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S&P Faces Critical Test at 2,060 – Will China Save Us?

SPX DAILYHere we go again!  

The S&P Futures are re-testing that 2,060 level, which is 20 points below the 200-day moving average and, more importantly, 35 points below the 50 dma, which means, if we finish down here, we can drag the 50 dma almost a full point lower and a few days like that can bend the line down and then we're heading into our 3rd major death cross sometime around the end of September.  

That's why we look for strong bounce lines off these critical support levels – if we don't get the bounces, the shape of the charts will change and that will turn sentiment more bearish and make it all the much harder for the indexes to rally in the Future.   All this is taken into account by our fabulous 5% Rule™ which, as you can see from yesterday's Big Chart – has really been driving the market lately.  

Last week, we discussed our outlook for the S&P by examining some of the major components and contemplating whether or not they could drive the market any higher and we concluded that Exxon (XOM) and Chevron (CVX) would be a drag on the S&P and the Dow with oil at $43.  A week later, oil is at $41 (we went long at $40.65 this morning in our Live Member Chat Room) and both companies have had a TERRIBLE week, with XOM down 2.75% and CVX down 5.75% (about the same as oil itself), both costing the S&P and the Dow heavily.  

Of course, we told you this would happen last Thursday, so don't act all shocked about it this morning.  In fact, yesterday's morning post called the action in the headline ("Whipsaw Wednesday – Monday Market Gains Gone in a Flash (Crash?)") and you can have those posts delivered to you pre-market, every day, by signing up right here.  

SPX WEEKLYLast week, the conclusion of our two-part study on the S&P was:

So, upon further examination, there is no change to our stance of being short the markets at these levels which, on the Futures this morning, are 17,400 on the Dow (/YM), 2,095 on the S&P (/ES), 4,550 on the Nasdaq (/NQ) and 1,212.50 on the Russell (/TF) and, as usual, we look to short the laggard of the set with tight stops above.  We also took on a more aggressive SDS (ultra-short S&P) position yesterday afternoon – as we felt the run-up was nonsense anyway – this post just confirms our gut reaction

Be careful out there!  

As of this morning, we're flipping long for the bounce and that means we're officially calling off those trades at:

  • Dow 17,150, a 250-point gain off last week's short and up $1,250 per contract
  • S&P 2,060, a 35-point gain off last week's short and up $1,750 per contract 
  • Nasdaq 4,475, a 75-point gain off last week's short and up $1,500 per contract 
  • Russell 1,190, a 22.5-point gain off last week's short and up $2,250 per contract

For the Futures-impaired, we suggested SDS, the ultra-short ETF of the S&P and that ETF is up 5% from Thursday's open, now $20.82, which is a double on the Sept $19 calls at $2, though we already took that money and ran on Tuesday's spike up and shifted to a longer-term SDS hedge in our Short-Term Portfolio.  

Now the battleground will be fought on the S&P at 2,060 but we expect this line to be held up (this time) by our friends in China, who have their own market emergency to contend with as the Shanghai Composite dropped another 3.4% overnight and took us back to the hyper-critical 3,500 line which MUST HOLD, as it's 30% off the silly top but, more importantly, it represents the line at which the Chinese Government has been assuring investors it would be safe to buy at for the past month and you know what they say about "fool me twice." 

The July 9th (also Thursday) spike low was 3,373 and the index was jammed up 10% off the low the same day (see "Flip Floppin’ Thursday – China Arrests the Short Sellers" and "Friday Market Fakery – Dollar Dip Does the TRICK!").  Keep in mind, China halted 2/3 of the stocks ahead of the 10% pump job.  If they try to prop up the index without the halts this time – they may find it's much more expensive than they realized to prop up the market and that may cause their resolve to falter – so we're going to be VERY concerned about China for the next few days!   

China may find it difficult but I believe they WILL prop up the markets and then we WILL rally because China rallied and all will be well for another few days in this Fantasy Land Market we've constructed for ourselves.  

So I apologize if you have been too cheap to get our newsletter or our pre-market Alerts like the one that went out this morning to flip long on the indexes, oil (prices noted above) and gasoline ($1.52 on /RB) and I'm really sorry if you have been missing these articles because they were rejected by editors as "too focused on technicals and/or current events" but I think the smaller picture is as important as the big picture – especially when you have a portfolio to protect.  

Be careful out there!  

 


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  1. Gas Tax / Phil – To continue that conversation from this morning… You mentioned that $30B fund that we used to jumpstart new energy companies (including TSLA) and where we had that big Solyndra bust. Of course, the GOP doesn't talk about that anymore because that fund is now profitable and we actually did create jobs and many of them good ones. They just have to keep that narrative that the government can't do anything right and that goes against that myth! Ironically enough, these same people have no trouble justifying spending $600B in probably the most wasteful of governmental organization – the Department of Defense. And to add to the irony, most of that waste is from private businesses taking advantage of these supposed hawks looking to spare no expense in the name of defense! End of rant…



  2. It looks like the people who actually do the fighting support the Iran deal:

    http://www.ritholtz.com/blog/2015/08/u-s-military-leaders-support-iran-deal/

    It's only politician who stay at home and whip up their base into a frenzy who are against it…


  3. Article about market dynamics:

    http://www.bloomberg.com/news/articles/2015-08-12/citigroup-something-big-and-fundamental-has-changed-in-markets

    The crux of this argument is that markets used to be self-limiting. Prices of securities would move up to a point where their yields would become unattractive, at which time investors would trim some of their positions, causing prices to go down and yields to recover. Now the intense search for returns has altered that dynamic, with investors chasing inflows as a means of getting higher prices and higher profits.


  4. Good morning!  

    We were doing good on oil ($41.50) and gasoline ($1.55) until the NYMEX just opened at 9 and now more selling.  

    Same as any move though, now we look to see if the retrace is weak or strong and, as long as strong holds first and weak holds 2nd test, it's still bullish.  

    Big Chart not too encouraging.  Any time spent below those 50 dmas bends them lower and time spent below the 200 dma bends that lower and falling 200 dmas are very hard to bounce back over.  

    Rant/StJ – I'll book you as a warm-up for Bernie.  wink  Charts are getting nasty:

    Iran/StJ – I just spoke to a friend who got back from Israel and he says it's about 90% against over there basically because they don't trust Iran at all and think this is just a ruse to get money flowing so they can fund more terrorists to keep Israel soft (from constant attacks) while Iran finishes a bomb in another country (good trick) and keeps their promise to wipe Israel off the map.  

    Keep in mind, these guys still remember being attacked on Yom Kippur, which is their high holy fasting day – it's like attacking a Christian country on Easter Sunday or Christmas except Jews aren't allowed to operate equipment on Yom Kippur so it forced them to not only scramble forces but break their religious beliefs to respond to the attack – really not nice.  In that war, it was Syria and Egypt who coordinated attacks from the top and bottom and Iran is now pumping money into Syria, who are attacking Israel on a daily basis.  

    LL back over $15 and now Cramer is saying nice things about them?  

    Markets/StJ – In other words Fundamentals are being ignored.  Not sure how long you can do that.

    Wheeee – oil and gas moving back up after a weak retrace.  


