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My Mid November Update

Reasonably on cue.

Significant focus on "debt" problems.  First Europe, then USA.  No mention of China or other emerging market concerns.  Very small emphasis on improving USA economic conditions.

Q3 turned out fine on USA SnP500 earnings.  Bloomberg says 95% reported with 75% improving with Q3-2011 at $25 versus Q3-2010 of $22.  YTD 2011, SnP500 is

Q1 - 22.5
Q2-  25
Q3-  25
ttl     72.5 with Q4 est of 23 equals 95.5 split the 12.5 PE vs 14.5 and you get 13.5 times 95.5 equals 1290.

Very close to my Sep and Oct 2011 forecast of 30 Dec 2011 on the S&P 500 of 1295 but way lower than my Jan 2011 forecast of 1390.  I see the Dow 30 closing year end at 12, 250, not much above it's recent Oct 28 high.  However, the SnP 500 could see north of 1300.  For example, a 4.5% increase over 1/1/11 would yield 1313 and if the Dow 30 managed a 20-25% premium to that, or around 5.5%, that would be 12,215 or so.  With IBM at 190+, CAT back over 100, TRV at 60, this is doable on the Dow.

So I still think around that 1300 mark is the SnP number and around 12,300 is the Dow number.  This equates to a SPY 130 and a DIA 123.

Check out the options.  SPY Dec 30 127 had 5600 calls on Friday, 18 Nov at $2 which was 60% of the open interest!!  Tell me if the Trading Elite does not have this wired.  You bet we are going 131-132.  And I will bet the Elite sold the Dec 30 120 and 125 puts, which respectively went for $4+ and nearly $7!!!!

Talk about using the FEAR FACTOR!!!! for improved volatility premiums. Man oh man.

I also was committed to the belief that the Power Elite and Trading Elite would engineer a mid November letdown to some of October's inflated runup.  This has happened well over the last week with 18 Nov closing at 1215.  I also was committed to the belief that 1200 remains a very tough floor to pass through and therefore continued to buy the "dips" of this past week.

So guess what?  All the BS talk of "double dip" recession was just that.  BS.

And I bet that Q4-2011, while coming in a little lower, say 22-23 versus bottom up estimates of 25, will be helped by goosing first the USD Index up to mid 78's here in mid Nov and then pulling it down in early Dec.

Finally figured out the factors on the oil play and that should dampen the mickey mouse 'rally' but not trounce my long positions.

Thanksgiving week will adhere to its long proven form of weakness and then the "GO" button gets jammed the week after, more or less, but certainly with a strong runup to start by the week of 4 Dec.  I think the best we get to this week coming is 1188-90 intraday but no close much beneath 1200.

European problems will 'fade' from view during the holiday season and thus allow this runup to occur relatively unabated.  Remember, fund managers get paid on showing annual results, not daily, not weekly, not monthly and for most, not quarterly.  No, annual.  SnP 500 Dec 31, 2010 was 1257 and the Dow 30 at 11,577.

A move to 1295-1310 is a gain and same with 12,250-350.

On the Dow 30, not going to see a lot of weakness.  With Buffet's backing on IBM and CAT's strong Q3, maybe it dips to 11,550-600 but that would be it.

So close the SPY (121 ave- small gain) and DIA (113.5 ave- $3 loss) shorts, and whichever energy shorts get in the money.  Patience.  I held the CVX short and impatiently closed at 102 as opposed to waiting for 99.  Patience.

I failed to average the DIA short on 10/28, otherwise I would be ok.

For 2012, I need to change my opinion and forecast.

Power Elite has achieved two goals.  One, to derail Perry because an Obama/ Perry contest would be tough, and two, put Romney as the candidate, virtually insuring Obama's re-election.

However, to GUARANTEE that outcome, the Power Elite MUST improve the 'appearance' of the economy in the months leading up to the Nov 2012 election.

They succeeded in eliminating Perry by exploiting his weakness (debates) which in turn has gutted his fundraising.  Why do you think that Bloomberg sponsored the first debate followed by CNBC the second?  To help the American people???  Yeah, right and oceanfront property in Arizona.

Second, by using Cain to clutter the scene knowing full well the allegations of womanizing were waiting to derail him, the Power Elite has now very adroitly put Romney in the "solid" position.

The American people are by and large clueless as to how they are herded by the Power Elite.

So, the Power Elite no longer must roll out monetary stimulus in the Jan 24/25 meeting to derail Perry or impact the Republican primary process unfavorably.  No.  The Republican side is now set and will pose no problem whatsoever on that.  Super Tuesday is Mar 6 and that insures Romney.

Ok.  The next dates are March 13, April 24-25 and June 19-20.

The Power Elite must have I am convinced an apparently sound reason to unleash more monetary stimulus.  This stimulus also needs some time to work through.  For example, need to lower Job Loss Claims to around 325k and U-6 Unemployment to 8.3-4% by June/ July.

What would be the reason?  Aha!  Problems in Europe AND China.  Check.  These could be best deployed in Jan/ Feb and the resulting turmoil then 'solved' by the Fed announcing their purchase of European bonds in conjunction with China.  This couple with a little monetary stimulus would send the markets up to 1450 in the June/July, a little see-saw, but hold thru the election.

I lean toward the March meeting for this because I feel that waiting until almost May for the April meeting would be insufficient time to reflect improvements in sentiment indexes etc. for June/ July.  However, need to pay attention.

So I need to buy back all my Jan/ Feb/ Mar 12 puts that are not ITM in the Dec 11 runup.  Forget taking the risk to collect all of the premium.

Remember Chase.  

1. Excess
2. Poor timing
3. Greed
4. Inability to take loss
5. PATIENCE

You would violate excess leaving hundreds of sold puts in front of a locomotive called Jan/Feb selloff.

Timing is buying them back with a runup.

Greed is ignoring the dollars left uncollected by buying them back as opposed to allowing them to expire worthless.

Inability to take loss kind of in the same light.

Patience.  I used time decay to my benefit by not buying back on Oct 27/28 and gambled for the Dec runup.


Ok, time to go.