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PhilStockWorld October Trade Review (Part 2)

We had a Hell of a start to the month.

As the market bottomed at the end of September, we had 59 trade ideas in two weeks and only 8 of them were misses for a very nice 86% success rate.  That only took us through October 4th, when the S&P was at 1,675 and on the way down to 1,646 on the 9th so here comes a tricks couple of weeks (hopefully we get to 3) where we start on a downturn and finish making new highs.  This is always exciting for me as these are our untracked trade ideas, so I always wonder how they turned out!  

Keep in mind, these are fairly arbitrary snapshots and we make both bullish and bearish bets on a regular basis and the trick is to keep a generally balanced portfolio so you can take advantage of moves in either direction.  When we are bearish, it's 60/40 bearish or 70/30 bearish but not 80/20 bearish!   BALANCE is very important in trading, and in life…

Remember, our core philosophy is to BE THE HOUSE – Not the Gambler (which was, in fact, the subject of our October 6th post), so we sell premium on both sides and that means we will win some and we will lose some and then we try to work out of our losers while continuing to sell premium on the other side of them.   Over time, that puts the odds well in our favor and USUALLY markets go up AND down, and we profit on both ends.  This year's market has been a lot more up than down – so far.

October, however, was marred in the beginning by the Government shut-down.  

Oct 7:  Monday Market Meltdown

Sometimes, all it takes to end a wicked bull run in the markets is a nice, cold splash of reality and what can be more real than the idiocy of the US Government?  This is  a country where almost 25% of the World's GDP takes place!  When you are pushing historically high forward market multiples, like our current indexes are - you have to BELIEVE things are going to go smoothly in the future – or, in the very least - not get worse.  

Clearly we are already worse and getting "worser" as the the GOP dug in this weekend and came up with a new set of demands with House Speaker John Boehner saying he wouldn't bring up bills to fully reopen the government or raise the debt limit unless Democrats agree to broader talks aimed at trimming the deficit.  "And your little dog too!" said Boehner as he cackled and flew away on his broomstick, leaving 800,000 Emerald City employees without pay for another week (but NOT, technically, unemployed) while millions people in the land of Oz suffer as vital Government Services contine to be withheld.

  • TASR 2015 $12 puts sold for $2.10, now $1.50 - up 28%
  • DDD 2015 $45 puts sold for $8.50, now $3.80 - up 55%
  • LMT March $110 puts at $2.90, stopped out at $1.40 - down 52%
  • AMZN Nov $280 puts at $3.90, out at $7.80 - up 100%
  • NLY at $11.52, selling 2015 $10 puts and calls for $2.70 for net $8.82/9.41, now $9.94 - on track

 photo post-26206-Yosemite-Sam-keeps-crossing-Bu-vFRB_zps95cf68f2.gifOct 8:  Testy Tuesday – One Step Closer to Disaster 

All this bickering is quietly pushing our market indexes off a cliff with the Dow already failing the 50 dma at 15,200 and heading down to test the 200 dma at 14,800 (sorry, news from the Future again).  The S&P is riding it's 50 dma at 1,680 but failed it into yesterday's close while the NYSE stopped just above the 9,575 line it needs to hold.  This is, of course, no surprise to any of us devotees of the 5% Rule™, as we cashed out at the top but now we're in the zone (down 5%) where we can't be too sure which way things will go.

We're still a bit over the low re-tests we're looking for at  Dow 14,950, S&P 1,670, Nasdaq 3,740, NYSE 9,500 and Russell 1,068, but not too bad for levels we predicted 3 weeks ago – before the market even topped.  Keep in mind our 5% Rule™ is not TA, it's just math – we only use charts to illustrate the otherwise boring numbers but, if you look back in our archives, you'll see that for years I simply wrote down the numbers and it worked just as well.  

  • AA at $7.97, now $9.51 - up 19%
  • YUM Jan $70/72.50 bull call spread at $1.30, selling $70 puts at $3 for net $1.70 credit, now .05 - up 103%
  • AA 2016 $7/10 bull call spread at $1.15, selling Jan $8 calls for .42 for net .73, now .05 - down 93% 
  • Oil (/CL) Futures short at $103.50, out at $103 - up $500 per contact 
  • AAPL 2016 $350 puts sold for $34, now $16.70 - up 51%

These (McClellan Oscillators) indicate we could have quite a dip ahead of us but, short-term (this was as of yesterday) we've relieved a lot of the hard pressure pushing us down but, every time the GOP get on TV an whine about how no one will give in to any of their demands, it's another downside catalyst that pushes us a little further towards oversold.  That's why I think we'll have a big pop when they do resolve it – but not likely to be before the weekend, best case. 

Oct 9: Wednesday – We're Yellen Like Magellan 

Looks like Janet Yellen will be the next Fed Chair.

Meet the new boss, same as the old boss (well, maybe a bit more balls than Bernanke has).  I love the timing, does the GOP have the energy to fight this nomination while keeping the Government shut down?  This is going to be a toughie.  

