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Thrilling Thursday – Dow Hits Record Highs on Lower Earnings!

Why should we worry?

The Dow is at 16,580 so all must be well, right?  The fact that we're up here on low volume and even lower earnings is just one of those nit-picky things that won't matter a year from now, when TA people use the movement to draw new, bullish trend lines.

That's what the Fed is controlling, they are painting charts in broad strokes to keep things moving along – even when they aren't.  

Sure the US economy is only growing at a 0.1% annual pace and sure that's down shockingly from 2.6% last quarter but, hey, we EXPECTED to only grow at 1% – so it's ONLY a 90% miss – what, us worry?

The Fed says it's just bad weather slowing us down and, whether or not you believe that, they also promise to continue to stimulate the economy long after it is necessary.  The Fed is like Santa Claus, only they don't have to put in any effort to make their toys, so Christmas comes 365 days a year for the top 0.01%.  For the bottom 99.99% – well, it's 0.1% growth on the "trickle down" effect.  

4-30-2014 6-22-17 PM Corp CashIn fact, if you take out the Banksters, who are piling up the Fed's free money in their vaults and using it to manipulate the stock and commodity markets (and higher costs for Energy, Food and Health Care were the only reason our GDP wasn't -1% instead of +0.1%), then you can see that those companies not protected by the Fed are in big trouble

Not since 1999 has there been less cash relative to debt in Corporate America.  Yes, money is cheap, so why not borrow some but that money isn't being used to invest in plants, equipment or, God forbid, hiring and training more people – it's being used to buy back stock and pay out dividends to give the ILLUSION that earnings are improving, when it's actually only the share count that's being reduced.  

As you can see from this chart of the S&P, earnings are up just 25% from where they were in 2009, when the market was 60% lower than it is now, but the repurchase of $1.4Tn worth of stock has reduced the S&Ps share count by 15% over that period.  

These are the kinds of things that don't matter – until they do – and then they matter a lot.  With record low borrowing costs and 50% discounts on stock prices, many companies were WISE to buy back their shares.  I was advocating that AAPL buy back most of their shares at $85, because I couldn't imagine a better use of AAPL's money than buying back their own stock at the time.  

Warren Buffett keeps a pretty steady floor underneath Berskshire Hathaway with buybacks but even he stood back in 2008, as his company's stock plunged from $150,000 to $75,000 per share.  Why?   Because there were other stocks that were even cheaper – and that's where he deployed his capital.  

Yesterday morning, in our Live Member Chat Room, we deployed some of our capital to pick up positions on EBAY and TWTR, which I also tweeted out (you can follow us here) along with adjustments to our other trade ideas on STX, PNRA and SCO (I had tweeted out the original earnings trade ideas as well).  Like Buffett, we KNEW the Fed would provide a backstop and that creates a very forgiving environment for equities.  TWTR, for example, bounce back $2 already and our $17 spread that we bought for net $2 is already $16 in the money – up 700% on cash if TWTR simply flatlines at $39."Be greedy when others are fearful' – Buffett's words, not mine.  The key advantage to fundamental trading is the ability to recognize a bargain when we see one.  Sure the chart on TWTR looked, and continues to look, terrible but, as I said in the original set-up for that trade in Tuesday's Live Webinar (also on Twitter), the bad news was already priced in.  Rather than stare at the squiggly lines, we stare at the balance sheets and we look at the competitive environment and try to determine TWTR's value as an INVESTMENT, not as a trade.  

In that respect, TA people who trade against us are bringing knives to our gun fight.  Their panic drove the PRICE (not VALUE) of the 2016 $30 puts to $6 – that's a net entry of $24.  So, our premise isn't that TWTR would or would not hold $35 (though we thought it would) but, very simply, that it's worth more than $24 – another 33% off yesterday's low.  

That's all there is too it.  We find a stock that is undervalued, one where the TA people and momentum traders are jumping ship and driving up the options prices and then we practice our patented system of BEING THE HOUSE – Not the Gambler, and selling that presumed risk to other people who are panicking.  I wish it were more complicated than that (so I could charge more to teach it to you wink), but that's essentially all there is to it…  

What we do teach, more so than the strategy, is how to fight your own bad tendencies and take the emotion out of your trading decisions.  When other people are panicking, there is a great opportunity – but only if you can refrain from panicking yourself.  There's no evolutionary advantage for the wilderbeast that refuses to run away from the lion with the rest of the herd – he simply dies and his "taking a stand" genes do not get passed on to future generations

That's why there is a very strong tendency for us to join our fellow mammals and run with the pack, in and out of stocks – and it's why we're so easily swayed by the opinions of total strangers on TV or even in print – the last one to panic gets eaten – that's the law of the jungle.  

The predators on Wall Street are well aware of this and use our all too human behavior to their advantage.   They use machines to take the emotion out of their own training and hire people with the most reptilian tendencies to do the actual trading.  They even hire psychologists – who tell them how to push your buttons.  If you are cold, heartless, uncaring, ruthless and unfeeling – Goldman Sachs has a desk with your name on it!  

Another thing reptiles are is PATIENT – there's not a harder thing I have to teach our Members than patience.  Markets go up, and they go down – so we have many, MANY opportunities to buy low and to sell high – and earnings season comes around every 3 months and last for over a month, 33% of the year, we are presented with DAILY opportunities to buy low and sell high.  

For example, the Nikkei is testing 14,500 again this morning (/NKD).  What do you think we are doing?  We've shorted it over and over and over again at that level and there was no NEW action from the Fed – just more of the same and there was no NEW action from the BOJ – so the VALUE of the Nikkei remains the same.  The S&P (/ES) is testing 1,880 – another shorting spot we're fond of.  

Oil, of course, we have been shorting since $105 but now we're at our $98.50 goal and that's down 7% from $105 so now we're looking for a bounce which, per our 5% Rule™, should be $1.50, back to $100 as a weak bounce in the very least.  That's $1,000 per contract of upside if we get a cross over $99 and make it to $100 today – hopefully that will be the move into Natural Gas Inventories at 10:30 this morning and then, we'll evaluate it in our Live Member Chat Room but hopefully, we'll have a chance to short it again.  

