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Tumblin’ Tuesday – Markets Take a Much Needed Pause


We keep betting on it and it finally happens but don't get exicted about this teeny, tiny pullback – it will take a lot more than this little action to derail the bull market.  I know it's very much in vogue to ignore "facts" and "news" but we're Fundamental Investors – we can't help ourselves and, when the conditions weaken, we bet against the market, no matter how good the charts look.  As I noted in Friday's Morning Report:

That means our index shorts (see yesterday's Morning Report) are back on in the Futures and we do have S&P (/ES) 2,850 this morning and Nasdaq (/NQ) 7,000 along with Dow (26,425) and Russell (/TF) 1,610 but, as with yesterday, we favor shorting the S&P and the Nasdaq as they cross below with very tight stops over the lines.  The once-again weak Dollar is supporting the indexes for now but it's not likely to last (China and Japan won't put up with it past this level).  

We're not shy about going back to the well and this is just another one of those ways the rich get richer in ways the poor don't even have access to (Futures accounts).  We discussed our hedges earlier in the week and I would strongly suggest not going into the weekend without any as it may occur to some people that a declining GDP might not support a 12.5% rise in the S&P since the beginning of Q4.

We didn't get a good entry signal (crossing below the lines from above) until Monday morning, when I sent out a 5am note to our Members saying:

Futures dipping a little bit but nothing exciting so far.  I still have 6 short /ES at 2,854 and 4 short /NQ at 6,999.68 and still long 8 /DX at 89.10.  Wasn't any news over the weekend to change my mind about March Futures.  

The 14-point drop on the S&P (/ES) Futures to 2,840 was good for $700 per contract but we dropped back to 2 contracts yesterday afternon – in case it bounced and also because we picked up other hedges – so we didn't need the additional protection.  This morning, at the levels indicated, I put out a note to our Members to take the short money and run here as this leg of the sell-off was only caused by panic in the Health Care Sector, as Amazon (AMZN), JP Morgan (JPM) and Berkshire Hathaway (BRK.A) are getting together and forming a Health Care alliance. 

In fact, these levels are now good for an upside play but I like the Dow (/YM) best above the 26,200 line, with tight stops below and it's lined up with S&P (/ES) 2,840, Nasdaq (/NQ) 6,960 and Russell (/TF) 1,590 so the same rules as when we short but now looking for bullish crosses over the lines. 

The Futures are an important tool that let you react to changing market conditions after hours and pre-market.  For our portfolios, we rely on index hedges, like the one I suggested to cover our Money Talk Portfolio on Friday using the Nasdaq again, but in a different way:

SQQQ is the ultra-short Nasdaq ETF that's a 3x inverse of QQQ.  So, if the Nasdaq drops 10%, SQQQ goes up 30% (in theory, it's not perfect).  I'm going to add the following trade as a hedge and WE EXPECT TO LOSE MONEY ON THIS ONE – it's like life insurance, you pay for it but you hope that, each year, it's a waste of money!  

  • Buy 40 SQQQ Sept $16 calls for $2.80 ($11,200)  
  • Sell 40 SQQQ Sept $23 calls for $1.20 ($4,800) 
  • Sell 5 ALK 2020 $60 puts for $8.20 ($4,100) 

That's net $2,300 and $2,620 in margin (from the short puts) to protect our current $36,975 gains and our potential profits – not a large price to pay and, if the Nasdaq drops 10%, then SQQQ (now $16.25) should climb 30% to $21.12 and put the $16 calls $5.12 in the money for $20,480, so we'd be up $18,180 and the max pay-out on the spread is $28,000 so about $26,000 of downside protection – which is half of what we started with!

ALK is a stock we feel is very underpriced but you can use any stock you'd REALLY like to buy as an offset on these hedges but, keep in mind, if the market does tank, you REALLY will be buying that stock!

Buy selling puts in stocks we really, Really, REALLY want to own if the market does correct, we offset the cost of our hedge significantly and, unless something specifically bad happens to our stock, it's not likely we lose both sides at once and, as a stand-alone, consider that if the market drops 20% and ALK drops 20% from $65 to $52, we'd be "forced" to buy 500 shares at $60 for a $4,000 loss while the spread would be paying us $28,000 – that's not a bad trade-off!  

So, how low can we go and when is it a bearish turn and not just a correction?  Fortunately, we have our fabulous 5% Rule™ to tell us that:

Over the long haul, the S&P moves in 800-point units, from 800 to 1,600 to 2,400 and now on the way to 3,200, half of which is 2,800 so that's a very significant line that we overshot without any consolidation this month.  That is not at all what happened at 2,000, which was halfway to 2,400 from 1,600 and, franly we didn't even have much consolidation at 2,400 before blasting higher, which means it's still very possible we pull back to there (down 20% from here).

Short-term, we're using the 2,800 line and the 5% Rule™ tells us to watch the 1.25%, 2.5% and 5% lines closely so that's 2,835, 2,870 and 2,905 and, as you can see, we hit the 2.5% line at 2,870 and pulled right back to the 1.25% line at 2,835.

Our 5% Rule™ tells us to expecxt consolidation along those lines and now we need to see if we are consolidating for a move back below the 1.25% line or for another try at the 5% line and, to calculate that, we look for the weak and strong bounce lines above and below and see which ones are being obeyed.  

In the context of the bigger move, from 2,800 to 2,870 it's 70 points so we expect a 14-point (20%) pullback as a weak retracement in the very least before going over.  That's 2,856 and you can see that line was rejected on the way up, which is normal.  A strong retrace would be 28 points (40%), taking us down to 2,842 and we're a bit below that now so, if you are bullish, what you don't want to see this morning is 2,842 being rejected – as that makes it much more likely we're consolidating for a move down.  

Oops, not looking good, is it?  We're being rejected there all morning but it's thin-volume Futures, so we take the action with a grain of salt.  To double-check our levels, we'll do the math of a bounce from the assumption that the 1.25% line is strong and will hold (evidence of that from 1/22-1/26 consolidation above it) at 2,835 and that would be, of course, a 35-point drop so 7-point bounces to 2,842 (weak) and 2,849 (strong).  Notice 2,842 comes up both ways – which makes it a very significant line.

So, this morning, we're looking for a move over 2,842 before we even consider being bullish and clearly below 2,835 is bearish (not a spike, mind you but a real move below the trends down for at least 3 15-minute candles).  The next critical lines to watch are the bounce lines of the drop from 2,870 back to 2,800 which is 14 points again and that's 2,814 (weak) and 2,828 (strong) so very bearish signal is failing 2,828 because it blows your premise that this is a bullish consolidation and you have to start calling the whole run-up into question, which means zooming back out to the daily chart and considering the entire move over 2,800 was just an overshoot – which is in-line with my fundamental take on the S&P for sure.  

If that happens, we have to start expecting at least a 2.5% pullback below 2,800 – to 2,730 and THEN we'll see if that holds and we're consolidating for a proper move back up but, if not, 2,600 is very possible.  And thanks to St Jean Luc for giving us the bigger picture with the Big Chart and notice we are still miles above our goals (+10%) for the Dow, S&P and Nasdaq and right at the goals for the broader (and harder to manipulate) NYSE and Russell. 


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  1. New York Today: Our State of the Union

  2. Eurozone economy enjoys its best year in a decade

  3. Venezuelans ‘loot to eat’ amid economic tailspin

  4. How the Swamp Drained Trump

  5. Why Do So Many Managers Forget They’re Human Beings?

  6. CNN Key Races: Democrats’ tough Senate map

  7. Fact checkers will be busy tonight adding up Trump's lies!

  8. Good Morning.  

  9. Why all forms of immigration are good for the country:

    But I guess threaten the white majority!

