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Thursday Thump – Europe Takes a Dive, US Futures Follow

SPX WEEKLYIt's going to be another wild one! 

As you can see from Dave Fry's S&P chart, we dropped all the way to 1,820 on the S&P yesterday, before recovering just after 1pm on an report from Bloomberg that indicated:

Federal Reserve Chair Janet Yellen voiced confidence in the durability of the U.S. economic expansion in the face of slowing global growth and turbulent financial markets at a closed-door meeting in Washington last weekend, according to two people familiar with her comments. 

That's TWO people who were familiar with her comments from LAST WEEKEND – that's certainly worth 40 points (2%) on the S&P isn't it?  The people, who asked not to be named because the meeting was private, said Yellen told the Group of 30 that the economy looked to be on track to achieve growth of around 3 percent going forward. She also saw inflation eventually rising back up to the Fed’s 2 percent target as unemployment falls further, according to the people.

SPY  5  MINUTEWell, as long as the people say so, that's good enough for us, right?  It seemed good enough that we began to cash out out short positions in our aggressively bearish Short-Term Portfolio but this morning it seems we may have gotten a bit ahead of ourselves as the Futures are right back to yesterday's lows, dragged down by another massive sell-off in Europe.

As we caught a great bounce from 1,040 on /TF (Russell Futures) back to 1,070 (+$3,000 per contract) on yesterday's rally we've been going back to that well at 1,050 this morning but, so far, only picking up $200-400 as /TF bounces between 1,050 and 1,054.  Still, as long as that line holds – I like it for bounces and, if that fails, we tightly stop out and go back to 1,040 BUT, if that fails – RUN AWAY!!!

VIX WEEKLYThere are no bonus points for bravery in the stock market.  If you are losing money in your portfolio and you are not sure how to adjust – GET OUT!!!  There's nothing wrong with being in cash – especially in a declining market.  In yesterday's portfolio reviews, we didn't find a lot of things we wanted to buy but we haven't gotten to our aggressive Long-Term Portfolio or the Buy List (though we did review it in Tuesday's Live Webinar) yet.  

While there SEEM to be a lot of buying opportunities – as I warned yesterday, this is a CORRECTION – which means the prices you are starting to see are CORRECT, not low…  There's a huge difference there and there should be a huge difference in your attitude towards the trades.  

We are rolling our long-term positions lower and longer and lowering our expectations for making profits over the long-term.  Our combined long and short-term gains have dropped down to just over 20% for the year and, if we don't get a handle on this turn, we'll probably cash out as 20% is good for a year, so there's no reason to blow that.  As I mentioned, we took a risk and flipped bullish yesterday – expecting a bounce but, so far, the Global Markets are not cooperating.  

Meanwhile, we're still watching our bounce levels but we came very close to failing 15,824 on the Dow yesterday and that would have been – BAD!  

  • Dow – 15,480 should hold.  Weak bounce 15,824, strong bounce 16,168.
  • S&P – 1,800 should hold.  1,840 (weak) and 1,880 (strong).  
  • Nasdaq – 4,140 should hold.  4,232 (weak) and 4,324 (strong).
  • NYSE – 9,900 should hold.  10,120 (weak) and 10,340 (strong)
  • Russell – 1,050 MUST HOLD.  1,080 (weak) and 1,110 (strong) 

As you can see from the Big Chart – so far, all we really have is a bounce off almost perfect tests of the lows we predicted for the week on Tuesday morning, which were just the already predicted lows using our 5% Rule™ and the lines we established almost 2 years ago.  Not bad for long-term predictions.  

On that basis, we've been playing for a bounce off our 10% lines but, if we don't get over those weak bounce lines by tomorrow.  Losing the weak bounce lines on EITHER the Dow or the S&P would be BAD! – so let's watch that this morning as the S&P already looks like it will open below it. 

With the Dow still the relative outperformer, DXD still makes a nice hedge and we highlighted that spread in yesterday's post, which hit $1.25 on yesterday's bottoming action – up 50% from the morning post and up 100% since we called it on Monday.  We'll also have a big winner on our NFLX spread, where we took a $2,250 credit to short it in our Live Member Chat Room on the 9th.  NFLX fell over $100 on poor earnings last night (as expected) and we should make a lot more than $2,125 on that trade!  

NFLX earnings are 10/15 (pre 17th expiration) and we can sell 5 of the Nov $475 calls for $17.50 ($8,750) and buy 5 of the March $470/500 bull call spreads for $13 ($6,500) to cover in the STP.  That's a net $2,250 credit and we have $30 of upside coverage on our short calls.  Hopefully, NFLX stays below $475 and the short calls expire worthless and we get whatever is left on the long spread as a bonus.  As long as they stay below $490, we should have a nice winner.

It's earnings season and we'll have lots of opportunities to make quick trades like these around earnings – it's one of the fun things we can do when we are in CASH!!!  NFLX is going to be a drag on the Nasdaq and we'll see if 4,140 does indeed hold today or if, perhaps, we should start adding more SQQQ hedges.  

 


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  1. Good morning!  

    I'm only here until noon, unfortunately.  Just watch those levels very carefully – if we don't bounce higher than we did yesterday – that's going to be a bad sign.  

    154915 600 Isolation Room cartoons

    154894 600 Romney Redux cartoons

    154838 600 Hes My Bum cartoons


  2. It's been a long time since we have seen a panic such as the one we are looking at right this minute. It's funny when people associate momentum with upward moves, but momentum works both ways and gravity helps on the downside…


  3. Oil Lines

    R3 – 84.54
    R2 – 83.49
    R1 – 82.11
    PP – 81.06
    S1 – 79.68
    S2 – 78.63
    S3 – 77.25


  4. American voters / Phil – On MSNBC yesterday, Scarborough was saying the voters will vote out some Dems senators because voters are smart and were not fooled by these guys who pretend to be independent and vote with Obama 90% of the time. And voters can't be fooled and can see through politicians. And no one asked him why 50% of the voters who are so smart keep voting against their economic interest! They are the fools, not the politicians… 


  5. That sounds like a better assessment:

    http://qz.com/281609/larry-summers-explains-why-the-world-is-too-optimistic-about-chinas-economic-future/

    As a result, they say, even the more cautious economic forecasts for China are overestimating the country’s growth prospects. Summer and Pritchett’s calculations, using global historical trends, suggest China will grow an average of only 3.9% a year for the next two decades. And though it’s certainly possible China will defy historical trends, they argue that looming changes to its  authoritarian system increase the likelihood of an even sharper slowdown.

    Looking at the predictive power of averages, it certainly seems like China’s time is up. While many countries have experienced what Summers and Pritchett call “episodes of super-rapid growth”—meaning, above 6% a year for at least eight years—they have typically lasted no longer than nine years. China, however, “already holds the distinction of being the only instance, quite possibly in the history of mankind, but certainly in the data” to sustain super-rapid growth for more than 33 years, they write. The country’s streak now stands at 36 years, including the time since the study’s data set ended. Even when you consider “episodes of rapid growth”—meaning GDP growth of more than than 4%—China still takes the crown, beating Singapore’s 30 years at 4.2% growth and Indonesia’s 29 years at 4.7%.