Today is a bounce day for the market but, as you can see from the Big Chart, Republican idiocy is taking it's toll with a MASSIVE drop in the Nasdaq yesterday as well as the Russell which, fortunately, was exactly what we told you to play for on Friday, with the TZA Nov $22/25 bull call spread at $1 along with the SPY Nov $163 puts at $2.  

As of yesterday's close, the TZA spread was already $1.35 (up 35%) and the SPY puts hit $3 (up 50%).  That's pretty good leveraged protection against a 3.2% drop in the RUT (11:1) & a 1.5% drop in the S&P (33:1).  Having good risk/reward profiles and strong upside leverage is the key to good hedge selection (see early morning Member Chat for more conversation on this topic).

  • Oil (/CL) Futures short at $103.50, out at $101.50 - up $2,000 per contract
  • INTC 2016 $18/25 bull call spread at $3.30, selling $20 puts for $2.85 for net .45, now $2.05 - up 355% 
  • F 2015 10/15 bull call spread at $3.80, selling $15 puts for $1.65 and selling 1/2 Jan $16 calls for $1.33 for net 0.99, now .85 - down 14%

Technically, we're down from $104 to $101.50 in a quick move (1 day) so $2.50 means bounces of .50 to $102 (weak) and $102.50 – that's great for us as it lines up right where we want them anyway.   Failing $102 will be a great sign that we'll follow-through below $101.50 and anything below makes $98.50 much more likely! 

Oct 10:  Thrilling Thursday – Deal or No Deal? 

Our own Futures are up about 1% and, fortunately, we already made some bullish adjustments as I had interpreted yesterday's Fed Minutes as bullish in Our Member Chat (alsotweeted out in the afternoon), which led us to cash out some of our bearish winners (TSLA, NFLX).  

We did, however, keep our oil shorts as it looks to me like $101.50 will break after that horrific inventory report that netted a 10 MILLION BARREL BUILD!  As you can see from this Bespoke Chart, a build like this is almost unprecedented, representing 1.5 days of imports at our currently, ridiculously low rate of imports. 

This Thursday I'm telling you we are playing short below the $101.50 line (tight stops above) with a target of $98.50 on the remaining 222,305 contracts for a potential, additional $666,915,000 gain.  We'll check back next Thursday and see how it goes.  We also maintain our short positions on oil using USO and SCO the virtual Short-Term Portfolio we track for our Members.

  • 222,305 Oil (/CL) Futures short at $101.50, out at $98.50 - up $666,915,000
  • VIX March $22/30 bull call spread at $1, selling Oct $18 calls for .75 for net .25, now net .71 - up 184%
  • SPY Nov $165 puts at $2.15, expired worthless - down 100%

Oct 11:  Flip Flopin' Friday – Hope Springs Eternal – For Now

A lot of our trading may seem contrarian but all we are doing is ignoring the noise and focusing on the Fundamentals so, often, we end up buying when others are selling and selling when others are buying.  On Wednesday, for example, we sold YUM 2015 $62.50 puts for $6.55 as the first entry in our new Long-Term Portfolio.  Those puts are already down to 6.20 for a quick 5% gain in 2 days but we're in them for the long-haul, of course.  All we did was follow-through with our original plan for YUM earnings, executing our strategy for the sell-off. 

We also added INTC longs for our Income Portfolio and got aggressive on NFLX and TSLA, as mentioned, in our Short-Term Portfolio, got more bullish on AAPL in the STP, bought AMZN weekly $305 calls for $1.40 that hit $3 yesterday but we, unfortunately, let ourselves get stopped out at $1 on the flush into the close (can't win them all).  We also set up a bullish trade idea for F and took the money and ran on our CZR short puts.  In short, while the market was dropping and people were panicking (and the VIX was high) – we were going long.  

We're not missing any opportunities – we're WAITING for them!  When things are clearly ovesold, we buy and, when things are clearly overbought, we sell.  When things are in-between – especially when the facts (earnings, debt ceiling, missing Government statistics) aren't clear, what's the sense of throwing money at things?

  • Oil (/CL) Futures short at $101.50, out at $101 - up $500 per contract 

Oct 14:  Monday Market Meltdown – Again

This is how we began last Monday's post as the House failed to pass a debt deal and the markets begain to panic after having popped 100 points on Friday in anticipation of a revolution.  Those who forget the past yadda, yadda, yadda - I suppose.

We could have yadda-yadda'd all of last week and wouldn't have missed much – except some fabulous gains in oil, of course, as we got all the way back to $100.50.  This morning we caught a nice ride from $102.50 back to $101.25  for a $1,025 per contract gain from our entry in early morning Member Chat but, at this point, I certainly hope you don't need me to tell you what lines we're shorting oil at! 

  • Oil (/CL) Futures short at $102.50, out at $101.25 - up $1,025 per contract
  • Oil (/CL) Futures long at $101.25, out at 102.50 - up $1,025 per contract
  • Oil (/CL) Futures short at $102.50, out at $102 - up $500 per contract

Oct 15:  Triple Top Tuesday – Here Come Those Tears Again

What a rally!  

