to justify not being overweight the stock through the holiday season and into 2013.

    Yesterday, Mizuho Securities‘s Abhey Lamba wrote that Apple should have a strong december, while Canaccord Genuity‘s Mike Walkley this morning wrote that his “checks” suggest the new iPhone was eating into sales for other vendors’ smartphones, such as those of Samsung Electronics (005930KS).

    Apple shares are starting off the quarter on a weak note, falling $8.95, or 1.3%, to $658.16.

    Looking back over the past nine years (i.e., 2003 through 2011), October has proven to be the best month of the year to own Apple’s stock. This is no minor statement, as Apple has generally delivered healthy stock performance over this period. Over the past nine Octobers, the stock has risen by an average of 10% MoM and had only one down October (i.e., in 2008). In fact, no other month has experienced a higher number of up years compared to October. Taking into consideration the October seasonality, the attractive valuation (10.7x ex-cash), the
    overwhelming demand for the iPhone 5, the growing cash payout potential and other new opportunities on the horizon such as the iPad Mini; we continue to believe it will be difficult for investors to justify not being overweight the stock through the holiday season and into 2013.

    $25KP – Good time to roll the AAPL $670s down to the $660s for $4.70 (anything below $5). 

  120. $25KP – QQQ Oct $70 calls can be doubled back down for .30. 

  121. Tim Burton – See! He's already tried once…..and got FIRED!
    From Wiki: "Burton's next live-action short, Frankenweenie, was released in 1984. It tells the story of a young boy who tries to revive his dog after it is run over by a car. Filmed in black-and-white, it stars Barret Oliver, Shelley Duvall (with whom he would work again in 1986, directing an episode of her Faerie Tale Theatre) and Daniel Stern. After Frankenweenie was completed, Disney fired Burton, under the pretext of him spending the company's resources on doing a film that would be too dark and scary for children to see."
    I do feel the Haunted Mansion at Disneyland is his best work, especially Halloween and the Christmas holidays…. :)

  122. ….and does anyone know what happened to Shelley Duvall?…….

  123. Damn Phil you're making me feel guilty! lol. I bought in at 1.70-180 and sold many covered calls so my basis was probably in the 1.40s. I was planning on holding for a long time so the covered calls were my way of "taking profits". Anyways, thanks for the excellent advice as always. Sold 3/4 of my position.

  124. AAPL – Weird prints after the bell.

  125. Phil: Ty Cobb
    thanks for the earlier response. I get there is no "system" and I'm trading more by feel like your surfing analogy anyway. Just wanted to give you another opportunity to share the Ty Cobb example for those that hadn't heard it  :)

  126. Has AAPL started buyback of shares?

  127. Well, that was a crappy close but, on the whole, we're mostly green for the day. 

    Burton/1020 – I didn't know they fired him.  That sucks, what did they expect him to do?  

    Shelly Duvall/1020 – I say alive.

    WFR/Jrom – You have to stop out or at least look to stop out when you have a double.  If you stop out 1/2 – the rest are free – what's not to like?  Then you can sell puts and buy more cheaply.  Especially when there's a big change in sentiment, like there was from the top and then we hear something like this – it's not the investment we started with…

    LOL Lincoln!  See, I went with Musial for variety but there's no better example than Cobb.  

    AAPL/Msf – I'm not aware there is a buyback.  

  128. Phil/Burton  I'm pretty sure this, is what the Disney brass had in mind…..

  129. msf65/Phil
    AAPL $10B buy back started today.  I believe it was announced in March

  130. Phil – RE: AAPL Share Repurchase Program:
    Apple Announces Plans to Initiate Dividend and Share Repurchase Program
    Apple to start buying Apple – Fortune Tech

  131. I love it when the pundits say that the market is up because of institutional buying, yet ma and pa are not in the market.  Let's see…unemployment is still high, market is up.  Dr. Ben is giving money away and ultra low rates prevail.  Market is up.  Oh….I know, it is the companies buying back their shares to give the appearance of better P/E…and taking on debt in the low interest rate environment….using debt to buy shares…..there, I feel better now for that justification…that those pundits never give.

  132. Phil-- I am short the GS Oct 115 calls and the oct 115 puts. I never expected GS to take off like nuts.
    I am down 728 on oct 115 call and up a mere 20 bucks on oct 115 put. Any ideas to repair this position . I am learning a lot from this forum  and its helping me a lot.

  133. Big Chart – Still holding a bullish consolidation but it becomes a bearish one of those lines break. 

    Strange link 1020. 

    AAPL/Ac – What is the point of buying back 1.5% of your stock – is there really nothing better they can find to do with their money?  Dividends are nice but also very small.  Of course they do have a ridiculous amount of cash (about $100Bn).  They should buy GLW – that would mess up the competition.  