INDU WEEKLYThe volume was so low, we may as well have been closed yesterday.  As noted by Dave Fry, the record close was the result of "window dressing" in the last minutes and, with most of the World's markets closed today for May Day, today is going to be another low-volume affair that is easy to manipulate.  

We don't care because we remain "Cashy and Cautious," which doesn't mean we're not playing – just that we're taking those quick profits and running back to cash more often than not.  Some days there are lots of plays to make – some days there are none.  

Doing nothing doesn't seem like a strategy but, when employed strategically, it's one of the best ones:


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  1. Good Morning!

  2. Oil Lines

    R3 – 101.54
    R2 – 101.03
    R1 – 100.36
    PP – 99.85
    S1 – 99.18
    S2 – 98.67
    S3 – 98

    I doubt that we'll see much action with holidays around the world. And most people are also off tomorrow.

  3. Well, I missed the short oil call at 102 again.  I was sitting there looking at my phone, and didn't have the cohonies to put it on.  But at least I have a reason! My daughter was born 6 weeks early due to pre-eclampsia complications, but she's a healthy 18in , 4lb 11oz breathing on her own.  Mom is good and healthy too.

    That would have been a nice 3k/contract to buy a gift with, but more chances will always come.  

    Ok, back to trading.


  4. Jobless claims increase doesn't seem to have any impact to per market opening activity.

  5. Congrats Burrben!  :)

  6. Burrben / Congratulations!

    By the way, it is spelled "cojones".

  7. This begs for an answer:

    Here's what makes that a head-scratcher: The vast majority of Republican respondents — 78 percent — also told questioners that Obamacare should be repealed. So a significant portion of Republicans don't think the government should pay for people's health insurance, but they are not willing to pay even a small amount more so that those people can get covered through their employer.

    Which leads to a puzzling question: How, exactly, are these people supposed to get insurance?

  8. definitely a big congrats burr!

  9. Congrats Burrben and good luck!

  10. The big charts for April:

    Too many to post… but:


    US-industrial-capacity-utilization-US-industrial-capacity-utilization-_chartbuilder (1)

    Ignore the bad ones….

  11. Congrats Burrben! I had twin girls two years ago born at 31 weeks. They were 3.25/4.5 lbs. It was a rough 5 weeks in the hospital, but they're amazing now. Are you going to start trading at night, being that you will probably be awake anyway? ha ha..

  12. Congrats, Burben – that pre-eclampsia is nothing to fool around with! (By the way, here in LA you don't hear 'cojones' much – more usual word is 'huevos' – eggs, get it?)

  13. Burrben/…    No, you had the COJONES not to be connected!



  14. More from Barry on Piketty's book:

    The data-driven demolition of trickle-down economics has the Ayn Rand crowd panicked. But what I find so fascinating about this debate (having not yet read the book, though I plan to) is the inability of the economic right wing to respond. Thus far they have been rendered impotent, unable to construct an intelligent counterargument. The strongest response so far — and I am not making this up — has been to give the book a single-star rating on's website.

    Alexander Kaufman at the Huffington Post collected some of the more amusing one-star reviews. There wasn't a single verified purchaser of the book on the entire, absurd list.

    Which raises a question about John Stuart Mill’s notion of the marketplace of ideas: Is the debate driven by the quality of ideas, or by the marketing, branding and PR behind it?

  15. Burrben, a big congratulation to you & your family! 

  16. Burrben – Congratulations ! 

  17. Preclampsia  /Blurr.


    My wife had it with our first son, you can believe how fast they ( the mothers) lose the weight, ( yes, I know you are worry because how you see her), she can lose 10-15 pounds in days because is just water  accumulated in the preclam. process

  18. Phil – That article that you pointed to about CLF might concern us a little bit:

    Using the guidance provided by [Cliffs Natural Resources] (i.e., not our views on how things will play out) we now know why the company is projecting iron ore prices, on avg., of ~$120/ton in 2014… because at $119.99/ton, [Cliffs Natural Resources] will be in violation of its most restrictive financial covenant (i.e., the one that says debt cannot exceed 3.5x EBITDA); looking at iron ore prices through 4/29/14, to avg. ~$120/ton for 2014 as [Cliffs Natural Resources] is guiding (& Consensus is assuming), iron ore will have to avg. $120.96/ton for the remainder of the year…

    I think that commodities might be under pressure this year so rising iron ore might be hard to see whoch might put CLF under a lot of pressure. I am not rushing into that one for now, we might get better prices yet.

  19. Burr

    Congratulations!  As my last girl gets ready to move out, I wish you well on your new journey with your new daughter.  It was, and continues to be, a fantastic journey for me and my three daughters. 

  20. Burrben,

    Congratulations to you and your bride !

  21. Burrben – congrats! My child went thru similar circumstances, but now she's getting ready for college in the fall. Which reminds me – back to trading!

  22. Good morning!

    Nothing that happens today (or tomorrow) is going to mean much with the low volume.  

    As noted in the above post, Dow Futures short at 16,500 (/TF) and /NKD at 14,500 and oil long at $99.50 (/CL) seem like the best bets at the moment.  

    Congrats Burr, that's great news.  Maddie was 3 weeks early, weighed 4lbs, 15 oz, when we took her home – I think I was prepared for everything but how small she would be.  Now she's turning 14…  

    Jobs/Den – There's no one around to read it.  

    • Initial Jobless Claims: +14K to 344K vs. 319K consensus, 330K prior (Revised, previous estimate 329K).
    • Continuing claims +97K to 2.771M vs consensus of 2.708M.
    • March Personal Income and Outlays: Income +0.5% m/m vs. +0.4% expected, +0.3% prior (unrevised).
    • Personal spending +0.9% m/m vs. +0.6% expected, +0.3% prior.

    Also amazing how they think that seeing spending outpacing income by 2:1 is a positive – as opposed to people sinking deeper and deeper into debt just to pay their bills.   And, don't forget how unevenly those income gains are distributed.  

    How/StJ – They are supposed to die quickly and decrease the surplus population, of course.  

    RUT failing 1,120 (/TF) – there's another line we can short. 

  23. Burrben – Congratulations.  Exciting and rewarding days ahead.

  24. I love these charts – think about how excited this uptick in EU Prices got everyone this month:


    Funny how, when you put things in perspective – the thrill is quickly gone.  

