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Which Way Wednesday – Fed Edition

Wheeee, what a ride!

There's nothing like a nice market shake-out to let you know where things stand.  After all the drama though, we're right back to the same 2,835 line we were watching on the S&P in yesterday morning's PSW Report.  If we're back over 2,835 this morning, then all that panic was for nothing and this is merely a little consolidation off a huge run but we did run levels in our Live Member Chat Room that now need to hold on each index (futures) in order to be bullish again (currently we're just waiting and seeing):

  • Weak bounce lines:  Dow 26,130, S&P 2,835, Nas 6,980 and Russell 1,585.
  • Strong bounce lines: Dow 26,260, S&P 2,850, Nas 7,010 and Russell 1,590

At 8am, we have (in the Futures) Dow 26,257, S&P 2,836, Nasdaq 6,968 and Russell 1,595 so mixed signals so far and nothing we'd like to throw money at though yesterday, in our Live Chat Room, we were throwing money in all sorts of directions as we played the nice, violent market moves in the Futures.

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.

That was it for our futures trades for the day as there was too much static going into the close with Trump's State of the Union and the Fed announcement coming up.  So far, Trump's speech went off without too much turmoil so the markets are up this morning and now we'll see what the Fed does at 2pm today (and we'll have our Live Trading Webinar at 1pm, EST) and then we can consider which position we want to adjust.  

Meanwhile, it was a nice day trading the Futures with gains of $1,500 for each contract set traded so congratulations to all our Members and, of course – You're Welcome!  

We're not a futures trading site but our portfolios are well-hedged so we really don't have much to do during a big drop other than wait patiently to see what stocks we can buy at good prices when the dust clears.  Futures trading is just a fun way to pass the time while we wait and it pays for lunch, so win-win.  Our Long-Term Portfolio did give up 50% of it's January gains and is now up just 2.8% for the month but our Short-Term Portfolio, which is paired with it and has our protective plays, is up 1.7% so we're up about 3% for the month and our insurance cost was zero – you're welcome!   

Being well-hedged is such a benefit when the market is crashing.  We can sit back and relax and check out our Watch List and look for bargains on stocks we REALLY want to buy, like Apple (AAPL), which pulled back to $166 but we're waiting on earnings to buy more – hoping they disappoint, actually – even though we already have a bullish position.  Barrick Gold (ABX) will be featured in my appearance on Money Talk this evening (7pm), Alaska Air (ALK) just got downgraded by JPM for stupid reasons (United is trying to compete with them in San Fran).  Yes, businesses have competion – get over it!  

Bed Bath and Beyond is still cheap at $22.99 and they are already in our portfolios but a strong buy here.  Coeur Mining (CDE) got cheap again and we already have them too.  Chimera Investment (CIM) is way down, so time to buy them around $17.33 and Annaly Capital (NLY) is the same management team and down to $10.50 so that's a BUYBUYBUY as well and we'll add them to our portfolios this morning.  We're ready to pull the trigger on Ford (F) at $11 – patience paid off there!  

See, we're only up to F on our Watch list and plenty of things we can pick up cheaply on this little market dip.  Now that we know our hedges held up well on a sharp drop (2.5%), we can confidently add more longs and then punch the hedges up proportionally and you know what that makes us?  BALANCED!!!   

Copyright There is nothing better than being well-balanced in your portfolios.  Of course, most traders reading this won't get it as they thing "balanced" means no profits but that's only because they are the suckers while we are "Being the House – NOT the Gambler" and selling premium so our balanced positions continue to make nice, steady gains while the premium we sold continues to decay.  It's boring, but effective!  

Take our Dow (DIA) hedge in the Short-Term Portfolio, at the moment it's even (well-balanced) although it's 100% in the money as it's a June $280/260 bear put spread we bought for $13 and against it we sold the Feb $257 puts for $1.90 (20 in the STP).  That dropped our net cost to $11.10 ($22,200) and it's a $40,000 spread and, right now, it's about even as the net of the bear spread is currently $34,000 but the short DIA puts are now $2.15 ($4,300) which negates our profits on the spread.  

But the DIA puts are out of the money and are 100% premium while our bear spread is 100% in the money and has no premium, so all we have to do is let the clock run out and we have another $15,630 (70%) coming to us if the levels stay the same and, if not – it's very easy to adjust along the way.  

The idea of this INSURANCE is that, if the Dow kept going up, we'd sell the March and April whatever puts for another $3,500 each month and that would net us $10,500ish from put sales against our $26,000 hedge so net $16,000 is our risk against a $24,000 reward and the only way we can lose on the spread is if the Dow is up to 28,000 – in which case we're pretty sure our longs would more than cover the $16,000 loss on the insurance!  

On the downside, we're $40,000 in the money after laying out net $22,200 so we have a $17,800 advantage on the short puts and, of course, they can be rolled lower.  For example, the March $250 puts are $2.05 and the April $240 puts are $1.92 so the Dow would have to drop 1,000 points per month (5%) before we were even worried and, even then, we would simply add another bear put spread that would make another $17,800 and then another after that – adding to our hedges while still protected by the short puts. 

That's what we call a Mattress Play over at PSW (see: "Hedging Your Way to Fun and Profit – Once Upon a Mattress Play").


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  1. Another dip to buy?

  2. I really try to understand the hate of immigration – I wonder if the ancestors of all these GOP guys would qualify for the immigration rules they want to setup now. None of them committed crimes? They all came legally and none of them brought family members with them. ICE checked everybody that came out of the Mayflower? How about skills – for crying out loud, Trump's mother worked as a maid when when she came in. Today he would not let her in the country! It's a joke!

  3. Good morning all!

    Join us for the weekly webinar today at 1pm!

