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Non-Farm Friday – Is America Working?

Our last Non-Farm Payroll Report really sucked.  

Jobs created dropped down to an anemic 20,000 in February, possibly as a result of the Government shut-down, which ended at the beginning of the month.  We'll see what happens at 8:30 as 160,000 jobs are expected to be gained for March but they expected 200,000 jobs last month and Leading Economorons missed that one by 90%.  Most likely we get a big rebound as 20,000 was unusually low.  

NFP is made up of a lot of factors so it's best not to guess.  Interestingly, wages rose 0.4%, which is an almost 5% annual pace and that is running red-hot and, if we see that kind of number again – we can expect a downturn in the Futures as it's a sign the economy may be running too hot and that puts the Fed back on the table because the inflation the Fed hates the most is Wage Inflation.

Wage inflation scares the Banksters who run the Fed as it squeezes Corporate Profit margins, causing them to borrow less money and, of course, banks employ many, many low-wage workers and giving money to workers can lead to inflation becuase, unlike the current plan of giving money to people who already have lots of it, when you give money to the bottom 80%, they tend to spend it and then it circulates in the economy and has a multiplier effect and then we get inflation due to an increased demand for goods and services.

Why do Banksters hate inflation?  Because they lend you $300,000 at 4.5% for your home and you pay them back $1,721 a month for 30 years but, if inflation is 5%, over time the bank gets less and less money back relative to inflation.  For over a decade, this has gone the other way, the banks were lending at rates that were locked in higher than they rate they could borrow at (currently 1.75%) and they've been making tons of money and inflation has been non-existent - they don't want that to stop.

8:30 Update: We got a very nice 196,000 jobs added in March and wages only rose 0.1%, calming considerably so, of course, we're getting a quick pop in the  Futures but I very much doubt we'll take out 2,900 on the S&P 500 (/ES) into the weekend, so that's a nice shorting spot if we test it (with tight stops above). 

Of course the Dow is up 1,000 points (4%) since the last NFP report so one has to wonder whether a good report will take us down, rather than up but the low wage gains is very market-friendly so we should get a very positive reaction.  We also have the tailwind of continued claims of Trade Talk Progress and that's what's really been driving the markets for the past month even though a free trade deal with China only puts us right back where we were before Trump was elected and the market was 38% lower than it is now (Oct 2016).

I think the China deal is still far off but the market is still going up every time "progress" is made and, as I've been saying all week – we're still long but we keep adding to our shorts on the way up – it's all we can do in this very irrational market.

Have a great weekend,

- Phil


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  1. Good Morning!

  2. Was that an April Fool article:

    “We’re bombarded by endless kvetching about rising inequality, plus demands for draconian taxation to fix the problem. The complaint has been raging for years, despite highly suspect data claims and fuzzy measurement techniques.

    I’ve always had doubts that rising inequality, even if true, would even be a problem, simply because in a market-driven economic environment, it takes nothing away from me that the guy across the bar is a billionaire and I’m not. Chances are that he is providing jobs, donating to charities, and boosting investment in the capital structure that actually benefits all of us . . . As a practical matter now, the poor today live better than kings of old. If the goal is to better the lot of everyone, measures of material equality actually distract from the main goal of universalization of dignified lives.”

    These guys write stuff and convince themselves that it's true despite contrary facts and evidence!

  3. Back in KC july at 0.9586

    I will DD at 0.9450

  4. The Future of Fashion Is a Rented Dress

  5. Good morning! 

    0.02 pop in /RB at the open – gotta make 'em pay at the pumps every weekend…

    Oil back at $62.50 so I'll be liking it short below that line (tight stops above) again but ONLY if /BZ is below $70 and the Dollar isn't heading lower (testing 97 again).

    We got a nice pop on /NG off the floor too.

    26,500 is a good shorting line on /YM and we're lined up with 2,892.5, 7,590 and 1,581 at the monment

    Still waiting for the RUT to confirm 1,575 (200 dma) can hold for more than a day. 

    Fools/StJ – And they get 12 more years to play with it:

    Image result for life expectancy rich vs poor

    /KC/Kgab – I find Monday's or early Tuesday are often the lows for the week.

    2/25, 3/4, 11, 18, 25 and 4/1, 8 are the Mondays.

  6. What are your thoughts on SOX?

    Overdue for a pullback?

  7. if we wanted to trade oil with the trend instead of against it, where’s a good pullback price to go long on?

  8. SOX/Jabob – I think IoT is going to be so huge that we have a long-term bull market for SOX.  I think it's the sell-off that was silly, not this run back to last year's highs.

    Oil/Dawg – Certainly they should bounce off $60 if they are going to be running up but I really like /NG long so much better.  I wouldn't be surprised to see $70 in July but, after that, it should be a great short – especially if the Dems are polling over Trump in 2020.  Don't forget oil was barely over $45 when that idiot came into office.  If the Dems take power again and reinstate CAFE standards for cars and push for clean energy – the floor's the limit on oil.

    Very frustrating on my /ES shorts so far.  /YM was good for a quick 100 points ($500) though.

  9. you think what is going to be so huge?

  10. Phill// What are your thoughts on LNTRX as an IoT play

  11. jabo, IoT is the internet of things.  The performance and growth of microcontrollers (as opposed to microprocessors) has revolutionized the ability of 'smart' devices to exist everywhere.  You're going to continue seeing a movement of processing in everything.  With it comes an explosion of data to send back to the marketers.  The one big issue with the plan is the slowing down of manufacturing tech and moving to smaller lithographic processes is going to cut into the continually falling prices on ICs. 

