And up we go again!
We went into the week looking for another 300 point move and, surprisingly, we went up exactly 300 – this time without giving it all back (yet). Buyers were certainly brave ahead of next Tuesday's Fed meeting but we firmed up the put side and left ourselves in a much more neutral stance than we had been in at the beginning of the week. Really folks, how many times do we have to watch this video before we understand market movements?
On Monday we were pleased to find additional evidence that the US markets continue, by virtue of their relatively poor performance, to be a less scary place to park capital than other shaky alternatives. Government shakeups in Japan and Russia and inflation worries in Europe seemed poised to squeeze some of that excess capital we've been hearing about over this way. Although it took a few days to take effect, I noted Monday morning that Japan's negative GDP revision was exceptionally well timed to save the dollar before it fell too far below 80.
Also on Monday the NYMEX pump crew decided to go for broke (making us broke and them rich of course) and started the process of bidding oil up to $80 a barrel based on "demand" while simultaneously canceling the 289M barrels THAT WERE SCHEDULED FOR DELIVERY ON MONDAY WHEN OIL WAS AT $75.75. Since Monday, oil went as high as $80.25 on "record demand" yet STRANGELY, that demand didn't extend to the traders ACTUALLY WANTING those 289M barrels as orders for October delivery were down to 197M barrels by Friday.
In what possible, legitimate way do prices go up while demand goes down? I'm not trying to beat this to death but I will continue to track this BS through it's Thursday conclusion as these thieves cancel another 150M of your October barrels next week so they can have the parrot-heads on CNBC tell you all about the oil shortages next month as well. Until you people really do open up those windows and shout "I'm mad as Hell, and I'm not going to take it anymore," expect them to stick it to you like this over and over and over again.
While I may have had to do a little adjusting on Monday it was nothing compared to Cramer's attempt to adjust his stance that evening when he claimed: "For months and months I have been saying that we are heading to a recession. For months I have been saying that hundreds of thousands, perhaps millions of people will lose their homes. For months I have said that unemployment is coming."
Tuesday morning I said: "While I am less gloom and doom than Cramer about the Fed doing the right thing and LEAVING RATES ALONE – If I make any move from the road today it would be to roll the profits out of my calls and raise my puts if the Dow retests 13,300 or higher and pulls below that line (13,250 for example). That would be my target for a healthy day, 13,250 to 13,300." Well, Tuesday was a healthy day with a close near the high of the day at 13,308.
Half our gains for the week came on Tuesday with a big boost from MCD (cheap food) and GM (cheap cars), neither of which seemed like signs of a healthy economy to me. Gold flew up, oil flew up but I called a top on oil and decided to turn a spotlight on the shenanigans over at the NYMEX while they took the anniversary of 9/11 as a good day to prep oil for the next day's celebration where the energy traders stood on the floor of the NYMEX shouting "Go, Go, Go" as they all jockeyed for the chance to put in the bid that would send Mahmoud Ahmadinejad $50 per barrel more than we sent him for 4M barrels a day prior to 9/11. I guess that's what Bush means when he says "victory at all costs."
On Wednesday I predicted China would be forced to raise their rates and it took all the way until Friday for me to be right about that but, despite a rising Yuan in our immediate future, I said: "Right now, the dollar is pricing in a 1/2-point Fed cut next week and we could have a snap recovery back to 81 – IF Uncle Ben does the right thing and leaves things alone." We'll find out if I get my second wish in just 2 days but I'm pretty sure we'll see a meaningless quarter-point cut that will make no one happy. My morning call for holding 13,250 to "regain a bullish chart" was right on the button and we closed at 13,291.
Wednesday night I was so disgusted by the action at the NYMEX that was all I could talk about. Still it was perfect for our week's plan to establish shorts into a Wednesday run-up and we have lots and lots of oil puts going into next week. Thursday traders decided to forget about the economy, jobs, energy costs, food costs, global warming, the health care crisis, the housing crisis and the social security crisis to focus on what's really important – the troop surge is working (according to Bush anyway). Somehow this was enough to give us another 130 points, which we surfed as best we could in comments, and even Bush's actual speech didn't change anyone's mind on Friday.
