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Trade War Friday – Game on Again as Trump Throws Speech Out

Holy cow!  

Things are just getting nuts now.  Trump declares unilateral trade war on China, China retaliates, White House says "just kidding" and then Trump says "not kidding" and TRIPLES the tariffs by adding $100Bn more and then he literally tosses out his prepared speech as it would be "too boring" and then began ranting about immigrants, claiming they illegally voted against him and that women are being raped by them "at levels that nobody has ever seen before – THEY don't want to mention that."

The only thing we can count on these days is chaos and God bless it because we're having THE best time trading it!  In our Live Chat Room yesterday, when the White House was busy walking back Trump's earlier comments on trade, I said to our Members:

Watch out for any of the levels that are now Green (or black) to turn red – that's a good sign to short the indexes.  6,650 on /NQ is a good line and it's lined up with 24,350, 2,660 and 1,540.

That was our only official play of the day but it was good for profits of $3,000 per contract so, no need for more, right?  We knew 6,650 was going to be resistance (between our weak and strong bounces) and, of course, we also knew Trump was going to continue to attack Amazon (AMZN) and that casts a shadow on the whole tech sector because – if the President of the US can harrass one tech company – what's to stop him from going after others and, with that precident set – what's to stop every World Leader from going after their political business enemies like Trump does?

America used to lead by example and God help us all if the rest of the World begins to follow our current example!

As noted by Joe Scarborough on MSNBC: "Lies about [Amazon], causes its stock to go down. I’ve watched enough episodes of Billions to know that if you’ve spread lies about a company or product to cause its stock prices to go down . . . the SEC should be coming after you.  

This is an excellent point, either the SEC at least investigates Trump's attacks on Amazon and that sets up a Constitutional Crisis or the SEC ignores Trump's action and we declare open season on any company the rich and powerful want to put in their cross-hairs.  Probably the latter – good night and good luck…

8:30 Update:  Oops, and now we have a huge miss on Non-Farm Payrolls, only up 103,000 in March so a 50% miss by "leading economorons" who were looking for 200,000 and it's off a cliff from 320,000 in February – so much so that Unemployment actually moved up from 4% to 4.1%.  Nonetheless, wages continue to inflate, up 0.3% for the month as 4.1% is still a very tight labor market.  It's very possible the poor jobs numbers reflect a bit of blowback against the higher wages being demanded by empowered workers.  

Actually, the poor jobs numbers may work in our favor as it keeps the Fed at bay so we can play for the quick bounce off that 6,500 line on /NQ with very tight stops below as well as, of course, our 2,640 line on the S&P (/ES) which, as I noted in our Morning Alert (follow us on Twitter), is still a great indicator.  Once those lines break down, we can use them to short again – I'll update that in chat, of course.  

Meanwhile, now China is threatening to retaliate in kind to Trump's latest trade rant and, don't forget, we're supposedly going to put the negotiator-in-chief in front of both Vladimir Putin and Kim Jong Un – either of which meeting could quickly degenerate into a button-pushing contest and the fact that you don't think that's a completely ridiculous statement is TERRIFYING, isn't it?

Image result for kim jong un trump nuclear

The only person who really knows how big Trump's button is seems to be Stormy Daniels and, so far, she's not telling – thank God!  

Have a great weekend, 

- Phil


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  1. I guess Thursday is meaningless as well!

    Quite amazing that we have a president clearly intent on doing anything to distract from his legal trouble. Clearly a big mistake from him on the Stormy front yesterday so in order to change the conversation, let's impose idiotic tariffs on China!

  2. And big miss on jobs – I assume no tweets today. I assume that there will a lot of pressure on the Fed to slow the rise of interest rates which could be what they need to save this market. This is what happens when you have a mentally unstable person in the Oval Office. Crazy stuff all the time! Complete disregard for the health of the country in general.

  3. Amazon / Phil – These attacks on Amazon are right from the Putin playbook. You attack business leaders who oppose you, drum up fake charges and force them to sell their business to your loyal friends. We are not there just yet, but another example of the attacks on our democracy.

