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Monday Market Momentum – Halfway to 5%

Well, you can't say I didn't tell you so.

Back on Aug 3rd our PSW Morning Report was titled: "Thursday Market Folly – You Need an AAPL a Day to Maintain Dow 22,000" and we began looking for AT LEAST a 500-point (2.5%) correction in the Dow as well as a 2.5% correction in the other indexes.  My logic was that, without some market-moving stock like Apple (AAPL) pushing up every day, at this point we'd have a tendency to drift lower.  We went over the monetary physics of the problem in this weekend's PSW August Portfolio Review as well.

As we approach year 4 (11/26) for our paired Long-Term/Short-Term Porfolios, we are well on track to making 40% compounded gains off our original $600,000 investment, which should take us to $2.3M but next year – to make another 40%, we need $922,000.  This is not a sustainable model because the economy isn't growing at a 40% pace yet the broad market is not that far behind us, having turned S&P 666 in 2009 to S&P 2,450 in 2017 – up 267% in 8 years which is a straight average of 33.37% a year.

If the US market cap is now $85Tn, then a 20% gain requires $17Tn – that is just shy of the US's entire $18.5Tn GDP that needs to go into the stock market, just to feed a significant slowdown in growth.  The market has become too big to succeed and that is why it's a bubble – we simply don't have the economy to feed such a beast!  

The net effect is that every market misstep is now magnified and we're already seeing that as individual earnings reports are routinely sending companies down 10-25% if they displease.  That's why I said in that 8/3 Report, to stay away from Tesla (TSLA), who are back below $350 and to buy Copper (/HG) instead, along with "Graphite, Nickel, Aluminum, Lithium, Cobalt and Manganese – that's what electric cars are made of."  As you can see, copper has done well this month, adding 0.12 at $250 per penny, per contract and that's good for a gain of $3,000 per contract playing the better hedge of rising metals on the broad macro outlook, rather than trying to pick a specific electric car maker that will "win" the space.

Remember, I can only tell you what is going to happen and how to make money trading it – the rest is up to you!

The same goes for the Dow Ultra-Short ETF (DXD) trade idea we gave you on Aug 2nd or the Amazon (AMZN) short trade idea we gave you on 7/25, which is up 346% already and on track for the full 566% we expected by January expirations.  When the S&P hit 2,480 on 8/1, we titled the Report: "Toppy Tuesday – Back to our Shorting Line on the S&P 500" – that was good, at 2,420 on Friday, for another $3,000 per contract gain (you're welcome) along with $1,500 per contract gains on the Dow (/YM), $4,000 per contract gains on the Nasdaq (/NQ) and $7,000 per contract gains on the Russell (/TF) – you're welcome!

Was that all?  No, I'm not even going to bother telling you what we made on the next paragraph of that Morning's Report, where I said:

We're also shorting Oil (/CL) at $50 but long on Natural Gas (/NGZ7) at $3.07 and long on the Dollar (/DX) at $92.75 – all fun trades for a Tuesday morning.

It's not complicated folks – we read the papers, come up with a premise and then decde what things are going to be affected by the things we see that are about to happen.  It's called Fundamental Investing and I know it seems like voodoo these days in a market that is 90% driven by technical trading – but it does work and it's a lot more relaxing than trying to guess which way the squiggly lines will bend next.  

In our 8/8 Report, it was still: "Trendless Tuesday – Stuck at the Market Top" and we reiterated our call to short the S&P (and other indexes) at 2,480 while adding the following bearish spread for the Futures-challenged:

 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.  

I was on a cruise that week, so not too many new trade ideas but we added a bullish spread on Macy's (M), which is still around $20 and I mentioned I liked Chigago Bridge and Iron at $12, now $10 (down 16.66%).  That brings us to last week's action and you are all caught up for August, where we are now looking for a bounce per our fabulous 5% Rule™, which tells us:

Remember, the 5% Rule™ is not TA – it's just match – we only use charts to illustrate it.  A failure at the weak bounce line today, after failing the strong bounce on Friday, would be a strong indicator that we will be breaking below 2,420 and legging down to the -5% line at 2,356 so playing /ES short below 2,420 with tight stops above can make another $3,000 per contract if we get it right.  

If we do pop up to the strong bounce line (2,442.50) on low volume, however – we're likley to also place a short bet there, along with the lines on the other indexes that I will draw out for our Members in today's Live Chat Room.  

Yellen is speaking from the Fed's Jackson Hole Meeting on Friday but, between now and then, there's not too much going on for the week, data-wise:

Watch out for Durable Goods on Friday, from what we're hearing during the earnings reports, those are shaping up to be a negative number.  Speaking of earnings, there are still quite a few companies who haven't reported yet, including heavy-hitters like BHP Billiton (BHP), Medtronic (MDT), Toll Brothers (TOLL), Cree (CREE), Intuit (INTU), Salesforce.com (CRM), Express (EXPR), Royal Bank of Canada (RY), Broadcom (AVGO), Tiffany (TIFF), Smucker's (SJM), AutoDesk (ADSK), VMWare (VMW), HP (HPQ) – not a week to ignore!  

But also, they are not really the kind of stocks who can move the markets by themselves so this is a good week to watch those bounce lines and see if this is yet another minor pullback that is quickly corrected or, if this is something we haven't seen in over a year – a 5% or more pullback!  

Have a good week,

- Phil

 


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  1. BDC – Can you email me at stjeanluc at gmail dot com? Thanks!


