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Monday Market Movement – Bouncing Back to Highs?

Image result for trade war market highsTrade War – so what?

Despite Friday's sell-off, which was more a result of Turkey's currency issues than the escalating Trade Wars, the markets are still generally shrugging off any and all bad news as they continue to march into uncharted territories.  Nothing has changed today – the Turkish Lira is still collapsing only now it's taking other currencies with it and the Trade War talk is heating up between the US and China, the US and Japan, the US and Russia, the US and Europe, the US and Canada and the US and Mexico and I THINK that's all the countries we're fighting with at the momen- all I know is I'm on a cruise with people from all over the World and they all ask me "What the f*ck is wrong with your President?"

So far, we're only scratching the surface of Trump's actions compared to Trump's threats.  About $700Bn worth of tariffs have been threatened which would tax the American consumers $175Bn at 25% but, so far, "only" $63Bn worth of tariffs have been enacted so 1/10th of the way there and look at all the chaos it's already causing.  Want to stay for rounds 2-10?

Image result for trade war market highsYet traders seem perfectly happy to ignore the multiple elephants in the room as we party like it's 1999 and now we'll see if last week's dip was the start of a correction or yet another pullback we bounce right back from.  Bounce lines to watch are:

  • Dow (/YM) 25,650 to 25,175 is a 475 drop so we'll call it 100-point bounces to 25,275 (weak) and 25,375 (strong)
  • S&P (/ES) 2,860 to 2,820 is a 40-point drop so call them 10-point bounces to 2,830 (weak) and 2,840 (strong)
  • Nasdaq (/NQ) 7,500 to 7,375 is 125 so we get 25-point bounces to 7,400 (weak) and 7,425 (strong)
  • Russell (/RTY) 1,700 to 1,675 is 25 points so 5-point bounces to 1,680 (weak) and 1,685 (strong)

We're certainly going to get our weak bounces and probably strong bounces into the open but what matters is what holds for the day from a technical standpoint but, from a psychological standpoint – the bulls are still firmly in charge and happy to pay more and more money for the same stocks that were 16% cheaper just last August (/ES 2,450, for example). 

Image result for jim cramer corporate shillIn fact, Jim Cramer is on CNBC right now telling the sheeple that trade wars don't matter and are having "far less than the expected effect on earnings than people feared" though Cramer is no idiot and can read the same chart we can which clearly shows that only 10% of the announced tariffs have been enacted so far and most of those too far into the April/May/June quarter to have possibly had any impact on anyone's bottom line.  So why is Jim Cramer trying to mislead his viewers into a false sense of complacency?  Surely he can't have completely sold out to CNBC's Corporate Sponsors who want you to BUYBUYBUY whatever they're paying to push at the moment?  

It's not just Cramer, of course, all these Financial talking heads serve at the pleasure of the sponsors and the sponsors are mostly investment banks and brokerages who are NOT looking for people to tell you to stay out of the markets.  Never forget how CNBC and other networks reassured you and told you everything was fine before and during the Financial crisis and then, when the Government stepped in and things were going to get better – they told you NOT to go back in – because their sponsors wanted to get in first!  

Then there's my fellow newsletter writers.  They don't like to tell you to worry because people want to know what stocks to buy – telling them not to buy anything causes subscribers to look elsewhere for advice.  I'm fortunate to have a subscription service with a very steady base but the churn of subscribers in a normal market newsletter is 30% PER MONTH – so it's essentially business suicide to not give the people what they want – even if what they want is all wrong for them.  And I won't say I'm any better because I don't need this income to feed my family – so I can say whatever I want but I'm not sure I'd be so honest with you if I needed your monthly check to pay my bills. 

At this point, we don't need to be too worried as long as the technicals hold up.  We are miles about the 50-day moving averages on all indexes but the Russell (1,677) and it's not going to be a market turn unless those are breached and bouncing off the 50 dma, like the Russell is doing, is a sign of strength, not weakeness as we bounced of 1,677 on the button overnight. 