  12. thanks JPH!

  13. Huge/Jabob – Internet of things.  Chips and drives and modems in everything these days.  Think of all the additional demand.  

    Image result for internet of things

    Every time you pick up something with a chip in it, think of that x 110M homes in the US.  Light switches, light bulbs, vacuum cleaners, toasters, refrigerators, car keys, watches, sneakers, locks, Echo etc., door cams, smoke detectors, thermostats, speakers (bluetooth)…  these are just the things I can think of that didn't have chips in them a few years ago so are all new business in this up cycle for semis.  Oh yeah, cars!  

    And what JPH said!  

    LNTRX/Rookie – No idea what that is.

  14. Rookie – LNTRX isn’t a valid symbol. Do you mean LTRX Lantronix?

  15. Rookie - LTRX is not optionable and it’s a nanocap. $75M. Volume under 100k. Looks like a nice target for a pump and dump. 

  16. LTRX is up about 40% recently, got a new CEO Paul Pickle (he was never teased as a kid, right?).  Mixed comments on Yahoo board, seems like a decent long term play but I wouldn't "buy the news" at this price, let it calm.

  17. Phil/TXN – speaking of IoT, as an IoT play what do you think about selling TXN puts? For the 2021 97.5s you can get $8.50ish and if they’re put to you, you net in close to the 52 wk low.

    You could add 2x the 105/120 calls so for say 10 of those you pay $7152. You get $4389 for 5 puts. so you’re in for net $2763 on a $15,000 spread that’s already $8640 in the money. 

  18. Update on the CMG trade I posted on 3/28:   We sold an IC. April 770/760 640/630 for $1.40    That's worth  $ .45 today , so you can buy the IC back for a 68% gain for a week in the trade.  Or, alternatively , you can roll the 640/630 put side of the trade up to 680/670 for an additional $1.10 credit, keeping the calls in place as they are.  I did the latter.   Love it when we can sell volatility !    Happy Trading

  19. 5 misconceptions about the U.S.-Mexico border

  20. Donald Trump’s week of utter chaos sends a message

  21. mrmocha/dawgydaddy – Thanks for clarifying.  It was a typo when I entered the symbol.  yes it is LTRX.  Will follow them.  They make IoT sensors for various industries.

  22. TXN/Dawg – We used to like them in the $50s but they got expensive and now $114 i hard to swallow for me but I do like that put sale if you want to take a poke near net $90.  They droped $5.5Bn to the bottom line last year so $105Bn (at $114) doesn't seem too crazy but they only paid $1.1Bn on $6.6Bn in earnings and that was 1/2 the tax they paid the year before on less earnings so I'd say earnings are really $4.4Bn and that's why I need a 20% discount  to be interested.  As a company – I still love them.

    CMG/Iflan – You're doing better than me.  I'm just suffering through the short calls.  Well played! 

    As usual, we're pressed up to the highs into the close.  I'm down $37.50 on my 2 /ES shorts, not going to risk the weekend, though it's tempting…

    Have a good weekend, 

    - Phil

  23. Vs the weekend summary of our positions at March expiration (most of which we reviewed early as I was going to California):

    • LTP was $1,249,183, now $1,314,863.
    • STP was $741,198, now $727,798
    • MTP, as noted above, was $118,630, now $134,470 (lost a bit today). 
    • Butterfly was $151,344, now $157,024 (gotta love it!)
    • OOP was $283,465, now $423,388.  Well, that's wrong, for some reason they haven't fixed HOV yet.  
    • LTP now $1,385,404.
    • STP now $717,613.
    • MTP now $135,025 (I'm on the show for an update on 4/24, 7pm)
    • Butterfly now $165,019
    • OOP now $441,145 (HOV still not fixed but wow!) 

    Not bad for 3 boring days.

  24. Endless Optimism

  25. 58,536,039  SPY  VOLUME.  Nothing supporting this move up. Overall market volume is down. Not a sign of a market that wants to break out on the upside.

  26. IoT

    STM is worth a look as an IoT play.  One of their uCs is used in the pretty awesome OpenMV project and they always seem to be the first to market (that I've seen anyway) with new Cortex-M designs.  I've never had a chance to work with their parts due to decisions made by other people but I have always thought their parts looked great.

  27. Yes, There’s a Crisis on the Border. And It’s Trump’s Fault.

  28. 25 local governments sue over California marijuana delivery

  29. While I remain in the cautious camp, others see the rally continuing:

    This Bull Market Has No Expiration Date

  30. 58,621,729  SPY volume on Friday.

  31. Fiat Chrysler to pay Tesla hundreds of millions of euros to pool fleet

  32. The Con of the Side Hustle

  33. Good morning! 

    BA taking the markets down again.  Down $17 is about 150 Dow points.  Since the Dow is only down 100 points, I'd say we're still generally strong in the indexes.

    Dollar is down a bit at 96.8 so that's helping and oil is flying up to $63.50 with /RB testing $1.99 so that should push the S&P a bit higher. 

    Houston Ship Channel Shut as Storm Hits Chemical Disaster Site.

    No major negative news.

    How is this possible?’ Analysts puzzle over stock market’s rally amid equity-fund exodus.

    TSLA up a big as they make a deal with Fiat to utilize their fleet mileage credit to help Fiat avoid EU fines.  I don't think the EU should allow it as it certainly violates the spirit of the rule.

  34. Trump’s health care brain trust says no thanks