Yes, we missed it.  Though we've had plenty of long-term winners (see September Trade Review), we certainly weren't expecting this short-term pop in the face of all this uncertainty surrounding the debt ceiling.  Our short-term portfolio lost $6,000 (down 20%) in the last week as we kept taking pokes at a possible sell-off that never (so far) came.  

Bulls continue to hang their hat on continued Fed easing and there's the undercurrent of a celebration that uber-dove Janet Yellen will take the helm in January and, already, they are talking about MORE QE than the $85Bn a month that is currently being pumped in to support the markets. 

  • Oil (/CL) Futures short at $102.50, out at $101.50 – up $1,000 per contract
  • Oil (/CL) Futures long at $101, out at $102 - up $1,000 per contract
  • Oil (/CL) Futures short at $102, out at $101 - up $1,000 per contract
  • CZR Dec $15 puts sold for $1.15, now .05 - up 95%
  • CZR March $15 puts, sold for $2.20, now $1 - up 54%
  • Dow (/YM) Futures short at 15,200, out at 15,100 - up $500 per contract 
  • DIA Nov $146 puts at $1.05, expired worthless - down 100%

Oil (/CL Futures) took another round trip from $102.50 to $101.50 this morning and we made some nice gains on yesterday's tumble as well.  As I said to our Members in the morning Chat Room, it's not much of a range ($102.50-$101.25) but we play the cards we are dealt and yesterday we were able to make money on the up move, as well as the down move.  As you can see from the chart – it's not very hard to play this channel.  

This is why I like the Futures though, the Dow was good for $500 per contract and all you need is $3,000 of margin and $5 to buy them and $5 to sell each contract.  That's a lot less friction cost than the options, which makes it well worth grabbing these quick little gains.  

SPY 5 MINUTEOct 16:  Will We Hold It Wednesday – Congressional Edition

Global finance ministers are worried that the uncertainty surrounding a U.S. default "would mean massive disruption the world over, and we would be at risk of tipping yet again into a recession," Christine Lagarde, head of the IMF, told NBC's "Meet the Press."  Most countries hold their foreign exchange reserves in U.S. dollars because the currency is viewed as the world's most stable.  "The very fact that more than 60% of central banks' reserves are in dollars gives them every reason to be concerned," Barry Eichengreen, a professor of economics and political science at UC Berkeley and a former senior policy advisor at the IMF, said of foreign governments. "If the bank in which you held 60% of your savings was threatening to default, you'd be concerned too."

  • Oil (/CL) Futures short at $102.50, out at $101 - up $1,500 per contract.  
  • AAPL 2015 $470/600 bull call spread at $45, selling 2016 $350 puts for $29 for net $16, now $45.30 - up 183%

We're getting a so what from the markets too (as we expected) with a 0.5% dip in our Futures and that's masked by a 1% drop in the Dollar, to 80 again as a new debt deal and a Yellen Fed means MORE FREE MONEY!!!!  So, for a little while, we are once again expected to outprint our rivals. 

Big Chart – Well, this is why we have to respect those strong bounces.  Once you move over the 40% retrace, it generally means the machines have been switched back to "bull" mode.  Now it goes the other way and we see what kind of retrace we get off the top (again).  As usual, Nas breakout is impressive but, as usual, it's driven by AAPL.  1,100 on the RUT is the big Kahuna. 

Oct 17:  Thursday Threat Level Reduced:  Debt Deal Reached – 90 Days Until Next Crisis 

Speaking of Walking Dead, China is looking a little scary, especially after IBM earnings show a 22% sales drop in our reddest of states.  

There are already China anomalies popping up in the results of some of the biggest U.S. tech names. At Cisco last quarter, sales in India and Mexico were up double digits, Russia and Brazil were flat, but China was down 6 percent.  Apple's business in mainland China was up only 5 percent in the June quarter, a startlingly low number given that it had been up 8 percent and 67 percent in the previous two.  Don't expect any signs of a China turnaround until July, when their next rounds of stimulus kick in.  Meanwhile, we'll be looking for signs of China strain in Apple and Cisco's reports over the next couple of weeks.

  • DIA Oct $152.50 puts at .55, out at .66 - up 20%
  • Dow (/YM) Futures short at 15,200, out at 15,150 - up $250 per contract 
  • TZA Nov $22 calls at $1.07, out at .75 - down 30%
  • Oil (/CL) Futures short at $102.50, out at $100.50 - up $2,000 per contract 
  • Oil (/CL) Futures long at $100.80, out at $101.50 - up $750 per contract 
  • NLY at $11.92, selling 2016 $12 calls for $1.05 and 2016 $10 puts for $2.05 for net $8.82/9.41, now $9.94 - on track 
  • LACO at $4.18, now $3.96 - down 5%

We are NOT long-term bearish on the market – inflation is likely to make that impossible.  There are certain stocks we think will fail and we like to short certain indexes at certain inflection points but, long-term, we are still bullish, not bearish.  

