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Monday Market Mania – Trade Talks and Shutdowns

Image result for no deal animated gifWell, we're still closed.

Today is, officially, the first day Government workers will actually not get paid.  Already we've seen TSA workers have sick-outs for protest and things are going to get much worse as Trump's Saturday and Sunday meetings with the new Congressional Leaders resulted in NO DEAL as Trump maintains his "wall or nothing" stance.  

Meanwhile, Trump has said he is going to declare a State of Emergency in order to fund the wall but he's already lost that court case by announcing that he's going to make up an emergency just to fund a wall – what an idiot!  I hope you enjoyed Friday's December Jobs number because, as of this morning, 420,000 people are working without pay and 380,000 people have been furloghed – a nice way of saying temporarily laid off.  

Trump has said he won’t sign any bill funding the government that doesn’t include $5.7Bn in border-wall funding that was part of a measure signed by the GOP-controlled House in December which THEY couldn't pass then, before Democrats took over the chamber. Two Democratic aides said Sunday that an afternoon meeting was delayed by 45 minutes because Republicans weren’t ready with documents to explain why that $5.7Bn amount was needed for the wall.  Keep in mind this is after two full years of sayinging they needed a wall.

The much bigger deal this week is the resumption of trade negotiations with China and we can expect a rumor-driven market until something official is announced, which could be a few MONTHS – if at all.  As you can see, Trump was tweeting out great progress on Dec 14th but that same day, as soon as China said they had no idea what he was talking about, the markets began their second 10% leg down – so be very careful trusting the President – not that you should need a warning about that by now….

We have 9 Fed speakers this week and the release of the last meeting's FOMC Minutes on Wednesday but not all that much data as the Government Shutdown is pushing back a lot of reports so we'll be flying fairly blind into earnings, which are also very light this week and officially kick off a week from Friday, when big banks report but then the 21st is a holiday (MLK) so this whole month is not going to feel normal.

We're still wriggling around between our bounce lines and the only thing that really matters is whether or not we get over those strong bounce lines and hold them into Friday's close – anything less than that and we'll have to get more bearish – again…

  • Dow 27,000 to 21,600 is 5,400 points so 1,080-point bounces to 22,680 (weak) and 23,760 (strong) 
  • S&P 2,950 to 2,360 is 590 points so 120-point bounces to 2,480 (weak) and 2,600 (strong) 
  • Nasdaq 7,700 to 6,160 is 1,540 points so 300-point bounces to 6,460 (weak) and 6,760 (strong) 
  • NYSE 13,200 to 10,560 is 2,640 points so 528-point bounces to 11,058 (weak) and 11,586 (strong) 
  • Russell 1,750 to 1,400 is 350 points so 70-point bounces to 1,470 (weak) and 1,540 (strong)

 

 


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  1. January 7th, 2019 at 9:11 am | Permalink Ignore this user


  2. January 7th, 2019 at 9:14 am | Permalink Ignore this user

    Good morning! 

    I was logged in as Greg so version one of this article has been deleted – sorry if anyone commented over there.

    Indexes a bit positive but nothing too exciting so far – especially as the Dollar is down 0.5% this morning.  How much of our bounce is owed to a 1.3% drop in the Dollar since Thursday?


  3. January 7th, 2019 at 9:29 am | Permalink Ignore this user

    Good Morning!


  4. January 7th, 2019 at 9:40 am | Permalink Ignore this user

    Phil / CMG – approaching the high in the Channel – Do you see any short term callers we can sell?


  5. January 7th, 2019 at 9:49 am | Permalink Ignore this user


  6. January 7th, 2019 at 9:52 am | Permalink Ignore this user

  7. January 7th, 2019 at 10:32 am | Permalink Ignore this user

    CMG/Batman – They just rolled out new menu items so people are excited and earnings are 2/6 and they could go 10% either way so not a great spot to be selling but a 1/4 – 1/3 cover would be fine if you want to sell something as that's easy to roll.  In the LTP, however, we still have 20 short Jan $485 calls – so I do hope they calm down for the next few weeks:

    Short Call 2020 17-JAN 580.00 CALL [CMG @ $458.58 $3.58] -10 8/27/2018 (375) $-48,800 $48.80 $-22.95 $-272.07     $25.85 $2.15 $22,950 47.0% $-25,850
    Short Call 2019 18-JAN 485.00 CALL [CMG @ $458.58 $3.58] -20 11/14/2018 (11) $-39,500 $19.75 $-16.53     $3.23 $0.48 $33,050 83.7% $-6,450
    Long Call 2021 15-JAN 480.00 CALL [CMG @ $458.58 $3.58] 20 11/20/2018 (739) $180,000 $90.00 $-0.35     $89.65 - $-700 -0.4% $179,300
    Short Call 2021 15-JAN 540.00 CALL [CMG @ $458.58 $3.58] -20 11/20/2018 (739) $-133,000 $66.50 $-0.15     $66.35 - $300 0.2% $-132,700

    Submitted on 2018/12/26 at 10:35 am

    CMG/Batman – The reason you are thanking me for the CMG short calls is because I waited PATIENTLY from the October dip to the November high before making that call.  There is no way I would short them down here, this is where we began establishing LONG positions on them!  

