1,440 – Again.
That's right, we have made not one inch of progress since we had the same exact title in last Wednesday's post, when I said: "This is the part where the MSM begins to realize that Manufacturing is slowing down, stimulus won't create jobs, earnings are not going to be as good as expected, Europe is not fixed, housing is not as strong as expected andthe stock market is being manipulated. Yep, all the stuff I've been telling you for months." Our plan was to buy into the dip and that's what we've been doing the past week as our short-term virtual portfolios are now much more bullish than they were a week ago.
As you can see from Dave Fry's weekly SPY chart, we're still in an uptrending channel and still over the major support line at 1,420 and we tested 1,430 at the end of last week but have, so far, held 1,440 this week.
Last week we were all worried about Spain because they were rioting in the streets and this week we are all worried about Spain because they haven't requested a bail-out yet. "Plus ca change, plus c'est la meme chose," as they say in the country next to Spain…
In Member Chat last Wednesday, we took advantage of Oil Futures (/CL) testing $90 to go long and by the end of the week it was back to where we liked to short it at $93 and this morning, ahead of inventories, oil is at $91.22 but we're not long today as we don't expect the bulls to have much to get excited about but, if we get a dip to $88.50 that holds – we'd like to go long there. As you can see from this USO chart – we're pretty well stuck in the channel but the bottom is about $89 so I'm thinking a build this morning takes us just below the $33 line on USO.
AAPL was at $666 last Wednesday and they closed at $665 yesterday but we've worked ourselves into a more bullish position there (we had several long-term bullish trade ideas on AAPL in Member Chat that day). XLF was holding $15.50 and we went longer there – now $15.69. We added QQQ Oct $70s at .30 and yesterday we had the chance to add them again after having cashed out that batch at .50 (up 66% in a week). We took $9 and ran on the PCLN Oct $595 puts in our $25KP and that nailed the high for the week, TLT was at $125 (now $124.19), the VIX was at at 15.70 (now 15.71) and my comment on HPQ hitting $16.50 to Members was "WTF?" and I reiterated our reasons for being long on that one (now $17.15).
Annoying as the past 7 days have been, as you can see from our Big Chart, it's really just a bullish consolidation along our resistance lines as we wait for the Dow to build up enough steam to hit 13,600 – which our Tuesday analysis of the Dow components ("Still Waiting for the Dow to Show Some Strength") determined should be possible but we're only expecting a 600-point run at most (4.4%) from last week's 13,559 as long as earnings hold up.
That, we determined, is why the Dow was and is having so much trouble getting over the Must Hold line at 13,600 and we were so harshly rejected there on Monday that we fell all the way back to 13,400 yesterday before turning back up.
This morning's ADP Report came in better than expected, with 162,000 jobs added in the private sector. Of those 162,000 jobs, just 4,000 were manufacturing and 18,000 "goods producing" with all the rest coming from the service sector. When I was in college 30 years ago and we used to talk about transitioning to a "service economy," I don't think anyone ever imagined it could get so extreme….
That shifts the focus back to Friday's Non-Farm Payroll Report, where we're expecting about 120,000 jobs to be added but last month was surprisingly weak at 96,000.
Tonight jobs will be a big topic of discussion at the Presidential debate but, as you can see from this chart, it's amazing that it's an issue at all. Obama took office pretty much at the dead bottom of that trough and the improvements made since that time have been nothing but stunning but, for some reason, the Democrats allow the Republicans to take control of the narrative and act like coming into office with an economy that was losing 800,000 jobs a month was somehow Obama's fault – ridiculous!
Also ridiculous is the Romney plan to cut tax rates by 20%, which will reduce taxes paid by households with incomes over $200,000 by $250Bn a year. According to the Tax Policy Center, If you leave preferential tax rates for savings and investing (e.g., long-term capital gains and dividends) untouched, as Mr. Romney has said he would do, that leaves only $165 billion of available tax expenditures that can be eliminated from this same group of high-income earners once their marginal tax rates fall.
That means there’s an $86 billion shortfall — the difference between $251 billion in tax cuts and $165 billion in potential tax increases on this high-income group — that needs to be accounted for somewhere. By process of elimination that somewhere must be the rest of the population, the 95 percent of households earning less than about $200,000 annually. No wonder Pinocchio Ryan said he didn't have time to do the math!
