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Weakening Wednesday – Global Markets Retreat as Tensions Ratchet Higher

I told you I like CASH!!!

In fact, I told you on Friday morning in our Report titled:  "TGIF – Silly, Low-Volume, Pumped-Up Week Finally Ends", saying:

"Volume has been anemic this week too with, 55M SPY shares trading on Monday, 67M shares on Tuesday, 59M shares on Weds and 68M shares yesterday vs an average volume of 101M shares so about 35% below "normal" volume, which is already close to half of last year's volume.  Why is volume drying up like this?  Because stocks are more expensive so the same money buys less and less stock and, because the economy isn't really growing – there is no more money to pay for the stocks – just a lot of idiots SPECULATING that there will be money to pay these ridiculous prices one day, so it's not important to actually earn any money because the greater fool theory will fix everything. 

"The greatest fools, of course, are the last people to buy at the top – we call them bag-holders and I have been saying all week that this test of our Strong Bounce Lines is a good time to dump your stocks on the bagholders that are coming in and get back to CASH!!!.  Again, I can only tell you what is likely to happen and how to make money trading it – the rest is up to you!"  

So far this week, the markets are down and the Dollar is up 1.5% and still cimbing this morning at 93.50, that's putting pressure on the indexes and commodities which makes people panic out of those and they then demand more CASH!!!, which drives up the price of Dollars (as they get scarce) and the cycle continues.  People are also trying to trade in their dying TBills for cash – so even more demand for cash.  Thank goodness housing is still dead or the Dollar would be back over 100!  

Image result for cash animated gifWe're thrilled to have a nice little pullback and we even bought a couple of stocks yesterday but, on the whole, we're even more thrilled to be mainly in CASH!!! during this period of market uncertainty.  You can read my rant about cashing out from last Wednesday and, if you didn't, it's OK as we're back where we started on that day and today we're looking to re-test the weak bounce line on the S&P at 2,684. 

Yesterday, however, we focused on the Nasdaq shorts at the 7,000 line and today the /NQ Futures are down at 6,889 so we set a stop over 6,900 to lock in a $2,000 per contract gain but, hopefully, we will collect the full $10,000 per contract we were hoping for as the Nasdaq falls to our 6,500 target.

None of this is TA, by the way, we're simply using our 5% Rule™, which uses good, old-fashioned MATH to let us know what ranges we should be playing in (see yesterday's Report for a run-down of the Big 5 Indexes).  When we know our ranges, we know when to hold them and we know when to fold them – and THAT is the secret to successful investing.  This morning, in our Live Member Chat Room, we decided to short the Russell (/RTX) Futures at 1,602.50, as that is the lagging index to the downside this morning.   

Volume on the S&P was over 50% higher than it was on Monday but I'm expecting a higher-volume move down before we begin to seriously look for a bounce since the entire "rally" last week was nothing but low-volume BS, mostly reeling the suckers in to hold the bags while headline stocks like Apple (AAPL) propped up the market.  You can see it in the very lame volume on SPY:

Date Open High Low Close* Adj Close** Volume
May 15, 2018 271.59 271.61 270.03 271.10 271.10 85,383,100
May 14, 2018 273.34 274.08 272.36 272.98 272.98 54,790,600
May 11, 2018 272.16 273.15 271.58 272.85 272.85 59,871,500
May 10, 2018 270.34 272.39 270.22 272.02 272.02 72,063,900
May 09, 2018 267.68 269.87 267.09 269.50 269.50 59,666,100
May 08, 2018 266.50 267.33 265.15 266.92 266.92 67,499,200
May 07, 2018 266.89 268.02 266.11 266.92 266.92 55,304,900

Here's just a few of the things that are going wrong in the World this morning:

Seriously, that's just this morning!  You may think I'm cherry-picking bad news but go look for yourself – I'll wait…  See, not good, right?  You can buy the F'ing dip if you want and, as we noted, we are still doing some bargain-shopping but nothing we aren't planning to double down on if they get 20% cheaper – which is what we expect if we have a proper market correction.  

