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Sunday, January 31, 2010

Market Thought... just the technicals

If we are to look at the markets, strictly on a technical perspective, it is hard not to be bearish here.

The SP500 and the Nasdaq both look to want to test the 200 SMA, which typically is support area for consolidating markets when mature into a rally.

Make no mistake, the markets are very very oversold and I am very hesitant about shorting it here due to the oversold condition, and on a valuation basis on key market players. (IMO, the easy money short, has been made.)

In fact, I have been slowly entering names, and am eagerly awaiting target prices on other names, as I previously mentioned, to enter.

I do not know if the markets will contract just yet to the 200 SMA, or if the markets will churn and meet the 200SMA at some point in the next few weeks. The only thing I do know, is what I will do. If markets continue to decline to the 200SMA, we will approach valuation of Nov 2008/March 2009 and I will go 'all in'.

Perspective - GOOG, AAPL, IBM

At the time of potential Global Economic Armageddon (Nov 2008) quality names were selling at a huge discount. The three I currently care about, as they can be compared via normalized earnings, are GOOG, AAPL and IBM.

The three stocks show their bottoms in Nov 2008, and subsequently their lowest valuations. Lets see how their valuations compare today...


Nov 2008 GOOG was trading with a trailing PE of 16. At the SP500 low, in March 2009, GOOG was trading with a PE of 21. As of Friday, GOOG is trading with a trailing PE of 26. (Assuming GOOG does 27 eps in 2010, GOOG is trading with a 2010 PE of 19.)

Does the valuation, in a relatively stable economy, for the most efficient method of advertisement (as per ROI) make sense? Did EPS growth stop? Will EPS growth reverse? Did the growth in YouTube irrelevant?


Nov 2008 AAPL was trading with a trailing PE of 14-15. It maintained its lower valuation, despite have the best products, and years a head of any competitor (and still are years ahead), due to the health issues of Steve Jobs. As of Friday, AAPL is trading with a trailing PE of around 20. But the new accounting makes AAPL look that much more inexpensive at the rate they are selling their products/services.

It is a dirt cheap stock, especially with iPad. Many are critical of it, but those people do not understand. (But I don't hold it against those people because 'they' visionaries. They do not see the world as it could be, they see the world as it was.) Not to mention the things they got going on in the pipeline with respect to the iPhone and mobile advertising.

The only deterrent against AAPL is Steve Jobs' health. The stock will crater if anything should happen to him. However, the culture of innovation is ingrained in AAPL, and the product line up and developments will mean Apple will continue with very nice EPS growth for the next few years, at least.


Nov 2008 IBM was trading with a trailing PE of 8.5. At the SP500 low, in March 2009, IBM was trading with a PE of 9. As of Friday, IBM is trading with a trailing PE of 12. (Assuming IBM does "at least 11 eps" in 2010, as indicated in the conference call in the previous earnings report which blew away all analyst metrics, IBM is trading with a 2010 PE of 11.)

Does this make sense? Did those selling IBM listen to the Conference Call? please re-visit my post

The fact remains, the market is not in the same situation as it was in November 2008. Valuations should not approach those of Nov 2008, and I would argue they should not approach those of March 2008.

Thursday, January 28, 2010

Market Thought... step back

Been doing a lot of thinking about this market. Obviously I have not been a fan of how it has been trading, but now that 'the smell' is calming down from Washington it is time to re-evaluate just what the market is telling us here.

Its no surprise the market was due to correct. Well, now that we are knee deep in the correction, does continued weakness make sense?

Here is what we know:

1. Earnings this quarter have been good. With the decline in the market, and earnings beating expectations, valuations are not optimistic. So much so, we now have GOOG and AAPL trading with a 2010 PE of 19-20.

2. Bernanke got re-confirmed, and after Obama's speech the other day, a lot of the smell from Washington was removed. However, the political pandering amongst the people that are suppose to be leading is still very present.

3. Technically, the market very oversold, but intraday action is simply WEAK. No sugar coating it, the action sucks. The big boys just do not know what to do, so they are choosing to sell.

4. On the macro-economic front, commodity leadership was completely lost. (I guess our monetary policy is not causing commodity prices to go through the roof.) China's effort to slow down, and the dollar rallying are most likely the reason. (The one exception to this is Sugar. The SGG is still very strong, which makes me keep liking fertilizer names, like SQM, despite POT's sell-off today.)

