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Monday Morning Market Movement – More of the Same

If it's Monday, the Futures must be higher.

It's very easy to get the markets going in thin weekend trading and usually we peak out of Meaningless Mondays or Testy Tuesdays and then we resume our normal shorting activities.  Last Tuesday, we called for shorting the S&P Futures (/ES) at the 2,480 line and we caught a ride down to 2,435 for 45 points at $50 per point per contact – a profit of $2,250 per contract (you're welcome) and that was a very poor 2nd to our Russell Futures short (/TF), which fell from 1,430 all the way to 1,370, which was good for a profit of $6,000 per contract.

It's really not hard to follow these trades, we laid out the levels and the details in Tuesday Morning's PSW Report and delivered it to the inbox of our subscribers by 8:35 on Tuesday morning, an hour before the market opened and that day's $3 investment in our newletter was paid back 2,000 times on the Russell alone.  Subscribe here if you'd like to catch the next 2,000x winner!  

Rembember – I can only tell you what the market is likely to do and how to make money playing it, that is the extent of my powers – the rest is up to you…

We also put up an options spread on SPY for those who aren't able to trade the Futures (though it's really not hard, we teach Futures trading to our Members in our Live Weekly Webinars) and that trade was:

We've been talking about hedges and a good way to hedge the S&P, other than simply shorting /ESFutures with tight stops above, is a bear put spread on SPY options, which we can accomplish with the following:

  • Buy 20 SPY Sept $247 puts for $2.50 ($5,000) 
  • Sell 20 SPY Sept $242 puts for $1.35 ($2,700) 
  • Sell 5 TEVA 2019 $20 puts for $4.40 ($2,200) 

That spread is net $100 and pays $5,000 (up 4,900%) if the S&P drops below 2,420 (2.5%) into Sept expirations.  You have an obligation to buy 500 shares of TEVA for $20 ($10,000), but that's a stock we really love at this price so, essentially, free money for promising to buy it.  Ordinary margin on the short puts is just $900, so it's a very margin-efficient way to raise cash but you can use any stock you REALLY want to own as an offset.  

The $247 puts finished the week at $5 ($10,000) and the $242 puts jumped up to $3.13 ($6,260) but TEVA got worse and those $20 puts are now $5.10 ($2,550) but that's still net $1,190 for a $1,090 (1,090%) profit for the week and THAT, my friends, is how you hedge!  The S&P may not stay down and, if it doesn't – then we don't need the hedge money but we're thinking this is just a bounce – as we predicted would happen in Friday morning's report, when we flipped bullish (so the above trade was cashed but can be re-entered on the bounce).  

On Friday the Dow (/YM) bounced to our exact goal of 21,800 and gained another $400 per contract before failing into the close.  We also played the Russell (/TF) long at 1,370 and we called for a 10% correction on the VIX, which is in progress this morning as well.  

Today, what matters is whether or not the bounce lines hold and, to sum up our morning call in Live Member Chat on the bounce lines, we were looking for: Dow 21,900, S&P 2,451, Nasdaq 5,850 and Russell 1,390 and those will be our shorting lines but NOT if DAX (Germany) is over 12,000 and we're well over that this morning so we're back in watch and wait mode for the moment and we'll have to play it by ear in live chat but if two cross back below we'll certainly want to short the laggards as they cross (with tight stops).

Image result for dragons game of thrones animated gifOn the whole, it seems that nothing is going to faze this market. North Korea is still a thing but people seem bored already – nuclear was is nothing compared to the Khaleesi's use of dragons aginst the Lannister armies. Trump was on a rampage and so were his far-right buddies, who rioted in Charlottesville over the weekend – though the President was quick to point out both sides were to blame – the neo-Nazis AND the people who oppose neo-Nazis…

When a Muslim driver runs over tourists in England, that's considered an act of terrorism but when a white nationalist runs over liberal protesters in Virginia, that's considered "an aggressive opinion." Oh boy, America is getting so great again!  In fact, President Trump’s Saturday comments were cited on the neo-Nazi website the Daily Stormer as evidence of “no condemnation at all” of such groups by the President. That site has now been hacked by Anonymous, apparently.  

Image result for charlottesville attack animated gifIt took the original colonies 5 year to escalate from the Stamp Act in March of 1765 to the founding of the Sons of Liberty in July to the Towshend Acts of 1767 to the August 1768 boycott of British goods to that October's occupation of Boston Harbor by British warships and then two more years until it escalated into the Boston Massacre on March 5th, 1770.  In the US, Trump has only been President for 7 months and our citizens are already killing each other and Virginia has had to call a state of emergency. This does not bode well

Nonetheless, the Futures indicate that investors could care less about rising political tensions, disappointing China growth, the meltdown in Venezeula, a possible trade war with China or nuclear war with North Korea and Elon Musk says that is NOTHING compared the threat that is posed by Artificial Intelligence and it amazes me how people think he's a genius and listen to him about everything – but this.

“Until people see robots going down the street killing people, they don’t know how to react because it seems so ethereal. AI is a rare case where I think we need to be proactive in regulation instead of reactive. Because I think by the time we are reactive in AI regulation, it’s too late.”  

Image result for terminator animated gif

“Normally the way regulations are set up is while a bunch of bad things happen, there’s a public outcry, and after many years a regulatory agency is set up to regulate that industry.  It takes forever.  That, in the past, has been bad but not something which represented a fundamental risk to the existence of civilization.  AI is a fundamental risk to the existence of human civilization.”

The fundamental risks to the markets are a withdrawal of stimulus that's been driving us for 8 years.  While the Fed Funds rate has climbed back from 0.25% to 1.16% in the past two years, the Fed is still putting $60Bn/month into the markets through their QE program and no one knows what will happen when they pull off the training wheels. We have Fed Minutes at 2pm on Wednesday with two Fed speakers (Kaplan and Kashkari) on Thursday at 1 and 1:45 and then super-dove Kaplan has the last word Friday at 10:15 so the Fed's support continues in this low-data week, which makes any kind of pullback far more concerning. 

 


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  1. Phil/KC- do you like coffee here?