    I have to point out stuff like this so the NEXT time I say something, hopefully you'll believe me!  cool

    What's interesting about this chart is how, after 20 years, the old-line companies re-assert themselves.   Snap, Twitter, Paypal, Amazon, Microsoft, Oath (what's that?), Facebook and Google are the only really new ones on most of them are getting long in the tooth as well.  

    Ah, turns out Oath is Verizon Media, so really old disguised as new.  

    That's what the history of Cannabis companies will look like in 20 year – all big tobacco again…

    Artificial intelligence will be a major theme at the world's largest tech show next week.

    Global Housing Markets From Hong Kong To Sydney Join Global Rout. 

    Mass Exodus: More People Left New Jersey Than Any Other State In 2018.

    Macron's Approval Rating Shrinks To 25% Despite Concessions To Protesters. 

    "The Criminals Who Run The Deep State Will Be Exposed": Kim Dotcom Teases "Next Round Of Leaks". 

    Here’s what Wall Street bankers think Apple should buy, if Tim Cook decides to go deal hunting.

    Have I Got a Fund For You! Why Brokers Push Some Investments.

    Markets Are Too Bearish Given Robust Economy, UBS's Weber Says.

    Goldman Says to Bet on Weaker U.S. Dollar After Powell Comments. 

    Seven Key Issues to Determine Success of U.S.-China Trade Talks.


  8. January 7th, 2019 at 10:51 am | Permalink Ignore this user

    StJ/Chart – I think you forgot to highlight '82-'89 followed by 1 down year (the 2nd year of a 1-term president), then 9 more years of prosperity.  I love the transitive property too!


  9. January 7th, 2019 at 11:15 am | Permalink Ignore this user

  10. January 7th, 2019 at 11:15 am | Permalink Ignore this user

  11. January 7th, 2019 at 11:15 am | Permalink Ignore this user

  12. January 7th, 2019 at 11:15 am | Permalink Ignore this user

  13. January 7th, 2019 at 11:15 am | Permalink Ignore this user

  14. January 7th, 2019 at 11:15 am | Permalink Ignore this user

  15. January 7th, 2019 at 11:15 am | Permalink Ignore this user

  16. January 7th, 2019 at 11:16 am | Permalink Ignore this user

  17. January 7th, 2019 at 11:16 am | Permalink Ignore this user

  18. January 7th, 2019 at 11:16 am | Permalink Ignore this user

  19. January 7th, 2019 at 11:16 am | Permalink Ignore this user

  20. January 7th, 2019 at 11:16 am | Permalink Ignore this user

  21. January 7th, 2019 at 11:16 am | Permalink Ignore this user

  22. January 7th, 2019 at 11:17 am | Permalink Ignore this user
    U.S. Sees Trade Deal Within Reach as China Dispatches Top Aide
    By: Andrew Mayeda, Kasia Klimasinska, Jenny Leonard


  23. January 7th, 2019 at 11:17 am | Permalink Ignore this user

  24. January 7th, 2019 at 11:17 am | Permalink Ignore this user

  25. January 7th, 2019 at 11:24 am | Permalink Ignore this user

    Phil,

    What do you think about the Saudi announcement? Is that a significant cut (sounds like it is but impact unclear esp with US production continuing to rise)


  26. January 7th, 2019 at 11:43 am | Permalink Ignore this user

    AAPL down again on a rising market. Not a good sign, as I said before!!!


  27. January 7th, 2019 at 11:44 am | Permalink Ignore this user

    Phil,
    I have a 4 CELG 65/85 spread which is +$3600. But I sold 2  jan 2019 $70 calls. They are hurt. At the moment they are -$3265. What can I do to escape from this situation?

    Thank you

    Gabor


  28. January 7th, 2019 at 11:59 am | Permalink Ignore this user

    AAPL / Yodi – Tons of negative articles today not helping… I am not a huge fan so not worried :-)


  29. January 7th, 2019 at 12:12 pm | Permalink Ignore this user

    STJ, Well if you do not have any options in AAPL no problem, but I still stand to my argument of the other day, A one horse Pony!