  6. Looking at the treasuries flash crash yesterday:

    http://qz.com/281790/what-everyone-is-missing-about-todays-wild-ride-in-the-markets/

    Now, these kind of things happen from time to time. But they’re not supposed to happen in the market for US Treasurys, which appeal to investors precisely because of the unparalleled depth and liquidity. Depth and liquidity—and of course safety—are effectively the brand of US Treasury market. And anything that damages that reputation is really important, as it forces the world’s reserve managers—like, you know, China—to rethink whether they want to park their giant surpluses in US Treasurys and the US dollar.

    That has implications for the manner in which the United States finances its persistent current account deficits, the health of the dollar, the functioning of US monetary policy, and financial conditions for millions of Americans. (Not to mention millions around the world, where US Treasurys also serve as an important benchmark of risk.) I have no idea why Treasurys suffered a mini-flash crash today. But somebody—Congress—really needs to get to the bottom of it.


  7. Market-wise, I just think it's been so long since we've had a correction that people seem to have forgotten that markets also go down.  That's what I was worried about with all that leverage that was going into the market, coupled with low volume and low fear in the last stage of the rally.  This is just physics – even in a healthy market, you need some corrections to form a proper base.  

    Yesterday's volume was excellent – especially as it reversed but now we need to prove which of those directions was correct.  This morning, with our Futures longs – we're assuming that Europe's panic is not our problem and we can shake off a 10% correction and AT LEAST bounce 2% back (weak bounce).  If not, then we have to start calculating what a 20% correction might look like.  

    If Airlines are going to drop 2.5%, like they did yesterday, every time a new city has an Ebola case – we're not going to have a good winter…  DAL, for example, is already down from $40 to $32 (20%) after testing 25% or, the normal overshoot.  

    Since we're seeing all these near-perfect corrections, I think this sell-off is more bot-driven than a real change in sentiment – exactly the kind of correction we should expect in a bot-driven rally and, keep in mind that we essentially began to fall in earnest right after the EOQ on 9/30 and we KNEW that was all BS in the first place.  

    Voters/StJ – You get the leaders you deserve, they say.  We must have all done something terribly bad to deserve these guys…  Can you believe that, today, after failing to confirm a Surgeon General for years now, Congress is going to waste the head of the CDC's time with a bunch of idiotic questions trying to somehow blame Obama for Ebola.  If that guy says one wrong word on Camera – we could drop 500 points! 

    I agree on China, law of large numbers catches up to everyone eventually.  

    I don't even want to think of what can happen if the Treasury market begins to implode but, as I have warned people for years – what kind of idiot give the Government $10,000 to hold for 10 years at 2% interest?  Unfortunately – LOTS, but the biggest idiot is, of course, the Fed and they make those purchases on behalf of we, the people, who ultimately get stuck with the bill. 


  8. Friggin' hippie!  


  9. Ouch, so much for DAL "only" falling 20% from the top:

    • Delta Air (NYSE:DAL): Q3 EPS of $1.20 beats by $0.02.
    • Revenue of $11.18B (+6.6% Y/Y) beats by $60M.
    • Shares -3.49% PM.
    • Press Release
    • Delta Air Lines (NYSE:DAL) reports passenger revenue per available seat mile rose 2.4% in Q3.
    • Mainline carrier revenue +8% to $8.14B.
    • Regional carrier revenue -3% to $1.63B.
    • Capacity was up 3.2% across the company, led by a 16.2% gain in Latin American routes.
    • Aircraft fuel expense +29% to $2.95B.
    • The carrier doesn't mention Ebola in its earnings press release.
    • DAL -4.2% premarket.

    It's not really a bad report, fuel expense up 29% seems a bit strange.  

    This is why CHK isn't playable – who knows what they have left?

    • Chesapeake Energy (NYSE:CHK) +2.7% premarket after agreeing to sell assets in the southern Marcellus Shale and eastern Utica Shale to Southwestern Energy (NYSE:SWN) for $5.375B.
    • The sale includes ~413K net acres and ~1,500 wells in northern West Virginia and southern Pennsylvania; average net daily production from the properties was ~56K boe in September, with net proved reserves of ~221M boe.
    • CHK says it expects FY 2015 production guidance to remain in the range of 7%-10% growth Y/Y adjusted for asset sales.

    On the whole, outside of the energy sector – earnings are coming in pretty good so far.  Doesn't stop people from panicking, though.  


  10. Weekly jobless claims fall to 14-year low

    The number of Americans filing new claims for jobless benefits fell to a 14-year low last week, a positive signal for the labor market.

    Read more: http://www.cnbc.com/id/102092928

    Sent from the CNBC app. Available on the App Store


  11. Selloff could get ‘a little scarier yet’: Jim Paulsen

    Wells Capital Management’s Jim Paulsen told CNBC that the ongoing stock selloff could get “a little scarier yet.”

    Read more: http://www.cnbc.com/id/102078853

    Sent from the CNBC app. Available on the App Store


  12. Early movers: GS, DAL, MAT, AXP, NFLX & more

    These are the stocks posting the largest moves before the bell.

    Read more: http://www.cnbc.com/id/102093171

    Sent from the CNBC app. Available on the App Store


  13. Where shoppers are cutting back holiday spending

    The National Retail Federation said that the average person celebrating the holidays will overall spend 5 percent more than last year.

    Read more: http://www.cnbc.com/id/102090576

    Sent from the CNBC app. Available on the App Store


  14. Phil / GTAT – With GTAT being delisted and starting under a new symbol GTATQ. What does that mean for any open trades on GTAT?


  15. CHK up 11% in pre-market. $19.6 now.


  16. EGLE – Stock going crazy after restructuring !  Better check the terms before doing anything.


  17. Good Morning!


  18. EGLE – bankruptcy restructuring approved and implemented. Old shareholders nearly wiped out.. 0.50% interest in new equity (i believe). 


  19. EGLE - I think FRO and TNK are worth a look instead…..


  20. On TOS my GTAT options converted 1:1


  21. GTAT/Pfel – That just means they are operating under bankruptcy – it's like a warning to potential investors, no real change.  

    CHK/Lunar – Sure, they just got a bunch of cash, but what will they look like going forward. 

    EGLE/Albo – That's what we hope will happen with GTAT!  

    Funny, we were just talking about them in the Webinar on Tuesday.  

    EGLE/Eric – 0.5% plus warrants to acquire 7.5% of the new entity.  Still, that 0.5% is up 2,000% this morning – probably works out to roughly $1.20 per share + warrants.  

    /TF finally making a good move, 1,065 is now the stop.  

    If we quickly retake yesterday's close then we can assume the big drop in the Futures was a move to shake out the weak hands.  We need to see 16,000, 1,850, 3,750 and 1,070 in the Futures before we can get comfortable with our bull positions.  


  22. Phil, some help with rolls please:

    I have some RIG 2016 Puts, both 38's (sold for $6.50) and 35's (sold for $4.50) now about $13 and $11

    Also CCJ, did a buy/write at $19.44 selling 2016 $17 puts and calls for $5.60, now about $5.25


  23. who are they fooling Bloomberg TV DOW -81 yahoo -83 and TOS -73 at the same moment????


  24. Phil/ABX

    I have a long Jan 15 $13 call I paid $6.60 and now $1.30  (part of a BCS I cashed out the short call for a profit).  Also have the short Jan 16 $15 put at $1.60, now $3.15.


