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Testy Tuesday – Finding Support at the 50 DMA’s

Well, we're holding up so far…

As I said last week, nothing really matters as long as we hold the 50-day moving averages and that's not really that hard to do as they are still in decline – so the targets are lower every day.  As of this morning our 50 dmas are:

  • Dow 24,199, now 24,528, 200 dma – 24,977
  • S&P 2,612, now 2,644, 200 dma – 2,741
  • Nasdaq (100) 6,597, now 6,712, 200 dma – 7,034
  • NYSE 11,864, now 12,100, 200 dma – 12,315
  • Russell 1,438. now 1,475, 200 dma – 1,590

So we're right in the middle and all these up and down gyrations are just consolidation as we prepare to break out but will we break out to the upside or the downside?  That is the question that can be worth Millions in your portfolio!  

Unlike the moving averages, which move, our 5% Rule™ remains the same – only changing in the short-run when long-term supports are found but never changing in the long run – unless we do a full re-valuation of an indexes base-case (the Must Hold levels). 

We were going to bump up our Must Hold lines by 10% due to the tax changes late last year but the NYSE and Russell never confirmed the move higher and then the crash came but now, if we do hold those 10% lines, we will be bumping the Big 3 up, who benefit the most from the lower tax rates and the weaker Dollar that comes with them (we don't pay our bills, we're a dead-beat currency).  Current levels are:

  • 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)

Since last Thursday, the Nasdaq's strong bounce line has turned red and that will be a very bad sign if ANY of the 3 remaining green indexes lose their strong bounce line or if the Russell (only 1,475 at the moment) fails to hold 1,470 but, at the moment, we're cautiously bullish ahead of tomorrow's Fed Meeting, where we expect some more doveish words in their 2pm statement and Powell's 2:30 press conference, which we be on LIVE for in our Weekly Trading Webinar, which will start at 1pm, EST, tomorrow – so that should be an exciting one!  

Meanwhile, you have to see this great Bloobmerg Report on "Shenzhen's High-Tech Dystopia":

The scope of automation is incredible – it shows how far behind we're getting in the US.  As the author notes, China is responding to pressure it sees from Vietnam and Africa to keep lowering the cost of manufacturing so that they can mainatin their dominant position while the US strategy is to build walls and place tariffs so we can keep pretending that the future of manufacturing is not more manufacturing jobs, but more manufacturing robots.  This is one of those cases of misguided Government policies laying the groundwork to make us completely uncompetitive for the long-run.

Image result for china big brotherObviously, the way the Chinese Government is usuing technology leaves a lot to be desired but our country only talks the talk on "Law and Order" while China is very much walking the walk – and handing out automated tickets to jay-walkers too.  Do you want to see American's learn to love self-driving cars?  Just automatically ticket people every time they speed.  That's easy technology – our police don't use it because, when they've tried – the speed-loving citizens have revolted – so far…

Speaking of tech, the Nasdaq's fate very much rests on Apple's (AAPL) earnings this evening.  Apple become the World's first Trillion-Dollar company this summer as share prices climbed to $230, but we topped out there and topped all the way back to $140, down $90 (39%) and that means the weak bounce is $18 – to $158 and we have been rejected at that, so far and that does not actually bode well as anything but strong earnings are likely to at least retest that $140 line:

Apple guided revenues down but did not guide earnings lower so it will be interesting to see what the report turns up tonight.  Analysts are still expecting $4.17 per share in earnings and that's way up from last year's $3.89 but that estimate is WAY down from $4.94, which was the expectations back in October, when they announced  a very solid Q3.  There have been endless rumors that IPhone sales are off and China is doing a soft boycott of Apple due to the US-Huawei Incident, which China is now calling a Kidnapping and is calling on the UN to sanction US!  As noted in Dissident Voice:

Image result for trump insane

The kidnapping of Ms. Meng is yet another example of the almost insane hubris and arrogance of the present government of the United States. Insane is not too strong a word, since many psychiatrists consider Donald Trump to be mentally unstable. Furthermore, Trump’s racism and his advocacy of violence are worryingly similar the the facists of the 1930’s, such as Hitler and Mussolini. It is clear from Trump’s actions that the present government of the United States no longer belongs to the American people. It belongs instead to corporate oligarchs, to Wall Street, and to the Israel Lobby. Trump’s advocacy of fossil fuels is an existential threat to the future of human civilization and the biosphere. 