  2. I guess we are up this morning since we didn't start a war over the weekend but the day is young!


  3. Got back on Saturday from Argentina and it feels funny to wake up in a country where the president is a fan of dictators around the world and neo-nazi feel that he is supportive of their message. And then I remembered that I was home in the US again.


  4. We might not need these coal electrical plants anymore soon:



  5. Musk called out his best buddies Adam Jonas from MS and Ben Kallo from Baird today.  He know longer has Amber Heard so these two are stroking him a bit.  

    MS revised earnings for 2017 from -3.53 to now -7.60 and 2018 from -1.14 to now -3.66 and with stock comps -6.58 and increased PT to 317 from 305.  Guess the SEC doesn't look into analysts anymore.  After 2000 they met their quota for a lifetime.

    And Kallo from Baird raised their target from 368 to 411 simply because the Model S ramp up made the stock move higher so the Model 3 should too.  Solid analysis.  I really think this will be a stock regulators will look at in the future and ask dumb questions like how could these shenanigans go on like it was done in secret.


  6. Yodi – been following your armchair trades over the past year with some success. I do have a few questions if you don’t mind.

    1.     Do you always use short straddle or short strangles as a starting position – or do you sometimes use long straddles or long strangles in your starting position?

    2.     I occasionally get blown out when a stock falls if I use a short straddle/strangle strategy. I’m assuming this has happened to you also. Do you use stops or some kind of alert system to try and avoid this? I assume you do with over 125 positions (I read that somewhere) I have been playing with a stop loss strategy at 50% to 75% of the offsetting short side to try and limit my losses. I have not found a one size fits all strategy, and I am always trying to be aware holding a position that may recover in the short term – the strategy is in process.

    3.     If you do get blown out do you adjust and try and recover or do you take the hit and move on? For me the answer kinda depends on how I feel about the stock/company – but it’s my time usage issue more than anything else.


  7. Ken Frazier from Merck who is African American resigned from the President's American Manufacturing Council after this weekend's events and the Trump's response so Trump just tweeted back at him:

    "Now that Ken Frazier of Merck Pharma has resigned from the President's Manufacturing Council, he will have more time to LOWER RIPOFF DRUG PRICES!"

    Republican's now are fed up with Trump, if there is reason to impeach after Mueller investigation, he will be gone quickly.


  8. Frazier / Rustle – This need for revenge that Trump holds all the time is one more psychological trait that makes him unfit but also works well with his base apparently. 


  9. Alexander Zverev kept his winning streak alive with a 6-3, 6-4 victory over Swiss ace Roger Federer in the Rogers Cup final on Sunday.


  10. One heck of a Monday move… everything is going up.  Forget N Korea, Virginia … scary. 


  11. Nantucket1,

    First what is blown out or blown up, known only with terrorists! Do you mean assigned?

    I trust I did explain this, If the stock goes up and your caller is 100% ITM, you might lose the stock but you did receive the cash for the call and your call will be zero. I trust your put will be worthless than, so where do you lose? You will have to decide if you carry on with the same stock or look for other opportunities.

    If you are assigned with the put consider to have bought the stock some 20% lower as originally bought and set up another trade with the stock.

    I only work with short straddles or strangles. I do not set stops only watch and follow the positions. If the put gets close to worthless in today’s market conditions, I close it sometimes before expiration. If I feel I do not wish to lose the stock in respect of the caller on the other hand, and the position is just about 100% ITM I might roll. You need to watch at or just before the company makes its report, that you add the Call value plus the div. which in some cases excides 100% and the person, where you sold the call to, might wish to call for the stock to receive his div. even you might think the caller has still some premium. Mostly stocks fall for the div. amount after the due date!

    Remember Stops do not work overnight while you asleep!


  12. Phil, NQ getting close to the previous shorting level of 5900 … thoughts? 


  13. Sold some Sept. 15 165 cherry apples for 1.91


  14. Good morning!  

    /KC/Ravi – A bit too chasey up here, don't you think?  

    If we consolidate at $140 then maybe that with tight stops after a week or two but, otherwise, I'd rather wait to get over $150 and then play that with tight stops but, hopefully, we'll see $130 again, where we can play with a little conviction. 

    Big Chart – The NYSE is the most real indicator and look how ugly it got.  12,000 to 11,750 is 250 so 50-point bounces to 11,800 (weak) and 11,850 (strong) are what we're looking for and 11,850 is pretty much the 7.5% line too.  At the moment, we're right there (11,854) so critical to watch today.

    Notice on the RUT and Nas and S&P, we tested 50 and 200 dma leves so very easy to bounce off – it's what happens next that matters.

    Home/StJ – Just madness.  

    Electricity/StJ – Thank God for that or the grid would have already exploded.  

    TSLA/Rustle – I call BS that they'll only lose $1Bn this year.  AND ramp up production to 50,000 cars a day?  Total fantasy land – the two things are mutually exclusive.  Makes you wonder if these analysts have any clue about the things they cover.  

    MRK CEO quits Trump's counsil and is immediately attacked by Trump:

    Now that Ken Frazier of Merck Pharma has resigned from President's Manufacturing Council,he will have more time to LOWER RIPOFF DRUG PRICES!

    And what Rustle said!  

    /NQ/Learner – It's too strong to short other than a quick bite with very tight stops.  Can't have conviction when it goes up 1% in a day (assuming it stays up).

    Today is just a sit back and watch day – as Monday's usually are. 


  15. Thanks Yodi – guess I've been watching to many Jeff Dunham videos – assigned would be more appropriate. I will go back to my Lotus spreadsheet (yes I'm from that generation) and work up some plays to get a better handle/comfort feeling on being assigned those puts – thanks again!


  16. Even BBBY is getting out of the closet


  17. Yodi – I'll start with a 10%, 15% and 20% reduction in the underlying stock price and work back into option premiums with dividend to try and limit a downside price reduction. 


  18. Nantucket1,

    I am still pining the lotus spreedsheet today, but with MSFT and TOS you have to have excel. At present I am fighting with on one computer having the English excel version and on the latest computer I have the German version, looks like I can not change this one to English, especially after the Brexit!!!


