Six Autumn Outliers
by ilene - September 7th, 2010 5:04 pm
Six Autumn Outliers
Courtesy of Joshua M Brown, The Reformed Broker
So that there’s no confusion, these aren’t predictions or forecasts, they are Outliers. I define an outlier as an event that is unlikely but possible. I’m not betting the farm on this stuff, but I wouldn’t fall out of my chair if any of it happened between now and the end of the year.
Enough hedging, let’s go:
1. Silver Explodes: Gold’s flashier little brother has had a decent go of it of late. Silver prices just broke above the $19.50-ish level for only the third time since November 2009, and you know what they say about "the third time". The big boys are usually buying gold right around now to get ahead of holiday demand and the wedding season in India, meanwhile the yellow metal is within melting distance of its high. If the Slingshot Effect that silver prices experience during gold rallies takes hold, look out above. My outlier here is that silver becomes the must-have investment of the season.
2. GOP Takes the House: It is conventional wisdom that Republicans are going to gain some ground at the mid-term elections this November, but I’m going to go a step further and say that the Dems will lose more than 40 seats and along with them, control of the House. Larry Sabato, a political scientist from the U of Virginia, has been quoted as saying that they could also lose as many as 8 or 9 senate seats as well. This ain’t your Daddy’s Midterms, or maybe it is – there are shades of Newt Gingrich’s Contract with America tour-de-force against Bill Clinton halfway through his 1st term back in ’94. Peeps is pissed right now.
3. Google Buys Twitter: This would be a real outlier if only it didn’t make so much damn sense. What in the hell are they waiting for in Mountain View, CA? They tried to build their own Twittery-thing (Google Buzz, anyone?), it wasn’t terrible but people don’t need two microblogging platforms even if Google’s did have the advantage of being bundled with Gmail. This is a doable deal for Google financially and as incredible a phenomenon as Twitter is, it’s still not a business yet – just a phenomenon. The Googster ($GOOG) could monetize it on Day 4.
4. Ballmer is Audi 5000: He’ll…
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Thrill-Ride Thursday – Where Will Economic Indicators Lead Us?
by Phil - July 22nd, 2010 8:27 am
Isn’t this fun?
Up 200, down 200, up 200, down 200 - wash out your savings, rinse and repeat! What a total sham of a market we have these days with machines running us up and down on virtually no news at all. Yesterday they would have you believe that Ben Bernanke caused a sell-off. How ridiculous is that? He didn’t say one thing that he didn’t already say in the Fed Minutes that were released on the 14th, which were the notes from the meeting of June 23rd so for analysts to get on TV and say "the markets were concerned by the Chairman’s comments" is beyond stupid – it’s criminal negligence.
That’s Can Not Be Correct and other media outlets are supposed to have something that is called a Public Trust, which means that broadcast licenses are a national resource that are meant to be used responsibly. I know, that almost sounds like a joke but it’s not – we used to care about these things… Now the public is treated like cattle and is simply stampeded to the slaughterhouse at the whim of the media and the Big Money that pulls their strings and our equally puppet Government spend their days fighting over who gets to wear the captian’s hat on the Titanic. Maybe it is a joke - too bad it’s on us!
That’s why we keep things light over at PSW – we know it’s a crock but, as long as it’s a crock we can figure out, we’re happy. I mentioned yesterday that Tuesday morning’s Alert to Members had 2 long plays on the Russell that made over 40% each in a day. Well yesterday we shorted the Russell at 9:42 with TNA $32 puts $1.60 and IWM $60 puts at $1.32. It wasn’t as exciting as Tuesday but the TNA puts made $2 (25%) and the IWM puts performed much better, also hitting $2 for a 50% gain on the day. We have now learned that TNA and TZA, despite looking sexy, are not as good to play for direction as the IWM puts and calls. This is due to the wide bid ask spread and low liquidity, which means the Market Maker can rob you blind by stealing nickels and dimes from you every time you buy and sell – this is something you should always be aware of when trading options on ultra-ETFs.
