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Meaningless Monday Market Movement – Waiting on the Election

"Nothing really matters."

That's the tag line from Queen's Bohemian Rhapsody, which is this weekend's hit movie, about a band with an outspoken gay lead singer who was a teenage Indian refugee who was granted the political aslylum that Trump would deny to others.  To this day, a guy who died of Aids has Conservative Republicans stomping their feet and clapping their hands at sporting events around the nation singing "We Will Rock You" and "We are the Champions" to this day.   Life is strange…  

Nothing matters today as the election looms large tomorrow and nothing matters tomorrow as we have a Fed Rate Decision on Tuesday so today is completely pointless so let's just see what's been going on recently that might matter:

We have the Iran Sactions kicking in but there are so many exemptions to it that it's pretty toothless at this point.  Nothetheless, it's certainly pissing Iran off and now Trump's pal Kim Jung Un is also pissed off because the US has not honored their pledge to reduce sanctions on North Korea – who did scale back their nuclearl program ages ago – so why should Iran believe a word Trump says?  US Foreign Policy plans should go further than "kick over hornet's nests."

Will US voters repudiate Trump's policies tomorrow or embrace them?  Sadly, just a day before the election – we still don't know.  Aside from the election, there are many market-moving ballot initiatives around the country.   For example, Colorado voters will decide on increasing the buffer zones around oil and gas development and could eliminate new drilling in more than half the state. Energy producers have put about $40 million into defeating the initiative - more than is spent in many Congressional races.

Electric companies in Arizona and Nevada face potential new requirements to produce more energy from renewable resources such as wind and sola and a separate measure in Nevada will ask voters to approve opening a competitive retail energy market.  In Montana, a ballot measure would require state authorities to deny a permit for any new hardrock mines that would create “perpetual pollution,” while a Washington state initiative to impose the nation’s first fee on carbon dioxide has drawn high-profile support, including from the rock band Pearl Jam and Microsoft Corp. founder Bill Gates.

Four states will decide on legalizing various uses of cannabis. Michigan and North Dakota voters face a ballot measure on recreational use, while Missouri and Utah voters will weigh legalizing medical marijuana.  We are already long on the Cannabis ETF (MJ) and it's already very profitable in our Money Talk Portfolio – a position we finished adding to on Oct 29th (from a trade idea we announced live on TV on the 24th), when the ETF was crashing:

Long Call 2021 15-JAN 25.00 CALL [MJ @ $32.30 $0.00] 20 10/29/2018 (802) $19,000 $9.50 $2.30 $9.50     $11.80 $1.38 $4,600 24.2% $23,600
Short Call 2021 15-JAN 45.00 CALL [MJ @ $32.30 $0.00] -20 10/29/2018 (802) $-10,000 $5.00 $-1.08     $3.93 $0.51 $2,150 21.5% $-7,850
Short Put 2021 15-JAN 30.00 PUT [MJ @ $32.30 $0.00] -10 10/29/2018 (802) $-7,750 $7.75 $-0.75     $7.00 $-0.30 $750 9.7% $-7,000

That's our 2019 Trade of the Year, in fact.  We're still pretty low in the channel and there's still 35 more states that can legalize pot down the road, not to mention 199 countries so I think this ETF is a great long-term bet and without the danger of any single bankruptcy dragging your investment down.  Even with our gains, it's still a $30,000 potential play that we paid net $1,250 for and, currently, it's at net $8,750 so up 700% in two weeks for our Members but, even if you did "save" $3 a day by not subscribing to our Daily PSW Report, you can still make another $21,250 (242%) from here!  

This is how we use Fundamental News Events to make money trading stocks.  It's also a good example of how stocks and ETFs are taken down by "THEM" ahead of those events so "THEY" (they know who "THEY" are) can chase all the retail suckers out of positions and pick up obvious positions dirt cheap.  Gasoline (/RB) and Oil (/CL) were examples of that last week and we flipped bullish on both ahead of the Iran Sanctions and, even this morning, Oil is still $63 and Gasoline is still $1.70 – both good lines to play long.

While the scope of the sactions is disappointing for the bulls, ANY disruption in the energy markets destabilizes all sorts of things around the World and instability tends to drive up prices so up is simply more likely than down at this point and also we have the looming Thanksgiving Holiday in the US – the last big travel holiday of the year that's usually a booster for gasoline consumption.

