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Terrific Tuesday – Markets Recover into the Break

Wheeeee, what a ride!  

I told you there would be lots of action and we had it all yesterday already – from 24,450 at Friday's close to 24,050 at yesterday's lows and back to 24,450 this morning – see how meaningless Mondays are?  Today will be even more meaningless as the US Markets close at 1pm for the July 4th holiday, which is expected to be a huge travel weekend, with 47M people expected to travel for the holidays – 2.1M by plane!

That's the most in 20 years but only really a 1-2% increase over last year yet gasoline (/RB) is selling at retail for $2.87 per gallon vs $2.28 last year so up over 25% despite there being just as many barrels in storage this week (241.2M) as there were last year (241.0M).  This is complete and utter nonsense and we feel prices have been manipulated higher and will correct after the holidays. 

In fact, speaking of manipulation, you can see from the EIA Report last week that these bastards EXPORTED 3,088,000 barrels of Refined Products (gasoline) PER DAY last week – effectively stealing 21.6 MILLION barrels from Americans and creating an artificial shortage in this country to drive up prices – WHERE IS TRUMP ON THAT???

It's too scary to short Gasline Futures (/RB) but we do like shorting Oil Futures (/CL) as they test the $75 line (with tight stops above) and we're also using the Ultra-Short ETF (SCO) to short oil with Sept $15 calls we bought for the Options Opportunity Portfolio for net $2.10 (we bought back short Sept $18s we had sold as a spread) and now they are $1.65 so we're going to take the OPPORTUNITY to roll them down to the Sept $13 calls at $2.75 to put us $2.30 in the money for $1.10 more money.  If all goes well and oil moves back below $68.50, this Ultra-ETF should pop 20% to $18+ and we'll collect $5 back on our net $3.75 entries.

Keep in mind we're using tight stops on our Oil (/CL) shorts over $75 so a $200 loss on an 0.20 move against us is our maximum risk while a drop down to $68.50 would be a $7,500 win so I very much like the risk/reward profile of shorting oil.  Unfortunately, there's a lot of cross-talk between OPEC, Iran, Libya, Russia, et al and the prices have been fluctuating wildly but the overall premise is that demand simply isn't there to support this kind of pricing.

Non-oil news this morning:

Trump thinks he's "winning" the Trade War because Chinese stocks have been diving all year, now down 22.5% from the January highs but he's simply a boxer who landed the first punch or a wrestler who just clobbered his opponent with a chair while the ref wasn't looking (and he's already threatened the ref by threatening to pull the US out of the WTO) but he's walking around the ring shouting how great he is while his opponent recovers and gets ready to counter just as viciously.  

Meanwhile, looking at the above news (and don't just go by me – read ALL the news in the WSJ or the Financial Times – both of which are considered "Trump Friendly") the question is:  Is this the kind of news you should be reading with the market at record highs?  This is the news of a World in turmoil that is full of uncertainty – not the news of a bull market about to make a record run.

I'm just saying – be careful, please.

And have a fantastic holiday, 

- Phil

 


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  1. Good Morning.


  2. 'Oil Bastards'  I like it!  :)


  3. Is there any greater rip off than the pharms?….



  4. This guy seems optimistic but I think that there is just too much headwind now:

    https://disciplinedinvesting.blogspot.com/2018/07/if-earnings-matter-equity-valuation.html

    Certainly the headline risk associated with the discussions around tariffs and trade wars is adding to the market's volatility. From an earnings and top line revenue growth perspective though, companies appear to be operating at a high level. With the year ahead earnings expectations looking favorable, this should translate into decent equity returns, but of course, not in a straight line higher.

    Companies have been buying back shares in record amounts – that's a one time trick. It makes P/E appear better as share counts goes lower. But a trade war will impact the E factor of that equation. 


  5. How does this guy still have a job?

    https://talkingpointsmemo.com/livewire/pruitt-kept-secret-calendar-hustled-to-get-wife-200k-job

    It's simply insane at this point! They would have impeached Obama if a cabinet member had behaved this way..


  6. Drain the swamp…. 


  7. Good morning! 

    Wheee on oil already, down to $74.75 so I now have 4 short at $75.13 avg.  Unfortunately, I'll have to take $4,000 off the table ($74.13) as that's my rule into a weekend – I'll have to rely on SCO for the bigger payout.  

    Pharms/1020 – I'd say oil and pharms are neck and neck though GOOGL and FB selling your personal life to the highest bidder without paying you a penny is in the running…

    Big Chart – As long as the 50-days are holding, not too bearish but, as long as NYSE is below 12,632 (and that's 170 lower now), nothing to be bullish about either.  