China took steps to slow down, but they are not grinding to a halt. Despite their ghost cities, and malls, China still has $2trillion to keep things humming.

5. Unemployment. Job creation is simply not here yet. (Gauging the productivity number seen late last year, I was expecting job creation to accelerate. But the proof is in the pudding, and it is just not here yet.)

So the economy has two fairly strong head winds to swallow... 1. lack of Job Creation and 2. the perception of China grinding to a halt.

Do these head winds justify a 2010 PE of 19 to GOOG and AAPL? (considering the Mobile Web is suppose to growth expodentially faster than the PC role out) Does it justify IBM having the lowest PE in 5 years, after it produced a simply blow out quarter and indicated faster EPS growth?

In my completely irrelavent opinion, NO.

There are reasons for the market to be weak, no doubt about it, and with commodity leadership lost, I am sure many big boys are scratching their heads because their thesis is shot to hell. (loose monetary policy equals higher commodity prices). Personnally, I disagree with this thesis at the moment because its not monetary policy that causes higher commodity prices. An acceleration in dollars entering the system is what causes higher commodity prices, and we just do not have that. But hey, to each their own.

The market should be churning here, as all leadership is lost, and this should be a stock picker's market. Instead we are in blind selling.

To the Big Boys: take a step back, look around you and grow a fucken pair.

Wednesday, January 27, 2010

Perspective - GS

BlackRock reported a really nice quarter this morning, and it gave me perspective toward GS.

We all know GS is under attack by Washington (and its so hard to stay angry at Obama, watching him give his speech, he is just so freaken charismatic! :), but how much different is GS to BLK?

BLK has a forward PE of around 20, and they are an Asset Manager. GS has a forward PE of about 7 (not accounting for the reduced cash bonus payout to execs that will INCREASE their earnings power), and they are a 'bank holding' company at the moment.

Both companies are in the same line of businesses, except for a few areas. So why doesn't Goldman remove their 'Bank' status and return to an Investment Bank or be considered a Banana? (courtesy of Matt Simmons for the Banana reference... read an article to where he mentioned it :)

GS maybe waiting for the implications of changing their status, as Washington has not made clear yet what the regulation of the 'new' status would entail. Basically, 'stick with the devil you know' concept.

IMO, once there is clarity on the type of regulation for a status, GS will decide. My guess is that they will no longer have a bank status by the end of the year. And with the removal of that status, and greater clarity, GS will be trading at a higher multiple. (I would argue 10-13, if not higher.)

Once Wall Street understands this, GS stock will rise, and IMO, rise hard.

(I am not worried about the increased capital requirements that will be placed on trading, as I feel, this is very necessary within the industry. But GS already had very tight control as to how it trades, and I do not expect their model to significantly alter due to the increase requirements.)

Tuesday, January 26, 2010

Market Thought... the smell continues

Until there is any sense of leadership, and not pandering, in Washington, I do not see how any good news can be deemed relevant.

For fuck sake, Roubini (Dr. Doom) even stated Bernanke ultimately did the right thing in his speech at Davos.

I happen to completely agree with Cramer on this point, WTF is President Obama thinking? (Unless there goal was to game the Treasury market and create demand for T-bills.)

This decline is squarely on the shoulders of Washington, from the President to the Senate. The uncertainty they have created, is causing this.

Many argue the market had a big run, but when factor in this quarter's earnings, valuations are not grossly overvalued as pundits are making them out to be. Its simply not the case.

And 'the smell' continues...

Trade - GS

I am playing GS for an expected pop on the testimony tomorrow. After reading this article, there appears to be evidence to show GS was willing to cancel the CDS' provided AIG made payment based on GS' real-estate valuations. Obviously that did not happen.

I think tomorrow will show GS, and the NY Fed, were not to blame for anything.

Also, GS is very oversold (from a short-term and long-term perspective), and a upward correction is due.

Would like to see a move to 165, but I am expecting a move to 160.

Saturday, January 23, 2010

Market Thought... the smell

Its everywhere.

-The Administration stinks. The pandering to populist bullshit, and diverting attention from its continued short-comings in Washington, is causing uncertainty within the Street. (And I am a big fan of President Obama, but he lost a lot of brownie points last week due to this.)

