This past week was a good one to be bearish...
OUR QID FEB 19 CALLS FINALLY CAUGHT FIRE JUMPING AN OUTSTANDING EIGHTY-FOUR PERCENT!
OUR BRAND NEW SKF MARCH 22 CALLS CATAPULTED TO A FIVE DAY SEVENTY-SEVEN PERCENT OPEN PROFIT!
OUR NEW CENX FEB 15 PUTS JUMPED TO AN INCREDIBLE FIVE-DAY ONE-HUNDRED-SIXTY-FIVE PERCENT OPEN PROFIT!
AND OUR LLTC FEB 30 PUTS ARE UP AN AMAZING TWO-HUNDRED-FIFTY-SIX PERCENT--AND RISING!
And those are our ONLY open positions--we don't have a single loser and the winners are all still open--so the profits are very likely to go higher from here!
After Friday's close toward the lowest point since early December one has to wonder what's in store for the coming week--to find out let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
There was some serious selling going on this past week so the two most important questions we can ask are--why--and will it continue?
If you look at the timing of the sell-off it wasn't related to the economy or even earnings--earnings have been pretty spectacular compared to the fourth quarter of 2008.
This sell-off was purely news driven.
After Republican Scott Brown's surprising victory in overwhelmingly Democrat dominated Massachusetts, President Obama spoke at a town hall meeting trying to focus people's attention on the banks--proposing tougher limits on big banks' speculative activity and an intention to 'get the people's money back' from the TARP dispersements--but noticeably left out the biggest recipients of TARP money Fanny Mae, Freddie Mac, AIG and of course the big employee voting blocs represented by GM and Chrysler.
His proposal fueled an immediate 213-point slide in the Dow when it was unveiled on Thursday and continued to drive the sell-off into Friday's session.
In president Obama's opening paragraph in the new bank rules speech he said: "Good morning, everybody, I just had a very productive meeting with two members of my Economic Recovery Advisory Board: Paul Volcker, who is the former chair of the Federal Reserve Board, and Bill Donaldson, previously the head of the SEC, and I deeply appreciate the counsel of these two leaders..."
Treasury Secretary Geithner was on the podium with the group but was not even mentioned and spent most of the speech looking at his shoes.
Volcker is just an advisor and Geithner is Treasury Secretary so it appears 'Turbo Tax Tim' may be next up on the sacrifice list as the administration tries to project a new 'get tough' on Wall Street image. Geithner is perceived as a 'Wall Street insider'.
Investors also hit the sell button on news Friday that some congressional Democrats are growing skittish about confirming Bernanke to a second term as Fed chairman. Senators Boxer and Finegold--both up for reelection this year and suddenly vulnerable--spearheaded the effort to attack Bernanke.
Several analysts estimate there could easily be a 10% sell off if Bernanke is not confirmed. There is only a week left in his term and if he isn't confirmed for a second term Donald Kohn, a Fed banker since the 1970s, would temporarily fill his seat until a successor could be named.
Analysts claim this sudden rousting of Bernanke is meant to show that our lawmakers are 'taking action' on the banking crisis by throwing out the old guard.
The Bernanke problem is going to escalate over the next few days--there is a Fed meeting on Tue/Wed and his confirmation problems will be on every news channel and every newspaper. This will be the big market influence this week with the term countdown clock going to zero at month end.
This is the last big week for earnings reports. The cycle will trickle on for several more weeks but after this week the majority of the big names will have reported. There will be little positive anticipation to drive the markets higher after this week so last week's sell-off could easily be the beginning of a new market direction for awhile.
Headlining earnings this week are Apple, Amazon, Yahoo, CAT, MMM and UTX.
Apple reports earnings on Monday and hosts its unveiling of what is expected to be a tablet PC on Wednesday. Bernstein Research warned on Friday that expectations for Apple's iPhone sales could be too high. Bernstein expects Apple to announce sales of roughly 8.5 million phones compared to the 10-million consensus estimate. Apple earnings are expected to be $2.07 per share and a miss there could drive the Nasdaq through support into another dive.
So far this quarter 92 of the S&P-500 companies have reported and earnings are up +193% over nearly zero earnings of Q4-2008. However, if you take out the financials that impressive gain drops to only +7%.
Seventy eight percent of companies beat by an average of +21%. Only 17% missed earnings but more than 50% struggled with their guidance. S&P says the bottom line earnings are still improving due to continued cost cutting but the top line growth has been minimal. This week there are 12 Dow components and 130 S&P stocks reporting.
Between the winding down of earnings--investor sentiment seeing the glass 'half-full' on even the best announcements (remember Intel?) and the ever-wilder political gyrations to 'direct the voting public's attention'--there is not a lot of positive impetus for this market--but there are some serious negatives. Every time a politician tries to save themselves by proposing to punish the 'evil capitalists' (otherwise known as employers) the market is going to tank--and when that happens everybody loses. Unless of course you are an options trader.