Thursday was a low-volume rally so we didn't take it too seriously and we went against the crowd, picking up a lot of puts. Now we need to wait to see if we're crazy or is everybody else… Friday I took a firm stand against a rate hike stating: "The LAST thing this country needs with food and energy prices spiraling out of control is a rate cut so people can remortgage their homes to buy more food and energy. When prices outpace the public’s ability to spend." Friday also gave us a run on the Northern Rock Bank in England yet somehow this was good news for the markets and we had to pull a very quick reverse off my bearish morning outlook.
I am nothing if not flexible and I had already warned on Wednesday we would need to practice James Bond Investing for the week and it took me all of 4 minutes to get worried and then 5 more minutes to call a bottom and dump the put positions we had accumulated the day before:
On the whole it was a rough week as we got a stronger run than we thought heading into the Fed. Nonetheless I took the painful steps of shifting the Short-Term Virtual Portfolio to a more neutral stance with 7 more puts and 3 more short calls leaving us with 81 open positions, up 27 after a very busy week of adding new plays. We added 10% to our overall returns, now 603% for the year and, even after making so many new plays, we are still 74% cash. Adding new positions brought our average gain dropped from 27% to 22% and dropped the average age from 60 to 35 days.
The Long-Term Virtual Portfolio added 7% in another week where very little was changed. The same 40 open positions finished up 212% for the year ahead of our usual burst of activity on expiration week. A big drop in the VIX crushed our callers but our leaps remain protected by length as we rolled out of virtually all of our '08s long ago. Last week I said we'd have to do some repositioning IF the market didn't gain any strength so, obviously, none was needed this week and our strategy is likely to shift towards protecting our gains in October but we've gained enough cushion to ride out the Fed with confidence still at 59% cash.
Our $10,000 Virtual Portfolio heads into its last week at $17,426, a little shy of my $20K goal but I'm not willing to force it as we have just under $15K in cash. Ideally my goal is to graduate $10KP players to the $25KP each quarter, which we open next week as we reset both the $10KP and the Free Picks Virtual Portfolio back to their original amounts. Just 7 open positions remain in the $10KP and any remaining open at the end of next week will be moved to the STP until closed so we can follow through with them.
The Free Picks Virtual Portfolio still has the same 5 open positions we were down to last week and they've gained another 4% for a total return of 583% going into the last week. We started this one on April 30th so it's not a quarterly but now it will become the new $25KP and no longer free. As we are already 97% cash there is little housekeeping to be done as we wind this one down but we will also transfer those plays into the STP.
Although the market had a good week, there simply weren't any openings in the Happy 100 Virtual Portfolio as we felt it wasn't prudent taking unbalanced shots ahead of the Fed. Our lone IBM position continued to do what we expected and fell to $115 but our $115 caller still has $1.60 in value and we are down $1,400 on the trade (-1.4%). At 95% cash patience is a virtue on this one…
The Stocks Virtual Portfolio was also untouched for the week and gained $2,,300, up 33% on the year. This virtual portfolio is 60% invested with 8 positions and we will, of course, be rolling callers where appropriate. Other than OXPS, all the calls we sold are pretty much right on the money a week before expiration!
The Complex Spreads Virtual Portfolio added another 10% for the week thanks to strong Apple performance leaving our 12 positions there up 289%. This is the virtual portfolio that will be reset as the $100KP next week so there will be lots of APPL and GOOG plays migrating to the STP! Currently we are at 61% cash with just 1/3 of the open positions unhedged.