We have PLENTY of long positions but we also have PLENTY of hedges – so we really don't care which way the market goes but I would urge caution as long as trade sanctions continue to be added and not subtracted as there are hundreds of Billions of Dollars that can still be added by both sides and, before you know it, we're talking Trillions in tariffs and that might, finally, matter.  The week ahead is light on data, we'll see if the market can keep drifting higher:

And there are still plenty of earnings reports to mull over but most of the majors are out of the way at this point:

 


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  1. Look where our tax cuts are helping:

    https://www.vox.com/business-and-finance/2018/8/12/17680748/tax-cuts-big-banks-jpmorgan

    Even without the Republican tax cuts, United States banks would have made $49.4 billion in the first three months of 2018 alone. But thanks to their reduced tax bill, they got an extra $6.6 billion, bringing in $56 billion in total. And there are plenty of signs the banking industry’s tax-bill boom is on track to continue — take Bank of America, which saw its tax bill fall to $1.7 billion in the second quarter of this year from $3 billion last year, a 43 percent drop.

    It’s not a bad time to be in the banking industry, and the GOP tax bill has made it even better.

    And then you see comments like this one from Jamie Dimon:

    In his annual letter to shareholders, JPMorgan CEO Jamie Dimon lauded the tax bill as “historic” and applauded Congress for showing “we can take on tough issues that have been holding us back.”

    They were held back to $49B in profits – what a joke! You know that when bankers are happy, the rest of us are paying for the party!


  2. I thought that the book was full of lies:

    https://talkingpointsmemo.com/livewire/wh-looking-legal-options-omarosa

    Publicly, the White House has sought to completely discredit Manigault Newman, but privately, aides are “terrified” of what the tape release could mean.

    That WH is like a nest of vipers! It's a wonder they get anything done… Oh, wait!


  3. Good Morning.


  4. Good morning!

    I have a seminar I want to go to at 11 but then I'll be back for the afternoon (though I'll likely cut out early).  Tomorrow I'm just posting in the am and then gone for the day after the open.

    RedZone/Grass (from weekend) – I've never used it, sounds interesting.  Unless HMNY has really firewalled MoviePass off from the rest of the company, I don't think they'd survive MoviePass failing.  Another weekend with no outages but still the stock is at 0.05.

    Let's watch those bounce lines and see how the day plays out.  Europe is DOWN 0.4%, VIX still hovering around 14.

    Don't forget Europe was down 2% Friday and SHOULD be bouncing with us but, instead, they are completing a 2.5% drop.  

    Can't blame the Dollar today

    /SI cheap again so I'm buying again at $15.20

    /YG over the $1,200 line too.

    Coffee is sad

    Need more data before risking oil again.

    Oh and TSLA back up as now claiming it is the Saudis (our initial suspect) who are looking to buy them for stupid money.  


  5. Phil,

    GNC making lows. Are you still a fan? Opportunity at this level or wait and see if they go lower 


  6. SPWR below $7 – usually the place to add or initiate. I don't see news to explain the 3% dip though.


  7. Put on a small position in Dec gold futures.


  8. GNC/Japar – Long, slow turnaround for them (if it works).  I think $3 is a good price ($250M) with $2.5Bn in sales and $19.5M (0.44/share) made in the past two quarters.  There's really no logic to this price – it's just going to take the markets a long while to accept that. 

    SPWR/StJ – The Trump Administration is still waging a stealth war against solar and other renewables, despite their falling out with the Kochs but I don't see how it affects the long-term trend towards solar on a global scale.  They may have a rough patch on trade issues but, in the long run – it's the future.  

    I like the long-term play at this price though we already have them in our portfolios.  As a new trade I'd go for:

    • Sell 10 SPWR 2020 $7 puts for $2.25 ($2,250)
    • Buy 20 SPWR 2020 $5 calls for $2.65 ($5,300)
    • Sell 20 SPWR 2020 $10 calls for $1.15 ($2,300)

    So that's net $650 on the $10,000 spread that stars off $4,000 in the money – not bad!  Upside potential is $9,350 (1,558%) if solar power manages to survive the Trump era. 


  9. Gotta run – back at 1pm.

    Not very impressive bounces so far, can short futures if they turn red but very tight stops above.


  10. Albo-GLD- what is your premise for the Dec futures trade? 

    And, why futures vs GLD, etc.?


  11. Phil// What are your thoughts TCEHY? 

    Thanks.