  30. January 7th, 2019 at 12:16 pm | Permalink Ignore this user

    Transative/Buckey – Buy = The = F'ing = Dips! 

    Saudis/Japar – Well GS dropped their forecast for oil just this morning and you know my theory that demand will not keep up with supply anymore due to electric cars and fuel efficiency in ICE as well.

    So the real question is are the Saudis cutting enough and can OPEC+ keep up production cuts and where exactly is balance and I've always maintained that $60-65 on /BZ is fair so $50-55 on WTIC is the right range but very easy to go +/- $5 from $52.50 so $47.50 – $57.50 is about where I expect us to settle in over time.

    Apple/Yodi – Still being downgraded by bandwagon-jumpers.

    Apple inks deal with Samsung to distribute iTunes shows on TVs

    . on warning: "I don't think Apple's earnings miss had anything to do with the present trade talks"

    still generates around $64 billion in free cash flow per year, implying a P/FCF ratio of 11.5

    Billy Ray: I'd wait till you get to around 10x trailing P/E, then I'd buy. You'll have cleared out all the suckers by then.

    That's at least 1.5 horses, Yodi…

    CELG/Kgab – Well you over-covered and got burned, not much to do about it without making massive moves.  I don't know the date of your longs but the Jan $70s are $18 with the stock at $87.79 and the offer is technically about $100 so you could roll them to 2x the 2021 $95 calls at $7 and HOPE (not a good strategy) that the offer isn't sweetened before the closing in which case you pay back about $5 and you can also sell the 2021 $70 puts for $4 against those so selling net $22 for each $18 pushes your break-even (no worse than you are now) to $107 and anything below that is a bonus vs where you are now.  


  31. January 7th, 2019 at 12:23 pm | Permalink Ignore this user

    Kgabor, CELG I trust it is the BCS 2021 so here you do have to pay the piper, check there is no premium left until you roll the 70 caller further out possible April 85 at 6.32. If you have sold leap puts aswell they are your friend, as well the long leap caller. I would not sell Puts during the stock is going up, as Phil suggested at this stage. Aswell we are in a very unstable market, things can go down at any time.


  32. January 7th, 2019 at 12:32 pm | Permalink Ignore this user

    CELG for example
    I hold the 70/85 21 BCS. The 70 call up 2.42 the 85 caller against me 1.60 and the Jan 20 85 put lost 1.25. I even sold the Jan 19 87 caller for 1.30 now up .52 cents. So things are not all against you as you can see.


  33. January 7th, 2019 at 12:35 pm | Permalink Ignore this user

    Want to get some more NYCB and sold the April 10 put for .70. Stock trading at 9.98. Stock yields 6.8%!!!!


  34. January 7th, 2019 at 12:39 pm | Permalink Ignore this user

    I think besides the VIX AAPL is just about the only red tail-light


  35. January 7th, 2019 at 12:39 pm | Permalink Ignore this user

    Now we've got some good follow-through…


  36. January 7th, 2019 at 12:49 pm | Permalink Ignore this user

    On more thing. If cherry calls hurting you, it is always a good sign, as you should be covered by BCS and short puts.However if short puts are hurting just watch out!


  37. January 7th, 2019 at 1:01 pm | Permalink Ignore this user

    FMCC looking STRONG


  38. January 7th, 2019 at 1:21 pm | Permalink Ignore this user

    Phil- For SQQQ new hedge is your preference the Jan ‘20 15/30 spread or the June 13/21 spread? Last week of Christmas there was discussion about both in the portfolios and I was looking for a new hedge. They are both fairly close in prooce now. Thanks.


  39. January 7th, 2019 at 1:51 pm | Permalink Ignore this user

    Phil thoughts on GDX vs LH.   these two diagnostic firms have cornered the market.  Seems like a safe play in this area. Both stocks heavily beaten up over the last 3-4 months


  40. January 7th, 2019 at 1:53 pm | Permalink Ignore this user

    Sorry that was DGX not GDX


  41. January 7th, 2019 at 2:08 pm | Permalink Ignore this user

    safe to short QQQ here, maybe by EOD


  42. January 7th, 2019 at 2:35 pm | Permalink Ignore this user

    Yodi,  When you sell your "cherry calls," as a general rule, how many do you sell relative to the number of spreads that you have — 50%, or what?  Also, do you attempt to sell weeklies, or do you go farther out?  I'm sure that it varies greatly depending on the stock, but when you sell, how far above the existing price do you try to set your strikes? I assume that your goal is to safely generate additional income and to have additional cover on the spreads.  Do you generally try to bring in .$50 or $1.00 per cherry call?  Thanks for any advice you can give me!


  43. January 7th, 2019 at 3:11 pm | Permalink Ignore this user

    FMCC/Soma – Too bad I got bored holding them.  Was bound to happen eventually.