  2. The last 6 months were good for job creation, but far from the best 6 months ever:


  3. How come no one is speaking up:

    http://money.cnn.com/2017/08/20/media/trump-carl-bernstein-reliable-sources/index.html

    "Republicans in Congress, the highest of intelligence officials, the highest of military officers in our country, leaders of the business community — all of whom have dealt with the White House, and many of them dealt personally with Donald Trump — have come to believe that he is unfit for the presidency," Bernstein told CNN's Brian Stelter on Sunday.
    He said those people are "raising the very question of his stability and his mental fitness."


  4. The economic benefits of renewable energy:

    https://arstechnica.com/science/2017/08/wind-and-solar-energy-have-saved-thousands-of-lives-since-2007/

    A paper in Nature Energy this week dives into the weeds by trying to estimate the economic benefits of wind and solar power across the whole of the US. Berkeley environmental engineer Dev Millstein and his colleagues estimate that between 3,000 and 12,700 premature deaths have been averted because of air quality benefits over the last decade or so, creating a total economic benefit between $30 billion and $113 billion. The benefits from wind work out to be more than 7¢ per kilowatt-hour, which is more than unsubsidized wind energy generally costs.

    We don't need more coal…


  5. Good morning!  

    Oil (/CL) is always a fun short below $48.50 (tight stops).  Still 68,000 contract s to kill with 2 sessions to do it.

    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Sep'17 48.72 48.75 48.31 48.65 06:58
    Aug 21


    -

    0.14 20181 48.51 68752 Call Put
    Oct'17 48.89 48.91 48.46 48.78 06:58
    Aug 21


    -

    0.12 163108 48.66 519400 Call Put
    Nov'17 49.05 49.06 48.62 48.91 06:58
    Aug 21


    -

    0.09 28525 48.82 206788 Call Put
    Dec'17 49.14 49.17 48.72 48.99 06:58
    Aug 21


    -

    0.06 17777 48.93 332554 Call Put
    Jan'18 49.21 49.22 48.83 49.07 06:58
    Aug 21


    -

    0.04 12800 49.03 156129 Call Put

    As I said Friday, /RB was a fun weekend short:

     

    /RB is getting to be a tempting short at $1.625, could easily drop 0.025 on Monday for $1,000 per contract gains but we have the holiday weekend coming so the last gasp for "summer driving season" is what's keeping hopes up. 

    2.5 cents on the button – You're welcome!  

    I still have 2 /TF shorts from 1,360 on Friday – up about $600, stop at $500, of course.

    Dollar down 0.2% and it's not helping or, more accurately, it is helping or things would be worse. 

    Big Chart – Watching the 50 dma on the Dow (21,620) and Nas (5,806)  and, if they break, then likely we all join the RUT at the 200 dmas.

    Speaking up/StJ – Amazing how long it took people to notice in the first place.   Good solar article.


  6. Good Morning.


  7. HLF – Soak up that float so Icahn can put it to Ackman !

    ~~HLF +7.4% (commences 'modified Dutch auction' self-tender offer to purchase for cash up to an aggregate of $600 mln of shares of its common stock at a per share price between $60.00-$68.00; discloses recent unsuccessful going-private discussions )


  8. Phil,

    Would you short front month (/CLV7) below 48.50? Or wait to short after the Labor Day run up?


  9. TEVA under 17 again … DANGIT!!!!


  10. Phil,

    When you get a chance, can you suggest new plays for TEVA, CBI, LB, M, and FTR for those who aren't in those?


  11. Painful to watch CMG as well


  12. new low on FTR and IMAX..ugh LB close too


  13. new low on M and GE too.

    not complaining — just shocked at how lousy these stocks are doing.

    I guess this is what I was afraid of months ago when I said what would happen to these names if the market stopped hitting new highs every day.

    ouch


  14. /ES breaking 2420.


  15. Jjennings - Do you mind giving us a quick summary of how you are choosing stock plays? Focusing on blue chips?  Momentum?  etc?  Thanks.


  16. FTR – In the 12s.


  17. albo--FTR is trading like a BK. So is TEVA. So is IMAX.

    These are the names that I am supposed to kiss Phil's tuchus in time square at the end of the year when they recover.

    Not sure what could happen to get them to stop sinking.

    Whatever it is I hope it happens soon!!!!!


  18. Jabobeast,

    Times Square – Humor in the face of adversity is an indication of strength. 


  19. Japar instead of chasing butterflies I just bought MO for 64$ and sold the Mar strangle 65/62.5 strangle for 6.79

    Combined income 1.83% per month!!!! I call it armchair trade! Sit back and watch


  20. Jabobeast,

    May the force be with you. Hopefully, the articles linking IMAX attendance with the reversal of hair loss, increased sexual prowess and longevity will be published shortly.


  21. 8800--doesn't TEVA offer a generic for that???


  22. Oil/Japar – /CLV7 is the front-month contract now, per ToS, so that's the one I was talking about.  I don't even think they will let you trade /CLU7, which is about 0.16 lower.   AFTER the rollover tomorrow (or any steep drop) I would not short oil again until after the holiday.  

    HLF/Albo – Poor Ackman.  Is he really still in that one?

    New FU plays/Japar – I think I'd wait for the broad rally to correct but I'd start with short puts to establish a position.

