Where do I even begin to go over this week?
I think, to set the proper tone, let’s look at my Thursday morning Alert to Members where I said:
Get out, Get Out, GET OUT of the short-term short-side plays if we get back over the 200 dmas. Take the money and RUN. CASH OUT THE SHORT SIDE. Is that clear? We may not hold these lines but that’s why we have October Disaster Hedges, the shorter-term downside plays are huge winners and should be cashed here - we’ll find something else to short if we fall off this support level. 200 dmas need to be held and those are: Dow 10,250 (8,650 is next major support), S&P 1,100 (900), Nasdaq 2,225 (not there yet! 1,800), NYSE 7,100 (5,500) and Russell 630 (still above! 500).
We never did hold those levels but, as I mentioned in Friday morning’s post, I thought the end of day sell-off on Thursday was a bit forced. In my first Alert of Friday morning I said: "TAKE THOSE SHORT PROFITS OFF THE TABLE!" Now, I am not prone to making statements in all caps in Member Chat - almost never is about how often - so this was a pretty important statement. Before that Alert, right at 9:42, I had already called for the SPY $105 calls at $2.45 as our first trade of the day. Those calls finished at $4.11, up 67% for the day so a good start to our expiration day!
A good start and our other day trades did very nicely as well:
FXI June $39 calls at .98, now $1.28 - up 30%
DIA May $102 calls at .13, out at .45 - up 246%
DIA May $101 calls at .95, out at .80 - down 16%
DIA May $101 calls at .10, out at .80 - up 700%
Of course we followed our strategies and took 1/2 the DIA’s off the table at a double so the other half was a free ride. (We like to gamble but we’re not crazy!) But the FXI was the only "keeper" for the day, we’ll see if that was a good idea on Monday. We also took (as I said we would in the morning post) a number of well-hedged, bullish plays on Boeing (NYSE:BA) (from the post), TNA, TBT (have I mentioned how much I like them lately?), Intel (NASDAQ:INTC), Apple (NASDAQ:AAPL), Valero Energy (NYSE:VLO), Freeport-McMoRan (NYSE:FCX) (I guess we’re done relentlessly shorting them!), Exxon (NYSE:XOM) and Altria (NYSE:MO). Certainly not our normal selection but, if they are going to throw a sale on the blue chips - why shop anywhere else?
So that was how our week ended, with a Yee-haw! But, how did we get so damned bullish? Well, it all started on the weekend, when I posed the question in our Weekend Reading - Now What? There I mentioned how it was still a good time to jump on our Disaster Hedges because we REALLY didn’t like the way the market was looking. We REALLY didn’t buy that "fat finger" BS and we found the bounce unimpressive. Since we had done a little shopping on that bounce, we also picked up a bunch of short-term downside hedges to keep them safe since our October hedges are very slow payers. As we noted on the 6th, it’s no fun having the market go down 1,000 points in one day and not making a killing on your short bets. So we tightened up the time-frames and came up with this list that did MUCH better in the morning when we took them off. I’ll just report the current figures and I’m sure you can see why we recommended them last weekend:
EDZ June $38/44 bull call spread at $2.80, now $4.50 - up 60%
EDZ June $35 puts sold for at $1.25, now .40 - up 68% (pair trade)
FAZ July $12/16 bull call spread at $1.10, now $1.50 - up 36%
FAZ July $10 puts sold for .70, now .35 - up 50%
IYR May $52 puts at $1.30 (fell to .79), now $4.10 - up 215% (a quad since Monday!)
OIH May $131 calls sold for $3.45, expired worthless - up 100%
OIH May $131 calls sold for $3.90, expired worthless - up 100%
QID May $16 calls at .32 (fell to .27), expired at $2.74 - up 756% (another triple since Monday!)
QID May $15 puts sold for .32 (rose to .37), expired worthless - up 100% (pair trade)
QID June $14/16 bull call spread at $1.15, now $1.90 - up 65%
TBT September $43 puts sold for $1.50, now $6 - down 300%
TBT September $43/48 bull call spread at $2.60, now $1 - down 62%
TZA June $6 puts sold for .70 (rose to .94), now .34 - up 51%
UGL October $49/54 bull call spread at $2, still $2 - even
GLD March $90 puts sold for $1.20, now $1.80 - down 50% (pair trade)
Vornado (NYSE:VNO) May $80 calls sold at $2.30 (rose to $3.90), expired worthless - up 100% (5x since Monday!)
