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Friday Free-Fall – Stop the Markets, We Want to Get Off!

Good golly, what a mess!  

The Dow gave up another 1,000 points yesterday and President Trump is now presiding over the worst week in stock market history.  Was it because he blew up the budget?  Was it because he got rid of Janet Yellen?  Was it because he's likely to be indicted and impeached?  Was it just because he was caught cheating on his wife with a porn star and then bribing her to cover it up using campaign donations?  Who can say – so many scandals, so little time.  

What is clear is that the US looks a little scary to investors, both foreign and domestic and it's not the kind of thing that can be fixed by having a huge military parade so money is coming out of funds and those funds are forced to sell their assets at whatever price and down we go.  

As noted during the week, we're in a bot-selling pullback and it's following the script of our 5% Rule to the letter but that's not good news as the S&P finished right at our 2,596 (weak retrace) line yesterday and is only just above it this morning.  We needed to go the other way, up to 2,728 and that's not likely to happen today but we are playing bullishly in our live Member Chat Room as follows:

Well here's the test of 24,000 and we're failing that and 2,600 and 6,350 and 1,470 but those are now the lines we want to play long if we move back up but very ugly if we're failing that. 

As long as 2,596 holds, we're willing to have a long on the S&P Futures (/ES) but it would be nice to have a confirmation from the others to let us know we're on track.  It's sad that I have to say this for the 4th time this week but yes, we still like Gasoline (/RB) long at $1.755, which is the 2.5% pullback line from $1.80, which we certainly expect to be back to into NEXT WEEK's holiday and that will pay about $1,800 per contract if we're right.  

We were right yesterday with our gasoline trade in the Morning Report and, as you can see here, 4 contracts made us a very quick $2,104 so you're welcome for that one and now our FREE Futures Trade Ideas are up well over $10,000 for the week – not bad!  Keep in mind we're only following our 5% Rule™ but that's how I wwas able to tell you yesterday morning, pre-market:

Bear (oops, don't say "bear"!) in mind 2,684 is likely to be rejected on /ES, so that's the point at which we want to take profits on /NQ (6,605) and /TF (1,510) and then, if we brake over, /ES becomes a good play over 2,685 with tight stops below along with the others (and /YM should be 2,850).  That's all it takes to play the Futures and we call that our Pony Express Strategy, where we ride a horse up to resistance and then get a fresh horse for the next leg up.  All the futures contracts pay similar amounts for similar moves, so it doesn't matter which one we play so we go for the one with the best lines at any given moment.

Not much else to do but watch and wait today.  Unless we're over our strong bounce lines tomorrow, we'll be re-hedging into the weekend (we're a bit bullish at the moment) but I'll be surprised if we clear 2,700 – let alone 2,728 and that means we're back to the same hedges we were using before the crash.  

Meanwhile, enjoy the bounce but "Don't get excited!"  


Remember, I can only tell you what the market is likely to do and how to profit from it – the rest is up to you.  

Using the same rules, we called the downturn in our Live Member Chat Room at 9:49, saying:

Ouch, there goes 1,500 (/TF) – no bullish plays if that's failing and, as I said, good lagging short below that line with /NQ 6,550 a good long on the way up.

The Russell pays $50 per point, per contract so the fall from 1,500 to 1,465 was good for $1,750 per contract but we took $1,000 at 1,480 in the afternoon and started playing for longs instead.  That yeilded a very messy $6,125 in profits after going in and out of /NQ positions 30 times by 1:50 pm – NOT for beginner traders but I had warned our Members right at the opening bell:

Friggin /NQ is moving up and down 5 points at a time – that's not normal at all!  I would avoid futures unless you can shake off a big loss as it's one of those days.  

Sometimes it's easy and sometimes we have to work for our money.  Our Dollar trade, which we have now been discussing for the entire month, is now up over $1,500 per contract and halfway to our goal at 92 and that one was a "set and forget" trade idea that I put out on TV (Money Talk) on Jan 31st – which I reiterated in the Morning Report on Feb 1st.



Also in the Money Talk Portfolio, we added a hedge that was meant to protect our gains so let's check in on that and see how it's doing.  The trade idea was:

(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!

SQQQ has already shot up to almost $22, just $1 shy of our target but, since it's a spread, we won't get the full amount yet.  At the moment, the 40 Sept $16 calls have jumped up to $7.20 ($28,800) and the 40 short Sept $23 calls are now $4.60 ($18,400) while ALK has held it's ground and the 5 short 2020 $60 puts are still $8.50 ($4,250) so our net on the spread is now $6,150 and we're up $3,850 (167%) overall but keep in mind we REALLY want to own ALK so the only thing we care about is the $10,400 we get to extract from the bull call spread on SQQQ – that's the real hedge

Keep in mind that if the Nasdaq goes any lower and stays low into September, we'll end up collecting the full $28,000 on the spread so lots and lots more to gain from here and it's more than covering for what is, so far, light damage to our positions.  If we were more confident that the market was going to recover, we could sell about 10 of our $16 calls to become less bullish and cash in $7,000 to lock in profits.  

