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Tarrific Tuesday – Trump Tweets Tariff Talk (again)

First of all – you're welcome!  

Our trade idea in yesterday morning's PSW Report was:

"We'll probably test good old 2,728 on the S&P (/ES) and here's a chance to prove a bullish consolidation if it holds.  The Nasdaq (/NQ) is down to 7,159 and still almost 10% above our 6,500 target but the Dow (/YM) is falling fast at 24,400 – just another 1,000 points to hit a proper retrace there and, of course, the Russell (/TF) thinks Trade Wars don't matter but, if the VIX is over 15 – I'd short the crap out of /TF – now 1,683 with tight stops over 1,700.  "

Aside from gaining $1,400 for each short contract on the Russell Futures, our Nasdaq shorts from last week's Live Trading Webinar at 7,350 made $7,000 per contract at the 7,000 line and now we're watching to see what kind of bounces we get but, just this morning, the S&P failed EXACTLY at our predicted and long-standing 2,728 line, which is where we consider the proper TOP of the S&P's range for the summer:

Notice how technically neat the S&P is behaving, bouncing right off the 50-day moving average at 2,716 and that's exactly down 2.5% from the high at 2,785 so we're right on the money with our 5% Rule™ and that means we'll watch for 14-point bounces to 2,730 (weak) and 2,744 (strong) though anything over our 2,728 line is a pretty bullish recovery for the moment.

Other bounce lines will be:

  • Dow 25,400 to 24,200 is 1,200 points (4.7%) and we'll call the bounces 250 points to 24,450 (weak) and 24,700 (strong)

  • Nasdaq 7,350 to 7,000 is 4.7% but really 350 was a 5% overshoot of 7,000 (and we're on the way to 6,500) but the Nas will bounce 75 points to 7,075 (weak) and 7,150 (strong) before taking another leg down. 

  • Russell 1,720 to 1,660 was only a 3.5% drop so look for the least bounce here but 1,657.50 is the 2.5% line from 1,700 and the rest was on overshoot so let's call that the real range (42.5 poins) and round off to 9-point bounces to 1,666 (weak) and 1,685 (strong).  /TF failing at 1,666 would be a good sign to short the rest.

  • The VIX is at 16 and below 15 means shorting time is over and the Dollar, more importantly, has already fallend from 95 to 94 so 0.2 bounces to 94.20 (weak) and 94.40 (strong) but 94.20 has failed this morning and that helps the indexes stay bullish for the moment.

Now, on to Trump though yesterday's mentions of the Presdient's shenanigans were censored out of my post at Seeking Alpha in a fine example of how Fascism creeps into your life without you even noticing.  All it takes is complicity from publishers who fear losing readers or angering politicians and suddenly you're in an environment where people are afraid to speak out – especially authors who need paychecks!  Why are my posts "so polical" compared to most financial writers?  Because I have a subscription model and I don't fear losing advertisers and we have a waiting list for Premium Memberships – so that doesn't worry me either.  

The President moves the market – this week he is the MAIN FACTOR moving the market so ignoring it would be ridiculous.  Yes, I could report on his nonsense in a non-judgemental fashion and, if you'd like to be lied to by authors who value your eyeballs and fear your opinion – there are thousands and thousands of Financial Writer who are more than happy to make you think they agree with your politics.  

My premise for shorting the Nasdaq (over and over again) from 7,200 to 7,350 was BECAUSE Trump's policies were insane and likely to cause a correction (as well as my premise that Tesla (TSLA) would implode).  If we censor Trump from the equation – what's my premise?  If I lie to you and make up another premise because I'm scared you won't be happy I think Trump is a dangerous moron – who does that help?

So you can look at the above tweet and this tweet from this morning and I won't comment that this is no way to conduct foreign policy or that it may be improper for a sitting President to threaten a US Corporation with punative taxation for making him look bad.  I don't want to look biased – I'm sure you can form your own opinion on how this will affect the markets.

This is what Dictators do, not what we do in Democracies – even Russian-Puppet Democracies, da?