We made a couple of attempts to go long, first with QQQQ…
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Will We Hold It Wednesday – Back At Our Bottoms
by Phil - July 21st, 2010 8:27 am
Wow, what a ride!
As I mentioned in yesterday’s post, we expected the Russell to lead us higher and we picked up both IWM and TNA out of the gate but, of course, we like our leverage so my 9:46 Alert to Members was:
Bottoms WERE: Dow 10,200, S&P 1,075, Nas 2,200, NYSE 6,800 and Russell 620. As I said yesterday, "don’t forget there’s a 5% drop to support below these levels).
For now, we’ll be watching the 2.5% lines at Dow 9,945, S&P 1,048, S&P 1,145, NYSE 6,630 and Russell 605.
My working theory is RUT is weakest because they are getting killed by cut-off of unemployment checks. That means that an upside play on the RUT could go very well in case they extend benefits today. I like TNA $37 calls for $3.20 and IWM $63 calls at $1.25. These are risky of course because if the extension is defeated we could go further down so take quick profits off the table on half to make a buffer and make sure you do have some disaster hedges.
We bounced right off those 2.5% lines and got our $3 copper signal at 10:24 so we knew we were good to go as we took those calls plus GOOG, BAC, GS, QQQQ, IBM, TXN, AAPL, WFR and BIIB. Other than BIIB, which is a long-term spread, all of our shopping was done by noon and the rest of the day we just said "Wheeeeeeeeeeeeeee!" as the market went up and up and up – and they haven’t even extended the unemployment benefits yet!
I have been saying we need to keep an eye on copper $3 during this whole market breakdown as $3 copper is NOT the right price for a Global Depression, which is what the market has been pricing in and at 10:24 as copper hit our bull target, I said to Members: "Copper $3! That’s like the little snapping sound when the bear takes the bait in the bear trap." Now we are back testing our "bottoms" which, as I said yesterday, are really the middles of our 5% Rule range but our view of earnings season so far is that we shouldn’t be in the lower end of the range and the recent action, as I summed it up in yesterday’s post, was silly.
Now things…
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Monday Market Movement
by Phil - July 19th, 2010 8:18 am
What the heck was Friday about?
Our working theory, watching the action in Member chat was that a fund was liquidating but there’s been no confirmation of that over the weekend so we’ll have to get cautiously technical until we get more facts. Also, who says they are done? This is why we add our disaster hedges at the top of any 5% move (which we did Tuesday and Wednesday last week) although a 3% pullback after an 8% run back to our 5% lines can hardly be considered and actual disaster – so far.
Six banks failed on Friday, keeping us at a record breaking pace for 2010 but it’s the same old story with the same old broke FDIC so hard to say that’s a market mover. BP’s well cap may NOT be working as there seems to be a leak somewhere else now. This is like fixing a leaking pipe in the bathroom but then, a few days later, you are still getting water dripping down the walls and you know it’s going to be MUCH harder to fix the leak you can’t see than the leak you can and it’s very hard to find a good plumber at 6,000 feet below sea level…
Europe remains uncertain as the IMF and EU withdraw about $21Bn worth of financing from Hungary, telling them that they must CUTCUTCUT their budget if they expect to get any help. There is a great article in the NY Times about Germany’s views on debt - a great read. Another pullback indicator in China is a sudden drop in the price of Car Plates, licenses to own private cars, which have fallen by 1,018 Yuan ($150) in June from 40,380 in May (2.5%). The licenses are auctioned and are considered pretty good leading indicators of demand AND the government offered fewer licenses and there are indications that 1.3M vehicles are stockpiled as expectations have exceeded actual demand. China is also questioning whether or not GDP is a good way to measure growth as they discover "stuff does not necessarily make you happy."