  4. stjean--It looks like nothing will stop this "Trump" rally from moving on up..

    I guess we will have to always hear him tell us how it is all because of him and Bezos!

    Good grief!?!?!?!!?

  5. Quote for you Jabo:

    "Allowing your partisan views to get in the way is a mistake. The tax cut are a large and potent stimulus. There is no rational way to reach any other conclusion."

    (Barry Ritholtz)

  6. FU BARRY!!!!!!

  7. BLCM – last night the company announce that their lead candidate has been put on clinical hold.  If one remembers, this company is in the same technology space as JUNO and KITE….both of which have been acquired.  There is indication that the treatment caused brain encephalopathy (swelling), but it is not determined if it is related to therapy or not (there is a chance).  If it is drug related, then the stock will probably go down 50% again.  So, play at your own risk.  I am holding the stock for now.  

  8. Phil,  Great discussion on the 5% rule – Much Thanks!    

  9. Thanks Pharmboy – Re: BLCM.  I was about to ask you on that name.  Big down move today on this news. 

  10. jabo – it may be better to forget all the commentary and focus on the price action. 

  11. AKS taking it on the chin today.

  12. AKS / Batman – Downgraded by BoA. 3 day rule in effect there….

  13. Sorry, what is the 3 day rule?

  14. Tysabri had the same issue and it is on the market. JUNO's lead is not.  Messing with the immune system is very risky, and BLCM's technology is doing just that.  Have to wait and see.  

  15. Good morning! 

    • Weak bounce lines:  Dow 26,130, S&P 2,835, Nas 6,980 and Russell 1,585.
    • Strong bounce lines: Dow 26,260, S&P 2,850, Nas 7,010 and Russell 1,590

    That's a nice, quick dashboard view of where we're at, hovering between the weak and strong bounce lines and, don't forget, the strong bounces are 40% of the drop so it's not about the 200-point gain off yesterday's close, the Dow fell 700 points and 200/700 is only 28.5% – it's very important to keep things in perspective in volatile markets – which is a thing we've forgotten even exists at this point!  

    Since the Dow and the RUT are testing the strongs but /ES, which matters the most, is struggling at the weak bounce – I'm looking to short the laggard (last to cross below) of those two with tight stops above and also out if /ES crosses over 2,835 as my premise for shorting the others at the strong bounce line is the weight of the S&P will make it hard for them to move 20% above it.

    Immigration/StJ – Maybe it's an East Coast thing but everyone here came from somewhere so it seems ridiculous to hate in immigrants but hatred and racism is what gets a guy like that in power and more of it is the only thing that's going to keep him there.  Don't forget, even in the 60s and 70s, we had George Wallace kicking around as a serious Presidential contender:

    "In the name of the greatest people that have ever trod this earth, I draw the line in the dust and toss the gauntlet before the feet of tyranny, and I say segregation now, segregation tomorrow, segregation forever."

    That's what he said when being sworn in as Governor in 1963.  Kennedy had to send the army in to force him to allow black children to go to school with white children and Wallace personally tried to block the entrance to the school.  

    "The President (John F. Kennedy) wants us to surrender this state to Martin Luther King and his group of pro-communists who have instituted these demonstrations."

    Those are the "great" days Trump wants to get back to.  Don't forget he and his father got in big trouble for discriminating against renters in their buildings.  Bill Maher made a great point that Trump loves to pick fights with black people – even as he ignores white people who are doing the same thing.    

    Sadly, it's human nature to be tribal and xenophobic and Trump simply plays to people's base instinct.  Society is about rising above our animal interests and doing what's best for the community – even if it's not our gene pool.   

    Image result for trump evolution

    OMG, did I agree to a webinar today???  I'm so crushed for time.  I did say I'd do it because of the Fed meeting but what the Hell was I thinking – I've got to be in NYC right after for BNN (7pm) with the rush-hour traffic.  

    Good grief/Jabob – That sums it up nicely.  

    Image result for good grief animated gif

    Expensive/StJ – Compared to what real people can actually afford – VERY!

    Barry/StJ – I reach another conclusion that they will not have as big an impact that is already priced in and the main benefits we're seeing is from repatriated funds, which are a one-time thing.  So maybe we keep rallying this year (BA just said they are buying back $9Bn worth of stock, which is 5%) but that still doesn't mean I want to buy BA for $357, which is a $213Bn market cap for a company that made $5Bn last year (slightly less than the year's before).  

    If BA has $9Bn to throw around and if their business is going to grow to the point where they justify 40x earnings – then why aren't they hiring 15,000 people (+10%) and opening a new plant.  TSLA spent $2.5Bn for a Giga factory so figure BA could spend that much and 15,000 $100,0000 people is "only" $1.5Bn so $4Bn, not $9Bn and they could produce 10% more planes on the way to the 100% more expected gains in production and profits that are baked into a p/e of 40.  

    They aren't doing that because they know it's a pop that doesn't last and they don't want to be sitting there in 5 years with empty factories and they have no viable competitors so why spend more money just to complete orders faster?  But is that a reason to pay them 40x?  Of course not – it's asinine!  The problem Barry (and many others have) is they are wrong so long they feel the pressure to capitulate and rationalize the market but that's wrong because the market is behaving irrationally and, as Keynes noted:

    "The market can remain irrational longer than you or I can remain solvent."

    It will end when it ends and not a moment sooner.

    You're welcome Grasshopper.  

    Hey, someone wanted to talk banks or some sector I said was complicated and I said later but then I forgot but now remind me and I'll say not today and then remind me again tomorrow and hopefully we can get to work!  

  16. By 3 day rule, I mean that it makes sense to wait 3 days after an event like downgrade, earnings, etc… to reassess a possible trade.

