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Merry Monday Markets – Holiday Losses Magically Erased

Nasdaq is up 1.5% this morning!

That's 100 points and that erases all of Tuesday, Wednesday and Friday's losses but we're still, unfortunately well below our 6,870 failure line (10% correction) and the weak bounce line for that is way up at 7,080 – so let's not injure ourselves patting each other on the back on a no-volume pop in the Futures.

I would much rather see the market consolidate and form some sort of proper base before climbing back up – when you build a recovery on low-volume rallies, you have nothing but a house of cards, ready for the next economic wind to collapse it all over again. 

Mexico said it would deport a group of Central American migrants who rushed a fence separating Tijuana and San Diego and were dispersed by U.S. Border Patrol agents using tear gas.The good news this morning is progress on Brexit, hopes that the US and China can make trade progress at the G20 and oil has finally stopped falling at $50 – so the energy sector is having a bit of a relief rally.  Also, border patrol agents seem to have saved us from that deadly migrant caravan by gassing women and children who dared to approach the US Border to file legal claims for asylum, rather than trying to sneak in.  I guess that's why they call them terrorists – those children sure look terrified (cue music "Proud to be an American").

Now we have to see if the markets can cross the border back into positive territory for the year but 2018 has been an exceptional disaster with 90% of all 70 standard asset classes now down for the year, the worst overall performance since data has been kept, starting in 1901 so it seems Trump has indeed set a record that may never be broken because, not even leading up to the Great Depression have stocks, bonds, metals, munis, energy, metals – even crypto currencies – ALL down for the year!

I had predicted way back on Jan 25th that 2018 was going to be a stock picker's market (our favorite kind) and, oddly enough, Apple (AAPL) was at $173.07 that day and it's right back there now.  The S&P 500 (/ES) was at 2,850 (now 2,657) and the Nasdaq was just testing 7,000 (now 6,625).  As noted by Poullaouec, it's been a pretty miserable year but you might not have thoght so because our Liar in Chief has been telling us, over and over again, how great the economy and the market is doing to the point where our brains have been thoughroughly washed and it's kind of hard to tell what reality is anymore.

That's why it's bad for investors when the Government lies to us.  We need good information to make good decision and, when your Government and the Banksters turn the Financial Media into nothing more than a propaganda machine to support their objectives – it makes it very hard for investors to figure out what to do with their money.

Hedge-fund manager Pierre Andurand, who earlier in the year bet oil could soon hit $100 a barrel, saw his $1Bn Andurand Commodities Fund suffer its largest monthly loss ever in October. Funds that had built up large stakes in fast-growing technology companies were also stung by sharp reversals. Twenty-six funds dumped their entire stakes inFacebook Inc. in the third quarter, according to a Goldman Sachs Group analysis of 13-F filings, including billionaire Daniel Loeb’s Third Point LLC, which offloaded 4 million shares, citing “a very disappointing quarter” for Facebook.

Speaking of bonds, we have a lot of them to auction off this week and a lot of data to catch up on as well and we have 6 Fed Speakers including Powell on Wednesday just ahead of their December meeting, where they are widely expected to hike rates.  Powell is speaking just ahead of a large 7-year note auction, which is interesting as they can't afford to see that go off badly.  The next day, Thursday, we get the minutes from the last Fed Meeting with Mester, Evans and Williams all scheduled around it to give it some spin so it does look like we have a market-boosting week ahead of us.  The question is, whether or not we make it back to those strong bounce lines.

 


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  1. I would like to know what is so positive today to lift the markets:

    1. Putin is doing his best to stir up trouble in Ukraine in order to lift oil prices (he needs them over $80 to balance his book)
    2. Our government is trying to hide the facts that global warming will cost us $500B each year if we don't do anything and idiotic GOP politicians tell us that if we do anything it will hurt the economy (but less than $500B – but we don't have math geniuses in Washington)
    3. Speaking of math geniuses, our so-called president wants to lower the deficit but wants to increase spending and not raise taxes! What happened to tax cuts paying for themselves.
    4. That Brexit deal (not signed yet) will please no one – it's like EU membership lite without all the advantages and with most of the costs! So years of negotiations and opportunities wasted!

    Other than that, everything looks great!


  2. More on our so-called president:

    https://www.motherjones.com/kevin-drum/2018/11/run-the-presses/

    Trump also repeatedly told Cohn to print more money, according to three White House officials familiar with his comments. “He’d just say, run the presses, run the presses,” one former senior administration official said, describing the president’s Oval Office orders. “Sometimes it seemed like he was joking, and sometimes it didn’t.”

