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Thursday, December 1, 2022

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Testy Tuesday – NYSE 9,300 or Bust!

Almost there!

The Russell is making new highs and the Nasdaq is just under it's May 22nd high of 3,532 (1%) the Dow is 2% under 15,542 and the S&P is also 2% under 1,687 but the NYSE is 4.5% below it's May high of 9,695 and still half a point below the 50 dma at 9,307 and, without that, the whole thing could fall apart.  

Painful though it may be, we stay bearish on these tests.  When we tested these highs in May, we were down almost 10% a month later on the NYSE and over 5% on the others.  

Why did the NYSE fall farther and why has it bounced less than the other indexes?  That's the key to understanding these markets.  

RUT WEEKLYThe problem is that the NYSE is a very broad index, with about 3,000 comanies listed and a Market Cap of roughly $20Tn.  The NYSE doesn't have any popular ETFs that track it, as it's too broad, which makes it very hard to manipulate – aside from it's size.  For example, while AAPL makes up about 17% of the Nasdaq, it's only 0.5% of the NYSE, which makes it so difficult (ie. expensive) to manipulate the NYSE that even Jamie Dimon would have trouble authorizing the funds.  

So, hopefully, the NYSE gives us a clearer picture of the market and we need to take it's lagging performance very seriously but, on the other hand – we cannot ignore the glory that is Russell 1,010 either.  The Russell (see Dave Fry's chart) is another broad index of 2,000 small-cap companies (under $2.6Bn, over $130M) and they add up to just $1.9Tn – much easier to push around!  

But, faked or no, we have to play the cards we're dealt and this is day two of Russell 1,000+ and now we have 3 of our 5 Must Hold lines green on the Big Chart, which means we need to get more bullish.  Both the Dow and the NYSE have a very long way to go to catch up (5%) but, if the rally is real – that shouldn't be a problem for either of them.  

Back on May 21st, we were very skeptical of the rally and that was also a Tuesday, when I titled my post: "2,100 Tuesday – Goldman Gets Sheeple Ready for Slaughter" as that "vernerated" firm targeted 2,100 for the S&P 500 in 2015 and gave us that silly spike on May 22nd.  

A major point in my argument that 1,680, let alone 2,100 on the S&P was getting too far ahead of itself as actual earnings estimates (chart on left) had radically diverged from the price of the S&P stocks.  

I was right for a month and the S&P dropped from 1,687 to 1,560 (7.5%) on July 24th but now we've come rocketing back in the past two weeks and are testing the 1,640 line, our 2.5% zone over our Must Hold Line using our 5% Rule™.  Keep in mind we're still LOWER than where we topped out 8 weeks ago.   We do not fear missing a rally – if the rally is real, we'll have lots of time to get bullish.  In fact, in that 5/21 post I mentioned using the SPY Dec 2015 $180/200 bull call spread at $5.60 to capitalize on Goldman's call.  That position has a 257% upside at S&P 2,000 and now it's $5.35 as the S&P is a bit lower but, if you feel the need to get more bullish – that's a pretty easy way as you can commit 5% of your portfolio to a bullish play and it returns 17.85% (12.85% gain on the WHOLE portfolio) if the S&P is actually over 2,000 in Dec 2015.  

Meanwhile, the REALITY is that stocks aren't really doing that great.  Not the broad indexes and especially not cyclical material stocks, which have gone down and down while companies that don't make anything (except promises) are skyrocketing – in an echo of the rally of 1998-99.  

Most surprising these past two months, has been the 15% collapse of gold, which followed the 15% collapse it already had prior to May's drop.  Officially, for the year, gold is down from $1,650 to $1,250 this year and that's 24%, though from top to bottom it was $1,700 to $1,180, which is 30.5% overall.  So, 24% (today at $1,250) is EXACTLY what we call a "weak bounce"  and it's another $100 to $1,350 – which is our "strong bounce" target for gold (which we have bullish plays on already).  

Keep in mind that we made lower highs (1,654 on the S&P) on June 17th and we didn't like that rally either as that day's article was titled "Monday Manipulated Market Malarkey – Welcome Greater Fools!" and the next day was "Technical Tuesday – Gravity’s Rainbow or Bernanke’s Pot of Gold?" where the message of both of those articles was to take the bullish money and run ahead of what turned out to be a quick 1.5% dip.  We thought we'd keep going down and test that 200 dma (S&P 1,525) so the turn at 1,560 caught us by surprise but now it's earnings season – time to put up or shut up for the market! 