-The Senate smells like stupid. The fucken morons do not get it. You vote Bernanke out, the probably of going into a Depression severely increases, and they will all be out of jobs. They vote to reconfirm him, they have a fighting chance. I love the way they blame him for the short comings of themselves. Bernanke does not have a doctrine to create jobs, that is the duty of the free market, and he makes sure the markets are functioning responsibly. (Which HE IS DOING!) He set to motion plans that simply can not be stopped over night, and the best person to run them and unwind them, is the person that put them in place. The Senate's pandering to populist bullshit is causing uncertainty, and will ultimately hurt this country very badly if they act stupidly.

-The markets smell like fear. Did you know the VIX is up 57% in 2-3 days? Why? Just take a deep breath and enjoy the nasty smell from Washingtion. (When the markets rise 60% everyone cries 'overvalued', but when the Vix does it, everyone cries 'sell the market'. Doesn't make too much sense does it.)

I highlighted when to protect (via my Market Thought... confusion post and indicated as such from the 'maybe, just maybe' and 'fear too soon' market posts), but the above events, IMO, exacerbated the decline and added more uncertainty than what the markets should be expecting, especially within the financials. Regardless, this is the situation we find ourselves in.

From a technical perspective, we are at a juncture that I wanted to become an aggressive buyer.

See how the Vix (blue line) approached the dotted upper red line. Also, many many names are very very oversold, and seem reasonably priced for a recovering economy.

But that smell coming for Washington is really giving me a fucken headache, and makes me question Washington's ability to lead.

So, how do we trade around 'the smell'?

Since some of my 'buy' triggers were achieved, I repositioned some options expecting a bounce on Monday. But I am also in 'day-trader' mode now. (Since many of you do not day trade, I am not going to post all my trades continuously.)

On Monday I will reposition my portfolio.

1. I will sell GS, regardless of it being up or down. (Its main function was to act as an income generator with the cash I am not using to actively trade, thinking it would trade in a channel, but 'the smell' is really fucking with the stock, and the income thesis is shot to hell. Although I think it is ridiculously inexpensive right now, 'the smell' can possibly make it go below 100.)

2. I will sell COST if I have to raise capital to invest else where. It is very oversold, and am expecting a pop to 59-60. But below I have developed a list, and if opportunities arise from that list, I would prefer them over COST.

3. Doing nothing with IBM.

4. PWR - the same reasoning as #2. But I expect a pop to the 20 level.

If Bernanke gets reconfirmed, I would like to enter these names with a declining market:

CHK - low/mid 20s
F - mid 8
IBM - low 120s
SQM - mid 30s
AAPL - around 185
GOOG - around 500
PBR - mid 30s (assuming oil remains above 66)
GS - there is technical support around 140, but I will have to re-evaluate how bad the smell is at that point in time

Now, the above market thesis assumes Bernanke gets reconfirmed, and is a positioning toward Bernanke not being reconfirmed. IF, Bernanke does not get reconfirmed, I am expecting the market to be a blood bath. I will...

1. sell all my positions (everything)
2. go short heavy the market via the 110 March Puts.

I will cover my market short position when the Vix overlay of the SP500 (via an 11 month perspective on the chart, approaches the SP500 level of 1150). That might not make a lot of sense to people who do not follow the vix much, but it does for those that do. (interpretation of data is what separates traders, and why many consider it Voodoo) I see a pattern w/in the 'SP500/Vix overlay' chart that suggests that will be the market bottom for such a thesis-shifting event.

I really pray the Senate is not that stupid. (seriously)

I will have very little confidence in the global economy, and will simply take short-term trades, after I think the markets bottom.

Friday, January 22, 2010

Market Thought... divorced goog

Had to divorce myself from GOOG at the moment, so I can maintain an unbiased thought process.

For the most part I think the decline is overdone here.

The spike in the Vix is nice, and I can see a scenario where the Vix approaches 28, but then I think of earnings.
Many gave very good reports, and indicated very decent guidance. On top of that we still have 60-70% of the stimulus to spend. I am hard pressed to be a seller at this point.
I will most likely enter GOOG again intraday.