    Nobody would care much about this except that apparently Trump has changed his mind and now plans a new attack on the deficit while simultaneously demanding (a) increased spending on a bunch of new programs he favors and (b) popular programs not be touched. The authors provide this example from a couple of months ago during the runup to the midterms:

    When staffers sought to include an attack on Democrats’ Medicare-for-all proposals in Trump’s campaign speeches this fall, he initially blanched, two administration aides said. Medicare is popular, he said, and voters want it. Eventually, he agreed to the attack if he could say Democrats were going to take the entitlement away.

    As someone was saying on Twitter, the fact that he ran 6 companies into bankruptcy fails to surprise!



  3. More on the Brexit deal:

    http://www.politics.co.uk/blogs/2018/11/23/may-s-brexit-deal-is-a-humiliation-for-britain

    The details are horrific for Britain but the EU held all the leverage points so why the surprise. The proponents of the Bexit thought that they would negotiate from a position of strength but the EU just called their bluffed and the UK had only a pair of deuce!


  4. Phil / Apple .  I was looking at selling some Jan short callers  Jan '19 20i5 @ 1.xx. Do u think this is a good short caller on a naked Jan '21 180 long callers?  Or do you think i choose something else?  thanks. 


  5. Batman, for what it's worth that does not seem like it brings in much premium (1.xx relates to around the Jan 19, 200 short call). The Mar 19, 200 call gets you $3.65. But how sure are you that AAPL will not 'pop' between now and Jan 19?


  6. Caravan, Thank God I did not reach the boarder yet!


  7. Winston AAPL his longs ( Stock?) will grow faster than his shorts. And there are still 25$ to go. In addition he can roll again.


  8. Good Morning.


  9. Winston . Yodi  AAPL—  I would be covering about 1/2 naked longs so I would be able to roar – I think 202 to 205 is a. pretty good resistance .. but also agree that 1.xx is not much pay… thus the Question for Phil – the maestro…


  10. Yodi – I hear you. But AAPL has already whipsawed many who were long LEAP bull call spreads and liked the idea of selling short covers. That 

    On Oct 5th, 2018 when AAPL had powered its way up to $228, that must have been a very painful position to be in for those holding short positions in AAPL. The only way out was probably to cash out the total position (bull call spreads and buy back short calls) and then re-enter again with a new LEAP spread at a much higher price.

    … and that strategy did not work out too well, because as these damn momentum stocks show, they have a habit of wrongfooting the investor at every turn. Just as people thought they could not take any more on October 5th and sacrificed profits on the spread in the process, sod's law dictates that the moment of capitulation was exactly the all time high of AAPL as from that point onward (with people now holding the new, higher BCS), AAPL starts its rapid decline to its current price. 

    It is now not far off the point of now needing to adjust that new BCS (I haven't checked the price of the long call but it may be approaching the net cost of the spread).

    There is nothing surprising or wrong about this, it is just par for the course on managing spreads with short term short covers against them. Occasionally they bite. Hard.


  11.  

    L Brands called as Black Friday winner

    L Brands (NYSE:LB) is up 2.50%as word spreads that the retailer may have been a huge Black Friday winner.

    Crowded lines at Bath and Body Works and huge sales for the Pink brand are being cited by @NotableCalls.

    Shares of L Brands still trade at less than half of their 52-week high.

     


  12. Winston I hear you, did have the Jan 19 170 short call as well and paid dearly buying it back, but again patience always pays off. Rolling at present a 160 Jan 20 long to 21 160 long and paying the roll with 1/2 the Jan21 155 puts. When these suckers are down I try to roll the longs only and hold on with the shorts.
    Obviously at present we still do not know how AAPL will turn out, so small steps or moves are always good.
    Do not forget if the stock goes up the short puts are your friend. But hell breaks out if it goes down. Just remember you cannot win them all. ( selling Cherry calls!)
    Well you cannot have the cake and eat it!


  13. Stockbern One swallow does not make a spring!


  14. Good morning! 

    Had a big family weekend and just catching up on things.  

    Still the same 10% lines and index lines we'll be watching as last week's slide below them was just a spike on the daily chart now that it's been erased, so we're at:

    • 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

    Another nice thing about the simple bounce line chart is it's easy to see where the inflection points are and this morning it's the NYSE, which is just over 12,150 at 12,195 at the moment.  Then we'd look to see if  the Nasdaq confirms a comeback but, at 6,651 after already being up 120 (1.8%) it's way beyond unlikely that we'll get another 200 points so we should be very skeptical of all approaches to the weak bounce lines while the Nas is still more than 10% down.  