  25. Phil/NFLX – NFLX is down to $347, and I'm short 5 of the $380 puts. My short calls look great, but what should I do with the putters?  You wanted me to remind you in the morning. 


  26. Europe is still sucking:  UK -1.6%, DAX – 1.5%, CAC -2%, Italy -2.65%, Spain -3.33%.  I'm amazed we're not way worse.  

    RIG/Jet – Look how much premium they have on them.  You sold the $38 puts for $6.50 so your basis is net $31.50 and RIG is at $29.35 and you have 15 months to get back over $31.50.  Do you think you should pay $13 to get out of a put that's only $2.15 in the money?  If you are inclined to press the bet, you can roll to 2x the 2017 $25 puts at $6 and then you are in for about net $22 x 2 as opposed to net $31.50 x 1, so it's kind of as if you doubled down on RIG at $10.    I'd do nothing because – keep in mind, if they assign you at $38, they are doing you a huge favor as you keep the $6.50, have net $31.50 and you are down $2.15, not $6.50.

    CCJ/Jet – They are at $15.79 and if you already sold the 2016s, there's not much you can do other than wait and see on that one.  As you see, the 2016 $17 puts and calls are $5.25 (and that's giving you low-ball numbers).   If CCJ finishes into Jan 2016 at $15, you owe the short puts $2 and the short calls nothing, right?  Then you sell the 2017 $15 puts and calls for $4 (being conservative) and that drops your basis to $17.44/16.22 and then, in 2017, if CCJ is at $18, you would owe the caller $3 and the short putter noting and you could sell the 2018 $17 puts and calls for $4 and then your basis would be $16.44/16.72, etc, etc. until either you get lucky and don't miss your target by $3 or you work your basis down to zero and then, what do you care.  

    While that strategy may seem very boring, you are knocking 10% off the stock in an average year which means, if you spend $20,000 now, you will collect $10,000 back over 5 years and you'd still own the stock and it would still be generating $2,000 per year (20% of the remaining basis).   That's what this is, a forced retirement plan – but only if you actually stick with the program and remember:  your job is to SELL PREMIUM – not guess what direction the stock will go every time it goes up or down less than 20%.  

    Fooling/Yodi – Everyone has a different delay on their feeds.  

    ABX/Jet – Well the call is pretty much toast but nothing wrong with the put (see above).  Doesn't seem worth rolling as the 2017 $15 puts are $3.55 – you want a lot more premium than that for another year.  On the long side, the 2017 $13/20 bull call spread is $2 – that's where I'd park a long.  


  27. Phil- will the Fed speakers today have any effect on where the markets go? I seem to recall seeing that four of them will be making speeches starting with Plosser who I know is a hawk. I am not sure where I saw this or where to go to see the calendar of Fed speakers, so I am wondering if you think these guys matter at this point like they did last week


  28. Phil, thanks for the advice.  It seems like selling the ABX Jan 15 call for 1.60 and buying the 2017 13/20 BCS is a good move at this point.


  29. Good morning!  My only tid-bit for the day, lows/highs are not made in the Pre-Market.  I am betting on a sharp sell off after this 'rally'.


  30. Phil, the bots are now scraping this site. You posted "/TF finally making a good move, 1,065 is now the stop."  A few minutes later 10:07 they run it to 1065 to flush the stops (at least mine) and then turn and race upwards.  Cruel.


  31. TRIN – yesterday high of 2.89, hit only for the fourth time this year. At the moment, 1.14,


  32. FYI…Elliot Waver I follow closely

    Repeat: The stock market is at risk of crashing before these wave threes are over, probably by the end of October. The stock market here in 2014 continues to remarkably track the 1987 path for stocks leading up to the 22 percent one day crash we saw that year. For the week before that one day crash, we saw a series of bad market days, a lot like we saw Wednesday.


  33. NFLX/Palotay – OK.  Well, for one thing, as you say, you have a lot of short calls that did great so keep in mind that you had a spread that was net hedged and it either worked or it didn't – don't be blinded by the unwillingness to take a loss on the side of your trade that lost.  If you try to "salvage" the short $380 puts there's a reason I said PRE-MARKET yesterday:

    NFLX/Palotay – Ouch, that sucks!  They are down like $115 now (25%).  That's why I was worried about my TSLA $140 short puts – not as far away as you think with these over-priced monstrosities.  Fortunately, you portioned it well and 5 $380 puts should be rollable to 10 2016 $250 puts and 10x $250 is not that much worse than 5x $380 but I'm not sure you want to sell calls.  Remind me pre-market and we'll see what the prices look like.  If you can, it might be good to sell more puts into the excitement and then wait for a bit of a bounce before closing out your hurting puts.  

    That's what you should have done but now NFLX has already bounced back from $330 to $345 and there goes a lot of the advantage to selling puts into the excitement.  Hopefully it was you but, at the open, someone did sell the 2016 $250 puts for $21.50, that's net $228.50 and even that makes me nervous because there is no reason NFLX should have a better p/e than TWX (16) and NFLX only makes $100M (not even after last earnings) a year so 16 x $100M is $1.6Bn, not $20Bn (even after the drop).   If you say that NFLX's subscription model is 10x cleverer than TWX's – that still only gets them to $16Bn, so another 25% to drop from here and that's right about $250.  

    Fed/Craigs – When don't they?  Of course, sometimes they cancel each other out but Kocherlakota is another hawk and I think they are there to reduce the shock we'll get this afternoon, when the Fed releases its balance sheet.  Our job today is to hold the line against the EU pressure – if we survive a double bottom – maybe we can build a weak bounce into the weekend.  

    ABX/Jet – I wouldn't sell short calls in such an unstable market (not naked).  If you do, watch the price of gold very carefully because, if it spikes $50 and ABX jumps 20% – what's your plan?  

    Sell-off/Pharm – Good call so far, bounces failed and back down we go.  

    Stops/MrM – On a $1,500 run – let them have it and God bless!  

    Elliot/Pharm – Damn, don't scare me like that!  cheeky


  34. Meanwhile, I guess we should all put everything into GMCR – that stock NEVER goes down…  

    That was, of course, sarcastic – PLEASE DO NOT put money into GMCR, we are shorting it and I simply find it massively annoying.  

    Keurig Green Mountain Announces Reporting Date for Fourth Quarter and Fiscal Year End 2014 Results

    Here is the GMCR chart of the Future:


  35. Phil/KORS I am sorry if I missed any comments on this one recently, I've been away.  What do you think of them now.  I am hold a small position at a moderate loss and in the interest of scaling back more, do you think they are one I should put on the cut list?


  36. Phil/ABX

    Re your comment on short calls, I am long the Jan 15 $13 calls, I would sell them to buy the 2017 spread


  37. Another reason oil demand is dropping – our devices consume less energy:

    Embedded image permalink

    Think about a 56%+ decline in monitor energy use in just 3 years!  30% less for computers, 20% less for TVs…  Globally there are what?  Billions?  

    Basics of game theory – pretty good.  My cousin just gave a lecture there.  

    Embedded image permalink

    Oil poking back to $81, report out at 11, not 10:30.  Nat gas inventories came in light.  

    Great article:  Will Ebola Vanquish the MBAs Who Run Our Hospitals?