For now, we're just waiting to see if the 1,600 line holds on the Russell which, so far, is being kept aloft by the strong Dollar (Russell Small Caps tend to do 80% of their business in the US, so a strong Dollar is good for them) as well as 2,700 on the S&P (/ES), 6,900 on the Nasdaq (/NQ) and 25,650 on the Dow (/YM).  If 3 of those 4 go over or under those lines you can go long or short the lagging index with tight stops.  

Macy's (M) knocked it out of the park on earnings and are up 10% pre-market and that might give the retail sector a nice lift that keeps us green in the morning.  Otherwise, there's not much data today so we'll wait and see which way things go.  We have a Live Trading Webinar this afternoon at 1pm, EST and we'll begin reviewing our 5 Member Portfolios as we head into option expiration day on Friday.

Be careful out there! 

 


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  1. As predicted, Kim is not ready to give up his nukes! Trump and Pompeo might have been played. Now Kim is happy, Trump was the first US president to call him excellent on live TV. He has soundbites he can use for his captive (literally) audience. And our administration looks incompetent – again….


  2. Interesting take on MoviePass and HMNY:

    https://www.reuters.com/article/us-usa-moviepass-stock-analysis/moviepass-the-unicorn-that-jumped-into-wall-street-too-soon-idUSKCN1IG21Y

    In fact, they say, MoviePass is not far removed from the success of other disruptive technology companies such as Uber Technologies Inc and Airbnb Inc that have been valued at more than $1 billion – the so-called unicorns, start-up companies valued at more than $1 billion

    “The transparency is killing them. You don’t hear about how much money Uber loses every time you get in one of their cars, you hear about how fast it’s growing. What we’re looking at now is one of the best examples of why you don’t go public” in the early stages of a technology company’s growth, said Kevin Landis, a longtime tech portfolio manager at FirstHand Funds.


  3. Never mind NK.  The Dems should run that "Kim is Excellent" soundbite non stop until November on loop.


  4. Good Morning, All!

    Join us for today's webinar, at 1pm here:

    https://attendee.gotowebinar.com/register/903228302274608641


  5. SI/Phil- I manage to grab a long at 16.2


  6. LOL malsg!


  7. Good Morning.


  8. ~~  M – Macy's leading retailers higher premarket after beating Q1 estimates and raising FY19 guidance.

    ARRGH !  

    I got out of M way too early.  


  9. Good morning!

    Indexes ticked up at the open as the Dollar dropped 0.25 so we'll see how that goes. 

    /SI back over $16.30 for another $500 win.

    Big Chart not showing any particular danger unless we fail those 50 dmas

    Kim/StJ – Just negotiating, I think.  Trump is all about bluffing and Kim is doing the same but also playing Trump like a fiddle.  

    HMNY/StJ – Yes, their problem is being public, which makes them look scary compared to Uber, who lose $200M a month and no one bats an eye.  TSLA too, for that matter.  Musk is amazing though, they shut down production for a week but spun it as a good thing because it will be "so much faster" when they turn it back on.  

    Tesla to Halt Production Line to Address Model 3 Bottlenecks

    /SI/Dave – Very nice.  When the Dollar is the main reason a commodity goes down – it's an excellent time to buy.   

    M/Albo – It's a shame, we got out of ours in Dec and never went back in.  I guess because we have LB and HBI and we didn't want to overload since those were not doing as well as we wanted though both are now improving (and we have lots).   

    Speaking of positions, I'm going to try to get the OOP finished before the Webinar, LTP mostly done but the write-up is a bitch.


  10. Phil

    M how high you think they go ?

    Would now be a good time to start a trade ?

    Thanks


  11. May 15th, 2018 at 3:01 pm | (Unlocked) | Permalink

    M/QC – There were super-cheap (below $20) when we bought them last year so $30 is not that exciting to me – though still probably worth it.  $9.1Bn and over $1Bn in profits is a good place to put money but, ahead of earnings – I hope they miss and go on sale – that's all.

    No real change from yesterday.  I like M but I'm not willing to chase them as good news is priced in now so I'll wait PATIENTLY for a pullback and, if not, I'll move on to other stocks that are cheap.  If you can't live without M you can sell the 2020 $27 puts for $4.50 and that nets you in for $22.50 and, if you aren't comfortable with that – why even look at this stock?  In fact, let's sell 10 of those in the LTP to collect $4,500 and remind us to keep an eye on them.  