There's not a lot of data this week but there are a lot of note auctions – so we'll see what prices those get over the next few days.  The Fed Meeting starts Wednesday but the rate announcement won't be until Thursday so a lot of earnings and rumor-driven action until then.  

On Friday, we have Fed speeches from Williams, Harket and Quarles pre-market – that usually happens when they think they might need to save the market from a bad week.

Just saying…

 


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  1. Both Nasdaq and S&P found some resistance around their 200 DMA. The Dow is over, but that's a meaningless index – one component can make it go one way or the other.


  2. Good post by Barry to list what has been revealed about America by the Trump presidency – not a pretty picture:

    https://ritholtz.com/2018/11/trump-the-revealer/

    Trump seems to bring the worse out of people! Racists, anti-semitic and shameless! 


  3. Big federal government is only 3.7% of GDP. Still a lot of manufacturing around though!



  4. stjeanluc that big chart looks awsum but its from 2017 lol


  5. Thanks Tommy! Gotta clean up my drive and remove these old charts! Fixed now…


  6. Good Morning.


  7. /NG up huge !

    December natural gas futures were surging 25.1 cents higher to $3.535/MMBtu shortly before 9 a.m. ET Monday as weekend weather guidance significantly strengthened the expected intensity of medium-range cold trends.


  8. APPL/Phil – Thank you.  Yes it is an older Short Put from last year and… was thinking rather than create a new position in APPL, I'd take advantage of the dip in Apple to move it up and put more money in my pocket.  And, keeping it slow and steady on those higher price stocks lets me sleep better at night.  Perhaps, I should consider the $160 Put, it is a bit more attractive.   But, I thought my IBM $120 put was golden when IBM was pushing $155 a few weeks ago.  Not that I am worried about a 2020 put at this point.   


  9. Good morning! 

    Dollar is calming down (92.175) so that's helping a bit but AAPL is down 3% – not helping at all.

    Nas is only down 1% so far but testing 6,900 is worrying. 

    Oct ISM was 60.6 – better than expected.  

    Still waiting for the same old bounce levels overall and, as StJ notes, we're not very impressed until the 200 dmas get taken back.  Also, note that NDX was just (thanks to AAPL) harshly rejected at their mini death-crossing 20 dma as it goes below the 200 dma.  

    Revealed/StJ – Sad and true, unfortunately.

    /NG/Albo – Nice Mega-Pop today.

    Puts/Grass – Well, there's a difference between "golden" and "worry free" – just because AAPL is very unlikely to STAY below $184 (so I'm happy to sell $184 puts) – it doesn't mean they won't GO below $184 for a while.  

    Should I stay or should I go now?
    Should I stay or should I go now?
    If I go, there will be trouble
    And if I stay it will be double

    This indecision's bugging me
    Esta indecision me molesta


  10. AAPL just sold  Jan 21 155 put for 10.20 even the market is only 9.77 !!!!!


  11. OK, let's have a bit of fun with the upcoming elections. Please , no political posturing, just taking a unscientific poll of board members – how will markets react post election?

    1. R's keep control of House- up, down, sideways

    2. D's take control of House- up, down, sideways

    What say you all. 

    My guess is 2 and down.


  12. my guess is 1 and up!


  13. 2 and down.


  14. My guess is 2 and down for while but then up moving forward.


  15. I hope 2 and up


  16. 1 and sideways.


  17. Poll/Pstas – 2 and sideways.  I don't think the people really believe its Trump that's caused this rally.  All the House gives us is gridlock for 2 years – markets generally like that anyway.

    What a lot of 2s!  Hope we're not over-confident!