Didn't we used to say that kind of stuff about Russian and Chinese Governments?  Seemed OK to say at the time, didn't it?  Now it doesn't feel so good – especially when it's mostly true…

Anyway, I think the bar may be a bit low for AAPL (we're long) and hopefully they do beat and lift the markets higher but, if they have a big miss – they'll take the indexes with them and we have a chance to re-test our lows.  Reporting with Apple this evening are Amgen (AMGN), Boston Properties (BXP), Ebay (EBAY), Juniper (JNPR) and MicroStrategy (MSTR) but this morning we already had good reports from 3M (MMM), Biogen (BIIB), Corning (GLW), L3 Technology (LLL), Paccar (PCAR), Pfizer (PFE), Phillips (PHG), Rockwell (ROK), Verizon (VZ) and Xerox (XRX) – so things can't be all bad out there.  

Tomorrow, Alibaba (BABA) will give us some insight into how much China's economy is actually hurting.  China's Amazon is at about $50Bn in revenue (they only count their commissions, not the raw sales that generate them) and drops 12% ($11Bn) to the bottom line but their revenues are still growing by about 40% per year with little sign of slowing – until possibly now…  

Another exciting report this week will be Tesla (TSLA), where we'll probably get another lesson in Financial Alchemy as TSLA MUST be back over $360 by March 1st or they will be forced to pay back $920M in bonds that were set to convert at that price.  Anything but spectacular earnings will spook investors out of the stock ahead of the looming debt payment as, clearly, if Musk does not have $920M to give, the company will be forced to borrow or renogotiate at less than generous terms, possibly dilluting current shareholders even further.

Recently, Tesla laid off another 7% of their workforce and they've cut back both prices and production levels yet, so far, the stock has not been given the awful treatment AAPL has gotten for essentially the same thing (sans layoffs).  The cheapest configuration of the Model 3 is currently $44,000 – still a far cry from the $35,000 that's been promised for years and, of course, the credits are running out so no more government aid to move the cars – it's all up to TSLA now to put up or shut down.

Stay tuned for the fun! 


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  1. Surprise…

    The Trump administration’s $1.5 trillion cut tax package appeared to have no major impact on businesses’ capital investment or hiring plans, according to a survey released a year after the biggest overhaul of the U.S. tax code in more than 30 years.

    The National Association of Business Economics’ (NABE) quarterly business conditions poll published on Monday found that while some companies reported accelerating investments because of lower corporate taxes, 84 percent of respondents said they had not changed plans. That compares to 81 percent in the previous survey published in October.

    The White House had predicted that the massive fiscal stimulus package, marked by the reduction in the corporate tax rate to 21 percent from 35 percent, would boost business spending and job growth. The tax cuts came into effect in January 2018.

    Instead we had buybacks and special dividends… No job created there!

  2. Oof – /NG dropped to $2.803. Long a little.

  3. I am riding along with you Atitlan, a March contract for a quick dip buying opportunity.    

  4. Good Morning!

  5. Good morning!

    I added a another long /NGH19 as we tested $2.80 (but didn't catch the bottom) so 2 long now at $2.85 avg and now we'll see if this week's inventory (Thurs) and the cold snap help.  The next few days are very cold due to the vortex but then things snap back but, for the month – things are generally colder than normal so the March contracts seem sensible enough for the next 28 days.

    I think we also have to consider HOW cold it will be this week.  Simple analysis looks at the number of "home heating days" to determine demand but this is not a normal cold – we're talking negative temperature for days in the Northeast and it takes A LOT more gas to get from 0 to 70 than it does to get from 30 to 70 – algos don't take that into account so we have a good chance that demand exceeds expectations and gives us a pop.

    The danger is there's no real support down to $2.50 so don't be a hero and take your losses if we fail to hold $2.80 and we can try again on the way back up (or at $2.50, where it will be easy to get an 0.05 bounce and get our money back).

    Gold hit $1,315! 

    /SI $15.92!

  6. Oil with a big pop (Venezuela sanctions):

    /KCN19 still $1.085 with /KC at $1.025 – another one I like a lot.