    NAHB: Builder Confidence decreased to 54 in October

    CBS just announced they'll also launch a subscription-based streaming service

    Philly Fed: "Firms were less optimistic about employment increases over the next six months"

    Dallas nurse lays into Texas Presbyterian Hospital's Ebola preparation: "I can no longer defend my hospital"

    The Game of Thrones in the Middle East

    OBAMA!!!  You can practically see the day he was sworn in at the peak…

    Embedded image permalink

    This is how you say F'd in German!  


  38. KORS/Jet – Luxury goods are taking a hit, China growth story is dead as Government cracks down on expense accounts.  Our last play on them was shorting them in Jan, when they fell to $74 so, at $70.70, I'm not a fan.  

    ABX/Jet – Sorry if I misunderstood but yes, I don't see them recovering fast enough to cover your rapidly decaying premium so I'd rather take that money and invest in the 2017 spread.  


  39. Phil as I still try to master my understanding of spreads can you advise me on what I should do if anything with 20 AAPL Jan'15 85.71/100 Bull call spreads I own. I am still up on these and wondering if I should roll to the 90/120 2017 BCS ahead of next week's earnings? If I understand this, I will get more upside potential, add more time and the 2017 spread is a couple of bucks cheaper than the 2015 spread I am holding, right? 


  40. Phil/ TSLA Triumph or Disaster. How much risk to take:

    Have 20 Jan 16 160/240 BCS; cost $20 current $40 – so a $40k profit 

    Short 25 Jan 15 240C sold $21 current $16 so a $12,750 profit – but buying back premium which I hate. 

    Question: Is it wiser to close out everything – or close out the BCS – leave the short calls and be ready to reload on a BCS if TSLA starts to move higher.

    I'm always trying to be too smart for my own good – so any advice greatly appreciated.


  41. Kamikaze trade.  Bought a few AAPL next week $96 calls. Thinking we might see some strength moving into Apple Event at 1PM today, and hopefully after.  Very small.


  42. Strangles- Peter has not been around lately but a reminder – VIX is way up- good time to sell.


  43. Ballard talks about extending QE.  What a friggin' joke those bankers are.  That is why we are up.


  44. We talk about the blatant manipulation of the market by HFT programs and the big banks and the Fed is worse than anyone.


  45. Let's try something…

    Fed announces QE, $20B a day.

    :)


  46. Bullard, in clear violation of Fed policy not to manipulate markets!!


  47. Would be great if you found out that Bullard told a friend or two what he was going to say in his speech and you find out his friend went to town on spx calls.


  48. Phil/Ebola article

    Agree, that IS a great article.  It sheds light on how poorly managed and dim witted much of hospital administration is.  I'm sure those administrators (who likely have minimal to no clinical knowledge) saw treatment of Duncan as an opportunity to be "heros".  Make a name for themselves and put that hospital on the map. Of course, now they look like complete idiots, without the sense to recognize something that was beyond their ability.  What should have happened is that he (Duncan) should have been expeditiously transferred to a center with the appropriate resources to handle an infection like Ebola.  The CDC ultimately owns this, they should have demanded control of the situation or at the very least participated in his care very directly.  Very few western trained physicians know much about ebola and even fewer have any direct experience with it.  Why  would we allow a hospital without the equiptment OR expertise continue to care for someone with a very virulent illness, and even worse at some hospital that is basically a local community center.  Sure it's a big building, but that's it, and we all know that means nothing.  I'm baffled!!  There WILL be more people infected, and we will have to determine how to handle it.  This whole situation is very clearly illustrating our complete incompetence when mangaing a true public health challenge.  We can't even get the idea of a quarantine right, the third person involved got on a jetliner and made a trip right after caring for Duncan!!  What?!?!!!  Now all of the passengers and their "known" contacts need to be observed.  This is ridiculous.  Imagine what a bioterrorism event would look like….very scary indeed.


  49. Is IWM tradable, or do we wait for 1110?


  50. Crude oil inventories up 9 million barrels! I guess that will drop prices again.


  51. SGEN/Pharm – great call out on them yesterday.. thanks!


  52. Bullard's remarks are interesting, given that as recent as Oct 2, he forecast a rate rise is first quarter 2015.  BTW, he isn't a member of the FOMC.
     


  53. OK, it's Long-Term Portfolio Time (LTP):  Down to $563,590 (12.8%) now from over $600,000 a couple of weeks ago.  The STP gained to make up for it but there's the age-old question – is it better to cash out when you are 20% up or ride out a dip like this?  Certainly getting in and out of so many positions would have cost us 1-2% by itself and, of course, we wouldn't have made so much money in the STP if we WEREN'T trying to protect exactly these losses in the LTP.  

    So, by default, I look at it as the LTP is what it is, a LONG-Term Portfolio, and we play our positions for what we expect over the next two years, not based on what may or may not happen in the next two months.  That being said, we still need to evaluate each position to decide if we still love them enough to ride out another 10% drop in our positions:

    • ABX – Of course we want them so no worries that they are down 65%, great for a new entry and not worth rolling to 2017, unfortunately.  
    • BBY – No worries.
    • CCJ – Another one we REALLY want to own.  
    • HOV – And them. 
    • IBM – Them too.  
    • RIG – Yep. 
    • SGEN – Yep. 
    • Wen – Yep 
    • WFM – Yep..  

    OK, that sums up the short puts – IF they get put to us, THEN we can work on them but no sense jumping the gun because we REALLY do like all of those stocks and we'd LOVE to own them for the net price.  

    • CIM – Love them and their dividend.
    • NLY – Love them and their dividend.  
    • AAPL – Tempting though it is to improve the position into earnings, it's currently net $0 out of a potential $40,000 at $100 so why mess around with it?  We paid $3,900 for it and currently it's showing that as a loss (so a better entry now) and, if earnings are good and we hit our mark, it's +$44,000 next Jan.  If not, THEN we can do some adjusting.  
    • AAPL – Nothing wrong with the smaller position either!  
    • ARO – As with Income Portfolio, nowhere near as bad as it looks.  Have to wait for earnings.  
    • CLF – Already adjusted.  
    • DBA – New and well-timed.  
    • GTAT – Arrrrrrgh!
    • IRBT – On track
    • LULU – On track
    • SLW – On track
    • TASR – On track
    • TM – A bit low but not worth adjusting yet.  
    • WFM – Also a bit low but no adjustments.  

    Oh dear, looks like we need another 10% drop before I'm going to want to put more capital to work on these positions.  I won't have time today but tomorrow we'll look over the Buy List and see if there's a couple of new ones to add but we've played this conservative all year and, now that we're having a stress test – you can see why.  If the market does pop – we already flipped the STP very bullish so we'll make our money there – we don't need to add risk here as well.  


  54. phil/NFLX,  how do expect it will behave next few days.  i have july $475 puts that i was too slow to close out first thing in the morning.  do you think it tests $330 again soon, technically speaking.  TIA.



  55. AAPL/Craigs – See above.  Do we have new information?  No.  Are the rolls a particular bargain?  No.  Still, if you don't want to risk earnings (and I wouldn't), the longer spread is a much better place to wait and see because, if AAPL does blow it – you won't have time to recover with that spread.  