    • TEVA 2019 $17.50 puts are $3.60 
    • CBI 2019 $10 puts are $3.20 
    • LB 2019 $30 puts are $4.20 (just picked them for Benzinga)
    • M 2019 $20 puts are $4.60 
    • FTR 2019 $13 puts are $5.50

    Those are all great puts to sell and let's say, for example, you sold 5 of each and collected about $10,000 and then, whichever ones go lower – you evaluate if you still like them enough to buy a bull call spread (cheaper than it is now) and DD on the short puts or just pull the plug and take the loss against the better performers. 

    CMG/Stock – Determined to test $300

    Lows/Jabob – Well they are not likely to go the opposite way if the market is tanking.  

    Times Square/Jabob – I think we can book the main stage.  cool

    • A war of words is bubbling over trade.
    • Beijing has responded to Friday's announcement of a U.S. investigation into China's alleged theft of U.S. intellectual property, expressing "strong dissatisfaction" with the "unilateral, protectionist action."
    • The Commerce Ministry will also adopt "all appropriate measures to resolutely defend China's interests."

    • The first round of NAFTA talks has wrapped up in Washington, with Canada, Mexico and the United States committing to an "accelerated and comprehensive negotiation process that will upgrade our agreement."
    • U.S. Trade Representative Robert Lighthizer made clear that strengthening rules of origin for autos – the biggest source of U.S. trade deficits – was one of his top priorities, along with cross-border data flows and e-commerce.

    • "Conflicts have now intensified to the point that fighting to the death is probably more likely than reconciliation," says Ray Dalio, speaking of political differences in this country, and comparing the current time to 1937.
    • "I can't say how bad this time around will get. I'm watching how conflict is being handled as a guide, and I'm not encouraged … Democracies are threatened when the principles that divide people are more strongly held than those that bind them."
    Good news for our new Hedge Fund!  Investors exit Jeff Gundlach's flagship fund
    • via Gregory Zuckerman and Kirsten Grind at the WSJ
    • Assets under management at the DoubleLine Total Return Bond Fund (DBLTXDLTNX) fell to $53.6B at the end of July – that's down 13% from their peak hit last September. Over that same period, funds in that same category had inflows of $7.2B.
    • What gives? Performance, most likely. While the fund still tops 90% of peers over the past three and five years, the margin isn't as visible these days. In 2017, the fund has returned 3.15%, beating 59% of competitors.
    • Gundlach, in fact, is recently on record about the worry of size hurting performance … "We can’t do $100B  in the Total Return Bond Fund … The market isn’t big enough for our style, the things we invest in.”
    • Mutual fund advisor Michael Lipper: "This is part of having exceptional returns – at some point there will be less-than-exceptional returns … [Gundlach] wouldn’t like the comparison, but the same thing happened to Bill Gross.”

    • Bitcoin cash, an alternative version of bitcoin launched by a minority of developers on Aug. 1, surged Saturday, helped by strong demand from South Korea and digital currency "miners."
    • The offshoot climbed 44% to $996.92, the highest it has ever traded in its less than three weeks of history, and a jump of almost 374% from its low of $210.38 on its first day of trading.

    • Along with millions of Americans, utilities and grid operators today will be closely watching the first total solar eclipse spanning the entire continental U.S. since 1918.
    • Glued to their monitoring systems… As many as 12,000 megawatts of solar power will vanish along the path of the moon’s shadow, while natural gas generators and hydroelectric plants help fill in the gaps.

    • The sell-off in sports retail is broadening out to include other apparal stocks. Several sell-side analysts have dropped profit estimates on retailers as the reset kickstarted last week by Foot Locker's guidance cut extends.
    • A partial list of decliners includes American Eagle Oufitters (NYSE:AEO-6.52%, Gap (NYSE:GPS-2.21%, Abercrombie & Fitch (NYSE:ANF-5.28%, Express (NYSE:EXPR-5.53%, Guess (NYSE:GES) -3.98%, Urban Outfitters (NASDAQ:URBN-1.96%, Tailored Brands (NYSE:TLRD-4.38%, Boot Barn (NASDAQ:BOOT-3.47%, J. Jill (NYSE:JILL-2.86%, New York & Company (NYSE:NWY-2.74%, Tilly's (NYSE:TLYS-2.34%, Genesco (NYSE:GCO) -7.22%, Under Armour (NYSE:UAA-3.21%, Canada Goose (NYSE:GOOS-2.29%, Perry Ellis International (NASDAQ:PERY-2.14%, Crocs (NASDAQ:CROX-2.48%, Fossil (NASDAQ:FOSL-2.40%, Caleres (NYSE:CAL-2.30%
    • The percentage of global point of sale transactions occurring through contactless payments will grow to 53% within 5 years, according to a new POS study from Juniper Research.
    • Contactless payments accounted for about 15% of transactions this year. 
    • Tailwinds will include increased promotion of the contactless payment systems, growing customer frustration at the slow speed of chip card transactions, and mandates from Visa and MasterCard that all mass market terminals accept contactless payments by 2020. 
    • According to Pymnts research, Apple Pay had the highest usage rate among those who could use contactless payment for a transaction
    • Contactless payment standings as of March: Apple (NASDAQ:AAPL) 5.5%; Walmart Pay, 5.1%; Samsung Pay, 3.3%; and Android Pay, 1.8%.       
    • Previously: Next iPhone could integrate facial recognition in Apple Pay (Aug. 3)
    • Freeport McMoRan (NYSE:FCX+2.8% premarket on continued optimism over strength in prices of copper, zinc and other industrial metals, as supply is constrained while demand remains strong.
    • Market dynamics have led the metals' prices, which were on a downtrend until rebounding in early June, and speculators also have entered the picture; FCX has climbed more than 20% since mid-June.
    • The recovery in copper and some other base metals “has really only just begun. There's much more to go,” says Jefferies analyst Christopher LaFemina.
    • Separately, FCX expects to regain limited access to the Grasberg copper mine in Indonesia today after hundreds of former workers blockaded the site and clashed with police over the weekend; trouble began Saturday afternoon during a demonstration over employment terms.
    • AllianceBernstein's Gershon Distenfeld: “I own a Tesla (NASDAQ:TSLA), I love the product. But I think investors recognize that 5.3% was probably not the right price.”
    • Issued only a week ago, the company's $1.8B of 5.3% notes due 2025 fell to as low as 97.4 cents to the dollar yesterday. The paper probably ought to trade in the 7%-8% range, says Distenfeld.
    • The high-yield market has been soft over the past few days, but the pace of Tesla's price decline is unusual for a new bond issue, where excess demand typically benefits pricing in the secondary market.
    • Shares slid 1.3% yesterday.