So more or less doubles from where they were Sunday, even if you didn’t take an optimized exit like we did this morning. This is not bad for free advice is it? Sadly I won’t be going into much detail on the 50+ bullish positions our Members took this weekend as we are still working into them. We’re very happy to discuss the plays we’ve filled or are done with but we are quite protective of the trades we’re still working on. Still, as you can see, even our breadcrumbs are worth picking up on occasion…
We had the charts and the levels we were expecting in our weekend post so hopefully you don’t need me to shout at you to take massive profits off the table when we get a big spike down. We are generally bullish, long-term investors but that doesn’t mean we put blinders on and run into whatever mo-mo stock Cramer and his Fund Buddies are pitching that day. When the market is overbought, we go short, but we go short looking to use that cash to go long as soon as we find some bargains we feel good about. If the market doesn’t go down, we are pleasantly surprised and go long and then our downside plays become our insurance hedges and so it goes - round and round and up and down, as markets tend to do.
Now that we have a little more consolidation near our 1,100 mark on the S&P (see Friday’s chart) we’ll be a lot happier to see some upside action next week - as long as it doesn’t get too ridiculous. Last weekend I closed with:
There has been surprisingly little news this weekend and that’s not good for the market as we needed some reason to move over our technical levels.
Let’s see how that panned out in a week that started the previous Wednesday:
In the morning Alert to Members, we went for the DIA $107 puts at $1.23 right out of the gate but the day was bullish and we were forced to double down and were lucky to get out even. Trades we are done with include:
Whole Foods (WFMI) May $41/38 bear put spread at $1.55, expired at $1.76 - up 13%
TZA $5 2012 buy/write at net $1.03/3.02, TZA now $7.34 - on target
My closing comment to Members said it all:
I think this is totally irrational. Unemployment tomorrow morning along with Import/Export Prices but all trumped by Retail sales on Fri with +0.6% expected. We also get Industrial Production and Cap Utilization and Michiigan Sentiment AND Business Inventories Friday so they can talk all they want on CNBC but if we get bad data, Friday will suck.
The pre-markets were rallying that morning and I was well beyond Fed up, our remaining DIA puts were getting crushed and our new TZA play, designed to give us a 400% gain to protect our bullish bets was already looking like a mistake.
Trades from that Thursday that we are finished with include:
DIA May $108 puts at .74, finished at $6.16 - up 732%
Netflix (NASDAQ:NFLX) September $135/May $120 ratio backspread at net $20, now $1,320 - up 6,600%
QID June $16 calls at .95, now $2.94 - up 209%
Baidu (NASDAQ:BIDU) September $90/June $80 ratio backspread at net credit $800, now credit $290 - up 36%
FXP June $40/46 bull call spread at $2, now $3 - up 50%
FXP June $37 puts sold for $1, now .50 - up 50% (pair trade)
We were shorting into the market rally and I was beyond incredulous. I wrote: "Oops, looks like the BIDU fantasy value hour has ended." That proved to be the first true sign of the coming market apocalypse... We had targeted a fall to at least test 10,700 again and the wild gyrations that day were testing our patience. As the S&P was once again testing our upside target of 1,166 at 2:07, I commented to Members: "Is anyone else noticing this?" I put up the futures charts for the S&P, Nasdaq and Dow, which gave us a good indication of the general direction, despite the wild gyrations: (Click chart to enlarge)
We made an assortment of momentum plays into the close, scalping dimes on DIA and QID. I wrote:
If retail numbers are bad tomorrow, the reaction could fill that gap back to around 10,500 so it’s a very random overnight session ahead, which means don’t go too crazy leaving short-term bets on the table. Now we can use 1,167 as a quitting line for day-trading shorts. Then if 10,850 fails we can use that and 2,400 on the Nas and then 7,250 on the NYSE….
It’s a very good discipline to keep moving your stops to lower and lower inflection points on key indexes as we tend to focus too much on the gyrations of just the index we’re betting on.
We woke up to Europe being down 2% at 7:30 and we fell hard in the morning but held it together with a very BS stick-save at the close. Since our bets were already in place, I spent the morning post talking politics.
The undercurrent to the post was that the Euro was in trouble. We had bet EUO in early May so this was no news to us but it seemed to shock many others, giving us a chance to sit back and enjoy the fun as the MSM caught up to our fundamental observations.