Thursday, January 21, 2010

Adjustment - AAPL

Thanks to what happen to GOOG, and the kind of beating I will take tomorrow, I can no longer leave my AAPL calls un-hedged. I must adjust the strategy. Basically, I will buy a corresponding amount of 190 or 195 Feb Puts (in relation to my Calls), in case there is 'sell the news' activity after they report Monday.

If there is a 'sell the news', AAPL may go to 190, maybe even 185. (GS absolutely crushed earnings, and the analysts are not pricing it a lower compensation -to any degree- in their models, which should INCREASE the equity value in the company, yet it declined massively... I am expecting the 'illogically stupid' at this point.)

I will either enter the position on Friday or Monday. (Apple reports after the market closes on 1/25.)

I would prefer on an up day, and Monday has usually been the up days.

If AAPL sells the news on Tuesday, I will close out the Puts, and re-adjust the calls and remain long. If AAPL rises, I will close out the puts, and assess the long position. (then I probably will have to go seek medical assistance to treat my severe shock :)


Traders are only as good as their last trade... and right now, I suck.

1st act of sucking: For the most part, my market thesis was/is correct, but the my timing/discipline was just piss poor.

2nd act of sucking: Thinking the consolidation w/in GOOG, from the 625 level, and the already decline in the market, would have led to a rise in the stock after earnings. (similar to ebay) -Dead wrong- The only good thing I did was maintain discipline and not add.

Will now have to do damage control. (This is where trader really earn their keep)

Bank Reform

For Fuck sake, President Obama better get his act together on this issue. To make banks smaller or to separate functions of the bank is a half-ass response to public anger.

To break down the Credit Crisis is not that difficult.

There were a tun of fuck ups at the ground level, including the 'main-street' part, all the way to the top of the large institutions.

But a few simple enforcement of established regulatory rules (at the ground level), and some new margin requirements for the investors, will force continued responsible lending and a prevention of 30:1 leverage scenario that crushed Wall Street.

There is no need to separate bank institutions, the solution is just a function of putting common sense rules in the works and enforcing the already established rules!

Establishing new margin requirements and enforcing good regulation is not difficult to do. Theatrics on declaring war on the responsible banks that survived are not necessary.

Closed out Protection

I closed out my protection. The main goal was to protect IBM, GS and COST. After the earnings on IBM and GS, IMO, they are at their low points and should be bought, not protected against.

Update: Talk about sucking. Quite literally, 20 minutes after I close out the protection the market tanks. All I can do is see the humor in it. Anyway, at the moment it is where I would have covered regardless, with the SP500 hitting 1125.


Goldman just annihilated earnings. I don't care what the bearish argument is today, or whatever excuse they have to justify why today's earnings are 'bad', on a normalized earnings basis, GS is simply too cheap.

It should not be trading in the 160s, it should be trading north of 180. period.

Wednesday, January 20, 2010

Interesting Video - pro NatGas

Boone was interviewed by Cramer today, and he provided some good insight. He basically stated that he strongly believes there will be a 'NatGas' bill (HR1835) before Memorial Day; thats May 31st.


If he is right, and anyone who doubts the soon to be power in NatGas merely need to look at the recent Exxon/XTO deal, the plays are obviously the dominant NatGas players. My favorite is CHK. Another of my favorites regarding NatGas, and alternative energy in general, is PWR (thanks to the Price Gregory purchase, adding to their in house NatGas biz). Despite the fact that Boone himself is playing down wind, PWR will still benefit from the required Nat Gas infrastructure that will be needed from the added NatGas usage.

Trade - PWR

I entered another position in PWR. The recent downgrade really took down the stock the other day. With the decline, it became very oversold. Looking for a pop to around mid 19, and will unload this position. The rest of the position I will keep until PWR become overbought.


1. I closed out my COST sold calls to capture their gain, as COST is oversold w/this decline.

2. Am looking to close out my market protection as the SP500 approaches 1125.

Tuesday, January 19, 2010

A word on IBM

The Fast Money crew was just bashing the hell out of IBM this evening, and I think they are dead wrong. They keep mentioning how expensive it is, compared it to Intel and at one point Guy Adomi mentioned it gets attractive at 120.

I was left scratching my head.

Let me explain... I take in a lot of info to make a decision, and no matter how much I respect the people of the FM show (or anyone for that matter) and the fact that I like the show, I have a shit load of confidence in my ability to make a correct assessment.

