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Timid Tuesday – Indexes get Gun-Shy as they Re-Test the Tops

SPY 5 MINUTEThat was disappointing! 

Things started out very exciting as we opened the S&P at 1,704 and ran all the way to 1,705 for a second there, just after noon but then reality stepped in and ruined the mood.  The Dollar had bottomed out at 81.13 but bounced back 0.5% to 81.55 and that, of course, took the S&P down 0.5% (because they have that kind of relationship) and we had a sad little close.  

On Dave Fry's SPY chart, it's 170 but, on the Index itself, we're testing 1,690 in the Futures this morning, down from 1,703.75 at yesterday's highs – pretty much the same thing but our goal for the index is 1,709.67 – that's the August 2nd high and that's what needs to be cracked on this run or the next time we test our +5% line at 1,680, it may not hold. 

Speaking of lines, it's no surprise, looking at our Big Chart, that the Nasdaq pulled back hard yesterday, dropping about 40 points (1%) from it's silly open to the more realistic close at 3,718.  As you can see from our spreadsheet (which is the real Big Chart, the rest is just illustration) the invisible string between the Nasdaq, the NYSE and the NYSE (both still below the Must Hold lines) was stretched more than 10% and either they had to go up or the Nasdaq had to come down.  

Of course AAPL tends to warp the Nasdaq but AAPL is DOWN $50 since the August highs and that's 10% so it SHOULD have a 1.4% drag (now 14% of the Nasdaq) on the Nasdaq but the Nasdaq is HIGHER than it was in August, when it was just below 3,700.  So, if AAPL is dragging the Nasdaq 1.4% lower but the Nasdaq is, in fact, 2% higher – then QCOM (7%), MSFT (5.5%), ORCL (4%) GOOG (4%), INTC (3%), RIMM (3%), CSCO (2.5%), AMZN (2.5%) as well as ATVI, EBAY, BIDU, COST, FSLR, NWSA, SBUX, PCLN, etc (1%ish) must be MORE than pulling their weight.  

That means the SQQQ ETF (ultra-short Nasdaq) is a nice way to protect yourself from a broad-market pullback.  SQQQ is $21.66 after bouncing off $21 in the morning on the opening spike.  As we KNOW we can pop .70 per day and as there are 31 days between now and October's expiration, a fairly cheap way to hedge is the October $23/26 bull call spread at .45, which pays $3 (up 566%) if SQQQ moves up 10% (a 5% drop in the Nasdaq to 3,530).

So, if a 5% drop in the Nasdaq is likely to cost you $10,000 in your portfolio, investing $1,000 in a hedge like this with a stop at $500 has a potential of returning $6,667 on a dip – over 10x more than you are risking and enough to mitigate most of your anticipated drop.  If you end up stopping out for a $500 loss, then that's simply the cost of your insurance and, if you are being the house, and not the gambler, the short options you sold should be making you much more than $500. 

That's all it takes to construct a good hedge.  It's not rocket sciece – we simply pick the index that has gotten the farthest ahead and bet it will come back in line with the rest and then find a nice short to play it with.  Going up, we do the opposite.  Back on 8/29, we were expecting the market to pop and the Dow was lagging the others, so I said to our Members:

If it were not the end of the month, into a long weekend, I'd be wanting to flip more bullish but it just does not seem safe.  Still, the cover play for now would be DDM Sept $90/94 bull call spreads at $2.40 which pay $1.60 more (66%) if the Dow gets over 15,000 again (DDM now $92.73).  Let's get 40 of those in the STP with a stop at $2 (below 14,850) so we risk $1,600 to make up to $6,400.  

INDU WEEKLYYesterday, at 12:38, one of our Members asked if we should take that money and run on the spread at $3.85 and I said, of course – why risk it when you're already up 60% in just a couple of weeks?  $3.85 x 40 contracts is $15,400 from a $9,600 investment for a $5,800 profit – that's the way we make a bull hedge – again, not complicated…

Our timing isn't complicated either – look how well-defined the DDM range is.  Also on Dave's Dow chart, we can see the channel and sure, we might have squeezed .15 more out of the spread but it's time to look for DOWNSIDE protection as we never assume a channel will break – the percentages favor playing for the patterns to repeat themselves (taking fundamentals into account, of course).  

Since we already pushed ourselves a bit more bullish as we took out the strong bounce lines last Tuesday, now it's time to look at a downside hedge like the Qs because BALANCE is the key to a portfolio that lasts.  And, by the way, if you want to pay for a short hedge today with a long play tomorrow, may I suggest selling the AAPL 2016 $320 puts for $32 for a net $288 entry.  What's not to love about owning AAPL at 36% off the current price?

Meanwhile, we're just wating on the Fed and ignoring the horrific 1.6% drop in Retail Store Sales and we'll ignore the 4.9% drop in European Car Sales and we'll just sit back and enjoy the drop in oil (now $105.86!) while we wait to see which 6 words the Fed changes on tomorrow's statement. 

Yeah, that will make everything all better…  sure it will…


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  1. Good Morning

    RE POST—from Friday

    here is the link to the site

    and the codes are


  2. Oil Lines

    R3 – 109.58
    R2 – 108.79
    R1 – 107.3
    PP – 106.51
    S1 – 105.02
    S2 – 104.23
    S3 – 102.74

    Yesterday's high and low – 108 / 105.72

  3. Oil below $106 Phil.  Do we get $105 today?

  4. CL- I know you comment on this daily but would be helpful to us (me?) newbie CL traders to get a line or two from you at the early time of the day re: trend; lines; general "feel" etc. I take it youare still bearish with a 103.5 target. 


  5. Phil usually comments at the end of the previous day's post.  It's the first place I look in the mornings and he also sometimes tweets if there's anything major going on.

  6. BDC, thanks for the comments on Green Energy.

  7. Phil / MSFT – glad i didn't sell this one yet in light of today's positive news.  i hold the stock out right.  been selling calls against it.  last ones expired in august.  which ones now do you recommend selling?

  8. How do you get the Twitter feed?

  9. 10 more days like this and we are golden…

  10. BRCM – I have Jan 15 20 calls uncovered and they are up 3% today but might be hitting some resistance around 28. Here are my lines:

  11. Pharm, you like BMRN?  I'm in the Jan14 65/75 bull call sp for $4.  Added it a few days ago.

  12. Good Morning!

  13. STJ – Also in BRCM via a spread.  I'm looking at the big gap above $28.50.

  14. Here is the latest Strangle portfolio update – might have moved a bit too quick last week but the market was ramping up so better be safe than sorry!

  15. Whiting Petroleum shares up more than 2% near 53.95 on deal speculation and call volume is 23x normal with 5500 contracts trading in first 30mins (vs 11 puts) and 30day implied volatility spiking several points. Oct 57.5 calls lead the most actives with 1500 contracts trading at an avg px for 63cents

  16. BRCM / Albo – That is a big gap and I think you need a big catalyst like earnings to fill that. Next ones on 10/22. I might cover with Oct calls before that if I see that we dip! But can't cover now with that move!

  17. Watching 3D printer stocks for possible bounce following big sell offs.  DDD, SSYS, XONE, etc.

  18. Are there stocks that focus on this whole self driving car wave?  In 10-15yrs it's going to be the next big thing.

  19. NYMOGood morning!  

    $105.50 bouncy on oil so far.  Inventories tomorrow and API tonight but, as noted in early comments – huge amount of pressure on the oil patch as we grind into Friday with Syria now on the back burner.  

    LAS VEGAS – Please folks, book your rooms using the link.  We're on the hook for these rooms you know.  If you book rooms outside the link, please let Savi know so we don't count on you but we have to sell our block or we pay for them anyway so PLEASE do that sooner than later – thanks!  


    Note on Dave Fry's NYMO chart that we have done nothing yesterday to work off the overbought condition BUT, per the longer-term NYSI, we're not really overbought at all.  So we're not gung-ho bearish into the Fed and of course our bounce levels are in no danger of breaking so still bullish at the moment – probably until the Fed proves otherwise.  