We made a few upside bets (you have to do something to hedge shortside profits) including hedging our U.S. Dollar cash with our favorite TBTs, which have not been very good to us lately:
TBT June $39 puts at .75, now $1.95 - down 160% (roll from May $42 puts)
SSO May $37/38 bull call spread at .75, closed worthless - down 100%
SSO June $31 puts sold at .68, now $1.20 - down 76% (roll from May $37 puts)
TNA May $48/51 bull call spread at $2.50, stopped out at $1.50 - down 40%
TNA June $36 puts sold for $3.20, now $3.50 - down 9% (net roll from $47 puts)
USO May $33 puts sold for .88, expired at .73 - up 17%
Notice we sell offsetting puts to pay for our long gambles as we try to get closer to neutral ahead of a possible bull move up over the weekend.
I reminded Members at 1:51:
I’m hoping for a double bottom here and a stick into the close and I think all Europe has to do is not burst into flames over the weekend and we’ll get a little relief move but cash is still king other than some speculating so far. Volume at 1:50 now 138M on the Dow so just 18M in the past hour - dead slow and VERY stickable.
We did get our stick but not enough to thrill us and that takes us right back to the Weekend Reading post where I reiterated the bearish positions we were protecting with our new bullish bets.
So, where were we? Oh yes, we had just finished getting full circle back to last weekend’s post, where we reiterated bearish positions. My target for this last week kept falling from 10,700, to 10,500 to 10,200 as we lost all confidence in the ability of our indexes to recover and, of course, Europe fell quickly apart:
It’s amazing how quickly people can lose faith in one of the World’s three major currencies. So amazing that I can’t believe you can sleep at night! Have I mentioned how much I like TBT lately? The Euro dropped from $1.51 in November to a low of $1.21 on Tuesday, that’s our 20% rule, by the way and a retrace to $1.27 (20% of the drop) is not going to be very impressive until we’re well over it.
Unless you are an exporter (and who in America does that anymore?) then a strong dollar is kind of nice. But the dollar isn’t actually strong, we’re down 6% against the Yen this month, it’s just the Euro is very weak. Unfortunately for Japan - everyone there is an exporter because their own people stopped spending money in 1990. That's when their market fell off a cliff and Japan’s people lost all faith in investing schemes and sham financing deals - you know, the stuff that pretty much drives the U.S. economy…
The Media talks about Japan’s lost decade, but this is the start of decade 3 of their deflationary cycle: (Click on chart to enlarge) The Nikkei has dropped from 40,000 in 1990 to 20,000 in 2000 to 10,000 in 2010. Remember when Japan was the next big thing and they were going to take over the World and U.S. executives were learning Japanese and U.S. firms were rushing to tie up business in Japan etc., etc? Thank goodness we’re too smart to fall into a trap like that again!
Nonetheless, I called a top at $25 on EUO. You can see us getting out on Monday as it topped out for the day. Tuesday they ran it up to $25.43 but that was when we went short (I’m fickle that way) so close enough I suppose. As I said on Monday morning:
Unfortunately, I can only tell you what is going to happen and how to profit from it, I can’t fix things.
I had spent last weekend with some people who were trying to fix things and I was actually encouraged and I mentioned that
There are, in fact, ways to improve our situation but, of course, we are held back by lack of government willpower to make the hard choices and do the right things instead of this global "chicken in every pot" nonsense that predominates global politics.
That led to a slew of Obama-bashing/blaming Emails that made me realize I was wrong - we are all doomed!
I reminded readers to make use of the DXD spread as protection for the week given all my very serious concerns. However, since I had the nerve to mention the fact that the Republicans had filibustered over 150 votes in 18 months (87%), judging from the EMails, I had already lost half the readers. They all rushed to their PCs to tell me how, if it wasn’t for the Republicans tying up government for 18 months, things would only be worse. Apparently it turns out you CAN lower taxes and pay off your debts and promote job growth and build up the infrastructure and eliminate the "death tax" and fight multi-Trillion dollar wars - as long as you don’t try to help any sick people or old people and leave those poor bankers alone to do God’s work!
I reiterated that DXD play for Members in the morning Alert - to make sure no one missed it:
That DXD play I mentioned is super-sweet as it is now:
Long October $23 calls at $5
Short October $27 calls at $3.40 (net $1.60)
Short October $23 puts at $1.35 (net .25)
That’s .25 on the $4 spread and DXD is currently at $26.89. DXD is a 2x ultra so figure a 10% move on the Dow, to 11,500 is required to force a buy of the puts (and they can be rolled). If you put $500 into buying 20 of these contracts, the margin is about $5,500 and you collect $8,000 if the Dow is still this low or lower in October…
For now, as I said in the weekend post, we would LOVE a good reason to cash out those short-side hedges but anything below 1,155 is no reason to act and below 1,140 is more of a reason to add more and we’re already getting rejected off that line.