  23. Phil--but the market isn't tanking ;-(


  24. Phil,

    Was the dip below /ES 2420 a fakeout? Looks like we're making up losses?


  25. Ackman – Phil, not only is he still short HLF, but he's also long a large position in CMG from a cost of $418.  VRX, HLF & CMG.  Almost as good a contrary indicator as Gartman ?


  26. Jabobeast,

    TEVA does not… but Trump Pharma does.


  27. Image may contain: 16 people, people smiling

    LA Times went nuts on Trump over the weekend:

    With such a glaring failure of moral leadership at the top, it is desperately important that others stand up and speak out to defend American principles and values. This is no time for neutrality, equivocation or silence. Leaders across America — and especially those in the president’s own party — must summon their reserves of political courage to challenge President Trump publicly, loudly and unambiguously.

    Enough is enough.

    Men and women of conscience can no longer withhold judgment. Trump’s erratic nature and his impulsive, demagogic style endanger us all.

    Also:

    Yesterday, Treasury Secretary Steve Mnuchin said something of potentially very high significance that received no attention whatsoever. At a House subcommittee hearing, Mnuchin very casually walked away from Donald Trump’s long-standing promise never to touch Social Security benefits.

    The exchange occurred more than an hour into the sleepy hearing. Utah Republican Chris Stewart made a plea for cutting mandatory spending, including Social Security. Mnuchin replied, “The president has made clear that on Social Security, that’s not something he’s addressing now, but if Congress wants to review that, obviously that’s within your prerogative.” Mnuchin was not pledging to cut Social Security. Instead, he was deferring the choice to Congress.

    Image may contain: sky and outdoor

    MOSCOW (The Borowitz Report)—In a stunning rebuke of a former close political ally, Russian President Vladimir Putin on Wednesday angrily resigned from Donald Trump’s 2020 reëlection campaign.

    In an unusually emotional comment by the Russian President, a visibly bitter Putin added, “I worked very hard on Trump’s 2016 campaign, and, at the end of the day, I have no more to show for it than Chris Christie does.”

    Image may contain: 1 person, meme and text

    How Donald Trump Shifted Kids-Cancer Charity Money Into His Business

    The best part about all this, according to Eric Trump, is the charity's efficiency: Because he can get his family's golf course for free and have most of the other costs donated, virtually all the money contributed will go toward helping kids with cancer. "We get to use our assets 100% free of charge," Trump tells Forbes.

    That's not the case. In reviewing filings from the Eric Trump Foundation and other charities, it's clear that the course wasn't free--that the Trump Organization received payments for its use, part of more than $1.2 million that has no documented recipients past the Trump Organization. Golf charity experts say the listed expenses defy any reasonable cost justification for a one-day golf tournament.

    And while donors to the Eric Trump Foundation were told their money was going to help sick kids, more than $500,000 was re-donated to other charities, many of which were connected to Trump family members or interests, including at least four groups that subsequently paid to hold golf tournaments at Trump courses.

    The hits just keep on coming with these guys. 


  28. Not tanking/Jabob – What?

    $47.75 on /CL!  

    Dip/Japar – None of it matters other than whether or not we get a strong bounce (2,442.50 – see chartabove).  Anything in between is just noise.   All you people spend way too much time looking at 1 min charts…

    Ackman/Albo – Wow, that's a real FU list!  

    Yellen, Draghi Head to Jackson Hole Amid Inflation UneaseAs the world’s top central bankers gather in Wyoming this week, their relief about a stronger global economy will be tempered by a growing unease that inflation remains inexplicably low. Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi will be among the officials addressing this year’s installment of the annual conference hosted by the Kansas City Fed. The summit, held at a Jackson Hole mountain retreat, comes as central banks in advanced economies creep toward the policy exit after years of unprecedented easing, even with outlooks are clouded by stubbornly tepid inflation.

    Psychologically scarred' millennials are killing countless industries from napkins to Applebee's — here are the businesses they like the least

    China's Debt Swaps Surpass $100 Billion. (videoAlmost a year after China rolled out steps to rein in soaring corporate leverage, concerns are rising that undeserving companies are benefiting while households are getting saddled with risks. China unveiled guidelines for debt-to-equity swaps in October, part of measures to trim the world’s biggest corporate debt loads. The idea was that healthy firms would use the program to cut interest-bearing borrowings, while bloated companies would be shunned. But it hasn’t always worked out that way, even as the total value of swaps reached 776 billion yuan ($116 billion) in the second quarter when volumes jumped to a record, according to Natixis SA.

