Tuesday, March 31, 2009

One with a smear.

807 SPX coming into play here. For those who bought yesterday, selling here makes sense. If you want to short, the gap of 809-813 is some good resistance. Looks like someone wanted to goose this market a little bit. I cannot remember the last time I saw $MSFT up over $1 on a day. Makes sense, you can put some good size to work in a beaten down name with cash to burn.

Monday, March 30, 2009

Que pasa.

For those who followed my advice, congrats on a 6% pullback. Seeing 782 SPX as a fib, so shorts I would cover, those looking for a quick trade, get long with a tight stop. Any upside should be capped at 807 for now. Target on this downmove is 768-750. Financials telling the story right now, but lots of news out there that could whipsaw this market all over.

Watch the VIX as last weeks new high in the market did not get us to close under 40. We should see a confirmation of the rally with a lower low in this index.

How the market handles this dip is crucial. We should make some headway by the end of the week to turn the calendar and hopefully the charts up.

1000 SPX still in play.

Wednesday, March 25, 2009

Down to the Waterline

At home dealing with plumbing issues today. See the market broke over Friday's high, as we held Friday's breakout on yesterday's close. (823 to 803 SPX). Charts looking like they are bending backwards, tends to be a sign of the rally running out. Most technical targets out there looking for 835-840 gap fill, so the odds are is that is where some supply rests.

Money flowing out of large, into small. Seems we are ready for a dip in the averages. I would lock in any gains from 675 SPX here by buying calls and selling stock, or collaring up. You will get some ammo to load up for that 750 dip.

Monday, March 23, 2009

All I want to do, is have some fun.

We are back at 800 SPX via the next round of Government market intervention. Financials have stopped going down, hence they must go up. I still like buying gamma here as we should not take each day's move as the prevailing trend. We spent the last 8 months in a down trend, going up is still counter trend.

Stealing a Jeff Cooper line, the second mouse gets the cheese, we should see a breakout above last weeks high. Whether that holds, I am not sure, but I am still waiting for one more push down to get the weak hands out of play.

Looking at the moving averages, we should see a negative slope on the 50 and 200 day as January's high comes 50 days past, and last years high comes 200 days past. This will make the charts start to look really good soon if we rally from these levels. My 1000 SPX target still in play.

Wednesday, March 18, 2009

Hot Child in the Citi

Having a great discussion with Adam W. about what's going on in the C options today. http://adamsoptions.blogspot.com/2009/03/citi-not-sleeping.html

It seems a few big customers are paying $1.05 for the June $5 conversion. In laymens terms, that allows you to put on a synthetic short in C, but it will cost you 33% to create a borrow for the shares. Why? I believe the reason is to play the preferred/common arbitrage that was created when Citigroup agreed to convert those lousy TARP preferreds for lousy common stock. What they did was sell the preferred at $25 face value, paying between 6.5% and 8.25% dividends. Now with the common so cheap, they offered to take the preferrerd off your hand for a premium to where it has been trading in exchange for the common shares. Without getting in too deep, you can buy the preferred for lets say $8.00, it is convertible into 7.3 shares of the common, which was trading about $1.25, so you are creating about $1.125 of value. As the stock has run to $3, the spread between the offer and where the preferred is trading has gone kablooey. Today, you could have effectively created about $8.40 of value!!!. Remember, you can only lock this in with a short of C, so that is why the options reversal traded so wide.

By the way, the WSJ picked this trading activity up so you can read about it tomorrow.

Pop Goes the Weasel

Call this the Bernake Short Busting rally. First the financials are being scooped, then everything else. As I write this we are sitting at 800 SPX with money flowing into retailers, home builders, you name it. Get out a shopping list, because the bull is back. I still like straddles here as a way to play the gamma and give you a real shot at buying the dip, whenever that may be.

Around Here

Financials with the big perk up this morning. AIG near a buck and a half from .40 earlier this month. Buying gamma in some of the big banks here an easy shoe in. Either we have busted out of a trading range in them, or else the shorts have covered and we head back down. Either way, the ATM struddle looks nice. With a bearish bias, I would maybe sell some out of the moneys also, but only for a trade.

The IBM/SUN deal rumor put a fire under the tech group, but the oils and consumer staples are dragging. Would not be surprised for that expiration week vol swing from these levels. We held 750 SPX, would like to see a recut of that level before I get super long again.

Monday, March 16, 2009

Bubble Busters.

As the Mad Man on TV says, I would schnitzel some here and take some off of the table. What that means, is to hedge some longs here as there is a strong possibility of a market correction from these levels. For those aggressive playas, maybe a short or two.

Financials acting like there is huge upside to come, but tech is holding the market in slow mode. We have expiration this week which may put a cap on the rally for a few days, but I am still looking for 1000 SPX before long.

My John Malone play still looking great. Hey, we almost are above a quarter a share.

Looking for some interesting bracket plays for the early games this week. Go Blue! Welcome back to the NCAA's. I hope they got some game left for Clemson this week.

Love on the rocks.

From yesterday's NY Times article on Madoff investors:

“These were people with a fair amount of money, and most of them sought no professional advice,” said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. “It’s like trying to do your own dentistry.” Mr. Hedges said, “It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances.”

A friend of mine was describing to me his reaction to the Cramer-Stewart confrontation. What he got from this was that there are 2 financial systems, one for the everday joe investor, and one for a privledged few, which cannabilized the everyday joe. Now myself being involved on Wall Street for nearly twenty years, I offered him some pretty hard evidence to the contrary of whatever ideas he thought were being given to him via the Stewart camp. But that did not matter, his mind was already made up.

The sum of all fears it seems is distrust. Distrust with a financial system that was preached for the past 50 years as a way for the salaried worker to see his money grow faster than inflation. It still is, in my opinion. Only with the guidance and dilligence of the few, not the many. If your only means of financial literacy comes from the idiot box, rather than the squauk box, thnn caveat emptor.

Thursday, March 12, 2009

Stop in the Name of Love...

750 SPX looks like some minor resistance on the way to 1000. Would not be surprised for some backing and filliing for the next day or two.

Friday, March 6, 2009

Big Bottoms

This is it. I am calling the bottom of the move here at 675 SPX. For anyone in cash, this is the time to buy. Any shorts, please cover. You will see a 50% move up on this trade.

March 6 2009 10:05 am CST

Wednesday, March 4, 2009

Hubba Bubba

After one bubble pops, probably another one is about to lose air. It looks like the 10 yr note is about to settle comfortably with a 3 handle yield. We havn't seen this one for a while, my guess is a quick move to 4 is a good trade.

Market holding well with GE being brought to the woodshed. A lot of bearish talk on the tube. Seeing one interview with SPX value derived in the 375-425 range and other looking for silver coins.

Next event risk is in the Autos.

Farewell to the AMEX, lots of memories.

Monday, March 2, 2009

Whop bop a loo bop...

Doing some serious charting this evening. Fibbonacci numbers from the 2006-2008 top put us at 675-695 SPX target. Based on all of the other doom and gloomsters out there, probably have found a level to rally from.

Saying that, where can we go? My theory is always to a level beyond the mass expectations. Just like we have sold off so far so fast, it will be the same on the upside. So buckle up and get ready to rumble.

Taking in to account the fiscal dollars flooding the system, and using 1931 as an example, 50% from these levels puts us at 1050. Just north of the 200 day as well as the high of 2008 Q3.

Crazy, yes, but that's what got us here in the first place!