Bloomberg reports that China’s eastern province of Shandong faces an oversupply of oil products, news portal dzwww.com reported, citing the local petroleum and chemical association. The province received 12.2 million metric tons of oil- product supply in the first half and fuel consumption reached 7.3 million tons during the period, according to…
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Which Way Wednesday – Topping or Popping?
by Phil - July 14th, 2010 8:14 am
Wheee, what a ride!
We only had one trade idea for Members all day Monday and that was the DIA $103 calls for .52 from the 9:46 Alert. It is extremely rare that we only have one trade in a day but there really wasn’t anything for us to do as we had been BUYBUYBUYing all last week so there was nothing to do but watch. The calls finished yesterday at $1.12 for a nice 115% gain in 24 hours but we took the money and ran at 10:04 on a spike up to $1.25 because it’s too close to expirations to mess around. They actually topped out at $1.55 near the close but - better safe than sorry. Anyway, we replaced them with IWM calls later in the day and those doubled up and we were out at the close – again, it just doesn’t pay to be greedy.
It’s fun to day trade options on expiration weeks because the premiums go way down and we get fantastic leverage. Our longer-term trades turned mixed for the first time in 2 weeks (we had been 100% bullish) and we went from one to a dozen trade ideas a day as we used DXD for an overall hedge and took bullish positions on AAPL (2), GOOG (2), INTC, T, TZA (which is really a bearish position) and bearish positions on DIA (2) and MA. Of course ALL of our bullish plays were hedged already so the mix was a real indication of how exhausted the rally was starting to look.
Too much, too fast was the watchword for Tuesday as we were already up 5% for the week so we expected a gap fill back to the open (didn’t come yet) before we get serious about taking out our levels (Dow 10,290, S&P 1,102, Nas 2,257, NYSE 6,930 and RUT 651). We expected good news from INTC (we did a bullish ratio spread aimed at $22) and now we’ll see if it’s good enough to get the Nas up to 2,257 but it was the NYSE that worried us yesterday as they were close but no cigar at our 6,930 target.
Gap filling would be nice and normal and would take us back to test Dow 10,200, S&P 1,075, Nas 2,200, NYSE 6,800 and Russell 620. If we can show a little support there and consolidate for the next run, we’ll be in pretty good shape to continue this run but FIRST we have to test them WITHOUT everyone freaking out and…
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Testy Tuesday – Already?
by Phil - July 13th, 2010 8:19 am
Wheeeee, this is fun!
It’s only been a week since I called for "Turnaround Tuesday" and asked the question "Will CNBC Apologize to America" for their ridiculous, sickening parade of negativity that chased their poor viewers out of the market (now 600 points ago) by completely misrepresenting the economic outlook in order to protect the TERRIBLE advice given by Jim Cramer, the Fast Money Crew, their sponsors etc. etc. – it was all one national frenzy of media negativity designed to shove retail investors entirely out of the market while the cognoscenti went shopping.
It’s not just CNBC, of course, it’s a problem with the whole MSM but I ranted about corporate (top 0.01%) control of the media last week so let’s move on as we wave bye-bye to all the beautiful sheeple who were kind enough to sell us their stocks at the bottom, despite my warnings. Our 500% upside plays are now well on their way to making 500% for us and our "9 Fabulous Dow Plays Plus a Chip Shot" are also looking good already. Even the trade ideas I mentioned right in last Tuesday’s post are well on track as I said last week:
On Friday, I had said to Members right at 9:38, in the Morning Alert: "If we run up, then it will be prudent to get more neutral into the weekend but if we stay down and hold our levels, then saying a little bullish will be fine. Out of short-term short trades if you haven’t already. Keep in mind we have some great 500% upside plays you can still grab here if you think you are too short."
