Tumblin’ Tuesday – Weak Dollar Not Enough to Save the Market

Our man, Mnuchin, is on the case!  

In an interview with The Wall Street Journal last week, U.S. President Donald Trump said a “too strong” dollar made it difficult to compete with other countries in trade, pushing the currency lower.  Yesterday, Treasury Secretary Steve Mnuchin told the Financial Times he agreed with Trump and that the Dollar's strength was hurting exports, sparking concerns are that the United States could take a tough trade stance against Japan, which has been wary of Trump's complaints that it and other countries have artificially weakened their currencies.

In even worse news for the markets, Mnuchin said it was now unlikely that tax reforms will come in time to have an impact on 2017:  “It started as [an] aggressive timeline,” the former Goldman Sachs banker said in an interview with the Financial Times. “It is fair to say it is probably delayed a bit because of the healthcare.”    

Mr Mnuchin rebuffed suggestions that Washington may be seeking to depreciate the currency via verbal interventions following remarks from Mr Trump last week. “As the world’s currency, the primary reserve currency, I think that over long periods of time the strength of the dollar is a good thing,” said Mr Mnuchin. “It’s a function of the confidence and the strength of the US economy.”

In other words, as I said on Thursday, it's yet another issue on which the Administration flips or flops on – depending on the day.  If you don't think this sort of thing affects the markets – just ask Mnuchin's bosses at Goldman Sachs, who just had disappointing earnings (told you so!), who said the atmosphere of policy uncertainty caused the 0.16 (3%) earnings miss and $500M (5%) revenues miss.  

Goldman Sachs (GS) is a Dow component and is down $6.50 pre-market and that should cost the Dow about 50 points at the open.  This will be good for the SKF trade we talked about yesterday.  Speaking of things we talked about:  In last week's Live Trading Webinar (Wed 12th, 1pm), we called for a short on oil right at the open (2:03) and we expected a drop back to $52.50 for a $1,000 per contract gain and, this morning, we're past $1,000 per contract at $52.25 ($1,250 per contract to be exact).

If not for the weak Dollar, oil would likely be heading lower than $52.50 but it's tricky to play it lower now.  You can play the $52.50 line with tight stops above and, if the Dollar stops falling, this should be a good one as there are just 3 trading days until the contract expires and the NYMEX traders are still stuck with 125M barrels worth of fake, Fake, FAKE orders that they have to get rid of by Thursday.  

On Wednesday, there were 287,000 open contracts for May and 468,000 in June and now there are 161,000 less barrels in May but 102,000 more in June and the other 59,000 barrels have generally been rolled to longer months so, as usual, it's nothing more than a shell game where the NYMEX traders pretend there is far more demand for oil than really exists.  That's what we take advantage of – it's such an obvious scam we can play along at home and the millions our Members make are inconsequential to the Billions these "traders" are screwing the American people out of at the pumps – so the scam continues…

This is our last month being short on oil (and we already have long July spreads on USO) as we turn bullish into the summer driving season, probably touching $60 at some point – after which we look forward to shorting again in the fall – plenty of fun ahead!  

Speaking of fun ahead.  If you want to play the President, he'll be stopping buy at Snap-On (SNA) today and Presidential visits tend to lead to gains as the Trump sheeple will buy anything he's selling.  SNA is actually a nice little company and tools are a good infrastructure play so we can play them for a quick bump with the April $160 ($5.30)/165 ($2.90) bull call spread at $2.40, which will pay $5 above $165 on Friday for a $2.60 (108%) profit in 4 days if all goes well.

Our faith in GNC Holdings (GNC) finally paid off as they reported earning 0.37 per $7.24 share in a single quarter, blowing away Wall Street expectations but right in-line with ours.  We liked the turnaround story and, in last week's Portfolio Review, we decided to double down on our position into earnings.  

This is options expiration week so we had a lot of work to do (relatively) in this period but we're very well-positioned for a market correction of 5-10%, which we expect in the near future.  Tomorrow we will do another Live Trading Webinar (1pm, EST) but this one is Members Only – there will be another free one in May.  

You might want to go back to that Webinar and check those hedges as it looks like we're going to give up all of yesterday's BS gains into the open (as well as those 50 dmas) but, as I said – we're well-covered for the correction.

Be careful out there!