  5. Good Morning!


  6. Phil,  thoughts on the spread between Sept and Oct (U vs V) /RB contracts.  Currently .15 difference with 11 days to go in the Sept contracts.


  7. This explains a lot:

    Also interesting:

    Contract spreads/Options – It's so volatile I don't think it's worth the hassle, kind of like doing short strangles – they work almost all the time but the one time they don't wipes out 10 times they did.  /RB has 6 days to expiration, not today – that's a lot of room to blow you out.  

    Nice spike down to shake out the longs – entry opportunities at all of our index targets. 


  8. BTU – Up 20%.


  9. Iran / Phil – Trust me, I understand the history and 3/4 of my immediate family is Jewish. But at this point we are running out of options. And possibly friends to help up keep the sanctions on. And I am not sure that sanctions are the best option anyway. Look how that worked with Cuba. There might be more progress toward democracy there in the next 5 years than in the last 50! I guess that's the hope with Iran. They almost did it a couple of years back! I want to stay positive because wars have not been productive the last 15 years or so!


  10. So….GDX Jan16 19 Calls were a good buy! 8)  Selling 1/4 now, holding on to the rest, looking for >$1.20.

    • Pharmboy (premium)

      GDX Jan16 19 Calls…buying 100 contracts at 49c.   This should explode.


  11. MNKD…who was that that said they would go no where, even if their 'Exhubera'-like drug was approved? 

    MannKind (MNKD) failed to settle a $100 million convertible loan before an August 15 deadline. The embattled diabetes-drug company is trying a second time to clear the debt but on even less favorable terms, which will bleed off a larger chunk of cash. Here.


  12. Phil in yesterday's portfolio update you did not update JPM.  There is the Aug 62.5C


  13. Wow, that is unexpected.  Sprout, which just won approval as the female 'Viagra' – even though the effects in women were … at most … whisper in the wind, is now being bought for $1B by Valeant.  That is stoopid money.


  14. @Pharm

    Bill Cosby was bidding 900mm for company, just got beat out.


  15. Option JPM Aug 62.5c I take it short? I sold the 70c 


  16. Yikes, Leading Economic Indicators down 0.2% offsetting Existing Home Sales up 2%.  Philly Fed surprisingly strong after terrible NY Fed:

    • August Philly Fed Business Outlook+8.3 vs. +7 expected, +5.7 prior.
    • Business Conditions +43.1 vs. +41.5 prior
    • CAPEX Index +18.4 vs. +7.7
    • Employment +5.3 vs. -0.4
    • New Orders +5.8 vs. +7.1
    • Prices Paid +6.2 vs. +20.20

    Indexes failing to hold our lines so far and much bigger rejection on oil ($41.10) and /RB ($1.5375) while gold plows up to $1,147 (silver $15.475).


  17. LOL.

    SGYP…Aug 8 Ps that were STO for ~50c, rolling to Jan16 6Ps for 30c credit. 


  18. Had more than a double on some DIA puts I bought on Tuesday morning and dumped them yesterday before the Fed minutes.  Watched market come back up, was happy I took over 100% gain on them in a day and today I am miserable I dumped them.Would've been 7x on my money.


  19. BTU/Albo – Like I said, +20% a day for a month and we'll be in good shape!  

    Iran/StJ – I agree, I think the deal we have is better than no deal, which leads quickly to war.  Just saying it's complex with many shades of gray to consider.  

    GDX/Pharm – Very well-timed!  

    Even ABX is perking up:

    Good call on MNKD too!  

    JPM/Butterfly, Options – Oops, my bad!  We've been deconstructing that one as we only have the short Aug $62.50 calls (now $4) which we sold for $6.75 because we decided to take our long calls off the table (we still have our long puts but pretty worthless) in a top call.  No change in premise so we'll just roll the 10 short $62.50s ($4,000) to 13 short Sept $65 calls at $3 ($3,900) so we'll spend $100 and pick up $2.50 in position.  

    Sprout/Pharm – What a joke but the FDA approved it and millions of men will be putting it in women's drinks now…

    And what Rustle said.  

    JPM/Yodi – Very good call on the short $70s, nice and worthless.  

    SGYP/Pharm – Another crazy-assed stock:

    DIA/Rustle – That's OK, on to the next opportunity.  


  20. Phil,

    I have several long positions that are strongly correlated with oil.  Is there an oil hedge you would recommend through Jan 2016?  


  21. Followed Pharm in GDX but mostly to lower my cost basis by about $4! At this point anything helps. Still looks like a lot of overhead resistance to be overcome though! And I still think that the dollar will get stronger.


  22. Cantor Fitzgerald sees upside for Lumber Liquidators

    Aug 20 2015, 07:09 ET | About: Lumber Liquidators Holdin… (LL) | By: Clark Schultz, SA News Editor 

    Cantor Fitzgerald upgrades Lumber Liquidators (NYSE:LL) to a Buy rating following a store tour with managers.

    The investment firm thinks margins at Lumber Liquidators will top guidance.

    A price target of $18 is assigned to shares.


  23. Now there is a nice move on NFLX


  24. ALL:  Does anyone see a trade in REGN?

    Thanks in advance,


  25. Bounces being rejected.  How for you interpret this Phil?  Or too early to tell?


  26. Yay on NFLX!  Finally…

    I was explaining why they were ridiculous on Benzinga Radio yesterday – I wonder if that helped?  You see, you can pump a stock like NFLX up to $130 but when people start selling $125 calls, offering to sell you NFLX for $125 in exchange for $10 now – at 100 shares per contract, you run out of real buyers pretty fast and it sometimes accelerates the price discovery process.  

    Oil/Csl – Well really you're asking for a short on oil at $40 and I think that's a terrible idea.  The time to hedge long oil positions is when you initiate them, not after oil has dropped to new lows and your positions are hurting.  If you don't have confidence in oil coming back – rather than trying to mitigate the damages, you should consider getting out of the long positions or hedging them by SELLING calls, so at least you are cutting your basis somewhat.  After all, selling a call against a long energy position is essentially a short hedge on oil except you have the play covered and money goes into your pocket – not out of it!  

    Gold $1,150!  

    LL/Batman – Wow, up 11% now.  See how that works out when you keep plugging away at cheap stocks until someone else realizes it's cheap too…

    17,100, 2,050, 4,425 and 1,185 are the lines they dare not cross now.  Europe got way worse with 30 mins to go it looks like they'll finish at the lows – maybe they are putting the downward pressure on us? 

    REGN/IHS – I don't know if they are good or bad but very high p/e and all they are doing is pulling back to the 50 dma, which is 20% higher than the 200 dma so it's not so much a bargain here as a sensible correction from $600, which is a double from last year.  

    $300 to $600 is $300 and that means $60 retraces to $540 (the 50 dma on the nose) and $480 (will be the 200 dma by the time it gets there, now $464).   I'd be patient.

    Bounces/Craigs – As I just noted, very bad if we break these lines but I think our selling is Europeans reacting to the Fed and it will abate after 11:30 but certainly no going long unless we are over the lines and very tight stops below.  

    VIX 17.14!  What a good day to sell puts…


  27. On that Radio link, I come on after the first break (right about 1:00:00).  


  28. Phil:  Thanks for your thoughts on REGN.  I agree that patience is called for.


  29. Talking about VIX and selling puts I set up the GOOGL Vertical Sell Sept 635/610 for 7.02 Possible not for all, little heavy in Margin 965.00 per 1 option.


