Monday Mop-Up

What a blah day!

Not much happened other than crazy swings back and forth – same old, same old…

We got our first Federal commentary from SF Pres. Janet Yellen, who noted that downside risks to the economy had risen "appreciably" because of recent credit- and housing-market turbulence. Still, she said, the extent of disruptions from such market turmoil remain uncertain and "can turn out to be surprisingly small."

Fed governor Frederic Mishkin reiterated those positive signs of business spending last night to a New York audience. But he also warned that "all this could change noticeably if many firms were to face significantly tighter credit conditions or if business sentiment were to soften appreciably."  Federal Reserve Bank of Atlanta President Dennis Lockhart said the labor-market data should be taken "very seriously," but added that the news also "should be evaluated with recently positive reports in retail sales."

The head of the Federal Reserve Bank of Dallas, Richard Fisher, referred to the drop in payrolls as an example of an "occasional discordant note" and said he still was evaluating other reports. "Our economy appears to be weathering the storm thus far," Mr. Fisher said. "The future path of that storm and the appropriate policy course, however, are still to be determined."  There wasn't much to add and we dumped out of our oil puts ahead of inventories and covered many position in the early chop.

Well that certainly clears things up!

Also unclear today was market direction, but we did a pretty good job steering through the turns during chat.  Aside from the usual nonsense we talk about, including plays, I try to call the market turns as best I can:

• Posted September 10, 2007 at 9:52 am | Permalink – Dow at 13,158

  •  Ideally, I wouldn’t mind seeing a run-up into oil inventories so we can recycle our bets after lightening up last week but they’re having trouble holding it together and the whole market looks shaky.

•  Posted September 10, 2007 at 9:59 am | Permalink – Dow at 13,154

  • Consumer Credit  – no such thing as bullish on a number that’s 45 days old already – it’s a different world today and news can only be worse than expected.

  • Finger on trigger of DIA puts and out of calls if we turn down here (and we probably will).

• Posted September 10, 2007 at 10:11 am | Permalink – Dow at 13,142

  • I do recommend weighting to the downside on DIA or whatever plays right now. If the market goes up (other than a fed thing) it will be slow but down can come quickly.

•  Posted September 10, 2007 at 10:16 am | Permalink – Dow at 13,130

  • Consumer credit was way down at $8Bn vs. $9.5Bn expected – that’s 20% and indicates the average analyst has NO CLUE what is going on in the economy!

  • Very bad not likely to bounce off this before 13,050.

• Posted September 10, 2007 at 10:30 am | Permalink  – Dow at 13,135

  • Market up VIX up is sign of the apocalypse but VIX is an S&P measure, not a Dow measure and the S&P is down so the angry VIX is to be expected.
  • Duck AND cover folks!!!

•  Posted September 10, 2007 at 10:44 am | Permalink – Dow at 13,091

  • Mattresses, if you are committed to a position you should be taking up the $130 puts on the DIA right now at $1.70 and putting a stop on your $131 puts at $2.10 to net you the $130 puts at $1.60 which you would stop out at $1.40. Simultaneously, you should, if we drop 50, start rolling down your calls to the $131s when they hit $2. This is for the mo players – if all you are looking to do is protect your virtual portfolio, you should just tighten up the Octobers every 100 points.

• Posted September 10, 2007 at 11:00 am | Permalink – Dow at 13,092

  • Janet Yellin speaks soon – watch out for upside surprise now – DIA $131s are the cover play to the upside. Normal tight stops rules apply for Sept calls you sold that you are ahead on or any Sept/Oct postion that can get burned on an upside reverse.

• Posted September 10, 2007 at 11:26 am | Permalink – Dow at 13,042 (the bottom)

  • How my mind works – since I am going to be out tomorrow and I know that I will NEED to cover with additional DIA calls by EOD, I do start to initiate with the Oct $132s here at $3.40 as I don’t anticipate a much better price than $3.50 unless we make another leg down in which case I will spend another .45 to roll it. Accumulating, of course between now and 4 pm, if the market turns I switch to the Oct $133s.

• Posted September 10, 2007 at 12:26 pm | Permalink – Dow at 13,083

  • XOM/All oil – I’m half out on this nice dip ahead of the usual run-up into inventory. If it keeps crashing, there’s a long way to go but I’ve seen too many good gains wiped out to just ‘go for it” with oil puts.

• Posted September 10, 2007 at 1:02 pm | Permalink – Dow at 13,067

   

• Oil pulling up this afternoon, back at $76. NYMEX traders just want to be absolutely sure they bankrupt the country, not leaving anything to chance… Oil patch not buying it yet but if they cna get some upside mo than that break up may rally the markets (dumb as that is) so watch VLO to hit $68 and XLE to make it back to $70.

