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Fiscal Cliff Thursday

openingimageDown 312 points yesterday.

That's a hefty sell-off and we'll see if we get some follow-through but we pretty much hit our downside targets on the head in a single day as I said to Members in yesterday's Morning Alert:

About 13,000 on the Dow. 1,400 on S&P, 2,980 on the Nas, 7,950 on NYSE and 800 on the RUT are about the lows we have to hold – all seem like good spots to go long to me with tight stops if we break below but let's look at this as a head fake except with a bit more conviction as 50% of the population sincerely believes they have to flee the markets before 4 more years of Socialism take us up another 100%.

As I mentioned in the morning post, this is mainly sour grapes selling by Romney fans but there are also legitimate reasons to take some of this year's massive stock profits off the table ahead of possible large increases in capital gains and dividend taxes.  Still, we knew this was coming on Tuesday, when the market rallied massively on thoughts of QInfinity and ZIRP as far as the eye could see.  

We didn't quite hold our targets so we couldn't get too bullish at the lows but we remain hopeful that there was a bit of over-reaction in yesterday's sell-off and that the truth will lie somewhere in between Tuesday's ephoria and yesterday's panic – let's call it 13,100 on the Dow and 1,410 on the S&P as our goals for Friday and then we can all take a deep breath and think about things over the weekend

Despite once-again rising bond yeilds, Draghi says whether or not Spain gets an OMT bail-out is entirely up to them and the ECB cannot/will not force them to do so.  That's keeping the Euro depressed ($1.274) and the Dollar strong (80.94) and that's keeping a lot of downward pressure on stocks and commodities. 

As we expected, oil had a huge build yesterday but we played it long in the futures (/CL) off the $84 line and we're sitting back at $85 this morning after a brief visit to $85.75.  Clearly the build in petroleum products was due to the storm but now we have another storm in the Northeast grounding planes and slowing traffic so not too much immediate improvement in oil's future – or the oil Futures, for that matter…   So we take our Egg McMuffin money and run on that trade and we'll be ready to go long off $84 again but happy to make $1 ($1,000 per contract) or even .50 as we follow the channel.

AAPL WEEKLY AAPL is back at our Summer buy target of $555 and the stock was just reiterated as a buy by Jefferies with a $900 target as they see gross margins improving in Q4 (duh) and are tracking IPhone sales at 53M, a good 10% over street estimates.  That can pop earnings per share over $16 vs. 13.52 currently estimated.  We are, of course, already long on AAPL and my comment to Members in Chat this morning was:

AAPL – I don't watch all those different indicators, I watch the 200 and 50 dmas on StockCharts and AAPL failed the 200 at $590 last Friday and a week below it would be bad – especially after being rejected on Tuesday and gapping down yesterday.  Meanwhile, they continue to make $135M a day while you wait and they are sitting on $140Bn in cash and their market cap is now down to $524Bn, which is a p/e of 8.  Let's say AAPL completely implodes and only makes $25Bn next year because no one likes their stuff anymore and they can't make enough to satisfy the low demand and they drop their margins on the stuff they can't make enough of that nobody wants by 50% – which is what people seem to be worried about.  That gives them a p/e of 16 and I STILL like them at this price ($524Bn – $140Bn in cash).  So, I don't give a crap what the squiggly lines are doing because I can buy a 2015 $450/550 bull call spread that's 100% in the money for $50.  This is not rocket science – you make 100% in 2 years if AAPL holds $550 without doing another thing.  If you don't like AAPL enough to make that bet – STOP LOOKING AT IT!!!

The market is giving us plenty of bargains at these prices but none more so than AAPL.  They may go lower so scaling in is critical but $555 is a fantastic entry point for a long-term position.  We'll see how the day goes but we must make some progress or we'll be adding more disaster hedges into the weekend – fortunately, we nailed the top on the 20th with our last batch of disaster hedges and, hopefully, this is the bottom of the channel we expected to test but, as our Members well know – hope is not a valid investing strategy – that's why we watch our levels! 

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  1. Good Morning to every one. Well do I see some green shouts on the horizon""""

  2. Can I ask for some help on updating hedges?  September through November is horse sale season for me so I am mostly out of pocket and away from my computer.  I had a TZA hedge in place which I closed out last week, and I am looking for a hedge to protect $110,000 in longs while still 60% in cash.  I made a mistake not closing out winning ACI and CHK trades before the election, so I am down 3.5% in the past week.  I need something I don't need to tend to for the next few weeks.
    Also, I love Ford's chart.  It may be the clearest inverse head and shoulders patterns I've ever seen.  I rode them up from $9 to $10.50 earlier in the year, and I want to play for a rise up to $12, with confident they will hold their 50 dma of about $10.25.  Is the Jan 10/12 bull call spread selling $10 puts playable or am I better off waiting until 2015's come out?

  3. Good Morning.

  4. Good Morning!

  5. Anyone that missed it….bolt included.  Monday, Breakfast will be ready at 6 b'f trading.  I will be there at 5 to close out the bar from the nightlife crowd…….

  6. Oil Lines

    R3 – 92.57
    R2 – 90.68
    R1 – 87.82
    PP – 85.93
    S1 – 83.07
    S2 – 81.18
    S3 – 78.32

    Yesterday's high and low – 88.8 / 84.05

  7. Friendly Poker:  I'm thinking Ceasars runs a friendly game 24/7.  Is the location determined for those not making dinner?

  8. mjj – from yesterdays post by lvmoda – 'Poker in Vegas is set for 10pm Saturday at Caesars poker room, after dinner at Nobu.'

  9. Thanks

  10. Someone asked about IMGN yesterday….I like them a ton, although revenue streams are not as rich b'c Roche was in early on their drug.  They have a ton of potential with their pipeline, but SGEN is much more robust as they are alone in their development.  Buy a small lot in here….I will as well.  April 12/11 strangle with stock.  Just a few.