HOW DO WE A MAKE MONEY ON IT?
We're already sitting on some outrageous open gains on our short positions--but it looks like there is more where that came from.
We've got two super set-ups this week--our first is a currency bet and our second is a bearish play on the small caps with a unique twist.
Both of them could easily result in 100% plus gains and it won't take much to make it happen--so let's get started...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, January 25, 2010
Monday, January 18, 2010
WHEN OUR TRAILING TRIGGER WAS EXCEEDED ON INTEL (INTC) WEDNESDAY WE HAD A FORTY-ONE PERCENT OPEN PROFIT IN JUST THREE DAYS!
This past week was a lot of fun as earnings expectations gave way to profit taking...
WHEN OUR TRAILING TRIGGER WAS EXCEEDED ON INTEL (INTC) WEDNESDAY WE HAD A FORTY-ONE PERCENT OPEN PROFIT IN JUST THREE DAYS!
Once our trailing triggers are exceeded many subscribers take profits but even if you waited until Thursday mornings open (like I did) you still made a respectable four-day ten-percent profit!
Plus our other new play from last week LLTC--is already in profit territory as the puts have more than doubled. Friday's plunge should have seen you sell the call side of this high-potential straddle to regain some of your investment. With the stock heading lower we should do really well on the put side of this play.
Earlier this past week CBE shot higher stopping us out of our puts on that play and also earlier in the week we got out of FDX.
We're starting off this week in pretty good shape but the big question after Friday's plunge is...
WHICH WAY THIS MARKET IS HEADED
The markets broke down Friday which was interesting considering how great Intel's earnings were.
Intel posted earnings of 40-cents per share compared to already bullish analyst estimates of 30-cents besting expectations by a substantial ten cents. This quarter last year the company earned 4 cents so it grew earnings a whopping 1000% over last year. Plus Intel posted record gross margins of 64.7% and provided strong guidance for 2010.
Traders WERE NOT disappointed with Intel's earnings--traders took profits while they had them--in fact the selling began after hours Thursday night ahead of expiration Friday.
Friday's option expiration was a major once-a-year event. This was LEAP expiration on options that have been around for two years--that's a lot of options that need to be settled and we're likely to see Friday's volatility spill over to Tuesday's open. Over 9 billion shares traded on Friday with 7.3 million in down volume---the heaviest volume day since December 18th.
The JP Morgan earnings were a much bigger cause than Intel in driving the markets lower mainly because of the ongoing concerns over potential bank losses on weak consumer and commercial loans. The banking sector had been trending down for about two months since the October highs due to loan concerns and dilution issues. On January 4th the sector jumped higher as new money came into the market with the Banking Index adding about 15% in a little over a week. With JPM the first big bank to report the pressure was on to post strong earnings and good guidance.
JPM posted earnings of $3.3 billion in Q4 and $11.7 billion for the full year--pretty impressive.
When you think back on the implosion in the banking sector over the last 15 months these earnings are amazing and they show what a strong bank JP Morgan is. However, even strong banks get hit when borrowers quit making their payments.
Chase Card Services lost $2.33 billion for all of 2009 and is unlikely to turn a profit this year. Chase retail services made only $97 million for 2009 after posting a $399 million loss in Q4. Chase agreed to temporarily modify about 600,000 mortgages and 89,000 have been made permanent.
But in spite of all that the bank still made $3.3 billion for the quarter.
What roiled the markets was a warning from CEO Jamie Dimon that he remained cautious about 2010 considering the job and housing markets continued to be weak.
"We don't have much visibility beyond the middle of this year and much will depend on how the economy behaves." He also said the economy was still too fragile to declare the worst was over
The JPM results on Friday sent up warning flags for this week because we'll be getting earnings from Citi, MS, WFC, BAC, GS, FITB, BBT and KEY. If JPM is taking such big hits from loan losses then what about the other banks? This worry sent the financial sector into a dive and it will probably take some good news from more than one bank to revive any upside. That 15% rally in financials since Jan 4th is going to be weighing heavily on the market this week as traders move to take profits.
The key to market direction this week is obviously bank earnings but there are also a handful of tech stocks to keep trading active. IBM on Tuesday is expected to produce strong earnings and could revive faith in tech stocks. EBay and Google report on Wed/Thr and will be heavily watched as well.
Aside from those releases the earnings calendar is skinny with the tidal wave of reports coming the following week with heavy hitters like Apple and Microsoft scheduled to report.
