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From Mitch King:

U.S. stocks were up throughout the day Wednesday but

gave up almost half of the day’s gains before the end of

today’s session. The indexes opened strong today after

a bond auction in Portugal helped ease fears over

European banks. Stocks later began to sell off after text

of President Obama’s speech on business tax breaks

was made available, and the Fed’s Beige Book showed a

deceleration in economic growth across the country.

From Schaefffer Research:

My view:

As summed by yesterday.. I think the market is scary but today's up is kind of expected. So for the next few days, I will pay attention to the S & P:

It will be in a new round of bounce back (overbought). If S &P can withhold 1090, it can go up to 1130. Or it will retrace back at least to 1040.

Let s watch tomorrow's jobless claim index. A bad number will definitely pull the market down as hard as it can.

Today's market recap - Sep 7, 2010

Today's market review:

VIX: Gap up and close above 200 MA, bullish!

NASDAQ: LH, LL, close with higher volume

DOW: Hit 200MA and pulled back, closed n dark cloud cover with lower volume

	Equity Options			Index Options			Interest Rate Options			Total			Put / Call
Time	Calls	Puts	Total	Calls	Puts	Total	Calls	Puts	Total	Calls	Puts	Total	Ratio
9:00 AM	166277	88909	255186	63962	107725	171687	0	0	0	230239	196634	426873	0.85
9:30 AM	252339	145087	397426	151689	348635	500324	0	0	0	404028	493722	897750	1.22
10:00 AM	336835	192328	529163	181539	373595	555134	0	0	0	518374	565923	1084297	1.09
10:30 AM	407299	236537	643836	223181	447538	670719	0	0	0	630480	684075	1314555	1.09
11:00 AM	467880	266934	734814	252491	491445	743936	0	0	0	720371	758379	1478750	1.05
11:30 AM	503388	294157	797545	279879	538748	818627	0	0	0	783267	832905	1616172	1.06
12:00 PM	539449	321353	860802	298990	860571	1159561	0	0	0	838439	1181924	2020363	1.41
12:30 PM	581461	341237	922698	318601	916836	1235437	0	0	0	900062	1258073	2158135	1.40
1:00 PM	621110	362773	983883	339903	934585	1274488	0	0	0	961013	1297358	2258371	1.35
1:30 PM	664304	394143	1058447	348207	950520	1298727	0	0	0	1012511	1344663	2357174	1.33
2:00 PM	727283	428999	1156282	374126	985926	1360052	0	0	0	1101409	1414925	2516334	1.28
2:30 PM	769925	460232	1230157	414602	1031551	1446153	0	0	0	1184527	1491783	2676310	1.26
3:00 PM	829185	499489	1328674	451354	1204554	1655908	0	0	0	1280539	1704043	2984582	1.33

Final Volume and Open Interest information can be found here.

From the index, the market will move down tomorrow again.

However, the higher put/call ratio from today is frightening, normally higher put/call ratio means the MM may hedge their position. normally Higher put/call ratio is an bullish signal.. So it is weird.

From VV: Renewed concerns over the health of European banks caused investors to dump stocks today, causing the Major Indexes to finish sharply lower. A little bearish.

From Schaeffer research: Senior Technical Strategist Ryan Detrick. From a broader standpoint, he thinks the S&P 500 Index (SPX) will eventually break north of its current range between 1,040 and 1,130, but says the big question will be the catalysts. "I think it'll be two things: better-than-expected third-quarter earnings, and the excitement – whether you like it or not – of gridlock coming to Washington this November in the form of the Republicans in power in the House," he explained.

Calendar (All Eastern times)

Wednesday, 10:30am, Crude Inventories

Wednesday, 2:00pm, Fed's Beige Book

Wednesday, 3:00pm, Consumer Credit,

Thursday, 8:30am, Initial Claims, 470K

Thursday, 8:30am, Continuing Claims, 4

Thursday, 8:30am, Trade Balance,

Friday, 10:00am, Wholesale Inventories, 0.4%

My thoughts: Because last week, it is strong up trend, this week after the 3 day holiday, the MM lose the momentum to test the highest point of last Friday.
But it didn't fill the gap from last week, which indicate the equal power between bull and bear. My view of the market trend is that the bull may last for several days for this up wave. The VV still indicates today is UPUP trend. If tomorrow goes down, I may take some long position.

Today's market recap - Aug 30,2010

Market was down most of the day with very lighter volume.

Historical observation from Cobra:

Bad situation if 2 consecutive down days after an accumulation day, which happened today. If the bull cannot withstand it,, a trending down will be mostly occur. Therefore tomorrow will be an important day to watch.

