Thrilling Thursday – Romney and the Markets Turn Up
by phil - October 4th, 2012 8:32 am
What a debate last night!
One of the candidates will lower taxes for the middle class and small businesses while slamming shut loopholes on the rich and Big Business, limiting their deductions and raising taxes if needed, he will provide national health-care and concentrate on jobs, punishing outsourcers and educating US workers to get them on the path to full employment. The other candidate is already President. Romney now claims there will be no 20% tax cut for the rich – I assume his rich backers assume he's lying to get elected (lying doesn't bother them) and President Obama was in no way prepared to debate the guy who showed up yesterday and he lost the debate in an embarrassing fashion.
From a market perspective, we were playing the weakness as nervousness ahead of the debates and accumulating long positions as planned yesterday. Oil blew past the $88.50 target I set in yesterday's morning post – all the way to $87.70 before finally bouncing back and hitting our target again overnight (now $88.64). That drop from $91.22 in the Futures was good for $3,500 per contract in the Futures but, of course, we were done being short, as planned at $88.50 and in fact made a couple of bullish trades – long on USO at $33 (as planned) and short on SCO at $44. We'll see how they work out today but up at the open is a good sign.
HPQ was irresistible as it tested $15 (long-term positions) and BBY gave us a good entry again at $17.50. We made a quick 50% on the TNA weekly $61.50 calls, which we grabbed for $1 in our $25,000 Virtual Portfolio at 10:09 in Member Chat and we caught a nice move up to $1.50 not even 30 minutes later as our 838 line (weak bounce) on the Russell continues to hold.
Our bullish stance on AAPL finally paid off as the stock went from $660 to $672 at the close – hopefully $680 is next. Gasoline only got to $2.75 (we were hoping for $2.70) but is back to $2.86 already in pre-market trading (/RB).
As you can see from Dave Fry's Russell chart, we're still in a bullish consolidation – just below our breakout level and today, so far, we don't have rising Dollar headwinds to hold…
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Toppy Tuesday – Can the Dollar Fall Faster than our Indexes?
by phil - December 14th, 2010 8:27 am
It's a race to the bottom!
While we may have thought we were flatlining yesterday near our breakout, Europe and Asia had a different view of our markets as we pulled back -0.5% to -1.73% when priced in other currencies. While you may not care what happens in other countries, there are 6.5Bn people who would disagree with you there and the US is not the World leader anymore (despite what the citizens of the US may think) – we can no longer afford to ignore things like how exchange rates affect us. Here's the chart for the Dow, S&P and Nasdaq priced in Dollars, Euros and Yen for the past two months:
Fortunately for the bulls (especially the commodity ones), the dollar has resumed it's pathetic decline as Obama and The Bernank have combined to dilute our currency by another $2Tn over the next 48 months, from about $14Tn to $16Tn (+14%) plus, possibly, the $110Bn of new $100Bills the Treasury is trying to run off. This has sent the dollar back down from it's Thanksgiving high and now it's going to be all about whether or not we can hold that 78.5 line as our Congress finalizes their vote on the Obama Tax Cuts and another $1,000Bn of US debt taken by our citizens in order to hand another $650Bn to the top 1%.
When $100Bills are being printed faster than rolls of Charmin are being made, your currency is probably on it's way to a crisis. You reach a certain point at which it's cheaper to just wipe your butt with dollar bills than to go to the store and buy toilet paper and, of course, we've all seen pictures of Germans in the 1920's, fueling their fireplaces by burning bills, which were cheaper than wood. Of course stocks and commodities are going up when priced in dollars – they are making more dollars every day, even Disney now has cartoons trying to explain to kids why this is a bad idea.
On top of the relentless devaluation of our dollar-denominated assets, we also have wild rumors driving up demand for commodities by speculators, who are generally…
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October’s Overbought Eight – Expiration Check-Up (Members Only)
by phil - October 15th, 2010 6:12 pm
Up and up the markets go, where they stop – only Ben knows!
We actually initiated the October 8 picks on Thurs, Sept 30th, when we had that crazy Dow spike to 10,950. As it was the last day of the month we got an instant winner on the NFLX play and some other good ones as we plunged to 10,700 that Monday. In between, when I wrote the post on Sunday, Oct 3rd, I said "I hate to go short."
We were still very bullish in our virtual portfolios (see September's Dozen, Turning $10K to $50K, Defending with Dividends, 9 Fabulous Dow Plays and the June 26th Buy List) since the June bottom (and we were early on that call too) but we felt is was time to start covering with some bearish plays as we completed our projected 12.5% run back 11,000. These 8 trade ideas were to get the ball rolling in October. Since then we have flown up to 11,062 on the Dow, slightly over our projected top, much the way 9,650 was slightly below our projected bottom in July. The rally still has not retraced enough to cause us to give up on our long-term longs so this is a BALANCING move on an expected pullback, not an overall long-term bearish posture – always be clear about that! We've been bullish since the beginning of July as this point it pays to diversify.