  7. Oh, silly me, /NGH19 is the front-month /NG now.  As I said yesterday, I think the people scrambling out of Feb contracts depressed prices for March too – we'll see. 

  8. China talk has us going up again, oil blasting to $54!

  9. China prepares $370bn package to fire up cooling economy

  10. Mueller Investigation Nearing Its End, Whitaker Says

  11. Uber Wants You to Catch the Bus or Train—if They Can Drive You There

  12. Still holding ZYNE? Up 30%… 

  13. Record-Breaking Cold Coming to Midwest After Snowstorm

  14. Qcom/phil- any adjustments for QCOM? or we waiting for the earnings which is tomorrow

  15. QCOM/Dave – We're flat to our entry and poised a bit bullish with a 2/3 cover but I'd rather see what happens before making any changes.

    Short Put 2020 17-JAN 50.00 PUT [QCOM @ $50.64 $0.00] -10 4/16/2018 (353) $-6,700 $6.70 $-0.90 $-16.13     $5.80 $0.00 $900 13.4% $-5,800
    Short Call 2020 17-JAN 70.00 CALL [QCOM @ $50.64 $0.00] -15 6/5/2018 (353) $-6,000 $4.00 $-3.37     $0.64 $-0.05 $5,048 84.1% $-953
    Long Call 2021 15-JAN 50.00 CALL [QCOM @ $50.64 $0.00] 20 11/19/2018 (717) $21,000 $10.50 $-3.25     $7.25 $-1.10 $-6,500 -31.0% $14,500



    • QCOM – Seem to be suing everybody but we're on track so we'll see how earnings look.

  16. Atitlan – I followed you into  /NG.  Scalped 1/2 for 4.  Stops to entry on balance.

    Thanks for the idea. 

  17. I'm half out of /NG here as well. Phil said to keep an eye on /NG yesterday so I did!

  18. Well done.  I haven't done much with stock futures.  Too choppy for me.

  19. I got 1/2 out on /NG too so now basis below $2.85 makes me happy to ride out a bit.

    Indexes bouncing back somewhat.  

    • The Dow is clinging to small gains, and the S&P 500 is barely in the red, but the Nasdaq is down 0.8% ahead of Apple's earnings report this evening.
    • Apple itself is lower by just 0.5%, but Facebook, Amazon, and Microsoft are all off more than 2%.
    • Working very well today are the industrials (XLI +1.2%) behind big post-earnings gains for 3M and Lockheed Martin.