    SQQQ/Calc – Depends what you're hedging against.  If it's LTP plays, why force yourself to buy twice?  As I no longer expect a major short-term correction, I've moved ours out to mainly 2020s.

    Markets have been falling since Trump announced he will hold a press conference near the Mexican border tomorrow – can't be good though it may end the shutdown if the Dems gave him a fence and he's decided to act like that's what he wanted all along.

    GDX/Options – What?  LH is lab diagnostics and GDX is a Gold miner ETF.  I thing I'd go GDX given those two choice.  DGX, on the other hand, is Quest and they are a nice little company, as is LH and both are priced about where they should be (13x earnings) for the long-term and I think either is good for a long-term hold now that the idiocy has come out of their prices.  

    DGX has longer-term options that seem more liquid, so I'd go with them for that reason alone.

    Shorting/BDC – I don't know, not going down after a huge up day is kind of bullish.


  44. January 7th, 2019 at 3:17 pm | Permalink Ignore this user

    FYI, VIX is still over 20. Good premium selling times with some caution.


  45. January 7th, 2019 at 3:18 pm | Permalink Ignore this user

    CHK/Phil- got sold off badly because of oil price crash? what's a new play for CHK? I thinking of trying


  46. January 7th, 2019 at 3:32 pm | Permalink Ignore this user

    John,
    I have written many times about selling cherry calls. I may say you might not have read or seen my comments.
    There is not an iron role to sell a call. Selling calls on leap BCS are different to selling calls on Stock.
    With BCS you should never sell more than ½ the amount of calls than the BCS you have. The cherry call can be weekly, monthly or even further out. Possible do not sell a call in the month the stock makes it’s declaration. Each stock performs different in respect to the BETA of the market. Volatility, position on graph etc., balance sheet, cash flow. You just name it. You need to study each stock you write BCS on or purchase a stock.
    The OTM call I sell on BCS should possible bring more than 1% per month
    If you own the stock you can sell the same amount of calls as the amount of stock you own.
    My armchair trades mostly are done with stocks which have a yield of more than 3%. The combined income of sale of calls and puts together with the div. can bring from 2 to even 5% per month.
    At present market conditions it is even more difficult to find the right day or even the right hour of the day to sell calls and puts. A fist role is, sell calls when the market is high and puts when the market is down.
    One can write a book about this, and as said above I have given many comments, and I have sometimes the feeling they are only read by few.
    It take more than 10000 hours and you still make many mistakes. There is nothing perfect.
    I hope this helps, as there is no role to fit all.


  47. January 7th, 2019 at 3:39 pm | Permalink Ignore this user

    Yodi,

    I do read very carefully what you say. You are succinct and make very good observations. Please do continue to post your input.

    Shashi


  48. January 7th, 2019 at 3:40 pm | Permalink Ignore this user

    CHK/Dave – Recovering a bit today.  In the OOP, we added 30 2021 $1/3.50 bull call spreads at 0.70 back on 12/26 and they haven't changed very much, looks like $1.60/0.70 now (0.90) on the $2.50 spread so that's a very nice upside, even without selling puts. 

    LOL Yodi – Now you know how I feel…

    AAPL $147.69, right about the bounce line at $148 so not too bad but that's the 2-day bounce from Thursday's drop – we still have a long, long way to go to get rid of the downtrend but consolidating at $150 is fine for a move back to $175 post-earnings.  


  49. January 7th, 2019 at 3:52 pm | Permalink Ignore this user

    Phil/AAPL

    speculative play Feb 01 (weekly) – 160/170 BCS for 0.51?

    regards


  50. January 7th, 2019 at 3:54 pm | Permalink Ignore this user

    ~Phil/AAPL

    sorry it is the 165/175 BCS

    or Feb 15  – 160/170 BCS for 1.46?

    regards


  51. January 7th, 2019 at 3:58 pm | Permalink Ignore this user

    Comment content omitted because it is too long.


  52. January 7th, 2019 at 3:58 pm | Permalink Ignore this user

    Fed's Bostic sees one interest-rate hike this year

    • Atlanta Fed President Raphael Bostic says the Federal Reserve may only need one interest-rate hike this year even though U.S. economic growth clocked in faster than expected last year.
    • Corporate executives' concern about moderating economic growth and a global slowdown may limit the U.S. central bank, Bostic said on Monday.
    • While he's not a member of the Fed's monetary policy committee this year, the comments illustrate how the recent stock market selloff, combined with weak economic data from China and Europe, have started to shift the tone at the Fed.
    • Previously: Powell gives averages additional boost (Jan. 4)