    TSLA/Winston – I would take bullish money and run on those guys.  They are just one bad number away from dropping like NFLX.  I sold the $140 puts and I can barely sleep – 25 short calls that are 5% out of the money???  Yikes!!!  If you have Millions, and this is a craps roll to you – then it's fine to gamble but TSLA could be bought by TM tomorrow for $350 (they can just print Yen to buy them with) and then you are out $275,000.  Keep in mind, that did happen to us when we first shorted them a couple of years ago – they jammed up like lightning and we were stuck with a very painful work-out.  

    AAPL/Albo – I like that idea, especially off that low open.  

    QE/Pharm – And he's supposed to be a hawk!  I wonder what the doves will say?

    Scary/Jeff – Good analysis.  It's crazy the way we manage (or mis-manage) health care in this country.  I have zero confidence that we could properly contain a real epidemic.  

    IWM/Bryan – Sure, using the same lines we use for /TF though now that we're at 1,080, we have to watch and wait to see if it hold.  

    Oil inventories/Craigs – ROFL!  At least it was offset a bit by gas and distillates (-5.5M) but still a net 3.5Mb build:

    • EIA Petroleum Inventories:
    • Crude +8.9M barrels vs. 5.0M last week.
    • Gasoline -4.0M barrels vs. 1.2M last week.
    • Distillates -1.5M barrels vs. 0.4M last week.
    • Futures -1.26% to $80.75.

    So much for getting back to $82. 

    NFLX/Lunar – If you bought the puts, I'd take the money.  Most likely there will be bargain hunters after that much of a correction.  If you sold the puts – can't get much worse.  As long as $350 holds, you can hope for improvement.  

    Interesting Kustomz:  "The chart, which is Treasuries plus TIPS, indicates inflation of just 1.46% over the next 5 years — well below the Fed’s target."

    US 5 year breakevens


  56. Phil/Zero confidence

    I'm with you on that, it would be pandemonium for sure.


  57. Putin: Russia may reduce gas to Europe

    If Ukraine takes gas from pipeline, Putin says Russia will reduce gas supplies to Europe.

    Read more: http://www.cnbc.com/id/102078856

    Sent from the CNBC app. Available on the App Store


  58. Pharm/ Any hope for ARIA, or dead money? Thanks much.


  59. From Bloomberg, Oct 16, 2014, 10:41:21 AM


    James Bullard, president of the St. Louis Federal Reserve Bank. Photographer: Scott Eells/Bloomberg

    The Federal Reserve should consider delaying the end of its bond purchase program to halt the decline in inflation expectations, said St. Louis Federal Reserve Bank President James Bullard.

    To read the entire article, go to http://bloom.bg/1F3VvJn

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  60. From Bloomberg, Oct 16, 2014, 9:35:33 AM


    A worker sorts components for a crop planter near an automated welding machine on the assembly line at Kinze Manufacturing Inc. in Williamsburg, Iowa. Photographer: Daniel Acker/Bloomberg

    Industrial production in the U.S. rose in September by the most since November 2012, driven by a surge at utilities and a rebound in manufacturing.

    To read the entire article, go to http://bloom.bg/1F3uSUH

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  61. From Bloomberg, Oct 16, 2014, 9:45:00 AM

    Americans’ expectations for the economy in October climbed to the highest level in almost two years as a pickup in hiring, falling gasoline prices, and low borrowing costs heartened households.

    To read the entire article, go to http://bloom.bg/1F3HAmt

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  62. From Bloomberg, Oct 16, 2014, 11:03:40 AM


    A general view shows the Saudi Aramco oil facility in Dammam city, 450 kms east of the Saudi capital Riyadh, Saudi Arabia. The Saudis might actually want the price collapse because it hurts rivals Iran and Russia in addition to slowing U.S. drilling, said Bruce Jones, a senior fellow at the Brookings Institution in Washington. Photographer: Hassan Ammar/AFP/Getty Images

    The bear market in oil is showing the world there’s still only one country in a position to choose winners and losers in the global market: Saudi Arabia.

    To read the entire article, go to http://bloom.bg/1xU9dJQ

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  63. From Bloomberg, Oct 16, 2014, 11:23:34 AM


    Oct. 16 (Bloomberg) — Andrew Wilson, Goldman Sachs Asset Management’s chief executive officer for Europe, the Middle East and Africa, says the rally in Treasuries has reached the “endgame” as the U.S. shows signs of economic momentum. He also discusses oil prices and the slump in Greek bonds with Jonathan Ferro on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

    Greece’s government debt is back in the spotlight and investors are looking for the exit.

    To read the entire article, go to http://bloom.bg/1rxSsys

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  64. From Bloomberg, Oct 16, 2014, 9:07:35 AM

      An illustration of the challenges oil companies have faced in recent years in bringing large discoveries to market is the $48 billion Kashagan venture. Long-delayed and over-budget, it entered production only briefly last year before being shut down due to leaks. It’s now undergoing expensive repairs and may not start back up again before 2016. Photographer: Nariman Gizitdinov/Bloomberg

    The global crash in crude prices is reverberating through the oil and gas industry, pressuring producers to curtail investment to protect profits and avoid cuts to dividend payments.

    To read the entire article, go to http://bloom.bg/1vgRkWi

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  65. With the EGLE restructuring, what happens to the 40 Jan 2016 $2.50 puts I have at net $.80?  Does it decay as it normally would? Account is showing $1.875 now for the puts and a $3,750 loss for the day with the stock up $14.

    Thanks Phil!  You suggested I rode this one out and I doubled down and I'm hoping to be glad I did.


  66. EGLE/Rperi – I imagine they'll split the options into pre and post contracts.  At the moment, the 2016 $2.50 puts are still showing $2.10, it will take a while before they settle into new pricings (like SHLD and CZR did).  

    We're just not getting over the hump of yesterday's close – that's not good.  Europe finished at FTSE -0.25%, DAX +0.13%, CAC -1.26%, Italy -2.24% and Spain -3% so better but not great by any stretch.  

    Still, we can't use them for an excuse for our weakness now so let's see what they really have.  VIX still nervous at 26.79.  

    DXD April $28/33 bull call spread is 0.60 and I think we should grab 50 of them ($3,000) in the STP to cover our short 50 Jan $27 calls – just until we feel more comfortable that the Dow will hold 16,000.


  67. By the way, as a hedge, that DXD play is good by itself as it pays $25,000 on $3,000 if DXD pops 22%, which is 11% down on the Dow (14,300), which would be catastrophic of course but we were at 14,760 last August – not all that long ago.  


  68. I was wrong, oil is heading back to $82 anyway.  Now $81.69.  Probably that Putin nonsense.  

    Dollar pulling back again, now 84.98, that's offering some support and sending gold back to $1,244.  Silver $17.44, copper still sad at $2.974.  Nat Gas $3.771 and gasoline liked the draw and went from $2.135 to $2.1825 now.  

    Well, I've got to get going.  Hope nothing too crazy happens while I'm gone.  


  69. EPI / Phil – India's been hanging up there – up 14%ish for the year. The Modi premium's still there in the face of everything thats gone on. He may have done well in Gujarat and I have no doubt he'll do well for the economy over the longer run but if markets leg down from here I think India will follow along. Any thoughts?


  70. I am seeing huge bid/ask spreads on that DXD BCS.  Anyone getting that at $.60?


  71. If you have a 1000 Quatloo at Bittrex you can get this trader for free:

    http://quatloos.org/trader.html


  72. jelu – me too.  0.88 minimum.  


