October Overview – When the Goblins Come Home to Roost
by Phil - November 1st, 2009 8:15 am
What a crazy month we had!
The Dow began the month of October at 9,712 and finished the month of October at EXACTLY 9,712. Now I don’t want to say the market is manipulated but… No, I’ve got nothing, there are no buts – the market is totally manipulated! Either that or you believe that the random outcome of tens of millions of traders around the globe trading hundreds of billions of shares of stock would just so happen to begin and end the month within .50 after going as low as 9,378.77 (on the 5th) and as high as 10,157.94 (on the 21st). So that is literally a 1 out of the 779-point swing coincidence to hit that 9,712 nail on the head.
At PSW we couldn’t be happier about this frankly. As I often say to members: We don’t care IF the game is rigged, as long as we can figure out HOW the game is rigged so we can play along. We were bearish in our September 27th Wrap-Up when I predicted that Earnings season would bring about a "Return to Fundamentals." We targeted retrace moves of Dow 9,512, S&P 1,020, Nasdaq 2,030, NYSE 9,496 and Russell 556 – all of which we hit the following Friday.
That week I highlighted my fundamental market concerns and Monday (9/28) my topic was "6 Unemployed People Per Available Job," Tuesday I said "Consumer Confidence is Key," Wednesday we caught the turn perfectly as I predicted "End of Quarter, End of Pump," and Thursday, October 1st was the day that "REIT’s Turned Rotten" – which was something we had been playing for during the September rally so we were thrilled with what is NOW the 2nd worst down day of the month. That was the day GS decided to agree with me that REITs were over-valued and gave us a signal that the Gang of 12 were no longer all on the same page. Friday, the 2nd, we were back to looking at the Jobs numbers when I asked "Is Anybody Working for the Weekend."
We could not have been more pleased with what was the worst week in the market since then end of August, which was a,most as bad at the beginning of July (are you beginning to see a pattern?) and I said that Friday: "Just like any good roller coaster, market plunges can…
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Weekend Reading – Looking for Green Shoots
by Phil - October 11th, 2009 8:21 am
I’ve been beefing up our bullish plays on the Watch List.
If we’re going to get more bullish I thought it would be a good time to look for some bullish premises so we don’t feel totally silly paying 20-year high p/e’s for the S&P 500. Obviously, our main hope is that the stocks we buy will grow into their earnings so the next month’s worth of reports will be key. The bar for corporate earnings is still set at very easy to beat levels yet, like this limbo-playing child, when they announce their beats of very low expectations we’re going to get all excited and tell them how great they are doing.
The problem is, these are not kids who we hope may grow up one day to be President or CEOs of major companies. these ARE CEOs of major companies and they are being paid top salaries for top performance and we, the stock purchasing public, are paying top dollar for what should be SPECTACULAR performance, not beating 75% off last year’s earnings by a penny!
When I am being asked to buy IBM back at it’s all-time high or AMZN or BIDU or AM, PALM, NFLX, PCLN, URBN, UHS, CERN, CREE, GMCR, CY, SWM, TRLG, BKE, etc – then their performance better look like this:
Nothing against those particular companies, any individual company can be exceptional and beat the market, but - Are the companies we’re buying really doing exceptional things or are have we just developed such ridiculously low expectations that we have been psychologically conditioned (and Wall Street firms employ armies of behavioral psychologists for a reason) to treat these stocks and the CEOs who run them like our children? If your child was the child in the above picture and I asked you for $20 to see her limbo show – you might pay it. If it’s not your child though, would you even consider making an afternoon of it? No, of course not, for good money you expect to see the cool fire guy at the top of his game and that is what you should expect from companies trading at or near all-time highs – NO LESS!
I love President Obama but he was just given a Nobel Peace Prize simply for not being President Bush – low expectations! On Sept 17th, PALM announced that it lost 10 cents a share, not losing the 25 cents expected and gave lowered guidance for Q3. The non-adjusted…
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Volatility Bursts After Take-Two Reports Smaller Loss and Phil Davis Picks Them
by Andrew Wilkinson - September 2nd, 2009 5:56 pm
Today’s tickers: TTWO, ORCL, URBN & GG
TTWO - The maker of the “Grand Theft Auto” series of video games surged more than 5.5% during the session to arrive at the current price of $10.75. The software developer reported a loss of 66 cents per share for the third-quarter, which was narrower than the 68 cent loss expected by some analysts. Options action in the December contract appears to be the work of an investor selling volatility by enacting a short straddle. It seems the trader put on the trade by shedding 5,000 calls at the December 10 strike price for a premium of 1.60, and then simultaneously selling 5,000 puts at the same strike, receiving a premium of 1.10 per contract. The gross premium enjoyed on the transaction amounts to 2.70. The trader will retain the full 2.70 premium if shares settle at $10.00 by expiration in December. Because the trader now holds short positions in both calls and puts, he is vulnerable to losses if shares surpass the upper breakeven point at $12.70 by expiration, or if shares slip beneath the lower breakeven price of $7.30. Option implied volatility plummeted from yesterday’s reading of 83% to the current value of 57% following third-quarter earnings for TTWO. – Take-Two Interactive Software, Inc. –
ORCL - Investor demand for December contract put options caught our eye this morning amid a 1% decrease in shares of the software company to the current price of $21.79. Perhaps some traders have decided to take cautiously bearish stances on the stock after news reports revealed that the completion of Oracle’s acquisition of Sun Microsystems (JAVA) could be delayed by the European Commission (EC). The commission’s deadline to rule on the deal is this Thursday. However, the EC could launch an investigation that may take as many as four months, according to some reports. Plain-vanilla put buying was employed at the December 21 strike price where about 5,000 lots were picked up for an average premium of 1.30 apiece. Volume at the lower December 20 strike surpassed 19,000 contracts as traders appeared to have purchased 15,000 married put options for an average premium of 95 cents each. The purchase of shares of the underlying stock in conjunction with protective put options suggests that some investors expect the stock to appreciate by expiration in December. The puts provide downside protection on the long position in case shares decline…
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More Profits on Urban Outfitters
by Andrew Wilkinson - June 16th, 2009 5:08 pm
Today’s tickers: URBN, URE, IPG, WDC, JPM, STEC & ATHR
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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
(