  4. Good Morning.

  5. Morning…  VRX news… Hopefully more analysts will join this soon. 


    Mizuho upgrades Valeant on elimination of "near-term sell catalysts"

    Mizuho analyst Irina Koffler says her improved outlook (NEUTRAL/$15) on Valeant Pharmaceuticals (NYSE:VRX) is due to the elimination of "near-term sell catalysts" and a realistic 2018 forecast, although she adds that 2019 will be "another down year" while management's turnaround plan advances.

    Other positives: Xifaxan sales growth, Lumify launch this month and the May 13 FDA action date for bowel cleansing prep PLENVU.

    Shares are up a fraction premarket.

    Source: Bloomberg

  6. Good morning! 

    Nice bounce off the lows, we'll see where it ends.  

    This thing blew my mind but, sadly, it's where a lot of these right-wing "accepted" theories are based:

    Meanwhile, it's good to be back in the command center!  1,545 is the key line on /RTX as it's the 50 dma and then /YM 24,900 would be the next cross – if we get that far but not happening today.  I'm leaning towards expecting a rejection on the RUT and that's lined up with 24,400, 2,655 and 6,600.

    Distractions/StJ – You said it, anything to keep people from talking about the mess he's in.

    Attacks/StJ – And notice Trump went after Russians today but not Putin or his assets – just Trump doing Putin's bidding, including going after Putin's "allies" that Putin can't touch himself.  Now Putin can choose to either be their hero and get Trump off their back or he can let them twist in the wind while he consolidates his own power. 

    The Trump administration’s responses to Mr. Putin’s needling have been uneven. Although Congress gave the State Department $120 million in 2016 to counter Russian hacking efforts, the department has so far spent none of it. And Mr. Trump said this week that he wants American forces to leave Syria soon, an exit that would benefit Iran, Russia and its ally, Mr. Assad.

    VRX/Learner – Slow mover since we jumped in.

    Robot dictator/Malsg – Can't be worse…

  7. there's a little too much emotion inside of me to watch those dehumanizing "people" that exploit tragedy like a political football for their agenda (whether they really "believe" it or not isn't relevant), but if I had a loved one that died, especially a child, there's little chance I would remain as composed as that pastor.

  8. Image may contain: 1 person, smiling, text

    Ouch, down we go to new day's lows.  

    Pastor/BDC – I would have kicked the guy's ass, no question.  Can't imagine a jury would convict me either.  

  9. Interesting times.  There is a little 'outrage' for everyone these days….just take your pick. :(

  10. yeah and the irony Phil is the guy wants the same protection from the government as everyone else. What a coward.

  11. let's go Mariners … this is our year!

  12. The Tenacity of Trump

  13. Phil, thoughts on the Friday /RB play……..especially after this tumble this morning? 

  14. how bad are these tariffs going to be for WMT? I'm not sure why a brick and mortar company has a PE of 26 even before considering new tariffs raising the price of everything they sell 20%.

  15. Phil,

    Do you think /KC is consolidating for a move higher? I’ve got 2 at 117.25

  16. /RB/Ult – Well, I guess $1.95 is a playable floor (we never quite got there) but almost back to $1.96 already but, if you are feeling brave, you can play over the $1.96 line with tight stops below but, for me, there's no upside catalyst I see other than "it's Friday" and I'm just not feeling bullish enough to play for that reason.

    On the whole, I feel better about playing /CL for a bounce if they get back over $62.50 (with very tight stops below) than I do about /RB but, as I said earlier in the week – I think, fundamentally, they both should be lower.

    WMT/BDC – I agree it's not good for them but, so far, there are no actual tariffs – just talk.  P/E reflects bad year but they are good for $5/share and at $87.33 – that's not even a 20 p/e.  Not one I'd jump to bet against.

    /KC/Japar – I always think /KC is going to move higher!  I think it should be more like $140 – I just don't know when that will happen but my timeframe is 1-2 years, not day-to-day or week-to-week.