The latter was a reference to our 500% upside plays. We also went with EEM July $38 calls at .99, and a QLD $50/53 bull call spread for $1.30 (selling puts as well for more profits) as well as long plays on RIMM, AA, HOV, VLO and TASR. My optimism was based on the considered TA analysis I shared with Members at 2:39:
After completing last month’s "Omega III" market pattern on the Trade Bots, it’s now time to spring the bear trap and run the "Apha II" into options expiration on July 16th. Maybe there will be as little logic to the rise as there was to the fall – who really cares – it’s just our jobs to try to
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TLP: Pay No Attention To That Ginormous Camera On Top Of The Car
by ilene - June 16th, 2010 1:01 pm
TLP: Pay No Attention To That Ginormous Camera On Top Of The Car
Courtesy of Jr. Deputy Accountant
It’s the data-sucking gadget inside you have to worry about.
NYT:
Attorneys general from about 30 states are investigating whether Google violated any laws when vehicles used by the company to snap pictures for the Street View service also collected snippets of personal information sent over unsecured wireless networks.
On Thursday, attorneys general from about 30 states participated in a conference call do discuss whether to join forces.
The call was spearheaded by Richard Blumenthal, Connecticut’s attorney general, who was among the first to open an investigation into the data gathering by Google.
“Violating legitimate expectations of privacy on the part of both homeowners and business people is an extraordinarily serious issue, and we want all the facts as quickly as possible,” Mr. Blumenthal said in an interview by phone.
Mr. Blumenthal said the conference call with his counterparts “was the first step in an effort to cooperate in a possible joint investigation and action. At this point, we are asking questions and frankly some of the answers we received so far have raised additional questions that we have put to the company.”
Dicking around will cost you. If anybody knows how to wipe the cache, dump the cookies and clear the history, you’d think it would be the Google.
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Fast and Furious Four-Day Wrap-Up
by Phil - June 5th, 2010 7:12 am
Wheeeee, what a ride!
Like any good car race, the lead changes often in the markets. Yesterday the bears took the lead as the combination of Hungarian debt issues and a disappointing jobs number were like a tire blow-out for the bulls, who were forced to pull in for a pit stop. Fortunately, we had our seat belts on and had assumed the crash position as I had warned Members on THURSDAY Morning at 10:04:
Watch that 666 line on the RUT – we don’t want to lose that or even show weakness there… ISM a bit disappointing, now we’ll see what holds but I’m out of short-term, unhedged, upside plays here.
I felt strongly enough about it that we also posted it on Seeking Alpha, to warn as many people as possible, under the heading: "Phil Calls Short-Term Top." I don’t post live trade ideas on Seeking Alpha but in Premium Member Chat (and you can subscribe here) I followed right up at 10:17 Thursday morning with the following trade idea:
BGZ (large-cap bear) is at $15.27 and I like them as a hedge here with the (June) $14/16 bull call spread at .75, selling the July $14 puts for .95 and that’s a net .20 credit on the $2 spread with about $2.70 in margin so you can do a 10 contract spread for a $200 credit and $2,700 in margin (according to TOS standard) with a $2K upside if the market even twitches lower. Worst case is you own BGZ as a hedge to a dip below Dow 10,600 (your put-to area) at net $13.80 (9% lower than current price).
That’s what hedged trade ideas look like in our Member Chat. At PSW, you need to put some time in LEARNING how to trade and, more importantly, how to hedge. This is a fairly complicated options play but we take it BECAUSE IT WORKS! There are many, many simpler ways to play that don’t work (or carry far more risk) but we prefer to teach our Members how to do the things that do work. As it stands, just 48 hours later, BGZ is up 10% on Friday to $16.89 (so the spread is now 100% in the money) and June $14/16 bull call spread is now $1.50 while the July $14 puts are Down to .60 so net .90 already on the spread that already paid…
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What Me Worry Thursday?
by Phil - May 13th, 2010 7:48 am
What a freakin’ recovery!
