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Friday, December 9, 2022

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Monday Market Meltdown – Global Wheeee Edition

Now THIS looks a little more realistic, doesn't it?

Last Monday we pointed out that the run-up, that was coming DESPITE a myriad of Fundamental negatives we were tracking, was essentially a load of crap aimed at bringing in more suckers before they pull the rug out from under the market.  To keep ourselves from getting sucked in by the hype, we drew some very simple lines across our mult-chart which were 50% retacements of the month's dip.  Not making those lines during last week's actions kept us from making poor decisions as the market hype continued all week.  My warning was:  

"How many times will the bulls be sucked in by the same empty promises?  How many times will they reach into their pockets and BUYBUYBUY the snake oil valuations sold by the Reverend James Cramer?

Tuesday I got a lot of sheeple angry by calling them sheeple for falling for Cramer and the rest of the Mainstream Media hype and we discussed a few of our hedges that were working already, like TZA, TLT and SQQQ as well as two that were still playable:  CAT May $95 puts at $1.10 – up just 15% from our initial entry and DXD May $12 calls at $1.35, up just 12% from when our Members got the Trade Idea.  Despite the market moving up, I reiterated my sell-off targets of Russell 775 and S&P 1,325.  

Wednesday we tried to find reasons to be bullish, presenting both sides but judgment was once again for the bears after weighing the evidence as I pointed out that the lack of economic improvement for the bottom 90% could not be ignored – something Nick Sarkozy just discovered this weekend.  In the morning post, I mentioned going back to the well and shorting oil again as it dared to reach for $104.50 again – another lovely pay-off last week and we caught it again this morning at $103.50 (/CL Futures) for a quick $500 per contract – so far.  

Thursday we were having great fun and we had a bullish spread on CHK at $17.20 that may still be playable this week as the market dips again.  We discussed our goal of re-shorting PCLN (back in the July $560 puts at $8.50) and we added a nice CMG spread in the morning post, selling the May $475 calls for $4.75 and buying the June $375 puts for $5 for net .25 on the spread.  As of Friday, the May calls were down to .60 and the June puts were $5.50 (still playable!) for net $4.90 – up 1,860% in just 48 hours.

SPY 5 MINUTEThat was a great finish to April's free samples and I hope a lot of people were able to profit from our ideas.  We're about full once again in Basic and Premium Member Chat and we'll be closing down admission for new Members next week until there is more room.  Friday went just as planned with a nice goose into the open that topped out around the EU close and then we had a nice little sell-off into the close.  

In Member chat we added a new SCO spread for May expirations as the April spread (which I gave out on BNN) of the April $29/33 bull call spread at $2.10, selling the $30 puts for $1.35 for net .75 finished at the full $4 – up 433% in 6 weeks.  We also had a chance to re-up our DIA puts as well as USO puts – even for our $5,000 Portfolio, where we also added a bullish bet on the Dollar with UUP May $22 calls at .17.  

All in all, it was a fantastic week of riding out a minor bullish bounce and, now that options expirations are over, we are back to the cold, harsh reality of the last week of April and things have certainly NOT improved over the weekend.  Our biggest fear in getting too bearish is Central Bank intervention but any weekend (like this one) where it doesn't happen – realizes the biggest fear for the bulls because without a constant flow of MORE FREE MONEY – what is their premise?  

This weekend, in Member Chat, we discussed On Balance Volume and how that indicator was cutting through the crap and giving us a very clear sell signal on the S&P.  As you can see from StJeanLuc's SPY chart and, as we discussed last week, the minor bounce in the S&P and other indices is only masking continued deterioration of the OBV indicator – giving us a clear signal of real internal market weakness.  As I said on Friday regarding the VIX's MACD indicator showing similar weakness:  

Do you see that MACD line on David Fry's VIX chart?  Do you really need 10,000 hours of TA training to figure out what's likely to happen in the near future?  Complacency is what's wrong with the markets – we are pricing companies to perfection and not discounting any kind of risk premium into our stock valuations.  Something is bound to happen – all we need to do is choose the form of the Destructor

This weekend Gozer takes the form of the French elections, in which Socialist Francois Hollande came in first, with 28.8% of the vote, beating incumbent Nick Sarkozy (26.1%) and a very strong finish by Marine Le Pen, who's National Front picked up a surprising (and scary) 20% of the vote.  “People are worried… because if [Hollande] beats Sarkozy, he’s going to look to renegotiate a lot of the treaties France has signed… The European problem hasn’t gone away,” said Piper's Andrew Sullivan

The economic data sure isn't saving us as HSBC's reading of China's PMI still came in at a contracting 49.1, up only slightly from March's 48.3.  France's PMI went the other way – into deeper contraction with April falling to 46.8 from 48.7 in March led by MASSIVE declines in service, from 50.1 to 46.4.  PMI services across the Eurozone fell from 49.2 to 47.9 while the Manufacturing PMI dropped into DEEP CONTRACTION at 46 vs. 47.7 in March prompting Markit's Chief Economist to say:  

The flash PMI signalled a faster rate of economic contraction in the Eurozone during April, extending what appears to be a double-dip recession into a third consecutive quarter.  Germany saw growth weaken to near-stagnation, while France saw a worryingly steep downturn.  The rate of decline also regained momentum in the periphery, which will inevitably raise concerns about the impact of deficit-fighting austerity measures.”