     

    China is facing a mounting debt problem

    China's Plunge Protection Team Holds $150 Billion In Stock, Claims "State Meddling" Stabilizes Markets

    Iran's president says its top priority is to protect the nuclear deal from US

    In Nationwide Address, Trump To Unveil "New Path Forward" On Afghanistan Tomorrow

    US Lawmakers Draft Bill 'Protecting' Cryptocurrencies From Government Interference

    Builders Complain Of Record Labor Shortages: Up To 75% Of Employers Can't Find Workers

    Video Emerges Showing Clashes Between Indian, Chinese Soldiers

    Elon Musk and other tech luminaries urge the U.N. to take action against ‘killer robots’

    Why Your Face Will Soon Be the Key to All Your Devices


  29. It´s a permanent interest in keep the downtrend  in LG, while true, it appears when prices are recovering, anyway looks like productivity per well can be increases  exponentially.

     

    http://oilprice.com/Energy/Crude-Oil/Russia-Claims-To-Have-Invented-Alternative-To-Fracking.html


  30. Here a play where I am curious to know how it will work out just not for weak at heart.

    AI offering a div. of 17.35% per year. Just as unbelieveable as FTR, stock tardes for 12.69 and I am selling the Jan18 12.5/12.5 straddle for 1.60. If this works out it will give a return of 2.69% combined div and straddle sale.

    As I said before it is hard to believe a company can offer a div of 17.35% but just as futures, for a gamble I have taken a low shot and see what is real.


  31. OK, here's the other bounce charts:

    FTR/Yodi – It wasn't their intention to offer 17.35% but the market keeps dropping the price of the stock while they have no actual reason to decrease the dividend. It's actually 18% now at $13.02 and the next payment is 9/14.  


  32. Phil I love it, as well as on FTR I do have similar plays, we see. As I said not for weak at heart!


  33. Phil,

    When do you consider /ES 2442.5 has failed? One day below? Two days? Trying to capture the 2.5 drop of its coming 


  34. This is what I struggle with. 


  35. Seeking Alpha   Hacked?


  36. Phil, thoughts on /KC?  Dec. contract at 130ish………….


  37. albo – not too long ago Ackman also lost big on JCP too


  38. CBI Puts adjustment    I have 10 J 19  $25 Ps sold for 4.30 (now 15.70) obligating me to buy for net $21700.  I'm considering buying them back for loss $11,400  and selling 35 $10 J 19 Cs for 3.20 $11,200 to me to breakeven. Obligation to buy $23,800.  This way any move up is magnified 3.5X instead of waiting. 

    I own the stock and bought back calls and also wonder if I should be selling monthlies or waiting for a bounce to sell.

    Thanks 


  39. Heart/Yodi – Not at all.

    Fail/Japar – Well it's a subset of the period you're looking at.  Generally, the full recovery has to take place in the same amount of time as the drop (to make a "V" pattern that negates the move) so the strong bounce generally needs to be hit by the 50% mark and weak at 25% so, if we look at the S&P and consider the fall from 2,480 to have started the 16th (it didn't make it back there but it was another rejection at the top), then it's been 2 sessions down and a weak bounce on Friday that failed so nothing less than a strong bounce today would save this from making an ugly mark on the daily chart.  

    Making ugly marks on the daily chart is much more significant than intra-day BS and then you back up to see if you are making ugly weekly candles, which is even worse.  Clearly, from the above, 2,400 is our key line, which is 30% over our 1,850 line (2,405 actually) and below that we'd quickly look at 25% (2,312.50) and 20% (2,220).

    SA/Advill – Looks normal to me.  

    /KC/Ult – Well, like every time, it starts getting interesting again at $130 but it also goes to $120 so it doesn't pay to be brave here.  $130 bullish with very tight stops and then we can try again at $125 and $120 gives me a bit of conviction.  On /KCH8 (the one I currently like), that's roughly $3.50 higher.  

      

    CBI/Tx – 10 $25 puts at $4.30 puts you in 1,000 shares at $21.70 so $21,700 is the obligation and,at $15.65 it costs you $15,650 to buy them back.  If you roll those to 25 $12.50 puts at $5 ($12,500) you are spending $3,150 of the $4,300 you collected so you still have $1,150 in pocket/25 contracts is 0.46/contract so your net entry on 2,500 becomes $12.04 ($30,100) so net/net you are obligating yourself to spend less than 50% more to get 150% more shares.  I don't understand suddenly selling naked calls "to get even" or, if you meant puts – I'd go more conservative.    If you insist on making money on a bounce, you can buy the $10 ($3.10)/17.50 ($1.35) bull call spreads for $1.75 and adding 10 of those uses just $600 of cash (you still have $1,150) and now your upside at $17.50 is $16,900 and even at $12.50, you make a few bucks.  

    As to the stock part – I'd flip the stock to spreads, you can go $7.50 ($4.20)/12.50 ($2.40) at $1.80 so 4x what you have in stock and then sell 2x Jan $12.50 calls for $1 so you net $1.30 on the $5 spreads that are half in the money and, at $12.50, you make 4x $3.70 ($14.80) – you can't do that with 1x the stock selling covered calls, right?


  40. txchili – CBI

    Look at buying the 2019 7.5/12.5 BCS and selling the 7.5 put to pay for it.  Cost is $0 or maybe a credit.


