Wheee! That was fun…. Can we do it again?
Unfortunately yes. The market is either consolidating for a breakout or getting toppy, I’ll let you know which as soon as we figure it out but, as I said this morning – I don’t know and, apparently neither do investors who rushed in and out of stocks today like the audience in a Bugs Bunny joke.
Much like Bugs Bunny pulling the lever that said "Intermission" and causing everyone to run out and crush Elmer Fudd, we played today’s action pretty perfectly as we took our vacation on Friday long in the market and short on oil and today (until 1pm anyway) those were both right on.
The markets were indeed off to a fine start this morning and punched through record highs but pulled away from a fairly bearish Fed report that indicated the Governors aren’t as wild about the economy as investors are but I think people are taking the minutes way out of context and the sell-off was unwarranted, even though I expected it to happen.
We were very comfortable with our choices today as the market failed us at pretty much all of our targets so we got in and out of positions with pretty good timing:
- Dow 12,550 fell at 1:20, giving us a great exit signal.
- Transports gapped up today and stayed well above the 50 dma – our best sign of the day!
- S&P did not hold 1,425, confirming the Dow drop at 1:20
- NYSE did indeed lead us, falling below our 9,200 target at 11. How did they know the Fed minutes would be scary?
- The Nasdaq was braver but also led the others down, turning under our 2,450 mark at 12:50 but giving us some small hope by closing slightly green.
- The SOX gave a great start but finished soundly negative.
- The Russell barely held the 820 mark after being soundly rejected from 830.
Don’t blame oil for this one, they did their best by dropping and dropping and then dropping some more finishing the day way down at $58.32 below my $58.71 wish-list target! Next stop may be $57.50 as the roaches scramble to leave the trap.
This is exactly the Roach Motel Theory in action as, after a week of weak volume, XOM and the others simply collapsed as quantity sellers tried to find other suckers buyers to join in the fun! 30M traded shares cost our pals at XOM $14Bn in market cap in just one day – oops!
As is often the case, the front month contracts you can see got better support than the contracts you can’t (if you can coll a $2.53 drop support). February has it’s own Roach City being built as just 41K contracts were traded with less than 8K contracts being shaved off what is now 291M barrels en route to Cushing in just 11 more trading days. Keep in mind that last month the contracts closed out with just 90M barrels slated for January delivery so, even ignoring the fact that February is a shorter month, there’s still 200M contracts that need to get sold to someone – any takers?
The March contract got few takers as they are already stacked up with 148M barrels and that cost the sellers $2.72 a barrel, dropping it all the way to $59,41 while the April finished at $60.34 and the Mays dropped a whole $3.03 to finish at $61.05. Our reference contract, the Dec 2012s, lost $2.10 to finish down at $62.41 – even at that "discount" there were only 4 contracts snapped up by long-range bargain hunters.
Gold ran up to $642 in early trading but then got yanked back into negative territory and finished the day at $629, posting an $8 loss for the day. We were spot on calling the top in gold when I pointed out in comments at 10:58: "Notice the miners are not doing well with gold at $642! That means we are very likely to get a dollar bounce here which will shove oil right off a cliff! I’m grabbing some XOM Jan $72.50 puts as a pre-roll for .50, ready to take some of my other Jan puts off the table on a bounce."
That call was a very nice moneymaker for all of us!
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Don’t be greedy was the rule of the day and hitting all of our targets virtually on the button didn’t hurt either:
First thing in the morning (9:35) I said: "I think there will be some profit taking on Apple (I hope so as I sold calls against my Febs!)." That was the understatement of the day as poor AAPL went from up $1.50 at $86 to down $3 at $82 before settling at $84, despite another round of rumors trying to take it down.
BTU was targeted to head lower early in the day, I’m looking for $35 if nat gas breaks down any further with a possibility of finishing the month at $30 as coal is piling up as fast as gas!
COP Jan $70 puts were taken off the table for $1.85 (up 147%).
We got half out of DD $50s right at the top (.60) and the rest at .50 for a .55 average (up 57%).
I was thrilled to get anything back on the DIA $124 puts so I got out for $1 (up 43%). We left the Jun $124 puts open as virtual portfolio protection.
DOW Feb $40s made it back to $1.50 (up 25%) which was enough to make our March $45s free so we took it and ran!
We grabbed EOG Feb $55 puts for $1 but natural gas held above $6 and we finished the day at .90.
GOOG looked toppy at 11:45 and we grabbed the Mar $470 puts for $22 and sold the Feb $470 puts right at the bottom for $24.60 (3:02), leaving us with $2.60 in our pocket and a 1 month spread!
Lars gave us an idea and picked up a quarter on the LOW $32.50 puts in a very tricky play that netted us a free ride on the $31.25 puts, now .30.
We doubled down on LVS Mar $85 puts at $2.90, dropping our basis to $3.48 (down .08).
MSFT July $30s were let go at $2 (up 90%) as I didn’t want to lose a double and they are easy to rebuy. I had seller’s remorse less than an hour later and went back in with a few at $1.80!
We took out our NKE $100 caller for $1 ($2 in our favor) and added more Feb $100s for $2.30, giving us a new basis of $1.20.
PBR $100 puts seemed too cheap when we grabbed them at $1.30 and I guess they were $2.50 (up 92%),
We rolled out of the PD $120 puts we sold for $4.40 (down $1.15) and then sold the $115 puts into the for $2.50, hoping to keep this one going.
We picked up more PTR Feb $130 puts at $1.90, they finished the day at $2.50 (up 32%).
At 12:29 I said: "Danger – SOX in a nasty rejection off 477 and having no respect for the center of their Bollinger band (10 min) – below 473 is a good time to buy QQQQ $43 puts for .30" That worked out great and we stopped out for .60 (up 100%).
RIMM Mar $130 puts stopped us out at $8.60 (up 213%) on a spike up to $132 but I wished I had them back just 2 hours later!
We took the money and ran on the SUN Jan $65 puts for $4.40 (up 110%). They went down more but we didn’t want to risk it since we still have the $62.50 puts, now 3.20 (up 73%).
Our TSO short position made me nervous so we sold the Feb $65s against them for $2.40 to see what happens.
Chirs’ suggestion VTS was holding up so well we took the Feb $80 puts for $2.10 as it seems a lagging mover in the energy sector.
X Feb $75s stopped us out at $3 (up 100%).
XLE Jan $61 puts came off the table at $420 (up 155%) and we let the $58 puts ride at $2.15 (up 271%).
The XOM $72.50 puts we discussed above finished at .80 (up 60%).
Boy I can’t wait to see what happens tomorrow!
