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Meaningless Monday Market Movement – Waiting for the Next Shoe to Drop

Are the dip buyers still out there?

That's not entirely clear anymore as we're testing a triple bottom on the S&P since late October and 2,950 to 2,650 is 300 points down and 2,800 is right in the middle and that's where we kept failing – not a very bullish sign and this dip has been faster than the first two so, if the bounce is weaker than the first two – that's a bearish pattern we'll be able to hang our hats on.

Trade talks with China did not improve over the weekend with Lighthizer saying March 1st would be a "hard deadline" while Navarro says "China's predatory days are over" – and those are our chief negotiators!  China is demanding that Canada release the daughter of Huawei's Founder and is treatening "further actions" against the US if the issue is not resolved and this is what happnes when people pretend to negotiate a trade deal but are actually only interested in sabotaging it so Trump can keep taxing (oh, sorry, tariffing) Americans on things they used to buy under free trade agreements.

Speaking of Trump – things have not been going well in Trump Land and that adds to the market uncertainty so I would take any move up this morning with a huge grain of salt.  Very simply, for the S&P, the 300-point drop leads to a 60-point weak bounce so that's the goal for today and failing that (we will fail that) then it's more likely we'll have to keep an eye on the floor tomorrow to see if that holds.

Meanwhile, both China and Japan had poor economic data over the weekend and riots continue in France for the 4th week with 136,000 people marching on Satuday leading to 2,000 arrests while Retail Sales are down $1Bn for the month and restaurant sales are down as much as 50% as people choose to stay home rather than navigate Paris' burning streets. 

If you wonder why you don't hear much about the Paris protests in the US – it's because the Yellow Vest Protests are about economic inequality and the Capitalists that own the media like to pretend there is no such thing so they certainly aren't going to give the Bottom 90% in the US the idea that they could actually object to being ground down by an unjust system that favors those on top to their detriment.

Rather than subsiding, the Yellow Vest Protests have spilled over to Belgium this weekend.  In the US, they try to convince you that this protest is about gas taxes but that was only the spark that started the fire – this has been a long time coming – and not just in France.  Macron is going to make a public announcement this week in hopes of calming things down and, of course, Trump is goading him for being weak while trying to convince his base these protests are over the Paris climate accords and not about calling Oligarchs like himself into account.

The Paris Agreement isn’t working out so well for Paris. Protests and riots all over France. People do not want to pay large sums of money, much to third world countries (that are questionably run), in order to maybe protect the environment. Chanting “We Want Trump!” Love France.

None of this is true, of course, but when has that ever stoped the President from making things worse?  Per Wikipedia, who have facts and citations:

Motivated by rising fuel prices, the high cost of living and claims that a disproportionate burden of the government's tax reforms were falling on the working and middle classes[24][25][26](especially those in rural and peri-urbanareas),[6][27] protesters have called for reductions in fuel taxes, the reintroduction of the solidarity tax on wealth, the raising of the minimum wage, and the resignation of the President of FranceEmmanuel Macron.

 In other worrds, they are essentially protesting Trump's agenda and yes, the fuel tax was a part of the Paris accord to discourage driving but the tax was disproportionately affecting the poor as a person in the Top 1% who makes 100 times the average income, drives just one car so the tax is, in effect, nothing to them while, for those making 1/100th as much – a huge burden.  A flat tax is a very unfair way to address Global Warming.

So there are many issues dragging down the market this morning but the good news is that we're finally pricing in the issues investors have been ignoring all summer long.  There's really nothing "new" here – Trade spat with China, Trump is a crook, Global Warming will kill us all…  same old, same old, on the whole so why worry about it now? 

This is, as I said last week, a CORRECTION, which means the market is CORRECTING towards a CORRECT price in relation to the true value of the stocks – that's nothing to be afraid of – unless you were unrealistically bullish.

 


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  1. From at tweet from @OddStats
    But how about 4th Quarter(s)?

    Yeah, it's not good.

    Here's where we rank so far this year vs $SPX Q4's since 1923 when the index began.


  2. Good Morning.


  3. hi phil ,

    the dx futures in five minute or fifteen minute views from 9pm last night until around 2am this morning jumped up and down by an amount of fifty cents a total of no less than twenty times.

    do you think this unusual action could indicate anything of importance.

    tom


  4. Good morning! 

    I'll finish the post when I get some batteries (7am PST) for my mouse.  Fortunately, my travel computer is a touch-screen (which I almost forgot) so I was able to get some stuff done but way less efficient than usual.  