  10. Good morning!  

    Fact check/StJ – That's what Joe Kennedy should do right after the SOTU – he should start with a list of Trump's top 10 lies from the speech we just heard and have a link to a fact-checking website ready with, of course, a cool hashtag.  That's how you play the social media game these days!  

    As to immigration, short Uber if Trump gets his way, 9 out of 10 are immigrants around me.  I don't even know what they are trying to accomplish when the country is at full employment and needing more workers.  Not only that, but we're aging and will end up like Japan, whose systemic xenophobia has left them with an aging population that buys more Depends than Pampers and now the people are making friends with robots for company.  Oh wait, maybe that is the plan…

    Not looking good with /ES 2,831 and the bell about to ring.

  11. That's better.  I have 4 /YM longs at 26,201 now.

  12. Make it 2 as things look iffy!  

  13. Dive, baby, dive….

  14. Coincidentally (or not), 2,842 is roughly S1 (Support 1) on the Pivot Points as well:

    Keep in mind we need to see consolidation between 2,835 and 2,842 to be even a bit bullish about this bounce.  I just took a quick $250 and ran on the /YMs as I don't trust this move.  Nikkei, Dax and Euro giving poor signals:

    And VIX 14!

    Image result for kevin bacon remain calm gif

  15. Would be cool to have a day of panic selling the same day that Trump touts the market in the SOTU speech.

  16. That comes tomorrow after he goes off on a senile rant this evening.  cheeky

    The Dems should seat the porn star right in front of him – I bet he'd lose it within 10 mins.

  17. Phil – Good one !

  18. Wow, down 300 on the Dow.  We'll see if 26,100 holds. 2,820, 6,915 and 1,585 on the others and 1,585 should be a little bouncy on /TF but very tight stops below or if any of the others fail.

  19. We might still see panic selling after all… But I am sure that bots will take over soon and buy, buy, buy!

  20. Phil/ABX

    Feb 15 calls are down nearly 50% at .24, DD here? 

  21. Sold 100 QUIK Aug $2 puts for .35.

  22. At some point, they have to start taking some profits.  Always tricky to call a top but what's so dangerous about this market is how low the volume has been on the way up and how narrow the focus has been on index leaders.  When selling does begin – there aren't going to be many buyers and things can drop really fast.

    ABX/Jeff – I want to see what they say at earnings.  That one is not in our portfolio, just an earnings trade idea from last Thurs.  The Feb $15s were 0.55 but now ABX is $14.44 and they need a much bigger move to get even so, if I were going to spend money, I'd roll the $15s (0.27) down to the $14s (0.73) for 0.48 as that puts you 0.44 in the money for 0.48 as opposed to spending 0.27 to be in for 2x out of the money by 0.56.

  23. Watch 2,835 on /ES,, if that fails, good time to take /TF profits and wait for the next obvious move.

  24. Very quick $375 can come off the table anyway!

  25. OK, first try at a bounce not working perfectly so far… Could be waves today.

  26. FU AMZN!!!!!!

  27. Thinking AAPL could bounce going into earnings.

  28. Volume has been much stronger than usual so far today:

    Close to 1.5x but it's been so weak lately. I guess it's only bots playing now.

  29. AAPL / Albo – 165 looks like a decent line and then we have the 200 DMA close to 160. 

  30. SQQQ and TZA are the worst. 

    Phil, don't you think there are better ways to hedge against a correction than these two POS funds?

    I know they are insurance against a bullish portfolio but over time they always sink (like VXX).

    • Stocks open with sharp losses, with the Dow dropping nearly 300 points, weighed by rising bond yields and weakness in shares of healthcare companies; Dow -1.1%, S&P and Nasdaq -0.9%.
    • "We've had a unilateral move higher [in stocks] to start things off and people are realizing this is not sustainable," says B. Riley FBR chief market strategist Art Hogan. "You're also seeing some cracks in the global story with interest rates rising."
    • European bourses trade lower across the board, with Germany's DAX and U.K.'s FTSE -0.8%and France's CAC -0.7%; in Asia, Japan's Nikkei finished -1.4% and China's Shanghai Composite closed -1%.
    • The health care group (-1.5%) leads the early retreat, with shares of health care providers including UnitedHealth (-4.8%), Aetna (-2.9%) and Anthem (-5.2%), and drug retailers such as CVS (-5.6%) and Walgreens Boots Alliance (-4.3%) sinking after Amazon (-0.6%), Berkshire Hathaway (+0.2%) and JPMorgan Chase (-0.3%) announced they will partner to form a health care company.
    • Meanwhile, Dow components Pfizer and McDonald's -2.2% and -1%, respectively, despite reporting above-consensus Q4 earnings.
    • U.S. Treasury prices are slightly lower, pushing the benchmark 10-year yield up by a basis point to 2.71%, its highest level since mid-2014.
    • U.S. WTI crude oil -1.9% at $64.29/bbl as the dollar strengthens today.
    • Still ahead: consumer confidence, and Pres. Trump is scheduled to deliver his first State of the Union address at 9 p.m.

    • Dec. Consumer Confidence125.4 vs. 123.6 consensus; 123.1 (revised) in Nov.
    • Present situation Index 155.3 vs. 156.5 prior
    • Expectations Index 105.5 vs. 100.8 prior.
    • Redbook Chain Store Sales+3.2% Y/Y vs. +3.8% last week.
    • Month-to-date chain store sales +3.2% Y/Y.
    • January sales are expected to be up 3.6% Y/Y.
    • Eurostat states that Eurozone GDP rose 0.6%, in-line with consensus in final three months of 2017, revising 3Q growth to 0.7%.
    • Eurozone GDP rose 2.7% y/y in 4Q, in line with expectations revising 3Q growth to 2.8%.

    • German inflation eased at 1.4% in January against the consensus of 1.6%, highlighting the challenge faced by ECB in regard to unwinding of stimulus.
    • Prices fell by 1.0% in December against the consensus of 0.7% driven by lower energy prices.
    • Labor market in Japan hit 40-year high with jobs to applicants ratio rose to 1.59 in December, driving for bigger pay increase at annual wage negotiations thereby increasing the prospect for consumer spending and inflation to pick up.
    • The seasonally adjusted unemployment rate edged up to 2.8% from 2.7% in the prior month, against median forecast at 2.7%, the lowest since November 1993.

    Bond Bloodbath Sparks Biggest Stock Drop Since September

    Global Bonds Swoon as Investors Bet on Inflation, GrowthGovernment debt fell around the world amid signs of economic expansion and declining central bank support.

    Asia Stocks Follow U.S. Drop as Bond Slump Extends. (video) Stocks in Japan, South Korea, Hong Kong and Australia retreated after the S&P 500 Index declined from a record high. Treasuries extended a drop that’s taken yields to the highest since early 2014 as traders gear up for a hectic week of economic data and the last Federal Reserve policy decision with Janet Yellen at the helm. German five-year bond yields broke above zero percent for the first time since December 2015 after a policymaker said there isn’t a single reason anymore to continue with quantitative easing. Japan’s Topix index lost 0.7 percent as of 10:37 a.m. in Tokyo. South Korea’s Kospi index fell 0.3 percent and Australia’s S&P/ASX 200 Index retreated 0.5 percent. Hong Kong’s Hang Seng Index dropped 0.4 percent. Futures on the S&P 500 Index were little changed after its 0.7 percent slide Monday, when the VIX index soared 25 percent. The MSCI All-Country World Index sank 0.6 percent Monday, the most since August?

    Japan Consumer Spending Softens, Labor Market Remains Tight

    Japan Boosts M&A War Chest With Record Bond Sales Abroad

    Asian Junk Bond Deluge Spurs Concerns About Investor Protection

    Blockchain boom could quickly turn to bust

    With Stocks Surging, Americans Are Saving at 12-Year LowShift away from saving could leave consumers exposed if stocks or other assets take a sudden turn for the worse.