  30. OTM SPY Oct 198 Ps for a bit of 'protection'.  Not too shabby.  Up 1.20 and will lighten up on them for now.  Waiting to either roll down or get back in on any bounces.


  31. NFLX / Phil .. thanks for the long Mar $90 puts idea .. I closed out today for a 44% profit in 2 weeks .. that is enough for me :)


  32. Phil, sell puts in what?


  33. BP/Stock.  That is where I would start.  Jan16 30s.


  34. what happened with SUNE, did debt problems somehow catch up with them?


  35. Phil; would you recommend protecting gains in GLD or do expect it to continue to  move higher.  Would you expect a bounce at some point?  1050-1150 in just a week or two is a very big move.


  36. LGCY ~~Legacy Reserves COO disclosed purchase of 34,255 shares at $5.83 worth ~$200K. 

    I still have a position in LGCY which is currently underwater, but continuing to pay a very big dividend.

    Added some LGCYO preferred.  Paying 16%.  The preferred is cumulative, so if the company survives, those dividends, even if temporarily suspended, will eventually be paid.


  37. The Donald just doesn't get it.  What a disaster he would be as Prez.

    ~~WASHINGTON, Aug 20 (Reuters) – U.S. businessman Donald Trump, the leading Republican presidential candidate, on Thursday said he would not back a higher minimum wage for American workers as such a move would hurt the nation's economic competitiveness.

    In a televised interview on MSNBC, Trump, a real estate mogul and TV personality, said the United States needed low wages and taxes to be competitive with other countries.

    "Having a low minimum wage is not a bad thing for this country," Trump said.


  38. ~~Pharm;  Thoughts on KITE with the recent down move?


  39. Time to bounce.


  40. Denlundy….what makes you say?


  41. Den – all I see is new lower lows on the day…


  42. GDX/Pharm

    How do you decide to sell the position outright versus covering with a short call after holding a naked long that has gone your way?

    Thanks,

    Joe


  43. Short-Term Portfolio Update (STP):  Boy are we bearish!  S&P down 1% and we're up $30,000 today.  Would be nice if it fell 5% more…  Actually, a lot of that is a huge turnaround in NFLX, which was killing us on the naked short calls (Jan $120s) and now back in line with NFLX at $112.50.   Of course, we put $30K in our pocket on that sale, so let's hope NLFX stays below $120 and we'll have ourselves a very Merry Christmas as it's still showing a loss of $3,000 at the moment, so a $33,000 flip in 5 months if all goes well! 

    On the whole, the STP is doing it's job protecting the LTP.  We got less aggressive with our ETF hedges after we got aggressive shorting NFLX but we'll need to look at every trade fresh – to see if it fits our current agenda and outlook:

    • SDS – Got less aggressive moving to Dec but still moves nicely with the market (inverse 2x the S&P) and we're 100% in the money above $20.75 (now $20.94 with S&P at 2,055).  That means we'll get 5,000 (50 contracts) pennies for each penny SDS moves up going forward.  So, if the S&P falls 5%, SDS climbs 10% to $22.99 and we gain $2.05 x 5,000 = $10,250.  So that's the cover we get from that hedge – $10,000 per 5% S&P drop.  
    • FAS – Coming down a bit but still not really cooperating.  It's a big position (40/60) but the banks were way overvalued at $35 and I'm glad we stuck it out as we're back to $32.70 already.  With the Fed tightening right about next earnings, this quarter will be interesting.  
    • Since the short Aug $33 calls are now 0.27 after FAS dropped $1.43 today, we should buy them back rather than risking a reversal (on China stimulus or Fed speak tomorrow).  That leaves us with just the 40 short Jan $29.50s covered by 60 2017 $35/42.50 bull call spreads – I'm very comfortable with that and we can add more short calls if FAS has a silly pop again.  

    NFLX – That was really sucking for a while, hopefully that silliness is over but a long time (and earnings) between now and expirations.

    SCO – Well, there's always something that will cause us pain and now it's SCO (ultra-short oil), which we shorted and rolled to these (1.5x the original) when the other shorts got out of hand. We collected $23.50 per contract and SCO is at $115 so our short $90 caller is $25 in the money, not terrible but premium shows us $29.60 for a price, so it looks a lot worse.  SCO is one of those ultras that decay over time – so we'll give it more time…

    GLL – Speaking of things that came back.  Like SCO, we shorted the ultra-short gold ETF, which was a bullish play on gold that was not working for a long time.  Now we're back on track and it's a small position (5 contracts), so we'll just see what happens.  

    TSLA – If we needed the margin, we'd close these as we're just waiting for them to expire (leftover leg of a spread).  

    XLU – Also leftover from a spread and we exited the longs too early as money has been flying into utilities.  

    • GLD – Back in black (or gold)!  Seems funny we were ever worried about it.  Will close with full payout ($4,000).  
    • INTC – Was in the money but no more as INTC retests the lows.  I guess we should buy out the short $30 calls (0.18) and roll the $27 calls ($1.43) to the Oct $25 ($3.35)/28 ($1.25) bull call spread at $1.10.  The original spread was net $1.60 and this roll puts 0.33 in our pocket so now we're in for net $1.27, call it $1.30 and we make up to $3 at $28 and we're 100% in the money at the moment – not a bad adjustment!  

    • RJET – On track.
    • BTU – Huge move up today!  Suddenly those $1 calls don't seem so crazy, right?  
    • GREK – I'm content to let the Augs expire and see if we get a pop next week on our Sept calls.  
    • BWLD – Another one that was hurting and is now calming down.  I'm comfortable with our targets (under $190 in Dec).  
    • FXP – This is a little tricky as my instinct is to cash in the longs that are huge winners and leave the shorts but Dec is a long time the way FXP moves and too scary to leave naked short calls.  The spread is $25/34 for $9 max and the $25s are $17 and the $34s are $10.50 for $6.50 out of $9 so not worth cashing in with so much more to gain.
    • GLD – Didn't we just do these?  Oh, we had two plays!  Well that's great and shows you how bullish I was on gold and fortunately we only sold 15 of the short Aug $105 calls and they should not even be there because they stopped out at $2.50 (I didn't update yet).  