    Optimism/StJ – "Appear" is the key word.  Everyone "appeared" to be doing great into Q2 of 2008 as well…

    Pruitt/StJ – It's sad the level of corruption we've been trained to put up with…


  8. Missed that short on oil


  9. Adding /KCM9 at $124.40 (2).  Obviously with the intent to sit on it for a while.  

    Obviously, that's not /KCM9, it's the front-month (Sept?)

    /SI and /YG made a nice rebound, congrats to the players on that one:  

    Copper is still lame so don't be greedy!

    Dolar pulled back half a point – that's been helping

    Missed/Bert – Geez, it was the main thrust of today's post…  blush  Don't worry, we do these all the time – the real trick is not to force it.  Notice people have been asking me for a week whether it was time to short oil and I kept saying "no" until this morning (also called the target yesterday for shorting), when it finally hit a spot I was comfortable with.

    Submitted on 2018/06/28 at 11:53 am

    /CL/Pat – As I keep saying – it's too dangerous into the holiday weekend.  For the moment, see yesterday's SCO adjustment as SCO can't bankrupt you in your sleep like oil futures can.  Not only is next week a huge driving holiday but we're early in the contract cycle so there's no natural downward pressure and, of course, this Iran talk is causing massive panic that won't quickly subside. 

    /RB/Dave – Same as above on /CL – just too dangerous into the holidays.  We have so many times when we can make obvious trades on oil and gasoline without too much risk – why play now, when it's so dangerous?

    July 2nd, 2018 at 9:49 am | (Unlocked) | Permalink 

    Oil/Pat – Yes, I am very much in favor of shorting /CL below the $75 line but make sure /BZ is below $80 and the Dollar isn't falling back.  Safer to use UCO, which we have in the STP but, if you like Futures (and I do) and you can afford the risk (I can), then I think it's a great time to bet on a post-holiday sell-off.  Beware Thursday's EiA report, though – as it will still reflect gas stations stocking up BEFORE the holiday (through Sat midnight).  


  10. Woops, I took those oil profits way too early – $73.30!  


  11. Corruption / Phil – Not we, but what this GOP congress seems to be willing to accept. I am pretty sure that everybody on the left is not accepting this level of corruption. Heck, he is being heckled in a restaurant by a mother…


  12. Went down and got the mail missed rolling SCO calls and the short. like you said there will be other  opportunities 


  13. Accepting/StJ – We're not out protesting are we?  As a kid in the US (late 60s, early 70s), you didn't go a week without running into a protest rally – it was a fact of life around NYC.  Now, once in a while people go "march" but really they're going to a place to listen to music and see celebrities.  People have to get MAD!

    Mail/Bert – That's why I pay my daughter to deal with mail and do my books…  cheeky  In fact, I'm giving Jackie a raise this year to go learn how to do my taxes too.  She starts working with my accountant in the fall.  I think it's a great skill for her to develop and she's been doing a great job with my books for 2 years now.  I just set up a new checking account with her so she can write checks herself.  If anyone needs a cheap bookkeeper ($300/month), let me know!  

    Damn, oil just hit $73!  /RB at $2.11 is getting tempting as a long into the close…


  14. Phil/personal life   Yeah, well, I hope they're envious…. ;)


  15. stj/news

    with all these corruption stories why is there nothing done by the Democrats? are they not supposed to make sure that these go on the TV. it seems republicans are better in propagating…..

    regards




  16. pat_swap  The Dems (mainly men) suck at messaging…. at least the Female Dems are showing some brass….


  17. TSLA really gets it on the chin today





  18. Woops, /RB went way lower, testing $2.09 now.  /CL still $73 but that's down 1.2% and /RB only down 0.5% so far so not going to keep on that one.


  19. CTL and other telecoms up today. 

    This is old news, but it turns out that Bill Miller, formerly of Legg Mason, lists CTL as one of his top stock picks. 

    In his 4th quarter letter, he stated,  "With a dividend yield approaching 13% at CenturyLink, the main question is whether this yield is secure, and we believe the answer is yes.  In a dire market for regional fixed-line companies, CenturyLink brought in solid management via Level 3 and is in a much better position than its peers," Miller said.

    " Even if the stock doesn't appreciate, an annualized 13% return should beat the market, but "we think the stock is worth closer to $30 though." (That's 68% upside.)

    We'll see.  So far, so good.  Even though the stock has recently moved up, it still offers an 11%+ yield.


  20. CTL/Albo – Trump is protecting them from CHL at the moment (until he gets paid to change his mind).  

    No love for FTR:


  21. TEVA has been on tear… Closing in on B/E for me! I was reluctant to add to my position as I am not in love with that sector, but I'll take what I can from what I have!