    JPMorgan(JPM) raises oil price forecast to $70, topping many Wall Street targets, citing strong demand

    Is Texas Set For Another Oil Boom

    A key Tesla(TSLA) engineer who helped design batteries has left the company

    These Are The 6 Traders Who Were Just Arrested For Manipulating The Gold Market

    Canada Risks Popping Marijuana Bubble As Prices Dive Before Legalization

    • Corporate governance experts are of the opinion that Wynn Resorts (NASDAQ:WYNN) directors could face the possibility of civil liability over allegations involving CEO Steve Wynn.
    • However, some say the board could "be shielded under some circumstances" if it's proven they've acted in good faith.
    • Fallout continued Monday from the sexual misconduct allegations against Steve Wynn as the casino giant's stock fell further.
    • McDonald's (NYSE:MCD) reports global comparable-store sales increased 5.5% in Q4 vs. +4.5% consensus. Total sales were up 8% during the quarter on a constant currency basis.
    • The restaurant chain reported positive traffic in all regions.
    • Comparable-store sales increased 4.5% in the U.S. to match the consensus estimate. Core menu items, the McPick 2 platform and beverage promotions boosted sales.
    • International Lead Markets segment comparable-store sales were up 6.0% vs. +5.0% expected, while comparable sales increased 4.0% in the High Growth Markets segment vs. +3.6% expected.
    • "Our development plans also include the opening of about 1,000 new McDonald's restaurants, 75% of which will be funded by our expanded network of developmental licensees and affiliates around the world," says CFO Kevin Ozan.
    • MCD -0.55% premarket to $176.79.
    • Previously: McDonald's beats by $0.12, beats on revenue (Jan. 30)

    Height weighs in on Amazon/Berkshire/JPMorgan healthcare venture

    • Height Securities' Andrea Harris says managed care firms are not the ones in the crosshairs of Amazon, Berkshire Hathaway and JPMorgan's planned venture into healthcare. The margins are too thin and setting up a care network is expensive and difficult.
    • The companies at greater risk are drug makers, wholesalers, pharmacy benefit managers (PBMs) and specialty pharmacies since this is where scale and efficiencies can make the biggest impact. Ms. Harris says if Amazon acquires Express Scripts (NASDAQ:ESRX), the only remaining large cap PBM remaining, it would be in a strong position to drive down prices.

    SoftBank among backers of $175M AI Fund

    • SoftBank (OTCPK:SFTBFOTCPK:SFTBY) is among the backers of the $175M AI Fund startup incubator.
    • AI Fund comes from Andrew Ng, former AI head for Baidu (NASDAQ:BIDU), who will serve as the general partner and direction lead. Former Fenwick & West partner Eva Wang will serve as a partner and CEO. 
    • Other backers include Greylock Partners, New Enterprise Associates, and Sequoia Capital. 
    • Ng wants to have small teams working on AI projects that could turn into larger companies through the incubator. Several teams are already formed and working on three different problem spaces, but no further details were provided. 
    • AI Fund will focus on seed and Series A funding and startups coming out of the incubator will have the benefit of a built-in professional network for future fundraising.  
    • Previously: Venture capital deals of the week (Jan. 27)
    • Corning (NYSE:GLW) is down 7%, outstripping a down market, despite a Q4 earnings reportwhere it beat expectations thanks to healthy demand for Gorilla Glass.
    • It did swing to a net loss in GAAP terms, though — to $1.41B from a year-ago profit of $1.57B — and took a $1.8B one-time charge tied to tax law changes.
    • GAAP sales rose 8% for the quarter and core sales grew 7%.
    • Core earnings dropped 9% to $485M.
    • GAAP net sales by segment: Display Technologies, $745M (down 10%); Optical Communications, $928M (up 13%); Environmental Technologies, $291M (up 19%); Specialty Materials, $393M (up 17%); Life Sciences, $225M (up 9%).

    Teva to raise $5B in debt; shares down 7% premarket

    • Teva Pharmaceutical (NYSE:TEVA) plans to raise $5B of debt securities as it pushes ahead with a global overhaul aimed at cutting costs and managing its massive debt burden.
    • "The net proceeds… will be used for general corporate purposes, which may include additions to working capital, investments in or extensions of credit to our subsidiaries and the repayment of indebtedness," Teva said in an SEC filing.

  31. Some good information on the VIX ETF:

    All of them are long term losers except the short ones it seems.

    The table below shows how much $1000 invested in each of these funds on March 26th, 2004 would have been worth on March 7th, 2017:


    These are simulations using the ETF algos. XIV would have done quite well although with big drawdowns I am sure. Same thing with SVXY:

    But you really need to sell premium to reduce your average cost and load up during panics!

  32. AAPL/Albo, StJ – I wouldn't make a big bet on it because any confirmation of disappointment on X sales will be an excuse to knock them lower.   I'm HOPING they go lower so we can improve our positions cheaply.  

    Hedges/Jabob – Yes, when the market goes up for 4 straight months, playing the ultra-shorts tends to be bet that doesn't work out but experience with actual pullbacks (in ancient times) is why the STP was up over 400% at one point – from using those hedges from 2014-2017. 

    VIX/StJ – well, if you had put $1,000 in all 5, then you' be up about $33,000.  

    I like our STP SVXY play, holding up well despite the short puts going in the money:

    Long Put 2018 15-JUN 140.00 PUT [SVXY @ $114.15 $-5.22] 20 1/19/2018 (136) $57,000 $28.50 $7.10 n/a     $35.60 $4.36 $14,200 24.9% $71,200
    Short Put 2018 15-JUN 110.00 PUT [SVXY @ $114.15 $-5.22] -20 1/19/2018 (136) $-30,800 $15.40 $3.80     $19.20 $1.70 $-7,600 -24.7% $-38,400
    Short Put 2018 16-FEB 130.00 PUT [SVXY @ $114.15 $-5.22] -6 1/19/2018 (17) $-4,560 $7.60 $9.58     $17.18 $3.35 $-5,745 -126.0% $-10,305

    Failed again at 2,835 – not good!  /NQ 6,950 is a good line to play for a short and we're lined up with 2,830, 26,125 and 1,590.

    Europe closing near lows. 

    Oil and gasoline still falling:

    Even Coffee is pulling back:

  33. VIX / Phil – I guess a 600% return in 13 years is no bad no matter what! But since we know that shorting the VIX is the way to get a 3300% return, I will be loading up on SVXY if we ever get a big VIX spike. I'll be patient if that means that kind of returns. 

  34. That's our experiment in the STP, in theory, we have a nice hedge when SVXY pulls back but all we ever have to do is roll the short puts and wait for the inevitable return to lower vol.

  35. Hi Guys, My comments on closing positions. Due to a great missunderstanding between TOS and myself I got the hell in and closed some 350 positions. I am just in the final stages to clear the missunderstanding due to one helful employee of TD ameritrade.

    So closing at the present market position, I can tell you it is not always that easy. So please be warned.

    Not that I do not have any more positions. I still have 15% of stock and options rest is cash.

    So just confirming here Phil's constant warnings.

  36. Sold 10 TWTR Jan 2019 $15 puts for .55.

    Phil, I'm just following your lead.  Would love to own the stock at that price.

  37. SoftBank invests $300 million into dog-walking startup Wag

    Exclusive: memo written by former journalist Cody Shearer independently sets out some of the allegations made by ex-spy Christopher Steele

    #ECB balance sheet hit fresh record at €4,493bn, equates to almost 42% of Eurozone GDP as Draghi keeps buying bonds amidst #EUROBOOM.