  73. EPI/Mckeo – I did like them as a short when they topped out on Modi fever in early Sept, still a good bet if the other indexes turn lower but, on the whole, I think we have a nice bottom here and they have pulled back almost 10% as well:

    DXD/STP, Jet – Don't chase, it either fills cheaply or forget it!  


  74. terra/DXD  and I'm seeing a $2.00 B/A spread on the 33, I bet you'd have to pay way more than $1 for it.


  75. Jelutuck, I just bought it for .80 cents


  76. Its $1.00 net now


  77. rickde11 / DXD spread … do you mind telling us if you bought that as a spread order or did you place the two legs as separate orders? Thanks


  78. Pharm

    Is your family here in the land of Oz as excited about the Royals as the rest of us? This is proof the world might really be ending :)



  79. Phil, LTP … sorry to point out but the GTAT short $3 puts are showing a market price of zero … so the gain of $9,600 should actually be a loss .. :(


  80. SGEN – UR welcome.

    ARIA – no, their drug works, just a wait and see. 

    Royals….I was also hoping the Cardinals would get in to re-do the '85 series.  The rest of the country would not care, though.

    I am slowly buying the SPY Nov 180 Ps.  Wave 3 is coming, and it will be nasty.


  81. hi pharmboy, i was wondering if you could post a chart to show what you mean?? thanks


  82. The Calm Before The Storm In The Gold Market
    http://www.zerohedge.com/news/2014-10-10/calm-storm-gold-market


  83. It's so ironic (and sickening) to see the people who opposed funding to fight Ebola when it was requested all jumping at the chance to criticize the people working hard and putting their lives in danger… 


  84. AAPL calls – Sold 1/2 for small profit.  Stop on balance at entry.  Not the excitement I was looking for.


  85. WFM/Phil – why these guys so low when KR and SVU only coming off recent highs?


  86. AAPL / Albo – It seems that new iPads are low in the interest of people at this moment. Bad timing it seems but then again, you can't plan for the last 3 days…


  87. Looks like a lot of stops were found and cleared yesterday..
    RRD – looks 'corrected' here, but not particularly cheap.


  88. STJ – I think you're right about iPads.  I do except Apple Pay to generate some excitement going forth as it is an entirely new revenue stream.  We'll see.


  89. scott/RRD

    RRD was way cheap in 2013, but it is a long term holding for me with a nice div at this level, with decent put/call premiums


  90. Apple Pay / Albo – If I recall, they will get a very, very small part of the revenues. They probably are betting more on the fact that people might migrate to iPhones for that feature. Although Google has been there for a while now with their Wallet app but with no support from the credit card companies (actually more like opposition). My guess is that 5 years from now it will be a standard feature for everybody. 


  91. What a load of shit.  From a CNBC article…stock market manipulation to push up the price of On Market Close orders gets settled for $1 million?

    "The Securities Exchange Commission on Thursday charged a New York-based trading firm of manipulating the closing price of thousands of Nasdaq-listed stocks from June to December 2009.

    The investigation found that Athena Capital Research used an algorithm to engage in a practice known as "marking the close" in which stocks are bought or sold near the end of the trading day to impact their closing price, a release said.

    "The massive volumes of Athena's last-second trades allowed Athena to overwhelm the market's available liquidity and artificially push the market price—and therefore the closing price—in Athena's favor. Athena was acutely aware of the price impact of its algorithmic trading, calling it "owning the game" in internal e-mails," the SEC wrote in a release. 

    Athena has agreed to pay a $1 million penalty to settle the case, the SEC's first on high frequency trading manipulation."


  92. Quote of the day:

    Morgan Housel, “Work a lot, spend a little, save the difference, invest it wisely, leave it alone. It’s not that hard. We just make it harder than it needs to be. Paying too much attention to the details of markets is a chief culprit.”  (Motley Fool)



  93.  Pharm- Since you called out SGEN, what was it that tipped you in the direction of jumping in at such a bad time in the overall market? This one has jumped each of the last two days without any news I can find after falling for several weeks. Was there something about the price it had reached, some announcement you saw outside of normal news channels, or something else? I would really love to know how you timed it so well. 


  94. Pharm I should add that I have been in and out of SGEN for a couple of years and keep my eye on it, so while it was a price where it has bounced in the past, with all the selling in the general market I never would have guessed it was ready to buck the trend just based on the price, or was it?


  95. pharm// Where do you see the market headed? Thanks.


  96. rookie

    Give him a chance to look in his crystal ball. 


  97. EW…crystal balls? No, just following along.  First set of targets are meet.  From Pretzel…


  98. Watch this video at http://bloom.bg/1yH4Y7y

    El-Erian: Market in `Technically Driven Correction’

    Oct. 16 (Bloomberg) — Mohamed El-Erian, a Bloomberg View columnist and former chief executive officer of Pacific Investment Management Co., talks about financial markets, the global economy and Federal Reserve policy.
    El-Erian speaks with Betty Liu on Bloomberg Television’s “In the Loop.” (El-Erian is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  99. SGEN – So many different reasons…..I was watching the price and volume, also the chart going way back (Tech Analysis does work most of the time!!)  Was it a WAG?  No, just a technical place that made me want to get in there.  Opts 5d MA flattened out and started to turn.  The company is sound.  They are still my favorite mid-tier company in biotech, and for $4B, they could be scooped up b'f you can go pee…


  100. So I need some help/advice from the experienced members and/or Phil himself on this data management question.  I have several accounts divided between TD Ameritrade and Fidelity.  I keep spreadsheets that I update manually every once in a while, but it struck me today that it is RIDICULOUS to have to do that when the brokerage houses have all the data and lots of compute power, so maybe there are reports that already do what I do manually.  The two pieces of data that I want to keep a handle on are:

    1) If a stock that I hold option positions in is exactly at the current price at expiration, what are my positions worth for each security and for the portfolio in total.  In other words, I guess, how much premium is in each position and in total?

    2) For each position, what is the breakeven price (from TODAY, not from when I purchased it) at expiration, and more importantly, what percent down from today's price is that?

    So if I am short 10 CCJ $17 puts worth $3.50 with CCJ at $16, that position has $2,500 of premium and CCJ would have to drop to $13.5 (16%) at expiration before that position would be worth less than it is today. 

    I calculate this info myself for each position in each account.  Is there a report in TOS or a tool that can extract the data to create a spreadsheet like this?  Seems like I am not the only person who might want this!


  101. Now, for SGEN you have a choice.  Sell for a nice 50% gain.  Or, sell a higher strike for $1, and pocket 10c, letting the rest ride to see if you can collect the spread…..decisions decisions.


  102. Another question.  My accounts are getting hammered partially due to the higher VIX, in spite of hedges. Is there a rule of thumb that translates how an increase in the VIX translates to higher option premiums?  And the inverse, how a drop of the VIX from 26 to 16, say,  would affect an account with $50K in net option premium? I understand that this isn't anb exact science, but there is a relationship because the VIX is calculated from option premiums, right?  Thanks in advance!