    Dollar held 81 and back to 81.37 with gold still weak at $1,312 and that's a factor of the war worry boiling out of it.  Silver still trying to get back over $22 and that will be the go sign for gold.  Copper is lame at $3.22, nat gas $3.75 and gasoline back at $2.70 is our bull line (/RB) with very, VERY tight stops below (and it's below now at $2.6924 so no play until it's over).  


    UNG has a strong chart and, if it breaks higher, ECA has been floundering at $18 and you can sell 2016 $15 puts for $2.20 for a net $12.80 entry and the Jan $16/18 bull call spread is almost fully in the money at $1.20 so +.80 (66%) if they move up .15 through Jan makes for a fun play. 

    Oil/Bruce – $105 is still our 2nd target but, be aware, it's our 2nd target and we already made the first and the lower we go (range $110-105!) the harder it is to make the bottom and the bouncier that bottom is!  

    Oil/Pstas – My daily comment doesn't change that much but, when it does, we talk about it in chat pre-market (previous day's post, usually).  There's no real "trend" other than our firm belief that the whole thing is fixed and they pump it up when they can and then, when the contracts near expiration (around the 20th), the pressure mounts and they have to start canceling their fake orders so we get some nice drops.  Then the game resets at the end of the month, into the next month.  

    And what Bruce said! 

    MSFT/Terra – It was only a .90 dividend in the first place.  Realistically, they are distributing another $1.6Bn out of their $22Bn in net profit.  Not a very big deal.  As to selling calls, I'd go protective as they have that Surface write-down coming and, unless Bill Gates is coming back – I think all the good news re. Ballmer leaving is baked in at $35 so I'd sell the Oct $32s for $1.45.  

    Twitter/Pstas -

    BRCM/StJ – Does look interesting down here.  

    Strangle Portfolio 666 – Very nice!  

    WLL/Burr – Good one!  They are pretty cheap at $54 and you can sell 2015 $50s for $6.40 for a net $43.60 entry (19% off) and leave it at that as they don't pay a dividend. 

    3D Printing/Albo – Expectations got way ahead of reality on that sector and, unfortunately, Elon Musk isn't CEO of one of those companies.  

    Speaking of TSLA, they really don't want to give up $165.  

    My Brother had a falling out with the manager at his dealership and is looking for a new job.  He's managed Mercedes, Honda, Volvo and VW down in Florida (Boca) and is a fantastic salesman.  If you know anybody who can use someone – please let me know either here or tweet me @philstockworld.  Thanks!

  20. StJeanLuc,

    Your indulgence, please:

    Can't seem to locate the Strangle P update (not under Virtual Port tab that I was able to access).

    Thanks in advance

  21. Pharm/Arna~~ Good morning! The fun play short Sep 7 put & long Sep 8 Call is not working. I'd like to hear how would you like to adjust it to make the money back. Thanks!

  22. HLF of "off the chain".  Anyone long?

  23. Phil

    Do you have the size limits for carry on? Selling to a luggage company sounds best.

  24. AAPL bounce to $460 would be normal and over $472 strong. I see more selling on the cheap phone isn't cheap. If the world economy ever recovers AAPL will be seeing new highs. The rich will never help so if fortunes reverse?

  25. StJean Luc,

    re spreadsheet portfolio link: THANKS !!  I feel like Rumpelskiltskin – not sure when you created this (I'm off line more than on) but thanks for what was a massive effort. Very much appreciated.

  26. Hi.  Where can I find Phil's video that was being discussed yesterday?  Thanks.

  27. taihuichi

    Video is on Fridays comments closer to the end.

  28. HLF/Burr – WOW!  

    Size matters/Shadow – Sure there are FAA standards that must be met.  

    To me, the biggest problem is my laptop and it would be great if the front of the case had a place to attach a separate laptop carry bag that fasten or stick to the the front and come off very quickly once I got on the plane and had to store the bag (leaving it back at the proper dimensions).  The detachable case should also hold the travel docs in an outside pocket for easy access.  

    The key to me would be to put a hinged 3rd pole where you usually pull out the handle and that would snap down and lock in place with a wheel that engages when you tilt the case down.  It has to be strong enough to take the weight of the bag plus another bag on top, of course.  

    This case has an extra pocket (many do) but it doesn't detach and, if you fill it – a lot of airlines don't have room to fit it overhead.  

    They sell a lot of dual carry-on bags where the one is meant to go on top of the other but, realistically, most people have their own brief case or laptop bag they prefer to use and they stick it on top of the wheelie bag and then it's too heavy on top – hence the problem we're trying to solve.  

    AAPL/Shadow – As expected, having trouble at the weak bounce line.  

    Video/Taihu – Do me a favor and wait a couple of days for the edited version.  I can use fresh eyes!  

  29. shadow AAPL
    i went and sold come more puts yesterday ( nice VIX ) I think once people or media grock the full story, AAPL is going to the moon. 
    It makes sense too – Jobs was an innovator, and that manifests in beautiful design and attention to detail on many fronts. Up until 20 years ago, that was unheard of. He also pioneered and had the vision of the 'product ecosystem' – to this day no one can even touch.
    Cook striked me more as a strategist. It occured to me last night that what AAPL is doing is going for 'the wallet' making POS and purchase transparent. The new fingerprint sensor has many implications we havent even thought of, but the most precient is the integration of technologies like triangulation with 'Beacons' and bluetooth with your phone. One of which would be Instant purchase – the implications of this are immense.
    We've tried this with international clients, but the stumbling blocks were always different protocols on phones and ubiquity, plug-ins, etc. AAPL has literally redefined NFC – I'm still unsure how they can patent it, but it is extremely clever.
    Someone said a while back – 'theres only so much you can do with a phone' . I tend to agree. The expectations are too high, but I find this on the back page and I have to wonder. AAPL is making all these very smart moves behind the scenes but no one is talking about them. I would go as far to say they are literally downplaying them.
    Comments welcome.

  30. kinda interesting on many levels: 1) the banksters don't want you competing with them by beating thema t their own game (currency manipulation), and 2) the length the gov't will go to protect them ("domestic terrorist"… fo rbeing innvative??? please!)

  31. CAG putting in a bottom?

    Maybe follow the 186 lot spread of the Jan 32/35 call vertical for 1.10?

  32. Wombat

    I am in serious doubt that they can patent the technology because it isn't really new. They are doing no more than my idea of Phil's carry-on. That is why I said sell it to a baggage co. I think AAPL stock is down because the consumer is not back and as it stands isn't coming back. May sound off to the well to do on the board but I know more shutting off devices than turning them on. Phil's kids have IPhones but the kids I know here don't and this is not a poor community. I have 2 friends that have IPhones one drives a 94 Pick up, the other an 82 Toyota, both have been BK and have no credit, one has a job that ends when the school is built, and the other no job lives with 80 year old mom. That problem is getting worse. Their are jobs in Pocatello ID with TV ads, truck driver recent and call centers. Call center pays $8.50 per hour and the word is it stops unemployment benefits, average stay is 3 weeks. Truck drivers are on the road, not a family glue, driving school is very expensive.

  33.  interesting china iron ore spot(leading indicator) rolling over as investors think economy accelerating…-2.4% today…-8.2% in 4 weeks

  34. A good, non-technical primer on one of the major issues facing green grid technology. (note: the vehicle-to-grid solution is really just a Li-ion battery solution with lots and lots of small, distributed batteries — "social energy" type of concept). 

  35. angelcur China

    Iron ore or whatever the pet economist comes up with next. They need a global economy revival and the top calling all shots is the problem, the rich seem to think people have secret stashes of money and holding back, they have nothing, it is called living paycheck to paycheck if you have one. The world is all the same, big money spread it out and no sharing allowed.

  36. Shadow, when I was at the Havana Jazz Festival in December, many of the students we saw had iPhones, which they get as presents from outside the country or smuggle in.  Our tour guide offered $700 for one of our 5s, he had a 4.  He said that "everyone" wants one.  Students and tour guides may be a small subset of this poor country to draw conclusions, but maybe useful in projecting demand in other "poor" and developing countries.

  37. BDC

    I am a thinker and small batteries came to mind with a big and heavy problem. There is still a stacked charging issue. Any series circuit has the connected problem and parallel suffers low voltage. Relays of any type to switch are unreliable under high current, either heat or contact fouling.