  19. Nantucket1 It is important you pick the right stock, not all stocks down 15 or 20% are suitable! Look at TEVA great return BUT I would not pick it!


  20. I would start for practice with a stock like CIM with say 200 share and look how it goes.


  21. Phil, Yodi

     

    CINR is a  9% dividend, soda ash main producer with a 52 weeks low,  any opinion?

    Thx


  22. yodi…did you have to mention TEVA?? maybe if the NASDAQ was up 50% that POS could be up a few pennies..


  23. sorry jaboeast


  24. Was busy all day on Friday with meetings in Buenos Aires but 2019 75 calls on UVXY that traded for over $20 on Friday afternoon are now $14 as UVXY is down 20%…


  25. I was hoping for a continuation of the downtrend today!


  26. As usual, RUT is up the most on a bounce. 

    CINR/Advill – Very strong growing season this year will lead to cutbacks but, if you like them for the very long-term, they seem like they are reasonably priced.  

    TEVA/Jabob – It's up 0.03 today!

    Continuation/StJ – We're lucky to string together two downside hours – let alone downside days…


  27. Advil, hi CINR sorry stock has no options, there for not interested.


  28. BDC – What is the best email to reach you? 


  29. TOOK SOME PIE W/ VANILLA ALAMODE   :  )  Strikes @   … $ 135 AND 130; $  60  AND 65 , PICK YOUR MONTHS. BOTH VERY WELL RATED BY STOCKOPEDIA AND THE TA’S ARE LOOKING GOOD!!

     

     By the way, I pasted this from an email I sent a friend, and the stocks are: LEA &  YY .   I have been makin' some $$$ writing premiums on each since this spring.  Just some ideas, oh and thanks YODI !!  


  30. It does look like we're running out of gas at /NQ 5,900 and 22,000 on /YM and 1,390 on /TF and 2.465 on /ES so those are now our shorting lines and, when two cross under, we can short the other two as they cross under.  If ANY of the indexes go back over their line at that points – we get out and wait for the next cross.  Those are super-tight stops!

    Oil failing $48.50 is playable (/CL


  31. CINR

    Yep, no options!  strange.


  32. Found this amusing:

    Mark B. Spiegel‏ @markbspiegel  6m6 minutes ago

    More

    Mark B. Spiegel Retweeted zerohedge

    In fairness, the size of the bet didn't demonstrate much conviction!

    Mark B. Spiegel added,

    zerohedge @zerohedge

    From Friday: Gartman Stakes His Reputation That "The Bull Market Has Come To An End" http://www.zerohedge.com/news/2017-08-11/gartman-stakes-his-reputation-bull-market-has-come-end …


  33. Gartman is a f'ing idiot.  The only reason he keeps appearing on CNBC is that his daughter is one of the producers for the network.  And since he says the bull market is over, it obviously means we have about 500% upside.


  34. Nice move on oil – stop if it goes back over $48, of course. 

    LOL Rustle.

    Bubble worry on record ETF inflows

    • via Chris Flood at the FT
    • "When the management of assets is on autopilot, as it is with ETFs, then investment trends can go to great excess,” said Oaktree Capital's Howard Marks recently."It is not clear where ETFs and index mutual funds will find buyers for their holdings if they have to sell in a crunch."
    • ETF inflows through the end of July of $391B (according to ETFGI) have already surpassed the record $390B for all of 2016.
    • Elliott Management's Paul Singer: Government manipulation of asset prices has "created the illusion that simply holding stocks and bonds in their index weights and sitting back, arms folded, is the perfect investment strategy … What may have been a clever idea in its infancy has grown into a blob which is destructive to the growth-creating prospects of free-market capitalism.”
    • Benefitting the most among the large asset managers have been BlackRock (NYSE:BLK) and Vanguard, which have hoovered up the vast majority of this fresh money. For BlackRock, its iShares unit has brought in $158.9B this year vs. $137.9B in all of 2016.
    • The spike in volatility last week was met with selling by ETF investors, with the iPath VIX ETN (NYSEARCA:VXX) seeing an outflow of $69M on Friday.
    • The ProShares Ultra Short-Term Futures ETF (NYSEARCA:UVXY) saw a weekly outflow of $237M, or 59% of its market cap, as traders cashed in on a 45% five-day move higher. Meanwhile, that fund's opposite – the ProShares Short-VIX ETF (NYSEARCA:SVXY) – took in nearly $300M of new cash.
    • Source: Bloomberg's Ye Xie
    • via Bloomberg
    • Among the signs of froth: Investment-grade issuance of nearly $1T this year is on pace to break old records, and junk-bond yields of just 5.8% have tumbled to near post-crisis lows. The final cherry may be the long lines late last week to get a piece of Tesla's $1.8B debt offering at relatively puny interest rates.
    • "People are ignoring the fundamentals and taking a big leap of faith," says Loomis Sales vet Kathleen Gaffney.
    • Columbia Threadneedle portfolio manager Gene Tannuzzo on the Tesla sale: "Elon Musk is a pretty cool guy but they haven’t figured out how to make money yet and that’s not a lot of yield.”
    • A big influx of foreign money in the past has marked plenty of tops, and Amundi Pioneer's Ken Monaghan notes overseas cash is no longer interested in Treasurys, but instead investment-grade and high-yield paper.

    FT: Chevron ready to confirm commitments to North Sea fields

    • Chevron (NYSE:CVX) is set to reconfirm its commitment to the North Sea, restarting a bidding process to develop the Rosebank field and considering extending the life of one of its main assets in U.K. waters, Financial Times reports.
    • CVX has been working to cut its North Sea project costs since the 2014 oil price crash, but its cancellation of a $1.8B order last year of a floating production and offloading vessel for the field raised fears it would abandon development; CVX now tells FT it expects to relaunch the tender process for the Rosebank FPSO later this year.
    • A final decision may be several years away, but the move likely will be viewed as a positive sign that CVX and its partners, including Suncor Energy (NYSE:SU), are committed to the Rosebank development, which is estimated to hold more than 300M recoverable barrels of oil.
    • CVX also will soon make a final investment decision on extending the life of its Captain field northeast of Aberdeen, which has been producing since 1997.