    • Canadian Solar (CSIQ -3.6%) sinks after rejecting an offer from CEO Shawn Qu to take the company private.
    • In rejecting the offer, the special committee set up by CSIQ's board cites significant changes that have occurred in the solar industry since last December's offer from Qu as well as the CEO's ability to secure the financing required to make a fully-financed offer.
    • Qu, the company’s largest shareholder, made an offer to buy CSIQ last December for $18.47/share at a 7% premium.
    • IBM (NYSE:IBMgains 2.3% on a string of insider buys including CEO Virginia Rometty purchasing 8.5K shares for $999K.
    • Director Frederick Waddell bought 2,153 shares for about $250K.
    • Director Joseph Swedish purchased 2K shares for $233K.
    • Update with more information: IBM says this is the first time Rometty purchased on the open market. She also picked up $2M worth of shares through a retirement fund.
    • Caesars Entertainment (NASDAQ:CZR) is up 2.85% as the New York Post report on interest by MGM Resorts (MGM -1.1%) in the casino operator circulates.
    • A combination of the two companies would see the new entity control about half of all the hotel rooms in Las Vegas and Atlantic City, a level seen by some as too high for regulators to swallow.
    • Trading volume on CZR is already up over 5K shares.
    • General Electric (NYSE:GE) shares advanced 1.2% before the market open on Monday after it was revealed that recently appointed CEO Larry Culp bought $2.2M worth of company stock.
    • He purchased 225K shares at an average price of $9.73 a share on November 1, according to an SEC filing.
    • Solar names are seeing early strength following reports that China could raise its 2020 solar installation targetFSLR +3.5%JKS +7.6%SPWR +2.4%DQ +5%CSIQ +2.7%VSLR+2.2%.
    • PV Magazine reports China's target of 105 GW of cumulative installed photovoltaic power, which originally was planned to be achieved by the end of the decade, has been surpassed by more than 50%, and the government may revise its 2020 solar target to 210-270 GW.
    • China’s energy institutes have been tasked to carry out an assessment of the effects of the planned adjustment of the target, according to the report.
    • ETF: TAN
    • FedEx (NYSE:FDX) says it will increase shipping rates beginning on January.
    • The company says FedEx Express shipping rates will increase by an average of 4.9% for U.S. domestic, U.S. export and U.S. import services.
    • FedEx Ground and FedEx Home Delivery shipping rates will also increase by an average of 4.9%.
    • FedEx Freight shipping rates will increase by an average of 5.9%.
    • FDX +0.6% premarket to $222.99.
    • Source: Press Release
    • Shares of iRobot (NASDAQ:IRBT) are on watch after Canaccord Genuity takes it rating on the consumer products name to Buy from Hold. The ratings bump follows a change in the analyst covering the stock to Jed Dorsheimer.
    • The firm's price target of $115 reps 20% upside potential for shares.
    • IRBT +2.90% premarket to $98.76.
    • Height Capital Markets issues its last election forecast before tomorrow's voting in the U.S.
    • "We continue to put odds at 55% that Democrats win majority of the House and Republicans maintain majority of the Senate in tomorrow's Midterm elections, the outcome viewed as most-likely by investors. We maintain our 30% odds of a next-most likely scenario, that Republicans keep majorities in both chambers, with only 15% chances of a Democratic sweep," updates the analyst team.
    • The firm's forecast differs widely from the latest FiveThirtyEight.com forecast of a 86% likelihood that the Democrats capture the House.
    • survey of market participants indicates that small declines for bond yields and the dollar are expected if the Democrats score a narrow House victory. Most analysts see initial stock market gains if the Republicans were to sweep.
    • Interestingly, history is on the side of stock market gains after the election, with the S&P 500 actually having posted a gain in every midterm election since 1946. Also in the mix, some Wall Street analysts are out with reminders this morning that overnight action with stock index futures in the 2016 election reversed quickly to leave some investors on the wrong side of the rapidfire post-result trade.
    • Natural gas futures +8% at $3.54/MMBtu and the top U.S. natural gas ETF (NYSEARCA:UNG+7.7% pre-market on forecasts for colder than average temperatures this week.
    • According to the Weather Channel, a blast of cold temperatures this week will be accompanied by the chance for some accumulating snow in parts of the Plains and Midwest later in the week, and several disturbances are expected to track from the Plains and Midwest into the East.
    • Another cold front is expected to move through the central and eastern U.S. late this week, reinforcing the cold conditions and bringing the chance for rain and snow.
    • Gas-oriented energy companies are indicated higher pre-market: CHK +5.7%RRC +5.6%SWN +6.3%COG +4.2%EQT +2.7%.
    • Although Apple (NASDAQ:AAPL) said it would do away with iPhone projections, estimates are coming in from elsewhere.
    • According to the Nikkei, the tech titan has told its smartphone assemblers Foxconn (OTC:FXCOF) and Pegatron (OTC:PGTRF) to halt plans for additional production lines dedicated to the recently launched iPhone XR.
    • Apple had also asked Wistron (OTC:WICOF) to stand by for rush orders, but the company will not receive any for the iPhone XR this season.
    • It's not just fantasy… Queen biopic Bohemian Rhapsody was box office champion this weekend, with an estimated $50M opening in North America – and another $72.5M internationally – despite production troubles and mediocre reviews.
    • Successes for the film division of 21st Century Fox (NASDAQ:FOX) will ultimately become wins for Disney (NYSE:DIS). The entertainment giant is buying most of Fox's entertainment assets in a $71B deal expected to close next year.
    • "The BOJ fully recognizes that, by continuing monetary easing, financial institutions' strength will be cumulatively affected," Bank of Japan Governor Haruhiko Kuroda told business leaders in Nagoya, central Japan.
    • "Although these risks are judged as not significant at this point, the BOJ will scrutinize developments," he added, outlining that Japan is no longer in a situation where it's best to "decisively implement a large-scale policy to overcome deflation."
    • Talking up his commitment to "free trade," President Xi promised to lower import tariffs, reduce investment barriers and broaden market access at the opening speech of the China International Import Expo.
    • Separately, China's services PMI chalked its slowest growth in over a year in September, a somewhat worrying data point as many have been counting on it to offset trade war manufacturing pressure.