It was a fairly calm week on the closing side, as we added more than we sold, finally putting a little cash to work although mainly in buying put positions to balance things out ahead of next week's excitement. Since we were fairly bullish going into the week, we didn't have a lot to get stopped out of. We closed 29 positions for an average gain of 42% and for the first time in a long time the bulk of our gains didn't come from our DIA spreads:
|
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% |
| 50 SEP 62.50 CROX CALL (CQJIT) | 5,910.00 | 9/12 | 1,990.00 | 9/13 | -3,920.00 | -66% |
| 100 SEP 57.50 CROX CALL (CQJIS) | 20,510.00 | 9/12 | 38,290.00 | 9/13 | 17,780.00 | 87% |
| 5 SEP 62.50 CROX CALL (CQJIT) | 610 | 9/12 | 190 | 9/13 | -420.00 | -69% |
| 5 SEP 57.50 CROX CALL (CQJIS) | 1,035.00 | 9/12 | 1,900.00 | 9/13 | 865.00 | 84% |
| 100 SEP 85.00 CVX PUT (CVXUQ) | 9,630.00 | 8/30 | 11,490.00 | 9/10 | 1,860.00 | 19% |
| 150 OCT 131.00 DIA CALL (DAWJA) | 62,730.00 | 8/3 | 90,440.00 | 9/14 | 27,710.00 | 44% |
| 100 SEP 132.00 DIA CALL (DAWIB) | 22,220.00 | 8/31 | 32,990.00 | 9/14 | 10,770.00 | 49% |
| 100 OCT 132.00 DIA CALL (DAWJB) | 35,510.00 | 9/10 | 43,990.00 | 9/12 | 8,480.00 | 24% |
| 100 SEP 131.00 DIA CALL (DAWIA) | 20,010.00 | 9/10 | 32,990.00 | 9/12 | 12,980.00 | 65% |
| 100 SEP 132.00 DIA CALL (DAWIB) | 22,220.00 | 8/31 | 25,990.00 | 9/12 | 3,770.00 | 17% |
| 200 OCT 132.00 DIA PUT (DAWVB) | 72,820.00 | 8/24 | 85,990.00 | 9/10 | 13,170.00 | 18% |
| 100 SEP 132.00 DIA PUT (DAWUB) | 22,010.00 | 9/7 | 28,990.00 | 9/10 | 6,980.00 | 32% |
| 20 SEP 146.00 FXI CALL (FFPIP) | 11,610.00 | 9/7 | 11,990.00 | 9/10 | 380.00 | 3% |
| 50 OCT 40.00 GE CALL (GEJH) | 4,010.00 | 8/28 | 7,990.00 | 9/13 | 3,980.00 | 99% |
| 40 SEP 180.00 GS PUT (GPYUP) | 15,210.00 | 9/7 | 15,590.00 | 9/12 | 380.00 | 3% |
| 20 OCT 55.00 NUE CALL (NUEJK) | 5,810.00 | 9/13 | 8,690.00 | 9/14 | 2,880.00 | 50% |
| 20 OCT 195.00 OIH CALL (ODLJS) | 6,010.00 | 7/27 | 6,590.00 | 9/13 | 580.00 | 10% |
| 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% |
| 20 OCT 135.00 SHLD CALL (KTQJX) | 10,770.00 | 6/3 | 12,990.00 | 9/13 | 2,220.00 | 21% |
| 30 SEP 90.00 SU PUT (SUUR) | 6,010.00 | 9/10 | 7,940.00 | 9/10 | 1,930.00 | 32% |
| 25 SEP 17.50 SYMC CALL (SYQIW) | 3,010.00 | 7/26 | 5,740.00 | 9/13 | 2,730.00 | 91% |
| 40 OCT 42.50 T CALL (TJV) | 730 | 7/2 | 1,190.00 | 9/10 | 460.00 | 63% |
| 60 SEP 30.00 TIE CALL (TIEIF) | 9,910.00 | 6/28 | 8,690.00 | 9/14 | -1,220.00 | -12% |
| 20 SEP 45.00 UAUA PUT (UALUI) | 2,810.00 | 9/13 | 2,490.00 | 9/14 | -320.00 | -11% |
| 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% |