    • Stocks start lower but have pared opening bell losses and nowhere near the bloodbath levels indicated by the futures markets overnight; Dow -0.4%, S&P -0.3%, Nasdaq -0.2%.
    • Trade worries are rising again as Pres. Trump requests that U.S. trade officials consider imposing tariffs on an additional $100B worth of imports from China, which reacted by declaring that is ready to respond to any new tariffs and that negotiations could not be conducted under current conditions.
    • Also, the March non-farm payrolls report showed the U.S. adding 103K jobs, missing headline expectations by a wide margin.
    • European markets have turned mixed, with Germany's DAX -0.4%, France's CAC -0.1% and U.K.'s FTSE +0.1%; in Asia, Japan's Nikkei finished -0.4% while China's Shanghai Composite was closed.
    • In the U.S., financials (-0.8%), industrials (-0.7%) and health care (-0.6%) are early laggards.
    • U.S. Treasury prices are higher following the jobs report, with the benchmark 10-year yield up 3 bps to 2.80%.
    • U.S. WTI crude oil -0.1% at $63.50/bbl.
    • Federal Reserve Chairman Jerome Powell will deliver a speech on the economic outlook at the Economic Club of Chicago at 1:30 PM EST (listen live).
    • Powell said a few weeks ago that he only saw "moderate vulnerabilities" in asset prices compared to their long-term normal levels. A continuation of the optimistic stance by Powell on the economy could help to lock in market expectations for two more rate hikes this year.
    • 4:00 PM Fed's Williams: Economic Outlook
    • 10:30 on Saturday Fed's Evans: Monetary Policy
    • An interesting economic read arrives in the afternoon hours today when the Commerce Department reports on consumer credit. Economists expect a jump to $15.1B in February from $13.9B in January when credit card usage was lower than anticipated. Did consumers return to a spending mood again?
    • China responded to the prospect of a hotter trade war by saying it would "firmly fight back" after President Trump Thursday evening instructed the U.S. trade representative to look at tariffs on $100B more in Chinese goods.
    • On a holiday Friday in China, the country's Ministry of Commerce posted a statement saying the confrontation was singlehandedly started by the U.S. and that China would fight to the end "at any cost" if America didn't pay heed to international objections and insisted on unilateral protectionism.
    • The MOC says its stance has been clear that it's not sought a fight, but it will adopt new retaliatory measures in response to any new tariffs.
    • While U.S. equity futures dipped in response to the news (the S&P down 1.2%, Dow down 1.3%), Asian markets are more mixed: the Nikkei up 0.1%; Shanghai down 0.2% and Hang Seng up 0.6%. Gold was up 0.2% with silver down 0.2%.

    • China's Department of Ministry says it won't hesitate with a "major" response to any additional tariffs levied against the nation.
    • It's unclear if anything other than rhetoric will occur before the U.S. Trade Office holds a hearing on its proposed duties on May 15.
    • U.S. stock futures are roughly where they stood before the announcement and the disappointing March U.S. jobs report posted about 20 minutes ago.

    Soft commodities, farm equipment makers slump on tariff threat

    • Stocks tumble to session lows after Pres. Trump escalates the tit-for-tat trade battles between the U.S. and China, with soft commodities and farm equipment makers bearing much of the losses; currently, Dow -1.6%, S&P -1%, Nasdaq -0.9%.
    • Concerns that China could further target U.S. agricultural farm goods in retaliation cause soybean, corn and live cattle futures to slide ~1%.
    • Among stocks related to the agricultural sector, Caterpillar (CAT -3.2%), Deere (DE -2.4%) and DowDuPont (DWDP -2.1%) are sharply lower, while Monsanto (MON +0.2%), Archer Daniels Midland (ADM -0.2%) and Bunge (BG +0.4%) are little changed.
    • Food producers are mixed, as analysts see tariff action depressing soft commodity prices, thus driving down the cost of inputs for such companies: TSN -0.1%HRL +0.6%PPC -0.2%GIS+0.5%SAFM +0.4%.
    • Japan's machinery order is expected to slip 2.5% in February following the robust growth of 8.5% in January,
    • The upbeat corporate earnings may lift demand for machinery goods, however, strong yen and international trade friction could erode businesses confidence in economic growth and undermine their willingness to spend.
    • Core orders, which outstrips ships and electric power utilities is likely to be flat in February from a year earlier.
    • German industrial output fell by 1.6% in February, highest in 2-1/2 years as factories throttled back in the face of the rising threat of protectionism.
    • Production of capital goods slumped 3.1% M/M, Output of consumer goods fell 1.5%, and intermediate goods down 0.7% and construction activity were also weaker overall.
    • The good orders situation and the positive mood among companies suggest the industrial sector will remain on an upward path," the ministry said in a statement.