    • Oppenheimer sees a delay to the early surge part of the tax season on its view that filers "paused" their activity during the government shutdown. Still, the firm's overall preview on Intuit (INTU -1.1%) and H&R Block (HRB -1.3%) for the tax season and beyond is largely favorable.
    • On Intuit: "We believe Outperform-rated Intuit’s TurboTax can achieve its targeted 9-10% y/y segment revenue growth in FY19, which should keep investors involved in Intuit’s overall growth story."
    • On H&R Block: "We’re cautiously optimistic H&R Block could garner investor confidence this year should it execute successfully relative to its significantly reduced financial guidance for FY19 (vs. FY18) in an environment of meaningful change."
    • Anglo American (OTCQX:AAUKFOTCPK:AAUKY) says its majority owned De Beers diamond miner sold 25% fewer rough diamonds in first sales cycle of the year, dragged down by weaker demand for lower-value diamonds.
    • January has been one of the stronger months in recent years as customers rebuild stock after the crucial holiday season, but De Beers sold just $505M in its first sale of the year ended Jan. 28, compared with $672M last year and $729M in 2017.
    • The decline was the result of a bigger than usual sale in December and low-value goods moving slowly through the industry’s pipeline, says De Beers CEO Bruce Cleaver.
    • Diamond miners are struggling across the board, especially those producing cheaper and smaller gems where there is too much supply, and De Beers has been forced to cut prices and offer concessions to buyers.
    • Empire Resorts (NASDAQ:NYNYjumps 4.5% after the New York Gaming Commission takes the first step in legalizing sports betting in the state.
    • Legal wagers could be seen at New York casinos as early as May.
    • The four facilities that will be covered by the regulations are Del Lago Resort & Casino, Tioga Downs Casino, Rivers Casino & Resort Schenectady and Empire's Resorts World Catskills.
    • Total (TOT +1.3%) says 2019 will mark its biggest exploration campaign in years as part of a turnaround plan that aims to ditch its focus on risky long-shots in favor of areas known to contain commercial levels of oil or gas.
    • The company wants to drill 23 wells this year in waters off Mauritania, Senegal, Namibia, South Africa, Guyana and Brazil, senior VP for exploration Kevin McLachlan tells Reuters.
    • While McLachlan does not say how many wells TOT drilled in 2018, the 2019 program would be the company’s largest in years, as the 23 wells planned represent ~3x the levels of 2017 and 2016 and higher than the 20 drilled in 2013, before the oil price crash.
    • Meanwhile, TOT's exploration budget would remain broadly in line with 2018 when it was $1.2B and 2017 when it was $1.1B – still less than half the level of 2014, when the price crash forced the oil majors to cut spending.
    • Crude oil prices rebound from yesterday's steep losses after the U.S. imposed sanctions on Venezuelan state-owned oil firm PDVSA; WTI +3% to $53.58/bbl, Brent +2.5% to $61.43/bbl.
    • But global oil supply remains high, largely because of the more than 2M bbl/day increase in U.S. crude oil production last year to a record 11.9M bbl/day.
    • Venezuela has the world’s biggest proven oil reserves, but exports fell to little more than 1M bbl/day in 2018 from 1.6M bbl/day in 2017; the country exports ~500K bbl/day of crude to the U.S., with PDVSA's U.S.-based Citgo refining arm, Valero Energy (VLO -0.4%) and Chevron (CVX +0.5%) the three largest U.S. buyers of Venezuelan crude.
    • VLO says it will "re-optimize" its oil purchases to minimize any impacts on its operations.
    • Cowen analysts see a resulting likely increase in heavy and medium crude pricing most negatively affecting VLO and PBF Energy (PBF -0.5%), with smaller impacts to Phillips 66 (PSX+0.4%) and Marathon Petroleum (MPC -0.6%).
    • PSX imported 552K bbl/day of Venezuelan crude last April but otherwise did not import crudefrom the country in 2018.
    • The restaurant sector is shaky after earnings leadoff hitter Brinker International (EAT -8.9%) disappointed with its report. The drop in Q4 restaurant-level operating margin at Brinker is standing out.
    • Decliners include Dine Brands Global (DIN -4.4%), Red Robin Gourmet (RRGB -2.9%), Del Frisco's Restaurant Group (DFRG -3.6%), Cheesecake Factory (CAKE -2.3%), Bloomin' Brands (BLMN -3.9%), Texas Roadhouse (TXRH -3.9%) and El Pollo Loco (LOCO -2.3%).
    • Previously: Brinker International lifts revenue forecast (Jan. 29)
    • Morgan Stanley downgrades Nvidia (NASDAQ:NVDA) from Overweight to Equal Weight and cuts the target from $220 to $148.
    • Analyst Joseph Moore: “Missing the quarter this badly in gaming indicates more significant challenges than we had anticipated, given that this is still a channel fill quarter for midrange/high end. This becomes a show me story with lower P/E assumptions.”
    • More action: UBS analyst Timothy Arcuri goes against the downgrade stream with an upgrade from Neutral to Buy but cuts the target by $10 to $180.
    • The analyst says yesterday's pullback “finally sets the stage for a new positive revision cycle starting this summer."
    • NVDA shares are down 2% to $135.20.
    • Previously: Nvidia -15% on Q4 guidance cut (Jan. 28)
    • Previously: Analyst slashes Nvidia target by 34% (Jan. 28)
    • Previously: Nvidia slips on two-notch downgrade (Jan. 29)
    • January Consumer Confidence120.2 vs. 124.3 consensus; 126.6 prior in December (revised).
    • Present situation Index 169.6 vs. 169.9 prior.
    • Marijuana Company of America (OTCQB:MCOAannounces that subsidiary hempSMART has completed the first month of signups for its prelaunch in the UK.
    • A regional office, customer service team and distribution center have been established. The launch of hempSMART UK will take place on March 9.
    • Bank of America Merrill Lynch updates on Whirlpool (WHR -0.9%) after the company posted operating results below expectations and set soft guidance.
    • "The biggest variances to our estimates were lower topline and higher corporate expenses while a lower tax rate and other/sundry expenses boosted EPS by ~$1.40. North America performed relatively well with EBIT inline and volumes a bit weaker and pricing stronger. As we argue in our latest replacement cycle analysis, we expect a similar dynamic to play out in 2019," reads the BAML note.
    • The firm keeps a Neutral rating on Whirlpool and price objective of $131.
    • Previously: Whirlpool -4% after soft guidance (Jan. 28)