  41. Phil the CBI sale of 10x 12.5 put @ 5 is 5000$ and not 12,500$ to liquidate the 25 putter cost about 15,700 so you still 10K down as I see it or did Isee this wrong?


  42. Yes, Yodi, it say "to 25 $12.50 puts".  


  43. So you more than dobble down from 10 to 25 right?


  44. OK got it.


  45. Wow, we cashed in CSIQ just in time!  

    • Canadian Solar (CSIQ -7%) is downgraded to Underweight from Equal Weight with a $14 price target at Barclays, which sees multiple near-term risks from the possible delay and/or weak pricing of project sales, soft investor demand for a J-REIT listing for its Japan assets in H2, and the Sept. 22 injury vote in the U.S. ITC 201 trade case.
    • Project sale timing continues to be pushed back, the firm says, with expected 2017 sales already potentially delayed into 2018 and likely driving a 2017 revenue guidance miss.
    • Barclays continues to see downward price risk potential for CSIQ to realize the full expected $1.8B of market value given the pressure on solar project values in the U.S. (60% of the company's portfolio); while CSIQ expects a J-REIT listing in H2, the J-REIT market continues to suffer from low liquidity, the firm adds.

    Now we get to watch them again for a possible re-entry.  

    August 17th, 2017 at 2:42 pm | Permalink

    • CSIQ – Boy did we back the right horse here!  Time to cash it in though.  I still like them but up 30% in two months is good enough for me.  

    10-25/Yodi – Yes right but what I care about is increasing the obligation by 50% to get 150% more shares.  You could be more conservative and just roll the loss to whatever number of $7.50/$12.50 spreads with $7.50 short puts at net $0 so $5,000 upside per 10 at $12.50 playing that way but no further losses above $7.50.   


  46. StJ – email sent


  47. $47.50 is now the stop on oil with /CL down to $47.25.  This is probably it though, as it's 2.5%.  Keep in mind, these are the blow-off drops we expect when they have too many contracts at rollover – it doesn't signal any longer-term weakness and now we can look for a bullish opportunity into the holiday weekend..  


  48. Phil – RB – does your thought on oil applies to RB as well?


  49. craigs or anyone else interested in the non-profit effort: biodieselchris at gmail dot com


  50. /RB/Bulls – Sure, we'll look for a long these as well into next weekend.  

    For those of you who can't get outside – live eclipse feeds.  

    I love how people freak out about it.   Imagine how freaked out people were 1,000 years ago.  Also, the way they warn you about looking into the sun is a bit extreme, isn't it?  It hits our eyes when we drive sometimes and we're not all blind from that…  Still not advocating taking chances.


  51. I think the really strange thing is what a coincidence it is that our Moon is at the right distance to make it almost exactly cover the sun.  That's gotta be a galactic rarity.  


  52. there are no coincidences Phil…;-)


  53. Eclipse – enjoyed watching 90% coverage from home with telescope and solar filter. Amazing quality of the light, and very pleasant drop in heat from the sun during the event. Very -cool- :-) Another good bit of live coverage is Nasa TV : https://www.nasa.gov/multimedia/nasatv/

    Hey, markets are still going. Awesome!


  54. MYOK – no options, but up ~300% in a month.. nice to see some biotechs are making progress


  55. Ackman – Pat that's right.  I forgot about that disaster.


  56. Phil – "I think the really strange thing is what a coincidence it is that our Moon is at the right distance to make it almost exactly cover the sun.  That's gotta be a galactic rarity."

    In the extreme, just the right size at just the right distance.  Add in the distance to the sun, its size and state. Add in our core and the resulting Van Allen belts. Add in, add in , add in,  what are the odds? and Out.

     


  57. Phil – Eclipse – "Imagine how freaked out people were 1,000 years ago."

    Yes, in the old days, much like the Mayans with their "accurate" calendar, humans were sacrificed to appease the "Gods".  Many died so the FU crops or stocks might rise. Be good Dathan.  

    The ruling class always puts a boogey man at the top of the ladder, which THEY draw their "powers" through association with over the ignorant commoners, just like royalty.  When the shit really gets out of hand, can't wait for the ET card to played by these taint wipes, and the brainwashed goof balls will buy in once again. Powers from "above", dumb monkeys and Out.


  58. WATT was a good short. Yes!!


  59. Phil/FTR

    Can you do a more in-depth valuation and reissue assessment of FTR.  It really is my weakness trying to determining a value opportunity, opposed to a risky proposition.  Some questions I have: is the dividend at risk?  Is bankruptcy a probable outcome in the near term?  

    You seem so resolute about the stock, but I have read others who don't see it the same way.  This is nothing new.  There are two sides to every trade and I know that. What I am hoping to see is a systematic way of evaluating value and risks using FTR as an example.  I currently do not have a position in the stock. Thank you as always.


  60. Is there bad news on FTR? Almost at 80c ..WTF???


  61. BABA    you can trade the June 2019's.   Somebody bought a bunch


  62. FTR – Help me Spock, help me and perform some due diligence.

    A 70% decline in annual free cash flow for over four years, with declines in customer base, which has sent many into panic, and bears scrutiny, why?  Like TEVA, FTR is in a sector which exhibits secular erosion, viz. increased competition,  alternatives or substitutes, and lower prices with the potential for reduced market share.  Market and economic conditions are an add in.

    More relevant, both are serial acquirers who have bloated their debt with acquisitions.  The amount of SGA, acquisition, integration, restructuring and other associated costs, ALL which affect operating cost, income and free cash flow, are important to note.  The TIMING thereof, must be observed closely for impacts to the financial statements and send the weak running.