    • Wheaton Precious Metals (WPM +0.5%) has nearly finished the discovery process in the Canada Revenue Agency case over the plan to reassess foreign earnings, CEO Randy Smallwood says.
    • WPM has not received official signoff from the CRA but the tax agency has asked no further questions and scheduled no additional interviews, the CEO says, adding "I feel incredibly confident about our position."
    • “We do not believe that Canada deserves any tax revenue for gold and silver that’s being mined in Mexico, Peru, Sweden, Brazil,” Smallwood says. "We have to fight this."
    • WPM is "open to settling this and putting it behind us, but we believe the right answer is zero,” the CEO says, "so if we do settle it, it’s going to be for a number very close to zero."
    • Source: Bloomberg First Word
    • SoftBank (SFTBY -0.1%) has borrowed about $8B in a margin loan backed only by its stake in Alibaba (BABA -1%), Bloomberg reports — a move that may ease the separate listing of its domestic telecom on the Tokyo exchange.
    • The loan won't be reflected in SoftBank group debt, whereas the telecom unit had been used as collateral for previous debt.
    • And it's getting participation from top Street banks, including BofA, BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Nomura, SocGen and UBS, Bloomberg says.
    • If SoftBank's mobile unit can get more independent by canceling debt guarantees, and then make it through what may be a ¥2T IPO, it would help to relieve SoftBank debt that has risen to ¥15.8T (about $147B).
    • If utter lack of interest is a condition for a bottom, perhaps the crypto bulls have something to be excited about here.
    • That Bitcoin (Cryptocurrency:BTC-USD) is down another 3.3% to $6.6K – close to the year's low and off about 70% from the all-time high – isn't huge news, but it certainly would have made for loud headlines a couple of months back. This morning, there's hardly a peep.
    • Ripple (Cryptocurrency:XRP-USD) is lower by 5% to $0.46. Was it only January when that crypto was trading above $2 and at least one major financial news outlet was giving tutorials on how one might go about purchasing?
    • Ether (Cryptocurrency:ETH-USD) is off 3.9% to $366, and Litecoin (Cryptocurrency:LTC-USD) is down 4.4% to $113.

  17. Boss, any recommended ETF to use vs energy direct /CL, /RB  futures?

  18. Thatway – You might take a look at XLE.  I've been trading ERX, which is a 3X ETF.

  19. I see, using the leveraged ETF is somewhat equivalent to futures.  Thanks.

  20. ETFs/That – Well there's USO for oil and UGA for Gasoline but USO is the more reliable one to play but there's a huge difference because the futures plays cost effectively no money to get in and out of ($1-3 per contract vs $100s gained or lost) while USO has not only the trading costs but the friction costs of the bid/ask spreads so you can easily be down 10-15% as soon as you enter a position and we're generally playing for 0.50 (1%) moves in oil.

    When oil is drastically low I'll play USO longs and when it's drastically high I might play SCO (ultra-short) but I haven't been so inclined for ages.  

    $50 is still the right price for oil but the Saudis have been pushing hard to keep Brent (/BZ) over $65, which is about $60 on WTIC (/CL) and that's not going to go away though, if they give up on doing the Aramco IPO this year and the June OPEC meeting fails to get them back over $70, then I'd short /BZ back to $60 or $55 on /CL but, until we see what's up there – it's too tricky to call.