Let's keep in mind that Harley Davidson (HOG) dropped 10% yesterday as they warned of $100M in damages from Trump's Tariffs but Trump has announced over $300Bn in tariffs which is enough pain to spread around to 3,000 Harley Davidsons at $100M each – that's going to be A LOT of profit warnings to come.  

Image result for but noooo belushi animated gifBut no, the President has effectively warned other companies NOT to warn their shareholders of negative impacts from tariffs or they will face his wrath.  Your President wants companies to lie to investors and say "everything is fine" whether they are or not while he barrels ahead with more and more protectionist insanity or, as it will be reported in Seeking Alpha – "everything is fine."  

Ignorance is not bliss – and certainly not for the investors!  


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  1. Wow, can't post one day and look what happens!

  2. Good Morning.

  3. Good morning.

  4. RCl/BAC/Phil- you asked for a reminder today to look at both names! :)

  5. HMNY keeps slipping down. Can't decide to buy more to lower cost basis or bail. Sinking ship?

  6. TSLA. I was out of country last week and missed the short. Do you think it’s still a good play here? I’m very negative on them being able to perform and think it’s becoming apparent they are just a car company with growth issues.  

  7. Good morning! 

    Big Chart – All about the bounce lines today (see above).

    My Mom's best friend died and I'll have to skip most of tomorrow for the funeral.  Probably I'll get a post up and on until 11.  Obviously, no Webinar but hopefully Thursday.

    BAC/Dave – Will do. 

    CTL/Albo – Nice.  

    HMNY/Pirate – SIRI got down to 0.11, I'm being patient.

    TSLA/TX – I'm sure they'll bounce a bit here but, on the whole, I think they go much lower.  Still, I would not jump in at this spot, below $320 with tight stops or back at $360ish.

  8. LOL "and a miniskirt featuring pepe the frog" the outrage over pepe the frog was one of the most ridiculous things ive ever seen, i can't believe that article even referenced it alongside swastika handbags and concentration camp shirts which are actually offensive. 

    I think it might be a generational thing, like how my parents still dont understand what a meme is no matter how i try to explain it to them. 

  9. You Can’t Hurt Lindsay Lohan Now

  10. Who is making money from struggling U.S. malls?

  11. Phil / FTR

    Thoughts on latest "Frontier Communications Announces Mandatory Conversion of Preferred Stock".  Are we going to see a huge dilution and eventual reverse split?  CFO also left in a hurry .. just a lot of negative news.  

    thx – BB

  12. ABX wtf?

  13. Jabob – Nice to have you posting again.  What, no reverse FU for GE ?

    Gold has been selling off.

  14. UF GE!!!

  15. Attaboy !

  16. ~~ Crude oil prices moving higher following report that US wants to push allies to cut oil imports from Iran to zero.

    Phil, what are your thoughts ?  

  17. RCL is a nice cruise company at $105.75 ($22.4Bn) with $9Bn in sales and $1.6Bn in profits so p/e about 14 but growing steadily.  They pay a $2.40 (2%) dividend if you own them but we can start a position in the LTP by just selling 10 Jan (as far as they go) $95 puts for $4.50 ($4,500) in the LTP.  That's a nice place to start with them with a net $90.50 entry as the worst case.  That's really good money for 6 months!

    Having looked at the banks, I decided I like C the best at this level ($65.44) as they paid $29Bn in taxes last year (repatriation), so I forgive them for showing a net $8Bn loss.  Normally, they would have paid about $7Bn and made $22Bn though usually their income is in the $15Bn range as a $166Bn company, so p/e about 11 but now they have $400Bn in CASH and Short-Term Investments and another $352Bn in Long-Term Investments – but don't get too excited as they are a bank and it's not really their money…

    Anyway, it's a good bank and in better overall position than BAC and with less baggage than WFC and JPM is a different animal entirely and $65 should be nice support for them and the 2% dividend is not very exciting so we'll take the following in the OOP:

    • Sell 10 June 2020 $60 puts for $6 ($6,000) 
    • Buy 20 June 2020 $60 calls for $13 ($26,000)
    • Sell 20 June 2020 $70 calls for $8.50 ($17,000) 

    That's net $3,000 on the $20,000 spread that's starting out $10,000 in the money.  As C moves up, we can sell a few calls for income but the upside potential here is already $17,000 (566%) if all goes just a little well – so no need to be greedy! 