    Auto sales we've discussed but this is a good visual:

    US-monthly-auto-sales-annualized-rate-in-millions-US-monthly-auto-sales-annualized-rate-in-millions_chartbuilder (1)

    In 2006, 7 and 8 – F was at $10, making more sales and more profits than they are now.  I like F (given the choice of car companies) but let's not be silly about it.  TM peaked out at $135 in 2007 but was mostly below $120 – also on more sales than they have now.  


    Japanese-trade-balance-in-billions-Japanese-trade-balance-in-billions_chartbuilder (1)


    US-existing-home-sales-seasonally-adjusted-annualized-rate-US-existing-home-sales-seasonally-adjusted-annualized-rate_chartbuilder (1)


    Somehow, this is supposed to be a good thing:


    University-of-Michigan-Consumer-Sentiment-index-University-of-Michigan-Consumer-Sentiment-index_chartbuilder (2)

    Yay, we're 85% as enthusiastic as we were right before the last crash!  

    And, this doesn't bother us:

    US-real-GDP-annualized-change-US-real-GDP-annualized-change_chartbuilder (1)

  25. Japan CPI / Phil – I think that a big part of that is the new VAT they imposed this month. And they do need inflation in Japan (and Europe)

    Also, the growth trend for China is not going in the right direction and I would love to see the real numbers, not the ones massaged by the party leaders!

  26. albo, what do you see for QUIK, I took a big hit on earnings…sure hope they can recover quik….get it!

  27. Wheeee on the RUT already!  1,115 now the stop on /TF.   Dow should be next.  

    Piketty/StJ – I've been thinking about that.  If the right had a book that reinforced their beliefs, they would be shouting from the rooftops and holding festivals and marches to make sure everyone in America knew that's the way things are.  I saw Piketty's work and shrugged my shoulders and thought "well, duh!"   That's a bad attitude for us to have – we need to spread the word and make sure people understand the repercussions of this work as it really does settle the debate and invalidate 40 years of bad economic policy.  But it won't mean a thing if we allow people to ignore it!  

    CLF/StJ – If they had lenders who ignored the reality of the market and chose to force them into Bankruptcy (despite having the cash-flow to service the debt) rather than amending an arbitrary target placed in SOME covenants that were written when $120 seemed very unlikely.  CLF has adjusted and now makes money at $120 or less – there will be plenty of other people willing to lend if the one with the bad covenant tries to be difficult – but that's ridiculously unlikely – but who am I to argue with Ben Levisohn?  

    Japan/StJ – They include VAT in their inflation numbers?  Do we include sales tax in ours?  That seems very strange.  

    • Ford (F -0.2%) reports a 9.1% drop in cars sold during April, a mark which was offset to a large degree by the 8% increase in truck sales.
    • The automaker saw sales for the Ford brand slip 0.3% to 204,323 during the month, while Lincoln sales were off 10.7% to 6,803.
    • Sales by model: Ford Fusion -1.1% to 26,435; Ford Taurus -2.8% to 5,725; Ford Focus -15.3% to 19,104; Ford F-Series +7.4% to 63,387; Ford Explorer +17.1% to 16,629; Lincoln -23.9% to 3,054; Lincoln MKX +5.1% to 1,828.
    • The EcoBoost engine accounted for 42% of F-Series truck sales during the month.

  28. Jr_mints – Unfortunately, I got blindsided by the weakness in Q2.  Company remains very optimistic about the year as a whole because of new product revenue they expect in the second half.  Likely to be dead money for awhile here.

  29. Japan Inflation / Phil – Apparently, VAT increase is part of the problem:

    Tokyo’s consumer prices rose 2.7 percent in April from a year earlier, the biggest jump since 1992, pumped up by a sales-tax increase and a year of unprecedented stimulus from the Bank of Japan.

  30. good call on the Dow Phil, I'm short at 16500

    where do you think the bounce is, 16450?  Or does this drop have legs?


  31. albo, thanks for the response. Based on your understanding of their fundementals are you going to add on additional weakness?

  32. Books / Phil – Well, the austerity aisle of the right had a manifesto – the one written by Rogoff and Reinhard and they were touting it everywhere until if course it was proven to be a fraud! There is of course Ayn Rand but:

    “There are two novels that can transform a bookish 14-year-kid’s life: The Lord of the Rings and Atlas Shrugged. One is a childish daydream that can lead to an emotionally stunted, socially crippled adulthood in which large chunks of the day are spent inventing ways to make real life more like a fantasy novel. The other is a book about orcs.” 

  33. It seems that $99.50 is now a resistance line for oil…

  34. YRCW getting crushed on a miss.  CPST, AVP, JDSU also coming out badly.  

    AKAM interesting tonight.  Also:  ED, EXPE, KRFT, LNKD, NTRI, OPEN, SWIR and WYNN.  

    VAT/StJ – I don't think the VAT is included in the calculation – just being blamed for rising prices.  VAT went from 5% to 8%, so that should have added 3% by itself if it were calculated right in.  Hard to tell for sure, of course but I think this reflects the pass-through increases and not the tax itself.  

    Dow/Pwright – Bounces are always at 50 and 100 lines, you just have to keep an eye on the other indexes and, if they are all bouncing, then you should be ready to bail on the one you are betting.  

    Speaking of ones we're betting – 16,472, 1,873, 3,576, 1,112 and 14,440 on /NKD (so stop is 14,450) and $99.22 on oil.  Winner, winner…

    LOL StJ.  

  35. bloomy changed the consumer comfort index scale from -100 to 100 to 0 to 100…..hahaha

  36. As I get older, I can dig that feature:

    Here's a fun new trick that Google just patched into Google Now, the company's card-based personal assistant: it can now keep track of where you parked. While there are plenty of apps out there that can help you remember your parking space, they all require you to open them and save your spot manually. In contrast, Google's parking tracker will save your parking location automatically. First noticed by Android Police, the new feature is part of Google Search 3.4, which is rolling out out to Android devices running 4.1 and above right now.

    Google Now is really a very useful app now. It's scary how it seems to read your mind (or maybe your searches and your emails and calendar)

  37. Good morning!  You know they want 1900 on SPX.  Just need a little volatility.

  38. I was late to the party with the EBAY trade from yesterday but did get a fill on the Jan $50/60 bull call spread at $3.95.  With the $50 puts all the way down to $3.10, am I better off waiting for a drop or just go ahead and sell the Jan 16 $45's for $3.75 as in the LTP trade?  the Jan $50's are rollable of course, but I would much rather own EBay at $45.20 then $50.85.