  103. so what's the deal with chicken, do the get Ebola

    TSN, PPC and SAFM  all "fried"


  104. jelutuck -  Check out Tradelog  http://www.tradelogsoftware


  105. Pharm- Thanks for the answer. I will be curious as to what your decision is, so please let us know when you make it. I also must admit that I can't really follow your SPY chart. Too much going on for me to follow and I can't seem to figure out what all the lines are on here. Probably because it is so compressed on this site. 


  106. Jelutuck, you can use the analyze tab to calculate the value of each position at varying times and volatilities.


  107. craig – SPY Chart….1900ish is the key, if it makes it there. 


  108. Since it's after hours I'm going to disagree on the politics part St Jean. Democrats are shooting themselves in the foot. They could've just nominated someone else, someone OLDER for the surgeon general post. What has this guy done at 36 to earn the title of surgeon general (besides being president of drs for Obama)? Further, I don't buy their reasoning for limiting/stopping people from travel to/from Liberia? Or, at least limit it to citizens who are trying to fight the disease- not random Liberians like the guy who brought it over here. 

    Trading dangerous terrorists for a deserter?  A lack of clear policy on fighting IS…..giving more aid to Syrian insurgent groups who oh by the way happen to be terrorists? The lack of support for Israel. these are just a few things causing me to rethink my automatic vote for democrats next election. If the repubs put forth a more progressive candidate who didn't make his millions dismantling companies I will strongly consider voting for them. 


  109. Jrom – Actually, I was talking about the request for funds that Congress turned down earlier this year. The administration had requested $800M and it was deemed too much so they proposed something like 1/2 of that… A bit short sighted it seems. Like also cutting funding for research. Or cutting funding for embassy protection. These types of policy mistakes.


  110. Jobless claims chart looking like stock charts:

    http://www.bespokeinvest.com/thinkbig/2014/10/16/jobless-claims-hit-a-14-year-low.html

    After some poor economic data relative to expectations on Wednesday, Thursday started off on a positive note with jobless claims coming in much lower than expected.  While economists were expecting first time claims to rise slightly to 290K from last week's level of 287K, they actually declined by 23K to 264K.  This represents the lowest weekly reading since April 2000.


  111. SPY—highest volume day of the year. Strether


  112. Long Russell, Short Dow works again…


  113. jromeha/ candidate from the DARK SIDE(at least on this site)

    I like your comments.  Let me know if you find this person! 

    I am trying to forget party affiliation and vote for someone who tells the truth, has common sense, communicates well, follows the Constitution, and understands that they serve the Office of The Presidency and all the american people.  We need statesmen, not more ideologues. 


  114. Trade Tracking – if you are using TOS, the TD Ameritrade website has a pretty good tool called GainsKeeper (under the My Account > Gains/Loss tab) that can be exported into excel and, granted, you need to work with it a little more, but the bulk of info is there.  You can pull it on a weekly (or daily) basis to stay up-close-and-personal with your positions..


  115. Hi Phil,

    If you have time please see this article;

    http://www.institutionalinvestor.com/blogarticle/3389830/blog/what-the-fk-should-investors-do-part-2.html#.VEDafBY0-Jl

    From the points on the article do you still think that Stock Markets should be in a short to medium rising trajectory?  Thanks.


  116. GT/ Phil

    Would you look at Goodyear here at 20 levels…..Rubber prices are at multi year lows, makes me feel GT would be a good bet over next 6-12 months?


  117. SPY  5  MINUTEGood morning!  

    Big upside Wheeeeeeeee! this morning with the futures popping 1%+ as Europe ripped 2% higher right out of gate.  Yellen is speaking at 8:30 but not much hard news driving things, just speculation on more stimulus and, of course, we knew we'd have to make those weak bounce lines by Friday.  I would have rather made slow gains on good volume but we had great volume yesterday, so it was a nice reverse signal.

    This will, of course, be fantastic for all those longs we repositioned to in the STP and, of course, will renergize the LTP and Income Portfolios as well.  

    Bullard Challenges Fed to Respond to Weakening Inflation

    European Stocks Rise Amid Growing Pressure for Stimulus

    European Car Sales Growth Revives on Price Cuts

    Renzi Plan to Shake Up Labor Market Seen Helping Italy Recovery

    Putin Threatens EU Gas Squeeze Raising Stakes for Ukraine

    Google Profit Misses Estimates on Slower Advertising Growth

    SPY DAILYSo certainly not new-driven, just a technical bounce and we'll just watch our 5% Rule targets to see if they end up being strong or weak but, per the Big Chart above, we already hit our weak bounce target on the RUT (1,080) and the Dow was nearly strong (16,117) and NYSE made it's weak bounce so all good signs into yesterday's close.  

    • Dow – 15,480 should hold.  Weak bounce 15,824, strong bounce 16,168.
    • S&P – 1,800 should hold.  1,840 (weak) and 1,880 (strong).  
    • Nasdaq – 4,140 should hold.  4,232 (weak) and 4,324 (strong).
    • NYSE – 9,900 should hold.  10,120 (weak) and 10,340 (strong)
    • Russell – 1,050 MUST HOLD.  1,080 (weak) and 1,110 (strong) 

    Today we'll need all those weak bounce lines to hold and at least a strong on the Dow or we'll have to take the quick profits on the short ultra-short calls we have naked.  


  118. WTF/CJ – I like Vitaliy a lot, he's a good guy and does good work, one of the few surviving Fundamentalists in the World.  He's doing a good job of covering the global basics but, like any Fundamentalist, he has to learn to watch his time-frames – we do tend to get ahead of ourselves when the macros SEEM obvious – but then our expected moves (like CAT falling) take ages to play out.  Also, he's looking at China too closely on that one because CAT's resource business is only 1/3 of their operation and could be quickly offset by a rebound in construction or infrastructure spending, which cheaper resources make possible.  

    Same goes for inflation, how do you forecast a collapse in the BRICS and surging rates in Japan – gotta pick one – it's not a Chinese menu…  So, anyway, from the points of the article it's a gross over-simplification of the Global situation and doesn't raise any issues we haven't been discussing here all year long so it's certainly not going to change my opinion that we have a 10% correction (check), bounce back strongly (in progress) and drift back to 1,900-1,950 through the end of the year without making new highs.  Nothing I'm seeing in earnings (the E in p/e) has led me to change my mind so far.  

    GT/Checho – Not after the conversation I just had with my brother.  They are twiddling their thumbs at a Toyota dealership in South Florida.  TM usually sells cars no matter what – it's extra-dead for this time of year.  Doesn't matter if your raw materials are cheap if you aren't making any sales.  If you want to work into a LONG-TERM position on GT, I'd take a poke by selling the 2017 $18 puts for $2.75.  That's a net $15.25 entry – hard to argue with that.  

    The problem the car dealers are having is that they used every trick in the book to drive people into cars for the past two years and they've now exhausted the number of people who need a car at the same time as the car buying cycle has moved from an average of every 4 years to an average of every 6 years as people just aren't flipping to new cars anymore the way they used to.  That's a 33% decline in rolling demand (and the real dip came in 2009-11, as that change in turnover was absorbed) and then they pushed all the marginal buyers into cars in 12-14 and that doesn't really leave too many people who want a new car at this point.  