    Fannie Mae, Freddie Mac jump after Otting takes over at FHFA

    • Fannie Mae (OTCQB:FNMA +13.8%) and Freddie Mac (OTCQB:FMCC +9.7%) rise to their highest intraday levels since November of 2016 as U.S. Comptroller of the Currency Joseph Otting takes the reins as acting director of the Federal Housing Finance Agency, the GSEs' regulator.
    • Otting will be able "to make any early moves that he, Treasury, or the Trump White House may have been itching to make during the cautious former Democratic Congressman's (Watt's) tenure," writes Capital Alpha's Charles Gabriel in a note.
    • "Any bold moves preparing the way toward GSE reform seem likely on hold" ahead of Mark Calabria's likely Senate approval as FHFA head later this winter, he writes.
    • Source: Bloomberg First Word.
    • Previously: Mnuchin hints at Frannie changes to end government control: Bloomberg(Dec. 18, 2018)

    Goldman cuts 2019 oil price outlook on oversupply concerns, U.S. shale growth

    • Goldman Sachs cuts its oil price forecasts for 2019, citing rising global production and surprisingly resilient U.S. shale growth, even as crude continues to move away from December’s 18-month lows; February WTI settled +1.2% at $48.52/bbl.
    • Goldman now expects the Brent benchmark to average $62.50/bbl this year, down from a previous forecast of $70, while seeing WTI averaging $55.50/bbl in 2019, down from a prior estimate of $64.50.
    • "We expect that the oil market will balance at a lower marginal cost in 2019 given higher inventory levels to start the year, the persistent beat in 2018 shale production growth amidst little observed cost in?ation, weaker than previously expected demand growth expectations (even at our above consensus forecasts) and increased low-cost production capacity," the firm writes.
    • Nevertheless, Goldman slightly raises its stock price targets for BP, which the firm says is "on the cusp of delivering one of the industry’s strongest pipelines of new oil and gas projects," and Royal Dutch Shell (RDS.A, RDS.B), which "offers the strongest cash returns to shareholders, on our estimates. (Source: Bloomberg First Word)

    Report: Uber IPO worth $90B, not $120B

    • Uber's (UBER) initial market cap could be a little less than $90B at its IPO or about $14B higher than its last private round valuation, according to The Information sources.
    • The valuation, which is lower than the $120B some floated when the IPO was announced, was based partly on projections Uber gave creditors last March. The company forecasted doubling its 2017 net revenue to $14.2B by this year and that its loss before interest, taxes and non-cash items would fall to $500M from last year's $1.7B.
    • Uber expects to go public in the first half of 2019, racing rival Lyft (LYFT) to the opening bell.

    Semis outperform ahead of CES

    • The Philadelphia Semiconductor Index gains 2.2% compared to the tech sector (NYSEARCA:XLK) +0.7% ahead of CES 2019 with Nvidia +5.7% and AMD +7.6% leading the way after the former's presentation yesterday that included a new gaming chip.
    • AMD chief Lisa Su will present a keynote address on Wednesday at 9 AM PT.
    • Related semiconductor ETFs: SOXL, SOXX, SMH, USD, PSI, XSD, SOXS, SSG, FTXL, XTH

    Pizza Hut expands expands beer delivery program

    • Pizza Hut (NYSE:YUM) says it's adding more restaurants to its beer delivery program. The second wave of beer delivery expansion covers nearly 300 restaurants across Florida, Iowa, Nebraska, North Carolina, Ohio and additional locations across California and Arizona by mid-January.
    • The rollout is a brand priority for parent Yum Brands, with Pizza Hut aiming to grow beer delivery capabilities to 1K restaurants across new markets by this summer.
    • "As the official Pizza Sponsor of the NFL, we've been celebrating football fans all season long, so it only makes sense for us to bring more customers the beloved combo of pizza and beer ahead of the Super Bowl," says Pizza Hut Chief Brand Officer Marianne Radley.
    • Pizza Hut reported a 1% drop in U.S. sales during Q3. YTD U.S. sales were flat through the end of Q4.
    • Source: Press Release

    FT: SoftBank slashes WeWork investment by $14B

    • SoftBank (OTCPK:SFTBF, OTCPK:SFTBY) is slashing its planned WeWork (VWORK) investment from $16B to $2B, according to Financial Times sources. The investment, which could value WeWork at $20B, will also no longer involve the Vision Fund.
    • The cut follows the recent tech sector rout and concerns among Vision Fund investors about the large financial commitment.
    • Despite the cut, SoftBank reportedly remains bullish on WeWork's prospects.
    • Sources say the funding could be announced as early as this week.