    Thank you, Phil.

  39. Jr_mints – I already have more than a full position.  Have bought some stock today in taxable accounts with the intention of selling it in 31 days for the tax write off.  Not reluctant to buy at these levels, but as I said, I think it's probably dead money for awhile barring any new product announcements.  In the past the company has not announced design wins until the product actually ships.  This is not expected to happen until 3rd and 4th quarters.

  40. Burrben- If you can handle one more me too story, my daughter was born 6 weeks early also weighing 3 lbs 8 oz, having a twin brother whose placenta fused with hers draining off all the good stuff (he was 6 lbs 7oz ) . That was Dec 29 1990 for all you tax deduction fans and today she is in a Masters program while teaching special ed full time (just hired in Jan after months of searching) ! She was also a star softball player in high school, so here's to our little preemies and best of luck to you! Cause it really is a crapshoot, since twin bro is struggling with all kinds of issues even though he was the "healthy" one.

  41. Silver Futures – I'm a bit of a newby on trading futures.  I'm looking at the Silver Futures contract /SI on the Nymex.  I thought I was trading the large contract instead I was only trading a small.  Every .01 move is worth $10.  Not a whole lot of volume either on the July contract.  Is there another exchange I should be trading with more liquidity?

  42. phil/TSLA, earnings play suggestions?  5/7

  43. Congrats, Burrben!

  44. albo, thanks for your insight.  I will probably start adding if it drops through the 200 and forms a bottom.  Kinda took me by suprise at the really sharp drop.  Here's to hoping (not a valid strategy) the 200 holds.

  45. CMG/Phil- Recovering nicely and moving very well today. I am just wondering if you could summarize your CMG plays or if you have any additional moves on this one now.

  46. Thanks all, much appreciated!  Love to hear the good outcomes!  She's breathing on her own, no apnea at all, with 100% o2 levels.  So (knock on wood) it's the start of a great ride ahead.

    Long oil at 99.10 now trading in the hospital, stop at 99.50.  over 99.50, stop at 100.  Since she's a "diamond birthstone" baby, I'll need to move to 2 contracts :)

  47. FU NFLX!!!

  48. QUIK/albo – dead money may be right. negative oper and net income, negative cash flows.. and these guys didn't just start up. what is it you see in them?

  49. Congratulations, Burrben --  Diamond birthstone, eh?  My daughter is scheduled to be born on Monday, fingers crossed, good thing that Ebay trade Phil put on yesterday has gone green!! 

  50. Congratulations Burrben, count me as another with a 3 week early child.  4 days in NICU but he is almost 4 and doing great now.

  51. congrats Burrben!!!

  52. Wow, RUT very bouncy off 1,110 – all recovering now.  

    Comfort/Angel – That's another thing about long-term data, they do tend to change the measures.  

    Parking/StJ – Will be useful until we have cars that come and get us.  

    Good list Diamond:

    Weak May Seasonality — A couple of items worth noting: Kronos Worldwide (KRO) has never had a winning May in its history. It’s been lower on 10 of 10 occasions with an avg. loss % of -7.84%. Also, Wynn Resorts (WYNN) has shown consistent weak May seasonality trends over the years. It’s been lower on 10 of 11 occasions with an avg. loss % of 6.51%.

    May seasonality weak stocks

    Strong May Seasonality — A couple of items worth noting:  Stocks like OmniVision (OVTI) and Reynolds American (RAI) have tended to show strong May seasonality trends over the years. OmniVision (OVTI) has been higher on 11 of 13 occasions, with an avg. win % of 16.03%. Reynolds American (RAI) has been higher on 12 of 14 occasions with an avg. win% of 7.18%.

    May seasonality strong stocks

    I was thinking LNKD would make a good short anyway.  

    EBAY/Rperi – Yes, I'd sell the long $45 puts, it's a nice, low net.   We ended up getting $4.60 for the 2016 $45 puts in the LTP anyway at the time.  

    Silver/Tshroy – Pretty violent thing to get your feet wet with.  The contracts we trade on TOS are /SIN4, which expire in July (55 days).  They make $50 per penny, per contract and are fairly liquid but I don't like to trade them too often as they are prone to violent moves – like this morning down to $18.68 before jumping right back to $19+ – you can't set hard stops, they flush you right out but, on the other hand, a single contract can drop $1,000 in seconds – so you have to have a very strong stomach to ride it out.  

    TSLA/Lunar – Not really.  We got our dip and now it's a matter of seeing what they actually did last Q.  I hope they zoom back up so we can short them again.  

    CMG/Craigs – Well, we were short, and then they got too cheap and we flipped long.  Now we're aggressively long with June $515 calls and short 2016 $280 puts to pay for them.  We practiced doing nothing (other than buying back the short calls) while they dipped and, hopefully, we can continue to do nothing while they recover.


    NFLX/Jabob – Seriously?  I'm rooting for them to go higher so we can short them again.  How greedy could you possibly be to still be short after testing $300?  

    Gold/Diamond – Not looking too pretty on the charts.

  53. LOL – /TF at 1,130 – what a joke that index is when it can go up and down 1% per hour!   Still, at least it's fun to play.   Back on the short side at 1,130, of course.  

  54. only short a little — reduced big time

  55. zero – Congrats on your "scheduled" birth!  Let's hope she cooperates….. :)

  56. Pharmboy.   Maybe next weeks jobless numbers will increase again and that will push us over 1900.

  57. Burr // Disposable Diapers
    Congrats Mate. And so it begins.SOunds like you have plenty of parenting experience here, so I'll refrain. I trade with my 2 year old on my lap all the time ; >

    Albo // QUICK
    ya, disappointing, but their so cheap I just DD and forgot about it. I'm more concerned about EZCH ?

    Phil // Can you suggest a hit and run on KRO ( short ) and DLTR ( short ), see if we can score on stats.

    TSLA // stop baiting me man. Big article yesterday on China Auto show. China will become the largest luxury car market in the next 5 years. Funny enough though TSLA is hardly mentioned, although they did say that part of their barriers to China is most EV cars are being subsidized by the government – not so with TSLA. But, hey. I'm still holding 320/420 bear call so bring it if you think the irons hot after earnings.