    Oil net longs at insane levels:

    Leaked version of Trump infrastructure plan reveals another ‘political favor’ for oil, gas industry 


    1. Dear America, Please stop using the term "Climate Change" & replace with "Climate Crisis." Change is going from summer to fall. Crisis is going from summer to rising sea levels, hurricanes, unnatural disasters. There's a subtle difference. xo @Thommy_Paine

    Bitcoin can handle 3 to 7 transactions per second, while Visa can handle more than 24,000 transactions per second.

    Not that anybody asked, but one-third (95 out of 289) of all American Nobel Prizes in the Sciences have been earned by Immigrants to the United States.

    The S&P 500 would need to fall 5.4% just to get back down to its 50-day moving average. And mean reversion does still exist. $SPY

    In an ideal scenario the President of the United States and the worst human being in the world would be two different people.

    CLSA Asks – How Long Can Consumer Spending Growth Carry The Weight Of The US Economy?  $

  38. Good note Yodi.  No wonder you've been so quiet – must have been very busy.

    TWTR/Albo – Good attitude but hopefully not too early in a massive pullback.  Today is NOT looking good for the bulls.  

  39. ~~ Apple ticking slightly lower following report that DoJ will soon launch investigation into slowed iPhones.  

  40. Some positions still in my ports show some good resistance in todays drop

    ARR at 23.89 CIM 17.33 F 11.08 GE 16 I loaded up yesterday at same price, T 37.59 Interesting to watch.

  41. GE/Yodi – That's got to be the bottom.

    • According to Bloomberg, Bitfinex and Tether last week were sent subpoenas by the CFTC. Both companies have the same CEO, with Bitfinex being Hong Kong's largest cryptocurrency exchange, and Tether claiming its tokens are backed with dollars on a 1:1 basis. Tether a few days ago confirmed it's broken off its relationship with its auditor.
    • Bitcoin has added to losses, now down 10% and hovering just above $10K.
    • Needham raises its Alphabet (GOOGGOOGL) price target from $1,150 to $1,350 ahead of Thursday’s earnings report.
    • Analyst Kerry Rice expects Alphabet to at least meat overall Q4 expectations but thinks Website revenue could post upside given growths in mobile, Shopping ads, seasonal holiday demand, and improved efficiency in campaigns. 
    • Rice expects a modest profitability dip due to increasing TAC but the firm expects operating margin (ex-SBC) to remain relatively flat. Profitability expected to improve slightly in FY18. 
    • Firm reiterates a Buy rating.
    • Source: 
    • Alphabet Class A shares are down 0.42%.  
    • Deutsche Bank says expectations for the Apple (NASDAQ:AAPL) iPhone are still too high for CY18 Q1 and Q2.
    • Firm isn’t surprised by reports of weaker-than-expected demand for the three newer iPhone models since the firm has held that opinion since last February.
    • Deutsche Bank expects roughly in-line results for the December quarter reporting on Feb. 1 but thinks consensus numbers for the March and June quarters are too high.
    • Deutsche Bank rates Apple at Hold with a $152 price target, a 9.5% downside to yesterday’s closing price.
    • Source:
    • Apple shares are down 1.2% to $166.01.
    • Verizon (VZ -0.1%) is dropping plans to sell phones made by China's Huawei, Bloomberg reports, amid U.S. government concerns about Chinese spying.
    • The company joins AT&T (T +0.9%) in such a move. Huawei was set to announce its first partnership with a major U.S. carrier earlier this month before AT&T pulled out of the deal at the last minute.
    • Government pressure not only presents a roadblock to Huawei (which would have had a tough go getting traction against Apple and Samsung under the best conditions), but also adds a hurdle to the race to offer 5G service, as Huawei had emphasized bringing a 5G-capable phone to market.
    • General Electric (GE -1.9%) resumes its downward pull – along with the broader market today – as Stifel cuts its stock price target to $17 from $18 citing the company's "messy, underwhelming" results reported last week.
    • Stifel's Robert McCarthy, who keeps his rating at Hold, says the continued challenges in GE's core power business and continued headline surprises, such as the disclosure of an SEC investigation, should weigh on the stock for a long time.
    • "Clearly, the fundamental turnaround of the core power biz is no easy quick fix, and the limited upside and transaction costs, and implicit GE Capital liability drag with a breakup are not compelling at all at these price levels in the $16 range," McCarthy writes.
    • Bearish Deutsche Bank analyst John Inch, who rates the shares a Sell, said yesterday that GE was not obligated to disclose the investigation but likely determined that its potential impact might be significant, thus the verbal disclosure "could portend an extensive review that might last for an extended period."
    • Energous (NASDAQ:WATT) was awarded a wireless power transmission system patent by the U.S. Patent and Trademark Office.
    • The patent pertains to “cluster management of transmitters in a wireless power transmission system.” Read the full abstract here
    • In other Energous news, Michelin North America Government Affairs VP Sheryl Wilkerson joinsthe Board of Advisors effective immediately.
    • Energous shares are up 6.2% to $19.08. 
    • Chesapeake Energy (CHK -5.3%) says it will lay off ~13% of its workforce, or ~400 workers, primarily at its Oklahoma City headquarters.
    • Noting that the company's two-year selloff of 25% of its wells resulted in headcount reductions in the field, "transition services agreements with buyers of certain assets caused us to not make corresponding staffing changes in Oklahoma City," CEO Doug Lawler said in a memo to employees. "As those transition arrangements have now come to an end, and we continue to see increased efficiencies across the company, we needed to respond accordingly."
    • CHK cut 740 employees, including ~19% of its Oklahoma City employees, in 2015.

  42. StJL – "But I guess threaten the white majority!"

    And now for a moment of Zen…. Disclaimer, there is not enough room to pick on everybody, but rest assured, as we are an equal opportunity annoyer, we hold all races, religions, ethnicity and persuasions in equal contempt.  Besides, it's not where you are from, it is what you are made of. 

    At the end of the day, the ONLY CLEAR majority with 164M of our 323M is FEMALE, so bow down now all U Boyz and get back to work makin money, cause your boss needs another pair of shoes and Out.

  43. OK, that was a nice dip to 6,920 but $500+ is always a good place to give your horse a rest so done with /NQ and now looking for a bounce again.  

    We have 26,000 on /YM, that's a no-brainer to play with tight stops below.  Lined up with 2,820, 1,580 and 6,920 so /YM is the cleanest line to play (we're a bit above) and down 400 means a weak bounce is 80 and 80 points on the Dow = $400!

    Obviously bad for all if weak bounces fail.  Looking for 6 on /ES, 3.5 on /TF and 15 on /NQ as bounces off those levels.

  44. By the way, they call Beyonce "The Queen" but her daughter is pure royalty – check out the way she calms her parents down at the Grammys:

    Image result for beyonce blue animated gif grammys

    That's a lot of poise for a little kid!  

  45. BitCoin back to testing $10K.  GreenCoin surprisingly holding up at 0.001607.

    Zooming to goal on /YM, watch for signs of slowing across the board. 

  46. HOV coming back to our Buy Zone:

    • A judge yesterday declined an injunction request by Solus Alternative Asset Management, clearing the way for Hovnanian (HOV -4.8%) to exchange its 8% senior notes due this year for unsecured paper due in 2026 and 2040, along with $26.5M in cash.
    • Behind the deal is some fascinating inside baseball between Solus, Blackstone (NYSE:BX) and Hovnanian. This move combined with others means a big payout for CDSs held by Blackstone's GSO Capital. Solus is on the losing end of that bet.
    • For Hovnanian, it's getting a credit rating downgrade, but got very favorable longer-term financing (from Blackstone).
    • S&P cuts to SD (selective default) from CC.

