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What Trade War Tuesday – Markets Fuggedaboutit Already

MAD About the Trump EraWhat, us worry?  

1, 2, 3, 4 Trump declared a trade war and then announced he's going to have fun in the sun at the G20 with his pal Putin but also plans to see China's President Xi in late June and force him to accept US terms of face SEVERE CONSEQUENCES.  This is the mindset of a 75 year-old racist schmuck who has a 1950s view of China and thinks we just won WWII and get to dictate terms to all the inferior races – not the rational strategy of a United States President!  

Nonetheless, the markets love it when Trump lies to them and we're up almost 200 points pre-market after being down 600 points yesterday so YAY!!!, I guess…

If you remember, way back on Friday morning, in our PSW Report, I told you "it's more likely we're consolidating for a move down" and we put up our anticipated levels, which all failed yesterday but we don't count Mondays (and the volume wasn't very strong either) so TODAY is the day that matters and I'm going to highlight the pre-market (7:30) positions so we can see where we 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)

Well that's not very good, is it?  That's why we use this system – it keeps us from getting irrationally exuberant when all the market is doing is weakly bouncing.   The only green box we have is the -5% line on the Dow – that's nothing to celebrate, is it?  The other indexes haven't even taken back their -5% lines and, if they can't take them back today AND make the weak bounces – we are likely to be looking at another 5% drop before the next support levels.  

Meanwhile, we did play the Dow and the S&P for a bounce yesterday but now we're back to neutral and just waiting to see if we can change any levels to green this morning but, as far as I can tell, the trade war is still on and there's no hint of a deal through the end of June – so what is there to get excited about?

You're welcome on Soybeans (/ZSU19), also from the Friday morning PSW Report (subscribe here) as they blasted back to $830 this morning for a $250 per contract gain and the SOYB ETF bottomed out at $14.20 and the Nov $14 calls were even lower than our $1.10 buy line and the Nov $15 puts hit $1 so our aggressive trade idea is a go and now we'll see how high SOYB can bounce, though our expectations are lower as there is no trade deal and China has specifically threatened not to buy our beans anymore.

Today we're excited about Gasoline (/RB) still cheap at $1.95 with the holiday looming and the July contract (/RBN19) is just $1.94 so a discount for an extra few months (and two holiday weekends) is an offer we simply cannot refuse.  I already sent out an Alert to our Members this morning about /RB, as well as a nice TLT trade idea (short) that we'll be playing in the Short-Term Portfolio.

As annoying as all this Trade War nonsense is, it's hard to get bearish when earnings were much better than expected in Q1 and, just this morning, Small Business Optimism jumped back to 103.5, with 8 out of 10 components increasing, led by earnings trends.  Anything over 100 is good and we've clearly reversed a downtrend that started in Q4 DESPITE all the nonsense that's going on.     


So we're going to watch our levels and see what else the market is willing to ignore but I'm not going to be enthusiastic until I see those Strong Bounce lines retaken and that's simply not going to happen today but we can't take the day off as a failure at the weak bounce lines will mean it's time to double up on our hedges and play for the next 5% correction.

Speaking of things we are ignoring – I'll leave you with a wake up call from Bill Nye, the Science Guy:

Whatever it takes – thanks Bill!  


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  1. Good morning all.  Anyone have any thoughts why SIG was destroyed yesterday?


  2. A modest bounce is expected I guess but how many more times is the market going to fall for the lies. It seems in fact that they don't believe the lies but use them to justify any move up that puts money in their pockets!

  3. We should worry about what we do at home, not competition with China:

    Others say that, alongside any security measures, the most basic task for America is minding the health of its own society.

    “Our country’s job is to do better innovation here at home,” says John Deutch, an MIT scientist and former director of the CIA. “China will overcome us,” he says, “only … if we don’t pay attention to our own technology and economy.”

    I guess stopping war on science would be a good step!

  4. Good Morning!

  5. I can't remember if this has been mentioned recently, but the futures micros are trading fairly tight – /MES /MNQ etc… so far they seem great for small trades – 1/10th the size of the minis.

  6. Micros / Atitlan – A good place to learn for sure. Low margin requirements and mistakes are not too costly. Volume is lower though.

  7. Good morning! 

    Certainly not rocketing higher and we have to get more bearish if those weak bounce lines fail.  

