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Down 60 Points from Phil's Bottom Call - His Take

|Includes:C, CROX, SPDR Dow Jones Industrial Average ETF (DIA), EUO, GLD, PFE, SSG, SUNEQ, USO, VLO

Good chance to see how Phil handles big move against us in chat.  We're even throwing in a few of Phil's trade ideas - you can see how they do next week (this is not even 1/4th of the ones from today!). 

Phil - June 4th, 2010 at 11:26 am |   


Ugly action!  Lows of Wed were:  Dow 10,020, S&P 1,070, Nas 2,220, NYSE 6,666, RUT 641 so we have a long way to go (except the Dow) before we re-bottom if that’s where we’re going.  If the Dow fails 10,020 and then 10,000 - we are probably going to cross lower all around and SSG is probably best protection as SOX are way high (Transports already blew the support line).

SSG $16 puts can be sold for .85 (SSG currently $16.23).  I also like the $15/16 bull call spread at .50 and you can sell $15 puts for .40 against that.

PhilJune 4th, 2010 at 11:51 am |  

Matt’s having fun!  I will point out here that Matt did totally call the great crash of ‘08 and he kept calling it while others were trying to get bullish at 11,000 and 10,000 and 9,000 and 8,000 so let’s not forget how relentless these sell-offs can be.  CASH IS STILL KING.

USO/Stock - Ah, see how $72.50 didn’t hold at all that time.  If someone took the futures at the end of that drop ($72) I would say get the hell out here at $72.15 as IT BLEW OUR BUYING PREMISE.  If $72.50 doesn’t hang tough, we can’t count on it not to turn into upside resistance now so we don’t want to take a risk again until it re-establishes itself.   Meanwhile, as to USO - 5% down in oil is now $65 and 5% down in USO is $31.50 so I like selling the July $31 puts for $1 on the assumption $65 holds and you can pare that with the $31/33 bull call spread at $1.20 if you want to get more aggressive, which is reasonable after this weeks bullish inventroy plus summer driving data on July 4th and from last weekend.

Phil - June 4th, 2010 at 12:06 pm |



Damn, here comes the lunch-time panic - we’ll see if our bottoms hold but 10K dropped off the Dow already.

PhilJune 4th, 2010 at 1:58 pm |   



(Upside Weekend) Catalyst/Dman - At the moment we have a G20 meeting in progress.  They usually don’t accomplish anything but a strong statement of solidarity or another round of global stimulus could give us a nice run up.  

See, now $72.50 is acting as topside resistance on oil.  What we look for next is consolidation between $72 and $72.50 and we see which way it breaks and then wait for a retest to prove we’ve got a change so we’re a long way from getting confident on new oil trades and the NYMEX closes at 2:35 so that’s it for those.  The hardest thing about futures trading is the 90% of the time you SHOULN’T be trading them.

No buyers but no sellers either.  Dow volume 104M at 1:15.  Waiting for next shoe to drop

Copper is a nice futures gamble again at $2.81 but dangerous into the weekend.  It was $3.18 last Friday (up 13%).

DIA/KyW - I still like the $103 calls (now .85, delta .29) but I’d 1/2 cover with $102 calls (now $1.26, delta .36) over the weekend.  Of couse selling puts on TBT but only if you REALLY intend to stick with it long term (on the crazy theory that one day, in the next decade, rates will go up)

Support/Shadow - I see 1,075 on SPX so not worried at all (well, maybe a little).

$102 covers/GS - Yes, see above.  1/2 sale is relative .58 to .36 delta, just enough for the sting to be taken out on a big gap down, which we could use the $102 winnings to roll further down with.  We have 2 weeks to recover and we’d roll to July by Weds if no luck. 

Welcome Amorgan!  Yes, I like shorting EUO. We had great success doing it at $25 before and $26 is another good spot but, at this point, I think I’d either wait for the weekend or just pick up the July $25 puts for .70 as a first attempt at shorting. 