    I thought they used to have longer-term options though, these only go to Aug and you can sell the $2 puts for 0.25 – not fun enough to play.  The $2 (0.45)/3 (0.15) bull call spread at 0.30 is a fun gamble on a recovery and, if they go lower, THEN we can get serious about them back around $1.65.

    So, not official but, if I wanted to get in now I'd calculate how much I want to own of HOV and say it's a $100K portfolio and we have $10K allocation blocks so I certainly don't mind owning $2,500 worth at $1.75 and selling calls for maybe 0.30 to net $1.45 so that would be 3,600 shares so let's say 20 of the spreads for $600 pays $2,000 if things go well.

    If not, we take the long calls off the table when they hit 0.30, so no loss and we then buy 4,000 shares at $1.75 to cover the short $3s and sell 20 short $2s for 0.30 to net $1.60 on 4,000 shares ($6,400) and, IF we can get 0.50 for 20 $2 puts, that's another $1,000 off and we're down to $5,400 on 4,000 shares ($1.35) with an obligation to buy 2,000 more at $2, which would raise out net to $1.5666.  

    So, if we don't mind owning 6,000 shares of HOV (50% allocation) at $1.566, then there's no reason not to risk the $2/3 spread to maybe make $1,400 so we won't be so disappointed if HOV recovers before we get to buy it so cheaply.

    The main reason I'm not doing it officially is it takes up space and has too many adjustments and people are terrible at getting good fills and nickels REALLY matter on these trades but it's a good example of how to think ahead and plan out what you will do with a position over time – setting spending goals and knowing what you are getting into long before you get into it!  

  47. Sorry, 6,000 shares would be a full allocation at $100K so cut in half to lower the risk, of course but I'd own 6,000 in a small portfolio at $1.50 as I don't think they go BK and we can sell Aug $2s for 0.50 which means 3 rounds of sales (18 months) and we recoup all our money and the rest is gravy.

  48. When you have the potential to get into a stock that can pay you 30% dividends (through call sales) every 6 months – take it!  

  49. And goaaaaaaaaaaaaaaalllllllllllllllll! at 26,080!  

  50. By the way, when the 5% Rule is being obeyed this closely, you know it's all bots trading the market.

  51. By the way, when the 5% Rule is being obeyed this closely, you know it's all bots trading the market.


    does that mean that you think the mkt will come right back as usual? btfd?

  52. The S&P and Nas are over their weak bounce lines so we can stay bullish until/unless they break.  We were looking for Dow 26,080, S&P 2,826, Nas 6,935 and Rut 1,585.  

    Next goals are strong bounce lines at 26,160, 2,832, 6,950 and 1,588.50.

    Above those lines erases the likelihood we'll follow through down tomorrow below the weak bounce lines again indicates very likely we fall further.  

    Since today is an accelerating loss day, tomorrow could be worse but huge wildcards from Trump tonight and Fed tomorrow. 

    Dow down 150 yesterday and 300 today means 600 possible tomorrow if weak bounces fail tonight – just a heads up!  

    Come back/Jabob – Best not to think during these things.  Rule here is if you don't hold a weak bounce (from the lows) into the close, likely follow through tomorrow and, since we doubled our drop today, the damage could get worse again tomorrow.

    At 26,600, where we started, a 2.5% correction is 665 points and that's about where we are.  Below that and we're looking towards the 5% correction (1,330) at 25,270, though hopefully not in one day or things could get mega-ugly after that.  If all goes well, we slow our decent and work our way down to 25,270 a bit less of a drop each day and then we can go back to assuming we bounce there.  

  53. thx phil

  54. WYNN found a floor today.

    They have to change their name at this pace. Now Mass is holding hearings on their license for casino they already started building.  They are getting a credit downgrade, which would doubly suck if they have to borrow money to buy Wynn out on top of the Billions they are spending in Boston.  I'd be cautious.

  55. Just read a paper "Volatility at worlds end: Deflation, Hyperinflation and the alchemy of risk"

    Found it very interesting (although admittedly some of it was over my head!) would love to get the take of some of the sharp minds on this board…Phil, Naybob etc…

    The article also deals somewhat in depth with some of the volatility instruments that many on this board use. 

    Cliff notes:

    -world economies are walking a dangerous line between deflation and hyperinflation due to central bank policies 

    -everyone is overly focused on the deflation issue and the hyperinflation scenario is not being considered as much as it should be 

    -argument that the CBs have been accomadative and we haven't seen huge inflation to this point are countered by; a) poor measures of inflation b) low current velocity of money, which if it increases can quickly lead to large gains in inflation. Example given that something similar occured in weimar Germany where economy appeared strong until money velocity picked up and this led to hyperinflation scenario. 

    -they conclude that in a hyperinflation scenario the relationship between the VIX and the market will be inverse to what it is now, volatility will rise significantly with the market (they went back and attempted to model this using historical data for weimar germany to use as evidence). 

    Anyway, definitely worth a read, if anyone has time and wants to chime in with their take on it would be interested to hear. 

  56. Big November upturn in "seriously delinquent" home loans:

    You can tell housing prices are overheated when the price-to-rent ratio disconnects:

    Good article on training your brain to beat the bots

    How can the U.K. and U.S. both have a services trade surplus with the other?

    Mark Carney defends the Bank of England's forecasts, saying Brexit made the U.K. poorer

    Infographic: The Biggest Crypto Heists  | Statista

  57. ~~
     08:34 ET


    AKS & NUE both beat consensus..  Both stocks are down.

    AK Steel beats by $0.07, beats on revs; expects solid demand in 2018 in many of its key markets.

    •Co says its Q4 results were consistent with expectations and reflected the impact of the major planned maintenance outages, which were completed on time and on budget.
    •Co says it's enthusiastic about 2018 as it anticipates solid demand in many of its key end-use markets, and it continues to unlock the opportunities being developed through its recent acquisition of Precision Partners.

    Sold some AKS Jan 2019 $5 puts for .85.

  58. Hyperinflation/CRS – That's actually an old paper, but a really good one.  I have been saying for many years that's the end game for global debt.  There's simply no other way out of it (well, default) because you can't have decades of global austerity so we hyperinflate, for a decade, which totally screws all the fixed note-holders without technically defaulting.  That's how we did it in the 70s and it worked out fine (short recession) until Reagan came along and ran the debt up again.  

    Also what I've been saying re. velocity.  They have tripled the global money supply and the only reason we don't have inflation yet is the velocity is near zero but, when it does pick up – there's no way to pull back the money fast enough to stop it from multiplying out in the wild and causing massive inflation but again – why would governments that are 100% or 200% of their GDP in debt, mainly in fixed, long-term notes, be adverse to their GDP doubling while the debt remains essentially the same?  

    Check this out from 12/9/2006:  Burn Dollars to Fight Gravity?

    So there's no inflation right? The government tells us there's no inflation and they've never lied to us before so there must be no inflation. It is true that a lot of suff costs less, IPods, TV's, Computers, Telemarketers (as long as you don't mind the accent), your salary, SS benefits (adjusted for the inflation that doesn't exist) and therefore anything you may be paying more for is just a function of your questionable negotiating skills.

    In fact the same Goldman analysts who tell you inflation isn't a problem are also telling you that the price of oil isn't a problem if you adjust it for inflation. I try to stay on top of all this BS but they just keep piling it on!!

    Oh yes – the dollar! So Hank Paulson, my nominee for the Mr. Potter look alike contest AND former head of Goldman Sachs, is off to China next week to prop up the dollar and, after much discussion, I've decided to let him use my Roach Motel Theory as a Weapon of Mass Dollar Destruction (WMDD) against the Chinese.