Like July, we can take advantage of the the spike out of our range to scale into positions and to roll and adjust the trades and, like July, we looked at some bullish covers along the way – just in case we are even earlier than we thought. I'm not going to get into the whole macro thing here – I did that all week but everything old is new again, as you can see from this chart:
I don't know how well you can see this but I copied the current rally and lined up the bottom with the Feb rally. It's hard to see because the movement is VIRTUALLY IDENTICAL. That's right, Lloyd is either too lazy or too cheap to even bother to change the Bots he uses to gooses…
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Testy Tuesday – Fed Pop or Drop?
by phil - September 21st, 2010 8:27 am
Isn't this exciting?
We popped all of our 5% levels yesterday, now all we have to do is hold them and we can start looking ahead to the 10% lines. Just 10 days ago, on Friday the 10th, we did our last multi-chart study and I said in the morning post: "I am not TA guy but If I were a bear, I’d be pretty darned concerned about the charts as it looks to me like the 20-day moving averages are registering a short-term mistake in a generally rising trend." Look at how those 20 dma's have snapped up in less than 2 weeks (blue lines are mid-points, green circles are 5% levels):
So Gold and Transports are running away with SOX falling behind. We've been playing the SOX up with USD, which is up 10% since I picked it in that Friday's post but that's been a relative underperformer for us as we nailed the bottom with a buying frenzy into the late August drop which culminated with my very bullish "September's Dozen" from the 3rd. There were actually 10 stocks and only 9 fit in the multi-chart (I dropped HMY, who already gained 15%) with way more than a dozen trade ideas for our Members to take advantage of the anticipated short-term moves. Of the 10, only IRM has been laying around but we weren't expecting a quick move on them and played a conservative April spread and took the risk on Oct $22.50 calls, which are our only loser, down 30% at .20 but I still like them if we break up from here.
The leverage you can gain with option plays is truly stunning. On BRCM, for example, the trade idea was a straight purchase of the Sept $32 calls for $1.25, BRCM topped out at $35.49 with the calls close to $3 on the 14th and they expired on Friday at $2.16, which is up 72%, even for people who didn't stop out between there and up 140% that Tuesday. That trade was a combo trade with the sale of the October $30 puts at .70 and those are down to .30 (up 57%) which are well on their way to expiring worthless for a full 100% gain. We also took an artificial buy/write that stretched from Jan to Jan 2012…
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Monday Morning – Basel Boosts Bourses
by phil - September 13th, 2010 8:03 am
Nice pop in the futures this morning!
The big news, which we already discussed in the "Weekend Reading" post, is the historic remake of the World’s banking regulations, which was finalized in Basel, Switzerland by the G20 Finance Ministers over the weekend. You can click over there for the details, as well as discussions on gold, college costs and the jobs market – so I won’t get into all that here. Suffice to say, the rules are good and, like FinReg, they will take a long time to go into effect and the markets are relieved that the uncertainty is over (well, that particular uncertainty, at least).
Jean-Claude Trichet, President of the European Central Bank and Chairman of the Group of Governors and Heads of Supervision, said that "the agreements reached today are a fundamental strengthening of global capital standards." He added that "their contribution to long term financial stability and growth will be substantial. The transition arrangements will enable banks to meet the new standards while supporting the economic recovery." Nout Wellink, Chairman of the Basel Committee on Banking Supervision and President of the Netherlands Bank, added that "the combination of a much stronger definition of capital, higher minimum requirements and the introduction of new capital buffers will ensure that banks are better able to withstand periods of economic and financial stress, therefore supporting economic growth."
All seems right with the World this morning as Oil touches our $77.50 goal in pre market trading and Gold stays below the $1,250 mark (no panics). Copper is in the upper end of our expected $3.40-$3.50 range and is likely to break over -even our poor Natural Gas is catching bids at the $3.80 mark, now $3.85 and TLT continues to fall (TBT continues to climb – see Dave’s chart) . This is all despite a strong dollar That held the 50 dma all last week – another week over the line and we begin to bend it up to match the rising 200 dma and then the fun can begin. Fortunately, we have had less of a run in the commodity sectors this time so, hopefully, the rising dollar won’t be the market-killer it usually is but we will be watching out for that.
Another chart we’ll be watching is the VIX, the volatility index, which is known as a "fear" indicator for the markets, hasn’t been below 20 since April and,…
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Friday Fizzle – Skimming the Top of the 2.5% Range
by phil - September 10th, 2010 8:27 am
Was this a "good" week for the markets?
Yesterday morning I put out an Alert to Members regarging our level watch: "Keep in mind that our 2.5% levels represent a 5% run from the bottom since last week so it’s natural that we get a 1% pullback from there so the key is to hold the 1.5% line – THAT will be our bullish indicator:"
- Up 2.5% (we hope): Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650
- Must hold at 1.5%: Dow 10,353, S&P 1,086, Nas 2,233, NYSE 6,902 and Russell 644
- Middle Range (MUST hold): Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635.