As I said on Monday: "It’s a paper tiger of a straw man we’re building for $1Tn but you HAVE to respect $1,000,000,000,000 – you just have to… Our 5% Rule series for the S&P over the 1,155 breakdown line is the very critical 1,170, followed by 1,185, 1,200 (critical), 1,215 and 1,230 and THEN we are on the way to recovery." Wow, that guy is AMAZING! Anyway, so here we are at 1,170, after two days of testing the 1,155 line as a bottom so now it’s onwards and upwards to 1,185 hopefully. I also said on Monday: "Below that, we’re not too impressed but it also won’t be very surprising if all $1Tn buys us these days is some moderate lift that isn’t strong enough to break our major technicals."
We have been casting a wide and bullish net since the crash, finally pulling some of our sideline cash for long plays on ABX, APPY, BAC, BIDU, BRK/B, BSX, C, CAT, DIA (3), DF, ERX, GOOG, LIZ, LVS, MEE, MON (3), RIG, T (2), TBT (2), TZA (shorting it), UNG and WFR. We’re hedging heavily, of course, but it feels good to have longs again after being in cash for a while. Our short-term bearish plays (mostly DIA and TZA) have been crushing us so far, which is good in a rally but yesterday was a bit much for us and we got a little more bearish but it looks like the G7 has adopted the "Better Red Than Dead" mantra as the World racks up astounding deficits to put off admitting that this little debt problem is not isolated to the PIIGS nations.
Nonetheless, the global markets are rallying in unison – even while the Pound ($1.47) and the Euro ($1.26) collapse and even the Yen jumped back up last night, falling off the very BS 93.63 to the dollar it hit at 3am to psych up the Nikkei exporters back down to 92.75 this morning. I noted weeks ago how the Yen knocked down for Japan’s open and then drifts lower into the US open virtually every night – it’s what currency traders call the "Goldman Trade" because you can bet it every single day and have a perfect quarter. Sure it’s blatant manipulation designed to fool an entire nation of investors but, what else is new – Fuggedaboutit…
So, a TRILLION Dollars down the rabbit hole in Europe – Fuggedaboutit! I pointed out to Members in yesterday’s…
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Manic Monday – Just Another (Million) x (Million) Dollar Bailout!
by Phil - May 10th, 2010 7:53 am
Another day, another Trillion dollars for the banksters!
I mean really – how much money did you loan Greece? Perhaps you wrote Spain a check? France??? Well, you did now! $220Bn of that money came from the IMF and 20% of the IMF’s money comes from the USA as we once again paper over the global financial crisis for another month or two – whatever respite $1,000,000,000,000 buys us these days…
So YAY, I guess. We couldn’t be more thrilled for ourselves as we cashed out at the top and went short, then we cashed out at the bottom and went long. We’ve caught moves in the market from top to bottom that used to be considered two or three good years of trading in the past two weeks – that’s nuts! We went up so fast that there was no point in putting plays on our new Watch List (can’t be a Buy List yet because we don’t like chasing) as we’ll be up 5% at the open today.
In addition to the DIA $107 calls (my comment into Friday’s close as to whether I would keep them into the close was: "Not if I can get out even but they are gambling money so I won’t take a small loss (not when I can have a much bigger one!)" – we also picked up very nice entries on BAC, BRK/B, C, CAT, ERX, GOOG, LVS, MEE, MON, RIG, T, TBT and TZA (shorting it). How long we stay in those after the instant gratification of a 5% bump in 8 trading hours remains to be seen, as I said in our Watch List post:
There are two major forces at work there – the NEED to OVERCOME GREED and the TOOLS to OVERCOME FEAR. At PSW, we have a 2-step program for overcoming greed. Step number one is "Taking the money" and step number two is "running." The people who master these two complex steps find they have lots of cash at the bottoms and the tops of the cycles – they find that you can buy low and sell high once you realize that you don’t have to wait until the top to sell nor do you have to wait until the bottom to buy – especially when we can go from top to bottom at
…
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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. She manages the Favorites backup site
(