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TGIF – Indexes Turn Red for 2018, Japan in Turmoil

chartDown 6.9% for the month!

That's the damage on the Nikkei after yesterday's 4.5% dip, putting Japan's market down 10% for the year (so far).  China's Shanghai dropped 3.4% in response to Trump's Tariffs but, so far, China has not responded in kind so, as we expected, the indexes are finding a bit of support at S&P 2,640, which is exactly what we prediced they would do on Wednesday morning.

Remember:  I can only tell you what is likely to happen and how to make money trading it – that is the extent of my powers.  The rest is up to you!

In the case of our S&P call from Wednesday morning's report, the 80-point drop from 2,720 to 2,640 was good for gains of $4,000 per contract (you're welcome!) and now we'll see what kind of bounce we get on the way to a full correction at 2,400, which will be good for another $12,000 per contract if all goes well (or badly, I suppose).  

As 2,640 is the 20% line on our Big Chart (a level we drew more than a year ago) and as the fall from the 25% line at 2,750 was 110 points – we'll be looking for 22-point bounces to 2,666 (weak and satanic) and 2,688 (strong) and, if the weak bounce fails to hold today – look out below on Monday!  the next proper support for the S&P Futures (/ES) will be the 15% line at 2,530 and the next stop below that is our 2,400 goal (2,420 to be exact).  THEN we get excited to buy things – despite the Trade Wars.

Until then, we have plenty of longs and plenty of hedges so we just sit back and watch and wait.  The US and European markets are closed next Friday (my Birthday, actually Thurs but it's celbrated on Friday this year) and Easter is Sunday and that Monday will be slow and that whole week will be slow, as will the weak before (next week) so not the best time to determine what levels are holding up but a great time to take a break!

  • Dow (/YM) 24,150 was the 15% line so that has to be taken back before we're even recovering.  25,200 was the 20% line and that fall was just over 1,000 points which calls for 200-point bounces 24,350 (weak) and 24,550 (strong) but, given the news-flow, that's not going to happen so, logically, we're going to remain bearish the morning.
  • Nasdaq (/NQ) was 35% over it's Must Hold Level (5,400) that did not account for Amazon (AMZN) trading at 250 years worth of earnings along with other silly valuations like Netflix (NFLX), Tesla (TSLA) and AliBaba (BABA) but even FaceBook (FB) and Alphabet (GOOGL) had gotten ahead of themselves – which is why our main hedges are ultra-short Nasdaq ETFs (SQQQ).  Anyway, 7,290 was the 35% line and we actually topped out at 7,200, which is close enough to count it.  From there, back to the 25% line at 6,750 is a 540-point drop and we know the Nas loves the 25s so we'll use 100-point bounce lines to 6,850 (weak) and 6,950 (strong) but those don't matter because we're testing 6,700 at the moment and again, looking at the news flow – they are never gonna make it.  

chart

  • Finally, the Russell has had the least damage so far at 1,548 but they also had the least gains and are not even 7.5% over their Must Hold Line at 1,440.  /TF fell from the 12.5% line at 1,620 and that's down 72 points so we'll call it 15-point bounces off 1,550 (though failing 1,548 would be catastrophically bad) and we'll look for 1,565 (weak) and 1,580 (strong). 

Well, I haven't calculated a single strong bounce line that I think will be taken and I don't even think we'll make weak bounces today so you'd BETTER have good hedges over the weekend.  If you have a $100,000 portfolio that will lose about $20,000 in a 20% market dip, then you want a hedge that mitigates about half the damage and that's easy with something like this:

  • Sell 5 IMAX 2020 $20 puts for $4 ($2,000) 
  • Buy 20 SQQQ May $17 calls for $2.25 ($4,500) 
  • Sell 20 SQQQ May $22 calls for $1.05 ($2,100) 

The net cost of that spread is just $400 and it pays $10,000 if SQQQ is over $22 at May expiration.  Since SQQQ is a 3x reverse track of the Nasdaq, to gain $4.20 from the current $17.80 would be 23.6% and that would require just an 8% drop in the Nasdaq to put you in the money.  

We're offsetting the cost of the spread by promising to buy 500 shares of IMAX for $20 in Jan 2020 and that requires $975 in ordinary margin and IMAX is at $19.25 now, so it requires a bit of faith in IMAX as well (we have that).  You can offset the cost with a short put on any stock you REALLY want to own if the market corrects but IMAX is a good fit for a $100K portfolio since the net assignment would be just $10,000 worth of shares.  

Meanwhile, why only mitigate half the damage?  Well if we're wrong, it's very expensive to overhedge and, if we're right, your $100,000 in stocks drops to $80,000 but then you get $10,000 in cash from the hedge and now you have $90,000 to spend on stocks that are 20% off the old prices.  That means you can buy 112.5% of the stocks you were able to buy before the market fell so, if you are a long-term investor, you have exactly what you want – more stock when it's cheap.  

Image result for dollar cost averagingAfter that, the market either comes back or the next set of hedges kicks in and you buy more stock at even lower prices.  Don't you wish that was your strategy in 2008?  Our system simply reinforces the concept of buying while other people are panicking by putting cash in your pocket at the exact time you want to go bargain-shopping!

Have a great weekend, 

- Phil

 


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  1. NYSE testing its 200 DMA. In the meantime, the 50 DMA are starting to take a downturn.