    • "China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing," writes President Donald Trump via Twitter.
    • And speaking about interest rates, Trump has to bring the Fed  into the conversation.
    • "If the Federal Reserve ever did a `match,' it would be game over, we win!" Trump adds.
    • Still, he insists, "China wants a deal!"
    • Earlier, he repeats his plan to aid U.S. farmers to offset China's purchases, saying the money will come from the "massive" tariffs being paid to the U.S.
    • Chinese yuan slips 0.1% against the U.S. dollar; in the past five sessions, the WisdomTree Chinese Yuan ETF (NYSEARCA:CYB) is down 1.3%.
    • Previously: Trade war sees U.S. farmers get $15B in aid (May 14)
    • JPMorgan says Apple (NASDAQ:AAPL) would need to raise iPhone prices by 14% to offset the costs of the new US-China tariffs.
    • Bank of America Merrill Lynch thinks Apple would need to increase prices by 20% if it chooses to move manufacturing to the United States.
    • But JPMorgan expects Apple to absorb the cost, which could lower the gross margin by 4%.
    • Previously: Tariffs could slash Apple EPS – Morgan Stanley (May 10)
    • The plant-based Impossible Whopper sandwich is being sold at Burger King (NYSE:QSR) restaurants in three new markets (Miami, FL, Columbus, GA and Montgomery, AL) today as part of a plan to take the meat alternative sandwich national.
    • A test of the Impossible Whopper went well in St. Louis, Missouri with consumers who said it was juicy and tasty enough to satisfy as a burger.
    • Impossible Foods (IMPSBL) is being closely watched after its recent funding round and the blazing IPO of Beyond Meat (NASDAQ:BYND).
    • Burger King has a leg up on McDonald's (NYSE:MCD) in the U.S. with vegan burgers, although the Golden Arches is testing a meatless burger in Germany called the Big Vegan TS in partnership with Nestle (OTCPK:NSRGY).
    • Previously: New funding round values Impossible Foods at $2B (May 13)
    • Source: Press Release
    • April Import/Export Prices: Import prices index +0.2% vs. +0.7% consensus and +0.6% prior (unrevised).
    • Export prices +0.2% vs. +0.5% consensus and +0.6% prior (revised from +0.7%).
    • The agreement calls for MediPharm Labs (OTCQX:MEDIF) to supply Cronos (NASDAQ:CRON) with about $30M of high-quality private label cannabis concentrate over an 18-month period, and potentially up to $60M over 24 months.
    • CRON is up 1.05% premarket.
    • Source: Press Release
    • Canntrust (NYSE:CTST): Q1 GAAP EPS of C$0.12.
    • Revenue of C$16.85M (+114.9% Y/Y)
    • Press Release
    • CannTrust (CTSTQ1 results: Revenues: C$16.9M (+116.7%); Medical: C$11.4M (+58.3%); Wholesale: C$5.5M.
    • Net Income: C$12.8M (+12.3%); EPS: C$0.12 (unch); Adjusted EBITDA Loss: (C$3.8M).
    • Harvested production: 9,424kg (+438.8% Y/Y)
    • Total Dried equivalent grams sold: 3,014kg (+197.2% Y/Y)
    • Dried Equivalent Ratio: 2.85.
    • Previously: Canntrust reports Q1 results (May 14)
    • The Trump administration is planning on providing about $15B in aid to help U.S. farmers whose products may be targeted by the newly unveiled Chinese tariffs.
    • The group has been among the hardest hit in the trade war, with U.S. soybean futures falling to their lowest in a decade on Monday and shipments of the most valuable U.S. farm export to China dropping to a 16-year low in 2018.
    • A new aid program would be the second round of assistance for American farmers, after the Department of Agriculture's $12B compensation plan last year.

    That CanTrust item cracks me up as New Age (PSWI's MJ Manufacturer) could announce the same thing.  Canada is so small compared to CA or the US market, $3M a month is only 500 liters or distilled THC (that they make edibles out of) and we're looking to get to 2-3,000/month by next year!   CTST already has an $823M market cap – we're waiting until we're making $50M/yr to go public at $1Bn+ but these guys are LOSING money – ridiculous!  

    SIG/Robert – China trade affects them.  

    The majority of analysts recommend a “hold” on Signet Jewelers (SIG) stock. Signet’s net sales and earnings are expected to decline in fiscal 2020, reflecting lower transactions, the promotional environment, and higher credit costs. Persisting sales and margin headwinds keep analysts on the sidelines.

    Of the ten analysts covering the stock, nine recommend a “hold,” and one analyst has a “sell” rating. Analysts have a consensus target price of $26.83 per share on SIG, which implies a potential upside of 33.1% based on its closing price of $20.16 on May 13.