  22. Yodi /TSLA

    In the chin and the stomach,  heading down to the 310….any recommendation, after all the got a hallmark in production yesterday and the market shows its joy with a – 6.5%.


  23. TSLA $315 – ouch!


  24. Indexes turned red – not a good way to go into the holiday. 

    Oil popped back to $73.85 but I'm done for the day…


  25. Advill  Re. TSLA Phil did quite a good play on this stock on 6/20 I entered with fewer options but up over 4K.

    But to do a similar play now would be risky as the play was entered when TSLA was reaching for the stars.

    Buying put when they on their knees would not be a good thing and selling puts now, I ask the question when are they going BK. Selling calls, they might find an other spin and you are in trouble. So as you can see I do not have a good asnwer.


  26. Trucks are selling like it's 1999!  

    - Consumer Reports finds Model 3 has worse braking than a Ford F-150 – rushes out a fix – At least one report of Model 3 anti-lock brake malfunctions – stops brake testing in order to hit fake production target

     

    When pressed on whether or not Musk himself gave the order to remove the brake and roll test, Arnold said: "I don't have anything further beyond the statement."

    China has apparently blocked MU chip sales.  Such fun these trade wars..

    Meanwhile, the debate on climate change continues:

    China heads for record defaults, and downgrades tip further pain

    Is MoviePass' new business-savings plan enough to send it to victory in its war against AMC?

    Trump returns to attacks on “fake news” only 5 days after Maryland newspaper shooting

    The kind of extreme hurricanes that tend to shut oil and natural gas platforms in the Gulf of Mexico, halt pipelines and damage crops may occur with less frequency this year because of cooler waters that rob storms of the fuel they need to develop.


  27. Yodi/  TSLA:

    Perhaps you don´t have a good answer( this time) but as Phil´s case a clear reasoning is always appreciated, anyway will review the trade Phil has.

    By Phil´s site map shows you are in Germany in Summer!! how come?.

    After being in hospital a few days now I´m planning a bit of South of France, what about you?


  28. Advill Yes watching soccer in Germany. Yolanda will fligh to MX mid July. So I am sitting put till 1st Sept.

    Will move around Holland and Germany in Sept and Oct headding south Miramar end Oct beginning Nov.

    Hope to meet you on the way. Yodi


  29. Well that was a crap finish.

    Have a great holiday,

    - Phil


  30. Advill RE TSLA play 6/20

    Sold 380 call for 15.31 now .73 x2

    Bought 435 put for 47.25 now 124.15 x3

    sold 400 put for 47.25 now 90.15 x3

    So not much to do there any more just let it go dead


  31. All you girls and guys have a happy 4th of July


  32. Thank you Yodi, Will let you know, Holland is a place where never been in RV, perhaps it´s a good option, 

    Thanks for the  TSLA  trade, obviously now is different,  perhaps playing a recovery could make sense, after all, there is a battle with  Goldman Sachs (selling calls) that even Elon Musk mentioned in his twitter, August could see a good recovery..will see.  Time for Colombia V.S England.!




  33. Why most Americans aren’t rich


  34. Trump’s NATO demands, explained


  35. California revives 100-percent carbon-free energy bill


  36. This is what is holding up the market:

    https://www.motherjones.com/kevin-drum/2018/07/corporate-merger-activity-in-2018-is-almost-record-setting/

    We know how 1999 and 2008 ended!


  37.  That’s a lot, but also it’s just a few very big ones driving it. Of course they were also big ones in 2006-7.  


  38. Certainly not Today…..but there will be an 'Independence Day' in our future worth celebrating… :)


  39. While you were celebrating I try to make a living looking at tradable stocks.

    Hard to find. STX for a shorter term of armchair, buy the stock and sell the Aug 10 55/58 Strangle for 5.28.

    The monthly return over this period shows me a combined return of 7.8 % per month.

    My break evens are at 49.70 and 63.20 at the present stock price of 56.90.

    The stock is at the media line of the scale, I would prefer it lower, but we are in an unstable market.

    So don't bet the farm on it. But I think the range is sustainable.


  40. A further Stock is Ford F. Good buy at this point. But with the clown and his trade wars on the rest of the world, 25% import duty on European cars, it might be hard to tell where this all will end. F has a yield of 5.4%, generally nothing to sneeze at for any armchair trade. I do have quite a few in my port, but for a new entry you might consider it.