  20. Looking at ILMN prior to earnings tonight. Is this a good butterfly play?

  21. Darn GME.  I was holding onto the stock and selling calls against it and capturing the dividend, but the news today is NOT helpful.  Why is this causing a 27% dive, just because they are not seeking to sell anymore?

    My basis is down to $16.43 and reducing it by an additional $1.52 a year from dividends, but now I'm thinking the dividend is in jeopardy.  It's in a long term portfolio so would you suggest holding onto it or turning it into an artificial spread in preparation for a dividend cut?

  22. Options are prices an $8-9 move for AAPL on earnings. That seems somewhat in line historically.

  23. What about Butterfly play on PEGI. Nicely range bound and pays stable dividends 

    • Chain store sales rose +5.8% for the week ending on January 26, according to Johnson Redbook
    • Sales are expected to increase 7% for the full month of January.
    • Executives at Wynn Resorts (NASDAQ:WYNN) ignored sexual misconduct complaints against former CEO Steve Wynn, according to details issued in the Nevada Gaming Control Board.
    • The company admitted to falling short of its commitment to employees in the report.
    • Numerous incidents with Steve Wynn were detailed in the report, including a $975K settlement to a former cocktail server for a noncensual sexual relationship.
    • Shares of Wynn are up 0.10% in premarket trading to $118.29. Analysts have been saying that Wynn could attract more attention from investors once it arrives on the other side of the legal turmoil tied to its ex-CEO.
    • Previously: Wynn Resorts settles with Nevada Gaming Control Board (Jan. 28)
    • GameStop (NYSE:GME) is down 22% as investors seize on the news from earlier this morning that the company has ended the sales exploration process.
    • Keep an eye on Barnes & Noble (NYSE:BKS) today as the two beat-up retailers sometimes swing up and down together.
    • Previously: GameStop ends sale exploration (Jan. 29)
    • Investors from mainland China were net sellers of $854M of U.S. commercial real estate in Q4, the third consecutive quarter that Chinese investors sold more U.S. property they bought and the longest stretch that they've been net sellers, the Wall Street Journal reports, citing Real Capital Analytics data.
    • For all of last year, Chinese were net buyers of $2.63B of U.S. real estate, the lowest level in six years.
    • The switch reflects efforts by the Chinese government to stabilize its currency, lower corporate debt, and offset the economic slowdown in the world's second-largest economy by restricting some foreign investment.
    • Corning (NYSE:GLWgains 5.4% on Q4 beats and a 15% Y/Y revenue growth.
    • Revenue breakdown: Display Technologies, $899M (+6% Y/Y); Optical Communications, $1.17B (+4%); Environmental Technologies, $319M (-4%); Specialty Materials, $399M (-13%); Life Sciences, $238M (+3%).
    • Earnings call is scheduled for 8:30 AM ET with a webcast available here.
    • Press release.
    • Previously: Corning beats by $0.02, beats on revenue (Jan. 29)
    • White House National Economic Council Director Larry Kudlow says he doesn't acknowledgethe Congressional Budget Office's estimates for how much the 35-day partial government shutdown hurt the economy, MarketWatch reports.
    • "I don't really agree," he said.
    • On Monday, the CBO said the shutdown trimmed Q4 real GDP by 0.1% and Q1 by 0.2%. It also estimated that about $3B of GDP growth lost to the shutdown won't be recovered.
    • Previously: Kudlow suggests strong January jobs number (Jan. 24)
    • Net earnings of $1.3B, or $4.39 per share, compared to a net loss of $744M, or $2.60 per diluted share, in the same quarter a year ago.
    • Sales by segment: Aeronautics +4%; Missiles and Fire Control +22%; Rotary and Missions Systems -4%; Space +2%.
    • Quarterly cash deployment: Capex of $459M; Repurchased 2.2M shares; Paid cash dividends of $622M; Record backlog of $130.5B.
    • Outlook for 2019: Diluted earnings per share of $19.15-$19.45, below Wall Street's expectation of $19.57 a share according to FactSet, on net sales of about $55.75B-$57.25B.
    • LMT -0.6% premarket
    • Q4 results
    • Brinker International (NYSE:EAT) tracks higher after reporting FQ2 sales ahead of expectations and increasing FY19 sales guidance.
    • System-wide comparable sales were up 1.8% during the quarter, driven higher by a 2.9% comp for Chili's company-owned stores.
    • Restaurant-level operating margin to 12.4% of sales vs. 14.9% a year ago as higher rent costs factored in and elevated labor expenses. Operating income as a percentage of revenue fell 80 bps to 6.3%.
    • Brinker ended the quarter with 1,685 total restaurants in operation (938 company-owned Chili's).
    • Looking ahead, the company sees full-year revenue growth of +2.0% to +2.75% vs. +1% to +2.25% prior outlook.
    • Shares of Brinker are up 1.16% in premarket trading to $47.99 vs. a 52-week trading range of $32.03 to $54.14.
    • Previously: Brinker EPS in-line, beats on revenue (Jan. 29)
    • Bookings at Macau's five-star casino hotels for the Chinese New Year look very strong, according to GGR Asia.
    • At least half of the hotels are fully booked for at least four days of the holiday, including both of Wynn Macau's resorts. Booking pricing appear to still be strong, even with the holiday right around the corner (February 5 – February 10).
    • The Macau Government Tourism Office forecasts total visitor growth of 8% to 10% for the Chinese New Year period.

