Monday, February 3, 2014


Welcome to your new job, Ms. Yellen! Hardly the best way to start your first day on the job, with Mr. Market dropping like a rock. With all hubris aside, it is comforting to know that the investment strategy(s) I have been extolling for the past 5 years - Deep-In-The-Money COVERed Calls, and more recently, LEAP Strangles (OTM puts and calls) are doing splendidly in this environment.
With the DJIA down over 1200 points so far in 2014 (SPX down over 100), a report card of my 27 fully invested positions show 8 DITM positions, only one Under Water; of the 19 Leaps, 7 are still in the call-away area (max profit), 9 in the sweet spot, between the put and call strangle, and only 3 precious metal stocks Under Water, with 2016 as the expiry date. Having missed the unexpected 30% runup in stocks last year, it did provide a cushion or hedge against the inevitable.

Sentiment extremes include the record margin interest, updated last week to $445B, huge Insider selling (see below) 215 sales, with only 40 of the from ESOP exercises by officers and board members; 40 is also the number of sales by 10% holders. Coincidentally, the per cent of AAII Bears surpassed Bulls last week (a/o Wednesday), historically more reliable than the Inv. Intell. Bull/Bear survey.
Also in the monthly update was ETF totals, with Equity up over $1T; Int'l and Bond ETFs were frozen.
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Here are the numbers:

Date> 1/31/2014 1/24/2014
Indices: DJIA  15698 15879
  NAZ  4103 4128
SPX  1782 1790
WklyVolume (Bshs). naz/ny 10.9/3.7 8.6/3.1
Specul.Ratio hi=bullish 2.95 2.77
Sentiment: put/call-CBOE  57 61
VIX>50-alltmlow=8.8 18.4 18.14
Advance/Dec-NYSE.. 1451/1756 1088/2130
Weekly Net: -305 -1042
     Cumulative: 153800 154105
Weekly  NYSE hi/low 138/171 366/91
New Hi's/Low's Nasdaq h/l 214/102 412/59
McClellan  Oscillator -31 -31
McClellanSum .+750/-1000 443 622
Newsletter Inv.Intel -Bull:tues 53.1 57.6
Surveys Bear:-5yrs 15.3 15.1
AAII  -Bull :wed. 32.2 38.1
Bear  32.8 23.8
COT:SPX w/w large/small (net)k 7/8k 7/21k
COT:gold  comm.hedg long-short.000 (65K) (46k)
CEOinsider selling 31:1 70:1
off.&bd b/s.vs. 10% holder b/s 215:40 200:70
3-box rev Bullish%-  70 79
US equity -ICI Fund Flows WeekDelay WeekDelay
MMF flows Change in $B (1.8B) 6.4B
MargDebt- top (300M) monthly  445B
ETF:mthlyEqty/ Int'l/Bond-$B 1028/399/246
2-yr Tsy Yield: Inflation 0.34% 0.35%

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Zero (IN)Tolerance

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