    SIG/Pstas – They have very easy comps as they wrote their way off to massive losses last year.  They took a $496M loss last May (strange quarters) after writing down $590M so a profit was there for the taking and last Q (ended 2/2) they took a $108M loss with $330M in write-downs so I like them – eventually.  People have no patience for retail turn-arounds but I think this is a great bottom on them but all we have in the OOP is 5 short 2021 $20 puts we sold for $5.30 (still $5.30) as I'd like to see them make a profit before buying more.  

    Big Chart – Not safe at all until we take back the 50 dmas and the Dow failed the 200 and so did the RUT and NYSE is on the line so watch them closely as an up/down indicator.

    Micros/Ati, StJ – Very good for practicing.

  8. Macy still dropping like a rock.

    Earnings are tomorrow – I can't help but get the feeling that everyone knows something and isn't telling me.  Are we in for a big negative surprise tomorrow?

  9. Jeff-It looks like all the apparel manufacture's are getting hit because of tariffs. LB HBI etc are all down from 4-8%. Most of everything comes from China including shoes so…..down they go. Higher costs for consumers.

  10. M/Jeff – They are supposed to earn 0.34 on $5.5Bn in revenue vs 0.48 last year and they are down 28% so about right for the lower earnings.  Q4 was an 0.20 beat at $2.73 but that's their whole year in one Q, these Qs are inconsequential really.  They've beat every Q since early 2017 but it hasn't done anything for the stock price, which is ridiculously cheap at the moment.

    The key will be whether or not they retain their $3 target for the year.  P/E less than 7 at that level. 

    Macy’s CEO Jeff Gennette is one of many retail industry leaders who has acknowledged the potential impact of the tariffs, telling CNBC that they would “affect a department store retailer more significantly because of the apparel pieces that are going to be part of it. What I can say is that we’ve been looking at our own supply chain, we’ve been looking at our own private brands and we’ve prepared for this."

    Indexes making some progress, Dow up 232 and over 25,500.  Very good with the Dollar up 0.25%.

  11. Does anyone remember if we ever did a Top Trade Review for Q1 2018?  I swear I did but I can't find any evidence of it.

  12. Last one I have saved was September, when we got to the end of 2017 but I remember starting 2018.  Maybe I lost a draft?

  13. Phil   you might check seeking alpha.  I know you did a Q1 over there.

  14. Yes, thanks Mike!  It was driving me crazy as I wanted to do a review but I'm thinking "I'm sure I did these already".  Now I can move on and get the next one done – thanks.  

    Thank you too Willsons.  I never categorized it and it got lost.

  15. Trump on WH lawn saying China wants to make a deal because their economy sucks and ours is great and we're making Billions of Dollars on tariffs and we have the greatest economy in history, etc.  Wow, you can see how he averages 10 lies a day, there's like 3 right in that statement…

  16. Hi Phil,  I wonder if TEVA has gotten cheap enough for you to be interested.  They plummeted yesterday on price-fixing charges (a number of other major firms were charged as well).  Teva is a Buffet holding.  What is your take?  Thanks.

  17. TEVA/John – That price-fixing thing is no joke.  Not only could be big fines but also impacts forward pricing.  I'd stay away.  Keep in mind they don't actually make money, if I want to lose Billions of Dollars for my investment – I might even prefer TSLA!

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 20,314 20,272 19,652 21,903 22,385 18,854 18,084 19,500 20,154 -1.5%
    Operating Profit $m 1,649 3,951 2,579 1,272 -17,526 -1,683 -3,014      
    Net Profit $m 1,269 3,055 1,588 329 -16,265 -2,150 -3,375 3,800 3,453  
    EPS Reported $ 1.49 3.56 1.82 0.071 -17.3 -2.25 -3.42      
    EPS Normalised $ 3.23 4.07 3.65 2.30 -3.51 0.83 0.24 3.52 3.21 -23.9%
    EPS Growth % -0.5 +25.9 -10.4 -37.0       +326.5 -8.81  
    PE Ratio x           14.8 50.1 3.47 3.81  
    PEG x           0.045 0.15 n/a n/a

    They are being accused of overcharging by 10x on key drugs yet maybe 20% drops to the bottom line (and there is no actual evidence of a profit so far this year) so how can they really afford to sell the drugs at lower prices?  Now, you might say "well then they aren't ripping people off" but that's misleading as they are a company that's built around ripping people off so the bloated management compensation and the beautiful offices and the jets and the bribes – all part of the windfall profits they've been getting so they may be forced to unwind the prices but it will be harder to scale back all the crap they've been buying with those profits.