  2. So yesterday Trump started a trade war and then by end of the day took some steps toward a real war when he installed Bolton as his new NSA. His is probably thinking that the Iraq war help Bush get re-elected so why not start a small war himself. After all, only spineless Dems like Obama don't start their own wars. The man is totally insane. This is not hyperbolic – look at Bolton's op-eds over the last 3 months – war with Iran and North Korea are his goals. We just have to hope that Matthis can keep Trump away from the nuclear codes now.


  3. Water is the new oil:

    http://ritholtz.com/2018/03/5-7-billion-drinking-water-2050/

    5.7 billion people to run short of drinking water by 2050


  4. Facebook might be a danger to society:

    https://www.vox.com/policy-and-politics/2018/3/21/17144748/case-against-facebook

    That Facebook’s relentless growth threatens the existence of news organizations is something that should make the architects of that relentless growth feel bad about themselves. They are helping to erode public officials’ accountability, foster public ignorance, and degrade the quality of American democracy.[...]

    And:

    By December of 2017, even Facebook’s in-house research team was admitting that using Facebook the way Facebook is generally used in reality is harmful to users’ mental health and well-being.


  5. Trump Threatening to VETO spending bill due to DACA / Wall issues


  6. Good Morning.


  7. A few comments about the overnight news attachments. The most interesting comments by Secretary Ross were concerning our interest in China increasing LNG imports to help trade deficit (I think he meant to say our energy corporations) and secondly that bizarre video of new NSA Bolten encouraging Russia to allow and expand its citizens to own and bear arms, ala NRA.


  8. In YM overnight at 23960 out of YM at 24036.. Hope it doesn't blast up now..


  9. Good morning!  

    Image may contain: one or more people and text

    Amazingly, Trump killed any chance of recovering by threatening to veto the spending bill.  Will he single-handedly shut down the Government – is he that bat-shit crazy?

    Big Chart – Not too much damage yet but watch the 200 dma on NYSE but, if it holds, we could set up for a positive triangle-squeezy thingy in 6 weeks, when the 50 dma and 200 dma come together – that will be right after earnings so – if we don't fall apart by May expirations – we could get a nice summer rally.

    If it's going to fail – it's going to do so earlier than May.

    Mattis/StJ – A guy named "Mad Dog" is your hope for peace?

    Water/StJ – Our lack of attention to this is terrifying.  

    Well, looks like markets determined to bounce anyway.  

    Bolton/Den – That guy is so dangerous in that position.  

    Bolton quotes:

    • There's no such thing as the United Nations. If the U.N. secretary building in New York lost 10 stories, it wouldn't make a bit of difference.
    • I think the International Criminal Court could be a threat to American security interests, because the prosecutor of the court has enormous discretion in going after war crimes. And the way the Statute of Rome is written, responsibility for war crimes can be taken all the way up the chain of command.
    • People say you favor assassination, what do you think war is? Except that it's assassination on a much larger scale, a much more horrific scale.
    • Negotiation is not a policy. It's a technique. It's something you use when it's to your advantage, and something that you don't use when it's not to your advantage.
    • You don't need to spend tens of millions of dollars on political consultants to tell you what you think when you already know what you think.

    Be very afraid! 

    Weak bounces failing already.  


  10. LABD – Sold another 1/3, up 22 %.


  11. /rb- 2.04


  12. /RB Phil – is there any level on /RB that gets you interested in shorting or are you content to wait until holiday weekend?


  13. ?How Mad – Don't fear the POTUS. This is one time history WILL NOT repeat itself…..


  14. They might have enough votes to override his veto anyway and then he looks weak! Won't do it – it's just like his threats to sue people. The guy is just a big coward. 


  15. He's a dead man walking….


  16. or maybe he is setting the market up for a rip and he is giving people time to get in the boat, its anyones guess here


  17. And BTW, why does he care about funding for the wall, Mexico is going to pay for it anyway :-)


  18. SJL, 1020

    This may be attributing more cleverness to POTUS than evidence to date would support, but could it be that DT has appointed a hawkish SOS and an overly aggressive Bolton to scare the NKs into being more amenable to accepting our terms at the yet-to-be announced summit meeting ? Ditto Iran. Just a different  perspective from the back of the room.


  19. Comrade P***y Grabber appears to be setting up the same 'when in doubt start a war' strategy that his puppet master Putin used to rise to power-

    http://www.businessinsider.com/how-the-1999-russian-apartment-bombings-led-to-putins-rise-to-power-2018-3


  20. 8800 – You are attributing way too much cleverness to him… The threat of was won't work with these guys unless you are willing to go through with it! And how much appetite is there for that outside of Trump new circle? So not very convincing IMO. 

    Trump sees people he perceives as tough on TV and wants to hire them. It's really that simple. 


  21. LABD/Albo – That means it must be almost time to buy LABU again. 

    /RB/Ravi – See, I told you guys too dangerous though $2.05 and I think I might have to add a short myself.

    Anyone's guess/Mike – What a crazy way to live!

    Trump/8800 – So he's secretly a brilliant strategist and only pretending to be a total disaster – BRILLIANT!   Now go back to the back of the room….