    Perishable food play from Amazon

    • Amazon (AMZN +3.7%) appears to be prepping to make a deeper push into ready-made meals, according to some digging by TJI Research.
    • TJI found a job posting from Amazon in which it says it's looking for the right hires to help it commercialize a portfolio of perishable packaged foods.
    • "Ready-made meals is an interesting strategy because it leverages two major competitive advantages Amazon has been investing in heavily: 1) its Prime Now network of last mile delivery solutions, and 2) its growing network of Amazon Go and Whole Foods food distribution centers, er, grocery stores. Ready meals are a logical application to run on top of this infrastructure," notes Justin Smith.
    • The development could be of interest to Blue Apron (APRN -3.5%), HelloFresh (FRESH) and Kroger's (KR +1.7%) Home Fresh business depending upon the targeted market

    World Bank president's resignation could spark a power struggle

    • World Bank President Jim Yong Kim's unexpected resignation could trigger a battle over who names the next president of the world's largest development-finance institution.
    • Kim plans to step down as president of the World Bank on Feb. 1 to join an unnamed firm to focus on infrastructure investments in developing countries. Details on the new position will be announced soon, the World Bank said.
    • He was first appointed World Bank president in 2012 and reappointed in 2016 to a term lasting through 2021.
    • In the bank's 70-year history, the U.S. has always selected its president; but in 2012, Kim's nomination by the U.S. faced contenders from Nigeria and Colombia, the Wall Street Journal says.
    • Previously: World Bank trims East Asia's 2019 GDP forecast on trade frictions (Oct. 4, 2018)

    Retail sector breaks higher

    • Retail heavyweights Target (TGT +5%), Walmart (WMT +1.8%) and Macy's (M +3.2%) are outperforming broad market averages. A resumption of U.S.-China trade talks and more positive read-through on Friday's strong jobs report may be helping to bring some buyers back into the sector.
    • Notable gainers include Ascena Retail (ASNA +11.7%), Stein Mart (SMRT +5.6%), Boot Barn (BOOT +8.7%), Abercrombie & Fitch (ANF +7.5%), The Children's Place (PLCE+6.7%), Gap (GPS +6.2%), Express (EXPR +5.3%), Ross Stores (ROST +5.3%), J. Jill (JILL +4%), L Brands (LB +6.9%), Ollie's Bargain Outlet Holdings (OLLI +7.5%), Dollar Tree (DLTR +6.1%), Burlington Stores (BURL +3.3%), Stitch Fix (SFIX +9%), Farfetch (FTCH +6.2%) and The Container Store (TCS +5.7%).

    Wolfe Research cites pros and cons with Caesars

    • Wolfe Research checks in on Caesars Entertainment (CZR +2.2%) after watching shares fall more than 50% from their 52-week high.
    • "There have been some positive developments like activism, M&A rumors and an offer from Tilman Fertitta, CEO change, and improving industry trends in Las Vegas," writes analyst Jarde Shojaian.
    • "However, right now there is also still a lot of uncertainty regarding future management, given the announced CEO change with no replacement announced," he adds.
    • Shares of Caesars have perked up a bit in 2019, up 6% YTD.

    Wall Street scales back expectations on bank earnings

    • A bunch of banks get downgrades Monday as analysts warn that interest rates won't help Q4 earnings and loan loss provisions may accelerate.
    • Raymond James cuts ratings on 13 banks as analysts David Long and Michael Rose lower earnings estimates for most banks across its coverage.
    • They expect plenty of downward revisions to net interest margin "with rates no longer providing such a benefit to asset yields, and deposit betas continuing to rise" as well as slowing loan growth and increasing loan loss provisions.
    • The firm cut ratings on: Business First (BFST -0.5%), Hancock Whitney (HWC +0.3%), and Independent Bank (IBTX -0.8%) to outperform from strong; First Horizon (FHN+0.9%), First Midwest (FMBI -0.1%), First Republic (FRC +0.1%), Hanmi Financial (HAFC -0.5%), LegacyTexas Financial (LTXB -0.1%), Towne Bank (TOWN -0.4%), United Community Banks (UCBI +0.2%), and UMB Financial (UMBF +0.3%) to market perform from outperform; Associated Banc-Corp (ASB -0.1%) and Trustmark (TRMK-0.6%) to underperform from market perform.
    • Macquarie analyst David Konrad cut Bank of America (BAC +0.2%) to neutral; he upgraded Citigroup (C +1.4%) to outperform.
    • Goldman's Richard Ramsden downgrades PNC Financial Services Group (PNC +0.3%) to neutral and Evercore (EVR -0.8%) to sell.