SPY 5 MINUTEOct 18:  Thank Google it's Friday – Super Stock Takes us to New Highs

Right behind mighty PCLN, GOOG is closing in on the $1,000 per share club after earning $2.97Bn or $10.74 per $970 share.  What?  Oh sure, yes, $10.74 is just 1/90th of $970 BUT, keep in mind there are 4 (four)big quarter and 4 x $10.74 is $42.96 and GOOG was expected to earn $43.50 this year anyway and though they were SUPPOSED to make $10.34 so, of course a .40 beat means the stock should pop $10%, right? 

Still, we have to give props to the move and, technically, they are busting out and a technical market is what we're in, so we're not going to get short on GOOG but we will keep tight stops on our 2015 $800 calls, which we paid a virtual $115.07 for in our Long-Term Portfolio and shame on us if we don't take what's likely to be a double off the table if it starts to fade on us.  See last night's Member Chat for our thoughts on how to play that position, as well as ISRG and CMG – all very exciting today.

How can you be bearish when ANOTHER $85Bn will be pumped into the economy this month, and another next Month, and another in December?  All those $85Bns have to find a home somewhere and IBM didn't make the Blue Chips look sexy so it's off to the Momentum Stocks like SBUX, TSLA, PCLN, etc. and big-cap techs like GOOG, AAPL, FB etc. and that's how we build a new bubble.  God help us all if the Fed ever does withdraw this liquidity! 

  • Oil (/CL) short at $102.50, out at $101.50 - up $1,000 per contract
  • ISRG 2016 $290 puts sold for $33, now $31.90 - up 3%
  • TSLA 2015 $190 calls sold for $41.30, now $19 - up 54%
  • EOG April $160 puts at $5.90, now $11.50 - up 94%

That's going to wrap up Part 2 and we'll finish the month out by the weekend and hopefully put a dent in November over the holidays.  HOWEVER – as I said at Thanksgiving and strongly reiterated this weekend – CASH, CASH, CASH!!!  We are done with our bullish positions, we have even closed out Income Portfolio leaving just our active (and short) Short-Term Portfolio and Long-Term Portfolio.

That means, of course, that these readings are very arbitrary as I don't go back to Thanksgiving to see where things were when they should have been cashed out.  As with all options trades, once you make a 20% profit, you should be protecting it and not losing it and once you make a 20% loss, you are either stopping it out or adjusting it for a longer-term play.  We track these trade ideas to give you an idea of where you'd be if you just left them alone (other than specific calls we make to change the positions, usually on day trades only).  

Our streak continues, with 34 winners and 6 losers, for an 85% winning percentage but, as noted above, we were generally bullish with our longer-term picks while consistently shorting oil as it bounced around in it's range (a very good thing to do with sideline cash!) so it was like shooting fish in a barrel in early October.  


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  1. From Bloomberg, Dec 15, 2013, 10:30:45 AM

    Germany’s Social Democratic leader Sigmar Gabriel presented the SPD members of the next cabinet, saying they’ll face a challenge turning pledges into policy in government with Chancellor Angela Merkel.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  2. From Bloomberg, Dec 15, 2013, 9:51:29 AM

    Dubai’s benchmark index rose to the
    highest in more than five years as real estate stocks extended
    the rally. Egyptian shares advanced as the president set a date
    for a referendum on the draft constitution.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  3. From Bloomberg, Dec 15, 2013, 7:06:47 AM

    China will map out city clusters across the country’s central, western and northeastern regions and develop them into engines for growth as part of its urbanization strategy, according to the nation’s leadership.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  4. From Bloomberg, Dec 13, 2013, 3:48:26 AM

    Bitcoins were dealt a blow in Norway as the government of Scandinavia’s richest nation said the virtual currency doesn’t qualify as real money.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  5. From Bloomberg, Dec 13, 2013, 2:10:39 AM

    Japanese Prime Minister Shinzo Abe’s
    focus on reviving confidence to spur economic growth means he
    will drive the Nikkei 225 (NKY) Stock Average toward 22,000 next year,
    a level unseen since 1996, according to Barclays Plc.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  6. From Bloomberg, Dec 13, 2013, 1:04:30 PM

    Columbia University Professor and
    Nobel laureate Joseph Stiglitz won the 2014 Daniel Patrick
    Moynihan Prize for his work on income inequality in the U.S. and
    its impact on public policy.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  7. From Bloomberg, Dec 14, 2013, 11:00:00 AM

    The data docket in the U.S. this
    week will be eclipsed by the Federal Reserve meeting as
    prospects mount that policy makers will trim stimulus in
    response to an improving economy. Elsewhere, November price data
    out of the U.K. will probably show inflation is cooling toward
    the Bank of England’s target, German companies gained confidence
    in December and inflation in Brazil stabilized through the
    middle of this month.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  8. From Bloomberg, Dec 14, 2013, 7:45:08 AM

    China’s leaders pledged to tackle
    local government debt next year while creating a stable economic
    and social environment to promote reforms.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  9. From Bloomberg, Dec 13, 2013, 3:23:55 PM

    Barbados will fire 3,000 public
    sector workers by March and freeze wages as the eastern
    Caribbean island’s debt burden soars and the International
    Monetary Fund
    says “urgent adjustments” are needed.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  10. From Bloomberg, Dec 13, 2013, 11:25:33 AM

    The U.S. economy is suffering a service interruption.