    Pundits/Pharm – But if we keep giving more free money to the top 1%, they can keep this up for years without hiring anyone and Bernanke said if they don't hire anyone – well then he's just gonna give them more free money until they do.  Boy that's tough talk from the Fed…

    GS/Amit – Well, not sure what you mean by "take off" when your target is $115 and they are at $116.86.  You only have a very, very narrow range they can be in to make a profit in the first place.  Last Wednesday, they were at $111.90 and I imagine you were in worse shape then.  If you are going to short both sides of a stock – first of all, pick one less volatile than GS.  Look at the movement in Sept – up from $105 to $122, back to $111.90 and now probably on the way back to $120 in 30 days and you bet that you could call their spot within $5 three weeks from now.  I don't think the Amazing Kreskin would make that claim…  To "win" a position like yours, you have to roll your losing side AFTER the premium burns so, in effect, you are selling about $3-5 of premium every month until you finally luck out and hit the target.  In this case, it's too early to roll but pretend you had sold the weekly $110s for $5 and the $110 calls are now $7 and the $110 puts are now .10 so the short puts are done and the calls have burned their premium on the move up from $112 on Wednesday.  So now you look ahead to the next but Oct is only 3 weeks so let's go to November and what you do is make a new target, like $120, and try to roll that $7 back to premium so you can sell the Nov $120 calls for $2.99 and the $120 puts for $6.10 and that's $9.09 so you put another $2 in your pocket and wait for that premium to burn off.  Now you have $7 of premium in your pocket and open calls and puts with unrealized losses.  I'm sure you can see that if you keep rolling and selling that over time you'll have $9 and $12 and $15 and $17 and $20 and, one day, the target will be close enough that you can close the position and take less than half of that money back out of your pocket.  Any other time, you roll.  This is a great strategy in a high VIX environment when you are getting well-paid to take the risk but, in a low VIX environment, playing with stocks that move up and down 10% in a month – it's ridiculously foolish and an invitation for disaster.  

  134. Phil/strange link   Talk about a buzzkill! 
    The point was: Disney, Ducks, Box office flop – Good.  Disney, Frankenstein Dog , kids scared sh*tless – Bad….. 
    What's the point?  I don't know, you brought this up….. ;)

  135. At the close: Dow +0.53% to 13509. S&P +0.19% to 1443. Nasdaq -0.08% to 3114.

    Treasurys: 30-year +0.25%. 10-yr +0.07%. 5-yr +0.02%.

    Commodities: Crude +0.17% to $92.34. Gold +0.3% to $1779.15.

    Currencies: Euro +0.24% vs. dollar. Yen +0.09%. Pound +0.17%.

    Market recap: Stocks finished mostly higher after a report on factory activity showed an unexpected expansion and Bernanke defended Fed policies and its employment focus. Weakness in techs pulled Nasdaq lower. Crude oil added 0.3% to $92.48; gold gained 0.5% to $1,783, retreating from an intraday high for the year hit earlier in the day. NYSE advancers led decliners seven to five. 

    Investors are shrugging off lagging default concerns and coming back to municipal bonds in increasing numbers, largely due to uncertainty over tax policy, observes U.S. Bank's Dan Heckman. “They look at munis as another safe haven outside of Treasurys, and you pick up additional yield and a tax advantage.” The heightened interest is not all too surprising, as muni-bonds of all maturities have returned almost 9% in the last year. The average effective yield is 2.48%, which isn’t too shabby when you consider that the higher risk corporate bonds are only yielding around 2.86%. 

    Foreclosure Crisis Year Six (Credit Slips)

    Now We Wait (Tim Duy’s Fed Watch)

    New York's AG has filed a civil complaint against JPMorgan Chase (JPM), alleging widespread fraud in the sale of mortgage-backed securities in the run-up to the financial crisis. The suit relates to billions of dollars of subprime securities issued by Bear Stearns' before its takeover by JPM, and is the first brought under the authority of a law enforcement group formed by President Barack Obama in January to pursue alleged wrongdoing during the financial crisis. More cases are expected to follow. Shares -0.8% AH.

    High frequency traders’ claims refuted by studies (

    Wall Street’s Brutal Job Cuts Are About To Get Much Worse (Forbes)

    MasterCard (MA) and Visa (V) shareholders can look forward to higher capital returns over the next three years, J.P. Morgan's Tien-tsin Huang forecasts. With relatively low capex needs and few large acquisition candidates, the analyst thinks MA and V can return the majority of profits to shareholders while still investing for future growth, noting each have ~$5B in unrestricted cash on hand.

    We're "in the later innings" of the long-oil/short-gas trade but "not yet in the bottom of the ninth," Sterne Agee says, believing well-capitalized operators with sufficient scale in oil basins and/or optionality on natural gas should continue to outperform. Energen (EGN), Pioneer Natural (PXD) and Oasis Petroleum (OAS) are the firm's favorites; avoid pure gas plays SWN and UPL.