    • LL – Signs of life today!   As I noted on that radio interview, we sold the Aug $23 puts for $4.20 and that's net $18.80 so there was never a reason to panic.  Those puts are now $7.60 ($7,600) and we can roll 10 of those to 15 of the Jan $18 puts at $4.80 ($7,200) for $400 out of pocket and now we've collected our original $4,200 less the $400 = $3,800/1,500 shares = $2.53/share so the net if assigned at $18 is now $15.50, which is where the stock is now.  Not bad for a trade that went way against us!  Since we have an LTP position, I'm not looking to put money into the bull call spread – we can just cross our fingers on those (the overall spread was a net credit so, if the short puts expire worthless, we win).  
    • SLW – Also back from the dead and over $14.  All good for the way our spread is set up and we'll roll if we have to in Oct. 
    • SQQQ – Another overall ETF hedge.  We got more aggressive on these and it's paying off with our Jan $18 calls now $5.70 in the money and we only sold 50 short $30s so miles of profit to go before these stop paying off.  So, like SDS, these will pay about $15,000 per 5% S&P drop so that's $25,000 so far on our primary hedges.  
    • TWTR – We need to move this to the LTP.  Thank goodness we sold some calls!  
    • TZA – Our 3rd major hedge is also very aggressive with a 2:1 ratio.  The Jan $7 calls are $4 in the money and it's a 3x ETF so here we're adding probably $12,500 for each 5% drop in the S&P so let's call it $40,000 per 5% or about $8,000 per 1% protection from our main hedges with a $33,000 bonus if NFLX stays down.  That's pretty good overall protection!  
    • UCO – Oops, this one went bad.  We don't think it will last so we'll buy back the short Sept $33 calls (0.10) and we'll take the $30 calls (0.15) and spend $1 ($3,000) to roll them down to the Oct $25s ($1.15) and see how things go.  The short puts (Sept $25s) might still work out into the holiday.  

    Gosh, every time I do one of these reviews I'm surprised by what a good combination of positions we have.  UCO is unfortunate but I'm into sticking that one out, feeding it $3,000 a month until we catch a good pop in oil.  Even if it takes until next summer – it's $18,000 invested where a $10 move up makes us $30,000 and UCO fell $10 this month and $10 the month before that and $10 the month before that – I'm just looking for one good one!  

    I'm pretty comfortable with the amount of protection we have but the indexes are breaking down at the moment, so we will have to be careful – in case we begin to feel our precautions aren't enough.  


  44. Cervantd   Can't argue about the lows. It looked like we were testing  Phils  support lines at 2050, 1185, 4025 and 17,100 for the bet part of 2 hrs. Time to use AAPL to put some life in the indexes. 


  45. SPY/Pharm – Great puts for people who need to stop the bleeding.  

    You're welcome DM.  

    Puts/Stock – I meant in general.  If the VIX is high(ish) and stocks are at lows, you get great prices for short puts.   Unfortunately, it also makes the LTP look bad…

    SUNE/Pharm – Old note on them:

    SUNE/Scott – People really hate their merger with VSLR and I wouldn't touch them until I see a couple of quarters with the combined numbers.  Bad mergers can keep hammering a company for a very long time. 

    Phil Submitted on 2015/08/07 at 2:18 pm

    SUNE/Stock – LOL, you love the charity cases, don't you?

    SUNE did a big acquisition (Vivant/VSLR) right after Invergy and that has been killing them and now it's looking like that was a Hail Mary to cover up the faults in their base business.  CHINA!!! is a problem for the whole solar industry.  They also have this strange structure with TERP, which comes across like a shell game and investors aren't happy with that either.   All this M&A has driven SUNE's debt to 4x equity and that's dangerous even for a company that's firing on all cylinders.  In a negative environment – it could be catastrophic. 

    GLD/Options – I think it's just getting back to where it belongs.  The plays we have are pretty conservative – really we just need it to hold $1,100.  

    LGCY/Albo – You do realize they will lose $3.64 per $5.25 share this year, right?  Another company whose cash reserves are being looted in order to pay dividends to people who need it the least.  $1Bn in debt, $500M in sales and a $250M loss means their $1.40 dividend is like the piece of fish in the bear trap.  

    Kyle Hammond already owned 135,700 shares so he's adding 25% and it was probably a trade-off agreement for the 130,000 shares he was just granted on the 15th.  Very sneaky by LGCY because it makes you think he had faith in the company when really he put up $200,000 and got 170,000 shares of stock so $1.176 per share is what he paid to get a $1.40 dividend (if they can keep the plates spinning for another year).  


  46. I think Phil was off a little and the lines in the sand were /TF 1180 ,  /NQ 4400 and /ES at 2045. If I am wrong I'll shut the F up and will not comment for again for several weeks. Bought a bunch of weekly calls on AAPL 112's and TNA 76's and 77's to back up my confidence. We will see how it plays out.


  47. Den – tnx for clarifying.  I'm long ES @ 2053 and it hurts a little.  Watching the close.  Prob going to flatten there, take my lump, and sell spy puts to play the long side bounce. 


  48. TWTR – I have some Jan 16 calls and must have not logged my trade notes. Can anyone shed some light on what that play was?


  49. WIN  a big spike just now


  50. Lines/Den – Well the lines don't change but now, of course, we have to look lower at 17,000, 2,040, 4,400 and 1,180 as the next set that must hold and breaking 17,000 is very bad, as is 2,040 (but our goal for this pullback is the same 2,035 it's always been).  

    TWTR/Pstas – Well it seemed cheap at the time but they've been dead money since April earnings and getting deader in this market.  I'd say you want to roll for time and position if you intend to stick with them.

     WIN/Stock – Wow, popped off $6 back to $6.40, that's huge.  

    Too bad, I would have loved a chance to re-buy lower.  


  51. Phil/Taking profits; my weak game is taking profits – either on cashing out longs or closing out short calls when a decent percentage profit has been made. Some examples where I would appreciate your perspective:

    AAPL Dec15, short 125 calls – premium received: $7.20 – price now: $2.90 – naked

    AAPL Jan15, short 130 calls - premium received: $13.80 - price now: $2.34 – naked

    AAPL Jan17, short 185 calls - premium received: $4.00 – price now: $1.30 – naked

    AAPL Jan17, short 130 calls – premium received: $21.00 - price now: $9.00 (part of BCS with long $90c)

    I always wrap myself up in the logic of holding on to burn off the premium – especially when positions are deep OTM. As a miser, I also hate to pay up to buy them back, and then immediately (and I mean like 2 minutes later) look for more short calls to sell on something else.Then I think well if the slide continues then why the heck didn't hold on to the short calls because tomorrow I could have bought them back cheaper. Easy to see why this leads to analysis/paralysis! HELP!!!!!!!


  52. SCO looked like it was going to be down finally…

    then reversed


  53. WINSTON: In my opinion you would be smart to take profits, you never know when AAPL will turnaround and start going up. I have AAPL jan 17 short puts at 100 and 105,  which I see as the downside for the stock. 


  54. Profits/Winston – You need a game plan for your positions.  When you sell, for example, the AAPL Jan $130s for $13.80 in June, you expect to make $2 per month.  If you get $2 ahead or $2 behind in any given month, that's like being off by one standard deviation and not a big deal but, if you are ahead or behind by $4 more or less than expected (ie. in Aug you should be up $4, so up $8 or flat would be a trigger), that's two standard deviations off expectations and you should be flagging the stock to re-evaluate and adjust.  

    Also you need to consider the margin vs what you can gain.  You sold Jan $130s for $13.80 and now they are $2.34 so now they make you, at best, 0.40 per month – I'm sure you can think of better ways to utilize your margin than that….

    AAPL is down and may go lower, I assume you have longs that you sold against and aren't an AAPL bear – this position certainly isn't for me – especially without some offsetting puts.  You have $15.60 of short calls of various types but you can pick that up selling 2017 $95 puts for $8 and $130 calls for $9 but I wouldn't be comfortable with naked short AAPL calls at all.  If you have $90 calls, then I'd sell the puts with the $110 calls at $16.70 and that and the puts is $24.70, which is 27.4% of the $90 you may be assigned at and, if AAPL is over $110, you get to keep the $24.70 + the $20 on the spread is $44.70, which is a nice amount of money for a much lower-risk play (as long as you don't mind owning AAPL for $90, worst-case).