    To read the entire article, go to
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  11. From Bloomberg, Dec 15, 2013, 11:00:00 AM

    This congressional session is historic: It’s the least productive, most unpopular in memory, and makes the 80th Congress, famously labeled “do nothing” by President Harry Truman, appear prolific.

    To read the entire article, go to
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  12. From Bloomberg, Dec 11, 2013, 7:56:16 AM

    Samsung Electronics’s Galaxy Round smartphone retails in Korea for about $1,000. It’s that expensive for a reason.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  13. From Bloomberg, Dec 14, 2013, 12:00:01 AM

    Verizon Communications Inc. (VZ) is near an agreement to purchase Intel Corp. (INTC)’s Internet-based pay-TV startup, according to people familiar with the discussions.

    To read the entire article, go to
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  14. Here is the latest LTP update:

    Not included in the P&L is the $123K losses we carried from the STP which I track separately. The positions we carried over from the STP are now showing a $514 profit that has been hit by $32K by our CMG short calls roll (included in the LTP P&L since we closed it there). The majority of the losses we have carried over are actually a previous 32K loss from our first CMG roll (we are consistent) and the $76K loss from the short AAPL calls that we covered with long spreads in the LTP. Without CMG and AAPL, moving short term losses to the LTP actually produces a profit.

  15. Not included in the portfolio are the futures trade from 12/4 and 12/5. On 12/4 Phil started the following trade:

    So, if you want to play Grand Theft NYMEX this year, I still like shorting the Jan 2014 contracts (/CLF4, now $97.10) and covering them with the Dec 2019 (/CLZ9, now $79.98).  That means, if oil keeps going up, you just keep rolling the short calls until they are directly over your long calls (in Dec, 2019) and then you collect the net of the spread.  If oil goes down, theoretically, you should maintain more of your long call value than the short calls you sell.  The real beauty of this trade is we can do it over and over and over again, until oil is below $80 so let's track a theoretical 10 contract spread, which will use up $37,400 in margin in our Long-Term Portfolio and see how it goes. 


    We closed the short Jan 14 at $96.50 with a $10K profit that evening. And re-entered short again at $97.50 on 12/5.

    /CLF4 now trades at 96.47 so another $10K profit there.
    /CLZ9 now trades at 78.41 so a $15.7K loss on that one.

    There has been not other trades so far. So overall a $4.3K profit to add to the LTP if you traded the futures.

  16. Arggghhh // CL Sunday
    Phil, long story short. I forgot Friday there were no after hours on globex. Got stuck with 4 short /CL at $96.47. Any advice – I'm sure this has happened during your bonehead years once or twice //

  17. … oh, and also you remarked on FXI on your tweet, but didn't see any reference in the article.

  18. America’s Wealth Is Staggeringly Concentrated in the Northeast Corridor [MAPS]

  19. A Most Illegal Adventure with New York City’s Wildest Underground Event Planners – The Daily Beast

  20. If QE is heroin, what is the methadone equivalent and how do we avoid side effects?

  21. SJL,

    Thanks for the LTP update. Appreciate your efforts in making this a great site.

  22. Mr. Limbaugh if you’re nasty: How right-wing mean media keeps conservatives on the fringe

  23. Just added all the trades to the Income Portfolio – we have now over 60 positions open which makes it time consuming to update. Now all I need is to update the prices and we are set!

  24. NYMEX/LTP – I need to remember to make our oil trades official for the LTP.  It's fine as a leave alone trade but silly not to take advantage of swings that can make us thousands each week.  

    Oil/Wombat – So far, so good, they are holding $96.47 but we'll see after 6.  Yes, it has happened to me and that's why I emphasize so much the DANGER of leaving open contracts over the weekend!  

    FXI/Wombat – I was just generally mentioning the Chinese markets, $FXI is shorthand for that.  

    Healing/Deano – Cool, very Star Trek!  

    Income Portfolio/StJ – I'm going to run a more active one next year and I'll do it in Power Options so we can do weekly updates easily.  This year, the market was all up so we didn't do much short-term call selling (and, when we did, it didn't work out), next year more likely to be flatter or even down so we'll probably want to sell more short calls and run more hedges but not managing our hedges led to a lot of losses in this year's Income Portfolio as well.  We'll leave the STP and LTP as they are but we must do at least a monthly update on the LTP.  

  25. And come on guys – please participate in the Holiday Shopping Survey – surely you went SOMEWHERE this weekend – or is retail totally doomed this Christmas?  