• We’re holding 13,050 and NYSE 9,400 and S*P 1,440(5 for that matter) and Nas 2,550. All numbers we would have been thrilled with the week of the 20th… Watch the SOX, still positive due to Apple buying every chip on the planet…

• Posted September 10, 2007 at 2:33 pm | Permalink – Dow at 13,129

  • Oil at $77.60, up .90 for the close, oil sector rallying the markets (I was out of oil puts on that prediction earlier).

     

• Posted September 10, 2007 at 2:57 pm | Permalink – Dow at 13,130

  • Woo hoo – let’s pretend it’s a rally at 13,130! Plus 16 after falling 250 points yesterday – BUYBUYBUY!!! {extreme sarcasm font!}

     

• Posted September 10, 2007 at 3:35 pm | Permalink – Dow at 13,187

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    Harsh rejection at 13,200 but if we hold 13,150 it’s a victory for the bulls. We can expect positive energy moves through Weds morning at least but, as I’m well covered with Sept calls I sold, my main concern is an upside move forcing me to buy them back so I’m going 50/50 on DIAs into my absent day tomorrow.

     

  We finished the day back at 13,127, up just 14 for the day after all that work!  As I mentioned, oil shot up to $76.60 for the day but only in the front-month (the one what you pay is based on!) while the Jan contracts fell .59, driving the difference between the two contracts to $3.  That means that a trader who doesn't find a buyer for his October barrels by March loses 5% of his purchase price in addition to storage and delivery costs as well as margin interest!

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  No wonder traders are begging OPEC not to release more oil, they really don't need the competition right now with a surplus of over 240M barrels ordered for NYMEX delivery in October and just 8 trading days until trading halts on that contract.  Every day traders must get rid of 30M barrels of oil just to get down to the 40M barrels that can actually be processed in Cushing and we will have fun monitoring their highly illegal activities.

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  Today, aside from a very well timed attack on a pipeline in Mexico, NYMEX traders managed to add $1.40 to the price of oil in the last 45 minutes of trading.  We knew something fishy was up when our man Phil Flynn comes on CNBC to pump crude at 1:50.

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  If you want to play at home, you can forward this series of articles to your Congressman, Senators or whoever needs to know what kind of shell games are being played in the energy markets in order to squeeze every last dollar out of the hands of the American people!  Not by OPEC, they only get about $55 per barrel, but you pay $3 per gallon at $42 per barrel ($126 a barrel) to the same bunch of crooks that are manipulating these prices!

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  Gold was again rejected at $715 but I think it's just resting after a 60-point, 10% run off the 200 dma from the 17th.  Oil is up 10% in the same period while the dollar is down 2.5%, holding steady just under 80, ready to bounce or die depending on the Fed's next move.

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  Once again our DIAs were good to us in both directions but so were our XOM puts.  Our AAPL puts turned up on us and we had to let them go at 33% but no regrets there as they did their job of protecting our longer positions during the last little downturn:

   

   

   

   

  Description	Basis	Open	Sale Price	Sold	Gain/Loss	%
  40 JAN 140.00 AAPL PUT (APVMH)	50,210.00	9/5	66,590.00	9/10	16,380.00	33%
  30 OCT 80.00 COP PUT (COPVP)	4,360.00	9/6	6,590.00	9/10	2,230.00	51%
  100 SEP 85.00 CVX PUT (CVXUQ)	9,630.00	8/30	11,490.00	9/10	1,860.00	19%
  100 SEP 132.00 DIA PUT (DAWUB)	22,010.00	9/7	28,990.00	9/10	6,980.00	32%
  200 OCT 132.00 DIA PUT (DAWVB)	72,820.00	8/24	85,990.00	9/10	13,170.00	18%
  20 SEP 146.00 FXI CALL (FFPIP)	11,610.00	9/7	11,990.00	9/10	380	3%
  30 SEP 86.63 RIMM CALL (RFYIW)	3,010.00	9/4	9,290.00	9/10	6,280.00	209%
  20 SEP 83.38 RIMM CALL (RFYIV)	4,010.00	9/5	9,990.00	9/10	5,980.00	149%
  30 SEP 90.00 SU PUT (SUUR)	6,010.00	9/10	7,940.00	9/10	1,930.00	32%
  40 OCT 42.50 T CALL (TJV)	730	7/2	1,190.00	9/10	460	63%
  20 SEP 71.00 XLE PUT (XBTUS)	2,650.00	9/4	4,890.00	9/10	2,240.00	85%
  150 OCT 85.00 XOM PUT (XOMVQ)	34,660.00	8/31	50,990.00	9/10	16,330.00	47%