June 4th, 2010 at 2:53 pm | (Unlocked) Permalink  edit  lock  
Mattress/Yodi - I think ride it out with the full cover over the weekend.  We can always roll to July puts and add more Sept puts if we don’t recover but RUT and Transports are down more than 4% so, even if we hit 5% on Monday, we would still expect a bounce back to where we are now so it’s worth the risk to be brave but, again, not with anything you can’t easily afford to DD and roll with.  



15 Mins to stick and the Dow volume is 135M - right on track.  Think about how few shares it took to knock almost $2Tn of market cap off the markets..

Euro not holding $1,20 - that’s what’s killing the market - a huge dollar rally.  Killing commodities too.  Pound down to $1.44 and Yen back up to 91.55 so another great day for the World’s easiest currency trade….

So keep in mind that your stocks are going down because they are priced in dollars and the dollar is up 1.5% today - we are very close to where we were in the Nov ‘08 and March ‘09 crashes on the dollar (89ish) yet, as Tusca points out, our markets are 70% higher than they were at the time.  If the dollar devalues now - our markets will rocket and that’s all the G20 has to accomplish and it’s a win-win for everyone - save the Euro, boost US equities….

Phil - June 4th, 2010 at 3:22 pm |  

Terrible/RMM - Well we had terrible news didn’t we?  The question is whether it was terrible enough to blow the bottom of our trading range and I don’t think so.  We are creating no jobs and more countries are screwed up - are you shocked?  Are you 5% shocked?  If not, the move is extreme…  Keep in mind I would not be shocked if France collapses and takes us down 20% or CRE collapes and takes us down 20% but that’s not what this is, this is just facts coming out that we, and I’m sure other market movers, knew about months ago and it doesn’t change the value of VLO or WFR, or PFE or even C for that matter. 

Euro/Tusca - To a point they want a lower Euro, as you can see from the long-term dollar chart as well as this chart on the Euro to oil or the Euro to gold - this is probably that point. 

Speaking of gold, that’s a good point.  Gold is now up 100% to the Euro since this run started in 2007.  There was major profit taking as they went up 50%, about a 50% retrace.  Now we’re up 50% from the retrace and up 100% from where we started so it’s very likely gold pulls back to $850 - all other things being equal, which they rarely are but it does pay to consider the possiblility.  Up 100% against the dollar would be $1,300 and the retrace there would be at least $1,150, which is my dollar-based target so I’m feeling very good about that target. 

Crocs/Morx - I have a pair, my kids have serveral and the store in NYC is packed.  I don’t think the utility function is faddish.  Also, they are finally doing more interesting things with the colors. 

Next week - If WWIII doesn’t break out over the weekend I think Monday will be a good short-covering day that takes ups back to at least 10,100 and then we need to see what the conviction is.

Phil - June 4th, 2010 at 3:58 pm 

So it seems to me that they are trying to stick the markets and that makes me think that they will do what they have to in the futures and we may have a gap up Monday.  I still like the DIA $103s overnight, now down to .72 and you can 1/2 cover with the $102 puts (now $1) and your delta is .50 to .32 and the plan would be to buy out the callers on a big dip and hope for a recovery or, if we move up, hopefully have time to buy back the callers bit by bit on the way up so you keep outgaining them.  Note that if you had half covered earlier at $1.29 the drop in the $102 puts would have completely offset the drop from .85 on the $103s - that’s how you hedge out to neutral…



Optimism/Tusca - Partly that I think there’s no NEW bad news and partly because where they hell else will people put their money.  Long-term, we will inflate and you need to have some assets.  Keep in mind that we’re "bullish" but also scaling in with about 20% of the mainly cash portfolio and hedged with Disaster protection and buy/writes all the way to a 40% drop that covers us back to 666 on the S&P so it’s a funny kind of bullish - more like a "we don’t want to miss a huge, stupid BS rally" kind of bullish than a "USA, USA, USA" kind of rally.  Clear?

Disclosure: Positions as indicated but subject to change