    First Solar wins supply deal for Australian solar projects

    • First Solar (FSLR -0.1%) says it was awarded a 241 MW module supply contract as engineering, procurement and construction contractor for Edify Energy's Daydream and Hayman solar projects in Queensland, Australia.
    • With the contract, FSLR expects its pipeline of solar projects in Australia to exceed 500 MW, making it the leading module supplier for large-scale solar in Australia.
    • FSLR says construction on the projects is scheduled to begin in Q3, with module delivery in Q4 2017 and Q1 2018.
    • Canadian Solar (CSIQ -5.5%) plunges in early trading after reporting a slightly smaller than expected Q2 loss but guiding Q3 revenues sharply below analyst expectations.
    • CSIQ forecasts Q3 revenues of $805M-$825M vs. $1.04B analyst consensus estimate, with gross margin at 15%-17%; CSIQ reiterates its view for FY 2017 total module shipments at 6.0-6.5 GW.
    • For Q2, total solar module shipments were 1,745 MW, compared to 1,480 MW in Q1 and the company's Q2 guidance of 1,530-1,580 MW; Q2 gross margin was 15.9%, excluding benefits of two AD/CVD reversals, vs. 13.5% in Q1 and Q2 guidance of 13%-15%.
    • Harmony Gold (HMY -3.8%) says it expects FY 2017 net profit will come in lower than the year-ago period, due to impairment charges and legal costs.
    • HMY sees EPS for the year ended June 30 of $0.05-$0.08, compared with $0.15 in FY 2016; excluding exceptional costs, HMY expects FY 2017 EPS of $0.20-$0.23, higher than adjusted EPS of $0.15 recorded a year ago.
    • HMY expects to record an impairment of ~1.7B rand (US$131M) following its annual life-of-mine planning process and a provision of 917M rand ($70M) for a possible silicosis class action settlement.

    CB&I wins Saudi storage project

    • Chicago Bridge (CBI +5%) has been awarded a contract by Tecnicas Reunidas for new product storage tanks that will be part of a clean fuels expansion project at a refinery of Saudi Aramco.
    • The scope of the project includes the engineering, procurement, fabrication and construction of nine flat bottom tanks, as well as modifications to numerous existing tanks.
    I told you they were too cheap!  Auto sector jolted by merger talk
    • Morgan Stanley boosts its price target on Tesla (NASDAQ:TSLA) to $317 from $305 on a higher expectation for Model 3 deliveries this year and a raised level of comfort with long-term investments. "Capex spend is certainly eye-watering, but not unequivocally concerning, as we continue to believe Tesla's charging infrastructure is a critical competitive advantage," writes analyst Adam Jonas.
    • Baird takes his price target on Tesla to $411 from $368. "In our opinion, TSLA isn’t a good short headed into the Model 3 ramp as we continue to believe upcoming catalysts will drive shares higher," advises analyst Ben Kallo. The EV automaker is a top pick for 2017 at the firm.
    • Oppenheimer has its eyes on the "watershed moment" bond offering from Tesla, observing the nearly investment grade pricing despite the financial pressures.
    • Sources: Bloomberg and CNBC's Carl Quintanilla.
    • Adding it all up has helped Tesla move 1.95% higher on the day to $364.85.
    • Target (TGT +0.3%) acquires transportation technology player Grand Junction to help it accelerate efforts to transform its supply chain.
    • "Grand Junction’s technology and algorithms will help Target deliver to guests faster and more efficiently," says Target chief supply chain and logistics officer Arthur Valdez.
    • Grand Junction is already working with Target on a same-day delivery pilot at the Target store in New York’s Tribeca neighborhood.
    • Terms of the transaction weren't disclosed.
    • Source: Press Release
    • Notable Calls cites an Economic Daily News report that Samsung (OTC:SSNNFOTC:SSNLF) will raise mobile DRAM prices by 10% to 20% in Q4 versus the flat pricing in Q3.
    • Other key DRAM players: SK Hynix  (OTC:HXSCFOTC:HXSCL) shares are up over 6%, Nanya shares up 3%, and Micron (NASDAQ:MU) shares up 0.04%.
    • DRAM pricing tends to go up around the holiday season but this year will have a tighter supply due to Micron's two-week plant shutdown in July, which might have reduced supply by 50K wafers.
    • Previously: DRAM prices expected to keep rising in 2H17 (Aug. 11)
    • Update: Micron shares are now up 3.73%.
    • Taiwan Semiconductor Manufacturing Company (NYSE:TSM) will begin volume production of its 12nm FinFET process chips in Q4, according to a Commercial Times report cited by Digitimes.
    • The process already has orders from clients including Nvidia’s Volta GPU series and Xavier series processors and MediaTek’s Helio P30 mobile chips.
    • Taiwan Semiconductor has already started mass production of the 10nm FinFET chips with Apple as the key buyer for the processors used in iPad Pro models and the A11 chips powering the upcoming iPhones. 
    • Production of the 10nm and 12nm chips expected to push Taiwan Semiconductor’s Q4 sales to about $8.9B to $9B. 
    • Taiwan Semiconductor shares are up 2.26%.  
    • Previously: Taiwan Semiconductor's July revenues hit low, Q3 improvement expected (Aug. 11)