  41. Happy 4th of July! 

    Futures turning down a bit, /RTY is the laggard at 1,666 so shorting with tight stops above to follow the downtrend, especially if /YM can't hold 24,100 with /ES at 2,713 and /NQ at 7,020.  VIX moving up but I don't know why (16.40) so I'm about to read the news…






  42. Indians Are Falling Out of Love With Gold





  43. Half the country thinks Donald Trump is a racist. HALF.




  44. Sanctioned Russian oligarch linked to Cohen has vast US ties



  45. China’s HNA Chairman Wang dies in France after falling from a wall



  46. Good morning!

    Markets flying higher as Dollar knocked back to 94 (-0.35%) ahead of the Fed Minutes but it's just good old 2,728 again:

    Sadly, I'm heading back to NY this afternoon, so I'll be in transit when that happens – I'll be here until about 1pm.

    Oil back to $74.50 so maybe another chance to short as the Dollar bottoms.

    VIX flipped down hard and fast on rumors that US/China will work out a trade deal ahead of tomorrow's deadline, but I doubt it.

    China Vows Not to Fire the First Shot in Trade War.

    The China-U.S. Power Struggle Is Just Beginning.             

    China Property Flashes Fresh Warning With Bad-Loan Jump Forecast.

    China's big bond experiment is about to go through a rough patch. China Hints at Pullback From Debt Crackdown as Markets Slide.

    Equity Bulls Are Abandoning Hong Kong as China Turmoil Mounts.

    Platinum Sinks to Near-Decade Low After Threat of Auto Tariffs.

    The EU is reportedly considering international talks to cut car tariffs.  

    Europe Turns Down Chinese Offer For Grand Alliance Against The US.

    The EU is reportedly plotting a major international effort to defuse Trump's trade war — but the US isn't buying it.

    EURUSD Spikes After Report ECB Members "Uneasy" With Market's Dovish View On Rate-Hikes.

    Europe blasting up 1% on the rumor so no point in trying to short until things calm down.  Still a very low-volume holiday day today.  EIA report at 11.

    Date Open High Low Close* Adj Close** Volume
    Jul 03, 2018 272.87 272.98 270.42 270.90 270.90 42,187,100
    Jul 02, 2018 269.51 272.04 269.24 271.86 271.86 63,554,800
    Jun 29, 2018 272.12 273.66 271.15 271.28 271.28 97,592,500
    Jun 28, 2018 269.29 271.75 268.49 270.89 270.89 76,650,500
    Jun 27, 2018 272.26 273.87 269.18 269.35 269.35 105,110,700

    There's not a lot of open barrels at the NYMEX, "just" 1Bn in the front 4 months vs 1.1-1.2Bn in months we felt confident shorting and it's actually a bit early to even count the 131,000 barrels in Nov (4th month) as having an effect.  Dec, however, is already a clusterfuck with 290,000 FAKE!!! orders – so that will be fun by Oct, the latest.  

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Aug'18 74.58 74.66 73.50 74.52 05:54
    Jul 05


    -

    0.38 316720 74.14 388344 Call Put
    Sep'18 71.98 72.17 71.18 72.05 05:54
    Jul 05


    -

    0.46 53997 71.59 277738 Call Put
    Oct'18 69.25 69.48 68.52 69.43 05:54
    Jul 05


    -

    0.59 26147 68.84 210985 Call Put
    Nov'18 68.46 68.81 67.86 68.74 05:54
    Jul 05


    -

    0.68 11422 68.06 131246 Call Put
    Dec'18 67.84 68.27 67.32 68.18 05:54
    Jul 05


    -

    0.74 25356 67.44 290890 Call Put
    Jan'19 67.10 67.77 66.92 67.75 05:54
    Jul 05


    -

    0.83 4400 66.92 137133 Call Put
    Feb'19 66.69 67.11 66.39 67.11 05:54
    Jul 05


    -

    0.74 1540 66.37 69442 Call Put
    Mar'19 66.10 66.79 66.04 66.74 05:54
    Jul 05


    -

    0.86 3257 65.88 87351 Call Put

    Still very confident with our Sept UCO play – anything under $75 is a winner there. 


  47. Cl/Phil- shorting at $75 again? 

    Si/Phil- I picked a couple silver longs at $16, you think I should sell it ahead of Fed minutes release?


  48. There's always something to be said about taking profits into uncertainty, isn't there?  Nothing wrong with taking a quick $500 off the table.  As to oil, we expect a good draw in Gasoline, as it's off last week's numbers, when stations were topping off their tanks and consumers were gassing up for the holiday so hopefully we hit $75 again but I'm short 2 at $74.50 and will short 2 more at $75 – just in case we don't get a pop – I'd hate to miss it!