  58. sorry DLTR ( long )

  59. Long and short list / Phil – Some of these are not very statistically significant – less than 10 for example. But WYNN looks like it could be a good short.

  60. And all these mergers being announced will surely lead to less jobs which should get us to 1,950 on the S&P.

  61. I should be trading in and out of the BITA July 30P's I'm short.  Every other day I'm down $400, or up $50….

  62. Phil // Crystal Ball
    I'm positioned for a pullback
    DXD, SDS, TNA x2 ( pretty bearish )
    How are you reading these levels on the big chart ?

  63. NFLX/Jabob – You have to expect a bounce after a 33% drop.  Figure $450 to $300 is $150 so $330 weak and $360 strong are to be expected – I'm more interested with how they handle $360.  

    KRO/Wombat – I don't see why you'd be bearish on them.  They're low in a rising channel and pretty reasonably priced.  You say you want a hit and run short, but what is that?  They're at $15.67 and will report shortly and maybe you'll get 10% ($1.50) if they suck but $14 has been a rock-solid floor and the 50 dma bounced off $15.50 at the beginning of the month and is now at $16 and the 200 dma is $15.70 so it's pretty easy for them to pop up.  So you want to gamble?  The May $15 puts are .35 but you need a 5% drop just to avoid being wiped out the second earnings are over.  The June $15s are .65 and that brings you to net $14.35 and now we're back to needing a 10% move and the delta is just .35 so a $1.50 move makes .50 but that will crush with the post-earnings premium crush.  

    DLTR/Wombat – It would help if I had any clue at all why you are picking these for shorts.  DLTR already fell from $60 to $50 (16.66%) and now back to $52+.  They bottomed out at $49.50 in Jan but then zoomed to $56+ on earnings in Feb so I'd pick something to limit what could become catastrophic losses shorting these guys.  June $50 puts are .90 with a .30 delta – so at least it stops you from getting completely killed if they don't fall.  

    TSLA/Wombat – I think you'll be fine on that spread.  

    DLTR/Wombat – OK, now that makes sense.  Figure good support at $50 means you can go with the Jan $50/55 bull call spread at $2.40 and, at $52.12, you're already almost 100% in the money with a net delta of .42 so a $2 move up nets you .88 (40%) while a $2 move down gives you a nice price for a put sale (the 2016 $45 puts are already $3.10).

    WYNN/StJ – Same as usual problem, they've already pulled back, so I've lost interest now. 

    Levels/Wombat – I think this is low-volume BS that won't hold up next week (or after a poor jobs number tomorrow).  

    Meanwhile, oil tapped $99.90 and already back to $99.50 for our goaaaaaaaaaaaaallllllllll from the morning and $250 back on the reversal ($99.75 stop line).  How's that for crystal balls?!? 

  64. Market, especially momo's have a very bad smell today.  Like a HFT program went to town to cause some squeezes.

  65. GOOGL – thoughts on 2106 500-600 BCS @$45, mostly paid for by 475 Put $40 vs.  2015 500-600 BCS @ $45, selling weekly/monthly puts to pay premium down.  Trade is $37 in the money today….June 2016 (potential roll) shows up in my chain but is all 0s 

  66. GOOG/Cdel – I have no thoughts on GOOG post-split.  I don't know, long-term, if people will accept the structure and, as you know, I think they are in for a rough couple of years with lots of R&D spending and little returns.  It's a stay away stock for me.  

  67. Yelp fuels Internet stock rally; LinkedIn on tap • 12:26 PM

    Yelp's Q1 report, which was accompanied by a full-year guidance hike and followed by a slew of upgrades, is helping fuel a major rally in high-beta Internet stocks that were pummeled over much of March and April.

    LinkedIn (LNKD +5.5%), which reports after the close and entered trading down 40% from a high of $257.56, is among the notable gainers. As are Twitter (TWTR +3.5%), crushed yesterday in response to its Q1 numbers and guidance, and Pandora (P +6.5%), hit hard last Friday due to the light Q2 guidanceprovided with a Q1 beat.

    Facebook (FB +3.5%), less damaged by the selloff than some peers, is posting solid gains as the Streetgives a thumbs-up to yesterday's mobile ad network launch. "Facebook is essentially bringing the high advertising ROI and targeting precision it has perfected on its own app to the rest of the mobile web," proclaims Goldman, albeit while cautioning near-term sales will be limited.

    Netlifx (NFLX +5.5%), off 30% from its high going into trading in spite of a positive response to last week's Q1 beat and price hike announcement, is bouncing strongly.

    Other gainers: ZU +5.9%. TRLA +5.6% (rallied yesterday following earnings). PCLN +2.8%. EXPE +3.7%.MEET +4.3%. LIVE +9.9%. ANGI +3%.

  68. CMG/Phil- Glad I asked, because I did miss the part about paying for them with the short 2016 $280 puts. I think you added this after the initial entry. I will say though it really is starting to gel now and I am beginning to understand the mechanics of the trades at least. 

  69. Phil // Ect.
    Sorry for the confusion. I was responding to the May charts that you put up for diamond.
    KRO ( Bearish b/c 10 out of 10 misses with an average of 7% ? ) sounded like free money to me. Your walk through was exactly what I needed though – thanks.
    DLTR ( also from the chart, thanks for the set-up )
    TSLA ( would love a new play post earnings – are you still bullish on Elon long term ? )
    LEVELS ( thanks – agreed – just wanted to make sure I wasn't alone in the forest )

    Just got a call from Google leadership team – interview on Monday. uh oh.

  70. Bitcoin – more perspectives:

    Stephan Molyneux talk: Bitcoin vs Political Power

    Covel interview with Brad Rotter:  Bitcoin is a 'perfect' currency

  71. If only somebody would make a derivative for investing in GDP expectations, I'd be a billionaire.

    All you would have to do is consistently short 6 months ahead and you'd never be wrong.  I can't count the number of times I've seen, "economists predict accelerated growth [in 6 months]" for those estimates to be double the eventual number.