Friday's dip was profit taking accelerated by option expiration and the negative comments from Jamie Dimon. We are overdue for a decent size correction but any real selling should wait until after the major earnings reports between now and the end of the month--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up with some significant profit potential. The first is a leverage on leverage play on the banking sector which should line up very well with the news coming out this week--this one could make us a fortune by this time next week.
Our second is a put play is on a metals company that just rolled over big time--when you see this chart you are going to be chomping at the bit to ride this one lower because with the right puts we should do extremely well.
We've got a market starting to churn with two great plays ready to ride it--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
WHEN OUR TRAILING TRIGGER WAS EXCEEDED ON INTEL (INTC) WEDNESDAY WE HAD A FORTY-ONE PERCENT OPEN PROFIT IN JUST THREE DAYS!
Once our trailing triggers are exceeded many subscribers take profits but even if you waited until Thursday mornings open (like I did) you still made a respectable four-day ten-percent profit!
Plus our other new play from last week LLTC--is already in profit territory as the puts have more than doubled. Friday's plunge should have seen you sell the call side of this high-potential straddle to regain some of your investment. With the stock heading lower we should do really well on the put side of this play.
Earlier this past week CBE shot higher stopping us out of our puts on that play and also earlier in the week we got out of FDX.
We're starting off this week in pretty good shape but the big question after Friday's plunge is...
WHICH WAY THIS MARKET IS HEADED
The markets broke down Friday which was interesting considering how great Intel's earnings were.
Intel posted earnings of 40-cents per share compared to already bullish analyst estimates of 30-cents besting expectations by a substantial ten cents. This quarter last year the company earned 4 cents so it grew earnings a whopping 1000% over last year. Plus Intel posted record gross margins of 64.7% and provided strong guidance for 2010.
Traders WERE NOT disappointed with Intel's earnings--traders took profits while they had them--in fact the selling began after hours Thursday night ahead of expiration Friday.
Friday's option expiration was a major once-a-year event. This was LEAP expiration on options that have been around for two years--that's a lot of options that need to be settled and we're likely to see Friday's volatility spill over to Tuesday's open. Over 9 billion shares traded on Friday with 7.3 million in down volume---the heaviest volume day since December 18th.
The JP Morgan earnings were a much bigger cause than Intel in driving the markets lower mainly because of the ongoing concerns over potential bank losses on weak consumer and commercial loans. The banking sector had been trending down for about two months since the October highs due to loan concerns and dilution issues. On January 4th the sector jumped higher as new money came into the market with the Banking Index adding about 15% in a little over a week. With JPM the first big bank to report the pressure was on to post strong earnings and good guidance.
JPM posted earnings of $3.3 billion in Q4 and $11.7 billion for the full year--pretty impressive.
When you think back on the implosion in the banking sector over the last 15 months these earnings are amazing and they show what a strong bank JP Morgan is. However, even strong banks get hit when borrowers quit making their payments.
Chase Card Services lost $2.33 billion for all of 2009 and is unlikely to turn a profit this year. Chase retail services made only $97 million for 2009 after posting a $399 million loss in Q4. Chase agreed to temporarily modify about 600,000 mortgages and 89,000 have been made permanent.
But in spite of all that the bank still made $3.3 billion for the quarter.
What roiled the markets was a warning from CEO Jamie Dimon that he remained cautious about 2010 considering the job and housing markets continued to be weak.
"We don't have much visibility beyond the middle of this year and much will depend on how the economy behaves." He also said the economy was still too fragile to declare the worst was over
The JPM results on Friday sent up warning flags for this week because we'll be getting earnings from Citi, MS, WFC, BAC, GS, FITB, BBT and KEY. If JPM is taking such big hits from loan losses then what about the other banks? This worry sent the financial sector into a dive and it will probably take some good news from more than one bank to revive any upside. That 15% rally in financials since Jan 4th is going to be weighing heavily on the market this week as traders move to take profits.
The key to market direction this week is obviously bank earnings but there are also a handful of tech stocks to keep trading active. IBM on Tuesday is expected to produce strong earnings and could revive faith in tech stocks. EBay and Google report on Wed/Thr and will be heavily watched as well.
Aside from those releases the earnings calendar is skinny with the tidal wave of reports coming the following week with heavy hitters like Apple and Microsoft scheduled to report.
Friday's dip was profit taking accelerated by option expiration and the negative comments from Jamie Dimon. We are overdue for a decent size correction but any real selling should wait until after the major earnings reports between now and the end of the month--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up with some significant profit potential. The first is a leverage on leverage play on the banking sector which should line up very well with the news coming out this week--this one could make us a fortune by this time next week.
Our second is a put play is on a metals company that just rolled over big time--when you see this chart you are going to be chomping at the bit to ride this one lower because with the right puts we should do extremely well.
We've got a market starting to churn with two great plays ready to ride it--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
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