We don't have the Fed Speak (though Draghi was a substitute this weekend) or any IBank upgrades to top us off this week but we do have PLENTY of fuel on the sidelines for a mega-rally as an incredible $60Bn flew out of bonds last month and, one would think, needs to be re-deployed somewhere over the summer.  It's up to earnings season to give us a reason to put that cash in play 

With this kind of money sitting around, it would be really pathetic if stocks can't garner enough interest to get them to new highs.  We'll be watching and waiting – but our action lines are now well-drawn and, today at least, we're still shorting this top.  

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SCO – Entered at /CL = 104.  Day trade NLT than end of wee.  July 32 calls, .42 delta. Theta is the concern at .04.  Looking for a quick 20%

Sell program stopped @ 15:56, that coundn't be the plan all afternoon?

So, PHil and StJ, are we expecting an up day or a down day tomorrow?

Tomorrow / Jerconn – My guess would be down as there has to be some profit taking here… I'll revise my call when I draw the charts!

/CL – report must be out… 104.55

Saw on diffrent chat -9 million again haven't confirmed

Anecdote:  Went to Miami Best Buy to service a 10 week old Apple [wife's machine] that froze up.  Although I am a very frequent customer, it took 1/2 to verify I bought it there, after being initially told that the 90 day warranty had expired.  Finally they accepted that it was under warranty, and took it in for service.  Picked it up the next day, turned it on — no change!! Frozen.  Went to Apple store rather than waste more time at BBY, they pointed out that it had a one year warranty, took it in, fixed it while we waited, fix an older model and reloaded software for a nominal price, took a broken iPad and broken iPhone [we have kids] for new ones at a cost representing a fraction of their price.  If this company is not being well-managed, you sure don't notice.  Went long calls today. having sold the $340 puts on Phil's advice to good effect some time ago. 

Wommer:  I know you don't want to hear this, but It was John Keynes, the influential British economist, who once said 'the market can stay irrational longer than you can stay solvent'.  Short Tesla is going to make someone a lot of money at some point, I hope it's you!!

Almost 105 after the "big shock" of an oil draw. Forget about the fact oil supplies well above normal range. F&cking pricks!

/CL – Currently 104.52.  Taken to the wood shed again.  Hope, that great trading strategy, that whip turns into a twig on my SCO trade.

When are the exchanges going to list 2016 LEAPS?

Cycle 1:
Monday, September 16, 2013: January 2016 LEAPS listed;

Cycle 2:
Monday, October 14, 2013: January 2016 LEAPS listed;

Cycle 3:
Monday, November 11, 2013: January 2016 LEAPS listed.

My guess is that TSLA is on cycle 3, so (if I am correct) the January 2016 LEAPS will be listed on Monday November 11th.

Oil dropping after china opened below 104.30

Phil, still think /NKD is a sell at 14600?

/NKD is on a tear…..Phil disregard the prior request…..Thanks

Phil, please sign me up to help with the Aggregator Project. I was previously offered a job as a writer/researcher at an investment research firm but I turned it down for a variety of reasons. Mainly I wasn't comfortable with the marketing practices. I would like a place that people could write honestly about investment and economic ideas without perverse incentives or hidden motives. 

Phil // TSLA
Thanks for the thoughtful response. A few corrections – my bad – perhaps I wasn't clear. 
The action items would be

— close the stradddle – very little window to make $$ at 92.5
— buy calls back at $100 from the bull spread ( providing sizable credit ) ( 75K )
— buying +40 $150 calls to complete the $130/150 bear spread
– i would retain the $135 short calls, $70 short puts

this knocks my margin into 1/3 and leaves me bearishj
as you know i have been pretty weighted into AAPL, I also feeel this is such a clear case, I want to be as aggressive and long-term as possible.

zero // thanks man – the smoke a mirrors gets me a bit worked up i guess. Trivis has these guys trading @ $35 – when do you pull hte trigger when you see a bear in the dark ?