  11. RED state sees a dash of blue!!
    Teton County, richest county inWyoming Voted 6211 Obama, 4858 Romney, 5299 for Dem Chris Henrichsen, 4747 for Rep Cynthia Lummis, and split the county commissioners.  

  12. shadowfax
    Let it rest now you will not change it any more!!
    AAPL some one is dumping AAPL's stock to make such swings!!

  13. IMGN/pharm – thanks, that was me.

  14. Good Morning—--could I hear from attendees staying at Vdara—we could meet in the lobby and go to Nobu together

  15. yodi
    I can't help myself, a die at it technical math nut ball! Everything goes down with selling but earnings are off and:
    Galixy S III passes Iphone in popularity!

  16. Savi
    I'm at Vdara.

  17. Pharm – PGNX getting killed today, double down or?

  18. Savi/Vdara,
    I'm staying at the Vdara – what time should we meet?

  19. Hi Savi — I'll be at the Mandarin Oriental (again), right next door.  Like 6:45?

  20. We seem to be getting better entry points for AAPL every day now…  Like I said, 530 seems to be the next support line! Hopefully someone steps in before that.

  21. Good morning!

    Wishy-washy start so far, if we're not up 0.5%, it's not even a weak bounce off 2.5% drops yesterday and, of course, we fell more like 5% from the tops so nothing under 1% is even the least bit impressive.  

    Hedges/Rperi – F is not a hedge, of course but I'd certainly put off on more longs until we clear some bounce levels.  As to hedging, I still like V off the Disaster hedge post (see above for link) as there's no way they are worth $143 if the economy is tanking.  The reality is, the economy is not tanking but at least they are toppy and should not zoom over $150 so it's a good hedge to have as you can pull it before you lose much and it should give great downside if we really begin to drop.  Currently, the Jan $145/135 bear put spread is $4 and that pays 250% back by itself.   You can offset it with the sale of 1/2 the 2014 $110 puts for $5.40 for net $1.30 on each spread or, of course, with any other stock you REALLY want to own at a discount.

    FAS Money – Right on track.

    AAPL Money – Wow, that dropped fast!  Below $550 now on big dump.  We should roll but a bit early to call it. 

    Galaxy/Shadow – What does it matter if AAPL is selling as many IPhones/IPads as they can make?  I'm not buying AAPL's market share, I'm buying their earnings.  People focus on the wrong things here.  

    Better entry points/StJ – Very glass half full of you.

    Don't forget that, even at this price, there are people who are up 40% for the year and 60% from last year on AAPL who want to book capital gains.  

  22. There are signs that it's not getting better in Europe right now – Germany exports were down 2.5% in September (-1.5% expected) and imports were down as well -1.6% (-0.4% expected). 

  23.  Savi I'm at the Vdara too.

  24. AAPL – $548
    Might be a good spot to take a bite!

  25. I am not feeling the love for support lines on aapl this seems to be panic selling.  my guess it is tax selling.  I would have probably done it myself if I owned it in the 100's

  26. Glass Full / Phil – Just don't want people panicking now, do we?

  27. Vegas/  —--How about 6.30 pm—as I need to get to Nobu a little early to make sure things are in order—lets meet in front of the coffee shop in the lobby—contact me using my e-mail and we will figure out how to identify each other--I hope to be in by noon or 1pm

  28. Taxes – seems to be no small matter this tax basis resetting.

  29. esc—sent you an e-mail

  30. Im staying at VDARA but not eating sushi  (not getting in til 7ish)will be playing poker at 10
    Also debating on a rental car as its suppose to be pretty chilly all weekend

  31. Good point Willie! With that stock up some 500% since the last election, there is plenty of capital gains to be taxed there! And it's widely held.

  32. Pharm – Do you like Biogen here (BIIB)?

  33. williex,
    one of my friend own AAPL for $25. She is not selling.

  34. Bert – taxi it.  Easier and cheaper.

    PGNX – it is down 30c, and my basis is almost even….so, I am not worried at this point.

  35. AAPL is wrecking the market – what a disaster at $545.

    AAPL Money – 2015 $550 calls, now $103, can be rolled down to $500 calls, now $126, for $23 – that's a good investment.  Let's also put a stop on the 2015 $700 short calls, now $56, back at $60 because we can then sell the $650 calls, now $70 for maybe $75+ and then that roll cost us just net $8 to roll our spread down $50.  


    SVU – Fine

    AMZN – Fine but let's pt a stop on the Jan $205 short puts at $4 – just in case.

    AAPL – We're done with the Dec $655 callers, now $1.60.  We'll sell something for about $8 later but we made $6 on these so we take that plus the $8 we plan to sell and roll the April $610 calls to the $570 calls for $14 and we'll spend $10 to buy back the April $685 caller and plan to sell something else there for at least $15, which would currenty be the $655s but that's a $85 spread, which is bigger than our original $75 so we can afford to wait.

    XLF – Still fine

    CMG – I'll be worried if we break lower but lots of room.

    QID – Fine

    DECK – Let's buy those back for .50 as it frees up a slot to sell something else.

    FAS – Love those

    QQQ ($25KPM only) – See how nice and boring this is compared to AAPL?  On track to make that $1.96, which is 30% of our long position already.  Longs, meanwhile, just down 15%.

  36. If I owned a stock with a 10x long term cap gain, I would sell it before the end of the year. There is no chance that cap gains will not be taxed at AT LEAST 23.6%. I would not expect to ever see a 15% rate again. You can always repurchase after the wash sale delay.