  12. Phil// Question on HMNY – From the cash reserves it looks like they can run the business for couple of months unless they further dilute the number of shares or go for a line of credit.  Knowing all of this information how comfortable are you with HMNY?  Will you DD if needed or what is the long term plan on this stock?  Thanks.


  13. Thanks Phil

    I like the: If you can't live without M you can sell the 2020 $27 puts for $4.50


  14. HMNY/Rookie – They either go BK or get saved but the save may dilute us.  Let's say, for example, our longs so far are down $10,000 and they drop to 0.30 and we're down $15,000.  The logical thing, at that point (if we want to stick with it), is to buy $15,000 worth at 0.30 (50,000) shares and simply hope they double and, of course, as soon as we can sell $1 calls for 0.30 or better – we do that to lower our exposure. 

    If the stock drops to 0.15, then we can DD for $7,500 and, at 0.6, we can DD again at 0.75 for $3,750 so we'd be in for net $26,250 on 200,000 shares (0.13/share) and, if you don't ABSOLUTELY want to take a chance owning 200,000 shares at net 0.13 with the stock at 0.75 (down $11,250)  then cut your losses now (down $10K) and trade something else!  

    As I pointed out last week, we did this with SIRI over a period of 2 YEARS and it finally popped up to $1, where we mostly cashed out with a huge profit.  Sometimes they win and sometimes they lose but I think HMNY has that kind of vibe, so I'm willing to make it my high-risk play for the year.  

    BTW – we don't have HMNY in the Hedge Fund – it doesn't take silly risks like that!  


  15. Options Opportunity Portfolio Review (OOP): $114,883 is up just under 15% in month 5 so well over our target to make 20% this year and, of course, we're beating a flattish market by a mile.  As of our last review, we were at $110,590 so up $4,293 from our 4/19 review is 4.3% for the month and that's great considering we pressed our hedges and doubled down on HMNY, which is still a disaster. 

    Of course we had some good news too as CHK, HBI, IMAX, LB & SPWR all turned around for us but that's the whole point to having a well-diversified portfolio – it's not likely all your positions perform poorly at the same time (or well, for that matter).  While it may seem like a neutral strategy, we do tilt a bit in one direction or the other but the bulk of our money is made in the middle – as all that premium we sold begins to expire but we get to keep the cash!  

    As I have said for the past week – if it wasn't my job to run these portfolios, I would have sold in May and taken the summer off as 15% is PLENTY to gain on the year so whatever I make between Sept and Dec, when I come back, would simply be bonus money.   Bird in the hand and all that…

    Quick summaries today.  We went into heavy detail last month and don't need to do that each month.

    • AAPL – These short puts were to raise cash to offset our SQQQ hedges – not at all worried about these.  
    • CBI – They have merged with MDR so these options are now maybe 8.2 of the MDR $15 puts – it's kind of hard to say but they'll just expire worthless in the end unless things go wrong so it doesn't matter much.  
    • CHL – We never got a good price to sell short puts so it's just the spread but near target that turns $4,750 into $7,500 for a $2,750 gain (58%) by Sept.  This trade required no margin and is good for 58%  in 6 months – it even works in IRAs!

    • FTR – Right on target.  
    • ABX – Still good for a new trade.  
    • ALK – Still good for a new trade. 
    • BBBY – Still good for a new trade.  Earnings are late (June 27th).

    • CDE – Pulled back a bit but I still like them.  
    • CG – Made nice gains, back on track.  
    • CHK – Finally turned back up and back on track.  

    • F – Already over our target. 
    • FNSR – Still good for a new trade.  At $17, this spread is $8,000 in the money but only net $2,000 at the moment and potential at $20 is $14,000 for a $12,000 (600%) gain from here.  It's fun when you do use the margin too!  