Copper is $3.06 so I don’t even have to look at the indexes to know we’re going to be weak. Add oil testing $70 again today and we still need a catalyst to take us higher. Earnings won’t do it, the Fed Minutes on Wednesday are unlikely to do it and none of our Economic data looks likely to do it so I’m not expecting too much for this Options Expiration Week but I will be very pleased if we consolidate between 10,200 and 10,650 on the Dow , which is about 1,100 to 1,155 on the S&P and 2,225 to 2,350 on the Nas and 7,000 to 7,250 on the NYSE (they are the most in trouble so far) and 620 to 660 on the RUT (they are the least in trouble).
So the tone of the week will come from whether the NYSE improves or the Russell deteriorates first - we’ll keep a close eye on them but it’s the S&P that’’s going to give us our best signals for the week.
Like I said, I can only tell you what’s going to happen and how to profit from it… The $23/27 spread has already widened to $2.10 with DXD at $29 and the $23 puts have fallen to $1.25 for a net of .85, up a quick 240% for the week. On Monday I began a top 10 list for stocks that were worth scaling into as we sell off. I used a combination of our DXD hedges (along with other Disaster Hedges already long in place) and our usual buy/write protection that should keep us safe all the way back to 800 if necessary. Some of those plays are even cheaper now and I’ll be updating a Buy List for Members this weekend. I will share my comment to Members on the oil trade here though, as it’s a big change from our historically bearish stance:
Oil/Pastas - Other than the normal futures buy above the $70 line, I’m starting to look at how well DIG performs. I am liking a December bull call paired with a short put sale but they are very thinly traded. We should have hurricanes coming off last year’s El Nino and, of course, $65 oil isn’t likely to last so the $22/30 spread for $5 paired with the sale of the $22 puts at $3 (now $2) has a nice 700% upside if DIG doesn’t fall 10% and a b/e way down at $23, where DIG has only ever been below for 3 weeks outside of a few quick spikes.
The momentum that carried us into the close continued into Tuesday Morning’s session but it was already looking overdone so I warned:
It looks like we also picked the right day to go long on oil and the Euro and short on gold. But those are more directional plays and we will be taking money and running as those run out of momentum since we do not have 20% cushions on those entries. We still have our technicals to get through and despite our amazing V-shaped recovery yesterday, Asia was not all that thrilled and only managed weak bounces with the Hang Seng failing to retake 20,000 (19,944) and the BSE still below 17,000 (16,875) while the Nikkei barely held their critical 10,200 line (10,242) in today’s trading and the Shanghai is still languishing at 2,594 but at least has averted a total disaster below 2,500 so far (300 on StockCharts).
We looked at our multi-charts and chatted about Germany and the upcoming vote - something it would have done Bob Pisani some good to read as he could have avoided misrepresenting the facts on Thursday (that is, if he actually wanted to). Most importantly, I noted that our indexes had made "death crosses" on the 20 and 50 dmas and that is NEVER a good thing. But I did have the wrong take on the day as I thought we’d run down but then be saved by the Fed minutes and flatline into the week. So we weren’t very aggressive with our new short plays. We did take eight long plays that we’re still working into and the plays we’re done with were:
DIA May $106 calls at .76 avg, out at .65 - down 14%
EUO May $26 puts at .90, expired at $2.19 - up 143%
IWM May $69 calls for .71, out at .60 - down 15%
As you can see, we mix it up between short-term long and short plays when we’re not sure of market direction. If you have a good stopping discipline, this can work out quite well. But keep in mind the underlying stance, as noted in my 5:36 am Alert to Members was one of extreme caution:
I think it’s insane not to be mainly in cash right now and hedged for at least a 40% drop. If the guy’s (who predicted a crash) wrong - our buy/writes pay "just" 20% and if he’s right, then we get to DD at good prices with the profits from our Disaster Hedges.