  37. Neet
    at 25 i would have sold it at death cross and waiting for a chance to get back in like the weekly 50

  38. Savi/Vdara,
    Just sent you an email with my contact info.

  39. Why is the headline not "WMT forces millions of worker's families to ruin Thanksgiving by opening 8pm"?  That's just ridiculous – this is why I strongly favor blue laws (we have them in parts of NJ) – there are some days people just shouldn't work.

    Good point Barf.

    Dollar 81.05 not helping matters.  Oil still under $85 at $84.73 and XLF very weak at $15.64 but no panic with VIX at 18.40 and TLT at 124 also not panic but good for 30-year auction at 1pm. 

  40. VIX is down 4% because of the stability of the market.

  41. AAPL: no worries
    I thought I would stop the AAPL slide for you all so I sold a next week 575 call short ;)
    you're welcome

  42. neet
    the problem with winners like your friends aapl trade is you fall in love and tend to ride them all the way back down.  of course going back down to 25 is not a problem with aapl. 

  43. Hi Savi, I'm at the VDARA also; if my bargain Spirit air taxi ride gets there!  Looking forward to seeing you and everyone again.

  44. WMT –  I would hope that they would offer incentives to those workers, like time and a half, or a turkey…. :(
    …Or maybe offer it to those who are only working a 20 – 30 hour week for which I'm sure there are many….. :(

  45. Phil / If I were to open a new position, based on the FAS money portfolio, I would replicate exactly what we have (strikes, # of contracts) right? TIA.

  46. Closing in on yesterday's lows.

  47. williex, 
    That 's her L-T investment. Her persistency Pays off.

  48. Phil AAPL
    I know apple is making money and samsung is only maybe, the issue is they are not always and forever going to be everything technical, the compitition is trying to out do them. What I don't like about them is attitude and management, the same thing. They have lost the way they got there. Now they are below my lowest expectation, most people don't have the extra bucks. Ipad mini shows they realize what I am saying.

  49. rdn--great --see you there

  50. Pharmboy,
    ZGNX? The March PDUFA is just too far off.

  51. AAPL P/E is an indicator that a lot of investors are in question. I feel a big spit to get the stock price out of only the megarich can play would help boost the P/E. $54.80 would allow me to play it.

  52. shadow
    your right,  if the mean income is 50k and i think i read awhile ago the median income is 25k then people are living pay check to pay check.  i toys are not in your budget.  in fact what you are talking about is true for a lot of companies.  Jeff Bezos gets it at amazon but most others are only demand is only based on replacement of worn and broken. 
    While the 10% have excess $ how many toys do you need. 
    well there goes aapl. setting up to begin falling again

  53. Savi,
    I am staying at Vdara – getting in around 3.00 … see you at 6.30

  54. shadowfax,
    AAPL setting up for snapper to buid right shoulder? Don't fight DOWNTRENDS!

  55. iflan or Phil – any thoughts on Apr AAPL 605 calls (sorry – AAPL., AAPL, AAPL).  I bought them when they were ATM.  Just writing weekly calls now.  And – again sorry – whats ur general theory PD one more time on rolling verticals?  in this case, weekly bull put spreads. thx  (i barely have the will left to type capital letters)

  56. Wash sale – only applies to losses i believe..

  57. willex neetcorp
    I stopped trading AAPL at $300, I don't have anything Apple, tablet, or smartphone. I am shutting off my cellphone in January. Half the population is living under $25,000 per year and that includes me.
    IWM below 79.90 is extremely bad, that needs to turn right now!

  58. it's nice to get all that fiscal cliff nonsense priced into stocks. Once the market stops caring about news again and QE / M2 begins inevitably lifting prices we'll see AAPL doing what AAPL does.

  59. ZGNX – march….no, Dec 7 from what I see.  The drug is a more potent form of Fentanyl.  To me, while it is good for patients, I am not sure that the coverage for something more expensive is going to be worth it.  Small lots, and be nimble.  If they get rejected (probably will not), the stock is pennies.

  60. How much do people love HOV by the way? I've waited a long time for this one to break, but that's OK since I hold stock only, no options!

  61. BDC – home builders suck.  I don't care how much 'land' they own…..yes it is what one wants to own in turbulent times, but when no one buys homes, land becomes cheaper, and they are left holding the bag.  Being an owner, I am not going anywhere….

  62. SGEN – removing the covers from the March 30/35 BCS.  25c for the 35s.  Will let them go….

  63. AAPL – I take responsibility for all my trading decisions – even without regard to the AAPL dive, I wrecked an 85% gain port this year by getting greedy six weeks ago.  Stupid play.  That said:  when the F will "they" let this f-er up off the mat?  It's the same damn company it was at $700.  I get the Levi theory, PD – just much harder to apply the thinker to a psycho-momo stock.  I know what my jeans are worth to me today and next year.  This thing?  Jesus.  K.  All better now.

  64. Vix is dropping and so is IWM???

  65. Thanks Lincoln!

    FAS Money/Amalfi – Sure, there's been virtually no movement on the longs and the portfolio is all about selling short puts and calls so starting with those longs is fine but, of course, wait for new short sales – don't chase old ones.

    Lows/Rain – Actually not to bad to double-test bottom before heading up.  Volume was good yesterday, double normal.