    • GE – Finally getting some upgrades after my hands were sore from banging the table!  Still good for a new trade and this was my top pick at the Feb Money Show at $15 and now again at $15.  
    • GNC - Another hated stock I like.  It's a long turnaround story.  We're only shooting for $5, which would pay us $5,000. 
    • HBI – At $18 we get back $3,000 from our net $600 investment and it's already net $2,000 but, at $23, it will pay $8,000 so I still like them – even as a very late, new trade.  
    • HMNY – So here's what I wrote about them in PSW Member Chat this morning:

    HMNY/Rookie – They either go BK or get saved but the save may dilute us.  Let's say, for example, our longs so far are down $10,000 and they drop to 0.30 and we're down $15,000.  The logical thing, at that point (if we want to stick with it), is to buy $15,000 worth at 0.30 (50,000) shares and simply hope they double and, of course, as soon as we can sell $1 calls for 0.30 or better – we do that to lower our exposure. 

    If the stock drops to 0.15, then we can DD for $7,500 and, at 0.6, we can DD again at 0.75 for $3,750 so we'd be in for net $26,250 on 200,000 shares (0.13/share) and, if you don't ABSOLUTELY want to take a chance owning 200,000 shares at net 0.13 with the stock at 0.75 (down $11,250)  then cut your losses now (down $10K) and trade something else!  

    As I pointed out last week, we did this with SIRI over a period of 2 YEARS and it finally popped up to $1, where we mostly cashed out with a huge profit.  Sometimes they win and sometimes they lose but I think HMNY has that kind of vibe, so I'm willing to make it my high-risk play for the year.  

    BTW – we don't have HMNY in the Hedge Fund – it doesn't take silly risks like that!  

    We're down right about $10,000 (previous losses) on this one and we control $5,000 shares at $1 so we need $3 to break even by 2020 but, as noted above, we'll flip to the stock if they make another leg lower.  They had earnings today and are up 8% so that's a little encouraging but they still have to demonstrate that they have the capital to execute their plan – and that may take a while (as it did with SIRI).

    • HRB – On track.
    • IMAX – Nice recovery, I never had any doubts.  

    • LB – Our 2018 Trade of the Year is still languishing but earnings are 5/23, so we'll see.   Actually, let's get aggressive and buy back the short 2020 $45 calls for $2.50 and spend $2.50 to roll the $35 calls ($5) to the $30 calls ($7.50) and then we'll see how earnings go before adjusting further.
    • NAK – Our net entry is an 0.15 credit ($1,500) and, at $2, we get called away for $10,000 for a $11,500 gain if all goes well.  Our break-even is about $1.50 and currently we're showing a $7,760 loss so this position could, possibly, turn around for $19,000 if NAK hits our goal and, if not, we roll the short puts and try again.
    • NLY – Paid us an 0.30 ($300) dividend on 3/28 and we'd like to see them back over $11, maybe $12 before selling short calls again.

    • SPWR – Back on track.
    • SQQQ – Our primary hedge is right on the money to cover us all year.
    • THC – Miles over target 
    • TZA – Our secondary hedge but also a long time-frame and also at the money.
    • VRX – Boy did we time that entry perfectly!  

    • WPM – Our 2017 Trade of the Year already exited in Dec but we're back in again and looking good again.  I love these guys!  

    That is just amazing – only 1 thing to adjust!  I guess we're very well-balanced and still have some cash to deploy but, on the whole, as we discussed in the previous review, the positions we have now have $140,000 of upside potential and that's up 122% from where we are now so we should expect to make about 6% a month if all goes perfectly (but it never does!).  


  16. Hi Phil.  Have 5 Jan CMG 380/440  BCS:

    +5, basis 93.20, now 81.40

    -5   basis 63.60, now  45.55.

    Moving in the right direction.  What now?  Advice pls.





  17. Macy’s profit surpasses expectations, shares soar


  18. phil, do you think /TF is going to pop at 1619?


  19. Remember when Obama was being blamed for lowering our image in the world:

    I guess we now have no friends left in Europe! This will have consequences eventually.


  20. 2,728 is good to play for the rejection with tight stops over.  1,620 on /RTX is worth another poke too.  Lined up with 2,750 and 6,950 so lots of good lines to watch with /DX @ 93.21.