Market sentiment:

After Friday big up, most of the public thinks that the market will keep the momentum for up trend this week. However, it goes against it and today the market went down most of the day. Even I thought the market should go up today...

My thoughts:

1. Currently dont put efforts on guessing whether market will go up or down,, but rather be flexible to deal with current positions in the portfolio. I still didn't put my money into the market yet, which is good thing for me, at least on a conservative way of investment at this moment because the uncertainty and the timing. Remember, all the managers, funding, institutional investment, even retail public are on vocation or not fully invest yet... Therefore, take the chance to learn from the market and keep notes for what happened is what I am doing now.

2. I am doing the paper trading on Options as well. Today based on one recommendation for buying put on NVDA. I did this on paper trading.. And I will post the results later on track the performance and evaluate the recommendation from this website.

3. I still have the position of MRVL. The situation gets worse for this. Now MA climbed up and the short term starts to be above the mid term and longer term,, which is a bullish sign. Today, the market went down greater than the MRVL. The STO is at high level,, the MACD is up, lighter volume... UP BB is up... PPL are hesitating to take more new position at current price level but they are not either at the mode to dump the position. It s too way up away from the support and the UP BB price is 16.76. I will keep close watch for this price. If it breaks this price, it may be a sign for me to close the position. I am ready any time to close it or will stand for a long time to see if it will turn the direction.

4. According to the observation, there should be a up that may above last Friday's high. So I am very cautious now and be prepared for that to happen and pick bearish side put and open new position.

Calendar for next week (Aug 30 - Sep 3 )

Due to my severe shoulder pain, i may pause for the blog till Labor day.

Here is a forwarding post for this week's calendar:

(http://www.hutong9.net/viewthread.php?tid=92538&extra=page%3D1)

(Mitch King as well)

Monday, 8:30am, Personal Income/Spending, 0.2%,0.3%

Monday, 8:30am, PCE Prices-Core, 0.1%

Tuesday 9:00am, Case-Shiller 20-City Index, 3.5%

Tuesday 9:45am, Chicago PMI 57.5

Tuesday 10:00am, Consumer Confidence, 50

Wednesday, 8:15am, ADP Employment Change, 13K

Wednesday, 10:00am, Const. Spending/ISM Index, -0.7%,53.0

Wednesday, 10:30am, Crude Inventories

Wednesday, 2:00pm, Auto/Truck Sales, 3.9M,5.1M

Thursday, 8:30am, Initial Claims/Continuing Claims, 475K,4435K

Thursday, 8:30am, Productivity - Rev. -1.6%

Thursday, 8:30am, Unit Labor Costs, 1.1%

Thursday, 10:00am, Factory Orders, 0.3%

Thursday, 10:00am, Pending Home Sales, 0.0%

Friday, 8:30am Nonfarm Payrolls, -118K

Friday, 8:30am, Unemployment Rate, 9.6%

Friday, 8:30am, Hourly Earnings, 0.1%

Friday, 8:30am, Average Workweek, 34.2

Friday, 10:00am, ISM Services, 53.2

This week will be a "nuclear power"-driven week:
Monday, Aug. 30
8:30 a.m.: PCE inflation gauge for July, at the Commerce Department.

Tuesday, Aug. 31
9 a.m.: Second-quarter bank earnings, released by the Federal Deposit
Insurance Corp.

10 a.m.: Consumer confidence for August, released by the Conference Board.
8 p.m.: President Barack Obama addresses the nation on the Iraq war, from
the White House.

Wednesday, Sept. 1
8:15 a.m.: ADP employment report on private payrolls for August, released by
Automatic Data Processing.

10 a.m.: ISM manufacturing index for August, at the Institute of Supply
Management.

Thursday, Sept. 2
8:30 a.m.: Weekly jobless claims, at the Labor Department.
8:30 a.m.: Second-quarter productivity revision, at the Labor Department.
10 a.m.: Factory orders for July, at the Commerce Department.

Friday, Sept. 3
8:30 a.m.: Nonfarm payroll and unemployment report for August, at the Labor
Department.
10 a.m.: ISM services index for August, at the Institute of Supply
Management.

How to sell a "covered call" - For Friend 01

Someone ask me how to sell covered call. As this question has general meaning, many people may have same question, so I post here with more detail answers, Hope this will help.

Q:
Ask a dumb question: how to apply "covered call"? from where broker? Thanks in advance.

A:
1. First you need to apply option trading capability in your account from your broker or trading firm. Sell covered call is the lowest level in option trading and has the least risk comparing other option tradings.