I think selling IBM here is completely wrong, and grossly misses what is going on with IBM.

A case for IBM to be viewed as 'expense' is a valid point. Earnings growth was projected to be around 10%, so a low PE is justified. But, and this is the fun part, if we assess what is going on with IBM, it will earn the right to a higher PE. Here is why:

1. They have consistently produced better then expected numbers, growing faster than the projected 10%. All this while we were in the heart of the greatest recession in 80yrs.

2. This earnings report beautifully showcased that they positioned themselves very very well, increasing Gross Margins.

3. Due to #2, a slight increase in revenue will be nicely reflected in earnings. (producing a faster earnings growth rate)

4. Spending will pick up in 2010 and beyond toward most, if not all, of IBM's positioned businesses. (This facilitates #2 and 3, which again will facilitate in a faster earnings growth rate)

5. IBM specifically told all of us, in the CC, that they have not seen the benefits from integration yet as the integration was not fully completed. (This increases Gross Margins, and will again facilitate in a faster earnings growth rate.)

You see the pattern here. Thinking a few steps ahead produces a scenario where IBM will be producing a higher rate of earnings growth. This in-turn produces a higher valuation on the stock, allowing for a higher valuation (or multiple expansion).

If I was actively trading this stock (remember for IBM I did not want to sell it via active trading), my discipline would have triggered a 'sell' before the earnings. The chart indicated an overbought position, and for a name like IBM, chartist can argue it moved too far too fast in one day.

Basically the good folks at Fast Money, and anyone else preaching to sell IBM, after the decline, is doing so due to over extended technicals and after hours action. But it is a mistake to think IBM will keel over, or retest 120, based on the above assessment. Those preaching will be luck if it breaks 130.

But for the pure chartists out there, there is very strong support around 125.

haha... gotta luv the market, and IBM

If anyone said this game was easy, they don't know shit. But anyway... IBM just beat on the earnings and revenue front, yet the stock is going down. (Oh did I mention it still has a trailing PE of 13.)

Ms. Market, I don't care how inefficient you are some times, I still love you :)

All I can say is buy IBM on the decline in after hours. IMO, I have a hard time seeing IBM going below 130 again.

Management is an Art, not a science

And apparently NBC sucks at it. I have never seen such level of incompetence, in fucking up a good thing (out side of the management from the failed banks). First, NBC announces that they will be losing about $200M while broadcasting the Olympic games, and now they are about to announce a $40M buyout of a very talented comedian.

The folks at NBC apparent like to bleed money.

Not only will they give $40M to a younger, hipper comedian to stop doing what he does best. Conan will definitely go to another station, where he will cypher viewers due to the newly found exposure from this whole ordeal. There-by costing NBC in the long-term.

Got to hand it to dumb ass management.

Sunday, January 17, 2010

Market Thought... confusion

I see information that confuses me. On the one hand the trigger to protect positions was achieved, however on the other hand strong individual names are consolidated (and in Google's case, oversold).

Attempting to objectively look at the market scenario, a legitimate case can be made that the SP500 will decline, at least to the 62 SMA. (Hence, I did not close out my protection yet.) The SP500 is acting weak around the 14SMA, and the decline to the 14SMA support did not produce the increase in the Vix I was looking for.

I am looking to the Vix to find out when to close out my market protection. I am looking for the Vix to approach 20-21. Or, when I feel the individual names I am protecting (IBM, GS and COST) are at levels that should not merit protection. (I have AAPL and GOOG calls, but they are not protected.)

Friday, January 15, 2010

Charts - PWR, IBM and GS

Waiting for the red line of the Stoch to go near 20 or below.

No chart is needed for IBM, but it look beautiful.

I just really like the set up in GS at the moment. Consolidated w/in a bullish scenario.

Thursday, January 14, 2010

Trade - PWR, IBM and GS

1. PWR - looks really interesting here for an initial/re-entry position. I re-entered, and will wait to see if the stoch (the tech oscillator) continues to show consolidation. If it does, I will enter another position at that point.