    • Goldman Sachs U.S. equity strategist David Kostin advises clients to buy growth stocks like Nvidia (NASDAQ:NVDA) and Autodesk (NASDAQ:ADSK), per CNBC.
    • Kostin recommends the strategy because the higher interest rates next year could slow earnings expansion and enhance the value of growth stocks. 
    • Kostin created a basket containing companies that allocate 90% of cash flow from operations to growth initiatives over the past three years.
    • Tech basket members, with YTD Return (and 3-yr growth investment ratio): Amazon, 28% (99%); Nvidia, 55% (105%); and Autodesk, 42% (161%). 
    • Meanwhile, Argus reiterates its Buy rating, calling the selloff overdone. 
    • Nvidia shares are up 5.82%.
    • Autodesk shares are up 0.89%.  
    • Previously: Barclays increases Nvidia price target (Aug. 11)
    • Amazon (NASDAQ:AMZN) announces two new customers for its Amazon Web Services platform.
    • FICO has already migrated several core applications and will migrate additional apps over the next three years. 
    • Hulu will use AWS for its new over-the-top live TV service. Competitor Netflix is also an AWS customer. 
    • Amazon shares are up 1.68%.  
    • Previously: AWS moves one step closer to Kubernetes support (Aug. 9)
    • Bernstein says Google (GOOGGOOGL) will pay Apple (NASDAQ:AAPL) $3B this year to remain the default search engine on iPhones and iPads, per CNBC
    • Google paid Apple $1B in 2014. 
    • The Google licensing payments are mostly profit for Apple and Bernstein estimates the payments could account for up to 5% of Apple’s operating profits in 2017. 
    • Bernstein analyst A.M. Sacconaghi Jr. says Apple’s products account for about half of Google’s mobile search revenues but that Google could still walk away from the payments at some point. Google wouldn’t walk unless sure that Apple would continue to include its search engine based purely on customer demand.  
    • Apple shares are up 1.19%. Alphabet Class A shares are up 0.87%.

  35. ?

    All is good in the world now that Trump denounces racism, even though he ripped Merck CEO a few hours before.  We are so doomed.  Markets don't care.  To the moon Alice, to the moon.


  36. OMER/anyone else own this?


  37. Phil – TEVA – bounce from 16.81 to 17.88 today, currently at 17.21.  

    We took a look and kicked the tires in TEVA: Fiddler Made A Goof?

    For Fibbers: Recent drop from 32 to 17 = 15 x .382 (1-.618) = 5.73 + 16.81 low =  22.54

    Looking at Sept 15th, PUTS strike 22.50 at 5 cents.  Thoughts? Just a passing cat fancy and Out.


  38. OOPS!!! I meant Sept 15th, CALLS strike 22.50 at 5 cents.  Must be time for a cocktail and Out.


  39. UAL/Phil – anything to suggest UAL or airlines in general will have a boost or support here?  UAL just tested it's low Thursday after they beat up that guy and now not even to a weak bounce level yet..  I would -expect- DOOM ahead, but airlines never seem to do what I expect when I actually put money on!


  40. FNSR/Albo – still bullish?


  41. As I have to be on TV Weds, I have productively spent this morning checking our portfolio positions, hopefully I can have them all written up tomorrow.  

    The last LTP Review was 7/21 (part 1) and 7/24 (part 2) and we were at $1,576,507 (up 215%) and now we're at $1,479,600 (up 196%) so down $96,907 on not a huge drop in the S&P:

    The STP was reviewed on 7/18 and we were at $424,326 (up 324%) and now we're at $493,650 (up 393%) so up $69,324 mostly offset the decline in the LTP.  The hedges, of course, are meant to cover a 20% drop, not a 2% drop and they are less effective with small drops – especially if they don't stick.  Also, FAS has gone up and that hurt us a bit.

    The question is, do we need to be more hedged?  I hate to keep throwing good money into the hedges but that's a scary amount of money to lose in a month on the LTP, which indicates we're pretty highly leveraged to the market though I'm sure Jabob would point out that we're getting killed by a few big losers like CBI, CHK, CMG, FTR, IMAX, LB, TEVA and UNG and AAPL is a bit ugly on us at the moment as the spike up was not good (looking) for our spread.  

    We cashed out a lot of our short puts, just 16 left – so we should be looking for more of those sales, maybe once every other week until we're back to 24 but, then again, we wanted to cash out the short puts to reduce our leverage.  

    We do have $1.19M in CASH!!! so no major worried but lots of short puts that obligate us to use it if the markets turn ugly too.

    The Butterfly Portfolio was reviewed on 7/20 and we were at $356,474 but that was a crazy $38,928 gain from 6/9 and we knew it would settle down.  Now we're back to $333,087 (up 233%) on essentially the same positions and, though we're down $23,387, part of it is general fluctuations and part of it is that we were closer to expiration last month and we don't really have any short Aug puts or calls in this cycle – so lots of short premium still left to wind down.

    Our OOP was at $322,855 (up 222%) on our 7/18 review and now $310,004 (up 210%) so down $12,851 is not a pretty month – also victimized by AAPL and the FU stocks.  

    So that's where we stand and now I start the reviews but I have to wait until tomorrow because I can't decide whether to be bearish or not.  I feel like cashing in on the longs again bit this market keeps going up and up and we don't want to miss it.


  42. Scott – Yep.


  43. OMER/Hanj – not back in yet. Missed getting in on the dip back under 20.


  44. scottmi/OMER  I just happened to get lucky and redoubled my position this morning before the news came out – pure luck.  Unless we get a large down move, I dont really see this moving below the 50dma.  You might be able to get it closer to the 20dma though.


  45. WPM/Phil – good level to sell puts for new entry/hedge offsets or is premium too thin? The  jan2019 $17 puts @ 2.05 will yield about 8% annualized with full margin requirement (i.e. IRA portfolio). Regular margin yields 36% annualized..


  46. OMER/Hanj – my favorite kind of luck! ;-)


  47. Phil--i will not point out TEVA, LB, M, IMAX, or any of the other FU stocks that keep hitting new lows while the market recovers to all-time highs…WTF… ;-)


  48. Trump/Pharm – Well he read that speech like a kid who was being punished so I'm not too convinced.  

    OMER/Hanj – No clue. 

    TEVA/Naybob – So, did you ever reach a conclusion?   Not sure why you'd want to buy naked calls on them.  Just because they are a nickel, doesn't mean they are cheap.  The 2019 $15 calls are $4.60 and the $20 calls can be sold for $2.55 so net $2.05 on the $5 spread is more my speed as your net entry is less than the current price and, if you want to be brave, you can pay for them by selling the $15 puts ($2.30), which nets you in with a credit of 0.25 a share and THAT you can use to gamble on some long calls if making $5.25 on an 0.25 credit doesn't do it for you. 