The spread was designed to protect us from the 10% pullback we expected but now that we're down 10% and, so far, only managing to bounce weakly off that 10% line – we're a little more concerned about an additional 10% pullback so we'll need an additional hedge.  This hedge is easy to pay for because we can, as I just said, set stops on our original hedges longs to lock in profits that will pay for both hedges should the market turn back up or, if we turn lower – the we'll be well-covered with 2 hedges:

All the indexes are down about 10% so it's hard to pick a favorite.  I think we should stick with the Nasdaq because Apple (AAPL) hasn't really corrected yet ($155 = 13.8%) and if they fall to $140, they will take everything with them.  Also, there are still stocks like Amazon (AMZN), Tesla (TSLA) and Netflix (NFLX) that are trading at hundreds of times earnings and those tend to get hit hard in 20% market corrections.  Also, it's easier to manage if we choose another SQQQ hedge so:

  • Buy 40 Jan $20 calls at $6.40 ($25,600) 
  • Sell 40 Jan $30 calls at $4.30 ($17,200) 
  • Sell 5 AAPL 2020 $130 puts for $10 ($5,000) 

That nets us into this $40,000 spread for $3,400 so the upside is $36,600 (1,076%) and we're obligated to buy 500 shares of AAPL for $130, which requires $4,325 of ordinary margin (any stock you REALLY want to own at a lower price will work) - so it's a very efficient way to protect yourself.  We can pay for the spread by simply putting a stop on 10 of the SQQQ Sept $16 calls (now $7.20) at $6 to collect $6,000 and we'd still be 3/4 covered on the original hedge with an additional $40,000 protecting us if the Nas turns back up.  And, if we do stop out the long Sept $16s, we then put a stop on 10 short Sept $23s (now $4.60) at about $4 (they would be lower too if the $16s stop out) so we are, in the least, getting a small profit on those 10 – even if we time it wrong. 

Remember, this morning we are betting on a bounce but, if it's a weak one, we'll be adding the hedge officially to all of our portfolios and anything but a finish over our strong bounce lines at the close will probably have us adding another hedge as this market is crazy and there's no sense taking unnecessary risks.

Have a great weekend,

- Phil


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  1. So we will have another SQQQ spread with a stop order for 10 of the sept spread?

  2. Decisions, decisions… What's a retail investor thinking today. It's Friday, let's go over our positions this weekend and see where we stand or bail today because everybody else will see red this weekend and bail on Monday!

  3. Good Morning.

  4. And Trump was bragging about the markets all year while Obama never really mentioned them and yet:

    You are right Phil, we should have put him in the Tesla Roadster this week on his way to Mars! When will people wake up and realize that the last 4 GOP presidents have led to crazy high deficits that had to be cleaned up by the Dems each time only to get blamed for raising taxes that fixed the problems. 

  5. Good morning!  

    SQQQ/Dave – I expect to make it official when we decide what bounce lines fail (and, of course, I'll post the adjusted trade). 

    Big Chart – Of course the 50 dmas on the NYSE and Rut must hold or DOOM!!!!  DOOM!!!! I say!!!!  The job of the day is to a lest look like we'll take back the 50 dmas on the others but that's far, 1,200 points on the Dow – so not going to happen today regardless.  

    For now, we'll worry about the S&P lines – same as yesterday because, if we have to redraw them, then the Index is already failing (and forcing us to use lower levels).

    And, of course, the lines don't change but the line we key off does.  Right now, we are looking at the 20% line on /ES and premising we consolidate there but, as I said yesterday, I think it's more likely we drift down to the 10% line (2.420) and that's where we should consolidate into Q2.  So, on the whole, I'm thinking 2,684 is going to fail today and we'll retest 2,640 next week and possibly blow it – hence the desire for more hedges!  

    Meanwhile, our index longs are doing great – don't be greedy.  Should hit resistance at 1,480 on /TF, 24,100 on /YM, 6,400 on /NQ (big time) and 2,615 on /ES.  Failing those and we should add the SQQQ hedge quickly to the OOP, STP and Money Talk Portfolio though I struggle with adding it officially as I can't announce it on the show.  

    Wake up/StJ – The way they teach economics in this country – you'll have a LONG wait.

  6. Phil/RB – 1.73

  7. /RB wants to see 1.7 again

  8. Bally, the High-End Shoe Brand, Now in Chinese Hands

  9. Cannabis Beer Soon To Be Available--In Canada

  10. Donald Trump launches into crazed late night meltdown

  11. Super-volatile, like yesterday – be very careful.  Gotta take those index profits on the way up (scale out)   I took mine off when /TF failed 1,480 and we can grab fresh horses if they get over.  Lines up with 24,100, 6,400 and 2,615 so 6,400 is the obvious one but it pains me to start /NQ longs 100 points higher than my last entry!  

    /RB/Ravi, Jeff – Make it $1.72!  That's the 2.5% line so re-entry or DD if you never stopped out but I'd keep tight stops below that though, on the whole, I'm fine holding 2 long over the weekend.  

    It's a holiday weekend next weekend – I think they are just stopping out all the suckers ahead of it.

  12. Yes, I stopped out of /RB this morning when it got rejected at 1.77. Back in 1x now

  13. Remember:  If the market fell 1,000 points yesterday then, very simply, 200 points is a WEAK bounce and inconsequential.  A strong bounce would be +400 and, if you are looking for yesterday's loss to be erased, you should get a weak bounce the holds the first day and a strong bounce that holds no later than the day after – otherwise, it's a false move in a downtrend (most likely).  

    If we fail to strong bounce out of this one and retest the lows – it will be the 3rd time the dip buyers are burned and THAT can lead to a massive sell-off as they throw in the towel.

    Image result for don't forget to bring a towel

  14. If we don't have a strong bounce today we could have a Meltdown Monday! You picked a heck of time to skip Mondays Phil :-)

  15. Could we still get a Meltdown Monday even with a strong bounce?

  16. NVDA up nicely after a strong beat. They have been soaring on the back of crypto mining! They are not cheap though. I wonder how expensive stocks will do if we keep going down. I imagine that people will start selling expensive winners to buy cheap potential winners.