  26. phil / sunday
    ya – it wasn't intentional. i wanted to see if there would be a beneficial drop after close and simply forgot it was friday ? Any suggestions ? The premarket is looking pretty bull

    We really haven't gone out for xmas shopping at all, just some Amazon stuff and local free trade stores. If I had the cash, definitely AAPL ( like I did last few years )  

  27. I am trying to figure out where the big losses come from – TSLA is the big culprit here and is responsible for close to $160K of losses there. But without it, a $60K profit with the amount of margin deployed and a market up 25% for the year is not that great. We did much better last year with less cash on the line. I guess we need a good review. I highlighted the NOK spread because it's good for the max profit already. Also, on ALU, our strikes got moved because of a special dividend. And finally, I don't know that we want to stay in BBRY for the long run!

    I for one, would vote to keep short positions out of the Income Portfolio moving forward as TSLA might turn out OK, but makes this exercise very stressful so far.

  28. Income Portfolio / Phil – I am all for moving to an easier system, but I still think that we have too many positions opened! It took 3 screen captures on a 30" screen to get all the positions! I doubt that many investors would run such a diversified portfolio. 

  29. wow. thanks StJ. I have 10 ; >

  30. The NGF14 Nat Gas contract dropped 2.07% right out of the gate.  

    Does anyone see any news as to why?  I cannot find anything.

  31. JohnO
    there was some news in t NYT this morning about some big contracts cancelled by Iran // might be a lead – don't know.

  32. Phil – shopping – sorry, I haven't started yet!

  33. Phil, quick one
    Are we switching to trading the Feb 14 contract from now?

  34. Oil/Wombat – There's no magic way to fix it but not necessary as the futures are open and you can get out new at $96.50 or just watch it and keep a sensible stop until you go to sleep.  Dollar down from 80.57 to 80.25 so I wouldn't push it.  

    As to the Income Portfolio, the last one (closed in Feb) was up $100K and this one is down $100K but all TSLA, of course and I wanted to go to cash so let's just kill it (for official purposes) and start fresh next year.  I don't see the markets staying up and I'd rather wait for a nice pullback and start buying new positions as we see them without worrying about, as StJ notes, 3 pages of old ones.   Last time we updated it was 10/20 and it was down $280,000 so this is a nice turn-around for 2 months but it could have been much better if we updated more than once every two months – even for a low-touch portfolio, that's a bit negligent!  

    So, as I noted before, we'll start a new Income Portfolio and, since TSLA is the only losing position (of significance) in it, we can toss that into the LTP and follow it through, the rest can be cashed and finished off.  Obviously, if people are interested, they can still ask about old positions but the ones we have here are generally basic, as we weren't doing anything fancy this year.  

    Nat gas/John – CHINA!!!

    • China HSBC December flash PMI: 50.5 versus 50.8 (final) in November.
    • Today's reading is the lowest print in three months.
    • Full release
    • China's leaders have pledged to curb ballooning domestic debt, particularly that of local governments, and cut industrial overcapacity, although whether they'll be able to follow through is another matter.
    • "They may be talking the talk" on debt, says UBS economist Tao Wang. "But it's hard to tell if they can walk the walk because of the rapid development of shadow lending."
    • China's leaders have expressed a desire to cut capacity before but without success, as they fear that any resulting layoffs could cause unrest.
    • The pledges, which include ensuring "reasonable" growth as well, came at the end of the Central Economic Work Conference, a meeting of China's leadership.
    • China also plans to extend and liberalize access to its over-the-counter (OTC) market for small and medium-sized companies. The move will provide such firms with another source of funding and comes as China aims to shift its reliance away from large state-owned enterprises.

    Shopping/Deano – Well get out there! 

    Oil/Razi – Usually we give it until a couple of days before so by Wednesday we should be in new contracts (/CLG4) and, of course, anyone even considering more than a day trade on oil should be in the /G4 contracts now.  Although, our LTP trade is hedged so it's too our advantage to try to catch a dip, cash out the /CLF4 contracts and wait for a bounce to short the /CLG4s.  Tricky timing but we can go for it.  

    Futures all looking weak, down about half a point so far.   

    Nikkei took a major power-dive, down to 15,300 (250 points on /NKD) already.  Our 15,600 line continues to be a very profitable short!  

  35. Shopping / The information is so anecdotal one hesitates to post it.  Members of my family spent five weekdays shopping in Miami Beach Dec.9-15.  The crowds were not notably busier than any given week of the year — neither scanty nor impressive, and the apparent buying activity seemed low. We were on and around Lincoln Road [walking street for shoppers]. and didn't even bother going out to the largest mall, Aventura, as it has more but not really better stuff.  More looky-loos than buyers, it seemed — it's not going to be a blowout shopping season, I'm pretty sure.  FWIW.

  36. @stjeanluc

    shorting front month and covering with longs next years later.