    Can a company that makes $2.50 a share be valued at $20?  After reading Naybob's article, I haven't got a clue but I do think TEVA is oversold unless paying more money for non-generics is the new master plan for the insurance industry to reign in costs (you never know). 

    Airlines/Scott – If you consider, going forward, that they need to have good comps, what are they going to do?

    • They now charge bag fees of $25 (new revenues), will they go to $50?
    • They make you check and tag your own bags 
    • They have cut leg-room to the point where they will have to stand people to squeeze more in.
    • They have taken away overhead space so now fights break out among passengers while they board.
    • They have stopped providing screens in the seats and barely even offer free wifi for entertainment (only conditional, with paid upgrades encouraged).
    • They charge for the food. 
    • Fuel is at what's very likely the lows and they haven't raised wages to keep up with inflation.

    Other than charging you for oxygen, I'm not sure what's left to push airline earnings further up and RYAAY is coming and LUV is expanding and we put our money on ALK, recently – because we liked the Virgin deal they made.  On the whole though, it's not an attractive sector.

    RYAAY under $20 is nice, CAL crazy low at $15.50, ABX is still a great way to by tons of gold and get a mining company for free at $18, GOOG held 5%, AAPL still at $92 and you can sell $85 puts for $5, that’s in at $80, VLO $15 puts are $2 but, frankly, you should be mad if you DON’T get to buy them at $15.  You may see these prices go lower on Monday or you may never see these prices again in your lifetime…

    RYAAY is my favorite airline and $24.25 is a good price for them.  Very nice if you sell the $25 puts and calls for $5.25 putting you in for $19/22.

    Submitted on 2011/07/19 at 1:18 pm

    Airlines/Asaenz – I like RYAAY as they got killed recently on no particular news (but Q2 is tricky for them).  I would go light, in case they miss with the March $25/30 bull call spread at $1.90, selling he $22.50 puts for $1.60 for net .30 on the $5 spread that’s currently $1.15 in the money.  UAL may be a falling knife here but, then again, so could Ryanair but I like RYAAY’s business model better (more flexible).  

    WPM/Scott – Sure I like them down here but I can't believe they are back at $19 again.  

    As an IRA play, let's say you are looking to make $2,000 and you will obligate yourself to own 1,000 shares of WPM for net $15,000 by selling the 2019 $17 puts for $2.  At $14 you lose $1,000 – that's your benchmark.  

    What about, instead, if you took 30 of the $13 ($6.65)/15 ($5.35) bull call spreads for $1.30.  That would simply cost you $3,900 in cash and no margin and, at $15, you make $2,100.  At $14, you still get $3,000 back, so the same $1,000 loss but it gets worse below there so don't let it go below there!  

    On the whole, it depends what you value more, cash or margin but, in an IRA – it's kind of the same thing. 


  49. Oil never came back, $47.60.  /RB down at $1.58 – SAD.  Brent is testing $50.50 – below $50 is a catastrophe for OPEC so I doubt they'll let it happen without a fight first. 

    Dollar 93.35 stopped going down, at least.  

    Another low-volume Monday:

    Date Open High Low Close* Adj Close** Volume
    Aug 14, 2017 245.59 246.79 245.55 246.57 246.57 35,185,536
    Aug 11, 2017 244.02 244.80 243.75 244.12 244.12 71,722,500
    Aug 10, 2017 246.29 246.44 243.70 243.76 243.76 120,479,500

    So, on the whole there was more volume on Thursday, while the market sold off and it was all down, than there has been during two days of recovery.  So net/net – more shares cashed out and the market went back up with less support than it had before.  


  50. Speaking of volume – just 7 trading days (including today) to NYMEX rollover and they are still stuffed with 288,000 contracts but it's the same 40,000/day they've had to deal with for a while.  Front 4 months are 1,217 so that's up 100,000 – probably indicating they are having trouble getting rid of them – hence today's sell-off.  More pain likely ahead as they run into a major problem with Dec already stuffed with 318Mb.

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Sep'17 48.79 49.16 47.55 47.57 14:21
    Aug 14


    -

    -1.25 663787 48.82 288171 Call Put
    Oct'17 48.93 49.31 47.70 47.71 14:21
    Aug 14


    -

    -1.26 123207 48.97 424217 Call Put
    Nov'17 49.04 49.44 47.86 47.87 14:21
    Aug 14


    -

    -1.24 43072 49.11 185954 Call Put
    Dec'17 49.16 49.57 48.01 48.02 14:21
    Aug 14


    -

    -1.21 64230 49.23 318589 Call Put
    Jan'18 49.28 49.68 48.19 48.19 14:21
    Aug 14


    -

    -1.18 18597 49.37 140612 Call Put

  51. WPM/Phil – thanks. excellent point re cash/margin in IRA. already have a BCS for WPM on.. like the new suggestion, too.


  52. CHS – another retailer i'm in (at net 8.57) finding new lows… humbug.


  53. SGYP / Phil,

    Are you still holding it post results ?

    thanks

    Pat


  54. Good Afternoon

    Hanj—-was in  OMER the buy call sell put  u suggested sometime back—worked out well but got out too early (obviously) some time back—thanks for the call


  55. Phil – TEVA – I like your options strategy, was just noting the 5 cents "worth" at the moment.

    Phil – "After reading Naybob's article, I haven't got a clue but I do think TEVA is oversold unless paying more money for non-generics is the new master plan for the insurance industry to reign in costs (you never know)."

    As we commented, "As branded therapies become more expensive, insurers increasingly push generics.
    Further customer (insurance and healthcare management) consolidation strengthening price negotiation.
    Faster FDA approval leading to more competition.
    "

    This leads to increased sales volume in the sector,  at lower prices for the product and potentially lower volume for the producer.  Top line revenues could be affected, adversely or positively. Ask your doctor if TEVA is right for you.

    Phil – "So, did you ever reach a conclusion?"