2. IBM - I made an internal decision with myself. I will not sell IBM until it reaches a trailing PE of 20. With their current line of businesses, and what I anticipate to be quicker revenue growth, I think we will see that. Wall Street just needs a few quarters of convincing before they give the stock that level of respect. (Its funny. Many people know I trade very well, and do very well and have given some really profitable information, but when I tell them about IBM they look at me as if they have seen a ghost. Everyone still thinks it is a dinosaur tech company, and have written it off. They do not realise just how cutting edge it really is.)

3. GS - I am itching to purchase those calls, but I want to be disciplined as I already own the stock. Think right now is a great initial entry position (as I already own the common), and if it tracks to the low 160s I will buy call options.

(will provide charts later in the day)

SQM and Cramer

Cramer got in the SQM game, realizing the benefit of the play. Welcome to the party Cramer (see video/article) He does say to hold off on purchasing, and wait for a pull back. Anyone reading this blog knows I agree. IMO, SQM needs to consolidate.

SQM is at a very light support level, while still being fairly overbought. I still think it can trace back between 40-41.

Wednesday, January 13, 2010

Is China Ready?

Is China ready to be a real force in the world?

The Chinese government can do whatever it wants, it has been doing so for many many years. So the obvious reaction to Google's letter would be to let Google leave. But that would be 'business as usual', and quite frankly boring and the blatantly stupid move.

What if China played its hand wisely?

If China sat down with Google, facilitating the situation and making some small concessions (i.e. to help track down the hackers, or facilitate in stopping the hacks from taking place). This would be a brilliant strategic move on China's part.

It will show the world, more importantly the prominent companies of the mature economies, that China is willing to facilitate to their needs (to a certain degree). But these concessions are made in such a way, that the Chinese government still maintains its tight control, but simply eases on its 'shadow control'. (Control typically not seen via the media outlets and the general public, but we were all given a peek at via the Google Letter.)

This should be China's play here. If they are as smart as I keep reading about, this is what they will do, if not more.

There is a win/win scenario here, I just hope egos do not prevent the best scenario from happening.


Volatility on the options are sick right now.

Say thank you, and buy GOOG

If you wanted to get into GOOG, do it today.

I will be repositioning my GOOG calls to the 570 March strike, ironically the quote is GOPCN :)

Tuesday, January 12, 2010

Market Thought... charts (hmmmm)

Here is where I see things standing... The Sp500 is near the 14 SMA support, and starting a consolidation.

Within the intraday, the Vix spiked pretty nicely. At one point seeing a +10% gain, but ended the day with a lot less flare.

The combination has me thinking the market can go to the 62SMA.

Then there is GOOG. Despite the possibility that the market can continue to decline, in the short-term,
Google is consolidated and looks really interesting here. I still think the Weekly chart indicated a 'buy' w/the 10SMA, the fact that the daily indicates a buy point, makes GOOG that much more appealing.

The fact that GOOG is probably going to exit the China market matters little to me. The China contribution is not material at the moment. I actually like the fact that they are sticking up for their position.

Market Thought... hmmmm

Reviewing the scenario, I can see how the market declines to the 62SMA, assuming names continue to decline. But again, certain internals do not suggest a big decline.

I will post a more detail description later, with charts. For now, here is how I am playing this thing:

I am maintaining my protection, for now, including the market puts and sold calls. But, and this is a BIG 'but', I added to the GOOG calls. And am strongly considering 165 April GS calls.

Side note: Loving the action in IBM today.

To Goldman Sachs

Go private.

Fuck everyone. Everyone obviously hates you, so fuck us all. Tell us to go fuck ourselves, and exclude us from your wisdom. Do not let anyone invest with you anymore. Do not let the bashers benefit from your strategic decisions. Despite the fact that most of the little and big guys love to invest in you, and most likely are invested within you either in mutual funds or some kind of index fund. (I love how Hank Greenberg, a large client of GS, is so quick to point a finger. Lets not swallow incorrect decisions, lets just blame 'the other guy'. How's that for moral hazard? Its laugh out loud funny.)

Your worth more than 168 a share, and I think you are worth more than the 173 Whitney puts on you.

You can re-enter the public markets after the dust settles, for a lot more money.

Monday, January 11, 2010

Trade - took protection, but still questioning

I took on protection as my triggers were met. However, the trigger was most likely achieved by the re-pricing of the Vix index instead of real decline in fear. Regardless, I protected my positions.