  38. BDC – thank you for the clean energy info. Interesting stuff. Any favorites on your watch list?

  39. Short-Term Portfolio Update – It's not the current positions that are killing us, they are only down $2,000.  It's the stuff we took losses on already (many of them from rolls, of course).  

    • SBUX – Selling the Sept puts was smart, they should expire worthless and we can buy back the Oct short $67.50 puts (.20) which leaves us with 2 sets of puts and hoping for a nice dip in the next two weeks but earnings are not until 10/31 so we may be rolling yet again.  
    • StarbucksKraft Bagged Coffee Battle Will Last Even Longer 

    • The legal fight between Starbucks (NASDAQ:SBUX) and Kraft (NASDAQ:KRFT), which is now awaiting a binding arbitration decision, will have to wait even longer. Both sides had said they expected the arbitration decision in the first half of the 2013 calendar year. In its newest quarterly filing, Starbucks has revised that to be expecting the decision in the second half of the year.
    • Fortunately, Starbucks clarified that it meant the second half of its fiscal year, which happens to end in September. But at least we know we'll have a decision before October, right? Not necessarily. "We are respecting the privacy of the proceedings, and there is no set deadline by which the arbitrators must provide a decision," said Starbucks spokesman Zack Hutson.
    • The issue is now not whether Starbucks will pay Kraft an early termination fee, but how much it will be. The two sides are rather far apart, with Kraft calculating the debt at $2.9 billion, plus attorney fees. (Why do we think the attorney fees will trump that debt figure?) Starbucks said the amount is actually $62.9 million. (Let's split the difference!, suggest Kraft's lawyers, between our ludicrously embellished figures and your absurdly underestimated figures. This is sort of the Dilbert school of marketing math: "Let's assume that everyone on the planet has either heard of the word 'coffee' or has heard of someone who has consumed it. So just cough up one dollar for each of those people and we're good. You don't think one buck is reasonable?")
    • Analysts are actually guessing that the arbitration will force Starbucks to pay more than $1 billion.
    • FAS – Didn't we have a stop on 1 of the short Dec calls at $3?  Yep, we did.  So stopped out on 1 and no worries on the other.   
    • CMG – $424 and still not worth $420.  We'll roll if we have to.
    • USO – $105.66 but they are October puts so no hurry.  
    • SCO – Looks promising to me!  Anything over $28 in Oct is free money x 2,000.  How nice would it be to get back to $32? 
    • TM – $127.14 with 30 days to go.  Japan is still up but I think we should take $130 and run if we get that lucky.  
    • GMCR – At $85 means we're being charged $12,930 in pure premium for our short Jan $90 calls with $5 to spare!  What's not to like?  
    • DIS – LOL, remember when it didn't look like they'd come back?  So glad we had faith.  Oct calls are still a long-shot but the bull call spread now looks healthy.  A TA guy looks at this chart at $61 and thinks "disaster" while a Fundamentalist looks at the chart, THEN looks at the company and thinks "opportunity"!
    • MA – Dead money. 
    • OPEN – Good on our short $75 calls but the longer-shot puts (Sept $65) didn't pan out.  
    • GLW – An all-time PSW favorite.  We'd hoped for $15 and it looks like we're getting $14.50 so a small loss and we can do it again next month with 20 of the Oct $14s at .70, selling 20 of the Oct $15s at .17 for net .53 on the $1 spread.  We'll also buy back the Sept $15 calls for .02 and see how the Sept $14 calls play into Friday.  
    • GLD – Wow did those go the wrong way but the month is young and gold is volatile so, if not now, when?  Our Oct $140s are .27 and we'll leave those but pick up 20 of the Nov $120/126 bull call spreads at $4 which pay back $6 (up $4,000) if gold simply holds $1,300.  If gold goes lower than this, I'll be all for selling puts to pay for a more aggressive roll.  Keep in mind this was originally a spread with the $145 calls which we made $1 on – so not as bad as it looks. 
    • MSFT – Hey, that one worked!  I think we're done with this one so let's take the $2.06 and run (should have sold into the excitement, of course).   That was a perfect call on the 9/3 entry:
    • TSLA – Behaving itself at the bottom of our bear spread (so far).  Unfortunately, we have another 30 days to worry over it.  
    • NFLX – Wow, I finally put my foot down.  It's us vs. Cramer on this one as he's pumping for all he's worth:  
    • Jim Cramer Watches for Netflix, Wendy’s, and These 3 Stocksat Wall St. Cheat Sheet(Tue 10:16AM EDT)
    • HLF – Ouch, I feel like Bill Ackman!  FU Icahn – we're buying back the Oct $65 puts ($2.15) and spending $3.90 to roll up our $70 puts ($3.70) to the $77.50 puts ($7.60) which puts us in the $77.50 puts at $2.80 (our original spread) + $2.15 (the buy-back) + $3.70 (the roll) = $8.65 so we're down $1 and we're not going to cover but we WILL sell the Oct $75 calls, now $4.30, for $5+ if this silly stock goes any higher.  We're playing against the expectations of this - 
    • Herbalife may announce an aggressive leveraged buyback, says DA Davidson
    • DA Davidson believes Buy rated Herbalife will announce an aggressive leveraged buyback once its audited financials are released in the next couple weeks. The firm notes a $2B tender offer at $75 per share would be accretive by a $1 per share and will put the bear case at rest once and for all.
    • POT – Still waiting for them to come back but moving up slowly but surely from our 9/10 entry.  
    • AAPL – Seriously?  We have until November for AAPL to hit $465 and we make up to $22,900?  And our break-even is $442.10?  Seriously?  Why do we only have 10 of these?  And yes, it's even cheaper now (net credit of $3.82).  
    • Now, above I noted that a TA person looks at a chart one way and a Fundamentalist another and maybe you are saying "sure, but what good does that do me a month later?"  Well, here we are looking at the AAPL fundamentally when the chart looks like crap and the trade, which was a $2,100 cost is now a $3,820 credit (so we're down $5,920 or 281%) EVEN THOUGH AAPL is at $457, which would pay us +$17,000 at expiration.  
    • I know it's asking a lot to expect you to ignore 281% losses and breakdown charts, etc but this is what Fundamental investing is all about.  You can't trade like this if you don't understand and BELIEVE in the companies you choose to INVEST in – not a game for traders….
    • WYNN – Just seems toppy to me at $150.  I likes that story about Chinese cruises competing with Macau for gambling revenue but Macau is up huge so we have to be careful with this one.  


  40. Speaking of clean energy, anyone see the Bloomberg Brink on Houze?  I think it's on youtube too.  Very cool.  Nat gas energy generators and plans for houses that have 0 energy cost.

  41. AAPL/Wombat – They already have over 400M unique credit cards on file and a lot of verifiable information to establish ID that connects them. They play a very deep game with ITunes and the App store just a way to get people comfortable with buying stuff through AAPL.  Their Apple Stores are a model for the modern sales floor (which BBY is already adapting to great success) and the reason they don't come out with cheap phones is because the fingerprint scanners aren't cheap and they don't care if Samsung sells 6Bn phones without scanners because AAPL only cares about the 1Bn people (the global top 20%) that want to use their phone as their wallet.  

    Interesting/BDC – Wait till they start rounding up the bitcoin gang.  


    Meanwhile, oil just tapped $105!  

  42. a social energy concept would be renting your personal Li-ion stack to store energy while it is not and receiving revenue (from the micro-grid around you). This is where Elon might be going with the tesla. Having highly distributed micro-grid points of storage is a viable solution to the energy-storage problem relating to intermittent green energy production.


    The user's incentive to save on their own power use is increased revenue, as opposed to just savings in traditional utility bills or the "good-for-the-earth" feeling… Now THAT is real incentive!

  43. Embedded image permalink

  44. taihuichi students, festivals

    That is the point I am making, students have money backing especially the ones at festivals. Go to the mall, restaurants or the airport and everyone has one or wants one. Take a look at grocery stores where the other 90% get food, not a trendy high end spot, and people walking around are not on the phone. The local store is very clearly tourists and their kids are texting, playing, talking. The locals used to be but it has changed. Yesterday in Idaho Falls, average pay $9 per hour, I saw just 2 people talking and no kids with anything. Went to Wall Mart, their cat litter is great, jammed at 5:30 not a single user and I made a point of walking by the phone center, not even a clerk. That is all I see, and I am sure it differs around NYC, San Francisco, or where you go. Check where you never go.

