Monday, October 6, 2014

We bought some vertical bull spreads targeted on the 300 strike quite a while ago, subsequently rolling them to give us the position for a net credit of 1.13.  The long side used calls with a Nov 22 expiration that could conceivably be back in play, but I'll wait to hear from subscribers before I attempt to revive the position. At the moment, the rally begun last Wednesday from 235.65 looks bound for a minimum 262.54 (see inset).  This implies that the pullback to its midpoint pivot sibling at 253.95 is buy-able, either via camouflage or with a 'mechanical' stop-loss of about 2.80. If you choose the latter, I'd suggest holding the position to a single round lot.  _______ UPDATE (12:25 p.m. EDT):  The stock has vaulted $7 in the early going, most of it on the opening bar, to trade at a so-far high of 262.49 -- a nickel from my target.  As a practical matter, no one could have gotten long, which is exactly what Mr Market intended.  However, I am still trying to determine how many subscribers may have been long to begin with via the vertical bull spreads we did earlier. We'd given them up for dead after building into them a guaranteed profit of $113 per spread. _______ UPDATE (October 9, 2:40 p.m.):  Unable to pry loose a response from subscribers, I am "de-listing" this tout. Rolling the spread foward as recommended would have produced an additional 0.80 of profit per spread, regardless of what the stock does.

Since the broad averages topped on September 19, a trader couldn't have gone far wrong shorting into strength. There have been two rallies since then, with a third developing as last week ended that seemed to have trapped quite a few bears. My gut feeling is that this rally, too, will fail and that it should be shorted, albeit cautiously. For precise instructions, check out today's E-Mini S&P tout and the chart that accompanies it.  The tout also includes the price at which the futures would become a screaming buy, as well as an odds-on bet to achieve new record highs.

Since September 19, when this vehicle topped at a record-high 2014.50, there have been two failed rallies. Will this prove to be yet another? My hunch is that it will, implying that I do not expect the S&Ps to achieve a new record high.  However, the ferociousness of this short-squeeze rally argues for caution if we are going to attempt to short into it. Keep in mind as well that, were buyers to exceed the #2 peak at 1992.50, the bullish impulse leg this would create will make the December contract not only a screaming buy, but an odds-on bet to surpass the old high. Accordingly, I'll suggest shorting 1966.50 with a 1967.25 stop-loss. The target comes from the one-minute chart, using these coordinates: a=1945.40 on Oct 3 at 8:41 a.m.; b=1960.00 at 9:06 a.m. ________ UPDATE (2:33 a.m. EDT): The futures have lurched higher early Monday morning after oscillating between 1965.50 and 1965.75 for more than four hours.  This is bizarre price action, and we ought not get in its way too aggressively. The rally projects to a minimum 1976.25, implying traders should position from the long side for the moment. Night owls can use the obscure external peak at 1970.75 recorded on 9/30 (30-minute chart) to generate an entry signal camouflage-style.

Netflix has just inked a four-movie deal with Adam Sandler that threatens to shake up the big theater chains by radically altering the way movies are distributed and viewed.  It will allow Netflix to produce movies and to stream them directly to customers’ home entertainment centers and computers, completely bypassing exhibit houses.  The online Washington Post put this ominous headline on the story: “Why the Adam Sandler deal with Netflix could doom theaters…”  Exhibitors, especially big chains like Regal Cinemas, Cinemark and AMC, are understandably upset.  But they needn’t be. When they come to their senses, they’ll realize not only that they have the means to compete with online movie producer/distributors such as Netflix , but to do so in a way that promises to usher in a golden era for the film medium itself. Let me explain. At first glance, it would appear that Netflix has an insurmountable cost advantage over theaters in delivering content to movie-watchers.  Mainly, it takes lots of bandwidth to provide movies-on-demand to subscribers.  And although Netflix pays a very significant premium to carriers to ensure that its subscribers enjoy smooth downloads, the expense of this, even after adding in licensing fees paid to film distributors, is much lower than the cost of building and operating brick-and-mortar theaters across the United States. Regal Cinemas, for one, has 7341 screens in 573 theaters -- a big nut to crack, especially with distributors raking as much as 90% off the top in the first two weeks of a movie’s run. As a result, the theaters have adapted their business model so that their profits come mostly from the concession stand. Lately, as you may have noticed, they’ve upgraded the fare so that movie-watchers can enjoy not just popcorn, Mild Duds and Twizzlers, but a martini and a