    AAPL/Shadow – And how did they do in the 5 years between the IPod (2002) and the IPhone (2007)?  The IPad came out in 2010 and before those it was the IMac in 1998 (the year after Jobs came back) and what was that except a Mac in a plastic bubble?  Apple doesn't have performance issues or product issues but it has expectation issues with idiot investors and pundits who now demand they revolutionize the industry every 24 months.  What has IBM done to change the world this decade?  How about DELL, P&G, MCD, XOM, KO, GS….  I'll keep going and eventually we can add them all together and come up a group that TOTALS AAPL's profits.  AAPL is disappointing only in comparison to what people wish AAPL would do.   Did people copy the IMac?  Sure, Compaq had a great all in one PC, HPQ bought the company and then died.  Did people copy the IPod – Yes, over and over and over again – better, cheaper, faster – whatever – didn't work.  Are people copying IPhones and IPads?   Sure but did you know that people besides MCD sell hamburgers AND French fries – yet MCD still makes money.  I've even heard there are other cola-flavored sodas and XOM has competitors who sell gas – can you believe the nerve?   This is beginning to get ridiculous – find a legitimate business reason to sell AAPL, not the fact that they can't make enough product to satisfy demand or that you don't think the current CEO is as good as Jobs after he's had just one year to run the company.

    AAPL/NF – The idea is to roll down in strike and out in time.  The April $605s are $27 and they can be rolled to the $555s at $46 for $19 so you move to at the money and $50 lower in strike for $19.  The question then is, will you be able to sell $19 worth of calls between now and then to justify it?  If not – don't do it.  Perhaps (assuming you want to stick with it) you could instead spend $50 to roll out to the 2014 $550s ($77) and then the question is – can you sell $50 worth of calls over the next 14 months to pay for that?   Well, you can sell the Dec $590 calls for $9.20 and that's 10% up from here and that pays for 20% of your roll on day one (or half the April roll down).  This is not complicated – you just have to treat it like a business where you are responsible to maintain adequate position to make sales going forward. 

    HOV/BDC – Always my favorite builder.  Hopefully there will be a pullback for those who missed that train.  And speaking of stocks that went into technical Hell – I put my foot down on them at $2 in mid-2011 but that didn't stop them from going to .89 in the fall but, for those who had faith and doubled down – the $1.50 average is a triple (and was a double by Jan of this year anyway) and now almost 4x.  

    Same thing for AAPL, $555 was our foot-down entry, they shot up to $700, now back at $545 but when it gets to $275 will you DD or bail?  If you enter a position PLANNING to buy more at 50% off – then you won't be upset when it drops 20% – you'll be hoping it goes lower – even though you own it.

  66. A little humor from SOH earlier this week….
    "BREAKING NEWS: Worse than SARS and Bird Flu combined, The Center for Disease Control has issued a warning about a new virulent strain of Sexually Transmitted Disease. The disease is contracted through dangerous and high-risk behavior. The disease is called Gonorrhea Lectim and pronounced "gonna re-elect him." Many victims contracted it in 2004, after having been screwed for the past four years. Cognitive characteristics of individuals infected include: anti-social personality disorders, delusions of grandeur with messianic overtones, extreme cognitive dissonance, inability to incorporate new information, pronounced xenophobia and paranoia, inability to accept responsibility for own actions, cowardice masked by misplaced bravado, uncontrolled facial smirking, ignorance of geography and history, tendencies towards evangelical theocracy, categorical all-or-nothing behavior. Naturalists and epidemiologists are amazed at how this destructive disease originated only a few years ago from a bush found in Texas."

  67. AAPL-Rolls – Yes, thanks, I get that, PD.  I was forgetting what I'd seen from you a few times on timing in relation to burning off premium before rolling…

  68. Phil
    You have forgotten yesterday I said if I could play AAPL I would be a buyer. All I am saying is I saw the reasons in advance and it has retreated less than $10 from that target and that is so far only interday today. Matter of fact I think they will close over $550 today, the botttom is today.

  69. Phil
    IBM – Watson    soon to be known if it's a game changer  but for anyone to catch up to watson will be difficult on the software side

  70. I'm staying at the Elara — got a good promo deal. Anyone else staying there or nearby?

  71. WMT should offer overtime for working T-giving at 8 PM and let people volunteer. Some would.
    That said they are a horrible company and I never shop there.

  72. Pharm/CTIX –
    I rarely follow micro-caps, but they had some interesting news today on clinical trials with its anti-cancer drug Kevetrin.  Do you follow CTIX?

  73. So much for yesterday's lows.

  74. Phil
    It really does look like tax selling on AAPL.  Perhaps it's more intense because of the high possibility of increased taxes. Do you think within a month that we should see buying return?

  75. rainman
    This is not right TLT just spiked up, SPY and QQQ showing a turn. Could this be the billionairs revenge, they spent big on Romney and now double down because they can afford it? Stupid if true.

  76. shadow / TLT — was there an auction today?

  77. 30 yr auction

  78. Looking over Lee Adler's articles again, he claims that QEi money will not start settling and hitting the market until 11/14.  What effect this will have, I don't know but just thought it was of some interest.

  79. Phil
    What would you do with this position?
    I have a legacy position in WSM – 1000 shares, from when my wife worked for them.
    I have been selling some over time. I like it based on the upper crust doing well
    & 2% yield. Earnings are 11/17. Cost basis for shares is around $ 37 (& probably lower after years of selling calls & puts). I am short;
    7 1/2013 40. Calls @ 3.25
    2 2/2013 44 Calls @ 1.1
    1 2/2013 45 Calls @ 3.6
    4 1/2013   30 Puts
    2 1/2013  35 Puts
    2 1/2013  45 Puts
    2 11/2012 35 puts – expect to expire worthless
    The 40 calls are not liquid and have about a dollar spread on them.
    I would not mind having about half of position called away to diversify holdings. Just trying to maximize holding without being a “greedy bastard”

  80. dclark
    Here is the stupid part to the selling. 
    you can sell, take out your commission and taxes and buyback and stil hold your position.  Most americans are relatively clueless about taxes so the tendency is going to be sell and wait for 30 days and see where you can get back in.  do you think wall streeet is going to let them in cheap ?   this will run up as soon as the selling starts to slow.  The funds sold since 700 the schmucks are selling now.   look at all the articles about the end of aapl coming out.  as phil would say heard the sheeple to the shearing pen now and collect the wool. 
    look at the trend line we are in the 3rd increase in a declining slope.  most trends will end after a 3rd increase in the slope angle.    the 3rd angle is where the sheeple sell.  looking forward to the breaking of the down trend line.