  18. Dems win Congress, even out the Senate and the markets go down….


  19. Definitely 1 and UP.


  20. How small dollar amounts become big ones


  21. Trump Administration Spares Corporate Wrongdoers Billions in Penalties



  22. The Yawning Divide That Explains American Politics



  23. Oil up as U.S. imposes sanctions on Iran, Tehran defiant



  24. Preference for congress chart / Phil – That chart right there goes a long way to explain the war on science and education. These are the true enemies of the GOP!


  25. Soybeans farmers are tired of winning the trade war:

    https://www.nytimes.com/2018/11/05/business/soybeans-farmers-trade-war.html

    But this year, the Chinese have all but stopped buying. The largest market for one of America’s largest exports has shut its doors. The Chinese government imposed a tariff on American soybeans in response to the Trump administration’s tariffs on Chinese goods. The latest federal data, through mid-October, shows American soybean sales to China have declined by 94 percent from last year’s harvest.

    The Chinese market is gone for good I think! That's what happens when you play with people who have a plan and have the means to enforce it. Maybe these farmers can start growing MJ…


  26. Good article Stjean – Check out the comments of the readers at the end of the article…

     

    "you reap what you plow"….. :)


  27. …actually, it was "you get what you plow" 

    I like my version better…. :)


  28. Phil / MJ – I have the following position in MJ was looking at potentially buying some Jan $25 calls ( Maybe 10) and leaving naked waiting for a pop.  The other option would be to roll down to the Jan '21 25/45 spread but would take a 18K hit on roll.  As still another option would be to continue to sell short term callers to get my cost down ( the is the one I'm leaning maybe selling April $35 callers 10X for $3.xx)…  Any recommendation on this would be appreciated. 

    Long 50X Jan '21 $35 Calls ( bought at 11.4)

    Short 50X Jan '21 50 Calls ( sold for 5..2)

    Short 5X Kan '21 $30 Puts ( sold for 6.5)


  29. There's a lot of insider buying happening with IBM, fwiw. (This is from insidercow.com) 


  30. Education/StJ – Carlin and I have been saying it for years, this country has been purposely dumbed down. As is made obvious by this 100 year-old test for 8th graders. That was for just starting high school!

    AAPL low was $198, back to $201.50, /NQ back at 6,900.


  31. MJ/Batman – You have a nice hedge, why turn it into gambling?  I could see SELLING 10/50 calls for an income but not buying them and paying massive premiums.  MJ is at $32.50 and you can sell 10 Jan $35s for $2 ($2,000) and, if it goes higher, you roll them along and, if it goes lower, you have $2,000 towards the cost of rolling the 2021 $30s ($9.20) to the $25s at $12.50 so $2,000 will pay for almost 20 rolls and then you can do it again until you have all $25s on the long side and then you can sell more short calls over and over again.  Why gamble when you can just do that?