    That was the old Reagan strategy:


  22. Stocks start flat as market weighs Trump's China tariffs

    • Stock action is relatively muted after futures overnight indicated sizeable losses and a day after across the board selling that left all the major Indexes breaking down under their 50-day moving averages; Dow +0.1%, S&P flat; Nasdaq -0.3%.
    • European bourses tumble to their lowest levels of the year, with Germany's DAX -0.9%, France's CAC -0.8% and U.K.'s FTSE -0.1%; Asian markets were hit hard, with Japan's Nikkei finishing -4.5%, the Shanghai Composite closing -3.4% and Hong Kong's Hang Seng -2.4%.
    • In U.S. corporate news, Nike +3.1% after reporting better than expected Q4 earnings and revenues, but Micron -7.8% despite beating quarterly profit estimates.
    • Most S&P sectors are higher, but the top-weighted tech (-0.2%), health care (-0.1%), and financials (unch) groups have ticked lower.
    • Also of note, February durable goods orders jumped 3.1%, well above expectations, and durable goods excluding transportation rose by a more than expected 1.2%.
    • U.S. Treasury prices are slightly lower following yesterday's rally, with the benchmark 10-year yield up a basis point at 2.84%.
    • U.S. WTI crude oil +1% at $64.98/bbl, lifted by comments from the Saudi oil minister of extending OPEC production cuts into 2019.
    • Shivers are running though the equity markets again, with Asian stocks diving overnight as China's commerce ministry struck back following President Trump's move to impose tariffs on up to $60B of Chinese imports.
    • Beijing will take measures against the 128 U.S. products in two stages – that cover about $3B and $1.9B, respectively – if it cannot reach an agreement with Washington. Legal action under WTO rules will also be considered.
    • "China doesn't hope to be in a trade war, but is not afraid of engaging in one," the Chinese commerce ministry said in a statement.
    • Nikkei -4.7%; Shanghai -3.9%; Hang Seng -2.9%

    Sea Of Red" – China Stocks, Commodities Crash As Trade Wars Escalate

    ?Japan’s Central Bank Is Halfway to Its Inflation Target

    New home sales just short of expectations

    • February New Home Sales: 618K vs. 620K expected, 622K prior (revised from 593K).
    • The median sales price of new houses sold was $326,800; average sales price was $376,700.
    • Inventory at February's end was 305,000, a supply of 5.9 months at current rates.

    Canadian dollar spikes on consumer inflation

    • The Loonie is surging today as core prices, which exclude energy, rose the fastest in six years, up for a 5th month to 2.03%
    • Minimum wage increases in Ontario were a contributor to consumer prices that rose 2.2%, according to Statistics Canada, but higher prices for energy, cars, and mortgage rates are the main source of inflation growth.
    • Bank of Canada may lift its interest rate hike forecast if inflation continues to rise.
    • ETFs: FXC
    • Venezuela's President Maduro is knocking three zeroes off the ailing bolivar currency, with the step against hyperinflation taking effect from June 4.
    • "Venezuela has been victim of a brutal, economic war," he declared.
    • While it sounds like a currency revaluation, economists consider the move a currency re-denomination as the country is not changing the value of its official exchange rate.
    • The SEC is preparing to examine as many as 100 hedge funds focused on cryptocurrencies,WSJ reports.
    • The action is separate from the dozens of enforcement investigations already under way, which largely target ICOs.
    • The SEC will also look at the accuracy of risk disclosures provided to investors, including how the documents explain the fund’s strategy of trading cryptos or tokens.

    Bitcoin Falls on Fears of Regulatory Trouble for Big Crypto Exchange

    • Crude oil prices tick higher after Saudi energy minister Khalid al-Falih said OPEC would need to keep coordinating supply cuts with non-member countries including Russia into 2019; U.S. WTI +0.3% to $64.50/bbl, Brent +0.4% to $69.17 after earlier crossing $70 for the first time since January.
    • “A decision about this is to be taken at OPEC’s next meeting in June… [and] al-Falih believes it necessary to maintain the cuts in 2019, he is essentially conceding that OPEC has no scope for raising production," Commerzbank says.
    • Middle East tensions also are at play, as Pres. Trump named former ambassador John Bolton as his new national security advisor; Bolton is known for his hard-line views on Iran.

    Corpus Christi seeking ship channel expansion funds to handle crude exports

    • Corpus Christi, Tex., port officials met with several U.S. lawmakers yesterday to advocate increased funding for a $327M project to expand the Corpus Christi ship channel, which could become the biggest U.S. conduit for crude exports in coming years, the Houston Chroniclereports.
    • Congress has committed just $13M to finance its $225M portion of the cost of dredging the South Texas ship channel, which would take more than a decade to finish at that rate and waste precious time as oil demand surges overseas, says the chief executive of the Port of Corpus Christi Authority.
    • Corpus Christi's energy exports have become vital to companies such as Occidental Petroleum (OXY +2.9%) and Cheniere Energy (LNG +1.8%), which expect to increase exports of crude and liquefied natural gas in coming years as oil companies produce more crude than domestic refiners can absorb.