  17. Getting no bounce right now!

  18. Is mr stick dead???

  19. Mr Stick came out and saw his shadow – that means 4 more weeks of weakness :-)

  20. SVXY closed at a big discount yesterday.

    What a crazy POS!

  21. Jabo – "Is mr stick dead???"

    Towelie smothered and choked him out with a massive sleeper.

  22. OK, I think we'll have to pull the trigger on the SQQQ hedge as I'm not sure we're going higher and it would suck if we went lower.  

    In the OOP, we have a FAZ April $10/11 bull call spread (40) that's deep in the money at $12.35 but, because it's a tight spread, it's actually showing a $600 loss at the moment.  That will reverse to a $3,000 profit at expiration (if we're still over) so great for a new hedge too – if you can get that price (net 0.04) but I think that's just because the broker is showing the worst combo of bid/ask and the spreads are wide.

    The other hedge in the OOP is TZA and we have 50 Jan $15/20 bull call spreads and we took profits on our July $7 calls so now we have 50 short July $12s and 25 short April $15s.  I think we will use the Qs, just to diversify so our trade for the OOP is:

    • Buy 40 Jan $20 calls at $6 ($24,000) 
    • Sell 40 Jan $30 calls at $3.80 ($15,200) 
    • Sell 6 ALK 2020 $60 puts for $8.50 ($5,100) 

    That nets us into this $40,000 spread for $3,700 so the upside is $36,300 (981%) and we're obligated to buy 600 shares of ALK for $60, which requires $3,190 of ordinary margin (any stock you REALLY want to own at a lower price will work) - so it's a very efficient way to protect yourself. 

    I went with ALK because the OOP already has 5 short AAPL and the margin is only $3,190 on ALK we already have 3 short puts so we'll just add them to that spread.  

    For the STP, we're going with the original spread but a higher amount as we just added more longs to the LTP:

    • Buy 80 Jan $20 calls at $6 ($48,000) 
    • Sell 80 Jan $30 calls at $3.80 ($30,400) 
    • Sell 5 AAPL 2020 $145 puts for $15.30 ($7,650) 

    That nets us into this $80,000 spread for $9,950 so the upside is $70,050 (704%) and we're obligated to buy 500  more shares of AAPL for $145 (we sold 5 to cover another spread), which requires $6,410 of ordinary margin (any stock you REALLY want to own at a lower price will work) - so it's a very efficient way to protect yourself.  

    We already took profits on other hedges so this is now covering the open end of those as well.  

    Finally, for the Money Talk Portfolio – I don't want to set a precedent of making adjustments off-show so we're just going to stick with the hedge we have – officially for BNN viewers who are not subscribers but, if you are following it here – I'd add the hedge as noted in the morning post!  

  23. this mkt is so freaking weak! DANGIT!

  24. Monday/StJ – I'll be here.  Next one is a holiday though.  

    Meltdown/Roamer – Getting a strong bounce only means it's UNlikely that we head lower the next day and, even if we do, then the weak bounce should hold (and we have time to adjust).  Failing the weak bounce on the first day or failing to hold the weak bounce on the 2nd day creates a technical pattern that gets the TA people to start selling and then you have a better chance of failing the line you bounced from.

    Again, I'm talking SHORT-TERM so we're looking at the bounce from 2,728 back to 2,596 and that's 132 points so 20% of that is 26 (2,622) for a weak bounce and a strong would be 26 more, to 2,648.

    Zooming back to the big fall from 2,860 (30% line) to 2,552 (strong retrace of the 20% line) that's down 308 so call it 62-point bounces to 2,614 and 2,676 so now we know we have zones of resistance at 2,614, 2,622, 2,648 and  2,676 and that makes it a tough slog to that strong bounce line so, before the day began, I could already tell we were not likely to make it (taking into account that we also had no bullish catalyst in news or data, of course).  

    Notice basically 2,614 failed – that was the weaker weak bounce line – NOT GOOD!  

    Woops, and while I'm writing this – down we go!  Wheee!  Very timely on the hedge…

  25. NVDA/StJ – And what if the cryptos crash?  How doe they replace that revenue?  I wouldn't chase them.

    $1.72 barely holding on /RB but I'm keeping them.  

    See what I meant about scaling out on the way up?

    SVXY/Jabob – Say hello to $5 if we keep heading lower.  

    At this rate, Trump could challenge Bush for the biggest stock market disaster in history – and he's doing it in just over 1 year – AMAZING!

  26. ABX     8500 Jan2020 $15 calls trade today for $2.21 to 2.25.  looks like opening buys into todays low

  27. NVDA / Phil – Would not touch them either. It's a wonder that people are piling on stocks with a 45 multiple in these times! Oh well…

  28. /SI / Phil – it looks pitiful, you said you'd love some at 16.5 and more at 16, that still the premise? I did the buy at 16.5, now trying to decide whether to DD or bail. I don't see any chart support from here until 15.70.

  29. Phil / CHK – getting cheaper everyday.   

  30. So if /NQ breaks lower…. where does it go?

  31. Seems like a lot of fear mongering on bloomberg.

    Not listening to CNBC anymore.

  32. Silver/MrM – I said it should go down 3% more as the Dollar rises.  The Dollar hasn't even gone up yet, this is just weakness so I'm not jumping in. 