Also in that early morning Alert, we had discussed 3 plays that would quickly pay off (as opposed to our slow-pay Disaster Hedges) if we got a "short, sharp shock" again. Again, I am not prone to do early morning Alerts to Members as most things are not so urgent that they can’t wait for my 8:30 am post. But I just didn’t want anyone heading off to work without the above warning and these 3 trade ideas:
- DIA June $96 puts at $1, now $1.90 - up 90%
- TZA July $7 calls for $1, now $1.55 - up 55%
- TZA June $10 calls sold for .30, now .60 - down 100% (pair trade)
- TZA July $5 puts sold for .40, now .20 - up 50% (same pair trade)
- FAZ July $17/25 bull call spread for $1.10, still $1.10 - even
- FAZ October $9 puts sold for $1.10, now $1.20 - down 9% (pair trade)
With FAZ at $15.17 the last is a very aggressive play but also fairly low risk with the financials needing a 15% move up to cost us that October $1.10. It’s a very nice, clean $8 upside if it all hits the fan —- again. I closed that Alert with the lyrics to "Smoke on the Water" as we checked out the news of the Bangkok riots, which I could not believe were not taking the markets. I also couldn’t believe what BS gold was as it hovered at $1,230 despite the global situation but Steve Colbert put it better than I could.
I re-reiterated our "5 Plays that Make 500% if the Market Falls" as well as our new DXD disaster hedge that’s good for 1,500% if the Dow is below 10,500 at October expirations. I also pointed to 16 of our shorter-term downside plays in the Weekend Post and if this sounds repetitious - it was! I don’t know how many ways I can say the market is about to fall and lay out plays to make for when the market falls. But, like our poor friend Chicken Little - sometimes the sky is ACTUALLY FALLING and all you can really do is stand there and say "the sky is falling" and hope someone will believe you…
After that, it was as I said in the morning post:
Not much to do but sit back and see if our levels hold. It’s a long way up before we’re going to be bullish again. But, as I said yesterday, that does not stop us from doing a little bargain hunting from our mainly cash positions with our Discount Stock Buying Strategy.
We took a few new long plays and took a poke at upside plays on DIA and IWM that did well on the mid-day move up but we took hits on QLD, SSO and TNA that wiped out those gains in a very choppy session. We were also very disappointed with the post-Fed action.
Now Greece was rioting again and THAT finally caught people’s attention as Europe fell about 2.5% before we opened so there was no hope from the get-go. I once again gave my Chicken Little speech and once again pointed back to our bearish plays (the ones we were protecting with the bullish plays) and Pragmatic Capitalist and Josh Brown also gave us reasons to be very afraid. I discussed the need for higher taxes and got another boatload of hate mail calling me some kind of Democratic sympathizer despite the fact that my next paragraph criticized Chis Dodd in far more detail than my single sentence about taxes.
Cramer said "BUYBUYBUY" to which Karl Denninger said ""Cramer, Are You Hitting the Pipe Dude?" but I did agree with Cramer that is was a good time to buy - but only using our strategy, not Cramer’s. Jimbo actually told people selling puts was dangerous and buying calls was "smart." I’m not going to get too into it with Jim here but if I WANT to buy Bank of America (NYSE:BAC) at $16 then why on Earth shouldn’t I sell the August $15 puts for $1.15? If the stock goes up, I make $1.15, which is 8% in 90 days and if the stock goes down, I do own BAC at net $13.85 so I have a built in 13% downside cushion on my entry - WHICH I DO NOT PAY FOR?
Why Cramer, why do you tell people not to do one of the most basic hedge fund strategies? Why do you keep your sheeple out of the one thing they can do that can consistently reduce their cost of entering ANY STOCK, ANY TIME? It’s one thing not to tell people the secrets your hedge fund buddies don’t want them to know but to actively tell them NOT to do something as simple as selling a put as an entry on THE SAME FRIGGIN’ STOCK YOU ARE TELLING THEM TO BUY is just mean. And then, to top it off by encouraging them to be the suckers that hedge funds sell calls to - well Mr.
Madoff Cramer, I am just too disgusted to even come up with ways to explain how friggin’ evil that is!
It is very interesting that Cramer told people to STOP TRADING on Thursday afternoon to tell people that the "people who give such advice" are "idiots" and "morons" and that "I fear if you’re short you’re going to run into a buzz saw" on the same day that I had posted that idiotic and moronic advice as well as closing my morning post with the following:
It’s going to be a rough day for White people’s markets as European stocks have broken that 2.5% line we were watching yesterday and are down another 2% already, ahead of the U.S. open. We talked about strikes and riots in Greece over a month ago so again, this shouldn’t be such a shock to US speculators but it does seem to be freaking people out although, as pointed out in this video, White people are prone to freaking out. Oh yeah, it also turns out they are prone to not paying their mortgage either (1 in 10 now not paying!).