  81. Williex – Exactly.  I am coming across more and more brokers and CPAs advising their clients to sell before the end of the year.  I don't deny that taxes have to and may go up but cap gains is not a major revenue source for the IRS.  If I remember correctly, it makes up about 4% of all Federal tax revenues.  THis whole "the world is going to end" attitude is a joke to me personally.  In the end, I truly feel that politicians in the Senate and the House will ultimately choose not to commit political suicide and kick the can down the road some more.   

  82. CTIX – interesting mechanism of action.  Starter is fine, but make sure you DD.  Since the trials just started, I would tend to wait and see where it goes.

  83. AAPL fact I just read somewhere – AAPL's market cap is only $15B higher than the company's book value at a price of $541.

  84. How the %&*(%& is VXX up with the VIX down today???
    FU VXX!!!

  85. Jabo – May I suggest changing your UN to "FUVXXAAPLCMGHPQGLWSVUWFR"?

  86. Phil, good time to start buying small positions?

  87. FU INK!!!

  88. AAPL/NF – It's just a business – stay objective and you'll be fine.

    AAPL/Shadow – Not so much aimed at you as a general comment on AAPL bashing.

    Watson/Willie – That one will put millions of people out of work.

    Tax selling/DC – Yes bit a bit panicked to be just that.  Fundamentals work great in the long-term but they don't watch the clock so I prefer April as a recovery target.  APPL was down at $85 for 6 months into March '09 and that was obviously ridiculously low but that didn't stop it from trading down there with all the same noises about the IPhone (is that it?  What's next?  Jobs is out of ideas (and dying).  The nano isn't innovative and their margins are shrinking….)

    TLT with a big move to $125.50 on auction.  They work that thing every month.

    WSM/Randers – So you get called away with lots of cash – where's the problem?  I suppose if you want to avoid taking $9,000 in profits off the table you can roll the $7 Jan $40 callers to the 2015 $47 calls at $8.30 – maybe trade 7 for 5 and then you keep 500 shares (instead of taking $20K in cash) and you have $3,500 more upside and maybe you can sell puts again (the $35 puts are $5) and you're back in a spread with a reasonable return.

    Buying/Rpme – Sure, there's lots of stuff worth looking at.   If they "fix" this fiscal cliff – we'll be up 5% like a rocket.  Hopefully, they don't want to go into Thanksgiving with this hanging over our heads.


  89. Jabo – I was just trying to help you out buddy.  :)

  90. Ink—it would have helped if you included PCLN…

  91. VXX / Jabo – The way that POS is constructed, the correlation is not with the VIX itself, but with futures so who knows… One more week before we launch the "Die VXX" portfolio where we will bet that it gets reset in 2 years or less.

  92. Thanks Phil, Looks good..

  93. VXX was started in  March 2009. It was reset in November 2010 after 20 months or so when it reached 10. And it reset again in October after 24 months when it reached 10 again. My plan as explained before for the "Die VXX" portfolio would be to buy Jan 2015 20 Puts because we know that that in about 24 months they will be worth about $10. Start with 1 contract and add contracts when you have monthly spikes in VXX like we have seen in the last 2 years. I think it's always a good plan when you can buy an asset and you already know it's value when you will sell it down the road. Makes planning that much easier. The only risk would be a big VIX spike at the end, but even in 2010, VXX went from 35 to 10 in 6 months… In any case, I intend to make a small test bet with walk around money.

  94. Out of work / Phil – Kevin Drum made a similar point today:

    Oh, and smart people on both sides of the aisle should start thinking seriously about how to handle a future in which smart machines do more and more work and humans do less and less. I'm dead serious about this.

  95. Quote of the day:

     “Buying at cheap to fair value is what drives good long-term returns. Not waving your hands above a darkening crystal ball.”

  96. One man's opinion of Apple:

    Cook’s decision not to try to play the part—to give up on herding cats in favor of simply purging the herd of troublemakers—may be the right call at this moment. But it’s also a reminder that all business empires eventually crumble. A team of stars is going to be a team of egos. As long as Apple had a superstar at the top, that was OK. Under Cook it’s not. That hardly means collapse is around the corner, but it’s a big step in the direction of complacency and away from excellence. Fans of Apple’s products should be worried.

    He is a big Apple product fan so not hater here… Just an opinion!

  97. Phil
    Seriously I think people should be buying AAPL now, at least start scaling in, and those that don't they will be chasing.
    Another thing is I doubt they will blow the doors down in the 4th Q and should be prepared for that, this is most likly their worse quarter
    And what williex and Inkarri19 just said!

  98. Williex
    I was thinking about the reaction of someone who was in Apple stock early and consequently made a whole lot even at these levels.  If they decided to sell their beloved stock for tax reasons, when would they buy it back? Of course, they would probably wait until the selling was over. That's because they were smarter than everyone else and the stock could go down further.  So whether they are right or wrong they will jump in late because they never wanted sell in the first place and be the impetus for a quick move back to reasonable levels. This will pass when we get the news on the fiscal cliff. In the meantime…….

  99. shadowfax – Just curious … what leads you to believe that the AAPL bottom is today?

  100. AAPL – "C'mon Apple, make me a believer."

  101. Forestall can't have had this many shares..

  102. Big chart will not look pretty tonight! S&P bouncing off its 200 DMA but Dow, Nasdaq and Russell not so lucky. As with AAPL we might be entering a self-fulfilling technical hell where people start to sell because we are under the 200 DMA and we always sell then therefore driving shares lower! 