    You see all these non-inflationary dollars that have been flooding the markets for the past 10 years have to be going somewhere. We created(and this is estimated now because they stopped reporting it) $1,200,000,000,000 brand new dollars last year and not many of them ended up in your wallet (unless you are in the top 10% of the country in which case you got 85% of it).

    So we didn't get the money as salary which means that retailers didn't get it either. The auto companies didn't get it. The airlines didn't get it (see a pattern) – none of the things we (The People) like to do got it. So who got it?

    Why the rich did silly! The bankers, the brokers, the doctors, the lawyers, the traders, the CEOs… The top 1% of the income earners (oh sure the "other" 9% got some too) got pretty much all of it. It's not just here in this country, this is a global fad.

    All that money has caused inflation of all the things you don't want to spend money on: Drugs, Health Care, Housing, Commodities, Legal Bills and, yes, stocks! You like it when your stocks go up, but HOW are they going up?

    Has anyone built something new and cool that makes your life better? Are there any great scientific and medical advances that have actually cured anything (rather than put you on a pill popping treadmill for the rest of your life)?

    Did American companies hire millions of high salaried workers or did they cut back on the blue collar jobs and cut out the white collar jobs entirely while executive salaries tripled in the past 10 years?

    Nothing has been built, no major projects have been undertaken, no one is looking for oil or creating better means of transport or really doing any damn thing to improve the quality of life for the bottom 90%. And, no, I'm not going all communist on you but the number one investment made by corporations last year was in buying back their own stock!

    Is this really what we pay them to do? This is not a good thing for anyone but the current shareholders who, coincidentally, happen to be, in large part, the Management! That's right in 1995 you paid your CEOs just 1/3 of what they make today and they said "pay me a bonus based on performance" and that sounded fair so we said "sure."

    I was warning at the time that those policies were leading to mispriced markets that were eventually heading for a massive collapse and that's what happened but 18 months later so I've been more reserved in my criticism this  time around – so as not to be so ahead of myself that people don't listen to me.  

    I'm sure you've noticed I've been pressing it harder since December (when we cashed out) and again the past week or so as I'm pretty sure my timing is closer to being right this time but, amazingly, it's really the same exact mistakes we made last time only instead of housing it's a market value bubble this time.  

    Steel/Albo – I would love to buy a steel company but they are all expensive so I settled for CBI though AKS is looking interesting. 

    Indexes very weak at 3:08.

  59. WYNN / Phil – Was that the floor with the massage parlor or the one with the dog trainer? 

  60. By the way, that may be the first use of the concept of the Top 1%.  Joe Stiglitz gets official credit for it in 2011 but he and I were hanging out at the Buttonwood Conference discussing the concept before that.  I never minded – just thrilled to see it catch on as a concept…

  61. LOL, StJ!  

  62. Speaking of the dollar, down just a bit today. Can't imagine what today would look like with the dollar up.

  63. Phil/DX – holding onto announcement tomorrow?

  64. mkt rallies and amzn hitting new alltime highs…


  65. DX/Ravi – Still long and strong (8) on /DX.  Hoping the Fed will say the right things.  

    Failing all the strong bounce lines but over the weak so not very telling for tomorrow's action – we'll just have to keep a close eye on them.

    I think we need more of a correction than this to get the markets healthy but SOTU and Fed tomorrow is too much of a wildcard to make bets on.

  66. CRS – "would love to get the take of some of the sharp minds on this board…Phil, Naybob etc…"

    From a mind of its own and as sharp as a good cheddar… "tail-events are now being priced as if they were standard risks… hedging the wrong tail… double convexity."

    Rising cost of loan funds (interest rates) and volatility will present an opportunity. There can be no hyperinflation, end of days.

    "something similar occured in weimar Germany where economy appeared strong until money velocity picked up and this led to hyperinflation scenario." 

    Indeed, but that was then, this is now, and circumstances are different viz. QE, which the authors of that 2012 piece fail to fathom the affect and effect of viz. how inside money works.   

    Since Q217 velocity indicators are picking up, but in a suspicious manner.  Watch swap spreads, in particular the 30 yr which has been rising, AND private credit creation.  Concomitant, this would indicate growth which would accelerate velocity and the money supply. TBD.

    My sense is without meaningful economic growth, which ALWAYS includes substantial wage inflation and thus spending, the central bankers are pushing on a string and all the talk is hot air which will turn into vapor and infanticide. 

    Proving that if you want to screw the pooch, in the form of the working class, and your punch drunk on your own kool-aid, the narrative viz. we recovered its all good, must raise, that's exactly what you will get, in your rear end. Notice no Dec raise, and the dollar tanked because that raise was "baked in". 

    Via high debt levels, higher cost of loan funds, which may occur without any raises, would cause the ability to create credit to roll over fast viz. put the kibosh on any acceleration or growth.  Crib death and doggy style retribution at its best and Out.  

  67. Were you channeling Steve Wynn when you used screw and pooch in the same sentence Naybob!

  68. Evenin' folks! nice pull back today. Hoping it extends out the rest of the week.

  69. Looks like Trump will have some tough language for Korea tonight and the guy they selected for ambassador to S. Korea withdrew because he didn't agree with our get tough policy there that possibly included a limited strike on N. Korea.

    Not sure markets will like that! 

  70. Dangerously Low on Water, Cape Town Now Faces ‘Day Zero’

  71. Team Trump Just Blew Its Cover

  72. stjean—doesn't look like it.

    the futures liked Trump I guess???

  73. Trump did not declare WWIII – Futures bounce!

    The American Petroleum Institute reportedly shows a build of 3.23M barrelsof crude oil for the week ending Jan. 26 vs. last week's build of 4.75M barrels.

    Gasoline reportedly shows a build of 2.69M barrels and distillates show a draw of 4.09M barrels.

    What a drop on /RB

  74. if bonds sell off "too far" and fiat debt-currency becomes strained, well, you know where I'm going with this. Worth watching. You can't borrow from the future forever.

  75. Top surfwear CEO goes missing off coast of France

  76. BOJ hoses down market speculation of early stimulus exit

  77. Democrats furious over Trump’s immigration rhetoric

  78. AP FACT CHECK: Trump on wage gains

  79. Comment content omitted because it is too long.

  80. Good morning! 

    Futures barely up at the moment and that's not a good sign.  

    Weak bounce lines:  Dow 26,080, S&P 2,826, Nas 6,935 and Rut 1,585.

    Strong bounce lines: Dow 26,160, S&P 2,832, Nas 6,950 and Rut 1,588.50.

    Actual: Dow 26,141, S&P 2,833, Nas 6,961 and Rut 1,592 so we're just over the strong bounce lines on all but the Dow but it's the Futures, so it doesn't count (thin trading).  Still, if we're over the strong bounce lines and stay over them today – that's bullish as it indicates we're consolidating for another run up, not down but, now that we're past one day, we need to take the bigger drop into account (those lines were for yesterday's drop for the purpose of calling the Futures for day-trading – they basically evaporate after a day).

    26,650 is a 2.5% move up from 26,000, which had consolidation on the way up so that's the line we should key off and ignore the pop to 26,700.  That makes the drop 650 points and the bounces are 130 so weak is 26,130 and strong is 26,260. 

    Now we know we're looking for 2.5% moves so 2,800 (prior consolidation) x 1.025 = 2,870 and that looks right so the drop (which never finished) would have been 70 points and the weak bounce would be 14 points to 2,814 and a strong bounce is 2,828 so /ES is looking good, pretty much holding the strong bounce line and that's the most important index.  

    Nas hasn't consolidated since 6,500 and 10% is 7,100 and 5% is 6,800, where there was not much consolidation but let's use that range and 7.5% is 6,950 and that seems to make sense so we'll call that the bottom from 7,100 and that's 150 so we're looking for a weak bounce of 30 points to 6,980 and a strong bounce back to 7,010 before we're impressed.  Still, keep in mind that 5% line should be great support if the market is still bullish (and if we ever get there).