    Copper (/HG) is getting interesting but very scary volatile.  $3 is a good line to play off though for the bounce

    CHK/Learner – No good news lately and /NG in the toilet today (also a good long at $2.60):

    $2.66 is $2.4Bn in market cap and, so far in 2017 the made $140M, $494M and -$18M for a 3Q total of $616M, which makes the P/E 4 with Q4 pending.  Revenues and profits should be steady next year so I can't see a good reason not to own them at this price.  

    /NQ/Roamer – Too much math for a Friday, but:

    Big Chart says Nas base is 5,400 and 30% line was 7,020 and is'nt it funny how they nailed it to the penny?  From there, we fell back to the 15% line at 6,210 (not all the way but closer than the 20% line), so that's the next major support and it's an 810-point drop so 162-point bounces to 6,372 (weak) and 6,534 (strong) and you can see how we're now failing 6,372 after making a run at the strong bounce so it'd very likely that, if this fails (stays under into the close) then we're on our way to test 6,210 and, if that fails (perhaps after one more weak bounce), there's really no support until the 200 dma at 6,090 and below that is the 10% line at 5,940 – a long way down for the Nas.

    Fear mongering/Jabob – How quickly they turn.  

    TSLA testing $300!   I'd buy them at $100.

    We were early and had to roll the short calls but then they calmed down and it turned out well.  

  33. At least we gave back that parabolic portion of the move up! That 2018 move up always looked phony but what a way to take it back.

  34. Price to sales is generally a better indicator that P/E because you can't fudge sales number as much:

  35. You can view the chart here -

    Won't let me post it! But we are even more expensive than 2008 for that ratio!

    P/E is at 24 today even after that big move down and that's not cheap either. Not sure how you can look at fundamentals and justify buying the market now. Maybe some stocks are cheap, but not the markets.

  36. Phil/RB – diving

  37. Eurostoxx have given up all of 2017 gains or close to it! 

  38. what a disaster week…/

    FU TRUMP!!!!!!!!!!!!!!!!!!!

  39. What a joke, Bloomberg says that Rand Paul is the last deficit hawk left in Washington. He made a big show last night about the out of control spending but voted for the tax cut that adds at least $1.5T. Some deficit hawk! He can't give anyone lessons on that topic.

  40. Our future with climate change:

    Cape Town, South Africa, a city roughly the size of Los Angeles, is about to run out of water — completely.

    Authorities are warning that as soon as May 11 — which they’ve ominously dubbed “Day Zero” — the drought-stricken city will have to cut off taps to all homes and most businesses, leaving nearly all of the city’s 4 million residents without access to running water.

    Residents will then have to go to roughly 200 collection points scattered across the city to collect strictly rationed water. People will be allowed just 25 liters — about 6.5 gallons — of water a day. That’s all the water they’ll have for drinking, bathing, flushing toilets, and washing their hands.

  41. might be time to invest in composting toilets

  42. BTFD????

  43. They sure are looking for a Valentine headline

  44. Yikes!  

  45. Wow, down and down we go.  

    I just bought some /YM longs at 23,450 – just to see if we bounce at -500 but very ugly charts.  

    There are just no buyers at all.   I guess there never really were….

    Price/Sales/StJ – Well that's just a ridiculous number.  If profits are 10% of sales (they are not usually) then your p/e is over 20 – that's just not sustainable.  People think it doesn't matter what you pay for a stock on a p/e basis but, in reality, someone has to want to buy the whole company for that price or you are just making up numbers and, when rates tick up, no one can afford to pay 30x profits to buy a company.  If there's no end buyer – then all this other trading is just a massive circle jerk and no real money ever comes in to reward the traders, who are just passing money around amongst themselves.  That's why it all comes crashing down in the end – no real buyers.  

  46. /RB $1.70!  

    Rand Paul/StJ – He just wants to win the next election so he made his libertarians happy.  As a Republican in Kentucky he only got 57% of the vote last time! 

    Quick money and out on /YM – I don't like how weak things still look.

    Cape Town/StJ – It's amazing how they know there will be a disaster 6 months in advance and this is their best plan.  And they are right on the sea – you would think that they could desalinate or use those moisture capture things or SOMETHING.

    BFTD/Jabob – Are you one of the ones that will get burned in the 3rd wave?   My kids' college money (and our hedge fund) is still in CASH!!! I'll let you know when I change my mind.  

  47. Still, it's half of yesterday's drop and that's decelerating so not the worst thing if we settle down next week on the 200 dmas.  

  48. Oh no, 26 rigs were added this week – that's huge.  More pressure on oil and gasoline from that news:

    Boy that Brent spread got so narrow.  

    I picked up a couple of /NGV8s at $2.72.

    Dollar is not helping things:

  49. Big spread with /YM futures down 520 and Dow only down 400 – that's unusual.  

  50. Back in the saddle on /YM long at 23,453 (2).

  51. Phil/RB – let us know if you bail on RB pls. Thx

  52. What could that mean, the difference in spread between the DOW and /YM?

  53. /RB/Ravi – No, I'm holding for the holiday next week.  Will DD at $1.60 and $1.50 I think.  Then I would average $1.60ish on 8 long and I'd be comfortable with that into the spring (rolling contracts as needed).  Usually you can count on Easter and then Memorial Day to boost prices and then July 4th.  Winters are the lows for /RB and they just got bad news (big builds) so we're testing the lows, I think.

    EIA Upgrades US Gasoline Demand for 2019

    $1.68!  One hour to NYMEX close.  That's about the 5% line for the day and down 0.085 so should expect an 0.017 bounce (weak) to $1.695.  I certainly hope so!