    In the case of FTR, Q2 estimated free cash flow is back up to 800M from 2016 265M. Go look at the statement. Knee jerk jack wagons and weak hands are going to keep sending this lower.  If you have faith, keep buying in and wait until later this year, early 2018 for any kind of pop.  Past performance is not an indicator of future returns. There are NO GUARANTEES and out.


  63. Size of the moon – also right size co-incidently to make size of tides oscillate over two weeks – meaning some beach slime at the very edge gets a couple weeks to cook/evolve before its hauled back out with the rip.


  64. thanks natt

    hope you are right.

    so far, my kiss is only in.. kiss my 2017 profits good bye…yuch


  65. that would the revolution around the earth not the coincidental size


  66. You can buy a $10 call on FTR for Jan 18 for almost no premium.


  67. The sun has returned, rejoice! 

    Hey Naybob:

    Image result for never tell me the odds animated gif

    WATT/BDC – They really fell apart. 

    FTR/DC – What do you want me to say?  They borrowed a lot of money to buy VZ's legacy business and it's doubled their operation yet, SHOCKINGLY, since this only happened 12 months ago – they have not yet stabilized the doubling of their operations and they have missed projections by $280M out of $1Tn in revenues – GASP!!!

    EBITA means "Earnings before interest, taxes, and amortization" and they made $906M in 3 months but – SURPRISE! – it cost them money to buy VZs assets and they borrowed money at THE LOWEST RATES IN HISTORY (can you believe how stupid these guys are) to buy assets that will generate revenues for decades after the loan is paid off (what morons!).  

    They are on track to cut $350M in expenses by the end of next year, adding almost $100M per quarter to their net profits.  

    80% of their losses were a goodwill impairment and, in fact, they added $529M to their cash pile last Q.

    2/3 of their churn was due to jettisoning VZ customers who weren't paying:

    The vast majority of the debt is unsecured, meaning they will be able to refinance it easily (as the debt-holders don't have much leverage):

    Unfortunately, all this stuff takes time and the debt level has people panicking out though this is the way phone companies grow their business and always has been.  

    Moody's downgrades Verizon's long-term debt rating to Baa1 following …

    Verizon's Vodafone Debt Bubble – SDxCentral

    Obviously they can afford to pay a dividend that uses 23% of the cash-flow. 

    So, you either believe they are a fairly typical phone company going through a debt cycle or you can believe they were fools and took a perfectly profitable company and blew it on a major acquisition that will turn out to be worthless or perhaps interest rates will spike and they will no longer be able to service their debt or 100 other things that can go wrong with businesses that don't execute correctly.  

    To me, they are doing exactly what they said they would do and we're one year into a 3-year process.  

    Another last minute attempt to move the indexes into the green.  


  68. rustle--you wouldn't get 2 dividends (if they pay them, of course)


  69. FTR/Jabo

    But you also wouldn't have $13 of risk if some shoe decides to drop.


  70. sun / moon  Sun's gravity stronger, accounting for distance and mass only (m/d^2) but then moon is so close that relative differences in gravity between side of earth nearest and farthest from moon churns the sea more.  http://hyperphysics.phy-astr.gsu.edu/hbase/tide.html


  71. Phil — thanks for the FTR above…

    Do you feel the same way about TEVA's acquisition or is it a totally different animal?


  72. Klondike gold rush is on! Yahoo put out the story (marked as "news") over the weekend. Stock halted after jumping 35% this morning…


  73. The disclaimer at the end is a hoot :)


  74. no, you said "also right size co-incidently to make size of tides oscillate over two weeks" which is a phenomena of the sun and moon being in and out of alignment ~2 weeks (known as spring and neap tides), which, as I correctly pointed out, is a function of the 28 day cycle of the moon revolving around the earth.


  75. BDC – Thanks for the email. Got back to you…


  76. /NG and Coal commentary from Raymond James ~Energy Stat: Why is Natural Gas Losing More U.S. Electricity Share Than Any Year of the Past Decade?

    ~As shown in the chart, natural gas’s share of the U.S. electric power market has fallen sharply this year as wind, solar, hydro, and (especially) coal have all gained share at the expense of gas. Strikingly, gas is on track to lose more U.S. power generation market share in 2017 (around 300 bps versus a 2016 base of 34%), than in any year since shale gas became a significant reality a decade ago.
    In this Stat, we will add substance to these dramatic 2017 changes in the electricity mix, while also explaining why the long-term U.S. power picture will likely see wind, solar, and gas gaining share.
    Wind and solar are the “real deal”: recent share gains are meaningful, with plenty of room to expand further in the years ahead.The pace of newbuilds in wind and solar can be expected to accelerate over the next several years.
    ~Coal’s revival is purely a temporary one, but for the time being it is squeezing gas.
    To point out what should be obvious, the recent recovery in U.S. coal-fired generation has nothing to do with the regulatory landscape under the Trump administration. The policy evolution that’s been visible to date is mostly rhetorical (e.g., announcing a U.S. withdrawal from the Paris Agreement) rather than substantive. Regardless of the politics, short-term fuel-switching decisions reflect purely how
    existing power plants are utilized, which is quite different from making investments in future generation capacity. Given this past winter’s increase in gas prices, there has again been a wave of switching from gas-fired power back towards coal. Henry Hub averaged $3.05/Mcf during 1H17, up 50% y/y. For 2H17, the y/y comparison is also unfavorable for gas, but nowhere near as harsh: our forecast of $3.35/Mcf is up only 15% y/y To be clear, U.S. coalfired power plants are still shutting down. At least 9.4 GW of coal shutdowns (4% of total coal-fired capacity) were announced in 1H17 – and this is occurring regardless of what ultimately happens with the EPA’s Clean Power Plan or the Paris Agreement. This compares to a mere 0.9 GW that’s in development, none of which is actually in construction.