    Not to be confusing but also keep in mind that the BIGGER picture on the Nas is 5,000 was a very key level so 6,000 is up 20% and 7,000 is up 40% so that's the major range, which means that 7,000 line is what really matters and -1.25% is 6,912.5 and + 1.25% is 7,087.50 so that range (175) is key and look what held up on the drop yesterday:

    That's a big coincidence, right?  So now we know we can use 6,912.50 as a very reliable base and if we're bullish back to new highs then we need to see 40% (strong) of the 175-point drop which is 70 points so 6,982.50 is the strong bounce and 35 less is weak (6,947.50).  This is how much work I do every day before I call out numbers, by the way! 

    The RUT's big picture is 800,1,200, 1,600 and we're just testing 1,600 for the first time so it would be silly not to have a pullback here.  There was big consolidation at 1,400 and 1,500 had consolidation in Q4 so we can look at the 1,600 line as solid unless proved otherwise.  Just like the Big Chart, we then take the major support (even if theoretical, as it hasn't been tested from above properly) and draw our -1.25% (1,580) and -2.5% (1,560) lines.  1,580 held so far so, if we're consolidating for a proper move over 1,600 – then we expect 4-point bounces to 1,584 and 1,588 (strong).  

    See – easy!

    Overall, I'd say the Trump thing was a neutral event.  He didn't fix anything but he didn't break anything either.  Now it's up to the Fed at 2pm, which we'll cover live in the Webinar.

    • With the outset of the Jerome Powell era only days away, analysts do not expect a dramatic shift at Fed's policy meeting today, which will be the last for Chairwoman Janet Yellen.
    • While the benchmark interest rate will likely remain unchanged, in a range between 1.25% and 1.5%, investors are still anticipating three rate hikes this year.
    • Another big event today will be the Treasury's refunding announcement, which will include details on first-quarter auctions and possibly other funding needs for 2018.
    • Stocks stumbled for a second day in a row, the first time this year that the S&P 500 and Dow Jones Industrials have fallen for two consecutive days.
    • The Dow, which suffered the most today (-1.4%) and during these two days (-2%), tacked on a 362-point shellacking – its worst loss since May - after yesterday's 177-point drop; the S&P's 1.1% loss today was its worst since August.
    • "We've had a unilateral move higher [in stocks] to start things off and people are realizing this is not sustainable," says B. Riley FBR chief market strategist Art Hogan. "You're also seeing some cracks in the global story with interest rates rising."
    • Ten of the S&P 11 sectors finished lower, with health care (-2.1%) the weakest after Amazon, Berkshire Hathaway and JPMorgan Chase said they were forming a company focused on reducing health care costs for their U.S. employees; health care providers including UnitedHealth, Anthem and Cigna fell between 4.4% and 7.2% in reaction.
    • The energy sector (-2%) also posted sharp losses, as WTI crude oil futures fell 1.5% to $64.5o/bbl and have dropped ~2.5% below the three-year high reached last Friday.
    • The consumer discretionary group (-0.5%) performed relatively well, as Amazon climbed 1.4% to a new all-time high, but McDonald's sank 3% despite beating Q4 earnings and revenue estimates.
    • U.S. Treasury prices settled mostly lower, with the yield on the benchmark 10-year note rising 3 bps to 2.73% while the two-year yield finished unchanged at 2.12%.

    Markets In Turmoil: Bonds Bloodbath, Stocks Slammed, VIX Vertical

    • While the eurozone economy may be enjoying its best growth in a decade and seeing unemployment drop sharply, the inflation rate is getting further away from the ECB's target of "just under 2%."
    • The figure fell to 1.3% in January from the previous month's 1.4%, making it even harder for the ECB to follow its peers like the Fed and BOE in reversing some of its crisis-era stimulus measures.

    Japan Factory Output Surges in December on Strong ExportsIndustrial production in Japan accelerated in December, pushing output to the highest level since the global financial crisis. The third straight month of rising factory output points to solid economic growth in the fourth quarter.

    China Factory Gauge Weakened Amid Pollution, Leverage Campaigns. (video) China’s official factory gauge missed estimates as efforts to rein in debt and reduce pollution dragged on activity. The manufacturing purchasing managers index slipped to 51.3 in January, compared with a 51.6 forecast in a Bloomberg survey of economists and 51.6 the prior month, the National Bureau of Statistics said Wednesday. The non-manufacturing PMI rose to 55.3 from 55 in December. A new composite index covering both services and manufacturing was released for the first time; it stood at 54.6. Numbers above 50 indicate improving conditions while those below signal deterioration.

    China's Largest Conglomerate Is On The Verge Of Bankruptcy


    • Mexico's GDP staged a recovery in Q4 by expanding at an annualized 1.8% pace during the period, resulting in growth of 2.1% for all of 2017.
    • The data confirms the resilience of the Mexican economy, which has continued to grow despite uncertainties over trade with the U.S., the destination of 80% of its exports, and despite two destructive quakes that shook the country in September.
    • A pre-sale of Venezuela's new "petro" cryptocurrency will begin on Feb. 20, according to President Nicolas Maduro.
    • The 100M issued tokens, each valued at – and backed by – the equivalent of one barrel of Venezuelan crude, would put the value of the entire issuance at just over $6B.
    • Earlier this month, the U.S. warned investors curious about the petro, saying dealing in it may contravene sanctions.

    EPA could reconsider 'endangerment finding'

    • At a Senate hearing on Tuesday, EPA Administrator Scott Pruitt refused to rule out an effort to repeal the "endangerment finding," a 2009 determination that greenhouse gases threaten the public health and welfare of Americans.
    • Scrapping the rule would make it easier for the Trump administration to wipe the slate clear of Obama-era environmental regulations and climate change directives.

    Overnight earnings roundup

    • Santander (NYSE:SAN+1.1% premarket after posting a healthy jump in underlying profits, although the bank's bottom line was hit by U.S. impairment charges.
    • Missing analysts' estimates, Ericsson (NASDAQ:ERICfell 7.3% premarket with the network market remaining weak.
    • Nintendo (OTCPK:NTDOYclimbed 2% in Tokyo, raising its Switch sales expectations to 15M consoles as operating profits rose 261%.

    Blackstone(BX) to Buy Thomson Reuters Unit in $20 Billion Deal. A group led by Blackstone Group LP agreed to buy a majority stake in Thomson Reuters Corp.’s financial and risk unit in a deal that values the business at $20 billion, sealing plans for the firm’s biggest buyout in a decade. Canada Pension Plan Investment Board and Singapore’s sovereign wealth fund, GIC Pte, will co-invest alongside Blackstone to acquire 55 percent of the business, according to a statement Tuesday. Thomson Reuters will retain a 45 percent equity stake. The unit, which provides data, analytics and trading to Wall Street and financial professionals around the world, doesn’t include the news-gathering operation.

  81. U.S. crude supply rose 3.23M barrels last week, API says

    • The American Petroleum Institute reportedly shows a build of 3.23M barrels of crude oil for the week ending Jan. 26 vs. last week's build of 4.75M barrels.
    • Gasoline reportedly shows a build of 2.69M barrels and distillates show a draw of 4.09M barrels.
    • Nymex March crude recently was $64.09/bbl in electronic trading, below today's $64.50 settlement price.

