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Tuesday, November 29, 2022


Tariffic Friday – Trump Taxes Americans, Claims Victory

No deal!!! 

That's right, as we expected Team Trump has not been able to make a deal with China and, as of midnight, tariffs increased on $200Bn (not $250Bn) worth of Chinese goods from 10% to 25%, which isn't really that terrible ($30Bn) but President Crazy Train is also looking to add taxes to another $350Bn worth of goods but, to do that one (legally), the U.S. trade representative’s office would need to identify the goods, seek comments on its choices and hold hearings – so it's very possibly just an empty threat from the President and China knows it because they study US law a lot more closely than Trump and his advisers seem to.

So, in the grand scheme of things, $30Bn more tariffs isn't going to break anyone and the total revenues would be $50Bn (25% of $200Bn), not "over $100Bn" that Trump is fantasizing about and how pissed off do you think Puerto Rico is to have Trump BS'ing about sending humanitarian assistance to "poor and starving countries" when they've been waiting almost two years for something besides paper towels to clean up after their disastrous hurricane?

The Futures are down again today and we may revisit yesterday's lows but we went long on Dow (/YM) Futures at 25,600 in yesterday's Live Member Chat Rooom caught a ride back to 25,850 into the close, which gave us gains of $1,250 per contract while our bullish play on the S&P (/ES) Futures also gained $1,250 per contract on a 25-point move back to 2,875.  

Of course, those same levels will be in play again today but keep in mind we made the call at 11:58 for our Members – as the indexes were crossing back OVER the lines and momentum was on our side – don't try to be a hero and catch the index while it's moving against you – that can lead to big losses if your line doesn't hold.  

In fact, later in the afternoon we analyzed the index moves and determined they were only making bounces off the 5% drop lines according to our fabulous 5% Rule™, which is not TA – just math.  Failing the bounce lines means it's more likely we're consolidating for a move down (towards a 10% correction) than up and our bounce lines are:

  • Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong)  
  • S&P 2,860 is the 5% line and the bounce lines are 2,875 (weak) and 2,890 (strong)
  • Nasdaq 7,475 is the 5% line and the bounce lines are 7,540 (weak) and 7,605 (strong) 
  • Russell 1,550 is the 5% line and the bounce lines are 1,565 (weak) and 1,580 (strong)

In order to get more bullish, we need to see all the strong bounce lines turn green and, if the weak bounce lines begin to fail, then we look for the first index to cross below the 5% line and look to place bearish bets on the laggars and it's the Dow that's lagging this morning at 25,700 – so it makes the best bearish bet of the group and you simply place a tight stop above 25,700 and then look to go long the laggars if the indexes start breaking up.  

There, you are now an expert at trading the Futures!  Of course we also watch the news and pay attention to companies and events that could drive the indexes but, other than a trade deal being announced (and we think there's no way this week), I think people will be bailing on the market into the weekend.  It's not about the $30Bn in new tariffis, it's about the general over-bought nature of the markets – this is just an excuse to sell for fund managers.

On the whole though, this is a nice, healthy sell-off and we're starting to recognize more and more market risks, which makes them less scary for long-term share holders so, if we manage to hold our highs despite all this nonsense – THAT will be impressive!  

Image result for china bond holdings usWe still have the weekend to get past though and China WILL retaliate and it seems they've already started as no one bought our bonds this week at the note auctions.  China is holding $1.1Tn of our Government's debt and they could begin selling it, which would quickly make it hard for us to get a good price at our own auctions and that would quickly drive up US interest rates but it would also devalue their remaining low-interest bonds – so it's a tricky move for them to make.  Simply stopping purchases would hurt us plenty.

China is also America's largest customer for Soy Beans and Soybean Futures have been collapsing, down 15% since April and, if you believe in a trade deal, you can make money playing SOYB bullishly.  Right above, our own President is telling the farmers not to worry because he will be happy to help them by buying Soybeans, etc. and handing them out to the poor and of course our President would never lie to farmers so I can't imagine why traders wouldn't jump on Soybean Futures – the September contracts are /ZSU19 at $825 and that gives Trump all summer to come through on his promises.  Any takers?