    Chinese steel and ore derivatives plunge as trade tensions rise

    • Chinese steel and ore derivatives plunged overnight after the government outlined plans for tariffs on $3B of U.S. imports after Pres. Trump announced 25% levies on as much as $60B in annual imports from China.
    • The most traded rebar contract on the Shanghai Futures Exchange for May delivery plummeted 6.9% to 3,369 yuan/metric ton ($571/mt), and the most active May hot-rolled coil contract sank 5.6% to 3,536 yuan/metric ton.
    • The most liquid iron ore futures contract on the Dalian Commodity Exchange for May tumbled 6.2% to 437.5 yuan/dmt.
    • "China's steel market has been bearish for weeks, and this just makes the market even weaker," a Chinese steel mill source tells Platts, adding that the market eventually will calm since China's steel export volume to the U.S. is limited.
    • Rio Tinto (RIO +0.8%) expects the global iron ore market to stay balanced through 2019 despite a likely moderation in steel demand growth in China, the company's top iron ore executive tells Reuters.
    • Rio, the world’s second largest iron ore miner, anticipates particularly solid demand for high-grade iron ore as Chinese steelmakers increasingly focus on higher productivity and lower emissions.
    • “We will see a slowdown in China overall as the economy will moderate through 2019,” Rio's Chris Salisbury says while noting that the company would continue to increase production of higher grade ore to meet increasing demand in the country.
    • Rio, which supplies ~330M metric tons/year of iron ore to mainly Asian customers, plans to spend $1B/year over the next three years for maintenance of its iron ore mines plus another $3B in total on new iron ore mines, including the Koodaideri mine in Australia's Pilbara region, Salisbury says.

    Nike Air flying higher again

    • Nike (NYSE:NKEopens up 3.69% after FQ3 results satisfy investors. The company is also catching some positive spins from sell-side analysts on the quarter.
    • Nomura reiterates a Buy rating and lifts its price target to $74, pointing to the "cleaner" inventory position and subsiding F/X pressures.
    • Telsey Advisory keeps an Outperform rating and $77 price target, noting the accelerating pace of Nike's improvement in North America and "strong slate" of innovation.
    • Stifel Nicolaus and Bloomberg Intelligence both like the early reception to Nike's new products and see opportunities to scale up the introductions. "There is clearly more excitement from consumers out there about the new styles than a year ago," notes BI analyst Chen Grazutis on Nike's assortment.
    • Nike's lifestyle air platform in particular seems to be gaining momentum. CEO Mark Parker explained the positive reception of the platform on the earnings conference call (transcript) last night.
    • Parker: "Both the Air Vapormax and the Airmax 270 are fueling energy across our Nike Air family of products. With more air innovation in the pipeline, we now expect to grow the Nike Air business by several billion dollars over the next few years. The greater scale of these platforms will create greater impact on our business into Q4 and beyond."

    Analysts adjust Micron targets after earnings

    • Stifel raises its Micron Technology (NASDAQ:MU) target from $85 to $95.
    • Firm says the May quarter outlook was above the firm’s and consensus estimates, DRAM demand continues to come for a variety of high growth end markets, and its evident that Micron’s 3D NAND Flash products are highly competitive. 
    • Mizuho Securities raises its Micron target by $4 to $70. 
    • Firm believes Micron is well-positioned heading into a stronger build season. 
    • Cowen raises its Micron target by $10 to $65 but Marvell (NASDAQ:MRVL) remains the firm’s top idea. 
    • Firm thinks the supply/demand environment in DRAM should remain favorable for he next few quarters due to hyperscale capex demand momentum. 
    • Firm does see some risks to NAND fundamentals. 
    • Source: Briefing.com. 
    • Micron shares are down 6% to $55.40.  
    • Previously: Micron -1% after Q2 beats, upside guidance; DRAM guidance up, NAND down(March 22)
    • Square (SQ -3.8%) was cut to sell as Craig-Hallum's analyst Brad Berning says that competition and challenging comps will hurt revenue growth and the stock.
    • First Data and Verifone are both launching services which will be cheaper and more competitive than Square's offerings.
    • In a separate note, Square’s price target was raised to $61 at Mizuho, citing that the company's plan of targeting millennials and the upcoming cash card, can raise both revenue and users in the next couple of years.

    MoviePass drops monthly fee to new subscribers

    • MoviePass announces that it's lowering the price of its annual subscription to $6.94 per month for a limited time
    • The annual subscription gives moviegoers the ability to attend up to one new movie per day in theaters for a whole year.
    • MoviePass, which is currently 81% owned by Helios and Matheson Analytics (NASDAQ:HMNY), works at over 91% of theaters in the U.S.
    • "We believe our business will succeed by granting the public greater access to see movies how they were originally intended to be seen – in theaters," says Helios CEO Ted Farnsworth.
    • MoviePass has over 2M subscribers.

    Goldman Sachs adds Cisco Systems to conviction list, raises list

    • Goldman Sachs adds Cisco Systems (NASDAQ:CSCO) to its conviction list and raises the price target by $3 to $54, a 25% upside to yesterday’s close.
    • Analyst Rod Hall writes, “We expect Cisco to deliver significant returns to shareholders from the recently enacted tax laws. Indeed, the company has already announced a $25 billion increase to share repurchase authorization, and hiked its dividend payout ratio to nearly 50 percent."
    • Cisco shares are up 0.7% premarket to $43.35 with a 52-week range of $30.36 to $46.16. 