    WTI/RBOB Drop After Surprise Crude Build

    • Crude oil prices sank for a second straight session amid today's broad selloff of stocks, bonds and commodities, with U.S. March WTI -1.5% to settle at $64.50/bbl and March Brent -0.6% at $69.02.
    • Just last week crude oil hit three-year highs amid strong demand, geopolitical risks, a weaker U.S. dollar and OPEC-led supply curbs; now some analysts say investors are waking up to the effects of rising U.S. crude production.
    • “U.S. oil production is rising and forecasts have moved up,” says Ehsan Ul-Haq of Resource Economist Ltd. “Oversupply is becoming the problem… with more and more U.S. crude we are going to be drowning in oil.”
    • But investor enthusiasm for oil also has led to lopsided bets that may have made the market vulnerable to sharp selloffs, as hedge funds, pensions and other investors have amassed their largest-ever net bullish positions in U.S. crude futures.
    • “It’s gone up too far, too fast and was due for a correction,” says Michael Hiley, head of over-the-counter energy trading at LPS Futures LLC. “It’s a similar feeling to the stock market – both are running hard and both… are correcting.”

    • Kinder Morgan (NYSE:KMI) tumbled 2% in today's trade, finishing at lows of the day after British Columbia's provincial government announced new proposed rules to block shipments of crude oil in a move directly aimed at the company’s Trans Mountain pipeline expansion.
    • B.C. says it will establish an independent scientific advisory panel to make recommendations on if and how heavy oils can be safely transported and cleaned up if spilled, and plans to bar any increase in oil shipments by rail or pipeline while the panel is completing its work; no timeline is provided for how long the advisory review would take.
    • Environmentalists hail the news as a "major setback " for the pipeline, which is under construction and would increase Canadian oil producers’ ability to send their oil to the Pacific coast by 590K bbl/day.
    • U.S. Steel (NYSE:X) plunged 6% in today's trade following concerns sparked by AK Steel's post-earnings comments about rising costs, but shares also may have been hurt by a negative analysis by Vertical Research's Gordon Johnson, who initiated coverage of the stock with a Sell rating and $25 price target.
    • Investors are paying too much attention to current steel prices and Pres. Trump’s potential Section 232 decision and not enough attention to underlying market fundamentals, particularly in China, Johnson says.
    • Chinese infrastructure, fixed asset investment growth, Chinese credit growth and further fiscal and monetary stimulus are more important in predicting near-term shifts in steel prices, Johnson asserts.
    • U.S. Steel reports Q4 earnings after the close tomorrow. 31.
    • AK Steel (AKS -13.2%) plunges to its lowest level in more than a month, despite initial gains after reporting a smaller than expected Q4 loss, amid investor concerns that rising costs will constrain margins even as prices gain.
    • AK Steel said in today's earnings conference call that it sees higher prices mitigating rising costs in 2018, guidance that Credit Suisse analyst Curt Woodworth says caused investors to be “pretty perplexed.”
    • “You’re getting pricing to cover costs, but that doesn’t mean you’re making a lot more money,” Woodworth tells Bloomberg. AKS "said they would cover raw material costs, but the point is you’re kind of running to stand still."
    • Woodworth says the “rubber meets the road” in Q2 because that’s when AKS will monetize spot business and get the bulk of remaining contracts booked.
    • Other steel producers also are sharply lower: X -5.7%WOR -3.5%NUE -3.3%CMC -2.4%MT -1.8%STLD -1.1%.
    • Source: Bloomberg First Word

    Top steel CEO says US 'desperately' needs new infrastructure to sustain economic boom

    • Vale (VALE -0.5%) is looking to sell un-mined cobalt worth hundreds of millions of dollars to investors, amid rising prices over a shortage of the metal needed to make batteries, Reuters reports.
    • Streaming, which allows an investor to make an upfront payment in exchange for future production at a discounted price, has expanded as a form of finance for precious and base metals companies but this deal would be a first for the cobalt sector, according to the report.
    • Vale reportedly has hired Canada’s Bank of Montreal to raise ~$500M from bidders for cobalt that will be produced at its Voisey’s Bay nickel mine in eastern Canada.

    DoubleLine's Gundlach still betting on commodities

    • JPMorgan cuts Alaska Air Group (ALK -2%) to an Underweight rating.
    • "We applaud Alaska’s decision to temper 2019 growth in light of current fundamentals. But ALK is the only name where we've cut our 2019 forecast (as has consensus), and the company remains in the United crosshairs in San Francisco, in our view," warns analyst Jamie Baker.
    • Baker also calls ALK expensive compared to JetBlue, which caught a JP upgrade earlier today.
    • Previously: JPMorgan makes the case for JetBlue (Jan. 30)

    Chipotle falls amid anecdotal food poisoning reports

    • Shares of Chipotle (CMG -5%) are down 5.05% with some reports of food poisoning making their way around.
    • There are anecdotal reports on Twitter and on the website that are drawing attention.
    • No mainstream media outlet has broken down details on an outbreak and the company hasn't issued a comment.

    AMD down despite Q4 beats, upside guidance

    • Advanced Micro Devices (NASDAQ:AMD) shares are down 0.4% aftermarket following Q4 results that beat EPS and revenue estimates.
    • Upside Q1 guidance: revenue, $1.5B to $1.6B (consensus: $1.24B); non-GAAP gross margin, 36%. 
    • FY18 guidance has double-digit percent growth in annual revenue (11.6% growth consensus) and non-GAAP gross margin over 36%.  
    • Computing and Graphics performance: Sales totaled $958M (+60% Y/Y) driven by strong Radeon and Ryzen sales. Client ASP increased on the year but flat on the quarter due to increase in desktop processor ASP. GPU ASP was up on the year and sequentially driven by desktop and professional graphics processors. 
    • Enterprise, Embedded and Semi-Custom performance: Revenue was $522M (+3% Y/Y; – 37% Q/Q) with the increase driven by server revenue and the decrease due to seasonally lower semi-custom SoC revenue. 
    • Key results: Cost of sales, $965M; gross margin, 35% (+3 percentage points Y/Y); R&D spend, $300M (-$15M Y/Y); MG&A spend, $133M (+$1M Y/Y); cash and cash equivalents, $1.18B. 
    • Press release 
    • Earnings call starts at 5 PM Eastern with a webcast available here.       
    • Previously: Advanced Micro Devices beats by $0.03, beats on revenue (Jan. 30)
    • Samsung Electronics (OTC:SSNLFsoared as much as 8.7% overnight after announcing a 50:1 stock split to enhance corporate value and broaden its investor base.
    • It's the latest in a series of moves to bolster shareholder returns, including 5.8T won ($5.4B) of annual dividends and 9.2T won of share buybacks in 2017.
    • Led by a memory chip "super-cycle," Samsung also reported annual operating profit of 53.7T won ($50.2B) last year, outstripping its previous record of 36.8T won in 2013.

    Facebook bans ads promoting cryptocurrencies, ICOs

    • Facebook (FB +0.5%) is banning ads that promote cryptocurrencies, a sweeping policy that covers bitcoin as well as other initial coin offerings designed to err on the conservative side.
    • That's an "intentionally broad" approach to prevent "financial products and services that are frequently associated with misleading or deceptive promotional practices," including binary options as well.
    • "We want people to continue to discover and learn about new products and services through Facebook ads without fear of scams or deception," the company says in a blog post. "That said, there are many companies who are advertising binary options, ICOs and cryptocurrencies that are not currently operating in good faith."
    • Enforcement will ramp up across platforms including Facebook, Audience Network and Instagram, it says, and it will revisit the policy "as our signals improve."
    • Previously: Rough day for cryptos gets worse as Bitfinex, Tether subpoenaed (Jan. 30 2018)

    5 Worst-Case Scenarios That Could Cause the Price of Bitcoin to CrashBitcoin may not necessarily turn out to be Tulip Bubble 2.0, but its price could take a huge tumble if these things were to happen.