    Spread/Roamer – I think it means people looking further down the road (March expiration) think we're on a downward slop with no expectation of a recovery – which is actually what I think too – I'm just playing for the bounces in between.  

  54. S&P at 200 dma (2,538) so it's now or never for the dip buyers.   /ES is in the same spot, worth a toss with a stop at 2,535 because, if this fails to hold – it will be really BAD!  

  55. 23,500 is goal on /YM, now stop /ES at 2,550 (2,551 at the moment) and then back to hoping /RB recovers to my $1.71 avg.

  56. Buyers / Phil – Well, we always have the bots and my guess is that the entire move up was driven by bots and they are taken us down now. 

  57. 2,560 is now the stop on /ES and I'm pretty sure we'll get over 2,570 at this pace. 


  58. Phil

     Holiday is the 19th week after next correct 



  59. You know that things are crazy when you see the candles on the Finviz 10 minute charts and your realize that they represent a 100 point move! 

  60. Holiday/QC – A week from Monday.

    Bots/StJ – Today feels like a flush but we'll have to see.  They may be taking advantage of light trading to flush the stop and freak out the Chinese, who are off next week. 

    Spoke too soon, done with /ES as it fails 2,565.  Fresh horse is /NQ above 6,250 with very tight stops below.

  61. At what point would you expect panic selling to set in?

  62. Panic/Roamer – If we fail the 200 dmas – that's likely.  

    Looking good at the moment though, should have been more patient with /ES but /NQ had a great line (now 6,312) so no loss.  

  63. Panic selling has already started.

    I'm more worried about the psychotic selling that is just around the corner.

  64. I don't know, Winston, buyers coming in hot and heavy now.  I think they are going for 24,000 on /YM and 2,600 on /ES.  

    $1.70 on /RB makes me very happy too. 

  65. It's the hot and heavy psychotic sellers you have to worry about!

  66. /NQ 6,350 is now the stop ($2,000 per contract in 20 mins!) and now we have 2,600 on /ES to use for our next horse or 24,000 on /YM but we might be done here.  /TF at 1,470 is the other watch line now – all very good lines.

  67. Ouch… I wasn't expecting that…

  68. Phil – I agree with you on CHK.   Looks too cheap.

    Added more short 2.5 puts.

    KODK is now down 60% from that ridiculous spike on their crypto announcement.  I'm short a whole bunch of Jul 7 puts.  Looks like I could be wearing a lot of KODK stock, but at a price of $3.70 where I'm comfortable owning it.

  69. This is the eyes wide shut collapse. Everybody and their dog knew it was going to happen, but too scared to call out a timing on this (long gone) excessive rally, for the fear that excess, well, knows no excess. The Ritholz's and Dalio's et al of this world will be shuffling around this weekend rewriting their own personal prediction histories to tell us – 'We Told You So!"

  70. Jabo, not a disaster week, imo.  I've been waiting for this since Nov. 2016.  

  71. Realistically been waiting since we cashed out in December

  72. KODK/Albo – You chased that?  For shame!  

    Image result for shame animated gif

    At least you sold premium and stayed out of real trouble so – good job!

    I wasn't scared to call it out, Winston, not in Nov of 2016 or all during 2017 or 2018, when I finally got it right.  I thought I got better on my timing since the last crash but apparently I'm still a little itchy on the sell trigger.

    $1.71 and I'm in the green on /RB baby!  Gotta have faith in those market manipulators…  

    Back to 2 long for the weekend, of course. 

    Indexes ran out of gas (/RB?) at our new levels.

  73. stjean, when do we sell UVXY calls?

  74. See how everything goes up and down at the same time?  Massive, MASSIVE buy programs running the market – humans have no place here.

  75. I hope that was a good live example of the Pony Express strategy for the futures.  Was slower than yesterday so I was able to call out the changes as we made them.

  76. Wow, they really blew /RB into the close, back to $1.69 now but maybe just caught in that general selling wave that hit around 2:30.

    No news at all, this stuff is just happening for no particular reason…

  77. Roamer – "At what point would you expect panic selling to set in?"

    When the retail idiots wake up and realize they been had.  Long ago, we addressed the fallacy of platform value and what ETF's face in liquidation here.

    SP futures hit 2540. All kinda puts and contrarian calls payin out like a mattress back Sunset Blvd slot machine.

    To repeat… Yen gaining on the dollar, no liquidity. Since mid Dec. Baltic shipping, bonds, money supply, interbank lending, commercial and industrial lending and credit from Fed reserve banks, all TANKED. These are all proxies of systemic economic growth, which have NOTHING to do with the markets?

    Sounds good, they can only continue to go up under false pretenses? Where's your sign sucker? Somebody woke up and said, time to hit the exit.

    Now oil and equities in the process of collapsing. This is just a prelude, you can say this, and this. Out.

  78. this stuff is just happening for no particular reason…

    A lot of potential energy had built up.  Once the conversion to kinetic energy starts it has to be dissipated by a big release or a lot of oscillations.  Stock market as physics :)

  79. UVXY / Stock – I have been selling VXX calls every day now. Added another one today! Better strike and safer IMO.

  80. Winny - Panic selling has already started. I'm more worried about the psychotic selling that is just around the corner. This is the eyes wide shut collapse. Everybody and their dog knew it was going to happen, but too scared to call out a timing on this (long gone) excessive rally, for the fear that excess, well, knows no excess. The Ritholz's and Dalio's et al of this world will be shuffling around this weekend rewriting their own personal prediction histories to tell us – 'We Told You So!"

    Eye's Wide Shut, you tell it like it is. Like I commented the other day, F Dalio in The A.