    I'm in Los Angeles this week and I'll cut out a bit early today and maybe Weds or Thursday but mostly normal hours as long as I can keep waking up at 3am (usually not a problem but I was out 'till 12:30 and I have a full day of plans AFTER the market closes – not even time to nap…

    Lots of people interested in our Cannabis Investing Fund for next year.  I would have thought more people would be working on something but most of the money here is chasing IPOs, which is insane as they are already up 1,000x before hitting the public markets.

    Anything down today is going to be BAD – so let's hope they can pull something out of a hat but, either way, it's Monday – so we can't take things too seriously.  The RUT has already broken down so unless that pops back over 1,475 (now 1,450 so they need a 2% up day) we're still very, very bearish.

    The pound is at an 18-month low with May speaking at 10:30 but it looks like that's getting out of control too.  

    Oil is also down 2.5% and that's after the cutbacks so – disaster!

    /DX/Tommy – It's about the Euro/Pound but the cross-current is the US may be losing a President soon so uncertainty on all fronts.  


  5. Phil you need a RV always batteries on hand shall I send some over for you?


  6. FDX -1.2% (downgraded to Neutral from Buy at BofA/Merrill)

    Seems an over reaction.  Bought some down 11.5.


  7. The Phony US-China Truce


  8. One Drug’s $2.5 Billion Journey from Lab to Market




  9. Sold 1/2 up 3.points.


  10. Brexit situation is a real mess now – the UK lived in an imaginary world where they thought that they had all the leverage and woke up in a world where they have none. It's getting clear that the Leave campaign was financed by bad actors and despite that, the are not doing anything about the results. Here we can impeach a president, but there, they seem to be reluctant to walk back that corrupt vote.





  11. Impeachment Is Getting More Likely


  12. Wow, missed the news about GE lowering the dividend to a penny! Jeez.


  13. atitlan-- what a POS!!!!


  14. ABX +2.5% today – hitting 14 / sh


  15. Phil,

    What are your plans for the portfolios at year end? 


  16. FTR traded with a two handle.


  17. Watching 2600 on the S&P! And 11,800 on the NYSE! And 1440 on the Russell… There are some big lines being crossed now.


  18. Speaking of handles, waiting for Bitcoin to trade with a 3 handle – I mean $3!


  19. Yay, back in business with my new batteries.  I've had this computer a couple of years, that's the first time the mouse died.  I thought it was AAA like my other mouse and I always have AAA batteries.  

    RV/Yodi – You may convert me yet…

    May "defers" the vote but concedes it's unwinnable at the moment.

    FDX/Albo – Nice drop for them 

    $190 is $50Bn and, with normal tax payments, FDX is good for $3Bn in profits ($4.5Bn pre-tax) but last year they took a credit which made earnings look way better than they are.  So $50Bn is 17x earnings and it's actually about right for this kind of company in a normal market – so I wouldn't look for much of a move up but it is a reasonable price for a long-term play.

    Corrupt vote/StJ – We need to do that as well.  If there were real justice – Hillary would be getting sworn in and all Trump bills and appointments would be voided.

    GE/Ati – That was ages ago.

    I love British Parliament – May actually has to talk to a rowdy live audience who are free to boo her during her speech.  Does wonders to keep things honest.

    ABX/Batman – People are starting to panic into gold.

    WPM still cheap (bang, bang, bang):

    Portfolios/Dreamer – If I were going to cash them out, I would have done so a month ago.  I think it's a good lesson balancing them out through a correction so steady as they go.

    FTR/Albo – 5G is going to be a real problem for telco/Cable – maybe that's why VZ dumped their 3 biggest states on FTR.

    And watch 3,00 on Euro Stoxx – that's a real collapse if we fail that:

    Bitcoin/StJ – Funny if it actually falls below the price of a beanie baby but at least a 2 year-old can enjoy holding a beanie baby….


  20. FDX – Phil, I like them going into the Christmas season.  But have a stop in for second 1/2 slightly above 

    entry.  In this market, not anxious to start new positions.


  21. I'm out.  That was quick.


  22. LOL Albo.  

     Wow, this is very ugly and OMG watch out if panic selling begins because you certainly are not enough buyers to support anything close to these prices. If we don’t improve tomorrow we’re going to have to seriously consider adding hedges against a 10% quick drop   


  23. 5G / Phil – Still many issues to be fixed though – for example the facts that the frequencies that they use don't travel far or though structures very well. Still a couple years away where you can replace your cable sub by 5G for your main internet.


  24. The recent moves in VIX, TLT and Gold look like early sign of fear?   USD remains strong too…


  25. Phil/GLD,

    good entry point or not that much of a movement to go for.,

    regards


  26. To put things in perspective, the Russell and NYSE are now only 4% higher than the day when Trump was inaugurated!


  27. Phil / SQQQ – I'm. going to rolls my March $25 Calls ( at a profit)  to June – I'm looking at the June $14 do you agree with this or do you see something else that looks better?  thanks 


  28. Oh on the above, I'm holding on to some March 21 Calls ( 50X ) at 1.00 – I think these should be ok let sit 


  29. 5G/StJ – True but it will be there long before FTR can pay down their debt…..