We're not expecting much of a move in the markets until after the debate because fiscally irresponsible nonsense like this scares a lot of investors – and rightly so. We also face headwinds from the BOJ having a Yentervention as they try to weaken the Yen by buying Dollars this morning. Already, at 8:45, the Dollar is back over 80 and the Yen is at 78.39, up from 78 yesterday and we assume they'll target 78.50 today and 79 tomorrow, which could bring the Dollar back to 81 if they are successful.
That will put pressure on commodities and the good news there is that gasoline is plunging below $2.80 (/RB) and weak demand evidenced in the inventory report (any kind of build) could send us all the way back to re-test $2.70, where they'll likely make a good long. Meanwhile, if the 2.80 line holds pre-market, /RB Futures make a fun bullish play over that line with tight stops below it as we don't expect the Dollar to go much higher from here (now 81.05) today.
Tomorrow is a big data day with Jobless Claims, Factory Orders and FOMC Minutes while we wait for Friday's NFP report. Earnings are not very exciting but next Tuesday is AA & YUM and then we're off to the races but today is most likely a watch and wait kind of day as we wait to see what nasty things Romney has to say about our "failed" economy – the one that's no longer losing 800,000 jobs a month with a stock market that's gained an average of 25% a year since Obama took office…
1%'ers/Shadow – Now you're on to something. It is a global thing, there's no difference between our top 1% and China's top 1% and they all go to the same parties as Saudi Arabia's top 1% and Mexico's top 1%, etc. That is the power that needs to be fought. The whole point of free trade was to freely trade labor down to the lowest possible level – they just forgot to mention that part when they were wrapping it up in a bow and selling it to voters over the past few decades. The top 1% have always moved manufacturing away from expensive labor – they ran out of workers to exploit in the US so they took their act on the road and we shipped 40M jobs overseas. This is great for Corporate profits but sucked for US Workers.
$87.85! On the whole, we're holding up pretty well with this massacre in the energy sector going on.
V & MA seem happy – making new highs.
AMZN rockin', PCLN waking up. Poor AAPL stuck at $666.
lots of apple insider selling going on
Phil, I think I've learned a lot from you and wanted to run my adventures with HPQ by you. I feel like I am in a much better position now that I would have been before following your site, but let me know what you think. I first sold 10 of the HPQ Jan 14 $18 puts for $2.70. When it dropped a few months ago, I rolled to 17 of the $15 puts for even money. When it dropped today, I rolled to 26 of the the Jan 14 $13 puts for even money again. So I started with a $2,700 credit and now I have essentially a 2.5X position with an entry price of $11.10, which is still 28% below here. I have a reasonable position size of $5K and I can still roll to the 2015 at some point and own HP for probably $8 or $9 worst case. I can sleep at night with this one!
Its finally happening. China building factories in the U.S.:
Lenovo announces plans to bring manufacturing back to the US
TOPSTONE OF THE PYRAMID TALK //yes Glass Steagall gone..NAFTA in..my man WJ CLINTON was the catalyst behind those two gems..they worked out brilliantly for the …yep 1%!..self enrichment is the only bi partisan agenda agreed upon.
And now it sucks for Chinese workers. Those rich guys are running out of places. Trading fairly effects them more than the bottom 99%, the power to stop it is there and a great time is now befor they put up the next head fake.
Oil just keeps falling.
IWM may have a seller getting out befor the debate, large blocks are red, the BOTS continue to not buy and that seems to be the reason. I assume the smart money is out and angel? says AAPL insiders selling? All insiders are selling. The BOTS are programed by the biggest money. What I don't understand is what is the big thing about the debate tonight? Who has the best line? The real policies are out for people like us that pay a little attention, all I want to know is what the stupid uninformed decide or are sold on. This is about the undecided and the undecided are dangerously stupid at this point.
Does anyone really think the debate tonight will matter at all for election, markets, anything? if so, please tell me in what way.
Since about 2:20 3 distinct sell signals and Algo's have a buy. The computers have made them very effective help to loose money. Did trading stop for 5 minutes or so? Did a breaker kick in and why?
Phil/ Chinese population control. My son works for a publicly traded reit here in the US. On a recent trip to their Shanghai office, he learned that the seven female employees must schedule their pregnancies with the male office manager. The office rule is only one girl pregnant at a time. If you are the girl with the lowest seniority , it could be up to seven years before you can have your one and only allowed child. Just incredible!
scottmi Debate means nothing!