    Facebook(FB) COO Sheryl Sandberg: 'It's not a question of if regulation, it's a question of what type'

    • The WSJ reports that Google (GOOGGOOGL) wants web publishers to obtain consent from European users to gather personal information for ad targeting.
    • Google will get consent from users on its own properties but wants help for third-party websites and apps using Google’s ad tech. The tech giant thinks those publishers should be responsible for getting clear, recorded consent. 
    • The company plans to offer an ad option to publishers unable to get consent for ad targeting. 
    • The EU’s upcoming General Data Protection Regulation (effective May 25) will require getting more explicit consent from users when collecting personal data. Companies also have to be more transparent about the data collected and how it will be used.
    • Violators of the regulation could face fines of up to 4% of the company’s annual global revenue. 
    • WSJ sources say Google could announce its formal plans as early as next week.   
    • Previously: Facebook's Zuckerberg: 'We have a responsibility to protect your data' (March 21)

  23. SJL, Phil,

    In doing a reality check I would agree with both of you guys that DT isn't that clever by half. However, as the prototypical narcissist, HE doesn't care what other folks in the country, not in and of his base ("inner circle"), think or believe - everyone else doesn't count because narcissists are a power unto themselves.

    FYI – The back of the room – just as being in the tall grass – adds perspective


  24. Yay back row, 8800!

    Nice little dip into the EU close and now we'll see if it's just the silly Europeans selling or if this trend goes through the afternoon.

    I'm leaving a little early as I have to take the kids to March on Washington (Gun Violence).  Here's some poster designs Maddie's working on…


  25. C/Phil- we have on ltp, do you think we need adjustments or we should leave it till Monday. 


  26. KC/ Long at 1.1715 – I think Phil likes to buy on the dips. 


  27. C/Dave – It's nothing specific they did, they are just down with the sector. 

    We sold the 2020 $70 puts for $6.70 so our net is $63.30 on the puts and we have some $72.50/85 bull call spreads at $6 and that we'll roll down when it's worth it.  The $62.50 calls are now $13 and I won't pay $7 for $10 so there's nothing to do but wait.  Same goes for buying back the short $85s – they are still $4.50 and I sure wouldn't pay $4.50 for 2020 $85 calls. 

    /KC/Tshroy – Testing the low lows now.

    Last time it was down here was a Friday too.

    WTF?  All of a sudden?  More like trying to stop the stock from failing $300.

    • Bloomberg estimates that Tesla (NASDAQ:TSLA) is making 805 Model 3s a week and says the EV automaker is showing signs of an improving trend.
    • "We think our model may be underestimating what’s going on at the Tesla plants. Based on some of the numbers we’re seeing, we think it’s possible that Tesla could already be producing more than 1,000 a week and climbing," reports VIN-tracking Bloomberg.
    • Shares of Tesla are down 2.15% on the day and traded as low as $300.45 earlier.

    I'd love to short this one:

    • Dropbox (Pending:DBX) pops over 40% in its IPO debut with an opening price of $29.
    • The $756M IPO had 36M shares priced at $21 yesterday. The company debuted with an initial market cap of over $8B.
    • CNBC source says the IPO was 25 times oversubscribed, echoing a Reuters report from early in the week that led to an increased price range.
    • Dropbox is now the largest tech IPO since Snap last year and provides a more favorable launch environment for the upcoming Spotify debut.
    • Competitor Box (NYSE:BOXdrops 5.2% to $21.59 on Dropbox’s strong start. 
    • Previously: Reuters: Dropbox IPO oversubscribed (March 19)
    • Previously: Dropbox raises IPO price range by $2 (March 21)
    • Previously: CNBC: Dropbox prices IPO at $21 per share (March 22)
    • Qualcomm (NASDAQ:QCOM) again extends its offer period for NXP Semiconductors (NASDAQ:NXPI) with a new deadline of April 2.
    • The company says 51,995,023 NXP common shares (or about 15.1% of the outstanding shares) have been tendered. 
    • That’s down from the 56,605,079 shares (16.5%) tendered in last week’s extension and the 65,276,925 shares (19%) from two weeks ago.   
    • Qualcomm shares are down 1.6% to $54.72. 
    • NXP shares are down 0.1% to $120.80. 

    Analyst expects foldable iPhone in 2020; new iPad coming next week?

    • Bank of America Merrill Lynch thinks Apple (NASDAQ:AAPL) could release a foldable iPhone in 2020.
    • Analyst Wamsi Mohan cites checks  that “suggest that Apple is working with suppliers on a foldable phone (that potentially could double up as a tablet) for launch.” 
    • Mohan expects this fall’s iPhones to “be largely unchanged” for the OLED versions except for the size changes. 
    • New iPad: Apple is holding an education-focused event in Chicago next week, and Bloomberg sources say the company could launch low-cost iPads alongside educational software. 
    • According to Futuresource Consulting, Apple accounted for 17% of Q3 mobile computing shipments to American students from kindergarten to high school. Google held 60% of the market and Microsoft held 22%.  
    • A new, low-cost MacBook is expected soon but likely won’t be ready for next week. The laptop is rumored to have a cost less than $1,000. 
    • Apple shares are down 0.11% to $168.66.    

  28. Has anybody looked at AAOI., perhaps as a pair trade with FNSR ? I have been watching AAOI for a month now and contemplating entry position at the current levels of $25-26 trought selling JAN 25 Puts for $6.00 ?