    ILMN/JMD – A bit too violent for a Butterfly and the risk is disproportionate for the $100K portfolio.

    At $285 that's still $42Bn and I'm certainly not seeing $42Bn worth of earnings:

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 1,149 1,421 1,861 2,220 2,398 2,752 3,242 3,329 3,809 +19.1%
    Operating Profit $m 200.8 134.1 514.7 612.8 587 606 916     +24.7%
    Net Profit $m 151.3 125.3 353.4 461.6 462.6 726 684 855.6 968 +36.9%
    EPS Reported $ 1.13 0.90 2.37 3.10 3.13 5.92 5.63     +39.2%
    EPS Normalised $ 1.06 1.57 2.02 3.15 3.08 6.04 5.63 5.76 6.45 +41.5%
    EPS Growth % +0.8 +47.6 +28.5 +56.2 -2.1 +95.9 -6.9 -4.71 +12.0  
    PE Ratio x           47.6 51.1 50.0 44.6  
    PEG x           n/a n/a 4.17 2.61

    GME/Rperi – Yep, now they have to justify their $1.1Bn market cap (at $11) against dwindling profits (massive losses this year) and $9Bn in retail sales (flat for 4 years).  If you are in for $16.43 and down $5 and what to stick with them, I'd cash out ($11.20) and sell the 2021 $13 puts for $4.50, so your worst case is netting back in at $9.50 and then you can pick up the 2021 $8 ($4)/13 ($2) bull call spread for $2 so, at $13+, you get back $5 + the $13.70 in pocket is $18.70 – so + $2.50 if things go well but, more importantly, you free up $13.70 to play with now (less the put margin).  

    Now /NG is moving! 

    PEG/Millard – That one is worth considering.  The problem is that they only have options out to Sept so your long premium still decays very fast, which means you can't afford to miss any targets (no time to correct).

  24. Oops, you said PEGI, not PEG…  I don't follow them at all, would have to do homework if you remind me on the weekend.

  25. PEGI I entered the stock as a small armchair trade. Has a yield of 8% however the premiums are very little for a butterfly!

  26. P.S bought the stock on 12/6/18 for 20.50 so in deed not much movement.

  27. What strikes did you use?

  28. I am still trying to learn how and when to use Butterflies 

  29. Yodi, what criteria do you use to decide armchair vs other approach?

  30. millard, The trade as such has been well explained.. But here in short. You find fundamentally well-established stocks with minimum yield of 3.5% plus P.A. Do your research well! You must be sure you are comfortable with the stock! Buy the stock and sell shorter month from one up to six month OTM calls and puts. Stocks like T, MO PM, are just some I hold. Important you need to buy the stock during a dip or at the low side of the scale..