    I actually did this during the summer run to $109. and eventually made very good return,

    BUT margin requrements at extreme points went up x6, yes six times. I barely escaped margin call.

    So this theoretical $37,000 margin can go to $200,000 – be prepared.

  37. Sorry, may be I was not clear,

    I'm talking about oil /CL

    and obviously not margin itself went up, but spread widened sginificantly and you would need bigger margin to wait it over

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  46. The euro zone isn’t creating jobs, but at least it’s no longer losing them

  47. The Federal Reserve’s balance sheet will hit a mind-boggling $4 trillion any day now

  48. Wow, quite the turn-around in the Futures.  

    Now we're up 0.25%.  Oil shot up to $97 with the Dollar back down to 80.20.

    Drop was 1,805 to 1,775 so 30 and that makes our weak bounce line 1,781 and strong bounce is 1,787 – so we'll look for those today. 

    WSJ is already featuring articles on the joys of exporting our oil.  It's amazing, did we suddenly decide the US has an unlimited supply?  No, the game is to drain what we do have as fast as possible and put us under the mercy of foreign oil again as soon as US supplies become more expensive to extract (once the easy oil is taken out).  It's always interesting to me how powerless the American people are to defend against the long game that the elites are able to play against them.  

    Holy crap – 0.4% while I'm writing this – back to Thursday's close.  Just like that, Friday never happened.  

    I guess we're up over Europe's PMI reports (not that fantastic) and Japan's Business Sentiment which, as we know, was bought for a huge price.  We expected a rally by Weds anyway (Fed), this is just coming ahead of schedule. 

    Asia was down quite a bit; Japan down 1.6%, Shanghai also down 1.6%, Hong Kong down 0.6% and India down 0.3%.  

    • Japan Tankan large manufacturing index: 16 versus 15 expected and 12 in the quarter through September.
    • The reading is the highest print in six years.
    • The sentiment index for small non-manufacturers turned positive for the first time in 21 years with an increase to 4, while the reading for small manufacturers was 1, the first positive number for six years.
    • However, large Japanese companies have scaled back their capex projections, expecting to increase FY 2014 spending by 4.6% vs a forecast of 5.1% three months ago.
    • "We still don’t find any evidence that corporates are really starting to get confident about the sustainability of the recovery and actually ramping up domestic investment," says HSBC economist Izumi Devalier. "And that remains a worry in an environment where consumption is going to weaken next year."
    • Full report

    China Slams Abe's "Malicious Slander"; Warns Japan Is "Doomed To Failure".

    China flash PMI hits three-month low

    • China HSBC December flash PMI: 50.5 versus 50.8 (final) in November.
    • Today's reading is the lowest print in three months.
    • Flash manufacturing output index slipped to 51.8 in December from 52.2 in November.
    • Output, backlogs, input prices, new orders and new export orders were among the constituent elements to grow, while employment and output prices decreased.
    • The PMI reading is above the average reading for Q3, says Markit, "implying that the recovering trend of the manufacturing sector starting from July still holds up." As a result, Markit expects "China's GDP growth to stabilize at around 7.8% on year in Q4."
    • Full release


    China Official Says Local Govt Property Push Is Worrying. China local governments' push for property market expansion is worrying, citing Li Tie, head of National Development and Reform Commission's China Center for Urban Development. Local governments placing their hopes on "cashing out" on property may lead to bubbles in third and fourth tier cities, Li said.

    • India's wholesale price index, one of the country's main inflation gauges, accelerated to a 14-month high of 7.52% on year in November from 7% in October and topped estimates that were also 7%.
    • The growth adds to CPI of 11% and will strengthen the case of those who argue that the Reserve Bank of India should again increase interest rates when it meets on Wednesday despite stuttering growth.
    • The RBI's key repurchase rate is at 7.75% after being raised in September and October.
    • The Sensex is -0.1% and the USD-INR is -0.25% at 61.96 rupees.

    Europe's data is mixed but the markets are not, with Germany, Italy and Spain well over +1% and UK up half a point and France up almost a full point despite TERRIBLE PMI data.  Oh well, who cares – MORE FREE MONEY!!!

    Europe faces moment of truth on banks, with flawed defences. Europe's banks face a moment of truth next year when health checks will spell out the repairs they need. The trouble is that fixing them could require cash-strapped governments to borrow more, often from the very banks that need their help. The European Union's efforts to break this "doom loop", in which frail banks and penurious states recycle the same money to prop each other up, are falling short.

    Welcome back to the eurozone nightmareTalk of eurozone turmoil may have been temporarily stilled by a fanfare over 'solidarity’, but the monetary union remains as flawed as ever.

    • French flash manufacturing PMI has fallen to a seven-month low in December, dropping to 47.1 from 48.4 in November and missing consensus of 49.1.
    • Services dropped to 47.4 from 48 and vs 49.
    • Manufacturing output declined to 45.3 from 48.
    • Composite output slid to 47 from 48.
    • "The last flash PMI readings for 2013 paint a worrying picture on the health of the French economy," says Markit, with falling new business at the heart of the slump, "as clients were reportedly reluctant to commit to new contracts."