    As deepwater drilling technology advances, thousands of bombs the U.S. dumped into the Gulf of Mexico after WWII have become a real hazard. The records of where these munitions were dumped are incomplete, and cargo likely was dumped outside of designated areas. Decades later, no one really knows where the bombs are or exactly how many were dumped.

    Alcoa (AA +0.2%) shares pare earlier gains after forecasting an $0.08/share charge in Q3 due to the Environmental Protection Agency's remedial action plan for the Grasse River in New York. AA has worked with the EPA and other agencies to evaluate remedial alternatives to address elevated levels of PCBs in fish in the river.

    GOL Linhas (GOL) says it's purchased 60 of Boeing's (BA) 737 MAX airplanes. The order is valued at approximately $6B, making it the largest order in GOL's 12-year history and the largest airplane order from a single airline in South America's aviation history. The order puts the 737 MAX at 724 firm orders to date. GOL -2.1%,BA +0.2%.

    Grocery stores 2.0: Peapod rolls out its virtual grocery service in more than 100 major commuter rail stations after completing a trial run in select locations. The concept is that commuters can use their mobile devices to buy groceries for future delivery using QR codes and product bar codes. Major grocery chains have only dabbled impassionately with online ordering as foot traffic in stores is highly preferable for bottom lines and early online venture failed, but Peapod could create a splash with the mobile aspect adding convenience for consumers. Watching the trend: SWYWFM,KRWINNSVU.

    Callaway Golf (ELY +4.2%) tees off after Raymond Jamesupped it to Strong Buy earlier today, saying that after four years of losing money, it expects the golf equipment maker to return to profitabiilty next year. The firm notes ELY's revamped product line and new marketing campaign due to be launched in 2013, which it anticipates will revive the brand name.

    Windows 8 Pro (MSFT) tablet development is being held upby Intel's (INTC) delayed delivery of power management software, Bloomberg reports. As a result, Microsoft hasn't yet approved any tablets running on Intel's Clover Trail Atom CPU, even though Intel just announced a long list of Clover Trail systems from top OEMs. Clover Trail is Intel's main alternative to the ARM-based processors that will run Windows RT systems. (Intel CEO remarks: III) 

    Is this a sign of bottoming PC demand, or are the industry's inventory woes about to worsen? Digitmes reports Taiwanese contract manufacturers boosted their notebook shipments to top OEMs in September, as vendors increase supplies ahead of Windows 8's (MSFT) Oct. 26 launch – H-P (HPQ) saw a 70% M/M shipment increase, Asus 50%, and Acer 30%. Williams Financial is encouraged by the report, and says it's consistent with talks the firm has had with Taiwanese supply chain contacts. (Clover Trail delays)

    Alcatel-Lucent (ALU -3.2%) falls towards the $1 level once again thanks to a downgrade to Sell from UBS. The firm is worried about weak fixed-line capex in Europe, a lack of a recovery forChinese demand, and the need for asset sales to address the company's debt obligations. UBS has been (accurately) voicing concerns about telecom capex for a while.

    Whitney Tilson went on CNBC to sing Netflix's (NFLX+2.9%) again, and that helped its beaten-down shares outperform. Tilson suggested Netflix resembles Amazon 10 years ago, when Amazon's shares were hammered by the bubble fallout and its survival questioned. He also addressed fears of rising content costs by arguing Netflix only has to outbid rivals with less video revenue. But what if studios refuse to license below a certain price due to the impact Netflix has on other revenue streams? (previous)

    Google (GOOG) is close to acquiring face-recognition technology developer Viewdle for a price "toward the high end" of a $30M-$45M range, a source tells CNET. Viewdle would give Google a means of providing a face-recognition solution for its Android apps, Google+, Picasa, and wherever else it's useful. News of the deal comes a few months after Facebook bought Viewdle rival

    Facebook (FB +1.5%) monetization data chief Brent Smallwood tries to counter criticism of the company's low ad click-through rates by arguing ad clicks give an inaccurate view of a campaign's effectiveness. While relevant for e-commerce firms trying to make immediate sales, ad clicks don't matter as much to brands trying to drive offline sales, Smallwood argues. Facebook is counting on its partnership with Datalogix to provide marketers with data about offline conversions. (COO remarks) 

    Sprint (S -6.3%) is ending the day lower courtesy of adowngrade to Market Perform from Raymond James, which cites valuation. Shares have now fallen 10% since making new 52-week highs last Tuesday. 

    Though gadget reviewers weren't thrilled with the Kindle Fire HD, most of them love Amazon's (AMZNKindle Paperwhite e-reader.The Verge scores it a 9 out of 10, and declares its lighting more "uniform and well distributed" than that of Barnes & Noble's (BKS)Nook GlowLight. "Forget everything else, this is the e-reader you want," writes Gizmodo. The big question for Amazon is how many consumers want e-readers right now, as tablets continue hurting demand.