  17. Pharm Do you think Cellectis S.A. (CLLS) will be acquired?


  18. HOV   Phil, I had terrible timing to buy some HOV Aug 2/3 BCS back in December when the stock was over $3. The spreads cost $.60 and are now $0.325, so a loss of 27.5 cents. The good news is if I had bought the stock, I'd be down $1, so there's that. I am thinking of closing this and buying the $1/2 spread instead for $.75, so I'd make the loss back at about a $2 stock price instead of $2.60.  Any thoughts?

  19. Phil

     talk banks

     It was not me, but I like the idea



  20. Phil,

    Banks/Insurers… that was me, guilty as charged. 

    Hoping to pick up some wisdom from you since I don't understand that sector at all.

    Anecdotally, rising rates, spreads are good for these guys and if we are in a regime of rising rates, then can we look a little deeper. [When you are ready] 


  21. Barry has to look after Ritholz Wealth Management (as does the oft quoted Josh Brown). He’s a buy and hold investment advisor now while he juggles his journalistic gig at Bloomberg. Not sure how that impacts/reconciles with an objective mindset. Always look for the alternative agenda.

  22. the most important quote I read in this bond piece:

    "The other headwind is the theme of technology displacing labor, which has strong disinflationary factors."

    Knowledge Economy replacing Manufacturing Economy = accelerating deflation. IMO this is more of a driving factor than government borrowing (which should be raising rates).

    AMZN can deliver you goods cheaper than Sears. The cost of a TV follows Moore's law. AI phone trees replace customer service. Automated convenience stores and burger flippers, truck drivers and taxi cabs.

  23. Phil – You do your webinar when you have the time. We'll be here.  :)

  24. ….just leave a little time for things that matter most…. :)

  25. HOV/Jet – Back to $2.12 today so there's that.   Aug is still the long month but you can cash the $2s for 0.45 and buy the $1s for $1.20 so net 0.75 puts you in the $1/3 spread for $1.35 and you're $1.10 in the money.  Since the $2 puts are only 0.30, it's not worth selling them but their delta is 0.36 so if HOV falls 0.25 they should be about 0.50 (the $3 puts are $1 so 0.70 to gain on a $1 drop) and then you could sell and your net would drop to 0.85 ($1.85 break-even) and, worst case, you are assigned more at $2 and your net on 2x would be $1.925 and then you can sell Jan $2s for 0.50 and drop to $1.425 on 2x.  If that doesn't appeal to you – take the 0.275 loss and get out!  

    Banks/QC – I think that was the sector.  Don't want to commit to 2! 

    Oops, where is our rally going?  

    NQ is the laggard at 6,985 and lined up with 26,300, 2,840 and 1,595 so, if those break, game on for the /NQ shorts (tight stops above).

    Banks/Learner – Yes a good thing to do but big job.

    Barry/Winston – I guess he serves two (or 3) masters and that means he has to be mindful of what he says which then makes him disingenuous, if not outright dishonest in his "opinions" or, more accurately, "spin."  

    Labor/BDC – I agree with the concept but we're not seeing the productivity gains yet.  We're still in the investment phase of the human replacement cycle.  

    I saw something on the weekend that was about a brick-laying robot that costs $2M and lays more bricks in one hour than 2 humans can do in a day so not just 24x more efficient but it can work 3 shifts.  Eventually, to build a building, they'll just drop a robot down and turn it on and come back a week later to move the robot to the next place.  Shame about the 72 workers it displaces but, even at $30,000 each, that's $2.2M/yr so the machine pays for itself the first year.  

    Without moving to a Basic Income model, society will collapse and Team Trump is driving us in the opposite direction.

    Webinar/1020 – No it's  on me.  I discussed it with Greg and thought I could pull it off but it's 11am and I regret it.  Not the first time I've had a hard day of work though…

  26. …it's a good thing you love what you do….

  27. Phil / Banks – I brought up banks 2 weeks.   The thought here was the there are several tail winds still in front of us….

    Rising interest rates

    Lower taxes – assuming the bank is primarily based in US ( BAC, bank of NY Mellon, etc), or other US banks that are paying a high tax rate.

    Regulation to be eased or eliminated will improve their bottom line and allow them to leverage thier BS more.

    The best one I found to date that check all the boxes in BAC – there are others though.

  28. Phil / Banks –  regional banks are the other area to look at…. these will probably have the more opportunity with regulations, tax rates and the possibility of  being taken over by consolidation.

  29. Phil … are we buying CIM, NLY, F  today in any of the portfolios? 

  30. Phil – Can you provide a preview of the BNS positions ?

  31. 10 things intelligent people never say

  32. Boss, what do you think of GRUB as short and long YELP.  I can't understand why GRUB is worth 6 Billion +?

  33. Donald Trump backtracks after Devin Nunes memo blows up in his face

  34. BAC/Batman – My favorite but not cheap anymore.

    I think they are all toppy but some are better than others.  

    CIM/Learner – Yes, I did mean to do that but no emergency as BA is up $18 and $18 x 8.5 is 153 of the 125 points the Dow is up so this is, on the whole, a weak day where we're failing our lines and not a recovery at all!  

    BNS/Batman – Is that BNN?  I posted it on Sunday and it's even a Top Trade so you got the Trades by text, Email, Twitter and it was in the comments of Friday's post.  