    Also, you need to learn to take the profits at the top or bottom of a channel and then WAIT for the next cycle – not immediately buy or sell more.  

    AAPL is in the bottom of a strong channel but could break down with the market through no fault of it's own but you need to know NOW at what point you want to be a buyer and, of course, any break back over $115 would make me want to buy back at least 1/2 those short calls.  

    Holy cow, market worse and worse and Nasdaq just lost 4,900!  

    125 S&P stocks have dropped 20% or more off their highs.  Not good…

    /RB back to $1.53, oil back to $41.13.  Dollar laying around at 96.  China better save us or we've got a long way to fall.

    LOL – STP now up 138%, gained $14,000 since the review.  I would almost say too bearish but thank God for it!  


  55. This is going to be a bad close.  No stick save or plunge protection team to the rescue. 


  56. I sold a few Jan 2016 $25 VXX calls.  Very small initial position.


  57. Phil--did you say that you think oil rallies after today?

    I don't remember seeing such negativity…

    Wasn't oil supposed to be at $200 now???  ;-)

    Funny, how now "everyone is saying $20!!!


  58. Phil as mentioned earlier in long ES at 2053.  It stinks but not the end of the world.  Question what the best way to manage this?  Leave it open and baby sit it to make sure we don't hit 2035?  Close out now and look for a rebound?   Have lots of cash and can be patient but I just want to be optimal too. 


  59. I am predicting that this what is going to happen – scientists will eventually find solutions to slow or even stop global warming and the anti-science crowd will claim that it was never a problem to begin with. First steps:

    http://www.engadget.com/2015/08/20/carbon-from-the-air/

    In a report by MIT Tech Review, it's claimed that this process could actually return the levels of CO2 in the atmosphere to pre industrial levels in just a decade. That's an ambitious claim, and it'd require a facility that took up roughly 940,000 square kilometers to make it happen. But let's be honest, if this process can be proven to work, we could wind up with super-clean air, not to mention cars, planes and computers made out of carbon fiber. Let's just hope that the team can make good on these promises, and fast.

    It's possible that one day we'll face a problem that has no solution like some sort of plague though. So far, we have been lucky to have scientists despite what we hear from some people!


  60. Embedded image permalink

    Disney, Time-Warner Sink: Bernstein Sees Accelerated Decline of Old Media

    Year lows like ahead if we can't hold 2,035:

    It's almost funny that anyone said I was too bearish when we've done nothing but chop up and down since March.  I don't see how anyone can interpret this chart as bullish – especially if you add up the red volume bars next to the green volume bars (probably 1.5:1 or more) to get a real picture of what's happening.  

    The last time we went this low (July 9th) it was only China's massive intervention that saved us.  If not for expecting another one – I'd be more bearish than I am.  

    Still, 17,000, 2,040, 4,400 and 1,180 are big lines and SHOULD be bouncy so it won't take much to give us a bounce into the weekend but it will take SOMETHING!  

    17,100 was the 5% line we discussed in yesterday's 5% Rule discussion.  Keep in mind we got our 5% drop (900 points from 18,000) and a 20% overshoot that quickly reverses does not negate the strength of the support.

    For the S&P, we were only looking at the 2.5% correction to 2,076, which we hit on the nose yesterday and now we're down another 1.5%, which is past a 20% overshoot so, if we finish below -1% on S&P today, then we're likely on the way to the full 5% correction back at 2,023.  

    On the Nas, I said yesterday:  "I'd wager we won't be seeing 5,080 before we see 4,800 (20% retrace of the 1,000-point run)." and here we are at 4,900 already with just 100 more to fall for a full weak retrace.

    NYSE is lading us lower at 10,500, interestingly keeping pace with the DAX

    Russell must take back 1,185 or all is lost and we'll have to draw lower lines.  

    Oil/Jabob – I don't know now as the sentiment is so negative but I also can't see how they'd blow the last big weekend of summer on gas prices.  The $200/20 stuff just shows you how clueless people are as well as what BS oil pricing is.  It trades more like art than an actual commodity – almost no actual relationship to supply and demand, which barely change.  Nor is there any relationship to the cost of production and distribution (about $45 avg) to the prices we end up paying.  

    /ES/Cervantd – Well, if it were me, I'd be DD at 2,040 (now) to drop avg to 2,046.50 where you at least have a chance to bounce.  If you keep a stop at 2,035, you can only lose another $250 on the new contract, which is offset by your much better chance of getting out even on a bounce up.   Also, if we stop at 2,045, you don't hang on for 2,046.50 – you can take a small gain on the new contract and it incrementally improves the original position.  

    Science/StJ – I have total faith in science to solve our problems.  What's needed is a commitment to fund the science and that's where the danger is from the deniers, who don't want to have to pay to clean up the mess they made.  


  61. IHS+Phil/ You are, of course, the voices of reason – a sensible path to profit taking and risk reduction – thank you.


  62. Wow, what are we, China?  That close was AWFUL!  

    Futures continue to sell off after the bell – really bad.  We closed right on 2,035 so at least we know the 5% Rule is working but, unfortunately, it's telling us there is more pain ahead.  

    You're very welcome Winston. 


  63. I didn't double down.  The last 1/2 hr just didn't look right.  It was the right call. So I took my lumps.  Live to fight another day. I shoulda respected the initial 2060 bounce that got rejected.  That was were I went wrong. 


  64. Wheee!!! Not even close to oversold, but sold half my SPXS at the close, taking some much needed profits :)


  65. Deniers / Phil – So far we have always found ways to clean up their messes (climate, economy, environment, energy, wars, etc.) and they still maintain credibility with 50% of the people! Really scary…


  66. Phil- I have two positions I want to check in with you about. First is an APPL bcs that I took when we were a lot more optimistic about them way way back in June I think. It is a 2017 120/160 that I paid $13.50 for and is now $9.20. I figure I am ok with it and Apple should be fine by January 2017 (unless they're not and we will deal with that later) but I just want to make sure. Next is a RIG position I probably should have taken action on and you probably already told us to. It is a 2017 13/20 bcs for which I paid 2.65 and is now $2.00. I also have $15 puts I sold for $3.15 and are now $5.75. Finally I have cash ready and waiting to take advantage of this plunge and I await your help in deploying it. I look forward to hearing from you in the coming weeks(months) about new plays and bargains after this carnage. I feel like a hungry lion with prey in my sights. I have been unusually patient for me  holding it and waiting so …ready when you are.


  67. Phil – Right now my short term (short) portfolio's beta weighted delta is equal to my long portfolio's delta.  So I am basically neutral the market.  Which has been great the last few days (I was up about 1% today), but I know that is usually considered being over-hedged.  I'm wondering when I should start taking profits and reducing this very heavy short position?  Today ended at the lows, and it seems like the 5% rule is indicating more downside.  Any advice here would be greatly appreciated.