    At this moment, Russell is under our Must Hold line and that makes 3 out of 5 indices.

  103. diamond
    I do charts on AAPL because they move the market, I don't save them so what I rember is I plotted trend lines on repeating declining slopes and times, a few months ago they pointed to $550, couple weeks ago it was $560. Then I multiplied earnings times lower P/E average and it came out about the same number. I am a true believer that things keep repeating in proportion.
    Soon I will do the same thing the other way to find a top but I need to get some hints on Q4 first.
    I wish they would do a 10 split so I could play them, right now good options are at my stock price limit.

  104. Phil, etc
    GLD bounced of its 200 Monday and is up  4 consecutive days, up5%. Sign of btr days ahead or just a bounce? Any significance?

  105. Machines/StJ – I've been saying that for ages.  We need to rethink society as it's simply not necessary for all these people to be working and something like Watson can knock another 20-30M US jobs off the table.  The jobs will still get done – just not by those people.  So, should IBM get the salary of 30M people while they starve or should they share the wealth?  What if I invent one robot that does the work of every single person in America and next week, 140M more people are out of work and I have all the money in the country?  Should I keep it and petition to have my taxes lowered or should my great benefit be shared with society?  We have to face these issues sooner or later but, so far, the people who make the machines that put others out of work get it all – ultimately, that can't continue.

    11:42 AM European shares give up decent early gains to finish mostly lower as Draghi reiterates the ECB will not act until conditions get bad enough to make Spain cry "uncle." Stoxx 50 +0.1%. Leading on the downside is Italy, -0.8%. The euro -0.2% to $1.2743.

    1:05 PM The Treasury sells $16B in 30-year bonds at 2.82%. Bid-to-cover ratio of 2.77, vs. a previous 2.49; indirect bidders take 45.4%, vs. a recent average of 32.6%. Direct bidders take 12.4%, vs. a recent 14.4%.

    The Bloomberg Consumer Comfort Index edges up to -34.4 from -34.7 last week. Kudos to the index authors who picked up steadily improving sentiment in the weeks leading up to the election that may not have been picked up in political polls, but clearly came out in the election results.

    The average 401K balance hit $75.9K at the end of Q3, according to a Fidelity study of 12M accounts it manages, up 18% Y/Y, and the highest level since the data started being tracked 12 years ago. About 3/4 of the gain was from rising markets, the rest from contributions. The amount is worryingly low, although looking at those over 50 brings the level to $200K.

    Flat long bonds get a lift after the 30-year auction: the 30-year yield -0.051 to 2.77%. Ten-year notes reverse losses as well, yields now -0.049 to 1.63%. TLT spikes higher, now +0.9%.

    With Operation Twist ending in December, a majority of economists surveyed by the WSJ expect the Fed to drop the pretense of an asset swap and just print fresh dollars with which to buy long-term Treasurys. The only question is what we'll call it. QE4? QE3a? QE∞+?

    "The complexity and risk associated with the management of our investments have recently increased significantly," says the SNB's Frtiz Zurbrugg, sounding like he's hedging on the bank's CHF 1.20 floor on the euro; though adding the usual line about enforcing such with "utmost determination." Previous: The SNB quietly unloads euros. 

    The eurozone considers altering the terms to some of Greece's bailout loans, reports Dow Jones. A cut in the interest rate and a doubling of the repayment period to 30 years are part of the discussion. "It's the least contentious part of the plan to bring Greece's debt to a manageable level," says an official.

    The NAHB Q3 55-and over Housing Market Index rises to 36, triple the level of a year ago. Nevertheless, a read below 50 indicates more builders view conditions as poor than good. A key issue is 55+ buyers having trouble unloading their existing homes to free up their move into a new community.

    Annaly Capital COO James Fortescue adds 8% to his holdings of company stock, exercising options to purchase 10K shares of NLY for $13.25.

    In its annual World Oil Outlook, OPEC admits for the first time that technology for extracting oil and gas from shale is changing the global supply picture significantly. The cartel says crude demand will rise more slowly than it had expected, reaching 92.9M bbl/day by 2016, a cut of more than 1M from last year's report; by 2035, consumption will hit 107.3M bbl/day, ~2M less than its prior forecast.

    Spot prices for solar polysilicon have plummeted to roughly $15/kg in China, according to Digitimes, while contract prices continue to hover around $20/kg. Those numbers suggest the losses incurred by local polysilicon vendors such as LDK and Yingli (YGE) are about to worsen. Western producers such as MEMC (WFR) have been estimated to have a variable cost around $25/kg. (anti-dumping probe) 

    Airline stocks rally as a number of oil analysts say they seefurther downward price action ahead with U.S. inventories and production high. The sector is also getting a little boost with New York-region airports recovering quickly from the latest winter storm. Advancers: JBLU +3.5%DAL +2.6%UAL +2.4%LUV +1.9%.

    The State of Nevada reports September Las Vegas Strip revenue rose 1.2% to $496.82M, while downtown Las Vegas saw a healthier 6% gain. Overall, the state hauled in $893M for September in gambling wins.

    McDonald's (MCD) announces comparable store sales fell 1.8% in October, with U.S. participating in the downward trend with a 2.2% dip for the month. The Asia/Pacific, Middle East and Africa segment saw a 2.4% decline in comparable sales, while Europe fell 2.2% with strength in the U.K. preventing further erosion. The company cites "heightened competitive activity" in the U.S. as a force, but questions on the execution of McDonald's value proposition are sure to be raised. MCD -0.9% premarket. (PR) 

    Three schools of thought on the drop in McDonald's (MCDcomparable store sales across the global: 1) The company isexecuting poorly and is fiddling while Rome is burning. 2) The restaurant chain is an early bellwhether indicating the global economy is in even worse shape than many forecasts. 3) The squeeze play is on with Burger King and Wendy's hitting the market with a premium menu and updated stores, while Panera Bread and Chipotle are stealing consumers willing to trade up.