    GRUB/That – We use GRUB all the time, they're great.   A bit better than the others we use but only $500M in revenue and $50M in profit in 2016 and moving to about $700M and $60M in 2017 so $6Bn is 100x earnings but the growth is 20% and restaurants do $800Bn a year in sales so it's not like they are near a ceiling in growth so, I wouldn't buy them but I wouldn't bet against them.  YELP, on the other hand, just bought Eat 24, who competes with GrubHub but restaurant owners are not generally Yelp fans – as there are always bad reviews and they tend to take it personally.  GrubHub wisely offers no opinions and just signs up lots and lots of restaurants.  Yelp's p/e is 200x earnings so I don't see why you like them and not GRUB.  YELP is heading towards $1Bn in sales and $20M in profits – miles behind GRUB and I don't see much of a moat around a review site – popular though they may be so a no on that one for a long.

    Keep in mind, of course, that I'm generally a conservative, value investor, so I'm never going to like things like that unless they are really ground floor or really oversold.  

    /CL and /RB recovering well from their dip – this is why I didn't play today – too tricky.

    /NG finally collapsed so now we can go long again (not today, but soon)

    /NGV8 is what we care about, now $2.916 and we got out at $3 and missed the big move higher.  

    It's also putting in a bottom (hopefully) on CHK.

    From the OOP:

    Long Call 2020 17-JAN 3.00 CALL [CHK @ $3.56 $-0.07] 25 1/8/2018 (716) $4,500 $1.80 $-0.30 n/a     $1.51 $0.05 $-738 -16.4% $3,763
    Short Call 2020 17-JAN 5.00 CALL [CHK @ $3.56 $-0.07] -25 1/8/2018 (716) $-2,375 $0.95 $-0.10     $0.85 $0.00 $250 10.5% $-2,125
    Short Put 2020 17-JAN 4.00 PUT [CHK @ $3.56 $-0.07] -25 1/8/2018 (716) $-3,000 $1.20 $0.03     $1.23 $-0.07 $-75 -2.5% $-3,075

  35. Cellectis S.A. (CLLS)/qc….too early to tell.  In bed with Pfizer, and I am sure they are going to take it a bit slower, as they are restructuring internally.

  36. StJL – Yo dog, thought you might appreciate this, especially the tunes.

  37. StJL – Ritholtz – "Allowing your partisan views to get in the way is a mistake. The tax cut are a large and potent stimulus. There is no rational way to reach any other conclusion."

    You may believe the cuts are a reckless, ill-timed, deficit-expanding wealth transfer to the rich; indeed, you can hate the impact of this sort of partisan policy-making approach and its long-term implications for the nation’s fiscal health. – Barry Ritholtz

    From those two diametrically opposed statements in the same missive, the latter sounds like somebody is internally conflicted by the truth,  and engaging in clueless pandering in the former.  Just sayin.

  38. And what WInston and Phil said, conflicted and Alex, what is being a tool?

  39. Phil – hatred and racism is what gets a guy like that in power and more of it is the only thing that's going to keep him there. Sadly, it's human nature to be tribal and xenophobic and Trump simply plays to people's base instinct.  


    Society is about rising above our animal interests and doing what's best for the community – even if it's not our gene pool.   

    Spot on to the former, as for the latter viz. voters, perhaps the gene pool is low on chlorine?

  40. Thatway – "what do you think of GRUB… I can't understand why GRUB is worth 6 Billion +?"

    To the former, on an extremely good day, that stock shouldn't be more than $10, as to the latter, which begs the former, some investors need to put down the crack pipe. Out.

  41. And what Phil said…

  42. Learner – "Anecdotally, rising rates, spreads are good for these guys and if we are in a regime of rising rates, "

    Low rates and NIM (net interest margin) compression are the bane of their existence. Increasing NIM are what banks live for, bigger spreads, bigger margin, bigger revenue, bigger profits.  The danger is when short term cost of loan funds or costs rise, and longer term asset yields decline, think yield curve inversion but not necessarily. Depending on the portfolio composition, and change in yields, and how those affect liability costs and asset income, this can effect mismatches in asset to liability duration, and potential NIM compression.  See here for some reference.

    StJL – tomorrow I'll have something that you will really like dog…. That's all folks, time for my IV and Out.

  43. I obviously jumped the gun on AKS yesterday.  Just sold some Jan $4 puts for .52.

    STJ- If it pulls back some more per the third day rule, I'll sell more, making it a full position.

  44. CHK – sold Jan 2019 $4 puts for $1.05.

  45. Go Beagles Naybob! 

  46. AKS / Albo – The way it's going, we might need to reset the 3 day timer each day!

  47. Yep !   Looks kinda like "good buy, good buy, goodbye !

  48. That was fun, left off the Webinar with a Nas short at about 6,941 just based on the fact it was lagging to the downside.

  49. F – options


    TOS has Ford options at 8.87 9.87 10.87 11.87 12.87 … for the strike prices.  Any reason for this?

  50. Whoops, turning red! 

  51. I have to get ready to go to NYC soon…

    Gene pool/Naybob – It's low on morals and not the kind people seem to get from churches these days.  I have no idea how people who call themselves religious Christians can have so much hate in their hearts or do such terrible things to other people and neither can the Pope, whose spoken out on the matter several times.  

    F/Jeff – I don't know why that happened.  

    "I have heard the President of the United States speak," the pope said, responding to a question from a Mexican journalist about Trump's decision. "He presents himself as a pro-life man. If he is a good pro-lifer, he should understand that the family is the cradle of life and you must defend its unity."

    Francis said that while he has not studied the specifics of the DACA program, he believes "removing young people from their family is not a thing that bears good fruit, neither for the young person nor the family."

    The pope said he is especially worried about young people who become detached from their roots and lose hope in the future, even then choosing to commit suicide. "Young people today need to re-find their roots," he said. "And anything that goes against this robs them of hope."

    What a Socialist!  

    Banks/Naybo – And, most of all, they simply make mistakes in allocations and blow their quarters and, in an environment where they have guys with 10 years on the job who've never seen high rates – those mistakes can be catastrophic.

