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Philip Davis
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  • Phil's Morning Alert to Members with 4 Upside Plays and Prediction for the Day 0 comments
    Aug 18, 2010 1:11 PM | about stocks: SSO, QLD, DDM, XOM

    Phil - August 18th, 2010 at 9:53 am |

    Good morning!

    It’s takedown day, I guess. 

    Morgan Keegan downgraded NFLX with a target of $100.

    Oil below $75, gold plunging back to $1,220 (woo hoo!), copper $3.31 and falling (way over $3.20 so no danger just noise) and the dollar holding pretty steady at about 82.50, which means we need a catalyst to punch through that 50 dma at 83.5 and that will have to wait until next week, when we get revised GDP (Fri) and Durable Goods (Weds). 

    There’s no volume to this selling, just 13M on the Dow in first 10 mins so we’ll see if we hold up at yesterday’s open, where we can form another base but last option expiration day (July 16th) was so nasty (10,350 to 10,100), that it’s easy to see why people are spooked as Friday approaches. 

    Note that our bullish plays into expiration day have not worked in the past 2 months.  Since they pay 10 to 1, they only have to work once in a while but these are "craps rolls" where we don’t want to bet more than we would not mind losing on a table in Vegas:

    • SSO Aug $36/37 bull call spread at .30, selling $35 put for .26 is net .04 on $1 spread with SSO currently at $35.78.
    • QLD Aug $55/56 bull call spread at .70, selling $55 puts for .45 is net .25 on $1 spread with QLD at $56.10 so they have to take your $1 away from you!
    • DDM Aug $43/44 bull call spread at .40, selling $43 puts for .50 is .10 credit on $1 spread with DDM at $43.25.

    We should get our bottoms with the crude inventories at 10:30 so no hurry on bullish plays, most likley.  Selling XOM $60 puts for $1 or more (now .47) on a dip today is a nice play into expirations as you can always roll them along.

     The global economy won’t suffer if banks are forced to adopt tighter standards on capital and liquidity, the Basel Committee says, and "substantial" benefits would result from a stronger banking system and greater confidence. Basel says the new rules would trim 0.38% from GDP in the U.S., euro area and Japan after four-and-a-half years.

    MBA Mortgage Applications: +13.0% vs. +0.6% last week. Thirty-year fixed mortgage rate increased to 4.60% from 4.57%.

    The CFTC formally withdraws its proposed rule on energy position limits as it prepares to issue broader curbs for all speculative commodities trading. The broader limit is mandated by the financial reform law.

    U.S. bankruptcy filings rose 11% Y/Y in Q2, topping 400,000 for the first time since 2005. For the year ended June 30, there were 1.57M bankruptcies, up 20% from a year earlier. Consumer bankruptcies rose 21% to 1.51M while corporate bankruptcies rose 9% to 59,608.

    9:30 AM At the open: Dow -0.15% to 10390. S&P -0.11% to 1091. Nasdaq -0.22% to 2205.
    Treasurys: 30-year +0.73%. 10-yr +0.25%. 5-yr +0.1%.
    Commodities: Crude -1.42% to $75.08. Gold -0.51% to $1222.00.
    Currencies: Euro +0.05% vs. dollar. Yen +0.33%. Pound +0.41%.    



    Disclosure: Positions as indicated but subject to change
    Stocks: SSO, QLD, DDM, XOM
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