Sell BA (buy back put)

Sell BA (buy back short BA Aug 100 put)

Market action is not good. I am taking my loss and standing aside. Back to 100% cash.

Buy BA Boeing (Sell BA Aug 100 put)

Buy BA Boeing (Sell BA Aug 100 put)
BA had nice earnings and new plane launch is relatively smooth, considering that it is a ten-year-long project.

Days like this

That old 50s song, "momma told me there would be days like this," comes to mind.

Sometimes I wish I was one of those paper traders that reports their trades after the market action is history. On days like today, a person could make a theoretical ten times on their paper money. In the real world, only a few folks made money today, most lost money.

SHLD Sears-Kmart continues to slide. The puts I sold for more than a double in one day, doubled again from where I exited. That is not a good feeling. A better feeling is being 100% in cash in my trading account when the market gets hammered. Yes, some shorts made money hand over fist today. However, some of the big name stocks that have been leaders on the way up, such as AAPL, BIDU, CROX obliterated the shorts during this week of broad market declines.

Some perspective

I don't think the low is in. I did look for at least a 5% decline from the 14000 Dow top, didn't know it would happen so quickly. As almost always, I expect a retest of the lows, at least on an intraday basis. In the chaos, WFR emerges as a buy side candidate.

Adams option blog has some stats that indicate some short term upside (search for Dr. Brett reference saying on average similar declines are followed by a 1.0% up move in the next five days).

Money manager Random Roger (link) talks about the need for an exit strategy before the market is moving and adds that:
A bad few months will happen over and over in our investing lifetimes.

Buy SHLD Sears-Kmart (sell puts)

Sell SHLD Aug 140 puts
I cover my short position, well off the lows of the day, still a nice gain, especially for a one day holding period.

All cash for now.

Sell TXN (buy back short puts)

Buy TXN Texas Instruments Aug 35 puts (closing trade). I close my TXN Texas Instruments position for a loss. Don't like the chart action and market action. Overseas, a big Japanese chip maker reported poor results.

Sell RJET Republic Air

Sell RJET Republic Air for a loss. Ouch. I've had enough and am cutting and running.

Short SHLD Sears-Kmart (buy puts)

Short SHLD Sears-Kmart, by buying SHLD Aug 140 puts

I'm taking a flyer on these puts. SHLD chart looks terrible, I suspect buying is mostly company buy backs and selling is from funds. Earnings were a disaster, retail group is weak. Overall market has a whipsaw higher opening.

Elsewhere BA Boeing and AMZN Amazon lead a long list of stocks moving on earnings.

Positions: long TXN, RJET, short SHLD

Big Bananas

Most longs get a big banana today, with a steep decline in many stocks. AAPL leads the way down on reports of slower than hoped for sales of the new IPhone. TXN also gets hammered on a so-so earnings report. The puts I sold yesterday, edge up 6 cents in value (that's a loss for me) on a $1.66 decline in the shares.

TXN illustrates how difficult it is sometimes to buy options and make money. Even a steep down day with the entire market in the tank, and someone buying that put yesterday is about break even with that 6 cent gain.

I am tempted to buy puts on SHLD, or to do some kind of bearish spread on AAPL. I remind myself, that I am not that adept at navigating fast moving markets. The exception is to get out of a position before it collapses. I had opportunities to close the TXN puts at break even minus commissions, and the afternoon decline took that away from me.

I am still long RJET and that got hammered, partially because JBLU went down on its earnings.

Buy TXN Texas Instr (sell puts)

Buy TXN Texas Instr (sell Aug 35 puts).

My previous position was called aways at expiration. I roll it forward at the 35 strike. This is equivalent to putting in a buy order at the 35 level.

Still holding RJET Republic Air, earnings due out next week.

Winners and losers

CAT and GOOG are among many well known losers on this tumble down Friday. However, quite a few name stocks are up, including AAPL, BA, ISRG.

One of the more interesting winners is TPX Tempur Pedic.

After today, I will only have RJET Republic Air long. TXN is called away for a reasonable profit, and the short M put expires worthless, so the bunt single worked out.

Random Roger writes about some warning flags (link) pointed out by John Hussman, then adds this:
>>
Bear markets come so infrequently that guessing on the next one in a meaningful way is like to be the wrong trade.

>>

I see this as similar to short term traders trying to call a top, instead of selling after a top is in place. Roger is waiting for the indexes to break their 200 day moving averages, something that some folks use as an indicator of the long term trend.

Buy M Macy's (sell puts)

Buy M Macy's (sell the July 40 puts). Macy's is up on takeover speculation. Expiration is this Friday, and 40 is support. Worst case is that Macy's plummets 10% by Friday and I get exercised, and have to buy the stock at 40. Best case is the option expires and I pocket the modest premium. In baseball terms this is like seeing the third baseman playing back and trying for a bunt single. Odds are good for the skilled bunter, however, the reward is modest, the bunt single.

My TXN Texas Instruments is likely to get called away this Friday at 35 (currently 38). I also have some RJET Republic Air stock unhedged.

For the most part today's market decline looks orderly and much needed. Railroads are up as a group on takeover rumors.

Stress test--20 questions

A "stress" test originally from the Traders Catalog and Resource Guide in a piece titled, "Killer Stress, Psycho-Drama & War-Zone Markets." Recently at Marketwatch, Paul B. Farrell (link).