    AKS/Albo – Gotta love the falling knives!  I believe I said I like CBI better?

    Go /NG!  

    • BP (BP -0.3%expects gas to overtake oil as the world’s primary energy source by ~2040 as demand for the least polluting fossil fuel grows, according to its vice president for strategic planning.
    • “We see [gas taking] over from coal in the early 2030s… We think there is a very good case for gas actually overtaking oil post 2040 or just before 2040,” says BP's Dominic Emery, highlighting estimates for demand growth for gas in China of ~15% Y/Y last year.
    • Emery also says one of the biggest challenges for the gas industry is reducing methane leakages from pipelines, which he estimates at 1.3%-1.4%.
    • “Once [methane leakage] exceeds 3%, it means that gas, certainly in the nearer term, over a few decades is actually worse than coal from a [greenhouse gas] perspective," he says, adding that "we’re getting a lot of pressure… to get our act together in terms of managing methane in the supply chain."
    • Royal Dutch Shell (RDS.ARDS.B) announces one of its largest U.S. Gulf of Mexico exploration discoveries in the past decade from the Whale deepwater well.
    • Shell says the well encountered more than 1,400 ft. of oil bearing pay and appraisal drilling is underway to further delineate the discovery and define development options.
    • The area is ~10 miles form Shell's massive Perdido platform, so the company hopes it can develop the area and reduce costs while using by connecting it to existing platform and pipelines.
    • Whale is operated by Shell with a 60% ownership interest and co-owned by Chevron (CVX+0.1%) with a 40% stake.

    • As expected, the FOMC stays on hold, keeping the Fed Funds target range at 1.25-1.5%.
    • The economy continues to strengthen, and inflation is expected to move up, according to the policy statement. The FOMC thus continues to anticipate further gradual increases in short-term rates.
    • Rate markets have about fully priced in March as the next move.

    • The FOMC kept rates on hold, but a rate hike is all but assured in March after the policy statement acknowledged continued strengthening in the economy and inflation.
    • The 10-year Treasury yield moves to new highs, now up three basis points on the session at 2.75%.
    • German retail sales are expected to rise by 2 percent in 2018, sharply lower than the 4.1% growth in 2017.
    • German retail sales adjusted for inflation, sales to grow by 0.5% in 2018.
    • The store sales to grow by 1.2% in nominal terms, while online sales will rise by 9.7% in 2018.
    • December retail sales fell by 1.9% monthly and yearly against estimate of 0.3%, contradicting a spending trend in Germany.
    I knew those wings were way too expensive!  Collusion charges whack chicken stocks
    • Poultry producers fall sharply after U.S. Foods (USFD -0.5%) and Sysco (SYY +0.1%fileseparate lawsuits alleging collusion between major industry players.
    • Reps with Tyson Foods (TSN -3.5%), Sanderson Farms (SAFM -3.4%) and Pilgrim's Pride (PPC-5.5%) have denied the collusion charges in the past.
    • Casinos in Nevada reported that gaming win revenue increased 0.44% Y/Y in December to $960.38M.
    • Revenue on the Las Vegas Strip fell 3.25% to $571M during the month. Downtown LV casino revenue was up 10.0% Y/Y.
    • Total slots revenue rose 5.91% to $579.72M during the month off a win percentage of 5.92% (down from 6.93% in November).
    • Games and tables revenue was down 6.88% to $380.66M off a win percentage of 13.46%. Football betting was up 8% during the month.
    • Nevada Gaming Control Board full report (.pdf)
    • Chipotle (CMG +1.7%) is taking back some ground lost yesterday amid a mix of news.
    • The restaurant operator says it will offer free Postmates delivery in 40 major metropolitan areas during the Super Bowl on Sunday.
    • Orders can be placed during normal Chipolte business hours through the Postmates app using a special code. Catering orders aren't eligible for the free delivery.
    • Nothing further has developed from yesterday's unconfirmed reports of food poisoning tied to Chipotle restaurants.
    • On Wall Street, one of the bigger bears turned less negative today when Deutsche Bank lifted its price target to $290 from $240.
    • Chipotle is due to report earnings on February 6.
    • Source: Press Release

  52. 6,925 is good for $300+ so done with /NQ shorts as /ES should bounce at 2,820 again.

  53. HOG doing its part today, to hold those indexes down…

  54. 1,575 is a good spot to play /TF for a bounce (tight stops below, of course and /ES has to be over 2,820 and lined up with /YM 2,6050 and 6,945 on /NQ).

  55. Phil – Touche . 

    You did indeed say you liked CBI better.  But it I'm not mistaken you liked CBI in the 20's and watched it fall into single digits. 8-).

    Hey, my downside on the $4 puts is only 3.48. :-)

  56. F/    Per OCC, F paid a special 13  cents dividend,  strike prices were adjusted downwards.

  57. Phil/F    Did you adjust /execute the F 2020 trade?

  58. CBI/Albo – An optimist would say I loaded up the truck in single digits after testing it in the $20s!  cool

    F/Taihu – Thanks.  That was very annoying of them.  No, we did not do the trade yet but probably tomorrow we'll take them with NLY/CIM (whoever has better options).

  59. Nice bounce on the NQ Phil…. :)

  60. Phil/DX – any premise change after the Fed?

  61. Phil – And it worked well !

  62. Phil// With LB down again, what would be your new trade suggestions?  Also for AAPL earnings play, would it make sense to buy 150/160BCS for $8.90?  This is a weekly option.  Thanks.

  63. Wow, that markets have gotten very temperamental, trades in indexes, gold, and oil that would have worked previously for me based on momentum and candles got stopped out over and over by the whipsaw movements. Most 10 minute futures charts look like bouncing balls the last two days. Time to take a break waiting for direction.