    "If I were a rich man", wasn't too much of a clue?  Some guys said going to $10, even $5.  Some said it's oversold. Opines, like assholes, everyone gots one.  If one THINKS they can avoid covenants, and cash flow remains ample, a potential golden opportunity, no doubt. 

    Aside from the top line, the ??? of the moment, with 450M shares changing hands in the last ten or so trading days, how many shares of their 100M has Allergan dumped so far?  And what are their intentions? One might think and hope that Allergan is done and TEVA has bottomed. TBD. 

    The sense of entitlement on SA is incredible. I can only tell people what I know and hope that helps. I cannot perform their due diligence and thinking for them. That's what Hobson is for… https://youtu.be/kftAQRl85Gs?t=7s  

    Your in for a penny, your in for a pound, with a strategy that is sound, time tested and proven. Better yet, you also have conviction on your side.  If one has all the above and the funds to back it, and can afford to lose those units in a worst case scenario, follow through might seem to be in order, buy some more, hedge, hope for the best and Out.


  56. RGC/Phil – also down, but not nearly as much as IMAX, and pays a healthy dividend, too. Still a falling knife here as far as I can tell, but whenever these (both) find support, seems that RGC is perhaps a better choice than IMAX?


  57. Scott – Sorry to be so curt earlier, was on a conference call.  Still looking for FNSR to report a mixed quarter on Sept 7th.  But the following quarter should be strong. 

    RGC – Might not be a Phil favorite, but looks like it could be a good tax loss swap for IMAX.

    I know Jabob, you're not looking for any tax losses. ;-)


  58. /NQ – Just makes my head spin that 'they' can bounce it right back to where it started before we can even cover or close our shorts.  The Plunge Protection Team now has unlimited firepower…


  59. Albo – no problem.. :-)   tax loss…not a bad idea. going to wait for at least what looks like a floor though.


  60. NYCB – found support? or just up with banks supported by the PPT?


  61. NYCB – looks like someone knew something on Friday with largest buying just before close.


  62. You're welcome Scott. 

    CHS/Scott – I worry about the small guys, especially after we saw Aeropostale fall apart a couple of years ago.  They fall apart so quickly…

    SGYP/Pat – I want to give them a chance until the next studies but not very confident.  

    If one thinks/Naybob – Ah, well I do think so I'm sticking with them.  

    RGC/Scott – Well you could argue they have less risk because they are more diversified than IMAX with multi-screens, so not tied to a single film but movie theaters make money on blockbusters, not art films.  IMAX is more geographically distributed, with twice as many theaters but RGC has 6x more screens.  RGC takes in $3.2Bn with $240M in profits with a $2.6Bn valuation, IMAX gets half the valuation ($1.2Bn) on $377M in revenues, dropping only $40M to the bottom line so I'd say RGC is a better bargain, even if IMAX has a better year this year.  RGCs quarterlies are trending down but, if you are in for the long-haul, I figure the slump in movies will work out at some point.   At the moment though, the whole sector is out of favor.  

    PPT/MrM – Well we have a President who grades himself with the Dow…

    Wow, we held the line all day – now we have to wait for tomorrow. 

    NYCB/Scott – good regional bank and pays 5.5% dividend.  Since the dividend is just 0.68 so 0.17/qtr, you can buy the stock for $12.48 and sell the Jan $11 calls for $1.70 as you won't care if you are called away and that drops your basis to $10.78 and, if we get a dip, then you can sell puts (the $12 puts are now just 0.45 so not worth selling).  "Worst" case is you get called away at $11 (though you would roll) for an 0.12 profit + 2 dividends = 0.34 so 0.46 back on $10.78 is 4.2% in 6 months on a very conservative entry.


  63. So Jabob – is NYCB an FU stock or an opportunity?  God knows I'd hate to buy a stock that might get cheaper just because they make $500M on a $6Bn valuation while paying out 5.5% while we wait.  That's a bad stock because it's cheap, right?


  64. Phil you are steeling my armchair trades NYCB


  65. don't know if NYCB is a FU stock.

    do know that TEVA above 40 was

    M above 35 was 

    FTR at 4 was

    IMAX above 29 was

    GE above 27 was

    GNC above 17 was

    GILD above 80 was

    TGT above 65 was

    LB above 58 was

    shorting TSLA 100 points lower was

    shorting AMZN 200 points lower was

    shorting NFLX 70 points lower was

    F above 12 was

    CBI above 23 was

    CMG above 400 was

    but we are all hoping you will get out of your slump soon..

     so maybe NYCB will not be a FU stock like all of the above calls???


  66. sorry for the sarcastic post but I am trying to learn how to be a long term investor without getting frustrated daily when the FU portfolio keeps getting cheaper ;-)


  67. jabo- Gosh u would think you would've learned that Phil is always early on his calls, not always, but a lot of the time. So if I question any of his calls, I wait. Some I resonate with; others not so much. I balked at 90% of the above named stocks especially IMAX for what I considered well grounded reasons. #1 was knowing that the populace is generally cash strapped, where are they going to get the $ to take the family to the movies? And I consider clothing to be also a discretionary purchase especially since jeans and other daily wear clothes last so long, at least for adults .So, I wondered about Target since they are closing stores etc. Same with LB.I like Vic Secret but it is pricey. I waited for ftr, LL and when it bottomed I moved. Also, gnc. The online supplements are making big headways into the supplement market ie Swanson's etc. I think it is called due diligence. If it doesn't feel right, look right, smell right, don't do it yet. I've been totally 100% accurate on some picks and still lost $ in this screwy messed up market. Now I'm triple wary, but Phil has a handle on the general markets and keeps us updated on what to expect. I sure can't fault him for my failures. And I'm still learning that I have to hedge!


  68. Wow, some cowards….

    https://www.nytimes.com/2017/08/14/business/dealbook/merck-trump-charlottesville-ceos.html

    Privately, many chief executives say they are fuming, outraged by the president. (This after many of them campaigned to get on Mr. Trump’s committees.) But many are too scared to say anything publicly that could make them or their company a target of Mr. Trump’s wrath.