    France Must Pursue Structural Reforms, ECB's Draghi Says. French competitiveness remains weak, recovery of public finances can no longer rely on tax increases, ECB President Mario Draghi says in an interview. France needs to regain fiscal stability for businesses to start investing again.

    • German flash manufacturing PMI has climbed to a 30-month high of 54.2 in December from 52.7 in November and topped consensus of 52.
    • However, services slipped to 54 from 55.7 and vs 55.5.
    • Manufacturing output rose to 57.5 from 54.9.
    • Composite output declined to 55.2 from 55.4 but still expanded for the eighth month in a row.
    • "Manufacturing achieved a particularly strong end to the year, with improving new order flows and renewed job creation," says Markit.
    • "Growth of new work was the fastest for over two and a half years, while stocks of finished goods were depleted at an accelerated pace…The strong accumulation of backlogs in December provides a further positive signal for production trends into next year."

    Spanish Debt-To-GDP Surges To New Record High. (graph)

    I guess our PMI will have to break the tie.  Very tempting to short the Futures here (with tight stops over /ES 1,780, /YM 15,800, /TF 1,110) but it's Monday – so who knows what will happen.  Silly to short the Futures with a weak Dollar but let's see if they test 80 and give us a good bottom.  

    Why Fed could rock market no matter what it does. No matter what the Federal Reserve does, traders expect a volatile week ahead. At its meeting Tuesday and Wednesday, the Fed is expected to discuss removing some of the extreme stimulus it has provided because the economy is improving and its continuous asset purchases may no longer be helping.

    Why QE Isn't Working: Bridgewater Explains.

    Jeff Gundlach Takes A Contrarian Stance On Fed Policy In This Sweeping Presentation.


    Ryan defends budget compromise before final Senate vote set for this week. House Budget Committee Chairman Paul Ryan on Sunday defended his compromise budget deal that avoids another potential government shutdown but suggested congressional Republicans will be more demanding of Democrats during the upcoming debit-limit talks.

    Paul Ryan Says There Will Be A Debt Ceiling Fight.

    Archaea Capital's "Five Bad Trades To Avoid Next Year" And Annual Report.

    John Hussman On The Coming Retreat in Corporate Earnings.


    bear1Profit Warnings Send a MessageRatio of Negative Guidance to Positive Is Highest Since 2006. Never accuse Wall Street analysts of being negative Nellies. From buy recommendations to earnings forecasts, they routinely set the bar too high when predicting outcomes far in the future. With the passage of time, though, it usually is lowered enough to keep the good cheer flowing after the fact, too. Three times as many companies produce positive earnings "surprises" as negative ones.

    Investors Are Hungry for U.S. Corporate BondsSmall Interest-Rate Spreads Compared With Treasurys Shows Confidence in Economy. Bond investors are showing the most confidence in corporate America since the financial crisis, underscoring expectations that the U.S. economy will keep rolling as the Federal Reserve prepares to trim monetary stimulus. Purchasers of corporate debt are demanding the smallest interest-rate premium to comparable government bonds since 2007. Demand has also put sales of new junk-rated corporate bonds in the U.S. on pace to surpass last year's record. Sales of investment-grade bonds in the U.S. this year are already at the highest ever, according to data provider Dealogic.


    Talking up oil prices:  Saudi Royal Blasts U.S.'s Mideast PolicyA leading Saudi prince demanded a place for his country at talks with Iran, assailing the Obama administration for working behind Riyadh's back and panning other recent U.S. steps in the Middle EastPrince Turki al-Faisal, an Arab royal and a brother of Foreign Minister Saud al-Faisal, said Saudi Arabia and other Gulf states were stunned by the secret American-Iranian diplomacy that led to the breakthrough deal between Iran and other world powers last month. His comments in an interview with The Wall Street Journal, rare in their bluntness, came on the sidelines of a security conference here at which he publicly blistered the U.S. for its role in Syria and in the region.The Arab royal said the failure by Washington and the United Nations to take decisive steps to end the violence in Syria—which has claimed over 130,000 lives—bordered on "criminal negligence." 

    Speculators Most Bullish Since October Before Drop: Commodities. Speculators got the most bullish on commodities since October, buying more gold, cotton and soybeans, before prices fell the most in six weeks on signs of surplus supply. The net-long position across 18 U.S.-traded commodities rose 8.9 percent to 677,505 futures and options in the week ended Dec. 10, the highest since Oct. 29, U.S. Commodity Futures Trading Commission data show. Gold wagers rose for the first time in six weeks. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 1.3 percent last week, the most since Nov. 1.

    About time!  Canada's antitrust regulators poised to formally investigate Google's search dominance. Government regulators in Canada are poised to open a formal investigation into whether Google is abusing its dominance of the Internet search market to stifle competition and drive up digital advertising prices.

  49. Good morning! :) Thanks for the market update, Phil!