  12. Pstas – Primarily seat of the pants.  Just thinking gold is getting close to a bottom.  Already own some GLD.

    Thanks for posting the SA article on CTL.


  13. Maersk Cuts Profit Forecast as Shipping Slump Deepens

    Shipping giant cites jump in fuel prices and weak freight rates

    Still some capacity issues no doubt but if everything is so rosy why are shippers struggling? 


  14. ~~TWTR – Twitter shares ticking higher in recent trade as Citron is out positive on the name. 

    https://citronresearch.com/wp-content/uploads/2018/08/TWTR-Just-Made-the-Turn-and-Is-Hitting-Stride.pdf


  15. SPWR/StJean  I don't think there was a 'falling out' with the koch bros, but I feel it's another distraction.

     

    You need to check out this Duke Professor's comments on distractions and the Big Picture….

    http://www.dukechronicle.com/article/2018/08/duke-prof-nancy-maclean-appears-on-hbos-real-time-rails-on-koch-brothers


  16. Gold- Im long so this might just be wishful thinking, but the commercial hedgers are usually correct and they are almost completely unhedged at this point-

    https://finviz.com/futures_charts.ashx?t=GC&p=w1


  17. Things are turning ugly and we can't blame Europe now…


  18. Emailmike how do you read the commercial hedger chart?  https://finviz.com/futures_charts.ashx?t=GC&p=w1

    How do you tell when they are hedged or unhedged?

    Thanks!


  19. Well, Cramer's in a suit and on all day – must be a need to herd the sheeple into the markets.  

    TCEHY – I'm not happy with some of the things they throw money at but, overall, it seems to work for them.  $35Bn and $11Bn in profits (as much of those "sales" are distribution revenues) BUT for $434Bn – it's not a good deal as you are paying for a company that caught it lucky by throwing cash into everything during a raging bull market that's made them rich but you have no idea how they'd ride out a contraction yet it's being treated as a riskless investment.   

    TSLA back down already.

    Shippers/Pstas – To some extent, they way overbuilt capacity so not as much an economic issue as an industry-specific problem though I doubt these frequent trade disruptions are helping.

    Gold/EMike – This might be the first time in history we have inflation and gold goes down – but I'm not willing to bet on it…

    Graph of Gold Inflation Data


  20. still hold /RB ? 1.98


  21. what happen to RB?


  22. FU GE ABX F HMNY LB!!!!!!!!!!!!!!


  23. ?dollar rise cause /RB to drop ?







  24. RB/Phil- Double down here?


  25. /SI getting hammered as well. Phil, you still have your /SI at 15.30?


  26. I can’t believe that /RB won’t be higher going into the holiday weekend as it’s their last chance to cash in on the summer


  27. Phil – CTL hit $22.

    I'm just sayin !


  28. japarikh/weekend- I am not from the US, so what weekend is coming? I assume it's just summer holidays.



  29. martinC / chart- The COT graph (Commitments of Traders reported by the Commodity Futures Trading Commission) below the gold chart shows the reported position of commercial hedgers.  Since they are hedging their long gold positions, they are always short.  But as the green line moves closer to '0', it's showing that they are removing their short positions / hedges. 

    Definitely not a guarantee, but with the $1200 line fast approaching & smart money getting longer & the smartest money (Phil) also leaning long Im cautiously optimistic!

    (sorry for delayed response, was out for lunch)



  30. Wow, Oil etc went down hard and fast, good chance to get back in for the bounce off $66 on /CL and $1.99 on /RB (tight stops below).  

    /RB/Gucci – Still hold?  From Friday?  As I said on Friday:

     

    Wow, /RB just paid for my vacation – $4,700 on the day is enough for me at $2.05  

    And, in case you paid no attention to that:

    August 10th, 2018 at 1:45 pm | (Unlocked) | Permalink

    Nailed it on the /RB exit!

    You shouldn't need me to tell you to tale a $1,000 per contract gain off the table or, in the VERY LEAST to stop out when your gains drop 50%.

    As to right now, I have 2 long /RB at $1.9927.

    Dollar/Gucci – Not much move there.  Not sure what news is driving it.

    /RB/Dave – See above, you guys can't hold trades like that with no stops – you'll lose your asses!

