April 2009

Let's try once again to short two April 135 calls (GSDG) against our position, since this strategy will be nearly riskless for us.  Offer two calls short for 0.98, day order.  _______ UPDATE:  The calls were an easy sale at our price, so we'll add them to our position.  Since we held April 130 calls to begin with, we have effectively legged into a vertical spread that can produce a profit of as much as $464 per but a loss no bigger than $36 if GS collapses.   Now, let this moron-driven stock do what it may, since we are all but guaranteed a profit regardless of whether it's trading at zero or $200 come next Friday.

Don't look for me in the chat room later this morning, since I'll be celebrating Passover at a morning minyan. To those of you who observe this Jewish festival holiday, may I extend my cordial greetings and best wishes  for a joyous seder.  Concerning the markets, I have forecast a dull end to the week but there is something to do in Microsoft nonetheless -- the first Pick of the Day trade I've offered in a while.

If Microsoft were going anywhere other than lower in the months ahead, it would have surpassed early February's 19.93 high on the last thrust. Instead, the rally sputtered out at 19.89. Accordingly, Let's try to build a relatively low-risk, bearish option position for the long term by calendar spreading a far-out-of-the-money strike. Start by bidding 0.68 for four

Gold spent yesterday in gratuitous spasms that added nothing to the short-term bullish case. A murky Hidden Pivot target at 896.00 can be used as a minimum rally objective, but I wouldn't recommend shorting there. Getting to that resistance

There was nothing the least bit impressive about yesterday's upthrusts, although shorts should be wary of bullish seasonality ahead of the long holiday weekend. At the bell, the futures looked bound for 833.75, just eight points above

The back-of-the-napkin numbers sketched out below are the handiwork of our good friend Doug B., a stockbroker who not only helped his clients dodge the bullet of recession/depression, but who also brought them some tidy returns on their portfolios last year. Doug got his clients out of stocks and heavily into Treasurys before the latter took off in 2008, and he has since redeployed the proceeds aggressively in municipal bonds.  During our lunch together on Wednesday, he presented a very persuasive case as to why only an imbecile or someone enthralled by Larry Kudlow could possibly think the stock market has seen its ultimate lows.  The fatal problem for that kind of optimism, he says, is, in a word, capitulation -- or rather, the absence of capitulation in a bear market that so far has been marked by more or less orderly declines the whole way down.  Indeed, we should ask:  How could the stock market have hit bottom if everyone who was on board at the top is still on board? And everyone is on board, for sure, if you parse some of the key numbers circled in red on Doug's tablecloth pastiche (which, incidentally, he drew and labeled upside down). The first number notes that in January 2008, when the S&Ps were in the early stages of what was to become a devastating collapse, domestic equity mutual funds were worth about $6.5 trillion. Lo, a little more than a year later, in February 2009, we see that the value of these funds had fallen by about 48%, to $3.4 trillion. But guess what: Over that time, net redemptions totaled only 2%, or about $100 billion! What that means, explicitly, is that mutual fund investors have stuck with this bear market throughout the decline.  Wholesale Dumping Ahead So, do we

We looked at the E-Mini S&Ps, Gold and Wheat futures on a day when big opportunities appeared scarce. Even so, there were a couple of good "camouflage" opportunities that would have allowed nearly riskless speculative entries with-the-trend.

The futures were in a labored uptrend, inching toward a minor target at 894.10 around 2:40 a.m. This Hidden Pivot can serve as a minimum rally objective for night owls, but if it's exceeded by more than $1, the next meaningful threshold would be at

For educational purposes, and to make a little money, we'll attempt to leg into a far-out-of-the-money calendar spread -- the September 260-May 260 put spread. A single spread has the potential to produce a profit of as much as $4,000 between now and September, but if we play our cards right our risk could be no more than a tenth that.