As you can see from David Fry’s SPY chart, it was an interesting day and we did pull an aborted stick into the close which kept us over 1,100 on the S&P and 7,000 on the NYSE and , as you can see, our 1.5% lines did pretty much hold up as a bottom test, other than the Russell, which we had already given a pass to in the morning post as they’ve been so pathetic we’re just proud of them if they try.
We had shorted PCLN in the same Alert (congrats to all who took that one!) and the inventory report chased us out of our upside oil plays (but not nat gas) at 11 and that initiated the market slide along with, as Dave notes, a poor Treasury Auction that finally got TBT back over $33 (I had also mentioned shorting TLT several times in the past few weeks). Is this the beginning of the end of the free money express - stay tuned for more action next week!
This week’s action isn’t done yet and we still need to hold our levels. As I said yesterday, the best time to take disaster hedges is when we’re testing our 2.5% tops, as we were in the morning. The Dow topped out just over 10,455, tested it until about 12:45, then failed BEFORE the auction, the S&P topped out at 1,110 and held its 2.5% floor, the Nasdaq hit 2,255 on the button at the open, the NYSE also held their 2.5% line as a bottom, and the Russell fell hard but then played around the 635 line in the afternoon…
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POMO Thursday – Bernanke Serves Up Another Round
by phil - August 19th, 2010 8:29 am
Today we get another round of Permanent Open Market Operations.
POMOs are the Fed’s way of creating additional bank reserves to finance asset purchases and loans for it’s Primary Dealers (the Gang of 12 or, as David Fry calls them, Da Boyz). GS and Co. then turn around and use this money to fuel their bots to buy equities and we believe we saw a little test run of those programs a couple of times this week as we had very irrational, sharp rallies for no particular reason and I had commented to Members, during chat, that it looked like some Bot testing.
Note that in David’s picture, Bernanke is still playing the role of the generous bartender he played in the hit video "Hayek vs. Keynes – An Economic Smackdown." Note this all ends badly for Keynes but WHAT A PARTY!
We made 3 aggressive upside spreads looking for a big finish for the week in yesterday morning’s Alert to Members on SSO, QLD and DDM. Fortunately our timing was good as my call to look for a run once we got past the 10:30 oil inventory report was on the money but then we were very disappointed by the size of the sell-off in the afternoon – even though we were short at that point (we can root for the bulls while betting against them). It’s all about jobs this morning and we need to see less the 450,000 pink slips handed out in the past week to get a little more aggressive.
My prediction in the morning was: "We should get our bottoms with the crude inventories at 10:30 so no hurry on bullish plays, most likely. Selling XOM $60 puts for $1 or more (now .47) on a dip today is a nice play into expirations as you can always roll them along." The XOM puts topped out at .63, so no luck there, but the action (see Davids chart) was right on the money for us:
We took a long play on USO at the bottom that did well (and we took money and ran) and we flipped back to bearish at 1:41 with put plays on IWM and DIA that did nicely into the close. As I had said in the morning post – blissful agnosticism!
8:30 Update: 500,000 jobs lost last week! Ouch!!! Looks like we should have held onto those puts because this is going…
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Goldilocks and the 300,000,000 Bears
by phil - August 14th, 2010 3:43 am
Talk about feeling outnumbered!
As the guy in Airplane kind of said – "Looks like I pricked the wrong week to get bullish!" Of course, as I often tell people I am neither bullish nor bearish – I'm rangeish – and our range is the 5% band between around Dow 10,200 and S&P 1,070, which takes us as low as Dow 9,690 and S&P 1,016 and as high as Dow 10,710 and S&P 1,123 before I really "flip flop" my positions. Despite the fact that this is the range we predicted last October and is the range we've been in (other than a brief trip to 11,200, which we shorted the hell out of) all year – people still seem to find it necessary to call me either bullish or bearish as we navigate the channel.
I suppose I have been HOPEFUL for the month (now heading into day 14) that we will finally make a little progress and establish a higher floor at our usual mid-points while, at the same time, the MSM have decided that we are all going to die. That does make me kind of bullish by comparison doesn't it? We are mainly in cash and we are well hedged to the downside so, unless we are REALLY heading much, much lower, there is little profit in speculating to the downside, other than our quick trades. As PT Barnum once said:
"A man who is all caution, will never dare to take hold and be successful; and a man who is all boldness, is merely reckless, and must eventually fail. A man may go on "’change" and make fifty, or one hundred thousand dollars in speculating in stocks, at a single operation. But if he has simple boldness without caution, it is mere chance, and what he gains to-day he will lose to-morrow. You must have both the caution and the boldness, to insure success."
Balance is the key to long-term success and we've had many conversations about that in Member Chat. Our goal is to be neither bullish or bearish but rather to sell premium to both the bulls and the bears when conditions permit us. As Ravalos said Friday in Member Chat:
"Ever since I became member (actually before I became member I
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.