  29. I should probably mention that I own 100 shares at $28 just so keep them on my list and don forget


  30. AAOI/State – I wouldn't call it a pair trade as they are too similar for me to want both at once.  I think the problem with them is that they are all over the place with earnings and guidance and they just disappointed yet again in Q4 and guidance for all of 2018 is lower than 2017 was.  Also, be careful as this is the kind of small company, who manufactures in China, who can get killed by tariffs.  


  31. Thank's Phil . I did not think of it from that angle. So used to assuming that everything gets manufactured in China.. for less..This should all work out now.. for everybody.. right.. higher cost..higher consumer prices coupled wit lower profits and less disposable income spent import tariffs.. Oh wait, I know.. This will create more higher paid jobs right ?


  32. March/Phil – Enjoy the walk. We'll be walking in S.D.   :)


  33. Armchair Trades Added some more BX at 31.80 and sold the Sep 31/32 p/c for 4.20 combined return 3% per month

    MDP at 53.20 and sold the Sep 50/55 p/c for 7.50 combined return 2.7% per month


  34. Jabobeast/Phil -  I opened a $500,000 portfolio in November. I have picked up a large majority of Phils suggestions at or better than his prices. However I have been patient sometimes waiting 30 to 45 days to get my desired price usually occurring when the market spikes in one direction or the other. I have positions in ABX, ALK, ARR, CBI, CHK, CM, CMG, DXD, FAZ, FNSR, FTR, GE, GNC, HMNY, IMAX, JO, KNI, LB, NAK, NLY, NRZ, OIH, SGYP, SKT, SQQQ, TEVA, TZA, UNG,AND WPM. Most of the positions are for 5, 10 and 20 contracts made up of writing puts and BCS.

    I am probably over hedged a little  with 140 DXD calls contracts, 100 TZA call contracts , 50 SQQQ call contracts with offsetting higher written calls.  I was up $4000 on Wednesday, over $5000 yesterday and over $10,000 today. 

    I have learned I am much more successful by exercising patience instead of immediately chasing every posted suggestion immediately upon its release.


  35. Phil, 

    What's your take on the market moves after Trump signs the spending bill?  Expecting some reversal into green for some time? 


  36. Phil,

    What are your current futures positions going into the weekend?


  37. As I predicted, Trump signs the spending bill and promises never to sign another bill like that. Probably will anyway… 


  38. I'm sure there's something in the works for Jared Kush-ner as well…. :)

    https://www.jeffsesh.com/


  39. Wow, Trump is incapable of giving a speech without attacking people.   His opening comment on the Budget isn't about compromise but about how hard he had to fight the Democrats because they hate the military and, if it were up to them, America would be weak….  Amazing.  

    Saying he's signing a bill that no one has read.  We know that's true but you're not supposed to say it!  

    Somehow he's blaming the Democrats for lack of DACA in the bill.  WOW!  

    He wants filibusters ended and a line item veto.  Essentially he wants to be a Dictator. 

    China/State – Yeah, who knows what's about to happen.  As I said yesterday, we will probably get a bounce due to China's no or mild response but that's only because China doesn't rush to respond to things.

    Walk/1020 – Yeah, I'm glad the kids will have a chance to be part of something.  My older brother took me to war protests in NYC and the war ended – I always took credit for that!  

    Overhedged/Den – Maybe a bit but you can adjust by cashing in some on the way down – once we feel safer at a bottom, of course.

    Reversal/Lerner – Looks like we're drifting down.

    Positions/Japar – Just the usual long /KC and long /NGV8s.  Indexes and oil/gaso too crazy to mess with.


  40. Bottom line is we haven't even made weak bounces so more like consolidating for big move down – especially if China retaliates over the weekend.  

    Very short-lived headline from 1:55:

    • Stocks turn higher after Pres. Trump signs the $1.3T spending bill passed by Congress, hours after threatening to veto it over dissatisfaction with its immigration provisions; Dow +0.5%, S&P +0.1% after spending much of the day in the red.
    • Trump says he signed the legislation for national security reasons, as it authorizes a major increase in military spending.

    That didn't take long:

    Image result for whole foods amazon cartoon
    • A Whole Foods spokeswoman tells CNBC the grocer has cut staff after its acquisition by Amazon (NASDAQ:AMZN).
    • Key part of the statement: “While we continue to grow in many areas, we recently determined a need to better align staffing, This decision was not made lightly and we are working closely with impacted Team Members to help them find new roles within the company.” 
    • Business Insider obtained a copy of an employee conference call yesterday that announced layoffs spanning the in-store marketing and graphic design departments. 
    • The information echoes an earlier WSJ report that over a dozen execs and senior managers have left since the acquisition was announced last year. 
    • Amazon shares are down 1.8% to $1,517.62.  
    • Previously: Amazon's latest delivery drone patent (March 23)

    Good for GE:

    • Glitches with Rolls-Royce (OTCPK:RYCEFOTCPK:RYCEY) engines that have hampered Boeing's (NYSE:BA) 787 widebody jet also are a problem for the Airbus (OTCPK:EADSFOTCPK:EADSY) A330neo model, Bloomberg reports.
    • Rolls-Royce’s Trent 7000 turbine, the only one available on the Airbus plane, shares the durability problems afflicting the Trent 1000 from which it was developed, according to the report.
    • The turbine issue is a setback for Airbus as it seeks to win new deals for the already slow-selling A330neo, a plane distinguished from the original A330 chiefly by its upgraded engines.
    • A potential breakup of General Electric (GE -0.7%) likely undervalues its businesses by 25% or more than previously estimated, according to analysts at Melius Research.
    • Previous sum-of-the-parts evaluations of GE's individual businesses cast doubt on whether a fire sale of GE's assets would even fetch today's price at ~$13.28/share, but Melius says spinoffs from U.S. industrial companies return twice the value of the broader stock market, which would imply a more optimistic forecast for GE.
    • Such spinoffs have "historically created outsized value," Melius says, removing the bureaucratic culture that comes with a large conglomerate., thus "even with lackluster" spinoffs, employees are reinvigorated and able to achieve greater efficiency than were ever probable under the conglomerate.
    • Spinoffs also are helped by "the scrutiny of a new shareholder base," according to Melius.

    U.S. total rig count rises by 6; oil rigs post eighth gain in nine weeks

    • The total U.S. rig count rose by 5 to 995, following last week's increase of 6, according to Baker Hughes' latest weekly survey.
    • The number of active oil rigs rose by 4 to 804, posting its eighth increase in nine weeks and matching last week's gain, while gas rigs gained 1 to 190; one rig was classified as miscellaneous.
    • A year ago at this time, the total U.S. rig count was 809, including 652 oil rigs and 155 gas rigs.

    Ireland chooses managers for Apple taxes; Tim Cook heading to China

    • Ireland chooses the investment firms it wants to collect $18.5B in disputed back taxes from Apple (NASDAQ:AAPL).
    • Ireland tapped Amundi, BlackRock Investment Management, and Goldman Sachs Asset Management to manage the money, which will go into an escrow account until Apple’s appeal process is complete. Bank of New York Mellon will administer the fund. 
    • The European Commission ruled in 2016 that Apple received unfair tax advantages from Ireland. Last fall, the Commission said it would take Ireland to the European Court of Justice for not collecting the money. 
    • CEOs go to China: Apple CEO Tim Cook is among the tech leaders heading to China this weekend for the China Development Forum. Cook will co-chair the Forum. 
    • The event was scheduled well before President Trump hit China with $60B in import tariffs, but that will change the conversations and climate.   
    • Apple shares are down 0.4% to $168.10.

  41. Wow, as soon as the sellers show up, there are no buyers to be found.  

    Date Open High Low Close* Adj Close** Volume
    Mar 23, 2018 264.17 265.02 260.26 260.33 260.33 94,003,998
    Mar 22, 2018 267.91 268.87 263.36 263.67 263.67 142,913,800
    Mar 21, 2018 270.90 273.27 270.19 270.43 270.43 78,709,600
    Mar 20, 2018 270.94 271.67 270.18 270.95 270.95 59,757,300
    Mar 19, 2018 273.35 274.40 268.62 270.49 270.49 109,208,400
    Mar 16, 2018 274.50 275.39 274.14 274.20 274.20 100,343,700
    Mar 16, 2018 1.097 Dividend
    Mar 15, 2018 275.88 276.61 274.43 275.00 273.90 83,433,000
    Mar 14, 2018 277.81 278.02 274.67 275.30 274.20 105,895,100
    Mar 13, 2018 279.84 280.41 276.03 276.72 275.62 91,968,900
    Mar 12, 2018 279.20 279.91 278.08 278.52 277.41 71,924,800
    Mar 09, 2018 275.70 278.87 275.34 278.87 277.76 113,625,300
    Mar 08, 2018 273.55 274.24 272.42 274.10 273.01 66,901,200
    Mar 07, 2018 270.42 273.18 270.20 272.78 271.69 87,063,500
    Mar 06, 2018 273.30 273.39 271.18 272.88 271.79 79,213,200
    Mar 05, 2018 267.73 272.89 267.61 272.19 271.10 97,307,400
    Mar 02, 2018 265.80 269.72 264.82 269.08 268.01 139,083,200
    Mar 01, 2018 271.41 273.17 266.00 267.70 266.63 176,855,100

    Remember, 2,640 is the 20% line so if that starts acting like the top of the range (and I've been saying it should be since the fall), then the midpoint is the 10% line way down at 2,420.   

    Europe is already back to last year's lows:

    Japan is trying to catch up:

    We still have miles to go before correcting:

    If the Dollar is down 15% and stocks go back to the price they were at when the Dollar was 15% stronger – what are stocks actually doing?

    This whole thing is such a sham!  

    Gold is only 10% higher – what a bargain!  

    Silver very out of favor at the moment.  


  42. Bouncing off 2,600 which was down 45 for the day so 2,609 is weak and 2,610 is strong but only intra-day.

    Time to go marching!  

    Have a great weekend – look for Maddie's signs on TV.

    I'll try not to get arrested, 

    - Phil


  43. NYSE might close below its 200 DMA for the first time since November 2016! We bounced quickly following the elections but the climate is a bit more challenging today and I don't see a positive catalyst on the horizon. The sugar high from the tax cut has been absorbed in the blood stream you would think. 


  44. Looking at IP for an armchair trade. Stock looks like a falling knife. At 50 $ not a bade deal even the 45$ would suite me better. So we see what next week will bring. As said we are looking for all the sellers running for the exit.