>>>
Answer each question "Yes" or "No" and keep track of each:

1. You've tried more than one new investment strategy this year?
2. Feel you're buying and selling funds at the wrong time?
3. Rarely open up to anybody for feedback about your losses?
4. Subscribe to two or more newsletters, feel overwhelmed?
5. Can count on one hand all the good laughs this week?
6. Have a lingering resentment about someone or something?
7. You love cable news, but need more extra time to trade?
8. Rarely break a sweat when exercising the past few weeks?
9. Wonder whether you bet too much on recent investments?
10. Need more than three caffeine and alcohol drinks a day?
11. Feel "something" keeps you from making more money?
12. Frequently don't trust your instincts or your strategy?
13. You've had a major family or personal loss recently?
14. Believe losses are caused by the market manipulators?
15. Are you overweight and snack often on comfort food?
16. Fear future trades may fail due to a losing streak?
17. Diet and sleep are disturbed by worries about money?
18. Your retirement portfolio's not growing fast enough?
19. No vacation in a year, and lack an active social life?
20. Nothing (or everything) interferes with making money?

Now grade yourself. Add up the number of yes answers. If the total of your stressors ("yes" answers) is eight or more, then short-term trading, market timing and shorting are probably too stressful and risky for you at this time.

Dow 14000--are you on board?

The bulls continue to run. There are quite a few folks left behind, or worse short in this market. The train has left with a lot of people at the station. I am in the left behind crowd. The easy thing to do would to be to buy whatever is moving. The stubborn thing to do is to try and call "top" and start shorting. Probably the smart thing to do is to continue to sit on the sidelines and continue to look for safe entry points.

While a rising market doesn't lift all the boats, it sure helps.

Irrational exuberance? No, says Hulbert

Mark Hulbert writing for Marketwatch (article) says his newsletter sentiment indicator is bullish. Despite the rally, newsletter writers are actually becoming more and more cautious. I confess, that my gut feeling is also in this camp, that I think the rally is overdone and more downside is imminent. I looked at quite a few puts (bearish bets hoping for a decline) today.

I hate to buy into runaway strength. However, right now, that would seem a better play than buying puts. I often write that calling top is a losing game, and at this time that would be exactly what buying puts would be, a bet that I can call the top.

Good thing the weekend is here. Enjoy the long summer days.

Freedom, lifestyle and money

Market has a buy-the-dips rally. I am not impressed by either the bull or bear case. Monthly seasonality points to a dip next week. Let me again, disclaim that seasonal patterns are near the bottom of the barrel. Earnings, interest rates, technicals, assets, all rate ahead of seasonal patterns.

Ben Stein interview discussed on Random Rogers blog (link). Roger goes on about how living below ones means a person can withstand almost any financial storm.

>>
the point that he [Stein] made was that "liquid assets equals freedom." He used that phrase several times and then went on to talk about the importance of saving. He quoted his father as saying liquid assets equals security and living beneath your means equals freedom.

SHLD Sears/Kmart irrelevant?

SHLD Sears/Kmart gets hit hard today on earnings news. They also announce a $1 billion stock buy back. Seems foolish in the face of that news and the run the stock has had. I was tempted to buy puts on this one, but did not pull the trigger.

Market seasonality points to more volatility until September.

Positions long TXN hedged, RJET unhedged

Impulses AMZN, BA, FDX

AMZN Amazon up on little news. BA Boeing up on the official launch of its 777. FDX Fedex up on rumors of a buyout making the rounds at Barrons. My impulses are to short AMZN, buy BA, and do nothing on Fedex. Usually, when I get these ideas, they are the wrong thing to do so I am ignoring them. AMZN is a much higher percentage short on a new high. BA a much better long on a pullback towards the base on 90, possibly when some glitch in the new plane comes to front. It is very unusual that a long term project such as a new airplane goes out without nary a hitch. FDX looks like it is stuck in a range.

AA Alcoa is first out of the gate with earnings, and they are good but not great.

Russell changes opinion on gold

Marketwatch reports that Richard Russell is now saying to put new money into stocks instead of gold (article).

>>>

Richard Russell, editor of the Dow Theory Letters newsletter, believes we could very well see a continuation of these trends in coming months. As a result, he is now recommending that investors allocate any new monies to stocks rather than to gold.

This will come as something of a shock to gold's defenders, since Russell for several years now has been favoring gold over equities. But, on the basis of his technical analysis of gold and stocks' relative strength, Russell has changed his mind.

Russell bases his technical analysis on a ratio of the DJIA to gold. This ratio hit its all time high in mid 1999, for example, at around 43.85-to-1, which meant that "one share of the Dow would buy 43.85 ounces of gold.
By May 2006, in contrast, this ratio had declined to 16-to-1."

Buy RJET Republic Airlines

Buy RJET Republic Airlines

Airlines as a group getting a nice bounce off news from CAL Continental. RJET has their own news and that is holding the stock back. However, unlike many of the other airlines the RJET chart is still strong. This is a small unhedged position. The stock trades a bit thin at times and options have a wide-wide spread.

Positions: TXN hedge long and RJET long

A bad feeling

The worst feeling for a trader is a position that goes against you. Another bad feeling is when you failed to pull the trigger on a stock and it explodes higher. Most recent example is RIMM Research in Motion.

Elsewhere the broad market is higher, gold rallies, ODP Office Depot lower on slowing sales.