  53. January 7th, 2019 at 3:58 pm | Permalink Ignore this user

    Daimler talks self-driving trucks at CES

    • Daimler Trucks North America (OTCPK:DDAIF) introduced the first SAE Level 2 automated truck in series production in North America as part of its CES presentation.
    • The new Freightliner new Cascadia truck is capable of both lateral (steering) and longitudinal (acceleration/deceleration) control.
    • The company says the new Cascadia also features one of the industry's most efficient designs, due to Daimler's significant investment in ongoing R&D in aerodynamics, powertrain development and systems intelligence. The enhancements give the new Cascadia  a 35% improvement in fuel efficiency compared to the first Cascadia introduced in 2007.
    • Looking ahead, Daimler plans to invest £500M in the coming years to advance to SAE level 4 capabilities with its autonomous trucks.
    • Source: Press Release

    Baird stays positive on Facebook as dramas subside

    • Baird is reiterating its Outperform rating on Facebook (FB -0.5%), saying engagement is starting to stabilize after a year of controversies.
    • It's basing its take on partner checks as well as an internal survey of users.
    • "While we were more cautious through 2018, we are incrementally positive as trust and usage likely stabilize/improve this year," writes analyst Colin Sebastian. "Instagram engagement growth is now on par with Facebook among younger cohorts (at Snapchat’s (SNAP +2%) expense), a positive given Instagram’s contributions to revenue growth." (h/t Bloomberg)
    • Baird has a $195 price target, currently implying 42% upside.

    Supreme Court rejects Exxon's appeal in Mass AG bid for climate documents

    • The U.S. Supreme Court declines to hear Exxon Mobil's (XOM +0.5%) appeal of a ruling by the top court in Massachusetts that said the state's attorney general had jurisdiction to seek records to probe whether the company concealed its knowledge of the role fossil fuels play in climate change.
    • The Court’s action marks XOM's latest setback in efforts to stop the Massachusetts investigation and a similar one by New York’s attorney general, who in October filed a lawsuit against the company.
    • The Massachusetts AG in 2016 issued a civil investigative demand to XOM seeking documents to investigate whether it had violated the state's consumer protection law through its marketing and sale of fossil fuel products; XOM said that because it is incorporated in Texas and New Jersey, the AG had no basis to seek documents to conduct a Massachusetts-based probe.

    Crude oil climbs as Saudis said to plan to cut exports by 800K bbl/day

    • Crude oil extends its recent rally from 18-month lows, bumping to highs of the day after OPEC officials say Saudi Arabia plans to cut crude exports to 7.1M bbl/day by the end of January, as it seeks a return to $80/bbl oil to cover a massive government spending boost: WTI +3.4% to $49.61/bbl, Brent +2.8% to $58.66/bbl.
    • The reduction of as much as 800K bbl/day from November levels would effectively go beyond commitments the Saudis made last month to OPEC, but cartel officials say the effort is unlikely to be enough to lift prices to a level the Saudis desire, WSJ reports.
    • OPEC oil supply fell in December by 460K bbl/day to 32.68M bbl/day, according to a Reuters survey, led by cuts from Saudi Arabia.

    Analysts skeptical of potential GE-Apollo jet leasing deal

    • General Electric (GE +6.1%) gains in early trading following a report late Friday that Apollo Global is considering a bid for the company's jet leasing unit, but Wall Street analysts are skeptical of the actual size of a potential deal and its impact on GE's turnaround.
    • The jet leasing unit could be valued at as much as $40B, according to the report, but J.P. Morgan's Stephen Tusa says the unit could be worth closer to $30B and is unlikely to be the "silver bullet" that some investors might be expecting.
    • "We remain skeptical on the company’s ability to harvest enough value out of its assets to reduce liabilities, both hard and soft," Tusa writes.
    • Barclays' Julian Mitchell says while such a deal could reduce some of the existential risks faced by the company, a lasting impact on the equity value would require more clarity on the liabilities at GE Capital; "otherwise, the 'narrative' will remain impaired – i.e. 'good news is really bad news,' in that GE has to sell assets because of a looming major cash claim at [GE] Capital."
    • Gordon Haskett's John Inch says "while a potential GECAS transaction could be worth $40B, this would only match the book value of GECAS reported assets of just over $40B. Consequently, it is not clear what debt would be assigned to this transaction and what proceeds would be realized."