  64. FB & MSFT report today.

  65. ~~ QCOM – Qualcomm prelim Q1 $0.98 vs $0.91 Capital IQ Consensus Estimate; revs $6.1 bln vs $5.93 bln Capital IQ Consensus Estimate.

  66. albo.. I think you talked about QRVO before…. beat ests but guidance is inline (sand bagging?) 

  67. Gotta be quick to make that futures money but it's working.

    FB down a bit.  

    MSFT crushed it.  Those Ballmer years really held them back….

    LB/Rookie – Remind me tomorrow.  Nothing wrong with the AAPL spread.  If they go down, you sell more expensive puts and roll the $150s to the $140s for $3.50ish.

    Break/MrM – Yes, super-choppy.

    OK, off to the city! 

  68. QCOM / Albo – And there is this:

    To address those concerns, Qualcomm said in a recent investor presentation that its adjusted earnings per share for fiscal year 2019 could jump to the range of $6.75 to $7.50 if the royalty dispute settles and the NXP deal goes through.

    If true, still cheap at $68.

  69. Learner – Unfortunately, I'm not still in QRVO.  Wish I were !

    STJ – good stuff on QCOM.  I agree.

  70. Learner – Are you in QRVO ?

  71. The Stormy Daniels hush money scandal is a big deal. We’re treating it that way.

  72. Exclusive: Trump asked Rosenstein if he was ‘on my team’

  73. @ albo – not in QRVO – ran away from me.  But I am in SWKS…. fingers crossed. 

  74. They are very dumb people:

    The draft budget documents viewed by Washington Post staff showed that the president is looking to cut the Energy Department's Office of Energy Efficiency and Renewable Energy (EERE) budget to $575.5 million, down from the current $2.04 billion level. Included in the budget cuts are funds for programs researching fuel efficient vehicles, bioenergy technologies, solar energy technology and electric car technologies. Additionally, the draft budget proposal seeks to cut jobs, dropping staff levels from 680 down to 450. One EERE employee told the Washington Post, "It shows that we've made no inroads in terms of convincing the administration of our value, and if anything, our value based on these numbers has dropped."

    Of course it won't matter when we can't bring in scientists in this country. The rest of the world is laughing now.

  75. Learner -  Good,. I'm still in SWKS as well.  Good luck to us.

  76. Castro freezes Cuban private sector, throws future in doubt

  77. Trump restarts racist war on pot

  78. FBI in public fight with Trump over releasing Russia memo

  79. Chinese small-cap stocks are suddenly getting hosed

  80. Mueller Zooms In on Trump Tower Cover Story

  81. Devin Nunes caught secretly changing the wording of his Trump-Russia memo after it was voted on

  82. Misconduct Allegations Against Steve Wynn Put Big Casino Project at Risk

  83. Qualcomm profit beats estimates but weak China mobile sales weigh on outlook

  84. Good morning! 

    Here's the show from last night.  I said we'd follow through another 2.5% to the downside – explaining BA was the whole Dow mover yesterday.

    By the way, I will be teaching a 4-hour class at the NYC Traders Expo at the Marriott Marquis (Times Square) on Sunday, Feb 25th (9am – 1pm).  I don't have a link yet ($150 early bird pricing) but save the date if you're around and I'd love to meet up if people are in town. 

    I'll be in the hotel Sat night so maybe dinner if people are interested?

    They have "early bird" pricing of $150 per ticket 

    Busy data day ahead and NFP tomorrow:

    It's PMI Day across the globe

    • Japanese factory activity in January showed its strongest growth in almost four years, while China's Caixin-Markit manufacturing PMI was unmoved from the previous month's reading of 51.5.
    • Meanwhile, booming manufacturing in the eurozone further saw the region roll into the new year with near-record momentum.
    • PMI manufacturing data in the U.S. will be released at 9:45 a.m. ET.

    Big results expected from 'Big Tech'

    • The earnings wave is set to continue today as Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Alibaba (NYSE:BABA) and Alphabet (GOOGGOOGL) open their books for scrutiny following yesterday's results from Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB).
    • A lot is riding on the success of tech companies as the recent deluge of reports has helped Wall Street climb back from two days of losses.
    • The sector accounts for more than a fifth of the S&P 500, meaning strong earnings could determine the direction of the stock market overall this week.

    India breaches budget deficit goals

    • India is going to miss its budget deficit targets as Prime Minister Narendra Modi "takes up programs to uplift underdeveloped regions" and creates jobs before next year's national elections.
    • The budget shortfall will be 3.5% in the year ending March 31, Finance Minister Arun Jaitley told lawmakers in New Delhi, wider than the previous 3.2% target.
    • Bond yields rose and the rupee fell following the announcement.

    U.S. crude oil production tops 10M bbl/day for first time since 1970

    • U.S. crude oil production officially has surged above 10M bbl/day for the first time since 1970, beating government forecasts by several months, according to data from the Energy Information Administration.
    • The EIA says the U.S. reached the milestone in November when output rose 4% from October, with the gains led by the usual producers of Texas, North Dakota and the Gulf of Mexico.
    • WTI crude is trading at ~$64/bbl and has posted monthly gains for five straight months, action that could encourage even more drilling.

    How is this guy not a Russian agent crippling US competitiveness?  Major cuts to U.S. clean energy research?