  45. Pharm    PLX   Whats your current take on them?

  46. BMRN – love them.  That is a lot to pay for it, but chart looks ok.  I would put a mental stop on it…JIC

    FYI – An HIV/AIDS vaccine candidate developed by researchers at Oregon Health & Science University shows promise for a potential preventive treatment of the disease, a crippling worldwide public health concern. The experimental vaccine, tested in non-human primates infected with a monkey form of the disease, has cleared the AIDS-causing virus in animal subjects.

    "To date, HIV infection has only been cured in a very small number of highly publicized but unusual clinical cases in which HIV-infected individuals were treated with anti-viral medicines very early after the onset of infection or received a stem cell transplant to combat cancer," said Dr. Louis Picker, associate director of the OHSU Vaccine and Gene Therapy Institute, in a statement. "This latest research suggests that certain immune responses elicited by a new vaccine may also have the ability to completely remove HIV from the body."

    To create the vaccine, the team of scientists, led by Picker, used an approach that involves a cytomegalovirus, or CMV, a common virus already carried by a large percentage of the population. In test subjects, scientists introduced the highly pathogenic strain SIVmac239--the simian immunodeficiency virus, which causes AIDS in monkeys and is up to 100 times more deadly than HIV.

    The scientists engineered the CMV so that it would express SIV proteins, prompting a favorable response. Pairing the CMV with SIV spurred the creation of "effector memory" T-cells while maintaining existing ones. T-cells are the immune system's disease-fighting cells, but T-cells generated by conventional vaccines of SIV alone are not able to kill the virus. But the SIV-specific T-cells produced by the modified CMV were able to clear the virus in monkeys.

    About 50% percent of the monkeys infected with SIV after vaccination initially developed SIV but eventually banished all trace of the virus. The research, which was funded by the NIH, International AIDS Vaccine Initiative and Bill & Melinda Gates Foundation, was published Sept. 12 in Nature.

  47. My borther in law doing his thing.


    Go see the f****** movie, alright guys!

  48. BDC

    A limit is how many batteries can be built. So what happens when your car plugged in has discharged to help demand, something happens, you have to go. Then batteries are DC efficient transfer on the grid is AC. This is a major issue with solar cells, conversion. Big heavy expensive transformers and don't forget all the switching. Flywheels and generators of AC bypass all these problems, not saying they are an easy solution but Elon is not that smart, doesn't understand limits. I have been approached on designing better cheaper conversion but it is not possible with todays components. Maybe a China like at 100s of times lower cost but who would spend all the money to make very little.

  49. FYI——-I phone 5s sells out instantly in China—-

  50. Shadow, no question about the growing divergence between rich and poor, urban centers (jobs) and the rest of the country. How does this affect your judgement about Apple as an investment?

    It seems like most everyone wants one, and the ones that have them use them to buy things. When I am in Costa Rica, my friends ask me to bring them minis for their kids to use in school.  


  51. I'm done with oil shorting until tomorrow, right Phil?

  52. Shadow – FC's are third leg to the micro-grid stool. #1 leg is Solar, which is generally widely distributed (home roof-tops the #1 installation) and then #2) wind which is exactly the opposite (huge concentrated farms) which is really just coal/natural gas replacement (so more base load than micro-grid), both of which combine to get you 70% of the way to the base load, which is both erratic and highly distributed (residential homes, industry, etc). So a micro-storage solution such as the battery we've already described is about half of the difference. The last leg of the stool is integrating a 60 kWh tesla size battery (about 3 days of power for most residential homes, on average) with an on-demand clean energy source that is 24-7 reliable.


    For example, we are making a home ethanol FC that runs at 300 W. So that would deliver 7.2 kWh/day to the user. This could tie-in to the DC solar already installed (this usually yields 5-10 kWh/day dependent heavily on location), giving the user a base per day total, on average, of ~12-17 kWh. Micro-metering and distributing this power locally drives incentive, because neighbors essentially buy power from each other (and electron goes takes the path of least resistance, so it'll go to where it wants to be used first), a concept in social energy, in that you buy and sell from each other and NOT the grid in a microfinancialized way.


    And no, I will not take the bitcoin bait (I no longer discuss this topic on this forum), with the caveat that, just this one time, I will say that bitcoin would be a damned good way to process such microfinancialized transactions….

  53. Nice primer BDC.  

    Houze/Burr – I like those.  Getting some high-profile endorsements too.  

    Idaho Falls/Shadow - This is a good site for getting a quick view of a city's economy in the US

    AAPL/Savi – Not too surprising.  Don't confuse all the naysayers with facts, though…

    AMZN took off again:

    BA really taking off (big Dow booster at 8 points per $1 – good for about 60 points in 2 days):

    Oil/Bruce – That's wise but I still like the play below the $105 line (/CL) as that's a bad break if it happens. 

  54. Speaking of bad breaks – gasoline $2.65!

  55. pharm – that's interesting eradication of SIV….

  56. taihuichi

    As an investment AAPL is about the best technology but check what BDC's f  ing movie to watch is about on the 27th. I am saying we are on a course that will take down all but the very richest. Bottom line is you need a buyer of anything or your business goes to the crapper, every one of them. You will need to grow your own food is the end game. Could be reversed but very unlikely. Remember "birds of a feather flock together". The silent un-seen can't get out on any level but they are there!

  57. Today is the 1000th consecutive day that the average price of gas was over $ 3in the US.…

  58. Pharm – AGEN, the biotech du jour.  Any thoughts?

  59. Pharm~ maybe a busy day for you. Have you gotten a chance to take a look at my earlier post regarding the Arna question?

  60. phil,

    your thoughts….tsla has been up slightly the last two days and my p/l has gone up about + 5k….is that the options vol going down or their pricing being reworked ????

  61. CL trading question- no position now. It bounced off the 105 line several times since this morning. 

    How do you read that if anything? 

  62. Some more shadow economics everyone should be keeping in mind before you blow me off as a disgruntle. When has the world raced for devaluation and what is the likely out come? First place looser won't buy you a meal if anyone would sell one. This is a world wide bubble and when it pops 1929 and 2008 will seem like a little kick in the ass. Think about a world liquidity problem, no one has anything with value because no one has money worth anything. Don't expect gold to save you because it will be worthless for the same reason. This happening all over at the same time has never happened. People will be fighting for food not trading for things without value. I know that everyone thinks it can't happen and likely it will be stopped at some point when the controllers finally realize they can't win either or eat. But don't think for a minute it couldn't happen. I think we are approaching a point of no return and hope it changes tomorrow.

  63. YES!!!!! That means end QE and never go back.

  64. Another CL trading question- via casual observation/not a detailed study mind you it seems that the dollar (DX) has lost its inverse correlation to oil prices. This article I found from earlier this year adds some detail.


  65. AGEN – interesting…..very interesting.  Misses in one trial, helps in another.  I think I will sit on the sideline, but a small put sale in time or waiting for it to retrace would be wise.

    ARNA – roll to Nov 7 Put. STO.  Call is dead.  this was a credit trade, so lets get our money back and be done.

  66. I like the Josh Brown article ilene just posted….


    I chose #9 – Sharknado…. :)

  67. Spitting Cobra formation.

  68. Interesting on gas Randers.  It is amazing what you get used to. 

    Quirky/Shadow – I love that.

    TSLA/Mill – I think they are steadying and some of the volatility premium is draining out of options (for now), that's all. 

    Oil/Pstas – Well, it's just in the channel from $110 to $105 since early July so nothing shocking here – what we're HOPING (not a valid investing strategy) for is a break back down to the $105-100 level or even the $95s, where we should be with no war and no summer driving:

    Notice the nice sell-off we got last Sept – right about this time.  That's what we're hoping to catch but not smart to bet the farm on it day-to-day….

    Point of no return/Shadow – How long?

    Dollar/Pstas – Clearly a daily move in the currency affects oil but, same as the markets – it quickly fades over time.  When oil was a steady commodity, it used to be more affected by the Dollar, of course.  There are simply too many other factors that affect both oil and the Dollar to imagine they should have a long-term direct correlation – especially when both are being manipulated by different cartels (banking and oil). 