    Stocky – "Jabo, not a disaster week, imo.  I've been waiting for this since Nov. 2016. ?Realistically been waiting since we cashed out in December"

    Realist, be patient.

    Phil – "No news at all, this stuff is just happening for no particular reason…"

    Way overdue and too many reasons to list, many crumbs were dropped in the forest, where nobody or their Mother could see the trees.  Comments to come over the weekend. Time for a massive IV and Out.

  81. please o please come out mr stick!!!!

  82. StJean, what uvxy would you sell now?

  83. UVXY / jmd – I would sell the furthest OTM calls you can. But right now that's only the 75 for Jan 19 and you can sell the VXX Jan 19 100 for the same money and much safer I think. Keep in mind that UVXY will run up faster than VXX! That's why I am staying away at this moment. 

  84. UVXY StJ – but you can sell the 2020 UVXY calls and only the  2019 for VXX

  85. Wow!  I went away for an hour, and now the markets back up?!  This is nuts!  

  86. UVXY / Tangle – But only the 50 strikes for the 2020! You can certainly do that, I am quite confident that UVXY will be below 50 by Jan 2020 but I just feel better with VXX right now.

  87. Physics/Tangled – I like it!  

    Stock Market Physics | Phil's Stock World

    Nuts/DC – Yes, nuts but profitable.  They are just giving money to rich people in the Futures while the poor retailers get whipsawed.

  88. Phil:

    So is there anyway to recognize when a bottom has been put in, or was this just another algo ploy to generate buyers for further selling?  Isn’t it getting difficult to tell?

  89. This is what's wrong with the VIX, 600 points down is volatile but 600 points up is calm?  

    It's a one-way indicator, not a measure of actual volatility but a measure of whether or not the market has sold off recently – that's about it.

  90. Bottom/DC – Sure there is.  See those Must Hold lines on the Big Chart – that's what I considered fair value at the time (last Fall) for the indexes and, from there, my expectation in a normal market is that we'll gain about 10% a year, so that's our primary range.  At the time I calculated the fair values for the Dow and the S&P, they were about 20% higher and I was pretty sure they'd come down to our range eventually but they went up to +30% first – that was surprising.  

    Given the benefit of a few months and earnings and tax cuts and repatriations – I'm willing to believe the 10% line may be the new Must Hold for the Dow and S&P and Nas 100 but the broader Russell and NYSE won't feel those benefits as much (despite Trump's claims) and are more likely to be squeezed by rising wages and lower productivity.  

    In either case, the 20% line is a good upper limit and I expect large caps to outperform small caps this year.

  91. Another undervalued miner:

    • Harmony Gold (HMY -1.5%) says it expects a 40%-60% Y/Y increase in headline earnings to 210-240 South African rand for the half-year ended last December vs. 150 rand reported in the prior-year period, but the guidance comes in below the 2.58 analyst consensus estimate.
    • In U.S. dollar terms, HMY forecasts $0.15-$0.18/share for the half-year vs. $0.11 a year ago.
    • HMY says headline earnings are higher due to an improved operational performance recorded by its South African operations.

  92. Phil 20% on S&P  was 2650. We're almost there now

    Given the benefit of a few months and earnings and tax cuts and repatriations – I'm willing to believe the 10% line may be the new Must Hold for the Dow and S&P and Nas 100 but the broader Russell and NYSE won't feel those benefits as much (despite Trump's claims) and are more likely to be squeezed by rising wages and lower productivity.  

  93. Phil 20% on S&P  was 2650. We're almost there now

    Given the benefit of a few months and earnings and tax cuts and repatriations – I'm willing to believe the 10% line may be the new Must Hold for the Dow and S&P and Nas 100 but the broader Russell and NYSE won't feel those benefits as much (despite Trump's claims) and are more likely to be squeezed by rising wages and lower productivity.  In either case, the 20% line is a good upper limit and I expect large caps to outperform small caps this year.


  94. Phil, 

    Just making sure I understand this and read the big chart (st jean luc)(, is Dow 23000 +10% a must hold fair value line… i.e.. there is still more downside (psychotic selling etc. +volatility )  ahead here before we reach fair value? 

    Given the benefit of a few months and earnings and tax cuts and repatriations – I'm willing to believe the 10% line may be the new Must Hold for the Dow and S&P and Nas 100

    • According to Bloomberg, Fidelity clients are free to sell any shares they have in the ProShares Short VIX Short-Term Futures ETF (NYSEARCA:SVXY), but buys are no longer allowed.
    • The SVXY has collapsed more than 90% in the last few sessions.
    • The selloff in energy equities has created a "unique" opportunity to build long positions, especially in large-cap stocks where discipline and return of capital themes continue to develop, says Goldman Sachs energy specialist Brian Kinsella.
    • Crude oil’s selloff has sparked debate on where energy sits in a portfolio relative to other market sectors, but Goldman analysts believe commodity markets are set to outperform other asset classes and remain convicted on their bullish oil call.
    • U.S. WTI crude oil today settled -3.2% at $59.20/bbl after nearly falling below $58, with Brent crude -2.6% at $63.15, plagued by rising U.S. production and a spike in the U.S. oil rig count; for the week, U.S. crude -9.6%, Brent -8%.

    Trump’s already had a parade.

  95. Mr Stick lives!  

    Image result for mr stick

    2,650/JMD – Yes, still too high for reality.