As to SOYB, it hasn't been this low since, well, ever – as the contract began in 2012 at $25 and never really went below $17.50 until the trade war began so $14.50 is quite a bargain and, as much as I hate to bet on Trump doing anything right, it's POSSIBLE we get a trade deal and that will hurt our hedges in the Short-Term Portfolio so, in order to hedge the hedges, a bullish bet on SOYB makes sense.  For the STP, we can:

  • Buy 50 Nov $14 calls for $1.10 ($5,500) 
  • Sell 50 Nov $15 puts for 0.95 ($4,750) 

That's net $750 and, if SOYB goes back to $16 on a trade deal, those options will be worth $1.50 each for $7,500 on 50 100-unit contracts, which would be a 900% gain of $6,750 – not bad for an offset and our worst case is owning SOYB at 7-year lows and we can then sell calls to reduce our net $15.15 entry.

Have a great weekend, 

– Phil



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TOS Question–

I swear I used to be able to write "notes" next to positions in the monitor/activity and positions tab — now I can't find any of my past notes nor do I see it as an option anywhere.  I think I used to 'right-click'.

Is it just me?

STJ, what do you typically do with your short VXX calls?  Do you take profits at say 50%, so you are ready to sell more on the next spike?  Or do you just hold them until expiration?

RE: Save the Home Sapies:  Every once in a while someone proposes that people should have to get a license to have kids.  That clip is a strong arguement in support of that idea.  LOL


Should we use the weakness lately in GOLD to roll down GOLD, or are we comfortable with our $10/$15 spread still?

TOS Notes / Jeffl – Right click on your open position in the P&L section of the account statement and choose thinkLog Notes in the menu.

VXX / Palotay – Last year, I held most of them to expiration although I closed some when they were less than $0.05 (free on TOS) but I had fewer positions. This year I have been closing them when they get around $0.20. But that might change… I am still experimenting to see what works best and adjusting based on margin. BTW, sold more calls yesterday – Dec 50 at $3.85. 

So right now, all my June positions are closed, and I have open ones in September and December. 



thank you —- i swear i used to be able to do it on the other screen i mentioned.  maybe they changed it in an update.

/YM – so far so good. Caught a nice ride down and then got paid again to cover the same ground on the way back up. Now, I know this is pushing my luck, but what do you guys think about trying to catch a Friday afternoon sell-off?

Jeffl – You might be right. I know that I lost notes at one point and I can't recall why. Also, the problem with this system is that you lose notes at the end of the year when closed positions are removed from the list. It would be great to have more persistent notes associated with a ticker for example.

My bad, you can add notes to a ticker in the top right menu (not very top one, the one for that ticker) in the Analyze tab.

I'm not seeing anything in the news to justify this rapid drop in the VIX, and big rally.  Didn't tariffs go through?  But everything is fine?  I'm confused.

platy – both true and Mnuchin said trade talks were constructive. I guess that’s when the ticker changed

palatay – both  TRIUMP) and Mnuchin said trade talks were constructive. I guess that’s when the ticker changed

It's hilarious that they can say that, and the markets go up.  But what can you do (besides smile as the premium in your VXX calls drops like a rock)?

You gotta love these VIX spikes! Are they going to use these trade talks rumors all year to manipulate the market though? I guess the answer is yes. But there is just so much room for corruption in that process – I imagine Trump phoning one of his buddies about shorting the market before he tweets about tariffs and then go long when he tweets that all is good. Rinse and repeat all year. 

GBTC 8.50

Just a note that you already had 10 of the INTC 2021 40 Puts in the LTP sold in January.  Does it make more sense to add the call spread now or double up on the puts.  Have a good weekend.

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