2. Option is the proxy of stock, it is a right to buy/sell certain stock in certain time period at fixed price. （ Strick Price）
To sell covered one call you should have at least 100 shrs underline stock. One call contact represents 100 shrs stock. One call contract means you have the right to buy 100 shrs of the stock in certain time frame at fixed price.

Sell covered call is just opposite of buying call.
By selling a call contract to a buyer, you have the obligation to provide 100 shrs of underline stock in certain period of time at fixed price. Since you already have underline stock, so your sold call is "covered" by your stock.

If you do not have stock, you still can sell call, but the call you sell is "naked" meaning the call does not has underline stock to cover. If buyer want to use his/her call contract to buy stock, you have to buy stock from market and provide these shares to the buyer at pre-defined price. （ or contact price.） For example. You sell a $50 August call of ABC stock at $2 and stock price is also $50 at the time. 10 days after you sell the call, the stock price went up to $60, the buyer has the right to buy 100shrs ABC stock from you at $50 regardless current stock price. You have to buy 100 shrs of ABC from market and deliver those shrs to the buyer at $50/shr That is dangerous if you are not seasonal trader.

3. After you done 1 and 2, you are ready to sell covered call. There are two parts to decide call price: 1）Intrinsic value 2） Time value which also related to Implied Volatility （IV） of the stock.

1） Intrinsic value: example: stock price is $50, for $45 call has $5 intrinsic value. （50-45=5）
2） Time value: The longer time period of contract contain, the higher time value of contract will have. Example: stock price is $50, For $50 call, there is no intinsic value but only the time value. August $50 call price is $2, so the time value from now to 8/15/08 （OE day） is $2. For Sep. $50 call it cost $3.

You can sell 1 August $50 call and get $2. By 8/15/08, if stock still has price $50 or under, you get $2 as the call contract expired worthlessly. Since you still own the stock, you can sell next month call again.

The IV plays important role in option price. High IV means stock price moving very quick in either direction. High IV generate high time value of the stock option.

For the covered call seller, the best time you sell the covered call is when IV has spike and option become very expensive. Seller has good chance to get profit. For the buyer, just do opposite of it, buy option when IV is low.

Normally, sell next month covered call is the best interest of seller. Because option time value decay within 30 days increase exponentially.

To calculate option price is rather complex, Fortunately there is a Option Price Calculator which can help you to get estimate option price. （Check end of this post.）

SKF August 170 Call this Morning when stock price at $147


4. Something you should know about selling covered call.

Selling covered call is not risk free operation, in general there are two risks involved in this strategy:
1） If stock fall sharply after you sell covered call, you can not cut loss by selling the underline stock.
2） If stock up significantly after you sell covered call, you can not sell the stock before OE to lock in the profit.

It is not suitable for downside protection, since the premium is limited. For those stocks which has singnificant down side risk, this strategy is not suitable.

It is also not suitable for the stock which has significant upside potential in near term, become it locked up underline stock until OE. Share holders could miss good profit opportunities.

This strategy is suitable most for those stocks which moving in a range and having a positive slop in general.

Option Price Calculator:
http://www.hoadley.net/options/optiongraphs.aspx?divs=Y

(forward from: http://web.wenxuecity.com/BBSView.php?SubID=finance_best&MsgID=11098)

Head and shoulder pattern - Aug 26,2010

SP500 Wave III-1 down started on 8/9 at 1130, wave (3) will be

done tomorrow or early Monday, then (4) up to 1055-60 mid of

next week. The end of wave (5) will be below 950 before

September ends which will conclude wave III-1. Enjoy the ride.

(http://www.hutong9.net/viewthread.php?tid=92222&extra=page%3D1)

Today the market opened high and closed at the low. S&P and DOW

formed a bearish outside day. Nasdaq and Russell back tested the S&H

neckline. The big picture is that market remains bearish, traders sell every

rally. Tomorrow we will have the Q2 GDP second estimate. Market expects

1.4%, but many people think the number is less than 1% all the way down

from 2.4% when it was first reported.

Tomorrow's market guessing - Aug 27, 2010

Today's one news from Forum:

There were massive paper sell orders on the cash close right on 4PM by MS, JP, GS, Chi Corp (used to be ABN AMRO as a lot of people have been private-messaging me asking what Chi Corp is). I counted at least 2000 cars sold (roughly 500 cars each) on the cash close. This is not a good sign for tomorrow. I suspect the institutions are expecting (or already known through their contacts) for a much worse than expected GDP estimate revision.

(http://www.hutong9.net/viewthread.php?tid=92232&extra=page%3D1)

So we expect another down day for tomorrow?

However, according to Cobra, now there is a pattern formed that on bullish reversal day followed by Dark Cloud Cover, which happened previously that indicates tomorrow will be a up day. Let s see.