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Will We Hold It Wednesday – 24,000, 2,700, 7,000 and 1,650 Edition

Lines in the sand.

The above levels for the Dow 30, S&P 500, Nasdaq 100 and Russell 2,000 are lines in the sand that the bulls dare not cross or we will, like China already has, enter bearish correction territory.  As I have been saying all month, we're expecting at least a 10% correction from the top and that's 22,850, 2,550, 6,500 and 1,600 – so we still have about another 5% to fall before we get interested in bottom-fishing.  

We did pick up a couple of longs yesterday, in our Live Member Chat Room as we caught CitiGroup (C) down at $65 and Royal Caribbean (RCL) at $105 – so we sent out a Top Trade Alert with bullish plays on both of them.   We have to be careful with banks as European and Asian Banks are off a cliff and the fact that it's being ignored in the US reminds me very much of 2007 – when we acted as if nothing that happened in Europe or Asia would affect us.  Here's a list of 16 of the 39 Global Sifis (Systemically important Global Banks) that are already down 20%:

Deutsche Bank, Nordea, ICBC, UniCredit, Crédit Agricole, ING, Santander, Société Générale, BNP Paribas, UBS, Agricultural Bank of China, AXA, Mitsubishi UFJ Financial Group, Bank of China, Credit Suisse and Prudential Financial.

According to the Financial Times, the synchronised dips were a sign of global financial stress.  Ian Harnett, the managing director of global strategy at Absolute Strategy Research in London, used the data this week to send out his first “Black Swan” alert since 2009.  The alert he put out on Monday was his first since a warning on inflationary risks in June 2009, as oil prices climbed higher. Mr Harnett drew parallels to another bearish note he wrote in March 2007, when European banks began to sink while non-banks marched higher.

We'll keep an eye on that into the holiday weekend but, on the bright side, Trump has already folded on his tough talk on China and is now falling back on our existing restrictions placed by Congress' Committee on Foreign Investment in the United States, or Cfius, which reviews investments for security threats.  “We have the great scientists, we have the great brains,” the president said Tuesday. “We’re going to protect it. And that’s what we were doing. And that can be done through Cfius. We have a lot of things we can do it through. And we’re working that out.”

While it's disturbing to think that Trump has scientists AND some loose brains stashed somewhere, at least it sounds like he's not going to haphazardly attack China though "turning things over to Congress" has been known to make things much, much worse – just ask 2,500 children who haven't seen their parents for weeks…

Image result for trump trade war cartoonThis does not take Trade Wars off the table, those offically kick off on July 6th, as the tariffs go into effect (and Trump has, so far, proposed $450Bn worth of tariffs on China) and we're still waiting for other shoes to drop as the affected countries roll out their own retaliatory tariffs.  Still, things are not as bad as feared and the futures are ticking up a bit but we still need to retake those bounce lines (see yesterday's Report).

We will certainly bounce this morning on the news that Trump is pursuing a less-crazy policy than the one he said he would pursue but it's not good to have a President who doesn't mean what he says, nor is it good to have random trade policies and, anyway, we still have all the stuff that took the markets down BEFORE things got crazier so I'm not sure what we should be getting excited about.

We're just going to watch our bounce lines and see if there's enough technical energy left to get us back into bullish territory but, for me, I stand by my month-old prediction that we're going to be 10% off our highs and at Nasdaq 6,500 over the summer – and it's only June 27th so, be careful out there! 

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  1. Morning All!

    Unfortunately, we need to reschedule today's weekly webinar. We're going to shoot for tomorrow. I will keep everyone posted!

  2. Good Morning.

  3. Good morning!

    Well, not really, I have to go to a funeral.  Not sure if I'll even have a chance to check in as it starts at 11:30 so probably I won't beat the market close but I will check in when I can.

    Looks like a bit of a bounce this morning and we'll see how far but the Dow is the laggard to the upside and, if we get over 24,350, you can play /YM bullish with tight stops as long as the VIX keeps going down (now 1,580) and the Dollar stays under 95 (now 94.75).

    Overall though, it is a watch and wait kind of day.

  4. Phil;  Thoughts on HOG at these levels?  2020 35 Puts are $3.3

  5. hmny…more bad news or just siri?

  6. HOG/Options – They just warned their earnings would take a $100M hit so $550M last year and this year was already weak but let's say $450M on a $7Bn valuation at $41.50 so not terrible at 15.5x and I bet they've been looking for an excuse to put a plant overseas for years so this isn't a terrible thing for them overall.  