The lingering question still remains... how severe will this correction be? I see AAPL and GOOG with very nice consolidations already. This leads me to question the size of the market consolidation. I have not closed out the bullish call options I have on these names.

Saturday, January 9, 2010

Market Thought... soon

I will be taking on protection soon. The triggers for me have not yet taken place, but it should by next week, assuming the action is what I expect.

Curious to see what happens next week, but if we get favorable action I am looking to close the option positions in AAPL and GOOG at +215 and 618, respectively.

How I will trade GS: if it opens down on Monday, I will do nothing and let the sold call continue to get worthless. If it opens up, and trends up in the week I will look to close the call near 180, and potentially sell the stock near there. (I will re-enter the name once it consolidates, I repeat, I will re-enter the name, to continue the 'sell-calls-income' strategy on GS.)

How I will trade COST: I was hoping for a rally w/its same store sales figures last week, to which I would have unloaded the position. However, that did not happen. Instead, I will sell in the money Feb 57.5 calls against my position next week. I have no desire to keep holding cost during a correction, but if the market corrects, I can pocket the premium from the calls. I do not expect a big decline from the mid 57 level.

How I will trade IBM: Nothing. Will buy March SPY 115 puts, when the timing is right. (These puts will also cover the GS and COST position, if I still have them.)

The one caveat, I do not yet know how sizable this correction will be. At the moment I maybe correcting for some market noise, and the Vix could stay bouncing around current levels. Given the reason for the protection, I take into account the individual stocks I am protecting. For IBM, GS and COST I am not expecting massive declines. All are reasonably priced, and I do not see IBM declining below 127-128, GS declining below 170 and COST declining below 57. So I can not expect the market to see a sizable decline. But I will have a better gauge as to the size of the decline as it is happening.

Thursday, January 7, 2010

AAPL, GOOG charts

Here are the reasons I like AAPL and GOOG here...

For GOOG, the chart that caught my eye was the weekly. Its very near its 10SMA support, and the daily is fairly consolidated at current levels. (Despite the fact that the daily chart does not have real support at current levels.)

For AAPL, the daily has come off its overbought position, and it is off a very nice consolidation.

Trade - GOOG, AAPL

FYI - Pulled the trigger on 210 April AAPL calls and 600 March GOOG calls.

Trade - SQM

I eased up on SQM. The move is nice and fierce today. It is a great long-term story, but the trader in me made me ease up. Will re-enter a position around 40, if a consolidation happens.

Wednesday, January 6, 2010

Market Thought... tug-of-war

Interesting action today. Tech stocks, primarily GOOG and AAPL, were down fairly nicely today, consolidating from their fairly overbought conditions. While others were up fairly nicely. This causing the SP500 to squeeze out a gain.

Basically the internals seemed too balanced to suggest a major move downward.

I am preparing for a market correction. For instance, I know I will be entering the 115 SPY March puts and maybe even enter GS puts if it rallies too much. But today's action suggests we will get a meaningful correction later-rather-than-sooner.

The Techs started to consolidate from their overbought position with today's move. (Probably sell the news due to CES. ) With GOOG and AAPL declining, I am of the bias to enter a position versus add to the selling. Looking at March 600 GOOG calls and April 210 AAPL calls.

I will still look to pull the trigger on selling/protecting if the Vix declines as indicated in my previous posts or individual stocks get too overbought.

Tuesday, January 5, 2010

Google F*cked Up

This 'tit-for-tat' by Google and Apple is interesting. A couple of years ago both had a common enemy, Microsoft. Now, Microsoft products are barely a foot note to Apple's and Google's services and level of innovation. With the former 800lb gorilla out of the way, Google and Apples are testing each others limits.

How did this 'back-slap' fest start? I have no clue what really happened, but I sure as hell think I can deduce how this started...

Apple came out with the iPhone. This is when Eric S. was still on the Apple board, and would 'leave the room' when discussing the iPhone as Google was only working on Android at this point. (Android was far from obtaining acceptance.) With the iPhone facilitating a very quick growing segment, there was no one else to get the mobile phones up to par so that Google can advertise on them.

Google needed to create the Android to create an operating system that would facilitate mobile advertising. Prior to the iPhone, the mobile OS software was SHIT.