    LOL 1020! 

    Spitting cobra/Albo – Very nasty…

    Wow, almost 3 already?  This week is flying.  Fed tomorrow! 

  69. Thanks, Pharm. I was thinking to have Arna assigned to me to practice buy/write to get my $$ back. I guess either way is fine. Damn Halo never gotten a chance to pull back to let me increase my positions. :)

  70. Pharm – SSH?

    Sometime of device that lets the heart heal without being tied to a machine?  Ppl are calling for a double?

  71. Attn Grand Theft Auto fans:

    • Were expectations too high? Even though Grand Theft Auto V's launch day has yielded plenty of long lines and a Metacritic score of 98/100, Take-Two (TTWO-2.3%) has given back its premarket gains, and is now down 4% over the last two days.
    • Reviewers glow about GTA V's movie-like realism, use of multiple protagonists (or are they antagonists?), and freewheeling plot lines. Polygon: "GTA V is a bright between games' present and the future." Joystiq: "The open-ended gameplay remains a showpiece for the vast amount of content that can be poured into a virtual world."
    • Wedbush's Michael Pachter thinks GTA V will see 20M-25M unit sales over its lifetime, and generate up to $1.57B in revenue for Take-Two. But as Pachter notes, Take-Two shares have already priced in a lot of good news.

    I think it's worth a toss to get back to $19.  You can sell Jan $15 puts for $1 and that seems good now that risk of a flop is clearly passed and the rest is waiting for 10/28 earnings and outlook, which almost can't possibly suck so the Dec $16/19 bull call spread at $1.30 give you a .30 net on the $3 spread with a 900% upside at $19 betting on a game company into XMas!  

  72. Our CZR trade is rockin' and rolling already:

    Caesars deals the cards for online poker this week
    • Caesars Entertainment (CZR +5.5%) says it will launch its real-money online poker site on 9/19 at 9:19 AM PDT.
    • In a twist to the launch that will keep politicians hopping, the company says it will support "shared liquidity" with other states outside of Nevada in order to open up the number of players that can match poker wits.
    • Gibraltar firm 888 Holdings (EIHDF.PK) is also taking part of the online rake under its partnership with Caesars.

  73. Phil how long

    I feel that 2016 is the end point and QE must end next year. Let the Japanese and the rest make cheaper products. If the US wakes up they will start giving money to go to work or do nothing but spend it. No real jobs no problem make some of the jobs report to work. What worked was the US consumes what the cheapest producers sell. How to pay for it? 1950s taxes. Or we could dig the deepest hole ever, first we need to find where on earth the molten center is deepest and that would put some to work while needing equipment to do it. And all those projects you want started in 2007/8.

  74. SHLD out of control!  

  75. Thanks Phil for the CZR trade idea. Wishing to buy more if it’d pull back.

  76. SHLD the 1999 warning of 2013.

  77. Czr – my idea :)

    The 2015 are still fine to sell.  Just throw the order out there.

    Also note the CZR 2015 $7.50 puts are $1.80 for a net $5.70 entry (77% off) 

  78. KERX

  79. HFT BOTS ran the market up today. Liquidity!??!

  80. CZR/Burr – right you are – thanks for catching that and paying for our trips to Vegas!  

    70M on the Dow with 23 mins to go is busier than yesterday and 1,703 on S&P is nothing to complain about.   At least some people have a fantasy that they Fed will send us to new all-time highs tomorrow.  

    Our do nothing policy on IBM paid off yesterday as they went back to $192 and our Butterfly Collection is back to being up 5.9% – yay doing nothing!

    Albo was asking yesterday  why people can't get excited about 20-40% annual gains and here's one making 3% a month (36% a year) and we get almost no comments on it.  I don't know why – I should probably just set up a whole other subscription site just for this.  According to Power Options (where I keep the portfolio), the margin requirement on this whole set-up is $420 and we've used virtually none of our $100K buying power but the 5.9% return is on the WHOLE $100K, not just the little spreads.  

    I find this VERY EXCITING and I wish other people would too.  

  81. I'm scared of butterflies.  Seems like you have to guess really accuratly for max profit, and the cost of commish is 4 legs.  Just my 2c, but I'll try the next set with you.  How did you pick GS and IBM?

  82. Phil – I guess we are the only two. :-)

  83. Burr
    ahahahahaahah – i was just writing the same thing but i wimped on the cheese factor

  84. TITN just not catching a bid here.

  85. ZNGA – Nice breakout.

  86. Phil

    Yesterday you questioned my engineering skills. Today I will tell you that a design program to do this is not cheap. I would spend some of my last dollars to get one and the time to learn it's use if I was sure I would break even on expenses. Many years ago I could draw this up but today that is fire starter. These programs do all the math but more important will show movement from collapsed to extended. Every angle, length, etc. I could give a very detailed proposal and if you knew a key person at ??? manufacturer it could be sold if you trust me and they trust you. I have this idea so down it makes me sick to know what industry wants and that takes an investment in a GD program.

  87. I'm with Burr and wombat, I don't understand them well enough to feel comfortable but I sure would like the 36%.  Maybe a quick tutorial on them would help us get that comfort level we need.

  88. Phil/butterfly

    I mainly trade in an IRA account. While this is ok for the balanced setup you have, if you start making adjustments I am screwed.

  89. Oil is behaving very strangely.

    Usually towards cycle end – spread between two front months is narrowing. (My guess was that it is because of rolling.)

    Today spread widened dramatically.? May be most of the roll is actually roll of short positions. Too many shorts?

  90. Phil – Butterflies are an interesting strategy and your examples and commentary is extremely helpful in getting comfortable with the structure. I tied them a couple of years ago, without any real success. I'm hoping to participate with the next few ideas. I'm sure people are monitoring in silent mode — guess we need to be a little more vocal… Thank you, Eric

  91. Burrben~ the 2015 czr 7.5 put is around $1.4 now. Still not bad though.

  92. Boring trading – Phil/  Thanks to PSW, my yearly covered-writes are on pace for 15%.  Add the long puts and well over 20%… and I look at it once a day and never lose sleep over it.  Actually doing better than my trading account at this point (Thanks, summer 2013)

    Anyway, the point is that anyone with enough money would be wise to do the 20% – 40% stuff and do trading as a hobby…

  93. Butterflies/Burr – Please do – Albo and I need a convert to the rational investing side!  The trick is to find stocks that are priced for more motion than they are likely to have.  MSFT, for example, just had a couple of violent events (Ballmer stepping down, upping dividend) so their short-term implied volatility is now probably higher than their actual long-term volatility will be.  

    So I look at this chart (and much longer ones) and I consider that they aren't going to be popping the dividend again and Ballmer can't step down twice and they are now back to last year's highs and we assume $32.50 to $35 is the "right" price going forward.  I see the 200 dma at $30.50 and I'm pretty sure that will hold (rising .50 per month) and the 50 dma is right at $32.50 and earnings are 10/14 – right before options expiration on the 18th.  

    If we want to squeeze around $32.50-35 we can buy the Dec $35 calls for .70 and the Dec $31 puts for .85 and we can sell the Sept (Friday) $33 puts and calls for .40 each because, no matter which way MSFT moves over the next few days, I know that October earnings will give me a nice premium roll no matter what and, most likely, they drift around here and, if we get lucky, they both expire worthless.  Let's add 20 of those to our Butterfly Collection!  