This might awaken USO a little.
Turkey fired on selected targets inside Syria immediately after Syrian shells hit a Turkish border town, Turkey's prime minister said in a prepared statement. Turkey said it will hit more targets if Syrian attacks are repeated.
What happened to oil? Did we miss an almost flash crash? Not much of chance for Mr Stick today.
TURKEY STRIKING TARGETS INSIDE OF SYRIA FINALLY SOME BALLS BEING EXIBITED
DJI, SPX and IXIC all rejected at their 200 minute squiggly.
HPQ – when does it end!?!?!
jromeha / HPQ — I'd give it time for the downgrades to roll in.
Rumour of strategic reserve release just in time for the election
Not that rumor again!
turkey now deploying tanks, artillery and missile batteries to syria border
HPQ/Jet – Sounds good to me as long as you are tracking the net properly. You're on the hook to own 2,600 HPQ at $11.10 ($28,860) vs originally 1,000 at net $15.30 ($15,300) so keep that in mind because it may get rockier for HPQ and you may find it's better to roll back to 15 or 18 or 20 2015 puts, even at a slightly higher strike, than to 26 puts. It depends on how comfortable you are with owning HPQ as a long-term investment.
China/Kinki – LOL, that's it, we're officially the 4th World.
Enrichments/Angel – Amen to that. Although I don't blame Clinton for Glass-Steagall. GOP Congress tied it to Christmas spending bill and Clinton could shut down Washington or do a pointless veto (they had the votes to override) and Bush would do it anyway a month later.
China/Shadow – Actually, if you want to be shocked, look up the massive investments China is making in Africa – that's where they plan to move their manufacturing.
Oil finding bottom at $87.70. I was off by $1 last week as well with my bottom call.
Debate/Shadow – The concern people have about the debate is Romney needs to spend 90 minutes convincing America we have an economic catastrophe on our hands and, if Obama is re-elected, we're looking at a total economic melt-down. To the extent he is able to make that point he can change sentiment for the markets – especially since Obama will probably win no matter what he says. Keep in mind, he doesn't have to convince all the buyers – just half and half are obviously swallowing whatever BS he spouts anyway. No idea about breakers.
Debate/Scott – I think Romney can put himself back in contention by having a reasonable explanation for an economic plan that will create jobs but that's a big stretch because he doesn't actually have one.
Scheduled pregnancy/Stock – Makes practical sense. Only seems incredible to us freedom-loving Americans who have babies willy-nilly.
Turkey/Den – Now they're causing trouble?
HPQ/Jrom – Being crucified by the MSM now, will be a good week for finding bottom.
And what Rain said – next comes the downgrade police.
HPQ is another sign of the consumer is tapped out. They aren't really doing anything wrong except not giving the lower ranks a raise. Others will follow and after all this the ecomorons wil say the resession started in the summer of 2016.
Maybe everyone will buy Apples but what I hear is most of their business is phones. Everyone with a connection has a computer. New is nicer but old works.
NFLX at $62.00…. MoMo for a day!
Can we trade that on the FX market:
HPQ – when do the 2015s come out? i'll be ready to roll a few put out and down 2x.
HPQ murdered (thanks Meg) but INTC and MSFT don't seem to have any sympathy. HP still has a business.
Remain long AAPL, no covers. See you tomorrow!
have a good evening folks!
Tapped out/Shadow – The consumer is tapped out from buying IPads and IPhones. A lot of these manufacturers screwed themselves rushing out "me too" products to compete with AAPL and I agree with you – there's no compelling reason to upgrade computers anymore when 90% of what you do is on the web.
NFLX/StJ – Amazing! Up 15% in 2 days. Their forward p/e is back to 68 and that can rise fast as they only made $2M so far this year (2 Qtrs) against a $5Bn valuation so expectations are that will move closer to $100M by Q1 (their Q4). SIRI has a complete monopoly and owns their content and they do $3Bn in sales and make $426M and they are valued at $10Bn. NFLX gets a $5Bn valuation on the same $3Bn in sales and I don't see how they can get to $200M as the space gets more competitive every day and it's not even their content.
Iran/StJ – They are closing the markets, they can't keep up with the daily inflation. This can get ugly fast.