I spend a lot of time teaching people of all creeds and colors NOT to freak out and this is going to be one of those days as we test those "fat finger" lows again. We are testing the lower end of the range I’ve been pointing to since we went short in early May so yay! We’ll be buying while others are panicking because we can hedge our entries and our very good timing has been a huge bonus, making us cash rich just as it all hits the fan and, as I said yesterday, we have a system for entering positions at a steep discount to the current prices so today is party time at PSW - let’s sit back and enjoy the ride.
Despite the sharp drop-off, I liked the way 10,200 held up initially and at 9:51 I sent that Alert to Members that I mentioned in part one of this review, so I’m not getting into that again! At 10:31, in Member Chat, my upside trade idea for holding those levels was:
DIA MAY $100/102 bull call spread is $1.35, selling $100 puts for .80 is .55 on the $2 spread that expires tomorrow. THIS WILL SUCK IF WE DIVE DOWN.
That trade expired at $1.84 (up 234%) and, keep in mind that we take these plays to PROTECT our bearish positions so we don’t get whipsawed on the reverses. We picked up many long-term entries by selling short puts into the drop. As I mentioned, that screwed up the plans of enough funds that they unleashed the Cramer that afternoon, telling people our strategy of protecting ourselves against a 10-15% drop before we buy a single share of the stock FOR FREE was a bad idea. Why is it a bad idea? Because, like the Dukes in "Trading Places" if they are spending their money to induce a panic but we buy their panic-induced shares and then sell them back at much higher prices - we can get rich and put them in the poor house!
Selling into the panic that afternoon was way too easy, we even sold OIH June $95 puts for $3.60 and, despite OIH going nowhere, they are already down to $2.70 (up 33%) - Oh please Mr. Cramer, please save us from these terrible trades! Another gift handed out during the carnage was my 2:11 Trade Idea for Members:
We got 33% in 48 hours on a trade Mr. Cramer told us was idiotic and moronic: In other words, a trade that can make you money on the big sell-off and reversal that was being engineered by his hedge fund buddies and his own network (if you believe those crazy conspiracy theories). Just remember, Cramer told us that if you, as a hedge fund manager, are not willing to manipulate the market using false rumors, pulling the strings of the MSM, then "perhaps you shouldn’t be in the game."
What cracks me up is how many letters I get from Cramerites telling me that the game is NOT rigged and Cramer is not a rigger - WAKE UP! Cramer says "It’s legal, it’s a very quick way to make money and it’s very satisfying," "you’ve got to control the market," "you can’t foment…. but you do it anyway because the SEC doesn’t understand it" and "this is actually blatantly illegal… but I think it’s important to foment" and "it might cost me $15 to $20 Million to knock RIMM down but it would be fabulous because it would also beleaguer all the moron longs who were also keying on Research in Motion…" Wake up, Wake Up, WAKE UP - Before sending me more hate mail, at least take 10 minutes to listen to the man you are defending!
You know, as Hillary once reminded us, it takes a village full of idiots to truly manipulate the market and Cramer has certainly found a home over at CNBC where, as John Stewart famously commented: "If I had listened to CNBC’s advice, I’d have a million dollars right now — providing I had started with $100 Million!" I only just realized here that my Friday morning post, in which I summarized Thursday afternoon’s nonsense on CNBC, that I should have started with the 2:30 idiocy by Jim Cramer and not the 3pm idiocy by Maria so let’s append the above commentary to this Friday post when putting it into a book version…
In additions to my rant against the evil that is CNBC, I did suggest it would be better to protect long positions with a simple (well, for us) September SDS spread that pays 7:1 if the market goes lower, rather than panicking out of existing positions. Very consistently, we were buying while the Dukes were selling and our hedges were driving Cramer’s fund boyz crazy as they just couldn’t figure out how to rip us off. We took full advantage of the shenanigans (as detailed in part one of this post) in our day trades and closed out a very nice week much more bullish than we started it.
We still have our October hedges but we’re off the sidelines now and ready to get a little more aggressive if we hold our bottoms. This week is going to be fun with plenty of data starting with Existing Home Sales on Monday, Consumer Confidence (misnomer?) and Housing Prices on Tuesday, Durable Goods, New Home Sales and Oil Inventories on Wednesday. So, as long as the housing sector is going great, the first three days of the week should be no problem!
Thursday is the Revised GDP and the usual 450,000 Job Losses while Friday closes us out with Personal Income and Spending, PCE Prices, the Chicago PMI and Conumer Sentiment. So we’ll get a really good feel on the "mood" of the country next week. Still, when I need to check my market mood ring - I still turn to CNBC. It’s just as accurate and $1.98 cheaper than the one I got for my daughter at the 7-11…