    Indeed, Mr. Trump’s vitriol against Mr. Frazier and Merck — a company that depends on the government as a buyer for many of its drugs — will perhaps have an even greater chilling effect on other C.E.O.s who may consider speaking out. (The potential for economic retribution against Merck also demonstrates just how brave Mr. Frazier was in taking a stand.)


  69. Phil your comments re oil and gasoline have me asking if you are making a call on either one? Do you have thoughts about what you would look for to trade either of these? 


  70. Well said Pirate.  Phil always says that it often times pays to wait until we double down, before initiating a position.  I too need to do more due diligence before jumping in.  


  71. Holy crap, the market is up yet again after hours. 

    NYCB/Yodi – Nope, just answering the question.  

    FU/Jabob – You keep missing the point.  We don't/can't know where the bottom is going to be but what we do know is when a stock becomes a value under normal circumstances.  If you are so blessed that you can pick perfect bottoms, then wait until there is a perfect entry.  I'm not as flawless as you so, sometimes, when I pick an entry point, the stock continues to go lower.  Fortunately, I buy in such proportions that we plan to scale in and, if we scale in properly, we are HAPPY to DD at 20-30% off and DD again at 40-50% off the original price and THEN we have a full position.  

    As it turns out, the other 60 open stocks we have in our portfolios went the other way and are profitable, not to mention dozens of others we have already closed out with profits (and some with losses).  When you throw in stocks like AMZN (which is now profitable), CMG, F, GE, GILD or TGT, which aren't even 20% off the open – then either you don't even understand our system or you are just purposely being an asshole and, since I've gone over this with you way too many times at this point – I'll have to go with asshole.  

    This year, because so many things are overvalued, I have been keying on value stocks but value stocks are out of favor and we're not being rewarded for it – at this time.  In theory, when the market turns down (if it ever does) and there's a flight to safety, then these stocks will be back in favor.  If not, then I hope you also have some momo stocks or at least an index long to hedge these stocks – like we do in our portfolios.

    And what Pirate said!  

    Oil/Craigs – As I said last week, just the quick in and outs, happy to make $500 and run (or $420 on /RB) as there are too many cross currents to make conviction plays on.  I think the general pressure is down into next week's rollover, so I look for shorting plays like this morning but, now that we're down at $47.50, we're too low in the channel to play a short.  So I wait… PATIENTLY, for a good set-up.  Otherwise, I just find something else to do. 

    I mean really, after all this time, do I NEED to tell you oil is too low in the channel to short?  Over the longer run, however, into the fall, we might swing back below $45 but there's no easy call from day to day.


  72. The Washington Post counted 18 states as of February where Republicans had introduced anti-protest bills; luckily, most of the bills mentioned haven’t gotten anywhere close to becoming law yet. But they’re important because they show just where the Republican Party stands on the issue of protest when it comes from the left, illustrating an authoritarian streak that existed in the conservative movement long before Donald Trump, and will continue to grow after him.

    These bills are part of an attempt to quell and control civil rights movements. Republican legislators are attempting to ease restrictions on drivers murdering demonstrators. At the same time, they’re also trying to criminalize peaceful protest.

    These bills originated with the goal of persecuting protest movements led by people of color. Police violence against Standing Rock protesters last year warranted a United Nations investigation; instead of addressing those human rights concerns, however, North Dakota Republicans tried to make it easier to kill people with your car.


  73. CEO's on a rol. Not good for Trump nor market.


  74. US government demands details on all visitors to anti-Trump protest site


  75. Police Brace for More White Nationalist Rallies, but Have Few Options




  76. Stop Reading Lists of Things Successful People Do


  77. Doctors Coming Around To Single-Payer Healthcare


  78. Lots of questions still hang over Trump’s tax plan



  79. Good morning!  

    Gotta love this VIX chart:

    Nikkei just as violent:

    22,000 again is all that matters – NOW we have a good shorting line.

    2,470 on /ES

    5,925 on /NQ

    And good old 1,400 on /TF

    12,200 should halt the DAX

    and there's no way EuroStoxx is popping 3,500 which is up 35 or 1%, so that's our "margin of error" to the upside, I think.

    Oil still drifting along at $47.50ish

    /NG finally pulled back

    Coffee with the usual action:

    92.50 is proving out as a good floor on the Dollar

    Now, if the Dollar decides to go on a major tear higher – that could really mash the markets.  We'd better keep an eye on that.  

    Recent strength in China's yuan may prove short lived via

    Chinese government says it will take action if US probe violates trade agreements or hurts Chinese companies.

    Why Blackstone is betting $7 billion on natural gas

     

    Why Blackstone Is Betting $7 Billion on Natural Gas

    Blackstone is making one of its biggest bets on the growth of natural gas production, wagering that even if gas prices remain stuck at depressed l…

    wsj.com

    America's shale natural gas production is taking off. Sort of

    Photo published for Report: Movie Box Office On Track for Lowest in 25 Years as Spielberg-Lucas “Blockbuster Implosion”...

     

    Report: Movie Box Office On Track for Lowest in 25 Years as Spielberg-Lucas “Blockbuster Implosion”…

    Reports now, according to Exhibitor Relations: if things continue as they have, this will be the lowest box office in a quarter century. While there h…

    showbiz411.com

    People seemed confused about the Nazi issue so I made a handy flowchart.

    Chrystia Freeland, the Canadian foreign minister, discussed her government’s goals in the Nafta talks on Monday in Ottawa.

     

    Canada Wants a New Nafta to Include Gender and Indigenous Rights

    Canada’s foreign affairs minister, Chrystia Freeland, vowed to make the pact “more progressive” during negotiations with Washington, but offered few…

    nytimes.com

    Pence and Sessions go to extreme lengths to defend Trump’s failure to denounce white supremacists

    JUST IN: Intel CEO Brian Krzanich has resigned from Donald Trump's manufacturing council

    Consumer Spending Expectations Down Again: Dear Fed, Why Don't You Believe Your Own Survey?

    Australia’s central bank has renewed its focus on mounting household debt

    Elon Musk and cheap oil killed off the dream of natural gas cars – here's how