    Even at 50$ the Aug 50/52.5 p/c for 5.40 looks atrachtive. combined monthly return 2.6 % nothing to seeze at. Let's look at it next week.


  45. IBM from 168 to 148 has as well lost some feathers. Getting attractive again.


  46. IBM armchair trade 145/150 p/c Sep at 17.00 gives you a combined monthly return of 2.2% if you called at 150 you still have a capital gain of 1.11$. Your break even point is at 138.47- How low can you go?

    With a clown on the helm you will find yourself in uncharted waters.


  47. This is the type of crap that Facebook spreads to users:


  48. Yodi / the armchair trades are a great way to go in this environment. For IBM another possibility is selling the Jan 2020 $135 put for $13.35 – so a put to entry of $121.65. For extra caution start with a quarter sale and add to each month over the next 4 months (or 8 or 12 depending on risk aversion!).


  49. Winston.

    With the armchair trades I like to stay as close as possible to the ATM positions, to gain max return per month. With this type of trade you can go three ways, 1. You receive more stock at 145 with a discount of 8.35, 2. both options go worthless and you can reload after Sep. 3. your call get called and you will be paid out for the stock 150, you paid 148.89 for. Your breakeven directions are 167/128. Not a bade range.

    Yes I do have as well leap puts but these plays, in your case the 135 put is good for setting up a later  leap BCS once the stock has more recovered.

    The coming week is a short one, Trump is on vacation in Florida, so I do not expect to many clown presentations, only the Chinese dragon might have woken up and will be spitting fire. So we might have more sellers jumping over the cliff, where we can pick up better pieces, I mean deals.


  50. Yodi – it is a good logic. That $17 of premium sold represents just over 11% of the stock price for the 180 day to expiry Sep 'ATM' strangle. A quick scan of some of my Tier 1 stocks (DIS, MO, PM) gives about the same percentage premium sale on the 180 DTE ATM strangle. That 10%+ premium sale on the ATM strangle may be a good rule of thumb. 


  51. P.S. the armchair trade should be a more relaxed type of trade, gaining 1.7 to 2.8 % per month, where you only have to act, when assigned during the running period. Achieving about 24% per year is nothing to sneeze at. This means you could recoup say a stock investment of 500K in 4 to 5 years, by having a return of 125K a year. Depending on your style of living, you have 10K per month. Compare this with the government support been given in Germany to the refugees and people without income of 680€ per month. Spain pays 450€ but I do not think they that generous to pay for refugees.

    Just remember, by running a diversified portfolio of stocks, you will not be exposed to a loss, as in respect to expiring options. Your option play is in addition to your div. income.


  52. Winston, DIS is a complete different play, 1.7% yield is not the right stock for the armchair trade. Still waiting to sell a cherry call on this one, but the stock is losing a lot of altitude.



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  55. Mueller probe witness secretly backed UAE agenda in Congress




  56. New Tax Law May Encourage Home Rentals


  57. Good morning!

    Huge rally in Futures reversing much of Friday's drop on promises of a trade deal with China.  Not sure how real it is but it just means we're watching the same levels we were on Friday morning.

    Mnuchin ‘Hopeful’ Truce Can Be Reached With China on Trade. (videoU.S. Treasury Secretary Steven Mnuchin said he’s optimistic that the U.S. can reach a agreement with China that will forestall the need to impose the tariffs that President Donald Trump has ordered on a least $50 billion of goods from that country. “We’re having very productive conversations with them,” Mnuchin said on “Fox News Sunday,” when discussing talks with China. “I’m cautiously hopeful we reach an agreement.”

    U.S. and South Korea Reach Agreement on Trade, Steel TariffsThe U.S. and South Korea reached an agreement on revising the allies’s six-year-old bilateral trade deal and President Donald Trump’s plan to impose tariffs on imported steel, Treasury Secretary Steven Mnuchin said. Mnuchin said U.S. Trade Representative Robert Lighthizer reached “a very productive understanding” with South Korea on the tariffs to reduce imports and the existing trade deal known as Korus.

    PBOC's Yi Pledges More Open Financial SectorPeople’s Bank of China Governor Yi Gang said the nation will further ease access to its financial sector and coordinate the opening with currency reforms. China will open the capital account in an “orderly” way and improve the yuan’s convertibility, the newly-appointed central bank governor said Sunday in Beijing. Yi also said that monetary policy will remain “prudent and neutral,” repeating the central bank’s recent stance, and pledged to continue work on defusing financial risks and enhancing regulatory capabilities. ?

    JPMorgan Sees Market Overcoming Stock Rout, But Beware Trade WarDespite a harrowing week for U.S. stocks, market conditions are looking favorable heading into the second quarter, according to JPMorgan Chase & Co. Conditions for stability will probably come together in the second quarter, and asset allocations should remain oriented toward growth, JPMorgan strategists led by John Normand wrote in a note Friday after the S&P 500 closed down 6 percent for the week. They also suggested, however, that a potential trade war is a threat to economic growth.

    Jamie Dimon Makes His Average Employee's Annual Salary In One Day

    Would WFC ever lie to you?  Wells Fargo(WFC) thinks its time to buy into the sell-off, even with fears over trade wars and rate hikes

    China Is About to Shake Up the Oil Futures Market