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Flip Flop Friday - 2% Up or Bust!

Submitted by ilene on 08/05/2011 12:07 -0400

Flip Flop Friday - 2% Up or Bust!

As the great John "Hannibal" Smith used to say: "I love it when a plan comes together."

Of course Smith's plans usually involved a great deal of mayhem culminating in things blowing up - very apropos considering the massive market blow up this week. The plan in Monday Morning's Alert to Members, which was titled "Cashing in Longs and Back to Cashy and Shortish" was pretty straight-forward:

If you want to play this rally for more upside, you can still short the VIX (we did the Aug $19 puts on Friday for $1, now 1.20) or play gold down with the GLL Aug $22s, that are still .35 or the GLD Aug $155 puts at .72 BUT I’m not really believing things are fixed so these are SPECULATIVE plays to follow the rally – WHICH I DON’T BELIEVE IN. Clear?

What I do believe in is shorting the Dow with DIA Aug $119 puts at $1.20 or the SQQQ Aug $21/23 bull call spread at .85, selling the Sept $19 puts for $0.55 for net $0.30 on the $2 spread.

USO Weekly $38 puts are $0.44, 20 of those in the $25KP for $880! (longs are, of course off).

Let’s be straight about that, all the short-term longs, including the ones in the Income Portfolio – are DONE. This was the pop we hoped for and now it’s done and back to cash!

The VIX puts are, of course dead with the VIX now at 31.66 but the Aug $22 GLL calls are still .15 (down 57%) and the GLD Aug $155 puts are now .95 (up 32%) thanks to the rise in the VIX. As for the trade ideas I believed in: The DIA Aug $119 puts are $6 (up 400%) and the SQQQ Aug $21/23 spread is now $1.60 while the Sept $19 puts have dropped to .15 for net $1.45, which is up 483% for the week and the USO weekly $38 puts are now $2.64 (up 500%) with 20 of those netting $5,280 off an $880 investment. THAT's what I mean when I say "I LOVE it when a plan comes together"!

On Tuesday afternoon I was live on the Business News Network at 3:20 and I laid out the macro plan for the viewers. It's just the condensed version of what the Members and I had been discussing for weeks and it all came to a head yesterday morning when the BOJ disastrously picked that morning to manipulate the Dollar higher, which sent the PRICE (but not the value) of US equities falling off a cliff.

We took many bearish positions during the week, up to and including yesterday. Our logic is that, even if the jobs numbers are good (8:30 update - up 117,000), they won't be enough compared to last month's 18,000 and "good" jobs numbers push QE3 back off the table and the economy is STILL a disaster so this does not "fix" our overall problems.

Nonetheless, we did play the futures up this morning as my 3:30 am Alert to Members suggested oil futures could be played over the $84 line (now $86.80, up $2,800 per contract) and gasoline could be played over $2.70 (now $2.78, up $3,360 per contract). As chat moved on we went long on the S&P over the 1,200 line (now 1,207, up $700 per contract) and the Russell at 720 (now 730, up $1,000 per contract) and finally, we picked the Nikkei long off the 9,300 line and they spiked up past 9,400 on the jobs report before stopping out (up $500 per contract). So, as usual, you get, BY FAR, the most bang for your Futures buck from oil and gasoline but they are very, very dangerous contracts to trade!

We are in take the bullish money and run mode in the futures, and will be at the open if we get a good relief rally. It's 2% or bust today as that's the WEAK bounce we expect off the 10% drop in our indexes. Europe turned around a 3% gap down at the open and, at 9am, we have the FTSE and DAX down less than 1% and the CAC up 1% - we'll see if that lasts into their close at 11:30. The Dollar fell from a high of 75.65 yesterday (Yentervention) to 75.20 today so that's half a point that our markets SHOULD be up based on price alone. That makes the little 0.7% pop we got off the jobs numbers less than impressive so far.

We are also taking the bearish money and running as our goal is to get cahsy and neutral this weekend because CASH IS FLEXIBLE and we will have a lot more information next week to place our bets on. I will be updating our very popular Income Portfolio as well as our $25,000 Portfolio (around $60,000 virtual dollar now!) over the weekend and we will discuss our strategy going forward but, for today, let's be happy to get back to cash and not try to force things. That was our plan when we topped out at the end of June and now we are - HOPEFULLY - at the bottom of our range - but we won't know that until these levels hold up through Tuesday's Fed announcement.

Until then, a wise prognosticator knows when NOT to prognosticate!

Have a great weekend,

- Phil

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Tue, 09/13/2011 - 23:48 | 1666344 chinawholesaler

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Fri, 08/05/2011 - 14:19 | 1527756 SwingForce

Prognosticate when you feel like it, whatever you do in the privacy of your own home .....

Fri, 08/05/2011 - 14:12 | 1527642 JW n FL

THE FORMER PRESIDENT OF THE WORLD BANK, JAMES WOLFENSOHN Explains how Americas Production / Manufacturing has been and is continuing to be cut into pieces and moved off shore. This is very much worth your time, if you are from the West or planning on living in the West.

http://www.youtube.com/watch?v=mOwZwkhFemQ

America was sold off to the World.

***** “Over the last ten years, China has mounted the biggest challenge to the U.S. manufacturing sector ever seen, threatening producers of steel, chemicals, glass, paper, drugs and any number of other items with prices they cannot match. Not coincidentally, the United States has lost an average of 50,000 manufacturing jobs every month during the same period.” *****

http://blogs.forbes.com/beltway/2011/02/14/intelligence-community-fears-u-s-manufacturing-decline/

The United States has shipped over 7 Million Manufacturing Jobs to China in the last 11 years.. along with those 7 Million Manufacturing Jobs the Tax Base that those 7 Million Manufacturing Jobs Represent. If you look at a 25% tax bracket for $50,000 dollar average pay.. over 10 years.. works out to $7 Trillion Dollars or Half our National Debt.

http://www.youtube.com/watch?v=6a0zhc1y_Ns

Former World Bank President: Big Shift Coming

James Wolfensohn, former president of The World Bank and CEO of Wolfensohn and Co., addressed Stanford Graduate School of Business students with details about his work at the World Bank during its transition years and how the equation between developed and developing countries is changing. Wolfensohn claimed that in the next 40 years, a global power shift will see today's leading economic countries drop from having 80% of the world's income to 35%.

http://gsb.stanford.edu/news/headlines/vftt_wolfensohn.html?cmpid=yt

Global Speaker Series: http://www.gsb.stanford.edu/gmp/speakers/index.html

Recorded: January 11, 2010

Fri, 08/05/2011 - 13:51 | 1527638 JW n FL

Cyber Threat Resembles Pre-9/11 Terror Threat, Says Former CIA Counterterrorism Chief

Government leaders don't understand the gravity of the threat of cyber attacks or the implications, ex-CIA official tells Black Hat attendees.

http://www.wallstreetandtech.com/data-security/231300305?cid=nl_wallstreettech_daily

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On Aug. 4, BIDS saw volume hit 136 million shares, its fifth day with more than 100 million shares traded since the dark pool first passed that milestone on July 21. BIDS' average daily volume in July was 72 million shares, up from about 65 million shares in June. (BIDS double counts its volume, a standard practice for dark pools.)

http://www.tradersmagazine.com/news/bids-new-highs-dark-pool-ats-108013-1.html?ET=tradersmagazine:e974:55405a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=tm_weekly_080511

Fri, 08/05/2011 - 12:49 | 1527400 Arch Duke Ferdinand