  72. Oh, and here's the article I was responding to:

  73. JPH1121

    I said in January that the truth in lending law would destroy housing and with that end the overall recovery, so far I have not profited much but check this;

  74. Phil   Much better the short of TF,  5 points in 15 minutes ( $ 456),  it was your call….

  75. Phil // Humour the student
    Just want to run my thinking past you ( this is where if it sounds too good to be true … )
    XRAY ( from the May charts as well – very impressive track record ) 20 for 23 beats returning 3.8%
    So, take current mark  ( 45.08 ) * (0.038 ) = 1.71 move on stock / 
    Oct 45's have a delta of .53, which means best case I get a move of .85

    Seems hardly worth a spread. Is my thinking correct ?


  76. Long weekend for many…

    CL  I believe it must be long, what do you recommend?

  77. Hays Advisory Service points out that much is made of the phrase, "Sell in May and go away."  However, further analysis of this tendency for stocks to decline in the May-November time frame is most pronounced in the second year following presidential elections, i.e. this year.  In fact, if you throw out the second year, then the May-November tendency does not exist.  Perhaps another reason to be cautious, despite the fact that several pundits believe we are breaking out to the upside.

  78. Thanks Jabob, that explains the Nas pop nicely.  

    CMG/Craigs – Yes, we added them when they tested $500, which we thought would hold.  Originally, it was just the bull call spread but, when they dipped more, we bought back the short calls and rolled down the long calls. 

    KRO/Wombat – Ah, I see.  Well, I like them to CONFIRM a stock I want to be bearish in but I wouldn't base a bearish bet on just that chart.  

    TSLA/Wombat – I'm long-term bullish on the company but not the stock at $200.  I think they are worth about $85-115 in reality and can grow to $200 in a few years so no way would I play them bullish but history suggests they make a lousy short too, so my only interest is if they completely peg the top of a range for a conviction short.    Good luck on Google.

    GDP/Jph – That's why I call them "Economorons."

    Chart/Shadow – LOL, I love how they can make charts say anything:

    This chart says we're in for a 20% correction

    Of course, if there were actually "truth in lending," no one would buy a house (see "Interest Scams and How to Avoid Them – Mortgage Madness").  

    /TF/Advill – Another winner!  I love these Futures!  

    XRAY/Wombat – That might be a good one because they are low in the channel so yes to them.  Very thinly traded options with ridiculously wide spreads, so be careful with them.

    /CL/Advill – We flipped short again at $100 ($99.90) so I'm not long at $99.50 – just a no play as it's not in a good spot.  If you want a long, try /RB if they pop $2.93 (now $2.9295) for a move up to $2.95 that should score $840 per contract.  Only if they get over though, as they may test $2.92 again first.  

    Sell in May/Albo – That's been a pretty random event for many years.

  79. Phil / XRAY
    Yikes, you're right about the vol and the spreads. I'll pass – thanks
    But, was my THINKING correct ? I would have passed simply from the number logic 

    XRAY/Wombat – That might be a good one because they are low in the channel so yes to them.  Very thinly traded options with ridiculously wide spreads, so be careful with them.

  80. Phil   ELX   Back in March I bot the July 8c @ .30c. Whats my chances of buying a bounce after the earnings miss?Would like to get back a piece of my investment,or is it throwing good money after bad?Your thoughts,THX

  81. TASR flatlining on the 200 dma.

  82. RUT. Sure would like them to manipulate it down below the morning low of 1115. TZA & TNA are like riding a roller coaster at Coney Island.  (Phil is it still there any longer?)

  83. PSW
    Guys, just learned something really cool from TDA desk. I've seen a lot of people ask about getting called away ( covered calls for example ) or div capture scenarios. 
    He told me check the price on your short calls – if the corresponding put is more than your call OR more than the dividend you're chances of getting assigned are much greater.
    May be common sense to most of you guys, but a cool way to actually check it.

  84. Pharm / SGEN
    Any last words ?

  85. RUT. RESISTENCE again around 1120

  86. XRAY/Womat –  Sure, logically they are good but the options suck.  When I pick something, I take ALL those things into account.  I look at hundreds of things every day where one thing or another isn't write and I cross it off my list and move on to the next idea – don't try to force things to work,. there's plenty of trades where ALL the stars line up that you don't have to chase ones that have problems.   Good rule of thumb on call aways.  

    There goes 1,115 on /TF – the gift that keeps on giving! 

    Coney Island/Den – Still there with a lot of the rides from the 20's.  They are building a great big psycho roller coaster for this summer – first new one in almost 100 years.  Can't imagine it's scarier than the Cyclone, because you're sure it's going to fall apart while you're on it…

    Dip buyers still coming back for more each time.  

  87. RUT.   A little bounce up to 1122.5 to shake some option holders loose and now down again.

  88. Earnings today:

    Consensus Estimate – 0.54
    Whisper Number – 0.56
    Average Move – 12.2%
    Priced into Options – 8.7%

    Consensus Estimate – 0.15
    Whisper Number – 0.19
    Average Move – 8.7%
    Priced into Options – 10.2%

    Consensus Estimate – 0.34
    Whisper Number – 0.36
    Average Move – 10.1%
    Priced into Options – 8.5%

    Consensus Estimate – 0.42
    Whisper Number – 0.46
    Average Move – 7.4%
    Priced into Options – 9.9% (May)

    Consensus Estimate – 2.11
    Whisper Number – 2.22
    Average Move – 5.5%
    Priced into Options – 5%

    FWIW, the stats at Earnings Whispers indicate a very strong bias (70%) on the upside for AKAM and EXPE, strong upside (60%) for WYNN, neutral for OPEN and strong downside bias (60%) for LNKD.

  89. Very strange. I put order in at the 2.20 bid to buy my TASR Jan 16 calls back (bid/ask 2.20/3.10), assuming it probably wouldn't fill. 00 volume on their 2016 options today. It filled immediately, and the stock took a nosedive.

  90. TASR – looking at a couple calendar/diagonals: 
    1/ Buy June 15 calls, sell May 16 calls for net .88
    2/ Buy Sept 15 calls, sell June 17 calls for net 1.60
    Exit if close under $14 (use for stop and sizing)

  91. Either I have stupendously bad timing, or somebody's having fun at my expense.

  92. TASR/griff – i'm noticing 'jumps' in the spreads as well. got a fill on order offered at a nickel below.

  93. Maybe that IS a head and shoulders on TASR, with wide head. Target 12. 50 week ma at around 14. Maybe it'll hold 200 by end of day. Too dang quiet, I'm losing my mind!