  136. Apple (AAPL) roundup: 1) iOS chief Scott Forstall, seen by some as Apple's future CEO, is drawing heat over the Maps debacle. The fact Forstall is also in charge of Siri isn't helping matters. 2) Japanese blog Macotakara claims iPad Mini production has begun at a Brazilian plant (presumably Foxconn's). 3) The EU is investigating Apple over its warranty marketing practices. 4) Piper's Gene Munster claims 16 of 20 surveyed U.S. Apple Stores were sold out of iPhone 5 units – is that due to huge demandshortages, or both? (earlier)

    The University of Oxford on the underperformance of the American health system from 1970 to 2010


  137. After having the new Google Nexus tablet for the last two weeks, I honestly feel the smaller tablets will become bestsellers….

  138. Tablets / 1020 – I bought a 7" Samsung for my youngest daughter. I love my iPad, but the 7" format is really portable and easier to handle for reading for example. The 10" format is better for video though. I am guessing that they must have started making an impact because Apple is talking about a mini iPad and Steve Jobs had said that 7" was too small… Competition sometimes does help!

  139. All U AAPL lovers….beware:

  140. LOL!!!   The above AAPL chart cartoon is way too funny …

  141. 1020:  The difference between phones and tablets is becoming rapidly blurred.  My iPad was already a "phone", since it has 3G AT&T service.  My self-touted Samsung Galaxy Note is close to a tablet with a 10.1" screen surface, and the little writing stick lets me write much faster and more accurately than finger-stabbing.  I wonder if I will end up with one device or two — if they become thin enough to fold at some point, the Great Convergence may take place.  As it is, I use the iPad less, and the Note more, due to screen size.

  142. Phil – Great calls yesterday, you were in top form.  As I was reading your postings, I had hindsight of what the day brought.  The calls were uncanny!  And I agree with your WFT statement on the crap Washington is playing with Lockheed Martin.  Just another example of people spending other peoples money.
    Have a great trading day!

  143. Good morning! 

    Markets up with a flat Dollar (79.80) – that's a good sign.

    Just got rejected shy of yesterday's highs but doesn't mean much for now.  

    Euro made it through $1.29, now $1.2917, Pound $1.6145, 78.11 Yen to the Dollar.  Oil hanging around good old $92.50 ($92.63), gold still $1,780, silver can't pop $35 and hold it ($34.87) but it's a quick ride to $37.50 once they do, copper just rejected at $3.80 ($3.7955), Nat gas up again at $3.515 and gasoline giving us a mall break at $2.8925.  Oh and the Swiss look like they are going for 1.201 Euros to the Franc (weaker Franc).  Used to be 1.2009 so a big (relatively) new floor for them if that's what they are going for.  

    Think about it, they spent about $400Bn to get the Franc from 1.2009 to the Euro to 1.201…  I guess if they hadn't, it would have gone much lower or maybe it would have had as little effect going down as it did going up – they never had the balls to test it.  

    Speaking of balls:  

    Top 1% Got 93% of Income Growth as Wealth Gap Widens

    The 1.2 million households whose incomes put them in the top 1 percent of the U.S. saw their earnings increase 5.5 percent last year, according to estimates released last month by the U.S. Census Bureau. Earnings fell 1.7 percent for the 96 million households in the bottom 80 percent — those that made less than $101,583.

    The earnings gap between rich and poor Americans was the widest in more than four decades in 2011, Census data show, surpassing income inequality previously reported in Uganda and Kazakhstan. 

    Come on folks – we have to admit we have a problem here, don't we.  Even if you are benefiting from this – it's ridiculous…

    Kind of goes with Colbert from last night:  

    The Colbert Report Mon – Thurs 11:30pm / 10:30c
    The Word – Supply Chained
    Colbert Report Full Episodes Political Humor & Satire Blog Video Archive

  144. Minis/1020 – I'm psyched for one.  

    Best Phone/Diamond – Well, after all that, still picking the IPhone.  

    Thanks Nicha.  

    AAPL/Pharm – Ah, there's always someone willing to draw the old cliff chart….

    Phones/ZZ – I am pissed my IPad isn't a Phone.  I wouldn't need my IPhone if my IPad could make and get calls.  It has Skype, of course, but not worth it to get everyone to call me that way although I know plenty of people who do that now.  My oldest daughter doesn't even use a phone – all Skype with here friends all day long.  Typical teenage girl as they were in my youth otherwise, spends her whole day on the phone but she does it on the computer while she's multi-tasking other stuff so a slight improvement, I guess…

    Thanks Jfaw and I'm very please to see we may have been right to risk being bullish into the close…

    Time to go to work…