    Fear/Mito – For sure, finally people are worrying about bad data/events

    GLD/Pat – I'd rather play ABX/FCX/WPM than GLD.  I think the uptrend is sound but likely to be very choppy.

    SQQQ/Batman – Well I don't think I'd want naked longs.  Still a chance we get a trade deal at some point or the Fed signals a hold.  If you have the short March calls, you should be good. 

    Dollar should be done going up, now we see if the market has any bounce left in it.


  30. Generic drug makers hit by Washington Post article on price fixing.  TEVA is down over 7%… other makers also impacted Mylan etc.   Gosh… if this market was not on a free fall…good time for some longer term positions.  Phil.. when will we be interested in TEVA again? $15 for some 21 puts? 


  31. Phil,

    Is there an AAPL option play your like or is it watch and wait since they failed $170. I had the play on from last week but bailed out when AAPL closed below $170


  32. See, indexes all better already.  Gotta love Mondays!

    TEVA/Learner – They were $11 last Nov so $18 isn't that much of a bargain.  They lost about $18Bn last year but this year looks like break-even but it's not a very exciting-looking investment.  On the plus side, they've written off a ton of dead-end drugs but, on the bottom side, they have a portfolio of aging drugs that are all facing declining sales and stiff competition – all in a price-pressure environment.  On the whole, I'll keep my $18.5Bn until I see clear evidence that they can make at least $300M in a quarter – which shouldn't be a hard trick for an $18Bn company but TEVA has only pulled that trick once in the last 6Qs.

      2017 2017 2017 2018 2018 2018
    Period End: 2017-06-30 2017-09-30 2017-12-31 2018-03-31 2018-06-30 2018-09-30
    Period Length: 3M 3M 3M 3M 3M 3M
    Currency: USD USD USD USD USD USD
       
    Revenue 5,720 5,617 5,459 5,065 4,701 4,529
    Total Revenue 5,720 5,617 5,459 5,065 4,701 4,529
       
    Cost of Revenue, Total 2,865 2,967 2,917 2,717 2,640 2,508
    Gross Profit 2,855 2,650 2,542 2,348 2,061 2,021
       
    Selling/General/Administrative Expenses, Total 1,307 1,215 1,357 1,100 1,026 1,052
    Research & Development 469 531 360 317 290 311
    Unusual Expense (Income) 6,834 509 13,443 -358 853 638
    Other Operating Expenses, Total -13.0 17.0 397 -82.0 -94.0 13.0
       
    Total Operating Expense 11,462 5,239 18,474 3,694 4,715 4,522
    Operating Profit/Income -5,742 378 -13,015 1,371 -14.0 7.00
       
    Total Non Operating Interest Expense -300 -235 -229 10.5 -501.5 -234.5
    Other, Net 64.0 -24.0 36.0 -127.5 265.5 14.5
    Income Before Tax -5,978 119 -13,208 1,254 -250 -213
    Income Tax – Total -22.0 -494 -410 46.0 -76.0 -26.0
    Income After Tax -5,956 613 -12,798 1,208 -174 -187

    AAPL/Japar – We sold the 2021 $170 puts for $22, now $22.50 so you're all caught up.  We already have long spreads but of course I like the 2021 $150 ($39)/$200 ($18) bull call spread for $21 on the $50 spread that's $19 in the money to start. If you sell 5 of the puts for $10,100 and buy 10 of the spreads for $21,000, you net in for $10,900 on the $50,000 spread.


  33. /KC back near our magic number again on good crop news (see above).  Below $100 doesn't make sense for /KC so it's a good place to start a position if you intend to happily DD at $100 (or a bit below).

    On /KCN19 it's $111 after bottoming at $110 so that's where I'd go 1x long.


  34. Well, it looks like another nice, flat day so I’m gonna takeoff and get to my meeting.




  35. TSLA train (car?) leaving the station. 


  36. HBI under 15 again…dangit!





  37. Phil,   Referring to your 11:04 comment,hat are your favorite hedges to be added on if you detect the market getting ready to tank ? 


  38. And Phil….Someone here is obsessed with Trump.  They put his picture up on your site multiple times a day! 


  39. Good morning!

    Hedges/Iflan – I’ll put up a few later. 

    Trump/Iflan –  yeah, I can’t control what pictures come with the news. I do realize it’s like way too many pictures of Trump but that’s our current “cult of personality“.