Manic Monday - Dubai, CitiGroup and GS Move Markets
by Phil - December 14th, 2009 8:28 am
What a morning it’s been already!
Last night, at about 11:30 EST, Abu Dhabi gave a $10Bn bailout to Dubai (until the end of April, anyway) with the following statement from Sheik Ahmed bin Saaed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee: "We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices." That was enough to send the Hang Seng from down 300 points to up 300 points in less than 30 minutes of trading (on both sides of their lunch break) while the Shanghai went from -2.2% to +1.7% and the Nikkei also reversed a 100-point drop, but only managed to get back to even at the close.
US futures trading also went wild, up over 100 points at the time but we’ve given up about half of those gains as of 7:30. Does it make sense that the Dubai crisis, which dropped us from 10,450 back to 10,250 when it came up, should be the catalyst to get us over 10,500 just because they were bailed out? Of course it doesn’t - that’s why we went to cash. This is one of the most ridiculously irrational markets I’ve ever seen. The other "good" news this morning is also the same old songs: Citigroup will repay their $20Bn TARP loan by diluting their stock by about 20% and GS says oil will go to $85 early next year.
I don’t know why they even bother to pretend anymore - they should just put 10 market-boosting statements on a chip that randomly plays one of them whenever the MSM needs a quote for the morning. People don’t seem to notice it’s the same thing over and over and over again so why even bother with the pretense? Speaking of pretense - I mentioned in the Weekend Wrap-Up that we expected this nonsense this morning but, had I realized that Greenspan AND Cramer were going to be on Meet the Press yesterday, I would have gone more bullish as those are the two biggest market hypers GE could have used for this week’s quotes.
Europe seems happy enough with Asia’s recovery and all the bull*** commentary (that’s bullISH - what were you thinking?) and they are up about a point ahead of our open DESPITE the FACT that Q3 euro area employment is down 0.5%, the fifth straight quarter of contraction. All sectors reported declines,…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Thrill-Ride Thursday: Jobs, What Jobs?
by Phil - October 15th, 2009 8:12 am
Yesterday was very hard for us.
Our theoretically conservative $100,000 Portfolio dropped 6% in one day as we had a farily bearish position into options expiration that I stubbornly refused to adjust this week. Surely, I thought, after running up 250 Dow points from Thursday, 10,000 would act as some kind of resistance? We’re also up a neat 500 points for the month of October so that’s our 5% rule and to not get a 1% pullback, even in the most bullish of markets, is very rare indeed.
So we stayed bearish yesterday and got crushed by the AMZN $90 calls we sold as well as UYG calls we sold and our PSQ calls we bought for protection got slaughtered as the Nasdaq flew up not 5% but 5.5% for the month and up 6.2% from it’s October 2nd low. While we are disappointed, we’re not terribly concerned as we’re only going to roll the calls to November anyway and I did promise the members that, if we hold our breakout levels for 2 closes, then I’ll be shifting more bullish. I’ve been trying to identify more bullish positions this week but our mix has still tended bearish as I’m just having so much trouble buying into this rally.
In yesterday’s Member Chat, my comments on the current situation was:
I do wish we were more bullish, this is a very smart group of people and we’re pretty bearish but so is the general investing public or there’d be volume to this rally. I have a hard time ignoring the fact that 600,000 more people lost their jobs this week and, even if it’s "only" 500,000, I still think that’s not really a sign of a healty economy. I think the REITs are off in fantasy land and I think so is the government, who cannot keep borrowing money at these low rates. The dollar has dropped 25% of it’s value since March so the market is only 25% ahead of the currency fall which means a flight back to the dollar, which could happen very suddenly if an EU nation like Spain collapses, could send our market down as fast a 9/11.
That being said, we have no choice but to follow the technicals and now that we can look at nice, easy support levels like Dow 10,000, S&P 1,100, NYSE 7.200, Nas, 2,200 and RUT 620 and simply call that the mark at which we’re 60% bullish. I’ve…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Stock Market Crash - Year One Review III - March Madness!
by Phil - September 10th, 2009 5:51 pm
We left off in Part II with our Feb 23rd Big Chart Review.