  68. From Bloomberg, Aug 19, 2015, 7:17:13 PM
     Aug. 20 — Bloomberg’s Michael Regan reports on currency markets and the equities selloff. He speaks on “Bloomberg Markets.”

    The rout in emerging assets knocked the Standard & Poor’s 500 Index out of its seven-month trading range and gave U.S. equities their biggest drop in 18 months amid intensifying concern that global growth is slowing.


  69. From Bloomberg, Aug 20, 2015, 2:32:52 PM
      A Uniqlo fashion boutique in Melbourne.

    Fast Retailing, the parent company of Uniqlo, Theory, and J Brand, will offer a four-day workweek to about a fifth of its workforce starting in October, the company confirmed to Bloomberg. About 10,000 full-time employees at Uniqlo’s Japan locations will have the option of a three-day weekend in exchange for 10-hour work days the rest of the week. The retailer is also considering introducing a shorter week at its corporate headquarters and at more stores, if this trial goes well.


  70. From Bloomberg, Aug 20, 2015, 12:17:20 PM

    On most days,
    Kazakhstan finds itself in the backwaters of financial markets. Yet, it’s this central Asian nation that has delivered the
    latest shock to global currency trading.


  71. From Bloomberg, Aug 20, 2015, 2:38:04 PM
      Pope Francis wears a plastic poncho as he waves to well-wishers after a mass in the Philippine city of Tacloban on Jan. 17, 2015.

    Pope Francis released a 180-page indictment of capitalism and climate change that has fallen, for the most part, on deaf ears in the U.S.


  72. Opko- Just saw a note that Philip Frost the CEO of Opko bought 544,000 shares of the company today on the open market. The BRLI deal closed today and he is back at it. Also because that deal was a purchase for stock and closed today when the stock is almost $7 cheaper than it was when the deal was announced I guess they got the deal done for a lot less than expected. Stock is up almost 2% after hours on the news.


  73. Korea – very mild concern here about what seems to have been an NK rocket that fell in the mountains north of the border, whereupon the south army sent about 20 shells at northern positions. People were slightly freaked for about 10 minutes. Haven't had a look at the play in US media yet.


  74. From Bloomberg, Aug 20, 2015, 7:00:05 AM

    With the yuan floating who knows where and China’s markets looking for a bottom, investors, analysts, and economists worry the country is headed into a time of volatile swings in public policy.


  75. From Bloomberg, Aug 20, 2015, 4:13:41 PM

    Hewlett-Packard Co.’s earnings outlook disappointed investors on the eve of breakup that’s designed to improve the computer maker’s growth prospects.


  76. From Bloomberg, Aug 20, 2015, 2:37:35 PM
     Aug. 20 — Bloomberg’s Matt Miller reports on the declining price of Twitter stocks. He speaks on “Bloomberg Markets.”

    Twitter Inc. shares dipped below their $26 initial public offering price, down almost two-thirds from a peak soon after the stock began trading.


  77. From Bloomberg, Aug 20, 2015, 11:33:44 AM
     It’s all just algorithms.

    Here’s the seven-factor Fung and Hsieh model:


  78. From Bloomberg, Aug 20, 2015, 4:51:45 PM

    U.S. banks are facing the best environment for loan losses since 2006, as net write-offs fell in the second quarter and delinquencies improved or held steady for the 21st straight three-month period.


  79. From Bloomberg, Aug 20, 2015, 6:00:04 AM
     

    Last August, the tens of thousands of answer sheets from the bar exam started to stream into the National Conference of Bar Examiners. The initial results were so glaringly bad that staffers raced to tell their boss, Erica Moeser. In most states, the exam spans two days: The first is devoted to six hours of writing, and the second day brings six hours of multiple-choice questions. The NCBE, a nonprofit in Madison, Wis., creates and scores the multiple-choice part of the test, administered in every state but Louisiana. Those two days of bubble-filling and essay-scribbling are extremely stressful. For people who just spent three years studying the intricacies of the law, with the expectation that their $120,000 in tuition would translate into a bright white-collar future, failure can wreak emotional carnage. It can cost more than $800 to take the exam, and bombing the first time can mean losing a law firm job.


  80. From Bloomberg, Aug 19, 2015, 5:00:12 PM

    A man points out the towns that will be affected where the canal, red line, will be built across Nicaragua.

    Deep on the southeastern side of Lake Nicaragua, along a bumpy dirt road that climbs gently through lush-green forest, sits the tiny town of El Tule. It is quintessential rural Central America: Chickens roam outside tin-roofed homes while pigs stand tied to trees, awaiting slaughter; the sound of drunk locals singing along to ranchera music greeted visitors on a recent weekend afternoon.


  81. From Bloomberg, Aug 20, 2015, 5:54:11 PM

    The worst drop for American equities in 18 months is setting up the biggest test since October for bulls after the floor caved in under the Standard & Poor’s 500 Index.

    More than $500 billion was erased as the S&P 500 slid 2.1 percent to 2,035.73, plunging below a level from March that had held as the index’s lower boundary for seven months. Biotechnology companies dropped into a correction, down 12 percent from a July high, while chip stocks entered a bear market.

    Lines on charts are exerting unusual influence on traders in 2015, a year in which the second-longest bull market since the 1950s has ground to a halt after two years of nearly straight-up advances. Concerns ranging from China to the Federal Reserve contributed to Thursday’s retreat, which also sent the S&P 500 more than 2 percent below its 200-day moving average. 

    “It’s definitely important that we closed below the March lows,” said Jonathan Krinsky, chief market technician at MKM Holdings LLC. “Eventually the market needed to correct and for that to happen, the larger-cap stocks needed to get hit. We’re finally seeing that happen.” 


  82. From Bloomberg, Aug 20, 2015, 5:06:47 PM
      A guest plays a slot machine at a casino in Massachusetts.

    U.S. casinos are making it tougher for players to win at the slot machines, and that’s led to less betting.


  83. From Bloomberg, Aug 20, 2015, 5:01:00 PM
    China’s President Xi Jinping. Photographer: SeongJoon Cho/Bloomberg

    Facing a demographic time bomb that threatens China’s economic rise, President Xi Jinping is considering shifting his priority to population growth, according to a person familiar with the discussions.


  84. From Bloomberg, Aug 20, 2015, 3:01:06 PM

    The value that commodity producers have lost in the past year almost equals India’s entire economy.


  85. From Bloomberg, Aug 20, 2015, 2:44:16 PM

    For decades, Kraft and other food behemoths offered convenience, comfort, and the promise of a modern lifestyle. But the compound annual growth rate of the packaged food industry in North America has been less than 1 percent for almost 10 years, with Big Food losing market share to smaller, healthier brands. Venerable Kraft Foods—whose Singles are a “processed cheese product,” and whose Cool Whip didn’t contain milk or cream until five years ago—has lost revenue for the past three years. “Now these big food brands are old-fashioned,” says Bob Goldin, chief executive officer at researcher Technomic. “Consumers don’t see them as relevant.”


  86. Korea – ooops, my mistake. That NK rocket did come down in the south, apparently to no effect. I don't care; I'm on Jeju Island….although even friends in Seoul don't care.


  87. From Bloomberg, Aug 21, 2015, 12:01:27 AM

    The oil price was near its lowest in more than a decade, cash reserves were being depleted, emerging markets were in turmoil and Saudi Arabia was beginning to panic.