  94. Any updates on STX?  I'm pretty shocked to see them down 7% in two days.  Over reaction to nothing or should I be changing up my position from the earnings call?  I know it's early and I have until June, but it seems like this is either getting excessively hammered in which case I can roll for a much better position or on its way to a being a 100% loser.

  95. Phil / EXPE
    I know we had a play on them a while back. I missed the first one but they seem WAY discounted to me.
    Any interest on earnings play ? Went from $45 to $75 pretty darn quick.

  96. TASR / Phil … Wow down nicely at near $15 .. must be time for a bullish play out to 2016 .. maybe the $15/20 call spread with puts to offset. Thanks

  97. My acct value is the highest it's been all year.  Generally it gets around this area and then drops by 10% as the index's drop.  I'm considering just cashing all my winners, keeping the spread ideas "queued" and just rebuy them when we fall again.  

    They are alot of Jan15 and Jan16 postions, but so what right?  Can we breach 1900 or 1950?

  98. burrben

    Cashing out sounds extremely smart at this time. Even with glazed topping this thing is orver 0 GDP and that is not just weather. The GDP police have been quiet so far.

  99. Earnings/StJ – I like LNKD now that the other social media have been forgiven for misses.    Expectations are pretty low (.34 vs. .45 last year and .39 last Q) so I do like them for a beat.  However, they have a huge p/e and have to show big growth to justify it.  If all goes well, they'll earn $1.50 a share this year for a 100 p/e, which means I can't sell a short put with much conviction.  So, playing them for a move back to $200 seems right and the June $180 calls at $4.60 are not a terrible gamble as they can double very easily while they should hold $2 in a non-catastrophe – so risking $2 to make $4 on these.  

    AKAM I like at the $50 line and there we can sell 2016 $45 puts for $5.40 for a net $39.60 entry and we can use that money to make an aggressive Jan $55/65 bull call spread at $3.40 which is still a $2 credit on the short $45 puts.  

    TASR/Griffin – It's amazing, isn't it?  Sometimes I think we're the only humans trading.  

    STX/Jph – WDC just disappointed too, that pushed STX down another leg.  For STX, growth SLOWED to 2.5% from 7% last year.  We know the market is crap for their stuff at the moment but, if we're going to believe in Dow 15,600 – then STX is too cheap at $50.  

    EXPE/Wombat – We liked them at $40, now they are $75 – no thanks.  Current p/e is 40, they have to show impressive growth before I'd consider them up here.  

    TASR/DM – I'm very upset that Putin doesn't seem to use Tasers on his people – that would be a nice re-order!   We already have the short 2016 $15 puts in the LTP at $3, now $3.40.  No particular reason to do more than that at the moment.  

    Cashing/Burr – I'm for that play.   Next week is going to be tricky.

    We have that dilemma in the LTP too, now up 11.1% – I'm tempted to cash here, once again.  

  100. TLT/Phil – has been working an alert line all day that I set a while back. top of channel?

  101. I entered orders to cash all my positive positions at midpoints and waiting for fills.  If I get a fill, I'm putting in a order to sell it at the same price I sold it before in case we drop.  I really *like* all my positions now, but I don't see us getting out of this channel until summer is over.  Just my 2c.  I also decided to sell calls against my losers, hopefully protecting some of the sell off if it comes again 

  102. Kind of hard to grow a forest if you keep uprooting the seedlings.  I like better the idea of preparing hedges against a down market (USO, TZA, etc.) and being prepared to buy more seedlings after the dust settles.  But I am not looking at a great deal of gains at this point either.  If I were I might think differently.

  103. Phil,

    Despite today's EWJ's gap up above recent resistance (and in a quiet mkt, lo volume), what are your thgts re buying Jun 11 strike puts (now .18) with a close stop below 16 (2014 low).

    Thanks as always.

  104. Tesla watching: Tesla Motors (TSLA) could show a year-over-year decline in deliveries in North America this year, forecasts Morgan Stanley. The investment firm isn't panicked over the potential deceleration in Model S sales growth, noting the long-term story of Tesla disrupting the industry still plays.

  105. TASR / Phil – The Putin play is to sell lots of puts in KALA, MIG and SAM! Or whatever symbol they use in Russia for their defense contractors.

  106. sibe14 – It's totally a personal preference.  I suck at buying hedges in the right amount, right timing and right vehicle.  I found it costs me less in commish (ib is cheap) to just cash winners, and then wait until I can sell the put again for a good price.  Some get away on me, but locking in gains as the index's are reaching a 4th top area around 1890 locks in my gains.

    Some I'm leaving like my AAPL plays my VXX play, etc.  Stuff that swings like BITA and CLF and WMT (since that's up huge) I'll just take off the table.

    I've found that in a downmarket I never buy enough hedges to cover my losses, and if the market doesn't fall, I cry and scream that I'm losing money on my hedges.  It's just my style though.

  107. Burr"
    Whats her name ?

    You didn't name her 'cojones' did you ?

  108. TLT/Scott – You would think so but hard to say with all the manipulation going on.  Also, we have notes to sell next week and TLT may reflect people moving to cash, not real demand.  

    Good idea, Burr, sell 'em only if you get a good price.  

    Uprooting/Sibe – True but we end up with something else we like better.  Easier to re-plant stocks than trees.  It depends how invested you are and how much you like your positions as well.  

    EWJ/8800 – They barely worked the first time, I'm sour to them now.  If they get back to $12, I'd like a short back to $11 but nothing at $11.20. 

    TSLA/Jabob – LOL, what a joke.  MS is not worried about deceleration in the only car they sell?  Shoot that analyst!  

    Russia/StJ – I still think Putin ultimately makes nice and scores a Nobel Peace Prize for his efforts.  

    Good point Burr, in the end – we have to do what makes us happy too.  

  109. I should have named her that!  Lily grace.  

    StJean – You still in the Jan16 VXX 25P?  I'm down 27% on it, avg price of 5.91.  I have a order to double up at $3.

  110. Speaking of hedges – STP now only down 7.3% ($7,300) with LTP up 11.1% ($55,500), big improvement.  

    In the STP, let's go back in on XRT with 10 June $82 puts @ $1.50, 5 in the $25KP too.