Even though I said: "Once again we are in a market that environment that reminds me of the Simpsons episode where Homer jumps over a gorge, crashes, is taken up by a helicopter (Ben) smashing against the wall along the way only to fall all the way from the top again. Pain, pain and more pain every time we try to get long" - we still weren’t fully prepared for the devastation that was to follow as the Dow fell from 7,500 to 6,500 in the next 10 days. My commentary on the environment the next day was:
According to Cap, someone on the YHOO message board was counting the number of times CNBC talking heads said "nationalization" this morning and, as of 8:15, they were up to 300 times. Sadly, this is the fear-mongering that is driving the markets to new lows while Cramer continues to keep his sheeple out of protective ETFs like SKF. So you have the man’s network telling you financials are going to zero while dog and pony boy tells his minions to sell ALL the financials, causing them to go to zero - even though they could hold on and protect themselves with conta-funds, if Cramer didn’t spend 3 days a week convincing his viewers contra-funds are poison. I’ve never seen anything like this outside of a racketerring investigation. Speaking of racketeering - Dennis Kucinich nailed it when he pinned that charge on Paulson and company back in November.
Our wall of worry continues to be a steep one. After yesterday’s failure we do not expect too much out of today, we’ll be happy to just see a bottom at this point but it’s looking a little more likely that we’re heading into a capitulation event that can take us down to frightening levels. The 60% line is a line the markets dare not cross but, as I pointed out yesterday, we already lost the SOX and the Nikkei, with the Hang Seng and the BSE hanging on by a thread. Let’s take these levels very seriously, if the administration can’t turn it around this week - the downward momentum can easily pick up steam.
I’ll spare you the details other than to say we DIDN’T turn it around that week and the downward momentum DID pick up steam. I was at war with Cramer at the time as he was blatantly ripping off my ideas and trying…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Weekend Wrap-Up, Ripping Through the Top or Topping and About to Tip?
by Phil - July 25th, 2009 12:34 pm
What a week this has been!
In last week’s 600-Point Weekly Wrap-UP, I said it would take some spectacular earnings results next week to keep the rally going and it seems like we got them this week as roughly 85% of the companies reporting this week beat expectations with 42 of this week’s reporting companies guiding up and only 18 guiding down. While people like Richard Bernstein may make very good arguments for why we shouldn’t focus too much on quarterly earnings surprises, I have to say I am somewhat swayed by the preponderance of evidence we’ve gotten this week that, by and large, the vast majority of our companies are weathering the storm far better than analysts have expected.
"It’s pretty amazing what passes for good news these days," remarks Barry Ritholtz on his blog, The Big Picture (www.ritholtz.com.) "Beating dramatically lowered earnings forecasts on cost-cutting and layoffs — rather than top-line growth — seems to be the order of the day. The irony is that the Wall Street analyst community overestimated earnings at the top of the cycle — pure extrapolation of trend to infinity. They seem to be doing the same thing now, only extrapolating falling earnings to zero. What that produces is not true upside surprises, but merely jumping over a dramatically lowered bar," he says.
It’s interesting Barry says this now because it sounded familiar and I went back to my May 2nd Weekly Wrap-Up, where the sentiment was very similar and I said at the time: "With 2/3 of the S&P 500 weighing in, earnings have been 70% positive. I had warned earlier in the week that we are only beating a very low bar but we are beating nonetheless. As you can see from the above chart, even if we do keep moving up, we are heading into some very serious overhead resistance that may not prove futile this time. With the added pressure of the old "sell in May, go away" adage - there will be a lot of obstacles to overcome this week and next so we will remain on guard but we have also trained ourselves not to think and simply go with the flow, letting our levels guide us and, so far, our levels keep saying yes - despite our common sense saying no."