    Starbucks (SBUX -1.8%) plans to continue selling coffee atpremium prices despite wholesale input costs that have dropped off dramatically over the last year. Edward Jones analyst Jack Russo says the power of the Starbucks brand is elevated enough that consumers will pay up, although he warns $5 for a cup of joe might be the level where the company finally sees a bit of pushback.

    Black Friday news wrapup: 1) Online shopping watcher Brad Wilson has an interesting take on why retailers are pushing the envelope to launch Black Friday deals early. He says it's in order to create a lot of noise to confuse smartphone-enabled shoppers. 2) More brick-and-mortar retailers haven't jumped in with online price matching programs like the ones from Target (TGT -1.3%) and Best Buy (BBY -1%). Is it a surprise or good judgement on their part? 3) PayPal's (EBAY -0.8%Price Matching promotion continues to create a buzz and increase the focus on pricing. If nothing else, the program threatens to lure customers away from using proprietary credit cards from retailers.

    The gun trade is still on two days after the election with both Sturm, Ruger (RGR +8.3%) and Smith & Wesson (SWHC+3.4%) carving out healthy gains again. Technical traders say the move is just the start of a multi-month rally, while fundamental-leaning traders see some risk on the downside if the fiscal cliff gets resolved.

    Accolades pour in for Qualcomm (QCOM +4.9%) following its strong FQ4 results (III) and better guidance. A rising baseband chip ASP is going over well, and so is all the design activity seen for Qualcomm's Snapdragon processors – Canaccord believes there are 125 devices in the pipeline that will use high-end Snapdragon S4 parts. FBR is a little worried about Qualcomm's soaring R&D spending, but admits the spending will make it "increasingly difficult for smaller competitors to keep up." (transcript)

    Verizon Wireless (VZVODplans to finish its 4G LTE rollout by the middle of 2013, says CFO Fran Shammo. That's 6 months ahead of Verizon's original plan, and 18 months ahead of AT&T (T), which wants to offer LTE to 300M Americans by the end of 2014. Verizon plans to cover 260M people by year's end, well above AT&T's 150M. Shammo adds 13% of Verizon's customers now use its expensive shared data plans, and that he'd "love to see [Windows Phone 8] be a successful platform. (AT&T capex)

    U.S. e-commerce sales will rise 15% Y/Y this holiday season, estimates Forrester. The total number of shippers is only expected to rise 3%, but the average shopper is expected to spend 12% more online. Amazon (AMZN), whose North American sales (includes non e-commerce revenue) rose 33% Y/Y in Q3, should again be a share-gainer. So might eBay (EBAY), whose U.S. merchandise volume growth (exc. vehicles) rose to 16% Y/Y in Q3 thanks to strong mobile uptake.

    Consumers in a dozen states can buy wine from Amazon's (AMZN +0.5%) website starting today in the company's latest far-reaching venture. As is usually the case with the online giant, it's quantity over quality with over one thousand different wines for sale with some listed at under a sawbuck. 

    If there was any lingering doubt Samsung's (SSNLF.PK) Galaxy S line has an unrivaled cachet in the Android universe, Strategy Analytics' Q3 data should remove it. The firm estimates 18M S III units were shipped, giving the device a 10.7% share of total smartphone shipments. It also estimates Apple (AAPL), which sold 26.9M iPhones overall, is believed to have shipped 16.2M iPhone 4S units and 6M iPhone 5 units. Samsung's total Q3 smartphone shipments were previously pegged at 56.9M. Key Galaxy S III suppliers: MXIMSWKSADNCBRCM.

    Though analysts have come to its defense this morning, Apple (AAPL -1.9%) can't catch a break – shares now trade at 8.2x FY13E EPS (exc. cash). The decline comes as signs emerge Apple is taking new steps to vertically integrate: Digitimes reports Apple is now directly placing orders with material suppliers, who traditionally interact with manufacturers, and Horace Dediu theorizes Apple may have invested ~$2B in Sharp's display production. He also notes Apple's off-balance-sheet manufacturing/component purchase commitments have risen to $21.1B.

    Three lunchtime reads:

    1) Three big post-election concerns for investors

    2) Are bond funds riskier than bonds?

    3) Laughable European forecasts

  106. GLD/8800 – It's very Dollar driven (80.90 now) and the Euro is too weak to play gold long.  Of course, if there were real worry about the Fiscal Cliff, gold would be flying but it's not – it's all media hype scaring out the sheeple.

  107. The sky is not falling, oil holding about $85, dollar on downward slope and what I am hearing is phil's captiulation phase, not this board but the rest of the news can't see in the dark. Besides in Ameria the only news worth printing is the worst news.

  108. I mentioned $530 as the next line for AAPL earlier and amazingly enough it seems within reach now… Just incredible! We seem to get to one Fib line every other day.

  109. AAPL is now 17% under its 50 DMA and close to 10% below its 200 DMA. You have to go back to the end of the world in 2008 to see the same setup!

  110. On the whole, we're decelerating from yesterday's drop.  

    Finishing down at the 2.5% line indicated there were more sellers left and, of course, failing to weak bounce this morning sealed the deal but, the good news is, we're NOT down 1.25% – which would be bearish follow-through on the way to a 5% drop and tomorrow it will be all about taking back those 2.5% lines (yesterday's lows).   

    Also, you have to consider the drag AAPL is putting on the Nas and S&P – that's skewing the readings too.   