  94. why no AAPL love ; <

  95. 1 Custom Spread
    view Long Put 2013 21-DEC 31.00 PUT [MSFT @ $33.00 $0.19] 20 9/17/2013 (95) $1,700 $0.85 $-0.02 n/a     $0.83 $-0.16 $-40 -2.4% $1,660
    Short Put 2013 21-SEP 33.00 PUT [MSFT @ $33.00 $0.19] -20 9/17/2013 (4) $-820 $0.41 $0.02     $0.43 $-0.21 $-40 -4.9% $-860
    Short Call 2013 21-SEP 33.00 CALL [MSFT @ $33.00 $0.19] -20 9/17/2013 (4) $-820 $0.41 $0.01     $0.42 $0.01 $-20 -2.4% $-840
    Long Call 2013 21-DEC 35.00 CALL [MSFT @ $33.00 $0.19] 20 9/17/2013 (95) $1,440 $0.72 $-0.02     $0.70 $0.02 $-40 -2.8% $1,400

  96. Phil – slow to comment – but I liked the video very much. The fundamental elements  -PEG etc, were very useful, but we spend so little time discussing those, it was almost novel. I am all in favor of the boring and  very profitable trades, and would like to see those featured more frequently. After three-four years as a member, I almost never follow the short term portfolio (although I have done well with your earnings back spreads), but very much like the longer ones. I realize that the site would not be very exciting when most of the time would be spent waiting for selloffs. I have participated and enjoyed the butterflies, and would like to see more. I personally have been more successful working with ratio spreads, and would like to see  some additional discussion on the topic. TIA

  97. Phil

    Another point about engineering and my ability to see what is needed. About a week ago very depressed with my outlook I posted, " They will need a team, go from the front and back at the same time and I have neither the money or the contacts to make it happen." Yesterday the doctor said to straighten my spine they would need to go from the front and back at the same time to correct the alignment and hold it in place, first push from the front and clamp from the back, clamp the ribs, and finally clean un to fuse from the front so the disc can be removed. The person with me dropped a jaw when he said that. I gave every detail on the 1.5 hour drive of what I saw in the MRI and CT.

  98. On the AAPL side they failed to hit or close above weak bounce levels.

  99. Butterflys- OK you got my interest. Never traded them. First question- looked up definition and it calls for a long call above; long call below; and 2 shorts in between. TOS sets up the same way when I select that option from the menu. 

    Your MSFT example uses calls and puts plus different expirations? 

    Please explain. 

  100. Rocco strikes again – here Phil – tweet this 

  101. So the simple concept on the butterfly is that, between now and December (including December) we just have to sell more than $2.50 in premium and we pretty much can't lose.  Selling .80 in the first week is a good start.   

    By the way, the system calls it a custom spread because a normal butterfly is all in the same month, we simply extend the life of the trade.  

    TITN/Burr – Sad. 

    ZNGA/Albo – I like them down here.  Poker is now a plus again.  

    Programs/Shadow – Just giving you ideas I think would make money. As I said, money could be raised on Kickstarter to fund it but if you can't even prototype a design – not going to go anywhere.  

    Tutorial/Jr – As above, that's all there is too it.  Mechanics are simple, the real skill is in selecting the right stocks but I'm pretty good at that.  I'd say learn by doing with one share at a time until you get comfortable because these trades take a while to play out and there's no substitute for following along.  

    Adjustments/RJ – For the purposes of this portfolio, we are not moving into unbalanced positions – tempting though that may be at times.  Generally, we let one end expire worthless and roll the losing short position to the next month (splitting to short puts and calls again) until we hit our expiry month, hopefully between our two original strikes for maximum profit.  The most we can lose is the spread which, in the MSFT case, would be the $2 between the short put or call and the put or call that covers them plus the $1.50 we spent on our longs less the .80 we sold to get started for net $2.70 maximum loss.  We can sell Oct $33 puts and calls for $1.75 and, once we do that, the max loss drops to $1(ish) and then if we sell Nov $33 puts and calls for $1.75 – we gain at least .75 no matter what and, if that works out (MSFT stays flat) and we sell Dec $33s for $1.75, then we gain at least $2.50 and possibly a lot more.  That's it – not complicated.  It simply requires the one thing very few people seem to have – PATIENCE!  

    ADBE (Jackie's pick for the summer) is hitting new highs at $51.  Too bad she quit on us – she was a promising intern!

    Oil/Lol – Yes, this is as crowded as I've ever seen the trade.  That December firewall makes for a tough roll as Jan is a new year and causes accounting issues for the traders.  It looks like they only dumped 2,000 contracts all day and the termination date is Friday!

    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Oct'13 106.22 106.43 104.94 105.51 16:10
    Sep 17

    -1.17 273440 106.59 140021 Call Put
    Nov'13 105.83 105.96 104.40 104.72 16:10
    Sep 17

    -1.37 199082 106.19 289372 Call Put
    Dec'13 104.43 104.64 103.02 103.27 16:10
    Sep 17

    -1.36 87242 104.82 258811 Call Put
    Jan'14 102.98 103.21 101.54 101.75 16:10
    Sep 17

    -1.36 24257 103.35 84212 Call Put

    Thanks Eric, that's encouraging.  

    Boring is good/Arivera – Thanks, I hope others take heed.  We do tend to overlook these simple, money-making strategies because they aren't much fun – until you retire rich, that is!  

    Ratio spreads/Deano – Well earnings is a great time to bring them up.  Make sure you pester StJ for those excellent notes he has on the usual earnings volatility – that's where a lot of our best trade ideas come from.  

    Seeing it/Shadow – So let's figure out how to put that talent to use.  

    AAPL/Shadow – Very sad but it's just a Price.  Just means we have to wait for the chart to realize the value.  

    Butterflies/Pstas – That's because I'm teaching you things no one else knows.  It blows my mind that no one ever modifies these old saws but my mind was blown 30 years ago when I first started reading Schaeffer's after college and realized the guy knew less than my Grandfather taught me when I was 10.  

    Rocco/Wombat – Doesn't say anything new but a good re-hash of the current situation.  

  102. Earnings / Phil and Deano – I have to get back on track with these… I lose interest after the first 4 weeks usually. I suggest that people send me request for the analysis. But I'll get the main ones when we get started in the next 2 weeks.

  103. Wombat, I like Rocco and always followed him at SA, thought maybe he had gone over to the dark side as I had not seen much in the last year.

  104. Phil provide it

    I tried a free program and the results were less than a drawing. I could build a wooden prototype even an aluminum but haven't got the stock. I know a local welder that could build it but first I don't trust him to not screw me and second he wants $60 per hour. After a while the $2,000 program that an engineering student said I need is cheap. His school doesn't provide it but the professor says that is the required program today. By the end of the year it will be something else at a higher price.

    Fact is I am holding details now, this site is watched.

  105. Phil, I would like to see a workout on the Butterflies going against you. Did we not used to have a guy called the Income Trader that had a massive blow up some years ago doing those?

  106. Want a detailed explanation call me on the land line. That I trust as the NSA has no clue on anything but terrorism and crime.

  107. BTW this idea is good enough to fear theft and Thanks! for the inside.

  108. Does anyone know how to enter a custom butterfly trade in TOS? I can't get it to show me 4 legs. Thanks.

  109. TITN / No biggie, I only did 2 of the spreads instead of 10.  I have an alert that if they move to 17.50, I'll buy a little more, then a little more at 18, etc.  Therefore I don't go "all in" at once.  If they drop below the 52wk low, I'm out.

    Article on TITN

  110. NPR on Linda Ronstadt

    She was a Jerry Brown sweetie when I lived in CA and now has Parkinson's.  She said she loves to knit but can't do it now or sing. I always liked her music and to day relate to what you can't do when you can still do so much. The worst part for me is falling into ridiculous not being able to support myself because the status quo is "You are replaceable and someone younger has a longer run." All you tax payers should take note as you will be paying keeping me alive although it doesn't need to be that way.

  111. japar

    TOS used to be great and gave PSW a great deal. That ship sailed many years ago and other brokers do a better job. Think about how many should go away at PSW.

  112. japarikh - Buy – double diagonal – double calendar. Under spread column change to Custom.

  113. Phil—I am very excited to participate in the butterflies and moths thingys   ;-0

  114. CGNX – the machines continue to rise with a 2:1 split..

  115. CCJ/Phil – japan tuned off nukes again.. but future should still be glowing. For a simple way to get an annualized 33% on regular margin, sell the 2015 $20 puts for $3.30.

  116. BLDP/BDC – looks like an ok entry point here on the weekly charts.. except I sure don't like the direction of their revenue or income.

  117. ROFL!!! – I just sat down at my screens to see /CL dropped 0.75 at their open tonight.

  118. Jfaw, I believe that is just because the contract switched over to the November, as the October one is about to expire.