More importantly, with the Dow right at 8,200 that Friday and the S&P at 875, was my call that we had…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Weekend Wrap-Up - Dynamic Portfolio Adjustments!
by Phil - March 14th, 2009 11:40 am
Was that a great week or what?
No really, I’m asking as I’m not sure yet… We had a great rally once we got Monday out of the way but, all in all, it was a hell of a lot of work to get back to where we were last options expiration day (Feb 20th). We nailed the market turn to a tee, beginning with my calls to go long on QLD, HOV and FAS while shorting the SKF at $250 (now $138) in last Friday’s appearance on LiveStock. In fact, my closing comment in Friday morning’s post was: "We EXPECT a 400-point BOUNCE along this downtrend so we’re not even impressed with anything less than 7,000 next week."
We did a little further investigation in member chat yesterday and decided that we need to break 7,450 on the Dow to actually be impressed next week. Our main concern is we get a quick spike up to that level and then a rejection that sends us racing down to the bottom so we will be positioning to guard against that next week. At the moment, we ended the day slightly bullish but would not be surprised by a drop back to the 7,000 line and we’re positioned for that, as we sold the 3/31 $72 puts against our longer puts. The $2.25 we collected from those pays for us to roll up our long protection 400 Dow points but, to the downside, put a break on our insurance at the 7,000 line (the point at which they go in the money).
By contrast, last Friday, my advice to members was to cover the long DIA puts with $70 puts at $4.32. Those are now .61 and the profits from that already paid for more than half the cost of our long June puts. This is very important to understand as we often talk about being 50/50 or 60/40 bearish but when you can offset 1/2 the cost of your 60% bearish side like this, it makes it very easy to go with the flow on a market rally. The only other stock I picked on Friday was AMZN as $62.50 for reasons I elaborated in the live show, they finished up near the highs at $68.63 but the FAS as $2.85 was a real winner, finishing up at $5.15 yesterday - not bad for a week’s work.
Of course nothing says lovin’ like a $110 dive…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
Testy Tuesday - A Very Dangerous Line in the Sand
by Phil - February 24th, 2009 7:17 am
Well we are up in the pre-markets (7am) - that’s something…
Interestingly the global markets took our dip rather well. The Shanghai fell 2.8%, the Hang Seng gave back yesterday’s 3.5% gain, India hit the 2.5% rule, and the Nikkei fell 2.2% - a bad day but not worse than ours, as is often the case in Asia. The DAX is, of course, leading Europe lower with a 2% loss into lunch but the CAC and FTSE are down just a point. I had a busy evening doing a Big Chart Review and indulging in my political rant of the week about the budget fiasco but maybe that will be a weekend article as my comments alone in the members section were over 2 pages.
We went mildly bullish into yesterday’s close, mainly by covering our long index puts, looking for at least a bounce off what is now a 1,100 point drop since February 9th, when we did our previous Big Chart Review. We are actually 14% below the 8,280 on the Dow that we held that morning so another 1% down to go before we hit our next bounce, just over the 7,000 mark. The gravity of the 5% rule dictates that we are more likely to go down than up now that we blew through 12.5% and finished at yesterday’s low and getting back to that 12.5% line (7,245) will be our challenge for the day. On the S&P we’ll be looking for 760 to be taken back but we are just a hair over 738, which is the 15% drop off that 2/9 open. The Nasdaq is about 2% over 1,352 and just under the 12.5% line at 1,392 so we’ll be looking for leadership there to the upside.
The NYSE is our most worrying index. They are aleady down more than 15% (4,675) at 4,633 and the Russell (see David Fry’s chart) is the NYSE’s partner in crime, failing the 15%, 400 mark by 5 points already. So it’s going to be an easy day to look for a turn as we need the NYSE to break over 4,675 and 4,790 is our next stop. The Nasdaq needs to hold 1,352 and get back over 1,392 and the Russell must break over 400 and return to 411 in order for us to see anything more than a weak bounce in today’s action. Notice 411 was the Russells failure point yesterday and keep in mind…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
Facebook
Twitter
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
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
(