Another ho-hum Wednesday.
Just like last week, same as it ever was… Nothing much happened, we could have gone shopping (some of us did!).
Our levels did nothing so we’re not going to discuss them, there was a bit of excitement in the morning but the VIX was quickly sedated and slipped back down to 10.3 for the day.
Oil jumped a dollar on a 6M barrel draw but then Zman and I alerted the markets that the number was, in fact, a major disappointment as we are now in day 7 of the Houston Ship Channel shutting out 80 ships and tankers which have failed to deliver over 16M barrels of oil since last Wednesday.
The new contract finished at $63.72, down .75 from Friday’s close. Let’s look for $60.80 as our downside target with $62.40 as our nearest waypoint resistance. On the upside, breaking above $64 would be bad and $65.60 would signal a new uptrend. No current oil contract has seen $64 since October 1st.
So, although CNBC was "shocked" by the draw in oil, we calmly continued to buy puts today while all the oil roaches bounced around in their little traps. As millions of barrels of oil kept piling up in storage:
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There are 303M barrels on order for February (vs. 77M needed in January).
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OPEC has been sending (they claim) 1M less barrels per day for a month now.
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16M barrels are backed up in the Gulf
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Demand is falling due to the weather
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Millions of SUVs have come off the road
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Airline consolidation means less flight using less fuel
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and the less economical planes get scrapped first!
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Our 2 MILLION BARREL A WEEK war may actually end one day
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The Democrats are coming!
The reason the global economy runs on oil is because it is cheap! For over 100 years we used oil because, if you make a hole in the ground where there is oil, it comes "gushing" out and all you had to do was scoop it up and pour it into something that could burn it for energy.
There are many, many, many other ways to heat things, and cool things, and run things without oil and they have now pushed it way too far and the backlash of demand destruction is upon us.
The dollar found a little bit of support at 83.5 and may consolidate there for a crack at the falling 50 dma at around 84 while gold languished at $624.
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It was a light trading day with little activity worth mentioning.
We grabbed the BP $65 puts for .25 and they finished the day at .40 (up 60%).
COP $75 puts were taken again for .95.
It was another day of a dead DIA trade, out with just a dime profit on the Jan $124 puts.
DELL May $27.50s came in at $1.55 but dropped to $1.50.
FDX $110 puts (sorry about the confusion) were called off (well, I was trading the $110s) at $1.95 (up 39%) while the $115 puts we sold for $3.50 were bought back for $1.10, leaving us with a basis of $4.60 on the July $120s which finished at $5.50 (up 20%).
Like I said, these are not sexy plays but they are fairly safe!
HD May $40s stopped out at $2.45 (up 26%).
GLW May $20s ran up to $1.85 (up 16%).
I picked up GOOG Mar $500s for $16, looking to sell the Jan $500s for $5 or more. We are also watching the Jan $420 puts for $1.70 as a possible momentum play if it turns down on us but I am just playing with these, trying to figure out the best set-ups!
NKE just kept going up all day so we took the Feb $100s for $2.90 and sold the Jan $100s for $3 negating my need to cover! My basis of ownership is now -.10 so I really don’t care what happens now… At the moment the Jan $100s are $3 and the Feb $100s are $4 – nice work if you can get it!
This one is sexy and safe!
TXN Apr $27.50s finished the day at $3.10 (up .10).
We picked up the UPS Jan $75s as they seemed cheap at $1.75 but we overpaid by a quarter!
We took the VLO Jan $55 CALLS as a cover for $1.50 and again for $1.10 but they finished the day at $1.05, down a quarter from our $1.30 average entry. We’re supposed to be happy to lose money on our covers as it means our main plays are doing well but losing always sucks!
It was a blah day and we didn’t close out as much as we meant ot but that’s kind of what happened last Wednesday too.
Tomorrow is a very data-heavy schedule:
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8:30a.m. Initial Jobless Claims, 3Q Final GDP (est +2.2%), 3Q Corp. profits (duh, huge)
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10:00a.m. Nov Chicago Fed (was down in Oct), Conference Board Leading Indicators, DJ Business Barometer for Dec 9
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12:00p.m. Dec Philadelphia Fed
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4:30p.m. Money Supply (so they say!)
This is the 3rd different way they are telling us the GDP and the first two times we’ve had rallies so let’s hope 3rd times a charm!
