rovo's Market Journal -- 2011

[rovo]

D.I., I assume the trade was a PUT. Correct?

[rovo]

My trade in buy GLL, double short gold, is currently in the green by 0.5%. This is the first hurdle on any trade.

D.I., So you sold a handful of contracts, Puts DE $60 Jan 2013. I'm still trying to understand these plays. So, you get the sales dollars in your account immediately? Do you have to have a reserve in case you are Put the shares? These will probably expire worthless so you pocket the entire premium? At any time you could buy back the puts if the price drops enough to make it attractive?

[yclept]

I don't know how many contracts you sold, but unless I'm misunderstanding the transaction, you would not be out money if held to expiry and expired worthless.
You would be ahead $460/contract, minus the commissions paid which you said were $10 plus $0.75/contract.

So, if it was one contract: $460 - $10.75 = $ 449.25;
if 100 contracts: $46000 - $85 = $ 45915

This statement made it sound like you would lose money should the options expire worthless:

IF, I were to Ride these out until their Expiry Date and they Expired OTM (worthless) I would only Be out the Cost of the Initial Trade ($10 + $0.75 Per Contract) - And That would be the Time at which I would Be Required to REPORT the Income to the I.R.S. .

[rovo]

The port took a today as WHX inflicted severe damage. It is hard to make up for one stock dropping about 25K in a day. Oh well, the week isn't over yet and I'll have to try to pull something out of my hat. MTD = +3.08% and I'd like to get it up to at least 4.4% before month end.

[yclept]

"It is hard to make up for one stock dropping about 25K in a day."

Ha! Tell me about it! Last year, EGMI ate almost all the profit I made from everything else all year; it wasn't all in one day, but it was very quick. Just another lesson for me regarding eggs and baskets.

[rovo]

I just picked up another hunk of GLL on the price dip. I'm now where I wanted to be with respect to share count. No more shares until I see a complete breakdown in gold.

[lovetobike]

Boy, WHX is taking another big dive today. I'm glad I got out of the small holding I had yesterday. The amount I have remaining is still positive, I'm trying to decide if I should bail or wait to see if this guy bottoms and goes back up. I've never seen anything like this before.

[rovo]

lovetobike, A while ago several on this board looked at WHX and came to pretty much the same conclusion as the link you posted yesterday. I even had a note in my paper journal to exit the position but somehow the note got buried with other items. I snoozed, I losed.

[lovetobike]

Rovo - but the date of the transfer was in 2015 - I wasn't expecting a dive 4 years prior to this. I was thinking more like a year out.

[rovo]

lovetobike, What can I say?

Ford has been doing nothing going into the earnings report. Is the report going to be worse than expected? GM is rising and Ford is falling. Opportunity or a trap?

[tyfighter3]

Here is a pretty good take on WHX.
seekingalpha.com/article/248359-whiting-usa-trust-analysts-issue-downgrades-on-no-news-again?source=msn

[rovo]

Thanks for the link Tyfighter3.

I think what we are seeing in the market is concern over tonights State of the Union speech. The only thing I look for in these speeches is the proposed direction going forward. In the case of Obama, it appears he is moving toward the center of the spectrum but his speech tonight will be more definitive than just a lot of news snips.

[livinincali]

Here's some quick F TA. Looks to be establishing an intermediate term top but if 17-17.10 holds and it rallies we may see another high on a third negative divergence. At this point it's probably 50/50 but if 17 fails to hold then it's pretty likely we'll see 15.50 before 20. Of course we are just dealing with probabilities so anything can happen. This quarter earnings have definitely been a sell the news kind of thing. Even AAPL which completely blew earnings out of the water sold off after gaping up.

[rovo]

The State of the Union address looks pretty benign with a few exceptions. He's calling for more taxes on the wealthy (again), for eliminating subsidies to the oil companies, energy independence, and the usual call for alternative energy. The usual contradictory message to make us all feel good until the details are all filled in.

Also, calls for simplifying the tax code and eliminating loopholes. How many times have I heard this message. Continuation of college credits, $10K. Urging schools to do a better job at teaching our children. Solving the Social Security problem. Blah, blah, blah.

Generally not much of substance in the speech. Same old, same old, the government can solve the problems without acknowledging that government is most of the problem.

[rovo]

Cali, Thanks for your input on Ford technicals. I'm not sure how applicable it is comparing Ford to Apple. Apple sold off after earnings but had run up going into earnings. Ford has done just the opposite in that it has dropped a tad (5%) prior to earnings and appears to be in a wait and see mode. There is also a big difference in reactions when Apple had a PE of over 25 and Ford is sitting with a PE of 10. Apple ... priced for perfection .... and Ford .... priced for stodgy growth.

As an aside, I think it was you who advised me to follow the underlying symbols when dealing with ultras, either short or long. I want to say thank you for the advice as it has served me well.

[rovo]

I was in there this morning trying to pick up more of both options on Ford. Missed one by a penny and the other by a couple of cents. Ford has ramped up, as has the entire market, after the housing numbers. Now if we can just get the Fed to issue a benign report this afternoon, then we could be seeing new highs on the Qs. Dow and S&P already hit new highs but the Qs are still lagging.

[livinincali]

Dow and S&P already hit new highs but the Qs are still lagging.