  31. What do you guys think of buying a 450/300 2021 put spread on Tesla and selling the 360 calls?

  32. not for me

  33. TSLA options are looking pretty pumped up – might be worth checking out for an earnings play tomorrow.

  34. Dawg, I really like that play, but you need to make sure you have a lot more margin reserved for when the trade goes against you.  Tesla could easily spike up to $360-380 in the next couple weeks, with a surprising earnings report.  I believe they are in huge trouble, but Q4 was probably the last positive income quarter they will ever have, but with the large short interest you have to respect the risk of a short squeeze.  I hold long term puts, and am short a ton of the 2021 $450 calls.  I decided to put $5k in a March 340/360 call spread as a hedge just in case Musk paints another good quarter, that pays something like 6 to 1.  He needs the stock to be above 360 average over the next 20 trading days in order to convert this upcoming bond payment into stock (instead of having to pay it out of cash), so there is a big incentive to pull out all the stops to pump the stock.  Long term this is a $0, but Musk has had nine lives so far, so you need to be prepared for the trade to go against you, and not panic out.

  35. Butterflies/Millard – You want something where you can take protective, long legs cheaply and has good premium to sell up front.  You want something that's short-term volatile but stays in a channel you can rely on over the long term.  In this market – they are hard to find.  

    TSLA/Dawg – Too crazy to play.

    And what Palotay said!

    Wow, still getting a pump into the close but it's all about AAPL today.

  36. nice move for GOLD today

  37. AAPL beats – all is well!

  38. not much of a move, I guess flatish is good though for the puts and spreads we are in

  39. AAPL/Coulter – 4% is $40Bn, that's the entire market cap of most companies.  Quite a big move really.  Our main spread is short $170 puts and 40 long, naked $120 calls so I'm very happy with gaining $24,000 for the evening's work!  

  40. Options were predicting an $8-9 move! Dealer wins again… For now!

  41. Souring Deals Put China’s Belt and Road Dreams Under Pressure

  42. Mark Zuckerberg’s Delusion of Consumer Consent

  43. Deutsche Telekom Warns Huawei Ban Would Hurt Europe 5G

  44. Phil / AAPL – 40X Jan '21 120 calls – are you looking at covering these partially or otherwise?

  45. China’s Huawei Reckoning

  46. A Deep Freeze Envelops the Midwest, Even Stopping the Mail

  47. Good morning, I think is a good analysis of Apple.

  48. The US wants to halt Huawei’s global advance. It may be too late

  49. Good morning! 

    working on my BNN show notes:

    On 1/29/2019 3:41 PM, Tong, Barbara wrote:

    Great talking to you Phil!


    For tomorrow, here's the rough outline from our chat.  If you could send me more details tonight, that would be great.  Thanks!:


    Segment 1:

    1. US China-Trade

    Phil: Thinks trade war will continue

    Market's trading at the maybe maybe not deal range

    But it's not going to hurt China that much. 

    What's the alternative?  It's not like "You're not going to NOT go to the $1.25 store instead of the Dollar Store!"


    So what are investors to do?

    Phil: Think cash and think flexible


    1. Earnings – is market priced correctly?

    According to DataTrek:

    Even with 22% of the S&P 500 having reported so far with an average of a 3% beat to Q4 2018 earnings expectations, numbers are still coming down for Q1 2019. Here is the progression of Q1 revenue and earnings expectations since the start of 2019:

    • On January 4th, analysts had 2.9% earnings growth/7.3% revenue growth baked into their Q1 2019 numbers.
    • On January 11th, that fell to 1.8% earnings growth/6.2% revenue growth
    • On January 18th, they declined further to 1.1% earnings growth/still 6.2% revenue growth
    • Now, expectations are for 0.7% earnings growth/6.1% revenue growth

    Key takeaway: Q1 2019 is shaping up to be a no-growth quarter for US corporate earnings. The problem is NOT revenues (expectations there are still +6%), but rather margins. While that’s an understandable trend this late in an economic cycle, negative earnings leverage is never an investment positive.



    1. Apple

    FB Facetime security/privacy glitch is just smoke…..