    • The Trump administration is poised to ask Congress for deep cuts to clean energy research spending, with a proposal to slash the budget of the Office of Energy Efficiency and Renewable Energy by 72% to $575.5M.
    • According to the Washington Post, the spending reductions would hit programs aimed at driving down the cost of solar energy, as well as fuel efficient vehicles, bioenergy and electric car technologies.
    • U.S. Steel (NYSE:X): Q4 EPS of $0.76 beats by $0.09.
    • Revenue of $3.13B (+18.2% Y/Y) beats by $30M.
    • Shares +2.6% after-hours.
    • Boeing (NYSE:BA) will ramp up capital spending as a result of tax reform, CEO Dennis Muilenburg said today after the company delivered stronger than expected Q4 results and an upbeat outlook for 2018 and beyond.
    • CFO Greg Smith said capital spending would return to “a more normalized level” of $2.2B this year, a level that would have been lower without the new tax reform agreement.
    • Muilenburg also said the company expected to end years of job cuts in 2018 after shedding 20% of its workforce, or ~34K jobs, since employment peaked in 2012.
    • Boeing amassed $13.3B in FY 2017 operating cash flow, easily beating estimates, and guides for above-consensus $15B of operating cash in 2018, as the company is not spending heavily on developing new planes and current models are rolling off assembly lines more quickly.
    • But BA's sky high stock price – up 90% last year and rising 21% so far this year - causes some hesitation for WSJ Heard On The Street's Alex Frangos, who notes BA's multiple of enterprise value to EBITDA has climbed to decade highs in absolute terms and relative to the S&P 500.
    • Boeing (NYSE:BA) is awarded a $6.56B contract to continue managing the Ground-based Midcourse missile defense system intended to stop North Korean or Iranian intercontinental ballistic missiles, the Department of Defense announces.
    • The contract includes overseeing the addition of 20 ground-based interceptors to 44 already stationed in California and Alaska, the Pentagon says.
    • The sole-source contract extends Boeing’s management role for six more years, through 2023, and brings its total contract to $12.6B.

    • Waymo (GOOGGOOGL) and General Motors (NYSE:GM) are still leading the pack in California's self-driving report cards.
    • As required by state law, automakers must disclose the number of miles driven and the frequency in which human drivers were forced to take control.
    • Waymo logged about 353,000 autonomous miles last year, with 63 disengagements, while GM's Cruise reported about 132,000 miles of test driving and 105 disengagements (a 1400% rate of improvement).
    • UPS (NYSE:UPS) shows an increase of 11.2% in revenue during the holiday quarter, driven higher by a 21% jump in revenue for the supply chain/freight segment.
    • Operating profit didn't quite keep up with the pace of revenue growth, moving up 3.2% to $2.294B.
    • Revenue in the U.S. Domestic segment was up 8.4% to $922M. Revenue per piece increased 9.2% as higher pricing factored in. A surge in shipments around the holidays added extra operating costs of $125M.
    • Revenue in the international segment rose 13% to $3.753B.
    • CEO update: "We made significant progress on key capacity investments in 2017. Our momentum, transformative actions and the economic catalyst from the Tax Cuts and Jobs Act, position UPS for growth in 2018 and beyond. We expect to unlock significant resources, which will be available for accelerated investments in our network and create additional opportunities for our people."
    • UPS expects full-year EPS of $7.07 to $7.37 vs. $7.17 consensus.
    • UPS -1.82% premarket to $125.00.
    • Previously: United Parcel Service beats by $0.01, beats on revenue (Feb. 1)

    GoPro Plus now includes replacements

    • Issuing weak guidance and announcing plans to eliminate 20% of its workforce last month, GoPro (NASDAQ:GPRO) is looking to generate additional revenue.
    • People who now sign up for the $4.99 monthly GoPro Plus service plan will now get a replacement camera if they ever break their current one, "no questions asked." The cost is about 20% of the camera's original price.

    Some Twitter followers vanishing as engagement-sales scrutiny grows

    • With attention growing toward firms selling fake social-media followers, a million-plus followers have been erased from the rolls of top Twitter (TWTR -0.3%) users in the past few days, The New York Times says.
    • That follows a weekend NYT story about Devumi, a company selling artificial engagement to prominent users, according to the report. Twitter said then it would take action against Devumi's practices, though it's not commenting now on whether it's cutting fake accounts.
    • But a number of well-known users have noted disappearing followers, and the NYT notes singer Clay Aiken and actors John Leguizamo and Lisa Rinna have lost large numbers.
    • Meanwhile, the Chicago Sun-Times has suspended its film critic Richard Roeper after reviewing his social-media following; the NYT says Roeper bought at least 25,000 followers from Devumi and that many of his nearly 250,000 followers are fake.
    • Senators and state officials are beginning probes into Devumi as a result of the outcry, and investor Mark Cuban has said it's time for Twitter and Facebook (FB -0.6%) to tighten requirements around associating accounts with real people.

    Qualcomm slips after Q1 beats, continued Apple impact

    • Qualcomm (NASDAQ:QCOM) shares are down 0.8% aftermarket following a Q1 report that beat EPS and revenue estimates.
    • Q2 guidance: Revenue, $4.8B to $5.6B (consensus: $5.57B); EPS, $0.65 to $0.75 (consensus: $0.86); MSM chip shipments, 170M to 190M (-5% to +6% Y/Y); QTL revenue, $1.15B to $1.35B (down 40% to 49%) 
    • Segment results: QCT: revenue, $4.65B (+13% Y/Y); EBT, $955M (+32%); MSM chip shipments, 237M (+9%); QTL: revenue, $1.3B (-28%); EBT, $887M (-42%).
    • Key financials: Cash and equivalents, $39.9B; operating cash flow, $1.8B; total liabilities, $40.4B.  
    • Apple impact: Qualcomm says Q1 GAAP and non-GAAP results were negatively impacted by the continued disputes with Apple and its contract manufacturers and the previously disclosed dispute with another unnamed licensee. The impact hit QTL revenue. 
    • Tax reform impact: Q1 GAAP results included a $6B or ($4.03) per share charge related to tax reform, which included a $5.3B one-time repatriation tax and $86M from the company no longer indefinitely reinvesting certain foreign earnings. Company expects to pay $3.3B for the Tool Charge over eight years beginning on January 15. 
    • Tax rate: FY18 annual effective tax rates estimated at 297% for GAAP and 8% for non-GAAP. 
    • Other Q1 charges: $1.2B or ($0.76) per share charge for the European Commission fine.
    • NXP comments: Qualcomm says it expects to close the acquisition in early CY18 and fund the transaction with cash.   
    • Broadcom comments: Nothing in the earnings release. Saving for call?
    • Earnings call is scheduled for 4:45 PM Eastern Time with a webcast available here.
    • Press release       
    • Previously: Qualcomm beats by $0.07, beats on revenue (Jan. 31)