  88. From Bloomberg, Aug 20, 2015, 7:01:01 PM
      European Central Bank President Mario Draghi Announces Interest Rate Decision

    The euro area’s monetary-policy makers aren’t getting to slumber through the dog days of August.


  89. From Bloomberg, Aug 21, 2015, 12:43:33 AM

    Chinese diaper makers, health-care providers and education companies would be among the biggest winners if President Xi Jinping shifts his economic policy priority to population growth.


  90. From Bloomberg, Aug 21, 2015, 12:01:12 AM

    ‘Santa Claus’ in his office in Rovaniemi, Finland.

    Santa Claus has been given a week to pay his creditors.


  91. From Bloomberg, Aug 21, 2015, 12:00:01 AM

    With an El Nino growing in the Pacific Ocean and climate change spurring global temperatures ever higher, almost nothing can stop Earth from breaking 2014’s mark for the warmest year on record.


  92. From Bloomberg, Aug 20, 2015, 2:20:59 PM

    Aug. 20 — The North Korean ruling party’s central military commission held an emergency meeting late Thursday after North and South Korea exchanged fire across the demilitarized zone in one of the worst incidents between the two since 2010. Korea Society Vice President Stephen Noerper weighs in on “Bloomberg Markets.”

    North Korean leader Kim Jong Un ordered his army to prepare for war after an exchange of fire with South Korea, ratcheting up the rhetoric as the latest skirmish between the two nations intensifies.


  93. From Bloomberg, Aug 20, 2015, 2:31:00 PM

    An app Goldman Sachs Group Inc. lists as one of the possible “billion dollar babies” among India’s Internet startups shows how local language content is becoming key to expanding the nation’s online population.


  94. From Bloomberg, Aug 21, 2015, 4:06:31 AM

    Hong Kong stocks entered a bear market as a rout in global equities deepened and the weakest Chinese manufacturing data since the financial crisis added to concerns about the world economy.


  95. From Bloomberg, Aug 20, 2015, 9:29:58 PM
     

    Currency and equity markets from Hong Kong to Johannesburg and London were already faltering. Then U.S. stocks joined in.


  96. From Bloomberg, Aug 21, 2015, 3:30:00 AM

    German manufacturing growth unexpectedly accelerated to the fastest pace in more than a year, pointing to building momentum in the euro-area’s largest economy.


  97. From Bloomberg, Aug 21, 2015, 12:14:05 AM

    Apple Inc. raised A$2.25 billion ($1.6 billion) with a debut Australian debt sale that’s the largest bond deal ever Down Under by a non-financial company.


  98. From Bloomberg, Aug 21, 2015, 12:00:01 AM

    Prinsengracht 199 in Amsterdam boasts a gourmet kitchen, a bath with canal views and vaulted ceilings. The price tag is 1.6 million euros ($1.8 million), but it could be yours for no money down.


  99. From Bloomberg, Aug 20, 2015, 9:45:00 PM

    A Chinese manufacturing gauge fell to the lowest in more than six years, suggesting the economy will need further policy support to stem a deepening slowdown.


  100. From Bloomberg, Aug 20, 2015, 12:00:01 PM

    China’s central bank pumped the most funds into financial markets in six months to ensure its intervention to prop up the exchange rate won’t starve the economy of yuan — and still interest rates climbed.


  101. From Bloomberg, Aug 20, 2015, 8:35:04 PM

    Gold bars are arranged for a photograph in Tokyo, Japan

    The top-ranked precious metals forecaster said the Federal Reserve will still raise U.S. interest rates this year and that’ll hurt gold, standing by his outlook even as bullion surged amid a global rout in stocks and commodities.


  102. From Bloomberg, Aug 20, 2015, 6:29:57 PM

    Microsoft Corp. filed a lawsuit claiming InterDigital Inc. has been violating its pledge to offer fair and reasonable licenses on patents related to fundamental mobile-phone technology.


  103. From Bloomberg, Aug 20, 2015, 6:24:25 PM

    They were hiding under the umbrella.


  104. From Bloomberg, Aug 21, 2015, 4:00:00 AM

    The euro-area economy picked up momentum this month, with an improvement in Germany lifting a business index to close to its highest level in four years.


  105. From Bloomberg, Aug 21, 2015, 12:01:04 AM

    Oil rig inspection is a dangerous business. Traditionally roughnecks dangled from a wire, in gale-force winds if needed, to manually log wear and tear on the girders. Assessments include giant chimneys – called flare stacks – that belch fire during million-dollar-a-day shut-downs.


  106. From Bloomberg, Aug 21, 2015, 4:42:45 AM

    The trading unit of China’s biggest energy company is set to surpass its record for Middle East oil purchases in Singapore as benchmark prices tumble to a six-year low.


  107. From Bloomberg, Aug 21, 2015, 5:00:21 AM
      The Wild Animal Sanctuary

    Jumanji’s whiskers twitched as he sized up his visitors beyond the fence. Seconds later he leapt toward them, ears back, yellow eyes narrowed, fangs bared.


  108. From Bloomberg, Aug 21, 2015, 4:36:13 AM

    Greek bank stocks tumbled for a second day after Prime Minister Alexis Tsipras said he was stepping down to seek a new mandate in elections.


  109. From Bloomberg, Aug 21, 2015, 4:25:44 AM

    U.S. stock-index futures were little changed after global growth concerns sparked the worst rout in equities since February 2014.


  110. From Bloomberg, Aug 21, 2015, 4:15:08 AM

    China’s corn imports rose for a fourth month to the highest in at least a decade as a slump in U.S. prices made purchases from overseas more attractive.


  111. From Bloomberg, Aug 21, 2015, 3:26:49 AM

    Fanuc Corp. announced a 900 million yen ($7.3 million) investment in artificial intelligence startup Preferred Networks Inc. as the race to endow industrial robots with learning capabilities heats up.


  112. From Bloomberg, Aug 21, 2015, 3:16:49 AM

    In the global iron ore market, the world’s two biggest exporters are expanding sales into the top customer, winning a greater share of trade as prices tumble.


  113. From Bloomberg, Aug 21, 2015, 3:00:00 AM

    France’s economy may struggle to gain traction this quarter after manufacturing shrank for a second month in August and services growth weakened.


  114. From Bloomberg, Aug 21, 2015, 2:23:40 AM

    China is close to reorganizing the leadership of its three main telecommunications companies as the government prepares to revamp the industry, people familiar with the matter said.


  115. From Bloomberg, Aug 21, 2015, 2:20:21 AM

    The panic selling that erased U.S. stock gains for the year and wiped out a Shanghai rebound dragged European equities towards a correction after a measure of Chinese manufacturing tumbled to a six-year low.


  116. From Bloomberg, Aug 21, 2015, 2:19:55 AM

    The benchmark gauge of Indian equity options advanced to its highest level in two months as the nation’s stocks fell amid a global rout.


  117. 2024 was rejected after the China PMI but since re-established.  Now at 2026.  Do the dipper buyers make it hold into the weekend??  It is opex Friday too.  


  118. From Bloomberg, Aug 21, 2015, 1:04:16 AM

    Taiwan’s stocks entered a bear market amid concern China’s economic slowdown and currency devaluation will curb demand for the island’s technology products.