    FTR/Jeddah – They are converting stock that was costing them 11.125% into ordinary shares at 1.3333/share – I'm thrilled with that deal.  Dividend was $2.78 per share, per Q so this is a huge savings to us in exchange for ordinary stock (25.67M shares out of  80M so about 30% dilution).  Since FTR was down "just" $20M last Q, they can now afford to pay everyone 0.60/share if they want but hopefully they don't and use the opportunity to strengthen their cash position.

     FTR revenues should be about $8.5Bn this year and next and they should be able to drop $1Bn to the bottom line once the transition is done, middle of next year.

    ABX/Jabob – Gold, though coming back now.

    Oil/Albo – Easy for us to say as we already don't buy oil from Iran.  Keep in mind we are now World's top seller of oil so we're demanding customers buy more from us, less from them.  World will tell us to F off – just another way we are blowing our goodwill.

  18. Interesting article, starts out about the fallacy of home ownership, then dives deeper into the destruction of the US economy:

  19. RCL options do go out to 2020. $95 Jan 2020 puts can be sold for $9.15 to maximize premium sold.

  20. MMM looks good for a trade almost in the YoY low and looks like a winner in case of trade sanctions.

  21. Home ownership/Snow – Good points.  I’ve said similar things in the past:

    MMM/Advil – Good call, worth a look   

    RCL/LTP, Winston – I would much rather sell the 2020 $95 puts for $9.15.  Not sure why they did not show up on Yahoo Finance. I’m at my moms and using that instead of thinkorswim.

  22. Here comes Elon……..

    ~~TSLA – Tesla moving toward HoD following tweet from Elon Musk discussing TSLA truck; says 'The Tesla Truck will have dual motor all-wheel drive w crazy torque & a suspension that dynamically adjusts for load' . 

  23. TLSA/Albo – Hope springs eternal.   Sam Antar is pretty sure it's a scam – and he's an expert!

    We know they are not paying their taxes:

    • /ES got over 2,728 (2,731) and seems to be hanging on but 2,744 is strong bounce and not there yet.
    • /YM 24,357 is not even weak (24,450)
    • /NQ 7,111 is just over weak at 7,075 and about 40 below strong at 7,450 but not likely to hit it tomorrow.
    • /RTY  1,674 is just over 1,666 (weak)

    So, overall, just a perfunctory weak bounce day but holding weak bounces on day one is not bearish – only failing them is.  Next we need to make and hold strong bounces tomorrow to get back on a bullish track but VIX still 15.85 means I don't think we're done yet.

    Keep in mind though that 6/30 is end of the quarter/half and that means we have some window-dressing between now and Friday too.

    Glad we didn't short /CL!  

    Gotta take that /RB money and run if you haven't already!

  24. Maybe trump tweets about this?

  25. Well, that was not a good close, gave up a bit at the end – especially 2,728.

    Hopefully tomorrow is uneventful as I won't be around after 11.

  26. From Morningstar ( I think the previous fair value was 18)

    GE has just announced that it intends to spin off its healthcare business and separate from its Baker Hughes oil and gas business. Following the previously announced merger of the transportation segment with Wabtec, what remains of General Electric is chiefly aviation, power, and renewables, plus a (smaller) capital group. However, we are placing our fair value estimate under review as we consider the implications of our fresh outlook on the performance of the full GE business portfolio, including these yet-to-be-divested operations. We expect to decrease our fair value estimate signific antly, likely by greater than 25%.
    Keith Schoonmaker, CFA

  27. Bitcoin, Watch Out Below

  28. Good morning!

    Asian markets had a bad finish, down more than 1% and we're down about half a point at the moment, largely because the Dollar is ripping higher but VIX is pushing up too.

    Of course the short story is "rejected at 2,728 again":

    Team Trump is already softening on trade – especially this week's China BS.  As I've said, as soon as this turns around and hurts the US, they fold like the paper tigers they are.

    Oil slammed to $71 and I'm dying to short it!  /RB was a good exit so far at 2.085.

    Coffee steadying up for another run:

    Fed hikes are forgotten.