    /RTX/Lunar – I think it's a good shorting line but out if it does get over. 

    CMG/Taihu – So the spread is net $36 out of possible $60 and you paid $30 so it's simply on track with CMG @ $438.  What is it you want to do with it?

    Webinar time!  


  21. Forgot all about oil today:

     

    • EIA Petroleum Inventories: Crude -1.4M barrels vs. -0.8M consensus, -2.2M last week.
    • Gasoline -3.8M barrels vs. -1.4M consensus, -2.2M last week.
    • Distillates -0.1M barrels vs. -2.2M consensus, -3.8M last week.
    • Futures -0.31% to $71.09.

    As we know, it's exports causing the draw but that doesn't seem to matter and it's a good excuse to pump up prices into the holiday weekend so we'll have to wait for a better opportunity.


  22. No trades in the Webinar – mostly strategy discussions.  

    I see /RTY popped 1,620 so no shorting the indexes and /RB testing $2.25, which is tempting but /BZ just below $80 means I'd rather wait to see that hit and play there (probably $72 on /CL). 

    As I said in the Webinar, the SCO June $15/17 bull call spread for $1 is appealing to me as an oil short – but not enough so that I'm putting it in the STP or OOP yet. 

    Very nice recovery on /SI!  

    Half off there of course ($1,000/contract) and tight stops below $16.40.

    /YG is still low at $1,289 so good, fresh horse over 1,290 with tight stops below.


  23. Phil:  I know that you responded to a question similar to this in the webinar, but I missed your answer.  I was inattentive & neglected to roll my TZA spread in time.  I have the July 12/17 spread with a net of 1.29.  I can roll to the October 10s for about .82.  I can roll the 17s to the October 15s for .21 or .22.  Is there a better way to salvage the remaining value here?  Should I wait to do the rolls until a big down day when the July 12s will come back to life a bit (delta on the 12s is .21, on the 17s it is .08)?  I could sell the 15s and just let the 17s expire, but I am not sure it is worth the risk, especially given the fact that the market is so high.  Do you have any other suggestions?


  24. White House pretends it never expected its much-touted North Korea summit to happen

    TZA/John – Sorry but, as I did say in the Webinar, there are no magic beans.  The idea is to roll BEFORE the price of the long call drops below the net of the spread to avoid being screwed – which you are.  The July $12s are now 0.22 and the Oct $10s are $1.02 so yes, 0.80 to roll but then you are still the idiot paying premium for out of the money calls, right? 

    Let's consider that the July $17s are SUPER-unlikely to go in the money so you may as well man up and roll to the Oct $8s at $2 and sell the $12s for 0.60 and that's net $1.40 less 0.22 so $1.18 out of pocket plus $1.29 spent on the July spread is $2.47 on the $4 spread – better than nothing and your $1.84 in the money that way.  You will need to also keep a stop on the short July $17s so let's say 0.30 and 0.40 on 1/2 each so you may increase your July cost by 0.35 so consider that ($2.82) when doubling down at $1.40 drops your average to $2.11 and at least you end up with near 100% upside protection at $12 but DON'T FORGET TO ROLL if the Oct $8s go to $1.50 – then you have to go to Jan and the $7s are $3 so another $1.20ish for that roll so $1.20ish is the quarterly cost of the insurance – just make sure you make it back in a flat or up market.

    Speaking of flat – indexes falling back down into the close.  Anemic volume so far (33M on SPY).


  25. CHK – Covered 1/2 with the Jan 4.5 calls for .53 just to cash flow the position.

    Still short a bunch of $2.50 & $3 puts.


  26. Phil/RGS

    What is your take on Regis. PE is 6.15 and EPS 2.65.

    Regards


  27. 2nd time was a charm shorting /RTY!  

    CHK/Albo – Good job, it's a nice run.  

    RGS/Pat – I'll have to take a look at them later, have to run at the moment. 

    Not a pretty close so we're back to probably consolidating for a bigger move down.  


  28. Phil – Nice entry in OPK  !


  29. baby stick?