    Homebuilders rise as KeyBanc sees rally on "dovish" Fed

    • The iShares Dow Jones US Home Construction ETF (BATS:ITB) rises after KeyBanc analyst Kenneth Zener writes that homebuilders and building products should gain due to a more optimistic macro sentiment, Bloomberg First Word reports.
    • He upgrades Lennar (LEN +3.1%), PulteGroup (PHM +3.8%), Masco(MAS +2%), and Gibraltar Industries (ROCK +3.7%) to overweight from sector-weight.
    • Sees H1 similar to previous trading cycles when builders rose 28% over six months as Powell's dovish commentary and Fed monetary policy should improve sentiment.
    • "Being early can be wrong, but Fed commentary now warrants action," he writes.
    • In the same vein, lower mortgage rates--their lowest in about eight months--may boost the housing market after a rough patch, the Wall Street Journal reports.
    • “I think there is latent demand on the sidelines given where rates are today,” said Sam Khater, Freddie Mac’s chief economist. “The problem is that volatility is the obstacle.”
    • Previously: Homebuilders stocks ready to ring out the year (Dec. 28, 2018)

    Netflix rallies after strong Golden Globes haul

    • Netflix (NFLX +4.3%) had another good night at an awards show last night by raking in five Golden Globes to lead all networks and streamers.
    • The company's The Kominsky Method nabbed two awards, including one for best musical or comedy TV series.
    • Shares of Netflix are up 3.69% in morning trading.

    Goldman starts Dell at Buy despite debt risk

    • Goldman starts Dell (DELL +0.2%) with a Buy rating and $59 target citing its "excessive" discount compared to its peers.
    • Analyst Rod Hall notes that part of the discount is due to Dell's $9.5B in debt that's due to be repaid next year. But Hall says the company "should be able to refinance $4.5bn in 1st lien notes payable in June-’21 over the next 12 months" and that fading refinancing risk will expand Dell's multiple.

     


  54. January 7th, 2019 at 4:00 pm | Permalink Ignore this user

    AAPL/Pat – Earnings are 1/29 so as long as you have a chance to catch that reaction – it's fine but very risky, of course. 


  55. January 7th, 2019 at 4:00 pm | Permalink Ignore this user

    Hi Yodi,  Thank you for taking the time to respond to my question.  I appreciate it.  I will try to read all of your posts henceforth.  The 1% a month income figure on bull call spreads gives me a good general idea of what you are aiming for.

    One question:  what did you mean when you wrote: " With BCS you should never sell more than ½ the amount of calls than the BCS you have."  There seems to have been some sort of glitch, what is the meaning of ½?


  56. January 7th, 2019 at 4:18 pm | Permalink Ignore this user

    sell 1/2


  57. January 7th, 2019 at 4:21 pm | Permalink Ignore this user

    Yodi in his Armchair – always good and refreshing to read: here

    Keep it simple, but no simpler than it needs to be.


  58. January 7th, 2019 at 4:28 pm | Permalink Ignore this user

    Looks like VXXB has  now completely replaced VXX with long dated options all the way to Jan 21. Someone already sold some Jan 21 90 calls and by then VXXB will have been reset 2 or 3 times :-)

    In the meantime, this is good news as it opens some rolling optiosn for shorter dated positions.


  59. January 7th, 2019 at 4:30 pm | Permalink Ignore this user

    Yodi in a 1000 option plays: here

    Yodi and a BA back/ratio: here (circa 2013)

    Yodi on the recent YOYO markets: here - super, honest explanation of the challenges and consequences of the various cherry call strategies in turbulent times (just before Xmas 2018)


  60. January 7th, 2019 at 4:42 pm | Permalink Ignore this user

    NLY announced more stock 4 months ago and the stock was impacted then, so why when they pull the trigger are they pounded?  And how did they know this was the timing that would most impact me? GRRRR


  61. January 7th, 2019 at 5:06 pm | Permalink Ignore this user

    Thanks Winston for posting the Yodi links!


  62. January 7th, 2019 at 5:35 pm | Permalink Ignore this user

    NLY / Tangle – Just in time to get assigned on the Jan 19 puts :-)

    But still not that bad… REIT have been hit a lot the last month or so and NLY has been holding OK.


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  89. January 8th, 2019 at 12:18 am | Permalink Ignore this user
    California Businesses, Government Would Join in Drug Buying Pact
    By: Drew Armstrong, John Tozzi, Riley Griffin


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  92. January 8th, 2019 at 1:10 am | Permalink Ignore this user

    Oh boy.  Trump addressing nation.  Only good can come of this.   ;(


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    Prime-time Trump faces credibility crisis
    By: Analysis by Stephen Collinson, CNN


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    Saudi woman fleeing family admitted to Thailand
    By: Bangkok Post Public Company Limited


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    Robert Mueller’s 2019 To-Do List
    By: Garrett M. Graff


  118. January 8th, 2019 at 8:16 am | Permalink Ignore this user
    S&P cuts PG&E ratings to junk, warns of further downgrade
    By: Ismail Shakil and Arundhati Sarkar in Bengaluru


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    Chinese newspaper warns US not to push too hard on trade
    By: JOE McDONALD, AP Business Writer


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