    Apple made $4.18 last quarter and that was up 7.5% from last year's $3.89 and they are on track to make $12/share in 2019 which, at $160, gives them a p/e ratio of just 13.3 vs MSFT at 42x earnings, Google at 40x earnings, Amazon at 90x earnings, Facebook 22x earnings…

    Not to mention Apple still has $245Bn in cash, which is up $8Bn from last quarter.   That's enough money to buy every single NFL team ($82Bn) 3 times and all the networks that broadcast them or they could buy 313M pounds of marijuana – a pound for every US citizen! 

    Still, Apple does have one concern and that's Huawei!

    Canalys study - smartphone Chinese market in 2018

    Study Canalys - Smartphone vendors market share in 2018

    Apple fiscal Q1 2019 earnings: revenue per segment and per region


  50. Segment 2:


    Phil quickly reviews the MoneyTalk Portfolio (please provide link)


    Phil's picks (2 max)

    Barrick Gold changed their symbol from ABX to GOLD but our play remains the same.

    Last time I was on the show (Oct 24th) our portfolio was at $95,645 and up 91.3% for the year.  As of yesterday's close, we were at $105,845, gaining $10,200 for the quarter and now up 111.7% in just over a year.

    In our prior review, we expected our positions to gain $70,015 by Jan 2021 and they are right on track but we can always do better so let's make the following adjustments:

    • Buy to close 40 short TZA April $15 calls for 0.50 ($2,000)
    • Roll 40 TZA April $10 calls at $1.95 ($7,800) to 40 of the Jan 2020 $8 ($3.90/15 ($1.60) bull call spreads at $2.30 ($9,200)

    We're spending net $3,400 to move to a $28,000 insurance policy that lasts through Jan of 2020.  The only way we lose (it's in the money) is if the market goes up and that would be a win on our longs.  That's what hedges are supposed to do.

    • Buy to close 10 short GE 2020 $18 calls at 0.10 ($100)
    • Roll 10 short GE 2020 $15 puts at $6.10 ($6,100) to 20 short 2021 $12 puts at $3.80 ($7,600)
    • Roll 30 GE 2020 $13 calls at 0.41 ($1,230) to 30 2021 $8 ($2.70)/12 ($1.20) bull call spreads at $1.50 ($4,500)

    Here we're spending net $1,870 to put ourselves into a $12,000 spread that's $3,000 in the money to start.

    • Roll 40 LB 2020 $27.50 calls at $4.30 ($17,200) to 40 2021 $22.50 ($8)/32.50 ($4) bull call spreads at $4 ($16,000)
    • Buy back 20 (1/2) of the short 2020 $35 calls for $1.80 ($3,600)

    In this case, we're spending net $2,400 to drop our target by $5 on the $50,000 spread.

    As a new trade, I'd like to add our 2019 Stock of the Year, which is IBM, which is still cheap at $135 but we don't have to be too aggressive and we can play it as follows:

    • Buy 5 IBM 2020 $120 calls for $21.50 ($10,750)
    • Sell 5 IBM 2020 $135 calls for $14 ($7,000)
    • Sell 2 IBM 2020 $130 puts for $16.50 ($3,100)

    That's net $650 on the $7,500 spread so the upside potential is $6,850 for a 1,053% return on cash and the ordinary margin requirement for the 2 short IBM puts is $4,488 so it's a very margin-efficient trade as well (using little margin to make big gains).

    We'd also like to take advantage of the sell-off in Caterpillar (CAT), where we already sold 5 short 2021 $100 puts for $12 ($6,000).  I'd like to add this bull call spread:

    • Buy 5 CAT 2021 $100 calls for $35 ($17,500)
    • Sell 5 CAT 2021 $130 calls for $19 ($9,500)

    That's net $6,000 on the $15,000 spread but we sold the short puts for $6,000 so we have a net gain of $15,000 if all goes well and the $5,000 margin requirement doesn't change so a very efficient trade from that perspective as well.  Even if you were to sell the $100 puts today for "just" $8.50 ($4,250) the net of the spread would be $3,750 with $11,250 (300%) of upside potential just $4 higher than the stock is trading at today!


    I doubt we'll get that all in so we can gloss over the adjustments and refer to the site and concentrate on IBM and CAT.

    Looking forward to later,

    - Phil