  30. Phil / SQQQ Hedge Adjustment – I have the 10 x Sept 16/23 BCS @ 1.60 with an AAPL 2020 140 Put @ 13.50.  My 16 Call is at 1.60 now.  Do you have a suggestion for an adjustment?  This is in an IRA.


  31. NK

    Ai-yi-yi – Okay, guys, here's the deal.

    1. Kim said he would stop development of nukes and missiles, not that he'd get rid of them yet. Complete de-nuking is the position of that jackass and Korea hater, Bolton, and Kim never agreed to that, nor did Pres. Moon.

    2. Kim said, and it's in the Panmunjon declaration, that a nuke-free peninsula is the goal. This is aimed squarely at the US, who have a history of plunking nukes in S. Korea in violation of treaty agreements, and of having nukes on their boats within easy range of the north.

    3. A condition for the talks with US was that the US military would halt their annual dick-waving exercise – excuse me, "joint military exercise" off the NK coast, as Kim perceives it as a threat (imagine that!). Kim blew up two days ago because the US military started up the exercise. I haven't looked much, but the US media doesn't seem to have noticed that. Just that Kim is randomly getting angry and being irrational and unreliable. ARRRGGHH!


  32. Korea / Snow – Well, reputable news agencies (read – not Fox News) have been mentioning the annual exercise. I honestly don't see that as a major sticking point, N. Korea is not shy on showing its military capabilities. The main issue is that Kim would never give up his nukes because it's the only security blanket he has at the moment! Most smart analysts understood that but apparently the idiots that run our government now though differently. Or maybe didn't think at all which is more likely, they were too busy looking at the spot where they would display the Nobel Peace Prize medal!

    So not a surprise for the more informed people! The problem with Kim is not that he is irrational or unreliable, it's the fact that he is reliably cruel to his own people, rationally thinking that if they ever found out the truth about his regime, he would not last a day in power! No one would miss that guy if he disappeared tomorrow!


  33. NK/StJ – the point being that NK doesn't parade its military where a slight change in plans could lead to US regime change. The US military exercises are deliberately set up that way. As for how Kim and his predecessors ran the country, a lot of what we have is propaganda. The girl band that was supposedly executed a couple of years ago, for example, is alive and healthy and the lead singer came to the Olympics. The country's probably a mess, probably ruthless to its own citizens, but anyone claiming to know what's going on inside the country is lying – and NK has only once attacked another country, although in their eyes they were reclaiming their own territory.


  34. Snow / stjeanluc 

    When there are annual exercise North Korea has to prepare in case it’s a real attack.

    There is no trust.  My 2 cent


  35. "and NK has only once attacked another country" – the only remaining country that borders them that is not russia or china.


  36. Phil/CLF

    Have the following, can you suggest adjustment. 

    Jan 19 40 long 5 call @4.82 now 3.93

    Jan 19 40 short 10 call @1.77 now .89

    Jan 19 20 short 7 put @2.03 now 0.52

    Thx


  37. Today I am looking at AGNC, a well-known REIT stock, has come down from 22.34 to todays 18.88.

    The stock pays a monthly div. of 18 cents.  Sell the Sep 18 18/19 strangle for .72 and buy the stock.

    Combined monthly return of 1.85%, just under my normal minimum 2% per month, but still could be a more relaxed armchair trade.

    Relaxed, because you hold the stock, and even if the price of the stock goes up or down, as long as you do not sell the stock, you set for the next opt. play after Sept. If the stock goes below 18$ and the put option holds no more extrinsic value, you receive more stock for a discount price, if the stock goes over 19$ you lose the stock and land up with cash, 12 cents more than you paid for the stock.




  38. This officer stopped a school shooter before anyone got hurt



  39. HKMA intervenes as Hong Kong dollar weakens, buys HK$9.5 billion in U.S. trade


  40. White House Eliminates Cybersecurity Coordinator Role





  41. Phil Question looking at GOOGL too expensive to buy the stock, what about buying a Jan20 1070/1120 BCS for 24.90 and selling a Jun18 strangle 1130/1035 for 15. Great re. margin and if you could do this twice you sure have the cost of your BCS back, as well as you can sell strangles for more month to come.


  42. Oops, I accidentally answered above questions in the new post!