  119. In China, Starbucks doesn’t sell coffee to make its millions. It rents couches

  120. Raghee Horner videos on Swing Trading. This is a really good 10 part webinar.

  121. Vegas Baby! / Savi – I'm local so don't count on me booking at Caesars.

  122. Slumping car sales underline fragility of eurozone economy

  123. Inside The 2013 Forbes 400: Facts And Figures On America’s Richest – Forbes

  124. In a year, Netflix’s competition shifted from Hulu to HBO to everything

  125. Two Signs Americans Are Rekindling Their Dangerous Love For Credit

  126. PRESENTING: Your Ultimate Guide To The Most Anticipated Fed Announcement In Years

  127. LNKD – another quick 31% return by November (189% annualized) is a $40 +/- iron condor on LNKD. Sell Nov 209/295 calls, 200/205 puts Iron condor for $1.55 is just $500 margin.

  128. For Past Three Years, The Rich Saw Income Grow While Everyone Else Made Less

  129. CHART OF THE DAY: Homebuilder Sentiment Is Decoupling From Reality

  130. 24/7 Wall St. » Blog Archive Eleven Countries with Soaring Inflation

  131. Inside The GOP Civil War That Could Turn Into A Debt Ceiling Or Government Shutdown Disaster

  132. Phil

    Every link to Business Insider bombs browser.

  133. Bubble Watch: “Booming” U.S. Auto Sales and Loans

  134. /CL – TOS Study – For those that I sent that study to, this study is only for a 15 min chart.

  135. GOP that foolish or next plan?

  136. Perhaps today's PSW blog headline "Indexes get gun shy…."   may be literally be tomorrow's timely short.  I'm getting the vibe that the U.S. military/industrial complex's rise to dominance — a larger military budget [USD $682 Billion] than China [USD $160 Billion], Russia [$90B] Japan [$60B], the UK [$60B] France [$60B], and Saudi Arabia [$56B'combined] is about to jump the shark.


     The post-war military gravy train began in the '60s. Many American lives and much capital were spent on ideologically-driven wars rather than dedicated to investing in civil, educational, medical and technological infrastructure for the U.S. population.  Thermonuclear weaponry loomed large in the U.S. defense budget, and in the popular mind, by the time "Fail Safe" was playing in the theaters [1964].  There was, it seemed, a genuine threat to our national existence, and the majority of Americans were glad to invest in freedom.


    But by the time we reached Iraq in 1990, the procurement tail was definitely wagging the war-fighting dog.  Neither Ideological fervor nor real threats had much to do with it.  All the U.S. needed was to be "dissed" by a country who couldn't possibly attack us — Saddam Hussein's Iraq, for example [whom we supported with poison gas to use against Iran] previous to the war] and we were off and rocking it.  The number of Americans killed in these wars was very low [e.g., Libya] but the expenditure of U.S. funds on weapons systems, both latent and deployed, was rising, and along with it, the U.S. budget deficit, which started to take off in the early '80s, but went non-linear since @ the year 2000.  What's most  curious is that the biggest U.S. deficits occurred when the U.S. was not at war [much] — during the  21st Century.

    I'm guessing there's a shark dead ahead, that military expenditures have peaked and are headed south. Those aging baby boomers are just far more interested in keeping their Medicare reimbursement high and their funding of "foreign wars" low.   Meanwhile, working American need jobs — in America, that builds infrastructure that will lead to more jobs and economic activity [and doesn't involve being shot at.]


      Everybody has sensed this it for awhile.  But, after the U.S. military establishment skipped lightly over Libya, Egypt and Iraq II, it's suddenly become crystal clear recently, in the aftermath of the Syrian gas attack, that the U.S. military industrialists are losing their mojo.  In the Congress, I found myself nonplussed this week by  the spectacle of Commie-baiting, A-rab killing southern conservatives rising up in opposition to Syrian intervention.  Sure, they like to oppose Obama, but there's more to it than that.  Their constituents, for example.  


    Many phenomena seem to cycle from bust to boom and back, and my point this evening is that I'm pretty sure that Syria is a watershed event — it is essentially the "foreign conflict involvement shark" that the U.S. is in the process of jumping.  The money just isn't there any more to play world policeman for no discernible profit [except for the companies selling Uncle Sam the stuff] and there just isn't enough "trickle down" from those companies to compensate for having high unemployment, overstretched government indebtedness, and crap civilian economy — read "which doesn't invest in infrastructure and create jobs like FDR did."  That's because military expenditures writ large have comparatively little multiplier effect on the economy, since, rather than making things people can use to make other things, military hardware is meant to be destroyed.  It has limited investment potential, in other words.


    So, cool.  It's about time that shark was jumped.  Now, my question, how would one turn what I perceive as a reverse flow among military and civilian funding [Northrop vs. Babcock&Wilcox-type idea] into a decent trade?


  138. Idea?  I get the CBOE new listing email, and they now listing options on a stock that's interesting, ADEP.  Makes robotics for manufacturing.  Stock has recently doubled from $3 to $6.  Looks like it is consolidating.  

    Article on SA

    Cboe new listings:

  139. WMT says screw a living wage.

    I say go WMT, I continue to short the 70P's each week and month.

  140. SPY 5 MINUTEGood morning! 

    Nikkei popped 200 points, China flattish, India up 1%, Singapore up half a point.  

    • Asian Shares Lag Ahead of Fed Announcement

      Asian markets were mixed on Wednesday as cautious sentiment prevailed ahead of the conclusion of the much-anticipated U.S. Federal Reserve policy meeting. The HSI fell 0.3%.

    Japanese Homes Make Their Own Power

    Tens of thousands of Japanese homeowners are generating their own power with hydrogen fuel cells and solar panels, part of a post-tsunami revolt against electric utilities.

    Vacant Japan Homes Show Holes in Abe’s Push for Housing Growth. More than 50 houses and apartments, almost 20 percent of the quaint residential neighborhood of narrow streets and stairway paths leading into green hills, are empty here, an hour’s train ride south of Tokyo and 1,000 yards (900 meters) from the Yokosuka naval base, home of the U.S. Seventh Fleet. That hasn’t stopped developers from building at least eight new apartment blocks in the same city in the past two years. 
    China's housing market continues to froth
    • New-home prices in China increased in 69 out of 70 tracked cities in August, rising 8.3% on year across the country.
    • In Guangzhou prices jumped 19%, in Shenzen 18%, and in Shanghai and Beijing 15%.
    • Despite fears about a bubble, the government seems unworried by the inflation, noting that on month, prices increased 0.8% vs 1.7% in March.
    • "The government is unlikely to take strong action nationwide to curb the property market, as that may damp economic growth,” says JPMorgan's Zhu Haibin. No new nationwide measures have been introduced since China's change of power in March.
    • Chinese shares +0.1%.

    Shanghai in Name Adds $45 Billion of Value Amid Bubble Risk. Zhang Guangdi has watched the market value of his Shanghai International Port Group Co. (600018) shares jump 130 percent since Aug. 22, when China’s commerce ministry said the government approved a free-trade zone in Shanghai. The 67-year-old retiree says he’ll probably sell the 2,935 yuan ($480) stake when the zone, part of Premier Li Keqiang’s plan to liberalize yuan trading and relax government regulation, opens at the end of this month. The port operator is valued at 25 times profit, a 121 percent premium versus the Shanghai Composite Index (SHCOMP), according to data compiled by Bloomberg. 

    Europe up about half a point across the board but none of it matters until the Fed and Bernanke's speech (swan song) this afternoon.  

    BOE united in keeping policy on hold
    • The Bank of England's Monetary Policy Committee voted unanimously to keep interest rates at 0.5% and against more quantitative easing at a meeting earlier this month.
    • In light of the MPC's forward guidance, it has agreed to reinvest £1.9B of cash flows associated with the redemption of the September 2013 gilt held in the bank's Asset Purchase Facility.
    • The pound spikes vs the dollar and is +0.3% to $1.5949, while the FTSE barely shrugs and is +0.1%. (PR)

    German Campaigns Get Desperate

    A slow-burning campaign has finally sprung into life, with less than a week to go and some parties fighting for their political life.

