Monthly Archives: February 2012

Respect

During my morning reading, this morning… I stumbled on a confession (surprisingly I don’t stumble on many) and it started me thinking. To be an anonymous blogger, to write his/her anonymous diary; wouldn’t that opportunity be a very strong incentive, maybe spawn an entire blog-style or a blog-based therapy? There are lots of people, catholic or not, who could use a good place to confess. Strangely the contrary seems true, pseudo-self-promotion (unhealthy) outshines the cathartic (healthy) act of autobiographical writing (confession). I get the impression that blog-traffic is becoming the social equivalent to a mid-lifer’s red sportscar. This particular curiosity makes me also wonder whether confessions are effective – for the confessor. At the extreme, why do we have a fundamental need to communicate, identify, and structure our own suffering? Joe the plumber, an anonymous blogger, the death of a journalist retrieving her shoes, Bernie, Michael, Jim, Marilyn, Curt.

I was surprised with the honesty from this anonymous blogger, obviously smart, at one of life’s crossroads, sitting at mid-life with structured thoughts and labels for his suffering, even a treatment, his post isn’t selfish, it’s even lyrical. So why is this self-expression so important? I don’t have THE answer, but to ask yourself why you are doing, whatever you are doing, seems simply smart to me and the act of expressing an answer, whatever it might be, equally smart. So here you have it:

I’m writing a blog for reasons maybe I’ll never understand, though my reasons today ring as justification: I’ve stepped aside from the traditional employment treadmill and seek reassurance that I’m moving forward, that I’m learning, that I’m getting smarter, that I’m solving a puzzle, that there’s structure hiding under the chaos; and I’d like to earn enough to eat.

Am I writing this blog as a confession masked in option trading ideas?

Justifications/excuses become second nature when you spend enough time in France, so therefore if I am masking a confession in an option trade, it’s important for me to come up with a name for this syndrome, at which point if I fail, I’ll be able to confess, identify the temptations, and treat other’s with my condition. What should I call this imbalance, this syndrome? It’s clearly psychological with a few grams of intellectual inferiority mixed in.

I identify with bits of each of the following:

  • Tourettes
  • Othellos
  • PTSD
  • Imposters
  • Napolean
  • Stockholm

Therefore my syndrome should be called TOPINS Syndrome. The wiki-definition will read: A post-traumatic-social-anxiety disorder associated with a European country manifesting itself during a culturaly accepted addictive activity (trading) or under situations of unconscious confession (blogging).

Good Trading.

EFA Shocking

EFA

The Index has been developed by MSCI Inc. as an equity benchmark for its international stock performance. The Index includes stocks from Europe, Australasia and the Far East. The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index.

Look at the option volume for the May contracts.

Today there was 232,000 puts traded and 14,000 calls.

This looks very bearish for international stock performance, combined with the ongoing spike in oil. Someone is betting big on a downward move in this ETF. The active contracts are the May 52 and May 43 puts.

 

Crude Futures Weekly Chart

Gold and Silver Spike

Thinking still about warning signs, GC_F (Gold Futures) have spiked 1% in the last 30 minutes. Gold is nearing it’s all time high of $1900. Remember the paranoia? The talk of a bubble? We are not hearing any of that now.

Why the spike on no news? It’s hard to say, but either big buying or safe buying. If it were safety plays you would see an inverse relationship in the equity markets, which you don’t. So it’s a big buyer (or buyers).

Three charts which are playing contrary to the market:

Crude Futures CL_F

Crude Futures Weekly Chart

Silver Futures SI_F

Silver Futures Chart

Gold Futures GC_F

Gold Futures Chart

SPY Warning Signs

SPY Troubles Ahead

The following are a few of the futures contracts I watch:

SPY Warning Signs

As I’m writing this the SPY is falling and Gold/Silver/Oil futures are rising. I’m reading this as a warning sign for the markets. I spoke about the VIX recently, here.

One explanation for this divergence is inflation. Central banks are printing, cash is being hoarded, the dollar is rising and corporate profits from europe are therefore vanishing. Add Greece debt to the mix and the strong possibility that they default, you add the inflation worry to the list and talking points for politicians, media, and market watchers.

Now take gas prices which are starting to come up as an election issue, even a war issue. Frankly high energy costs are a good excuse for the market to pull back, don’t forget that the media will be playing this up, mixed with war mongering, and as an election issue that’s low-hanging fruit and an easy way to scare off the recent retail investors market participation.

As a trade idea a SLV 40/50/60 butterfly at Jan expiration is one I’ve written about here and I still think this is a very prudent trade. Keep a close eye on USO as well.

Good trading.

VIX Chart

Is the VIX Flashing a Warning Sign?

For the entire length of this 3 month rally, the upward steps have lingered under 1% and usually under .5%. Only in the last 10 days has the VIX started to signal caution. The VIX is now solidly over 20 and approaching it’s recent high of 22.

Yesterday at the close we saw an unusual large pop at the close, and today we saw AAPL collapse 25 points in 5 minutes. AAPL lost it’s luster very quickly today, and that’s worrying… Euphoria is the word I’d use. Everyone has AAPL, literally, so sell. It’s hard to write that, given how popular, rich and well regarded that stock is. For how long the euphoria might continue is hard to say, but I read here that they accounted for 90% of the gains for the NASDAQ in yesterday’s trading. Strange. Buy some protection if you’re long AAPL.

VIX Chart

Option expiration is coming up this Friday, and tomorrow’s PPI and claims numbers risk to add fuel to this VIX fire.

NTAP Trade Idea

Look at the IV pre-earnings for NTAP. The front month is 158 and back month is 59.

You can sell the Feb 39 for ~2.00 and buy the Mar 39 for ~2.50… The spreads are .06 on each.

Currently: $38.82 Earnings after the close tomorrow. I’m aiming low, I’d like to see how this plays out.

VIX Chart

Something is about to happen

Complacency is the adjective I would use to describe the current state of the markets. With the exception of GLD and SLV the markets feel less paranoid than they should, less afraid. Maybe there’s reason to be optimisitic, apparently the ECB has things back under control atleast in the credit markets. But there’s a few charts which are telling me, watch out…

Take the VIX which is sitting at nearly 1 year lows. Doesn’t it seem like something is going to happen which will motivate some insurance buying? Take Syria, Greece, the US debt politics, Iran, corporate earnings, etc. There’s a fair amount of risk still in front of us. Straddles might be the order of the day, or VIX futures?

VIX Chart

Look at the SPY and depending on your timeframe, some pullback here can only be healthy. We’re also sitting at some high range resistance. I wouldn’t be surprised if we bounce off this 135 level on the SPY.

SPY Chart