    AT&T +4% as Q4 tops expectations and guidance looks strong

    • AT&T (NYSE:T) is up 3.9% after hours following an easy beat in its Q4 results despite revenues that dipped slightly, and the company set solid guidance for the coming year.
    • Revenues fell to $41.7B from $41.8B mainly due to declines in legacy wireline services, wireless service revenues and domestic video. Operating expenses rose to $41.3B from $37.6B chiefly due to a network asset write-off and higher wireless equipment costs.
    • It posted 4.1M total wireless net adds for the quarter (2.7M in U.S., driven by connected devices, postpaid phones and prepaid, and 1.3M in Mexico). In the U.S., it had 329,000 postpaid phone net adds with nearly 700,000 branded smartphones added to base, and postpaid phone churn was a Q4 best-ever 0.89%.
    • The company logged 300,000 total video net adds (161,000 in U.S., 139,000 in Latin America).
    • Revenue by segment: Business Solutions, $18.39B (up 2%); Entertainment Group, $12.75B (down 3.5%); Consumer Mobility, $8.27B (down 1.7%); International, $2.22B (up 16%).
    • For 2018, it's guiding to EPS of about $3.50 (above consensus for $2.97), free cash flow of about $21B, and capex approaching $25B.
    • Conference call to come at 4:30 p.m. ET.
    • Press release

    Fox turns lower after locking up Thursday NFL for $3B

    • Fox turned lower today -- FOX -3.7%FOXA -4.1% -- after confirming it would pay $3B to carry NFL Thursday Night Football over the next five years.
    • The move's of a piece with "new Fox," focused on news and sports as it sells its studio and content assets to Disney, but it's a heavy expense for what will soon be a much smaller company. CBS and NBC paid a combined $450M/year for rights last year, and were going to bid less than that this year.
    • Fox will broadcast 11 games between weeks four and 15, simulcast on NFL Network and Fox Deportes. NFL Network has other games as exclusives as part of its arrangement with the league.
    • The five-year deal made sense, NFL Commissioner Roger Goodell said, since it has deals five years out with other partners. It's still seeking partnerships with digital outlets in conjunction with Fox.
    • At last after-hours check: FOX +0.3%FOXA +2.1%.
    • Previously: Report: Fox taking Thursday NFL rights for $550M/year (Jan. 31 2018)
    • Facebook (NASDAQ:FB) is sliding in early postmarket going, down 4.9%, after a Q4 that easily cleared analysts' bars, but showed the slowest quarterly growth in a few years as its site changes cut time spent on the platform by users.
    • User time on site fell by 50M hours per day in Q4, thanks to changes like cracking down on viral videos "to make sure people's time is well spent," says CEO Mark Zuckerberg.
    • The year "was a strong year for Facebook, but it was also a hard one," he says. "In 2018, we're focused on making sure Facebook isn't just fun to use, but also good for people's well-being and for society. We're doing this by encouraging meaningful connections between people rather than passive consumption of content."
    • Ad revenue jumped 48% to $12.78B, and operating margin increased to 57% from 52%.
    • Net income, meanwhile, jumped 20% to $4.27B.
    • Operational metrics were in line with expectations: Daily active users in the quarter averaged 1.4B (up 14% Y/Y), and monthly active users hit 2.13B (also up 14%). Mobile ad revenue made up 89% of total ad revenue, up from a prior-year 84%.
    • The company had $41.71B in cash, equivalents and marketable securities at quarter's end.
    • Conference call to come at 5 p.m. ET.
    • Press release
    • Updated 7:16 p.m.: Facebook shares turned the tide with its earnings call (slides here) and are now up 1.1% after hours.
    • Microsoft (NASDAQ:MSFT) shares are down 1.3% aftermarket following a Q2 report that beat on EPS and revenue. 
    • Productivity and Business Processes revenue was $9B (+24% Y/Y in constant currency). Office 365 commercial revenue was up 41%. LinkedIn contributed $1.3B.
    • Intelligent Cloud had revenue of $7.8B (+15%). Server products and cloud services revenue increased 18% driven by a 98% growth in Azure revenue. This was the 10th consecutive quarter of 90%+ revenue growth for Azure. 
    • More Personal Computing totaled $12.2B in sales (+2%). Windows commercial products and services decreased 5% due to a large deal in the prior year. Gaming revenue grew 8% in the holiday quarter driven by the Xbox One X launch. Search ad revenue excluding TAC increased 15% due to higher revenue per search and search volume. Surface revenue was flat in constant currency. 
    • Tax reform impact: Microsoft recorded a net charge of $13.8B related to the tax reform. 
    • Earnings call is scheduled for 5:30 PM Eastern Time with a webcast available here
    • Press release     
    • Previously: Microsoft beats by $0.09, beats on revenue (Jan. 31)