    Our Futures are pretty flat.  Oil is $105.37 but they dumped another 36Mb worth of contracts yesterday so not as much pressure as we'd hoped – even though there are STILL 700,000 contracts open in the front 3 months, they pushed 40,000 of them into Nov and Dec since Monday morning.  
    Wednesday's economic calendar
    CBO – U.S. risks fiscal crisis despite cuts
    • Notwithstanding $2.1T in spending cuts that Congress passed in 2011, entitlement spending will continue to rise over the next 25 years – "unless substantial changes are made" – and could at some point cause a fiscal crisis, the Congressional Budget Office said yesterday.
    • One of the main problems is that an aging population will put strains on Medicare and Social Security, and cause public debt to balloon.
    • Congress would need to pass $4T of savings or tax increases over the next ten years to lower debt from 73% of GDP to below its 40-year average of 38%.
    Fed could cause volatility if it decides not to taper
    • The FOMC is expected to slice $10-20B from its its $85B-a-month bond-buying program at its policy meeting today, but what if it doesn't?
    • U.S. bond yields could drop back towards 2% "really fast," says Bill Smith, CEO of SAM Advisors. It would "catch people by surprise and the bond market will absolutely rip," Smith asserts. "The equity markets would rally on this; it just means more easy money."
    • The dollar would also be hit, says BNP Paribas' Vassili Serebriakov, while BK Asset Management's Kathy Lien reckons that the volatility that non-tapering would cause could threaten the overall economy.
    • Despite the obsession in the financial world with the Fed's quantitative easing, just 27% of respondents in a poll could identify what it is from among five choices.

    9-17-2013 6-31-40 PM nahb

    Gold Tumbles Below $1,300 to Six-Week Low Before Fed StatementGold for immediate delivery lost as much as 1.4 percent to $1,292.95 an ounce, the lowest level since Aug. 8, and traded at $1,294.79 at 9:26 a.m. in Singapore, sliding for a third day. Bullion for December delivery slid as much as 1.3 percent to $1,293 on the Comex in New York, the lowest since Aug. 8.

    9-17-2013 6-31-04 PM consumer inflation

    Volkswagen Says It Will Bring Electric Vehicle to U.S. in Two Years. Volkswagen, the largest of the European automakers, will bring its first electric car to the United States in two years, joining an increasingly crowded field of battery-powered vehicles on the market.

    CREDIT SUISSE: 3D Printing Is Going To Be Way Bigger Than What The 3D Printing Companies Are Saying.

    Adobe’s(ADBE) Shift to Subscriptions Puts Brakes on Profit, SalesAdobe Systems Inc.shares rose after the largest maker of graphic-design tools said it amassed more than 1 million customers for its online services amid a shift away from software installed on personal computers. A 47 percent jump in the number of Web subscribers, which exceeded some analysts’ estimates, coincided with a drop in sales and profit. Revenue for the period through August declined 7.9 percent to $995.1 million, the company said in a statement today, missing the $1.01 billion average of analysts’ projections compiled by Bloomberg.

    Obama Goes to WarThe President finds an enemy he's willing to bomb—Republicans.

    White House budget office urges agencies to prepare for possible shutdownThe White House budget office directed federal agencies on Tuesday to prepare for the possibility of a federal government shutdown should Democrats and Republicans fail to find a budget compromise by the end of September.

    The richest households live near the Capitol.

  141. API showed a net 1.2M draw – better than a build but hardly exciting:

    The American Petroleum Institute said for week ended September 13, U.S. oil inventories dropped by 300,000 barrels, well below the decrease of 1.5 million barrels analysts expected. Gasoline stockpiles fell 600,000 barrels while distillate supplies dropped by 200,000 barrels. 

    Analysts expected gasoline inventories to be unchanged while the expectation was for an increase of 1 million barrels in distillates. 

    Brent is $108.50, down from $117 and back where it was in July, when WTIC was as low as $97 but generally around $102.50 to $105.  WTIC peaked out at $112.24 so the same $8.50 dop takes us to $104 but the key indicator will be Brent failing $108 this week – there's not much support below there.  

    The Dollar is 81.25 and doesn't look like it will fail 81 without MORE QE (not the same for longer) and less QE should send the Dollar up a bit and everything else down. 

    Speaking of things going up, that very small gain yesterday pinned the NYMO at 60 – it's not the 60 that's a sign that we're overbought so much as how quickly we jumped from 50 to 60 (see chart at top of comments) on a 1-point gain in the SPY (0.5%):


    So, to extrapolate that – for the S&P to get up to 1,710 (another 6 points or 3.5%) we have to push the NYMO into overbought and anything higher than that gets us to extremely overbought.  

    The conditions are right for extremely overbought because the slower Summation Index says we're only neutral – it's when they both say overbought at the same time that we can be fairly positive we're about to turn lower.  


    Still, also back at the top of comments – we did get upward movement over 0 on this one too – about 60 points but a huge jump for a single day on this one.  If we consider that the NYSI is breaking down, then you can draw a line along the top of the falling sine wave from May and perhaps 200 will be the next top.  If so, it's the same problem as the NYMO and they could both top out on a rally into Friday's close.

  142. Earnings/StJ – They are very appreciated when you have the time.  

    Butterflies/Rpme – LOL, why does everyone like to see the failures?  Oh well, I'm sure we'll get one in time.  Income Trader, I think, was doing strangles and they fell apart when we had some violent moves (as all hedged trades tend to).  You are right, though, anyone can do well when things are going their way, the trick is what do you do when things go against you.  

    That's why we're using such a small allocation in the Butterfly Portfolio – look how much we can make on a small allocation – why risk more?  The new MSFT trade risks $5,000 max(ish) on 20 contracts ($2.50 each) so we can clearly recover from a disaster as we made that much in our first two months but, if we are greedy and have 10 of them and lose $50,000 on one market crash – then we'll have a very hard time getting our money back.  

    This is the big problem with a lot of these trades – they work so well that people are always tempted to push them until they have unsafe allocations and then, inevitably, you have a black swan that blows them out.  Like any tool – they are only safe if used correctly!  

    TITN/Burr – Not going to be a quick turn-around as they guided down but, of course, if the economy recovers – they should do better than they think they will. 

    Linda Ronstadt/Shadow – Sad, I like her.  

    CCJ/Scott – Other than not getting a quick pop on a restart, not a big negative for CCJ.  They are actually a good candidate for those 7 Steps to 40% Annual Returns kind of trades with the stock at $19.88 and the Oct $20 calls fetching .55 for 30 days ($6.60 per year).   You can also get fancy and add the short put sale (2015 $20 puts for $3.30), of course. 

    Oil open/Jfaw – Yeah, that was the new contract (November – /CLX3) that fell hard at the open and is now $105.23.  /CLV3 (Oct) is now $106 and still a good short on that line but today is probably the last day we want to trade it.  

  143. Swing trading/Scott – That's cool, good for the Education Archives.  

    LNKD/Scott – Condor is nice idea but beware of earnings. 

    Business Insider/Shadow – They work on my PC, Mac and iPad.  

    Big Chart – I think we're bullish until/unless the Nas and RUT fail their tops. 

    Military/ZZ – I HOPE we've peaked.  As I noted when I went over the budget recently, the military is already completely out of control in relation to any other country on the planet (we ARE half the planet's spending and we're not even enemies with most of the other half).  The problem with dismantling the military is the same as deciding to save money by cancelling your home security alarm – what if???  No leader wants to be the guy who left the door open for a crushing military defeat because he tore down our "defenses".  I think all we can realistically hope for is that the military budget stops keeping up with inflation but good luck with even that kind of progress…

    ADEP/Burr – Very interesting.  Looks like they are doing the right things in general. 

    WMT/Burr – If you can't beat them..

  144. This doesn't work for WMT (too many workers (2M)) but here's an idea for AAPL:

    How about they sell 2.5M 2016 $400 puts for $65 ($16.25Bn) and, worst case is they have a buy-back of 250M shares for net $335 ($83.75Bn), which is about what they are planning anyway over 2+ years (and they have $180Bn of cash and are making $40Bn more per year!).  If the stock is over that price, they can bonus their 75,000 employees $216,667 each and, if not, they were going to do a buyback anyway and this saves them money!  

  145. MSFT Butterfly trade- how are you arriving at the max fisk of $2.50?