  111. Not a very impressive close and NO volume at all.  

  112. I thought I was fast but with only  90 seconds left of trading there's no way I could get the XRT trade on. Maybe tomorrow. Have a good evening friends.

  113. oh, i remember that.
    you guys are playin the VIX short
    wasn't there this theory that StJ worked out that it resets itself every cycle, or something ?
    i remember wan't to follow with you.
    quick explanation 
    long Jan16 25 puts @ $4.65

  114. XRT squirrel shot

    got it ! come on Phil, ya gonna have to do better than that : >

  115. LNKD beats .38 v .34 est  +2% now

  116. TSLA / ALI
    I just don't understand why this is a big deal. So, now people in CHina have to go to a different website to buy a luxury vehicle ? Is it just a brand awareness thing ? Thats like saying TSLA now available on Amazon … who cares.

  117. VXX / Burrben – Yup, my average price is about $5.50 as I already added to the position. This one requires patience, still about 18 months to go! VXX was at $54 back in February, it's at $40 today!

  118. VXX / Wombat – Yes, resets about every 18 months or so when they hit around $10. These Jan 16 25 puts should be worth about $15 then. Call that an upside hedge!

    No sure thing, but as close it will get in this market. But you need patience, not something that will work overtime. But last time I scored 45% in less than a year. I'll be patient for this kind of return.

  119. Wynn Resorts beats by $0.26, beats on revenue

    Wynn Resorts (WYNN): Q1 EPS of $2.32 beats by $0.26.

    Revenue of $1.58B (+14.5% Y/Y) beats by $90M.

    Press Release

    ?Stock not moving much in after-hours.  Which is good news.  

  120. So far, so good on earnings prediction:

    AKAM – Up
    EXPE – Up
    WYNN – Up
    LNKD – Down

  121. $$$$ just dumped

    guess I'm on /NKD duty tonight 

  122. Of course the one I play is LNKD

  123. Wynn up to $212, Lnkd down to $156, and AKAM down after hours to $54.58.  


    Not a great earnings day.

  124. hi wombat ,

    are you shorting nkd at 14500 for tonight  dropped while I was typing this.


  125. this is getting ridiculous.


    I mean, seriously, airline stocks?

  126. Burr:  Don´t call her Cojones  Pleasssseee!  ( lol)


    I seriously thinking  about your proposal and Phil comment, after all, my position is mainly in stocks not options so perhaps I will sell my stocks and just buy some PUT´s instead, surely will kill my sleep tonight.

    Great call with RB, NKD and TF thanks Phil, for me it was a good day.

    Good night to all, Rgds.

  127. tommyt / NKD
    you betcha

    AKAM // WTF ??

  128. SGEN…..I am selling more puts…..

  129. I was just looking at them Pharm! Do you have a more detailed opinion? Should I leave my long uncovered for now?

  130. Quite a day on the Russell, still bouncing around the 200 DMA.

    Jobs, jobs, jobs tomorrow!

  131. I thought jabo would like this:

    congrats burr!  Speaking as a mom of two teenagers, this Mother's Day will be special for you and your wife!

  132. cturb--thank you…


    pretty funny how TSLA seems to fight anything and everything and always needs to make a point that they are better and safer than everyone else!

  133. It appears that the cockpit tapes of Malaysian Air Flight 370 were doctored by the Malaysian government before being released to the media.  They appear to have cut out pieces of pilot speech.  China will not be pleased if this turns out to be true.

  134. StJ – well, I am in the May 40s…so I think they pop.  I would sell the May 45s though.


    There is a ton of activity in the June calls and puts….might have to buy some spreads.

  135. zero // 370
    Say more – whats the source ?

    tommyt // NKD
    hope you had a fun night ; >

    Burr / VXX
    can you explain ?

    Pharm // SGEN
    Selling more puts at …..

  136. May and June Wombat.  40, 35 or 30….pick your gut level.

  137. Pharm // SGEN
    Thanks – I already had the June 35's – hangin 

  138. SPY 5 MINUTEGood morning!  

    AZN turns PFE down – so do we unwind all the gains from earlier in the week since the deal isn't there?  Of course not.  Rumors don't need facts to back them up – just ask Elon Musk!  Actually, PFE is now going to offer $106Bn with more cash in the mix but it's still only 32% cash and the rest PFE stock (talk about a messy split!). 

    • Global equities are mixed ahead of the U.S. jobs report today and as government forces in Ukraine attempt to retake the rebel-held city of Slaviansk in the eastern part of the country.
    • Economists estimate that U.S. nonfarm payrolls rose by 210,000 in April after increasing 192,000 in March, while the unemployment rate fell to 6.6% from 6.7%.
    • "People are a bit nervous about payrolls," says market strategist Michael Hewson. "Last month, there was so much hype about it and it came out below expectations. They don't want to get caught out twice, so they are hedging their positions." The numbers should also give a better idea about how much the severe winter affected the economy in the early months of the year.
    • Japan -0.2% to 14458. Hong Kong +0.6% to 22261. China closed. India flat.
    • Euro Stoxx 50 -0.2%, London +0.1%, Paris -0.3%, Frankfurt +0.1%, Milan +0.5%, Madrid+0.2%.
    • U.S. stock futures: Dow +0.1%. S&P +0.1%. Nasdaq +0.1%

    SPX WEEKLYJust waiting for NFP but what are we looking for?  Too many jobs means the Fed tapers out by the end of the year – is that a good thing?  Especially if unemployment hits 6.5% – the Fed's original target for ending QE.  So I think over 220K and below 350K will spike us up but then we fade.  Over 350K and we should just keep going up as we're in a full recovery (super-doubtful, there's no other data supporting this).  Under 220K may dip us but it does keep the Fed at the table – same old song.  

    Oil just hit $100 on the dot and a short again (/CL) below the line.   Gasoline (/RB) did hit $2.92 and now back to $2.935, as expected.  /NKD tested 14,500 again and now 14,485 but all these may make violent moves at 8:30 – I wouldn't risk it!  /SI tested $19 and now $19.17, which is good for $850 per contract since 2am, but I slept late today.  frown

















  139. GOOD Morning!

    RB/Phil   Great call Phil, 95.21 with 3 contracts! I got the full year suscription to PSW , thanks

  140. You're welcome Advill, nice job!