  111. I placed another TZA hedge on early today.  Almost neutral.

  112. Of course, very hard to go long into the weekend now….

  113. PGNX – now time to DD.

  114. Ugly finish.  132M on the DJI

  115. Maybe spoke to soon with that nasty close…

    S&P made it to -1.22%, Nas over thanks to AAP and Rut lost it too.  

    Will be fun to try to chart bottom on Sunday.   

  116. Phil – if you were to apply your 5% rule to AAPL (and I hate to ask about this one stock as you're probably sick of it) would you predict another 1% down tomorrow? Thx

  117. PCLN buying Kayak!!!

  118. Phil/TZA,
    I have the Jan 12/15 BCS that is deep in the money-thanks for that one. I need the protection, so I'm thinking to roll the 12 calls to the 13 calls for a credit? Or what would you suggest. Thanks

  119. Possibility of Hindenburg Omen on the horizon – time to be extremely cautious on those long positions. Not surprised as technicals have broken down on major indices (sept lows broken as well) – start of a bear market?

  120. Jackass / 1020 – It's amazing how these guys base their analysis on the fact that they have more members in the house when the only way that can happen is because of redistricting and because incumbents are so hard to unseat. The facts are:

    Republicans have won the popular vote for president once in the last six presidential elections.

    That's once in 20 years! If congressional elections were based on the electorate rather than made up district, we would have a different congress. And the Senate where people are elected on a state by state basis reflects that a bit better even though states like Montana have one senator for each 100,000 people and we have one for each 4.5 million in NJ. If it was based on population as well, we would not have to worry about filibusters! I understand the original concept that small states could not be bullied by larger ones, but it's now the opposite – small states are imposing their rules on the majority. 

  121. Very detailed – well written article on the undervaluation of AAPL:

  122. Thanks for sharing deano

  123. Getting really ugly out there – 4 out 5 indices are now below their 200 DMA. We have 50 DMA now pointing down in 3 cases and Phil's Must Hold lines breached by 3 of the indices and one hanging on by a thread! AAPL clearly not helping – down another 4% today and that's a drag on the indices due to the market cap weight. Good thing they didn't put AAPL in the Dow or we would be down another 1500 points! VIX and TLT not at panic levels yet so it could still be some election reaction and could provide some new entry points on favorites, but panic could spread quickly especially if we have a bad Friday with a weekend to mull over profits not cashed yet!

  124. Here's something to restore the faith in everyone who's getting their portfolio handed to them by Apple right now.  Pretty cool.

  125. Many of the stocks on my watch list had nearly 2x the avg volume. Capitulation?

  126. All right, I missed this one by a day, but maybe we can talk in Las Vegas about formalizing plan's for Phil's annual holiday retail watch, as it may become pretty important this year.   I was going to recommend a medium term short against KORS, but when I pulled the chart up today, I see it already dropped some 7% today alone.  I've been doing some shopping lately for some more career-friendly clothes after a long absence from the stores; and I've been appalled at the quality of merchandise available under the supposedly high-end names.  Basically, like the assumption that the CPI doesn't count the substitution of ground beef for steak, polyester has been substituted for silk and wool in all of these "designer" names.   This just can't end well for the higher-end brands, because they're not going to be able to compete against the cheap knockoff brands, which own that segment of the market.  In the past, you had a clear choice between a silk-lined wool jacket with hand-stitched details (okay they were probably hand-stitched by children-wage-slaves, but I digress), for $500 and up, or the $69 H&M or Target knockoff with the same style but made out of lower-quality fabrics with a lower-quality look and "feel".   Now, that quality difference is gone.  Alright, so the $69 jacket is now $89-$99.  So what?   Which one are you going to buy if the quality of both sucks?
    Also, when I checked on Ebay, I see that about 90% of the handbags available "new with tags" are either Coach or Michael Kors, even though these are already popping up at the low-end discount stores, like TJMaxx or Ross, at lower prices.  This tells me that these companies are increasing the merchandise available at their factory outlet stores.  In the past, many small entrepreneurs made a dependable source of income buying merchandise at the factory outlet stores and re-selling it on Ebay for a small profit.  It looks like a lot of them may get stuck this time around.

  127. rdn4evr
    Nice analysis

  128. Thanks Williex, too bad I didn't post it yesterday… also, what's with all the typos?  "plan's"? Fer cryin' out loud, I was an English major!

  129. BRK/B- for followers of Warren- stock is getting down to support levels of 110% of book value. Latest Qtrly reports BV at $74; stated share buyback at 110% of book = $82.
    Will nibble at some 14-Jan LEAPS- probably the 80's. Plan to sell front month calls and eventually turn in to a spread.

  130. Good morning!

    Getting our follow-through move to 5% retrace – I'll write about this in the morning post.

    5% AAPL/Jabob – That's in progress now.  We went from $400 to $700 this year so $550 is a 50% retrace and 20% overshoots are common on big moves so another $30 to $520 should be the spike low and that would be confirmed by a quick recovery to $550 and then we'd look to retake to 200 dma at $600 before it gets pulled down – so before Thanksgiving, that's what we need to see but can't be below $550 for more than a few days.

    TZA/Jomp – Remind me in the morning post. 

    Capitulation/RJ – The volume is a good sign if we find a floor – if it's rising while we continue down it's a sign that we shouldn't fight the tide. 

    Cool fashion report RDN – definitely not something I'd ever notice but well worth paying attention to.  Thanks.  This is what's great about this group – so many areas of knowledge to give us perspective. 

    BRK.B/Pstas – Good idea, always worth a look when they get cheap.

  131. Phil
    Perhaps more disaster hedges are in order. It looks like Congress and the Prez are going to wait until the last minute to solve the FC.  In the meantime the markets are going to take it on the chin as everyone runs for cover. Where and what would you add?  TIA.