    Meanwhile, Dow bucking like a bronco:

    I'd bet we're going to break lower but it's Friday and this market is so unpredictable.  Just glad we're well-hedged!  

  21. Phil / CBI – trouble with MDR shareholder…. taking a big hit today….  you still positive on them…. what is your stand alone price on them?

  22. I'm in next friday's UVXY 20 calls. Weekend tariff/trump twitter meltdown will be helpful.

  23. CBI/Batman – I liked them fine without the merger so we'll just see how this shakes out.  

    McDermott’s special meeting of stockholders is scheduled to be held on May 2, 2018. McDermott encourages its stockholders of record at the close of business on April 4, 2018 to vote “FOR” each of the proposals relating to the combination. Stockholders who have any questions or need assistance voting their shares should contact McDermott’s proxy solicitor, MacKenzie Partners, Inc., toll free at (800) 322-2885.

    CBI is 200% of the OOPs total losses:

    Long Call 2020 17-JAN 15.00 CALL [CBI @ $12.44 $-1.22] 10 1/8/2018 (651) $5,000 $5.00 $-2.55 n/a     $2.45 $-0.15 $-2,550 -51.0% $2,450
    Short Call 2020 17-JAN 25.00 CALL [CBI @ $12.44 $-1.22] -10 1/8/2018 (651) $-1,750 $1.75 $-1.23     $0.53 $-0.08 $1,225 70.0% $-525
    Short Put 2020 17-JAN 15.00 PUT [CBI @ $12.44 $-1.22] -10 1/8/2018 (651) $-2,680 $2.68 $2.32     $5.00 - $-2,320 -86.6% $-5,000

    So we're in for net $12.50 and of course we'll roll the long calls lower and likely buy back the short calls – but earnings not till around 5/10, so no hurry.  

    Powell is speaking – not helping markets so far.   Says labor market is not too tight, expects inflation to pick up.  He's really just going over the Fed minutes, sounds a bit more doveish than 4 hikes though but I guess market wants him to say no more hikes and that's not happening.

  24. Phil, So I guess we see 200 DMA on /RTY again? Is this DJT guy in the Peoples house chasing all the weak hands out of the market, so the .001%er can scoop up all the dividends and repatriations from overseas from the new tax laws?

  25. Phil Might be time to close the SQQQ 16/20 May vertical and take the profit???

  26. I sold the XLF April 27.50 calls for .78. Very tempted to buy them back for .35.  This is part of yesterday’s XLF trade.

  27. Wow, Powell is no Yellin – down 600 as he finishes (2.5%).

    Games within games/Jasu – You would hope that's all it is but I think we could be heading down a pretty deep rabbit hole here.  Anyway, was just talking to Rustle (our resident Hedge Fund Trader) and we are playing for a drop to 2,400 on /ES but we'll be adding positions there.

    SQQQ/Yodi – We already cashed the $16s but, for those who didn't do it, in the STP we have/had the May $16/20 bull call spread and the $16 calls are now $3.60 so, if you didn't cash them at $4.50, at least they are back to $3.60 and that's almost all of what you hoped to get for the spread.  

    XLF/Knight – Yes, I still think XLF will do well on next week's earnings but might be overwhelmed by this sell-off if they can't walk back the Trade War talk over the weekend.

  28. 2,596 is -2.5% on the S&P – it better be bouncy!  66 point drop means 13-point bounces so call it 2,610 for a weak bounce – if we even get that.  

    On the whole though, Trump's extra $100Bn and China's response puts us WORSE OFF than we were Monday, when we hit 2,560 – so no real reason we shouldn't test that again.

    So that's 30 points to gain ($1,500) on /ES short below 2,600 with a tight stop over 2,596.

  29. Trump faceoff with China exposes GOP weakness in rural US

  30. So basically this entire week didn't matter at all… Back to were we started or even below! Fresh start Monday? Although there is the possibility that we start a war with Korea, impose more tariffs on China or send troops in Mexico to stop the caravan! Or that we have more people indicted in the Russia probe. Insane!