EWP WEEKLYMeanwhile, Spain's Central Bank says their economy contracted 0.4% in Q1 and down 0.5% from Q1 of last year, when the Global markets fell off a cliff over what a disaster Spain (and other EU countries were looking like).  Now things are clearly WORSE yet the S&P is up 10% – does it make sense to you because it sure doesn't to me?  

Also casting a shadow across Europe was news that the Netherlands will face an early general election (with more right-wing leadership) after budget talks, aimed at trying to meet European Union rules and keep its triple-A credit rating, fell apart on Saturday.  The right-wing Freedom Party reportedly walked out of three-party talks, saying EU budget demands were impossible to meet. Dutch Prime Minister Mark Rutte has reportedly resigned.  The Czech government is also collapsing – but no one seems to care..

There is a growing sense that it’s getting hard for force the austerity program through both referendums but more so local parliaments — this increases the tail-risk which one month ago had all but disappeared, and reforms are now even more on the back burner,” said Steen Jakobsen, chief economist at Saxo Bank.  “I remain extremely defensive as we move towards May 6th double referendum, and with no ‘salvation’ ahead we could see further losses,” he said, referring to the date of the second round of the French election along with a Greek election.

Mish summed up the situation in Australia this weekend with the very simple title: "Australia is Screwed," in which Ian Vettender notes: "Our retail malls, once proudly displaying two discounted sales a year, now are permanently emblazoned with discount banners, promising 30 per cent, 50 per cent or even more off the "regular" price.  Our banks are faced with the very same dilemma. Month after month, the Australian Bureau of Statistics unveils figures detailing a drop in lending for new housing and for business, falls to levels not seen in decades, sometimes of a magnitude never before recorded. No-one is borrowing."

Back home, Barron's polled the top money managers and found them to be a generally bullish bunch with 51% in that camp and only 14% on the bear side so whoever told you that there's a lot of money to come in from the sidelines has been lying to you – but what else is new?

Since the "bears", like us only expect a small correction before the Central Banksters step in and turn the money machines back on – the overwhelming bullishness pumps up the S&P another 6% by the end of the year.  Notice NOBODY wants to bet against the AAPLdaq and very few people are willing to bet against either Asia or Emerging Markets – truly this is 2007-2008 all over again and we have learned – NOTHING! 

Call girls are, at least, fast learners and the International Alliance of Professional Escorts has, in the wake of the Secret Service scandal, already downgraded the US's credit rating saying it's members : "should be aware that doing business with the government of the United States carries with it a significant risk.  We are urging our members to avoid conducting transactions with the United States and to focus on more reliable customers, like the International Monetary Fund,” the statement added."  Maybe NOW Congress will take some action — as their own action is being curtailed…

As a rule of thumb – if a hooker won't do business with someone – you shouldn't either – so look for TBills to shoot up as people run to the relative safety of play money because that Global demand story is coming apart at the seams despite all the "positive" Q1 earnings reports (more on that when I have time). 

Let's continue to be very careful out there! 

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What F'in idiot bought NFLX at 111……I love the smell of capitulation in the air…..

 

Down USO, down.

Strangle / Boltdude – You actually sell the strangle, not buy it! Buying a strangle ahead of earnings is the worst sucker play ever as volatility is pumped up then. The idea of selling the strangle is that there will be a volatility crush tomorrow morning and you'll be able to buy it back cheaper. That NFLX 80/130 strangle is in the money now, but it might be dicier in the morning. Obviously the legs can be rolled… For example, the weekly 80 put can be rolled to the May 70 puts now.

Like I said, risky plays…

Phil/Dollar

 
You're right, the dollar didn't move much, however, it doesn't take much.  They play the same game over and over.  They pop the dollar either in pre-market or at the open to stimulate the sell off, then once the initial excitement wears off (and volume drops), they start to ratchet down the dollar in small increments.  That's usually enough to stop the selling.
 
It really is amazing to watch how the market reacts to every tick of the dollar.

phil, on nflx, is it better to wait to the end of the week to totally burn off the premium of the short straddle and then roll the losing side?  the june spreads will probably hold their combined value till then. thx.

hopefully my NFLX deep OTM puts (becoming closer to ITM), finally pay off

WTF really?!?
Reuters) – Texas Instruments Inc posted a 60 percent decline in its quarterly profit but revenue was slightly ahead of analysts' expectations and the chip maker said a prolonged inventory related decline in demand had come to an end.
The company, whose chips are used in products ranging from cellphones to industrial equipment, said profit fell to $265 million, or 22 cents per share, from $666 million, or 55 cents per share, in the year-ago quarter.
Revenue fell 8 percent to $3.12 billion from $3.39 billion but was slightly ahead of the consensus Wall Street forecast for $3.06 billion, according to Thomson Reuters I/B/E/S. TI's own revenue target was $2.99 billion to $3.11 billion.