    /SI/Japar – /SI I did get stuck with as I was holding it for a longer run so yet, I'm adding 2 more at $15 to avg about $15.17.

    CLT/Albo – Definitely your stock of the year. 

    Holiday/Dave – Monday, Sept 3rd is Labor day.  One of our few Federal Holidays where pretty much everything is closed (except retail and food, of course).  


  31. well I though you said to hold cause you may not see /RB 2 again 


  32. That's why we went in but you have to learn to take those profits off the table.  And, what I actually said was:

    August 10th, 2018 at 9:36 am | (Unlocked) | Permalink

    • /RB is not terrible at $2.01 but, like yesterday, could easily test $2 again at $420 per penny!  

      You make more money taking quick profits off the table and going back in on a dip than you do holding out for "the BIG one" most of the time.  Sometimes you get lucky – but I'd rather be consistent.  


  33. Emailmike / GC- thanks for this information. Very helpful.

    —-

     https://finviz.com/futures_charts.ashx?t=GC&p=w1

    The COT graph (Commitments of Traders reported by the Commodity Futures Trading Commission) below the gold chart shows the reported position of commercial hedgers.  Since they are hedging their long gold positions, they are always short.  But as the green line moves closer to '0', it's showing that they are removing their short positions / hedges. 

    Definitely not a guarantee, but with the $1200 line fast approaching & smart money getting longer & the smartest money (Phil) also leaning long Im cautiously optimistic!

    ——


  34. Phil – The excitement in OSTK didn't last very long, just as you suspected.


  35. So, to be clear – that was another nice pop in /RB so I'm OUT with $1,000+ per contract.

    See, that's all I need for a retirement job – I'm doing this from the middle of the Atlantic Ocean!

    OSTK/Albo – I can't believe how many people still believe in those guys.


  36. If I could make $2,000/day I could just live on the World and pay no taxes!

    The World – Luxury Residences at Sea

    Image result for the world cruise

    Image result for the world cruise

    My mom has a friend who loves on that thing – she loves it.  


  37. The World/Phil- wow you sure as good at introducing dreams… that's such a nice idea to retire on….


  38. Here's the scoop if you want one:

    "They range in size from 337 – 3086 square feet and are priced from $825,000 – $7.6 million. …



    "Annual maintenance charges are about $167.00 per square foot. The commercial maintenance, which is paid quarterly covers the entire cost of running a 43,000 ton ship ie: fuel, port charges, wages of the crew, stevedoring, daily housekeeping, insurance policies on the ship and includes an accrual for dry dock where the ship is refurbished. On top of the commercial maintenance is an annual Food & Beverage charge which is $33,180. This can be spent in the restaurants, room service, take out from the restaurants, in the deli, for private parties etc. So if we look at the current apartments for sale at say an 'A' apartment (1106 square feet), the total annual charge is $220,596.



    "'The World' was launched in 2002 and is the only privately owned self-contained luxury resort at sea. The ship has 165 residences, each combining the comfort of a private home, along with mobility, services and facilities of a luxury ship. 'The World' travels continuously around the globe, calling for extended stays in the world's most exotic locales. I want to stress that this is neither a time share nor a traditional cruise ship. Homes can be used 12 months a year, left vacant while you are away or rented out. Please note that the Board of Directors requires that our buyers have a minimum net worth of US$5 million. We do not allow pets."

    There's also a thing going on where people are living on cruise ships instead of retirement homes.  If you are a couple with an all-in cost of $1,000/week for a cabin, free food and free medical care (outside of hospitalization, which should be under medicare) – it's a hell of a lot nicer than checking into a nursing home for the same price!  


  39. Alright guys, I'm off to the pool – hopefully the markets don't collapse while I'm gone (which they often do). 


  40. So… when you die on "The World", they throw you overboard and no-one ever notices that you disappeared. Meanwhile, they keep collecting your annual charges and slowly sell the contents of your residence. LMAO!


  41. I guess they could make an episode on Locker War on The World for the dead people belongings! The lockers of the Rich and Famous…




  42. Florida’s Orange Crop Is Bouncing Back From Bugs and a Hurricane




  43. Good morning!

    As is often the case, Monday's action is wiped out by Tuesday morning for no particular reason.

    VIX is still high, so be careful.