HPQ/Scott – They are usually out by the end of October. I don't blame Meg – huge turnaround taking a long time and she's being honest about it. They do $130Bn in sales and they MUST change their product mix – not a quick thing.
AAPL/Lflan – I'm keeping the 3/10 we have. Figure we'll roll to next week $680s.
scottmi – RE: HPQ 2015's …
Either Monday, October 15th or Monday, November 12th.
IWM closed right on the up or down point. No answer there, dead after the bell.
There's the bell and just 102M on the Dow after all that.
AAPL really came on strong at the end – good for Nas (20% of that index) and S&P (about 5%).
Good day on the whole with Dollar strength taking down commodities but not the broad market.
Barely off from this morning after all that nonsense. That 838 line on the RUT still holding up.
Phil, on the keeping people from voting, there was a good special on last night with Dan Rather that talked about all the great things that have happened in Ohio since 2004 where they had expanded the number of voters by 30%. Expanded voting hours, weekend voting, easier registration and mail in. All done away with this year by the Republican legislature under the guise of streamlining the process. Truly worrying!
Link to 2015 options schedule (article) – CBOE
Your welcome stjeanluc! 🙂
Last post on this topic:
HPQ is obviously in the February, May cycle. Therefore the HPQ 2015 leap options will be available on Monday, October 15th.
I'm exhausted not illiterate! Should be you're NOT your!!! Oops … 😉
diamone – thank you
So much for FTR's visit to $5. Do that many people really sell when Cramer says?
HPQ – Just my 2c, but why even bother with HPQ when you can just sell 2015 AAPL puts? What's the point? Why bet on a company that is admitting it's struggling? Did you see the latest HPQ laptop release? It's like they threw everything at the wall to see what sticks? Did anyone look at their 17in bahemoth laptop? Compared to the samsung 17 I got, it was twice as thick and $500 more expensive.
Again, just my 2c, but look at PeterD or LFlan for good examples. They trade high profitability stratagies using a limited number of names and are very successful. Having tons of these "maybe" stocks doesn't do it for me anymore. Probably why I'm pretty quiet. I'm building up bigger positions by scaling in to stocks I know and trust and have a huge cushion for the bet to pay off.
Or do the "Gut Check". Who wins, AAPL or HPQ? Go with you're gut.
HPQ/Burrben: I'm think the same was said about AAPL compared to MSFT, DELL and ironically, CPQ (now HPQ) throughout the 90's when they were basically written off as a has-been company destined for bankruptcy. They managed to turn it around pretty well (altho it took a few years).
They are a very undervalued company now, even based on revised guidance and the sentiment on them is horrible. That gives them a big margin of safety which makes them a lower risk investment for a long-term value investor. I must admit, the chart looks like pure crap though.
I don't see why you can't own both AAPL and HPQ in your portfolio — a little diversification never hurts.
Kink, you are so right. I bought AAPL at $192 and got chased out because all the pundits were coming out of the woodwork saying they sucked, should have bought more on the way down, hindsight and all…took me to $310 before I got back in, and still have it today.
Sold some HP puts today, saw on CNBC a guy saying its going to $7, I sure hope so, I can buy more cheaper. I admit buying good companies when they are cheap is hard…I have had other experiences, RIMM for example…
What are your thoughts on PANL? They've shown up on my radar TheStreet has downgraded them for no particular reason other than price going down, which makes this downgrades somewhat suspicious. Do Cramer's friends want to accumulate the stock or am I getting paranoid?
Only difference I see is Steve Jobs had a vision and drive to pull his team to the next level and to instill the confidence and trust to innovate and create in ways previously unimagined. Does Meg Whitman have that kind of juice?
I'm not a doubter, just skeptical. HPQ, and Dell(where I used to work), need to truly innovate and revamp themselves. IMO, they have to figure out how to leap frog to the next generation of technology which they can produce….or go the way of Wang…..and it may already be too late….
I guess to each his own on HPQ and AAPL. AAPL turned it around when they release a revolutionary eco-system around music. Up until then it was a hodgepodge of services and devices…and they made it cool. As soon as any of my blue collar friends who works in the field tells me "I have to have this thingy from HP", then I'll be a believer.
Until then shorting the Jan15 400 puts for 36+, with a net buy in of 364 for AAPL is a darn good bet that I would rather commit capital too.
Phil – After tonight's debate, please post your impression that you have of it. Thanks!