    The good news is that demand will come back as cars can only be driven so long before the cost of repairs exceeds the cost of a new car but, like anything in the economy, the artificial stimulus (low rates, easy financing, rebates) that has driven people to new cars in the last few years hasn't changed the underlying problem – that the habit of people wanting new cars and feeling that it's important for them to spend money just to have a shiny thing to drive has been broken – and now auto manufacturers have to adjust to the new normal in the US, Europe and Japan. 


  119. Thought for the day:

    Quatloos/BDC – Star Trek is always right.  

    GTAT/DM – Yep, that price is screwed up.  

    Wednesday, just hours before the matter was set to be heard, GT, Apple and the newly appointed official committee of GT’s unsecured creditors agreed to delay the substantive parts of the secrecy challenge to Oct. 21.

    Royals-Cardinals/Pharm – Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz….

    Ebola/StJ – I wonder if the lack of fireworks at the Ebola hearing ended up being a plus factor for the markets?  

    AAPL/Albo – Oh ye of little faith…

    "I've heard people say it's evolutionary, rather than revolutionary," tech expert Carolina Milanesi of the research firm Kantar Worldpanel said after Apple's announcement. But she added, "why do you need to revolutionize something that's already the best in its class?"

    [video] Chinese iPhone 6 launch 'extremely strong': Pro

    [$$] Apple Pay Draws Hundreds of Banks

    Will Apple Pay be the next iRevolution?

    The service, which goes live Monday and has hundreds of banks on board, is "hugely important" says Forrester Research analyst Frank Gillett. It puts Apple in the middle of a wide range of consumer transactions, underscoring Apple's value as a brand and giving people a powerful new reason to buy iPhones, iPads and other gadgets.

    "It's a strategic advance not just because it may be a new revenue source, but because it injects Apple into a whole different value stream" for customers and the company's business partners, Gillett says.

    Everything You Need to Know About Apple’s Newest iPads and Macs in Two Minutes

    The key is all the new devices are ApplePay with TouchID now – this is what AAPL cares about, not wowing people with new devices.  

    WFM/Scott – Because KR and SVU cater to the masses and don't have much demand variation so lower food costs drop right to their bottom line while WFM (and we've talked about this before) deals with mostly local farmers and doesn't benefit as much from falling commodity prices (as they are governed by the big boys) and, it could be argued, that the cheaper produce in other stores may pull business from WFM.   Back when food costs were high, I remember noting I liked WFM because they were no longer much more expensive than my local supermarkets but had better quality produce.  

     WFMI/Rain – Yes, they make long-term deals with local farmers who make a very nice living selling to WFMI as their main customer so they’re not going to sit there and haggle when the price of fertilizer goes up 30%.  Also, since their distributors are distributed geographically, they are not as affected by something like a flood in Australia as big markets are.  And, of course, their customers are not very price-sensitive although sometimes I do notice something I’m buying that makes me go "Whuck?!?" but it’s usually not until I get to the register as a lot of their stuff is unmarked.  

    Manipulation/JPH – I agree, this is beyond disgraceful.  I have been pointing out this BS for years but I never imagined that, if it was finally found and prosecuted, that the SEC would just roll over like this.  Their behavior cost investors TRILLIONS of Dollars!  The only way I can put a good spin on this is MAYBE the SEC did this in exchange for their full cooperation, which will lead to MASSIVE fines against bigger investment houses.  Maybe…

    Submitted on 2012/02/15 at 1:59 am

    Volume info/Kallen – I watch it and the unfilled orders get filled in a process called "Market on Close", which is the trick I referred to and discussed here in detail last month.  What people don't realize is that, when there's a trade imbalance at the close (caused by bots stuffing buy orders into the close) the Nasdaq or NYMEX will broadcast the price and imbalance information back to their dealer network and essentially put the block of orders up for bid so the brokers can rescue the buys of their own bots at the lower price – that's why you often see the price suddenly collapse as soon as trading stops.  

    Submitted on 2012/03/14 at 7:51 pm

    Blocks/Shadow – That's those "market on close" orders we talked about last month.  The big boys stuff massive orders in at the close so they don't affect the prices (much) which is why the trick is to run the market up into the close, so they get the best price for their volume dump.  It's a total scam and it's the retail traders who suffer.  

    Submitted on 2013/12/04 at 4:16 am

    By holding up the QQQs, they use AAPL to trigger index buying, which most 401Ks and IRAs are based on and that guarantees them buyers for the rest of the index as they dump MOC (market on close orders) into the close – which is why we're seeing half the day's volume at the close. 


  120. Data Management/Jet – You get some of those things with PowerOptions, which I use to track the portfolios.  I think if you mention me you get a month free trial.   It does the expiration p/e calculation and the expected gain/loss, but only for standard spreads or buy/writes – it doesn't work on artificial buy/writes. #2 you should know when you enter a position – shame on you if you don't.  The break-even price doesn't change over time.  In your example, if you are short 10 CCJ $17 puts at $3.50, your break-even is $13.50 ALL THE TIME, no matter what the current price of the contract is.   

    VIX/Jet – Higher VIX = higher premiums and the farther out you are in time, the more the effect can be EXCEPT when there's a short-term spike in the VIX, as that will tend to affect the front-month contracts first.  And vice versa the other way.  The VIX itself is the square root of the variance swap rate for a 30-day term on the S&P then each individual stock has it's own implied volatility based on it's own internal variance.  To some extent, you may as well be demanding to know whether Schrodinger's Cat is alive or dead – better not to worry about it unless you intend to be a market physicist…

    Ebola/Stock – What?  Calm down dude.  Good information page here.  

    Flights/Jrom – I think the point about limiting air travel is that a lot of aid workers and supplies wouldn't be able to get where they need to be.  Screening at the airport can be effective if done right and limit risk to fairly insignificant amounts.  Cutting off Liberia will create other economic problems for them, which would come at a bad time and cripple the Government's ability to fight Ebola which again becomes our problem. If we had a massive government response with Berlin blockade-type military airdrops going on – THEN I would say it's OK to cut back commercial traffic but this is all part of the GOP demand that we allow the private sector to solve the problems and the Government should stay off their backs in this case.   Think how idiotic it is if we demand private-sector solutions and THEN have the Government interfered with the private sector.  Oh wait, that's kind of the GOPs whole thing, isn't it?  

    Statesman/DC – Sounds like you'd want a Professor of Constitutional Law with a Harvard Education (maybe the President of the Law Review) who tries to reach across the aisle to work with both parties (even though one of those parties blindly hates him) and, despite being under a microscope for 6 years, hasn't been caught lying about anything (but he did salute the troops with a cup of coffee in his hand).  Seriously, this is the best the NY Post could come up with on the "lying" front – pathetic.  

    Perhaps you need to consider your own affiliation when your "ideal" candidate is in office and doing an excellent job in a very difficult time and you still can't see it…  


  121. Ebola -http://www.nytimes.com/2014/10/15/opinion/frank-bruni-scarier-than-ebola.html

     

    As Bruni says, get your flu shot and wash your hands.  3000 will die of flu at a minimum from the flu this year.  If 30,000 gun deaths a year is acceptable collateral damage to the NRA, what is the worry about Ebola?


  122. DC – "understands that they serve the Office of The Presidency and all the american people. "

    obama hugs nurse

    Ever see Bush hugging a nurse that treated an Ebola patient?  Who does this guy care more about, himself or the people he governs?  


  123. Here you go again Rev, trying to use fact to combat ideology…