AMX is a useful little stock. I got interested in it a while ago during an investment tour of a low income barrio in the Dominican Republic, where even the humblest homes were not out of reach of wireless Internet and cellular services from the company's local subsidiary.
I opened  an at-the-money bull call spread and it has moved steadily further into the money, even today, when not many stocks made headway, it was up 2.5%
They are not very well known in the US, though their Straight Talk service is marketed by Walmart (WMT) a popular retail store (except in New York City). AMX's latest move is the iPhone–well not really, but they are now offering a naked SIM card that you can use with your own or out-of-contract iPhone for only $50 per month with unlimited calling, data, and texting. Add on another $5 a month for unlimited calling to landlines in Mexico or some other countries, and you have a pretty useful package much cheaper than AT&T.
Of course humble AMX is hardly positioned to challenge behemoths like AT&T or Verizon but the owner, a Mr.Slim, is a smooth telephone operator and could shake a few fat cats off their mats.

AMX / Jmm – Historically, this is a pretty volatile stock… Some wild swings back and forth. Not saying it's bad, but you have to hang on for the ride. 

Commodity Snapshot:

http://www.bespokeinvest.com/thinkbig/2012/4/23/bespokes-commodity-snapshot.html

Some of them are getting oversold now!

TZA  /  my unparalled trading acuity
 
my weekend thinking / analysis – "probably a very down week coming, finally a major rollover
 
8:49   exec says "maybe -500 today"
 
9:30  newbie buys TZA at the open at $20.13 (shares)
 
10:00  I go to bed for the day (don't ask)
 
10:30   Phil says "TZA / newbie – nice call!'
 
5:00 pm    I get out of bed, check the quotes  to count my profits –  TZA closes at $19.94
 
I loose 19 cents!
 
Now THAT is how you trade!! 
 
welcome to my world
 
(but it will be $25 by Friday, right?)  anybody?  Bueller?  Bueller?…………….Bueller?

my unparalled trading acuity
 
Part Two
 
on second thought, maybe I'll just start following Jabo     🙂

did anyone take notes on favorite news sites and tweeters? Or remember what days that chat was going on? I thought i copied for later viewing but can't seem to come up with it>
thanks

morx – this link?

thank you, kwan

I copied this list of tweeters from the 18th
http://www.optionstradingiq.com/top-25-traders-on-twitter/
I havn't gone through each one yet.

Anyone in the tech field:  Can you give a brief pro/con of Augme Technologies, Inc. (AUGT.OB)? R they worth $2?

  Also, I know I have asked before, but I have someone who works for this company and he swears up and down that it is going to 100 – Guidewire (GWRE).

 

Thanks.

Phil
There is speculation of a 10% devaluation of the euro as a way to stimulate euorzone growth.
If the US and UK went along with this, how do you think US markets would react?
Thanks
Strether

EDZ and TQQQ-
I missed these this afternoon.  Checked back in after a meeting with only 2 mins left on market open.  Will these be playable in the morning?
Thanks.

Thanks. Planning on oil tonight? I gotta eat.

NFLX down 16% – that number looks familiar. Oh yes, the average post earning move as I posted this afternoon. So far it seems that history is repeating itself! We will see how that works out in the morning.

Any of you subscribe to bullmarket.com?

Is it worth subscribing to?

Pharm, I took a quick look at GWRE.  Their 10Q looks solid, lots of cash and growing revenues, including from services.  Their customer list is also impressive but likely just scratching the surface, so seems like lots of room for growth.  It's probably not a fast changing environment so with their platform investment complete they can probably ride on their software core for another decade, which should keep R&D reasonable, always a key for tech companies.  There was no mention of 'cloud' or 'hosted' on their site, my key question for your friend would be are they working towards a scaled down, hosted solution that would allow them to the second tier, smaller customers.  Earnings are growing but I would probably wait and buy them on a dip; they seem like a Berkshire type investment, not sexy, just buy and forget…

Pharm, re AUGT, that one doesn't float my boat. Look at their SG&A, it's 4x their sales, that's a bloodbath.  Also the barrier to entry in their field doesn't seem very high, and their insider and institutional ownership is almost nil; there's better dice rolls out there…

Pharm – agree with mocha on both fronts. I see a lot of business plans, and on AUGT, I think I've seen something like it many times. On GWRE, you've got consistent earnings and revenue growth, not explosive, but that's what I'd expect in their industry. Could be very nice over the long term and worth digging deeper. I've only seen one other plan of something like it for that industry.

Interesting that the U.S. Foreign Corrupt Practices Act bans companies from bribing foreign officials to win business and yet it is perfectly legal to do the same thing in the US.

Phil/Dollar

 
Yep…..it's a total damage control game they've been playing.  Given the lack of terrible news today, we're probably in for a low volume BOT controlled gainer day.  They'll most likely continue to drop the dollar to keep pushing it up and if they get the shorts on their heals again might close with a triple digit gain that the talking heads can hype.

JMM/Bribe

 
First thing you need to do is define Bribe.  This world is so backwards that the lawyers will argue that giving a foreign official huge sums of money in exchange for business is not a bribe and win.

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