    While I don't LOVE them at $41.50, I could learn to love them at $35 so let's sell 5 HOG 2020 $40 puts for $5.45 ($2,725) in the LTP to remind us to keep an eye on them.

    Big Bounce with /YM back at 24,500.  Watch 2,750 on /ES and 7,200 on /NQ and 1,680 on /RTY but VIX is backing down and Dollar is flat so looking good so far as the market remains very, very bouncy.

    Don't be greedy on /YM longs, of course, 150 points is a quick $750 per contract and you can get back in over 24,500 with tight stops below that line if you are worried about missing out.

  7. MoviePass Majority Owner Helios & Matheson's Stock Falls After Company Issues $164 Million Of Convertible Debt — MarketWatch

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    9:59 AM ET 6/27/18 | MarketWatch



    10:16 AM ET 6/27/18



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    Real time quote.



    MoviePass Majority Owner Helios & Matheson's Stock Falls After Company Issues $164 Million Of Convertible Debt — MarketWatch Shares of Helios & Matheson Analytics Inc. (HMNY) are down 14% in Wednesday trading after the MoviePass majority owner said in a filing that it has issued $164 million in convertible debt as well as 20,500 shares of series A preferred stock. The company said these resulted in an "aggregate cash payment" to HMNY of $20.5 million. The convertible notes will mature in three years, unless they are converted or redeemed earlier. HMNY also said in the filing that it received a letter from the Nasdaq's listing qualifications department last week stating that the company's bid price has been below the $1 per share required to be listed on the Nasdaq. The company said this letter "has no immediate effect on the listing" of its stock, but that it has until mid-December to get back in compliance with the Nasdaq's rule. If the company completes a reverse stock split, which it has sought shareholder approval for, the reverse split must take place no more than 10 business days before December 18. The stock is down 94% in the past 12 months, to 21 cents a share, while the S&P 500 has gained 4.9%. 

    -Emily Bary 

    For more from MarketWatch: 

  8. How can it fall again?  This is the same debt it issued last week, isn't it?  Oh well, we knew it was going to be lower – still not low enough to DD and then they are reverse-splitting anyway, so better to watch and wait.  Rumors are they are well past 3M and maybe at 4M subscribers now but, unfortunately, that means more cash burn….

    Last week, MoviePass filed a preliminary proxy statement with the SEC, informing investors that it plans to potentially:

    • Quadruple the number of its shares outstanding to 2 billion shares, diluting existing shareholders by as much as 89% in the process (because Helios only has 223 million shares outstanding today).
    • And/or conduct a reverse split of its shares, shrinking investors' shareholdings by as much as a 250-to-1 ratio (i.e. if you own 1,000 shares before the reverse split, you'd own just four shares at the end of it).
    • And to complicate matters further, Helios is issuing $164 million worth of convertible debt, and 20,500 shares of preferred stock — with each preferred share conferring voting rights equivalent to owning 3,205 shares of common stock.

    So the preferred shareholders now control the vote but the good news is they now have about the same 80M shares we have and they paid 0.25 with an option to convert at $1.50.  Essentially they bought a $20.5M call option on the stock but that's not much money at our current burn rate.

  9. Worried About a Tech Bubble? Don’t Be

    Currently, two of the so-called Faang stocks meet the price run-up criteria specified by the study: (ticker: AMZN), which has beaten the S&P 500 over the trailing two years by 105 percentage points, and Netflix (NFLX), which has beaten this benchmark by 301 percentage points. Both also have forward-looking P/Es in the triple digits, and both have exhibited a sharp acceleration in price appreciation.

  10. Massive draw on EIA report!  

    Crude: -9.891M Gasoline: +1.156M Distillates: +0.015M

    Well-timed for July 4th but, of course, it's all the refineries opening more barrels to make supply for the holiday – nothing at all unusual so $72.50 is a good shorting spot but tight stops above as it's very dangerous.

  11. CHK is up almost 7% today.  Do you think it is a good long-term hold, that it can go a lot higher?  It has taken a year for the stock to get back over 5 again.  It seems very undervalued compared to other oil & gas companies.

  12. In the OOP, we said we would be happy to add to our SCO play if oil popped higher and here it is.  We have 20 Sept $15/18 bull call spread at $1.50 with 10 short $16 puts we sold for $1 and there are no lower calls so let's just offer to buy back the $18 calls for 0.60 or less (now 0.75).  

  13. Gotta go, have a good day.

  14. You too Phil.

  15. Damn, you guys broke the rally already?

    Can’t leave you alone for a minute… 

  16. Orders for US durable goods fall for 2nd straight month

  17. Take Control of Cable TV!

  18. Phil/Yodi/Germany-offering a better deal to workers?  Yodi, can this be true?  What a novel concept!!

    Left alone-Hell no you can't leave us alone!