    So, if anything, the NYSE failing 12,150 would confirm that the low-volume pop isn't likely to stick and then we can look to short the laggard on the way back down.  How's that for a morning plan?

    Big Chart – Not a recovery until we hit at least the top of the middle leg of the W's AND in the same time-frame (or better) so we have about two weeks to make it back to 7,200 on /NQ, etc.

    Positives/StJ – At least people are now realizing those negatives are out there – it's the ignoring that really scares me.  US markets are, by far, the best of the World at the moment and our economy looks better than most so people panicking out of Asia and Europe are looking at cheap US stocks (even blue chips) and finding them attractive places to park some cash.

    Global warming is everyone's problem but Putin is mostly Europe and Asia's problem and Brexit is, of course, a Europe problem, etc.  We're always happy to pretend problems in the rest of the World won't affect us – until they do.

    AAPL/Batman – I think AAPL is really low and, if you are a long-term holder, you might want to wait for a bounce to sell short callers.  If you failed to sell short calls when AAPL was high – then trying to make up for the mistake now is just silly.  If you did sell short calls when AAPL was high – then they did their job and went worthless and now you have cash to offset some of the losses and pay to reposition your longs.  If you don't think AAPL can hold $170 – why are you still in the stock?

    Apple is down because they have been relentlessly attacked over a presumption of slow IPhone sales based on some changes in their suppliers that might mean they cut orders or it might mean they cut orders on some models or it might mean they have a new supplier.  Apple NEVER comments on these things so the stock is often manipulated by rumor-mongers to ridiculously low levels and we take advantage of that all the time.  Maybe this time is different – but it feels the same to me and I was in a fairly dead mall this weekend (WPalm Beach) but there was a line to speak to salesmen at the Apple store – so I'm sticking with my premise until I sit at a table with 6 people and less than 4 of them have IPhones.

    Caravan/Yodi – Well we used tear gas as an opener and Trump has given "shoot to kill" orders for any asylum-seeker who throws something at the border guards so I think our "democracy" is safe for a few more days….

    Image result for trump shoot border cartoon


  15. Why is SCO not down more today?


  16. The latest AAII survey shows bulls down to 25.1%. 

    Historically, a good place to buy stocks.


  17. SPWR appears to have bottomed.  Stock up 11% today o good volume.


  18. I guess SCO was trading at a discount last week. That would explain why it isn't down more today.


  19. Hi Phil, I did not get out of the long LB calls in the OOP as suggested. Should I take the $12.5 for the Jan '20 20C or should I wait to see if the bounce takes them higher?


  20. SCO/Jabob – It doesn't react in direct proportion, the traders have to rebalance contracts throughout the day and there's also sentiment of money flow in and out of the instrument that may differ from what's happening with the underlying commodity.

    Meanwhile, Oil (/CL) is up 2.5% on the button at $51.70, so let's keep an eye on that line they were rejected at $52 already.  /RB hits the 5% line at $1.46.  

    AAII/Albo – Well it was down to 25% in early 2008 as well…

    Image result for aaii bullish sentiment chart historical

    Image result for aaii bullish sentiment chart

    SPWR/Albo – I like them for a long-term play.

    LB/Leap – So you still have the 2020 $20 calls LONG that we cashed out ages ago?  I have no idea what the rest of the position is so hard for me to say what I'd do with the stand-alone calls but I do like LB long-term from here and the 2021 $25 calls are just $10.50 and the 2021 $35 calls are $5 so you could buy those spreads for net $5.50 and take $7 off the table on the 2020 calls and still have up to $10 upside for net $17.50 off the table if they get back to $35 with a bit less risk (but a longer wait).  


  21. Blaming trump for crypto is awesome, why didn't I think of that???

    Speaking of thinking, why don't we prop up dictators with arms sales in central america so they can terrorize their population and we can sell arms to private companies at the border stopping the refugees we produced from coming here?

    oh wait.



  22. Thanks Phil. Yes I missed the update on 11/16. Of course LB crashed the next trading day. The only other part of the trade was the LB JAN '20 35 Put which I believe is still in the OOP. 


  23. Phil / Box

    I like Box and Mar '19's 19 call and 16 puts are almost at the same price what would be a good set up to have a long exposure? 

    Thanks as always 

    Pat


  24. LB/Leap – Well, if you have the put, I'm fine with that target and, as I said, I'd do the roll on the long calls while the 2021s are still cheap but there may be more upside if you wait to cover them.