Google was smart with creating Android, and help usher in mobile advertising, as the other mobile players (MSFT and NOK) were far from ready to take on the challenge to Apple's level of innovation.

Google royally fucked up when it thought it could beat Apple at its own game. (Look at this CNBC click, at 4:30 into the clip, look how the Fast Money crew just rips into Google... very funny.) Google should not be selling consumer hardware. Leave it to the HTCs or Motorolas of the world. The space moves too quickly for them, and it is too much of a commodity biz for them to even care about it. (Regardless, HTC even helped design the freaken phone so I do not know how Google can call it a Google phone.) So for a 'less than stellar' phone, Google lost a beautiful relationship with Apple.

So now that Google took a direct shot at Apple, obviously Apple has to do the same. Except Apple's shot is going to hurt.

Apple purchased Quarttro (a mobile ad network). Apple has 3 billion downloads off iTunes, 2 billion within the last 2 months alone. Apple can and will stream line their developers, especially those developing the free apps, to utilize Quarttro. It will effectively squeeze out AdMob (and other mobile ad networks) from a majority of iPhones. That is a big piece of the pie Google will not have for these type of applications. This ultimately will hurt Google's wireless efforts.

Kiss and make up big boys, we need both your levels of great innovation. I do not want to return to the world that lacked controlled by Microsoft and Nokia.

(For the record, I really like both companies, Apple and Google.)

Who benefits from this competition... CSCO and QCOM

Trade - IBM, GS

IBM - I entered a second position in IBM at current levels. I do not plan on selling it. Rather I will protect the position with market puts. I would like to hold this one for a long-term trade, especially if I do not need the cash to make short-term trades. Considering it was consolidating for 10yrs, maybe now it will rally over the next 10.

GS - I sold a Jan 180 call against my 100 shares in the AM when GS was approximately 175. (I purchased GS at 170 and change.) The call expires on Jan 15th. If GS is not at 180 by Jan 15th, I pocket an income of 165 (minus fee).

This is not a re-run

Blodget wrote an article criticizing Apples's strategy for its mobile platform. He pretty much asserts that their closed system software/hardware combination for mobile will be their down fall, as it with the Personal Computer.

I couldn't disagree more with his oversimplified, antiquated thesis. Here is why:

1. Apple's closed system personal computer is currently gaining market share. Which means people are tired of the 'off the self' PC/software. (I know I am a switcher, and I will never go back to an 'off the self' PC.) So right away, his 1980's comparison is no longer an argument.

2. The iPhone is not a closed system. iPhone and iTunes is a platform to be built on by other developers. Apple's challenge is to streamline the development process to facilitate the developers. (We can argue the hardware/operating software is closed, but imo, that serves to have a far better functioning phone. I played with the Droid, and other Android phones, but they came far short of the iPhones functionality and capability.)

This 'off the self' PC or 'just sell the software' argument is so detrimental to innovation it kills me. I can argue until my face is blue that it hindered real innovation within the PC space for nearly a decade, and I am sure many techies would completely agree.

Google's entrance into the smart phone market is a good thing. Without them, there would be no competition for Apple. Seriously. All other competitors were asleep at the wheel, and that is why they are getting blown away. Hopefully they can continue to compete to give the consumer better services, but Apple is not slacking in that department.

Sunday, January 3, 2010


Sorry for the confusion. Basically the scenario is this...

The last trading day of the new year saw the Vix spike +8%. That is an impressive spike for the last trading day of the year, along with a flat end-of-year week.

In my opinion, the 8% rise is too strong of a move for a relatively quiet day. It is giving a false sense of fear and negativity. Hence my belief that the final week of the year was a means of consolidation, and the rally should continue.

But the market is a probability game, so despite my belief in a continued rally, if the market continues to decline into next week, the Vix should continue to rapidly rise, indicating a 'buy' signal. That should take place within one or two days.

With a market rally, I still think the Vix will break down to its lower limit to the lower dotted horizontal red line.

To me, this decline in the Vix will indicate market complacency, and that is when protection needs to be implemented. And that is when I plan on purchasing the SPY puts. (The move is independent of time. It could take a day, a week or two weeks.)

With this market move, most likely COST and GS will be in a position to which I will need to sell calls to protect. But confirmation and exact timing will be determined as per the individual charts.