    ~The longer-term picture is unchanged: coal has more room to fall, with gas and wind/solar competing for the spoils. Notwithstanding the month-to-month and year-to-year choppiness, particularly in the interplay of gas vs. coal, we would underscore that longer-term trends in the U.S. electricity mix show wind, solar, and gas as the market share winners. It is worth noting that U.S. electricity demand growth has been and will likely continue to be essentially flat. That means changes in market share are very much a zero-sum game.

    ~While we believe overall U.S. gas demand growth will be strong (due to petrochemicals, LNG exports, and exports to Mexico), energy investors may be overly optimistic about gas’s long-term share gains in
    U.S. power generation. Over the long run, wind and solar will likely capture two-thirds of the electricity share that coal loses.


  77. Greencoin – not sure how they grow if they never respond to people who apply to be a producer.  Phil?








  78. Hey Jabo, here's a reverse FU stock. Anyone else upset about selling their IRBT when they sold the military business only to see shares triple in value in the interim? Of course there doesn't appear to be any fundamental reason for this increase, with sales having increased some but not a three bagger amount. Phil any thoughts about why this stock has gone up so far so fast after we pulled  the plug? Please do not take my initial tongue in cheek comments as criticism by the way. Made complete sense to get out and the run up makes no sense which is why I'm asking you about it.


  79. tangledweb – what's your greencoin username?


  80. Noticed that the RSI on the $oexa200r fell below 50 today. Also…the black line on the MACD is below the red line…which meets the condition to exit long positions…if you are not hedged…did I mention how much Phil likes cash!? :)

    http://stockcharts.com/h-sc/ui?s=%24OEXA200R

    Following up on this popular indicator I learnt fro RVTV   It's below 65  which means stormy weather is coming 


  81. Palotay – no secret sauce I'm afraid.  I don't touch momentum stocks. I did years ago, but don't invest in anything anymore that I have no clue what the true value of the company is.  I have a decent concentration in blue chips that yield around 5% in dividends (the F's and T's of the world), which I sell puts and calls against consistently.  I've also hit a few fliers (did very well on the LL trade a few others).  Anything that people "obsess with" either on this site or in the investing community in general I pretty much try to stay away from (FAANG's, TSLA, CMG, etc. etc.).  I also stay away from any virtual trades in companies or industries I don't know much about.  I've been trading USO for awhile as it pops around between $9.50 and $10 and sell straddles on it.  Often times I'll just sell naked puts when I think something has been beaten down a bit too much (did this with TWTR).  Sold puts and bought BCS on TGT when they hit a floor.  So overall I've got a pretty decent mix of different types of trades.  That alone covers probably half my gains.  The rest I've been successful (or just plain lucky) in my trading in /TF and /CL.  Ever since we got the "Trump Bump" I've been short /TF.  At least 2 contracts open at all times – lets me sleep well at night and eliminates the "fear of missing out" when the market pulls back.  At certain points during the year I've gone net short in my portfolio vs. just hedging my long positions.  I've got a couple rules that I've implemented over the last couple years that have helped me out (whether they are good or not…just my preference).  I never add to a position that is "going my way".  i.e. if I'm short the market and it's heading down I never short more…I only start covering and taking gains (I keep my 2 open contracts so I don't get that feeling to chase when the market drops another 20 points when you get out).  I generally like it when a trade goes against me (as painful as it is to see red in your account) because I get to build a bigger position and market physics reversion to the mean tends to allow me to work my basis up or down. 

    I also have a few of the dogs with fleas….FTR (very small position)…PLX (small position)…



  82. Are We Fiddling While Rome Burns?







  83. The Kansas tax cut experiment





  84. Ohio Judge Returns Fire After He Is Ambushed on Way to Court


  85. Good morning! 

    Had a little pop in the Futures but half faded now.  

    2,430 is weak and 2,442.50 is strong so holding weak at the moment but if they can't get over strong today, it won't look very good as it's taking too long to recover.

    The rest of the World is enthusiastic that the Central Banksters will promise us another rally this weekend.

    Yesterday's volume (flat), by the way, was 1/2 of the prior two days (selling). 

    TEVA/Jabob – Not as clear-cut as FTR as TEVA may, in fact, have overpaid for for Activas ($10Bn) at precisely the wrong time for the sector.  

    GreenCoin/Tangled – Have you ever called Bitcoin tech support?  Or Google for that matter!  Anyway, I see BDC did respond so good luck with the mining.  

    IRBT/Craigs – Well, they executed their pivot well but mostly it's because their p/e rose from low 20s to 50s.  Like many Nasdaq socks, all they have to do is stay out of trouble and money comes pouring in.  

    Chart/Latch – That's turning ugly.  

    Good diversification JJ.


  86. Nothing frothy in the UK.  Nothing at all.  To be fair they missed but a 68% drop in a FTSE 100 share in one day … wow!

    http://www.hl.co.uk/shares/shares-search-results/p/provident-financial-plc-ordinary-20-811p/financial-statements-and-reports


  87. Dollar up.


  88. Thanks JJ. That was helpful.