  19. Seer, Wages lots of politics involved. Principal they have a problem with rasing wages, as most of the refugees they stuck with can not speak German, so paying them high wages is conterproductive.

  20. CEO of moviepass did an AMA on reddit, may be some interesting tidbits in there for those who are in this one. Some interesting tidbits;

    asked about long term viability of their model:

    "In our case, we intend plan to break even on our subscription model by the end of the year. The reason we keep our price low is to attract the occasional moviegoer. There are more than 200 mil occasional moviegoers in the U.S., who only go to the movies 4-5 times a year without MoviePass and 9-10 times a year when they join MoviePass. If we get enough occasional moviegoers to offset the frequent moviegoer, everything will balance out."

    when asked…Please elaborate on breakeven statement by end of year. You're burning over $40M per month right now and that is expected to increase over the coming months. Utilization has not dropped at all as expected (i believe it's over 2 movies per user right now). It has been stated that you could require additional capital exceeding 1.2B. From what I can tell, ad revenues and movie acquisitions are not even putting a scratch in the cash burn. 


    Utilization has dropped significantly since we ended repeat viewings and instituted ticket verification. Movies are seasonal, and summer is high point. When we adjust based on seasonality, it has an impact.

    The new peak pricing feature is also aimed at helping to curb heavy use, or supplement that use with more revenue. The important thing is that we're building peak pricing to be flexible, we can tweak it as needed."

    when asked about competition:


    The tens of millions of dollars we’ve invested in building our technology platform gives our large, loyal sub base access to 91% of the theaters across the country, not just one chain. This is a direct result of our proprietary and patented technology.

    We recently initiated a legal action against a competitor in order to defend our patented technology and we intend to continue to be vigorous about protecting our patents in the future."


    Anyway i dont want to post too much of a wall of text, think i covered the most pertinent answers here but check out the AMA if you want to see more. 

  21. Thanks CRS. 

    Geese, what an exciting day to miss – I’m still out…

  22. Yodi-thanks.  Is the labor market really that strong in Germany?  Obviously, refugees who can't speak German can't totally fill any gap, but these articles make it sound like employers can't find anybody to fill positions.

  23. Chipotle CEO plans marketing blitz, closing up to 65 stores

  24. seer, the problem is they cannot find enough qualified people to fill the job. I just ordered a new kitchen for my retirement home, delivery end October!!!. However on the other side of the coin, it is difficult to find a job for a normal person not highly qualified, especially if you even over 50 years old. The limit of working age in Germany is 65.

    Besides one of the big problems in Europe and especially in Germany is the refugee problem, no one wants them, a great deal are from Africa, domestic refugees, they want to come to the land of milk and honey, besides that they are mostly Muslims, and are not too popular here.

    I predicted this problem already in 2015, you cannot allow to let people uncontrolled in to a country. With this came a lot of crime, which has multiplied over a short period, even that security has doubled and tripled.

    Where as in Muslim countries women are covered from top to toe and only allowed to see the world though a slot in their burka, the women here can dress as they like, so this as you will understand leads to a great temptation and cultural shock for Muslim men.

    For the majority of Muslim men the women is only a better house animal. So as you can see this courses, besides the language, a great problem in respect of integration.

    Merkel’s immigration policy might cost her, her position. Simply European countries do not want any more refugees. The genie is out of the bottle,

    First the African countries wanted to govern themselves and outed the Europeans, now the African people want to migrate to Europe, as they are unable to govern themselves mostly due to corruption, mismanagement and uncontrolled multiplication of families. 12 children in one family are hard to feed!!!!

    Some arrive here with three wifes and 24 children. Well you put this in an option play and see where you land up with.

  25. US allows Nestle to keep taking water from California forest

  26. Walmart rolls out 3D virtual online shopping

  27. The world’s wine industry is adapting to climate change

  28. Yodi;


    110% agree with you, is stupid to have an acute lack of educated people to your work or run your business and economy and at the same time you have hoards of people just sitting in the streets seeing how the sun is moving without skills and language…and supporting them with public money. 

    Immigration will be the issue of Europe if don´t control and solve this the UE organization, the most important, complex and sophisticated social engineering since the Romans will disappear

    What they are saying is that they want European laws and order back in their countries, and we must find the way to bring it to them, is wiser to create new structures than saturate the existing ones.

  29. /Phil/WBA, what is your take on latest info, down over 7% Pre mkt? I had that on my watch list. Good for trade here or wait til smoke clears? Thanks