Wommer:  Phil is the one to answer that, but I think you have to have to scale in when it shows weakness and never before.  If the weakness is temporary, bail.  You have to give up the first 5% downside profit to someone else, and if it isn't good for more than 5%, don't even bother short-hunting it.  Tesla should be good for neggo 30-50% — but from what level, and when, is not something to guess at.  When this whole market tanks, Tesla will be way out in front, I reckon. 

Shadow:  I know you're skeptical on this point, but TLT is going to have its day, and I'm guessing it might not take as long as one might think.  TMF is 3X the 20 year+ Treasuries, if you like to trade with a knife at your throat. 

Shadow / P.S. — The gold futures backwardation ["gofo," check out the zerohedge article] doesn't exactly bespeak market confidence in future inflation.  And if we have deflation gnawing away at the global economy, bonds at current levels look a lot better than watching your Tesla longs tank.

Great newsbrief from Mother Jones, showing the legal defense S&P is using to defend their totally manipulated bond ratings.  This trial should be televised.  

It's true that courts have long allowed sellers to engage in what's called "puffery." If McDonald's says they make the world's best hamburgers, that's OK. It may be a ridiculous claim, but what do you expect them to say? "Our burgers are pretty good if nothing else is available"? Basically, you're allowed to make vague claims about your greatness without inviting lawsuits from folks who don't like your burgers.

So when S&P says they use "market leading software," they're probably on firm ground. That's standard puffery. Unfortunately, "transparent," "independent," and "objective" are a little trickier. Those words have actual meaning, and there's only so far you're allowed to stretch them. When your bond ratings are secretly based on the fact that bond issuers are paying you heaps of money for inflated scores, your claims of mere puffery are a lot less likely to succeed.

But hey! There's no harm in trying. Well, there's no harm aside from the endless mockery this defense is producing. After all, S&P is basically saying, sure, our ratings are completely meaningless because we just produce whatever rating the bond issuer pays us for, but everyone already knows that. Only a fool would ever have believed anything else.

Should be a fun trial.

And how about a comeback for Eliot Spitzer running for New York State Comptroller!  

http://www.motherjones.com/mojo/2013/07/eliot-spitzer-comeback-new-york-comptroller

He would be able to bug Wall Street operating one of the world's largest pension funds.  He and Schneiderman as attourney general could raise alot of hell together.  It is worth watching New York state politics because Andrew Cuomo could be a serious candidate if Hillary decided not to run.  And if Weiner wins the mayoral race in NYC, then it is not just Virginia that is for lovers.  What a crazy state.  

Phil/Spitzer – I would much rather have a sinner in office that believes and works for the common good, than all these "family values" Bible pounders who have no care of their neighbor.  I'd vote for Spitzer for comptroller in a heartbeat if I still lived in New York.  I would not vote for Weiner, and not just because he is more creepy.  Weiner is a sound bite and a makeup kit looking for  a camera.  (Stole that from Frank Bruni in the Times.)  He recently said many great leaders went through adversity – Roosevelt had polio, Mandela spent years in prison.  Yup, overcoming the stupidity of sending pictures of your penis to some unknown women on Twitter equals overcoming the injustice of apartheid.  Weiner should go run an homeless shelter or something for a couple of years and then see if he has learned anything about character.

Busy evening… Well, all 50 DMA reclaimed and maybe that's support now on the NYSE!

S1 on oil is at 105.29 and that seems to be holding so far!

You know that Eliot is in the one tenth of one percent correct..so somewhat elite in his own way for various reasons.. i wonder if kernan has ever paid for sex..i would think directly or indirectly …

Phil 
""or 15 AAPL 2015 $360/400 bull call spreads for $20 and no margin?  You can sell AAPL $300 puts for $16.20 to pay for most of that position if you want to throw some margin around but the simple spread pays 100% at AAPL $400."

I'm getting a TOS Margin of 13K on these spreads ( with -10 of the $300 short puts +20K )

Ami not seeing something ?

 

Phil
Btw, looks like my previopus posts didn't go up. Sorry for mmaking more work for ya – I know you dont have it all in your head. I couldn't find it on the Wiki or my notes. I have notes on every position and WHY I'm in it, along with your scenarios.
 

Sorry mate, 

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