  32. quiet board…


  33. Yodi, you predicted the  $20 up or down!…. a pity it was down because I sold some puts, hope it recovers soon.


  34. Quiet/Jabob – I'm on vacation, you guys should take time off too!  This week won't matter until Thursday afternoon.

    Dow's up 0.66% but Nas down 0.75% – even Oil and /RB basically flat.

    • Dow 24,300 with a weak bounce at 24,800 and a strong bounce at 25,300
    • S&P 2,640 with a weak bounce at 2,710 and a strong bounce at 2,780
    • Nasdaq 6,870 with a weak bounce at 7,080 and a strong bounce at 7,230
    • Russell 1,485 with a weak bounce at 1,530 and a strong bounce at 1,575
    • NYSE 11,880 with a weak bounce at 12,150 and a strong bounce at 12,400

    We lost greens on the Nas and NYSE – not a contstructive day!


  35. Phil / MJ – I pulled some money last quarter buy selling the Jan 42 Calls when MJ was at 40 ish and had closed those out.  It makes sense to go for another round on this one.  And keep doing this….    Thanks !


  36. /RB behaving badly…sheesh. I’ve got one contract at 1.70, didn’t stop out. See how it goes today but not good so far! 


  37. anyone fiqured out what is popping the market since two thirty all i can find is a little pull back in vix

    thanks


  38. Wow, oil and /RB collapse yet again!  $62.50 and $1.68.

    Can't imagine what the Dow is excited about based on that move.

    MJ/Batman – They pay great money on the front months, so I like them as a sales vehicle. 

    Pop/Tommy – Can't have the market looking all terrible into the election…


  39. WSJ scoop: Amazon will pick not one, but two cities for its HQ2 project. The workforce will be even distributed across two locations. The finalists are believed to be Crystal City, Va., Dallas, Texas and New York City.

     Dallas and Crystal City would be good for AAL


  40. Phil,

    Can you suggest a new entry on MJ?


  41. AMZN/Stock – Nice way to get free advertising for a year while they "decide".

    MJ/Japar – At the moment, I'd go with:

    • Sell 5 MJ 2021 $35 puts for $10.20 ($5,100)
    • Buy 15 MJ 2021 $30 calls for $10 ($15,000)
    • Sell 15 MJ 2021 $40 calls for $6 ($6,000) 

    That's net $4,900 on the $15,000 spread with a break-even around $32.50 and then you can sell quarterlies like:

    • Sell 5 MJ Jan $36 calls for $2 ($1,000) 
    • Sell 5 MJ Jan $29 puts for $2 ($1,000) 

    Now the net of the spread is just $2,900 and you have 8 more sales ($16,000) to go while you wait for your $15,000.

    If you keep a stop at $3 on 2 of the short puts or calls and a stop at $4 on two more – you're very unlikely to get burned.

    No much to do at this point but see what happens tomorrow.


  42. From WSJ Heard on the Street:
     

    f the election turns out the way most people expect — Republicans hang onto the Senate while Democrats take control of the House — it should be met with relief in markets. Bond market worries about bigger deficits under a Republican sweep (more tax cuts) or a Democratic one (infrastructure spending), will be laid to rest, for example. But when it comes to the forces shaping the economy, the election may not count for much, writes Justin Lahart.

    That is because the election will have little bearing on the issues that really matter now, like when economic stimulus will start to fade, how high rates go and whether the White House and China reach detente on trade or keep fighting.

    What happens on Tuesday will be enormously distracting, and could have important implications for the future of politics in America. But for investors, at least for now and not for the far-off future, it may amount to only sideshow.


  43. Election – well, I'm a weary old cynic, so I'm calling it repubs win big time accompanied by accusations of cheating, and the market zooms up.


  44. Dems win house   Senate a tos up. Market sideways









  45. Good Morning…

    Bausch Health Care beats on revenue and non-gaap income.

    Maintains full year revenue guidance and raises non-gaap EBITDA guidance. Stock up 3% pre-market.

    Repaid $360 million of debt during the quarter. Slow and steady… 

    Hi fives to all the members who were on the Valeant/BHC train.


  46. Phil ,  Good Morning.

     

    AAXN looks interesting for an entry?