Market is a bit fractured right here with fewer sectors and fewer stocks making new highs. Seem like sector rotation is in play right now. Even today's nice move up isn't coming on impressive internals. It's pretty average about 2-1 adv to dec in number of issues and in volume. Seems like there's just not a whole lot of money left on the sidelines to be invested at these levels. People will take their shots moving from overvalued to undervalued but we aren't seeing that mad rush that is raising all boats. I'm expecting some chop the next couple of days and then likely a big bullish move on February 1st. First of the month has contributed to more than 50% of the gains over the past year, so I'm move likely to get bearish if the first of the month doesn't end up being a very bullish event.

[livinincali]

Sold ZSL at 12.36 and bought EUO at 19.36. Both we're done based on technical conditions. ZSL looks like it's topped out in the short term while, EUO looks to be bottoming a bit. I've been trading a small portion of my portfolio in the Currency/Precious Metals space because technicals have been working but I might be a bit early on this one. No confirmation yet so I wouldn't be surprised to see this go against me.

[rovo]

Here we go. Up? Down? I don't know but we should see some real movement in 15 minutes.

[rovo]

I sold off the last 1K shares of TBT in the taxable account a short time ago. I incorrectly thought the Fed holding rates low would drive TBT downward. It did for a very short while but it then recovered. Anyway, this was a short term trade and was profitable at +2.70% for holding since Dec. 13. Bought at $38.005, Sold at $39.0295.

[livinincali]

Here we go. Up? Down? I don't know but we should see some real movement in 15 minutes.

Ehh, Another non event. Need to be closer to June before we get the QE3 announcement to keep pushing the market higher.

[lovetobike]

WHX is starting to come back That is good for the amount I have remaining - I bought it around $12/share.

Update on my Ag stocks:

DE: +1.79% (total gain 145%)
AGU: +2.13% (total gain: 6.5%)
MOS: +4.09% (total gain: 6.14%)
POT: +3.49% (total gain: 25.8%)

[rovo]

The port gained exactly 2% today with most holdings in the green for the day. GLL has swung to a slight loss as gold rallied after the Fed minutes. MTD = 4.41%.

[rovo]

So I bought some TQQQ in 500 share gulps on the 19th (169.03), 19th (168.72), 20th (160.02), of this month. It looked a little shaky for a while but is currently doing very well with a current value 169.93.

GLL appears to be a marginal play at this time. GLD in my opinion has a major support point at about $129. If and when it breaks thru the support the next stop is the 200 day SMA at about $125. After that, then nothing stopping it from falling like a rock.

Ford may approach the 52 week high of $18.97 today in anticipation of the earnings release tomorrow.

I'm still holding 2K shares of FAS at a buy price of 30.805 against current price of 30.61. Drat. This will be a money making trade in the near future.

[livinincali]

So I bought some TQQQ in 500 share gulps on the 19th (169.03), 19th (168.72), 20th (160.02), of this month. It looked a little shaky for a while but is currently doing very well with a current value 169.93.

Might be a rough ride for the next couple of days based on history but definitely should be profitable on Feb 1st. History says short the market today and cover at the close on the 31st. Then the 1st is suppose to be a big up day, > 1%. Let's see if that's how things play out this month. I figure we'll see a 1% decline between Friday and Monday and then get it all back on Tuesday next week.

[yclept]

Bonds should drop roughly 6 to 9 months before the Fed makes its first increase in interest rates. I expect the Fed to be too late in raising interest rates (they should probably do so within the next month or two, but probably won't until about this time next year -- by which time inflation is probably going to be significantly out of control). If my guess is right, TBT should ignite its JATO about April or May. This coincides with the yearly timing model ("go away in May"). Personally I'll be watching for a moving average full-sell signal and at that point take some of the money coming out of long stock positions and increase my position in TBT.

At least that's the plan, to the extent that planning market moves farther out than a few days serves any purpose at all! Robbie Burns said it best:

But Mousie, thou are no thy-lane,
In proving foresight may be vain:
The best laid schemes o' Mice an' Men,
Gang aft agley,
An' lea'e us nought but grief an' pain,
For promis'd joy!



Still, thou art blest, compar'd wi' me!
The present only toucheth thee:
But Och! I backward cast my e'e,
On prospects drear!
An' forward, tho' I canna see,
I guess an' fear!

[yclept]

I quote that often. I guess I should put up translations for some of the more obscure 18th century Scottish phrases:

no ‘thy lane = not alone
gang aft agley = often go awry
e'e = eye
och = oh

[livinincali]

I think the one stock I'll never understand from a valuation perspective is AMZN. It's getting smashed in AH today but for a company that has a 82 billion market cap and has only been able to consistently grow at about 20-25% per year for quite some time I'll never understand why people pay the 75 P/E. It's not like this is some little company that can expect 50%+ revenue growth any more. I know it's a player in cloud computing but come on.

[rovo]

I had a decent post I was working on but the system glitched and it was gone. Strange. I'm not going to re-type the entire thing.

There was only one red item in the port today. TBT. All others green.

Month-to-Date increased to +6.13% from yesterday's 4.41%.

Ford may give me a big finish to the month .... I just hope it is an upward move. ;D

[clarkrl2]

Burn's day is Jan 25. Many Burn's enthusiasts celebrate for the entire week.