  31. China is not building a wall (they tried already and that didn't work) but they are building trade routes.

    I would say smarter, but Trump sets the mental and intellectual bar really low.

  32. Retailers Worry Food-Stamp Overhaul Will Hit Them Hard

  33. Powell says Fed expects to stick with gradual rate hikes

  34. Week/StJ – Well it wasn't likely to be too meaningful with holiday weeks in Asia and Europe and half the US on spring break too.  And it's Passover, that doesn't usually line up right with Easter.  

    It sure was/is a crappy finish but US and China could agree to meet and talk trade and all will be well again – until the next time Trump opens his mouth.

    Volume picked up again today, could close higher than Monday's levels if we get a vol pop into the close:

    Date Open High Low Close* Adj Close** Volume
    Apr 06, 2018 263.4200 265.1100 258.0000 259.7102 259.7102 124,113,548
    Apr 05, 2018 265.5500 266.6400 264.3200 265.6400 265.6400 79,313,500
    Apr 04, 2018 256.7500 264.3600 256.6000 263.5600 263.5600 123,715,300
    Apr 03, 2018 258.8700 261.3100 256.8400 260.7700 260.7700 119,956,900
    Apr 02, 2018 262.5500 263.1300 254.6700 257.4700 257.4700 186,286,300
    Mar 29, 2018 261.1200 265.2600 259.8400 263.1500 263.1500 111,601,600

  35. I am surprised FB holds up so well. 

  36. Whistler/Phil, on a lighter note, (given todays mkt. selloff) how's your schedule/itinerary shaping up for Whistler next week? I just returned yesterday from a pretty awesome 3 days of skiing up there! How long you up there for? 

  37. Whistler/Airvine – I'm leaving tomorrow for Vancouver and should be in Whistler Sun – Friday.  

    Markets making a little bounce into the close but stopping right at 2,610 – as expected. 

    Have a great weekend folks, next week from Whistler! 

    - Phil

  38. Well, i'm safely landed at Whistler so now the trick is to get up at 3am in time for work!

    Futures up a bit more than half a point but don't mean a thing until we see what Europe does.

  39. Good morning to all. Here my early whistling!

    GEO, looked up the stock for two different trades. We do need more prisons. They always run out of space.

    My armchair trade: buy stock at or better 21.51 and sell the Sept. 20/22.5 P/C for 3.55 or better. Combined monthly return 3.53%.

    With a div. payer of 8.73% another comfortable side play is sell the Jun 18 20/17.5 put vertical for .55 cents, break even 19.45 and a PM margin of 91$ per contract.

    But as Phil said in his sleep, we like to see what Europe does. I think we will have a bounce after Friday's drop. So the put play is or even was good on Friday, but always on a down market, and the armchair trade is always better on a recouping market. As always do your own research and do not buy any wooden nickels.

  40. WSM not as low as I would like it but not to be greedy for an armchair trade with a combined return of 2.43% per month, while smoking a cigar. Buy the stock at 50.30 and sell the Nov 47.5/52.5 P/C for 8.20.

    I specially left 2$ space up and down for a positive thinking growth. Obviously you could squeeze another 1.15 out of the strangle by selling the 47.5/50 P/C. But then you do not leave much space for the stock to grow.

  41. One trade I am looking at is GIS, who has been beat up for issuing more shares and buying a new product line, which they have done successfully before. Trade idea is buying the '20 42.5/52.5 BCS, and selling the 42.4 puts for a credit of .53. Worst case is a 6% discount on this dividend payer which has increased its dividend for the last 14 years in a row.

  42. Good morning!

    Good trade ideas and I always love WSM when they are giving it away. I love businesses that cater to the top 10%.

    Unfortunately, Trump strikes again, just tweeted and how can he not be purposely tanking the market?

    When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade.  No, it sounds like STUPID TRADE –  going on for years!

  43. Trash-Talking Toward Conflict?

  44. Meet the 7 Russian Oligarchs Hit by the New U.S. Sanctions