    Box/Pat – They are interesting and growing revenues nicely but burning a lot of cash – $155M last year and about the same for the last 4 Qs so more sales don't seem to translate into more money so far.  For the pleasure of losing $35M per quarter they want you to pay $2.5Bn for the company at $17.35 and top line is maybe $600M so even if they dropped 25% to the bottom line – that would still be a p/e of 20 here and they are miles and miles away from that.  

    If you want to take a chance, you can sell the 2021 $15 puts for $3.20 and, as long as you REALLY want to own them at $15, then that's free money you can use towards a $15 ($6.50)/25 ($3.20) bull call spread for net $3.30 so either a free $10 spread or 2 $10 spreads for about $1.60 each – keeping in mind that if you do the 2x long, then you are spending net $3.20 so the short puts are net $18.20 at that point!  

    Dollar just shy of 97 so a good rally with a strong Dollar so far.  

    AAPL is being saved for later – still $172.


  25. Good tweet by Bruce Bartlett – rushing toward economic disaster:

    And he adds:

    Moreover, the ruling Republican Party's approach to economic policy has not changed one iota since Herbert Hoover. If there is a downturn, it is almost certain that those idiots will slash spending to restore "business confidence."


  26. Woo Hoo – Mars lander down.  We do ocaisionally get something right


  27. Just not my spelling of occasionally





  28. This Is How Capitalism Kills Us






  29. Phil – do you still like stashing away LMQT?

    had a nice run to .40 but now back at .13


  30. Big problem between Ukaine and Russia!!!


  31. is it new trouble yodi


  32. Where is phil?….did he sleep? :-) no comment after 1:53 pm


  33. Sleep – Turkey can do that to you…. ;)


  34. LQMT/Coulter – I do still like them but just long-term speculative.  Every time AAPL releases an IPhone that's not made of liquid metal, they go back down in price.  One day, maybe…

    Sleep/Pat – I was reading the news and doing my Monday things.  Technically, I don't work on Philstockworld.com Mondays – that's my day for getting other PSWI projects done however, since the policy was instituted in March, I think I've actually only missed a couple of Mondays but NEXT Monday – I will be out all day.

    As to no comments, none of you guys said anything and I didn't have anything to say – just watching the bounce to see how high we can fly.

    And yes, turkey totally works on me – puts me right out!


  35. Sleep/Pat – I'd say the board has become sufficiently trained/skeptical of any Monday price action.  Today's volume was even less than last week's holiday-shortened week.


  36. And a 50% reversal after hours!











  37. I like to put up a small BCS on NVDA for discussion.
    As known the stock has dropped considerately and has now a P/E of 20.
    I am looking to initiate a Jan 21 145/175 BCS for about 11.93 to be financed by selling half the amount of puts of Jan 21 125 put for 21.35.
    Further still selling half Dec 18 165 caller for 3.85.
    As long as you are happy to receive the stock at 125 another 18 % drop you have nothing to lose. Only the advantage of selling 2 years of cherry calls.


  38. Good morning!

    NVDA/Yodi – They have massively benefited from BitCoin, etc. mining in recent years, hard to judge how much of that business won't come back for them.  Makes them a little iffy:

    Battered Bitcoin Miners May Start Shutting Down.

    Related image

    Related image

    Image result for nvidia bitcoin

    That's 10-20% of their total revenues and it's their very profitable revenues since they are after-market retail upgrades while their core business is selling components to manufacturers at low margins.

    Image result for nvidia bitcoin

    AAPL back to $171 this morning, that's knocking the markets back a bit.

    Dollar over 97 not helping.

    We're not going to get back to 7,200 that way, are we?

    November 26th, 2018 at 10:36 am | (Unlocked) | Permalink 

    Still the same 10% lines and index lines we'll be watching as last week's slide below them was just a spike on the daily chart now that it's been erased, so we're at:

    • 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

    Another nice thing about the simple bounce line chart is it's easy to see where the inflection points are and this morning it's the NYSE, which is just over 12,150 at 12,195 at the moment.  Then we'd look to see if  the Nasdaq confirms a comeback but, at 6,651 after already being up 120 (1.8%) it's way beyond unlikely that we'll get another 200 points so we should be very skeptical of all approaches to the weak bounce lines while the Nas is still more than 10% down.  

    So, if anything, the NYSE failing 12,150 would confirm that the low-volume pop isn't likely to stick and then we can look to short the laggard on the way back down.  How's that for a morning plan?

    We're at 24,530, 2,660, 6,633 and 1,498 this morning and 12,150 on NYSE so no changes in our grid since yesterday morning which again is why Monday's are meaningless!