    Must Hold/Learner – The Must Hold line is the line the market must hold for us to remain bullish.  It's not really fair value but a bit below.  In a normal market, the rule of thumb is that we need 3 of 5 Must Hold lines to be green to be bullish on the market but it has been years since we've been at that level (look how long we've been over the 200 dma on SPY).  Basically, the Must Hold line is the line at which we like to buy stuff and below that we consider things a nice discount but, of course, that doesn't stop things from going much lower (or higher) than their proper values.  

    Have a great weekend folks!

    - Phil

  96. Wow, doesn't feel at all like that was an up 1.3% day but that's what's going in the books…

  97. $150 billion increase to military budget over next two years. Can we identify some stocks that will benefit?

  98. Due to the recent increase in market volatility, E*TRADE has raised its futures intraday margin requirement to 125% of exchange minimums

  99. TV Buying Guide

  100. A budget the likes of which the Pentagon has never seen

  101. Mike Pence’s Bid to Isolate North Korea at Olympics Falls Flat

  102. Even ‘safe’ bond investments falter as markets tumble

  103. Donald Trump’s incredible hypocrisy on the Democratic memo

  104. The Hail Mary Retirement Plan: Bitcoin IRA

  105. Phil— what do you think happens this week?

    Does your crystal ball say more panic or back to the BTFD mentality again?

  106. Next week/Jabob – I don't see the news getting worse and China is closed and Europe's economy is pretty good and ours is pretty good so no reason for panic selling and good reasons for bargain-hunting.  The main reason we pulled the trigger was the high VIX gave us great prices to sell puts and calls for.

    As noted in the above post, this may still be the top of a 20% range that bases 10% lower than here but, for now, I think there's not enough reasons to be trading in the low end of a proper range.  

    Military/Den – How about defense contractors?  They should do well…  wink

    LMT, TXT, and AIR are all good ones but don't forget how well HAL does in a war and Trump is still President, so odds are high on them.  HAL and AIR are not too expensive, LMT and TXT are still a bit much for me. 

    125%/Dsheara – So 25% more than they were?  That's not terrible.

    • Stocks staged a late rally to cap another volatile day of trading that saw the Dow Jones average finish 330 points higher after dropping by as much as 500.
    • Today's retreat halted as the S&P 500 hit its 200-day simple moving average (2,539), which had not been tested since November 2016, sparking a wave of buying.
    • The Dow, S&P 500 and Nasdaq all lost more than 5% for the week – their worst since early 2016.
    • "What's happened here is an understanding that inflation is returning and that the central bank quantitative easing that we've grown accustomed to is coming to an end," says Jim Bianco of Bianco Research. "Since the financial crisis, this is the first 10 percent correction in stocks that has not been accompanied by a significant fall in rates."
    • But for today, 10 of the 11 S&P industry groups finished higher, with the top-rated tech (+2.5%) and financial (+1.9%) sectors showing relative strength throughout the day.
    • The energy sector (-0.4%) finished at the bottom as the price of crude oil fell for the sixth session in a row; WTI crude futures sank 3.2% to $59.20/bbl to their lowest level of the year.
    • U.S. Treasury prices settled higher note, with the benchmark 10-year yield sliding 2 bps to 2.83% and the two-year yield dropping 7 bps to 2.06%.

    Trudeau: 'Clear path forward' on NAFTA

    • "There is a clear path forward [on NAFTA] and we're working very hard together on that path," said Canada's Justin Trudeau, capping a U.S. swing Saturday in Los Angeles after stops in Chicago and San Francisco.
    • "Let's not step back from the progress our countries have made… A generation later, it can be morning in North America."
    • He also identified several tough issues – including Chapter 11 investor-state dispute panels, U.S. proposals for the auto sector, and a U.S. demand for a sunset clause.

    Flu season is still getting worse

    • 1 of every 13 visits to the doctor last week was for fever, cough and other symptoms of the flu, tying the highest level of the virus seen in the U.S. since the swine flu of 2009.
    • "This is a difficult season, and we can’t predict how much longer the severe season will last," said Dr. Anne Schuchat, acting director of the CDC.
    • Deaths from influenza and pneumonia, which are closely tied to each other in the winter months, were also responsible for 1 of every 10 deaths last week, and that's "likely to rise."

    Texas reports sharp rise in drilling permits, completions

    • Texas oil and gas producers received 1,166 drilling permits in January, surging 21% Y/Y, with nearly half issued for the Midland area of west Texas, home to the prolific Permian Basin oilfield.
    • The Texas Railroad Commission also reports well completions soared 79% from a year ago to 963, as producers work through a growing backlog of drilled-but-uncompleted wells.
    • While the rate of well completions is rising, the number of DUCs in Texas also continues to climb, an indication that producers are still drilling wells faster than they can be completed, Reuters reports.
    • There were 478 rigs operating in Texas as of Feb. 9 vs. 361 a year ago, according to the latest Baker Hughes survey.
    • Cameco (NYSE:CCJ) squandered opening gains following its Q4 earnings report, finishing -4.6% after the company warned of further uncertainty this year in the nuclear market.
    • In today's earnings conference call, CEO Tim Gitzel said he was "cautiously optimistic" about the industry and that CCJ had "seen reduction in global demand expectations, driven by early reactor retirements, delays in reactor construction programs, slower-than-expected restart process in Japan, and by changes to government administrations."
    • While Q4 earnings beat consensus estimates, revenue fell 8.8% Y/Y to C$809M, hurt by lower realized prices for uranium under its Nukem unit, which handles CCJ’s marketing operations globally.
    • Airbus (OTCPK:EADSFOTCPK:EADSYwarns of new problems with the Pratt & Whitney engines on its best-selling A320neo planes, prompting the European Aviation Safety Agency to issue emergency restrictions.
    • The agency says it is aware of "several occurrences of engine in-flight shutdown" and other in-service events with the engine on the A320neo, and has ordered flight restrictions on planes powered by the engines.
    • The problem with a core part of the engine is the latest in a string of setbacks that Pratt & Whitney, a unit of United Technologies (UTX -0.6%), has suffered with its geared turbofan engines.