  119. From Bloomberg, Aug 21, 2015, 12:55:15 AM

    China Resources Enterprise Ltd. will switch focus to growing its beer venture with SABMiller Plc after posting a first-half loss due to a goodwill impairment on its discontinued retail venture.


  120. From Bloomberg, Aug 21, 2015, 12:46:00 AM

    Less than two weeks after pledging to allow a freer exchange rate, the People’s Bank of China has tightened its grip on the yuan, according to BNP Paribas SA.


  121. From Bloomberg, Aug 21, 2015, 12:26:22 AM

    Dollar bulls betting the Federal Reserve will raise interest rates in 2015 are shifting their attention to selling emerging-market currencies, as the euro and yen rally from losses earlier in the year.


  122. Good morning!  

    Very important note that, if you are playing /RB, you should be in /RBV5 (Oct), not /RBU5 (Sept) which expires on Tuesday.  /RBV5 is $1.37, way below /RBU5s $1.5085.


  123. Phil; I believe /RBU5 expires on the 31st not Tuesday 8/25.  Are you recommending rolling now or for new entires?


  124. Phil tos still defaulting to /RBU5.


  125. craig,

    you can manually add it  to watch list and trade it off of there…


  126. We're off to a bad start this morning with Shanghai dropping another 4.27% and taking Asia with it but Europe is "only" down 1% and that's only playing catch-up with our terrible day so it's now up to our indexes to take the lead (not looking good so far, down about 0.5%). 

    Lumps/Cervant – Yes, very lumpy now at 2,019.  Overnight low was 2,008 and we were rejected on attempt to get back over 2,035 – not good signs.  

    This is why I've been banging the table for CASH!!! for 6 months – when the sell-off finally comes, it's really fast and really sharp and it's very hard to unwind positions, so you'd better LOVE the ones you still have!

    Deniers/StJ – I also worry that some of these "miracle cures" are PR spins by the same climate deniers, who want people to stop worrying about something they should be worried about.  News article above says we are having warmest year on record, beating last year by a full degree.  If temperatures rise on degree per year, we have only about a decade before things get critical.   

    Source: NOAA

    Underground water supplies have been evaporating faster than they would have without the higher temperatures caused by greenhouse-gas emissions, according to the study published in the journal of Geophysical Research Letters.

    The NCEI’s monthly analysis showed Austria had its warmest July in records going back to 1767, Crouch said. The average temperature there was 4.9 degrees Fahrenheit higher than the mark set in 2006.

    “The bottom line though, is it’s not just about the temperatures, it’s about the changes we are seeing happening,” Blunden said. “Sea-level rise is caused by climate change and it ’s real. Glaciers are melting faster than they ever have since we have been keeping records. Eventually, it’s going to affect everybody in one way or another.”

    AAPL/LTP, Craigs – That one is no problem as it's very far away and the $120 calls are still $12.50 and you can roll them to a 2018 $100/140 bull call spread when they come out and leave the short $160s covered by the spread and then you can sell the 2018 $80 puts for $10 more – or something like that.  If that's not appealing to you, then you need to consider the wisdom of riding it out but I'm going to be THRILLED to have that position in the LTP.  

    RIG/LTP, Craigs – RIG is at $13.25 and you have the same spread we have in the LTP and it's essentially the same story as the 2017 $13s are still $3.50 and we'll roll them to a lower 2018 spread and leave the short $20s to twist in the wind (with stops, of course).   With RIG at $13, the odds of them suddenly getting bought for over $20 is pretty slim so we can be comfortable with the set-up (and, in AAPL's case above – they're NOT getting bought since $700Bn is the size of Switzerland's GDP, the 20th largest in the World).  

    Unlike our LTP, you already sold RIG puts but $15 is a good target and the $5.75 doesn't matter unless you were lying to yourself when you promised to buy RIG for net $11.85.  Of course, when 2018 comes out, you can roll it lower.  The Jan $18 puts are $5.85 and you have the 2017 $15 puts at the same price so probably you can do an even(ish) roll to the 2017 $12 puts – which is why the only thing we really fear is bankruptcy in these kinds of plays – as it ends our rolling process.  

    I agree with the hungry lion thing.  In fact, I was looking over the Buy List and thinking it was too soon to do a new one – tempting though it may be.  We made the last Buy List last Sept with almost perfect timing and then we made a new LTP in Nov and we added one or two positions per month – THAT is the right way to play things – slow and steady wins the race.  

    Over-hedged/Palotay – Well, this is where the 5% Rule is useful again.  Two weeks ago, for example, we took our Sept SDS profits ($2 for the Sept $19s, now $2.35) and moved to Dec $18s, which were $2.75 and now $3.35, so the Dec calls made more money than had we left the Septs alone because they didn't suffer from the same time decay.  So don't think of it as taking profits but finding a better mix.   The short-term your position is, the more itchy your trigger should be to take the profits off the table.  

    You need to prioritize your hedges (something we do in our STP reviews each month and see above for my notes) and consider whether or not they are doing the job.  If you go back to our previous reviews, you'll notice that we bought back some of the short SQQQs and short TZA's as a trade-off to "chickening out" of the very aggressive Sept SDS position.  It's all about balance – we were concerned that, IF the S&P popped higher, the Sept position wouldn't have time to recover while we were, on the other hand, very confident that we could adjust our longer-term insurance plays.   And, of course, the only reason we'd be making those adjustments in our $200,000 STP, would be because our $700,000 LTP was kicking ass.  

    Anyway, so at -2.5%, -5%, -7.5% – of course you should be taking your most aggressive profits off the table and then switching to something else.  It also helps to have layered your hedges in the first play, like we do in the STP with 1-month, 3-month and 6-month hedges.  The 1-months are gone and we'll probably leap-frog some of the Jans to longer months if the S&P gets back over 2,035.

    OPK/Craigs – Well someone better buy that thing!

    OPK just gave BRLI 2.75 shares per share to acquire the company.  OPK is $5.7Bn at $12.50 and BRLI was $1Bn at $34.61 so about 29M OPK shares means OPK issued 60M shares against a previous 245M float so 25% dilution means this action is just about right.  I agree with the logic that this doesn't price in any benefits from the deal and BRLI actually does have sales ($832M) and profits ($47M) and no debt but I sure wouldn't have paid $1Bn for them.  

    If we assume OPK overpaid by $500M, that would be a 10% devaluation on their side and, of course, OPK is burning through $50M a month so the cash-flow from BRLI won't save them.  OPK needs to execute this year or they will be in big trouble and it's going to be a lot harder to do while handling a merger.  Still, fun to play if they get a bit lower.  

    Korea/Snow – Sounds like you started something.

    Friday/Cervant – Going to be a wild one, I think. 

    /RBU5/Options – TOS says 5 days to expiration so I'm taking their word for it.  Even if they only THINK that's the date, I sure don't want to be stuck holding them.

    TOS/Craigs, Nols – Just specifically but /RBU5 in the chart box and you'll get that chart.  $1.3625 now with oil barely holding $41, even with the Dollar down at $95.46.


  127. Phil; The options on /RBU5 expire in 5 days but the futures contract have 10 days left