    • After months of roiling the movie-exhibition sector with a $9.95 monthly (almost)-all-you-can-see film plan, MoviePass is cutting its price again.
    • The service, owned by Helios and Matheson (NASDAQ:HMNY), is teaming with streaming service Fandor on a bundled plan at $7.95/month.
    • It's a limited time offer that's being reintroduced after a test discount in November, the company says.
    • Subscribers who sign up will be billed $115.35 ($7.95/month plus a $19.95 processing fee) and get a year of streaming from Fandor along with a year where users can visit the theater every day.

    Raymond James upgrades T-Mobile on expanding footprint

    • T-Mobile (NASDAQ:TMUS) is likely to see solid revenue generation as the fruit of an effort to expand its retail presence, among other factors, a bullish Raymond James says.
    • Analyst Ric Prentiss upgraded the stock to Strong Buy from Market Outperform, reiterating a $76 price target, implying 28% upside.
    • The company opened 1,500 T-Mobile-branded stores last year, along with 1,300 MetroPCS stores — and while many of the stores were in legacy markets, it's now continuing into "greenfield" markets, he says.
    • That translates into a growing retail presence that should come with significant cash flow generation, he writes.

    Venture capital deals of the week

    • Chronic disease treatment: GV (GOOGGOOGL), Shire (NASDAQ:SHPG), Novartis (NYSE:NVS), and AstraZeneca (NYSE:AZN) participated in a $53M round in Rani Therapeutics, which developed a pre-clinical stage pill to replace injectable drugs for chronic diseases. The round brought total funding up to $142M. 
    • Other round participants: GeneScience Pharmaceuticals, Bossa Ventures, Cathay Venture, Ping An Ventures, and Virtus Ventures.  
    • Rani plans to use the funds to invest in manufacturing to prepare for human clinical trials.  
    • On-site car maintenance: General Motors (NYSE:GM) Ventures and ExxonMobil (NYSE:XOM) led a $13.7M Series A round in Yoshi, a subscription service for on-site car maintenance and gas delivery. Y Combinator also participated in the round, which brought total funding up to $15.9M. 
    • Yoshi delivers gas, oil changes, car washes and other vehicle maintenance services to where a car is parked. Yoshi currently operates in the San Francisco area, Los Angeles, Austin, Nashville, and Atlanta.  
    • VR broadcasting: Intel (NASDAQ:INTC) was among the backers in a $11.7M Series A round for VR broadcasting platform startup Vreal. The round was led by Axioma Ventures joined by Akatsuki Entertainment Technology Fund and existing investors. Total funding in Vreal now totals $15M.  
    • Vreal lets users record or live stream a virtual reality experience. The recording includes the VR environment and player movements, interactions, and voices. Voice chat with live viewers will come at a later date. The service is currently in a closed testing phase with hopes of wider testing this summer.  
    • AI processing: Baidu (NASDAQ:BIDU) Venture and a consortium of U.S. semiconductor execs led a $10M seed round in AI processing tech company Lightelligence.  
    • Lightelligence speeds up AI processing through the use of photonics circuit technology, which offer better efficiency than electronic circuits. The photonic circuits use light to transmit signals for lower latency and higher throughput.  
    • Staffing change: Top venture capital fund Andreessen Horowitz lost a general partner. Lars Dalgaard left to start his own fund after spearheading such investments as Imgur and Zenefits. Andreessen Horowitz had 10 general partners and Dalgaard was only the second departure in the fund’s nine-year history.          
    • Previously: Workday launches $250M venture fund, appoints co-presidents (Feb. 7)

  107. Jabo – "what do you think happens this week? Does your crystal ball say more panic or back to the BTFD mentality again?"

    After reading that linked article above, I think widespread panic sets in for most who are not legal sex workers. $15K for an overnight provider, proving there is so much stupid money floating around, we should see a new round of greater fools bidding this overpriced crap up, thinking it's a good buy, as opposed to a good bye to your money.

  108. Futures looking pretty good so far.

    Please no tease!!!!!

  109. O futures, futures! All men call thee fickle.

  110. thats 125 from being bumped up from 100 from being bumped up two days earlier from 50%. why, because the market dumped? because no one in wall street retail is old enough to know the market can go down? and the last time it did, they disallowed short selling. so it’s rigged, and slanted in their favor, and that still not good enough. and they wonder why no one trades.

  111. New Tax Law Haunts Companies That Did ‘Inversion’ Deals

  112. Global stocks rise after Wall Street gains

  113. Markets are off to an upbeat start this week

  114. Trumpism for Thee, but Not for Me

  115. Good morning!  

    Dow looking up almost 300 points pre-market so YAY!, I guess…

    /ES at 2,645 which is, if you recall, the 20% line on the button so not impressed as it's not even the weak bounce we were looking for from Wednesday's drop:

    We have shifted bullish in our portfolios but we need an almost 2% move up from here just to make a weak bounce.  That's 40 more S&P points.

    Total lack of news so far this week so I guess we should drift to at least the weak bounce line by tomorrow.  Not much data this week either.  

    Last big week for earnings, after this only about 1/4 of the S&P left to report.