      Good notes on TEVA:

    Teva’s fall began with its massive $40.5 billion purchase of Actavis Genericsfrom Allergan (AGN) in 2015. The deal was initially well received by investors. After the acquisition was announced, the company’s stock skyrocketed by an incredible 16% to a record high market cap of $61 billion. Management boasted at the time that this purchase would help the company “win in global healthcare” and set lofty financial targets that in hindsight we can see were way off. For example, Teva expected the combined company by 2018 to deliver $11.6 billion in EBITDA and $8.5 billion in free cash flow. In reality, last year the company recorded just $5.3 billion in EBITDA and $3.7 billion in free cash flow, both less than half the projected amounts.

    Overpaying for Actavis put a tremendous financial burden on Teva and saddled it with $35 billion in debt. The acquisition also proved to be done with the worst possible timing. In 2016 with the election of Donald Trump, the FDA started speeding up the approval of generic drugs which flooded the market with a record number of new products. This, combined with the rise of group-purchasing organizations (GPOs), has put severe downward pressure on generic drug prices. In 2018, Evercore ISI found that generic price deflation was around 11%. When Teva acquired Actavis, it was at a time when the generic market was at the height of its business cycle. Past management gambled that those strong pricing conditions would continue – they were clearly wrong.


    Teva has also struggled due to the patent expiry of its blockbuster multiple sclerosis drug Copaxone. In its heyday, the drug was a major revenue driver for the company delivering annual sales in excess of $4 billion. While it remains a major MS therapy in the US, the drug has since gone generic and faces harsh competition from a multitude of companies including Mylan (MYL) and Novartis (NVS). As a result, quarterly prescription volume in the US has fallen over 21.7% YOY from 143,000 prescriptions last year to 112,000 in the most recent quarter. Pricing for the drug has also been negative, falling 25% as Teva is forced to lower the costs of Copaxone in order to remain competitive.

    And NOW they are under investigation for price-fixing!  

    The states say the pharmaceutical companies conspired with one another to fix prices and carve up markets for medicines among themselves, rather than compete on price. … Novartis AG’s Sandoz, Teva’s Actavis unit, and Taro Pharmaceutical Industries Ltd. are also named in the complaint. …

    The complaint puts Teva at the center of the conspiracy, saying it colluded with a core group of competitors to follow each other’s price increases. During a 19-month period from 2013 to 2015, Teva significantly raised prices on about 112 generic drugs and colluded with its competitors on at least 86 medicines, the states said. While the size of the increases varied, some were more than 1,000%."


    "Teva Pharmaceutical Industries' chief financial officer on Sunday reiterated that the company has done nothing wrong in the wake of a price-fixing lawsuit filed by 44 U.S. states.


    To make things worse, "60 minutes" aired a report on the matter, which will likely induce many fund managers to sell out to reduce "headline risk" (i.e. the risk that clients watching "60 minutes" think their fund manager is nuts to hold such an ugly stock and want their money back, thus reducing the fund manager's income).


    If you want to take a flyer on TEVA, the assumption would be that they will settle quickly and get it over with and that a lot of this stuff is already priced in (the suit is 3 years old, just amended recently) when TEVA went from $33 to $11 back in 2017.  It since struggled back to $25 and now $12 again and the 2020 $14 calls are $1.17 so, as a pure risk play, 10 of those is $1,170 and the $10s are $3.30 so a $4 pop on good news can more than double your money .  I'd rather go into it like that (limited risk) than put a lot of money into a spread that may go sour.  

  18. Speaking of TSLA – even more erratic than TEVA but, ultimately, the same 50% drop.

    I guess TSLA is more likely to drop another 50% than TEVA…

  19. Hi Phil.  Any take when CELG deal may close?  Puts below 90 maintaining some value.  Thx.

  20. Hi Phil, wondering about some AAPL tuning around these numbers. You suggested to sell 20 Jan 2020 160c to cover my 20 Jan 2020 150s, with no cap gains, (then buy 180/220 or 160/200 bcs). Wondering if I could sell 20 Jan 2021 160s instead, to catch more premium, then roll the 150s in 2020?


  21. /TSLA How about a 10x 2020 285/265 put spread and sell the 5x 275 call? $5 net on a $20 spread that’s 100% ITM. So 400% in  9 months if Tesla stays below $265. Or is there a better way to play Tesla? Seems like it’s a heads I win tails you lose situation. I’ve got 20 of the spreads in an IRA but looking for a play in my brokerage account. 

  22. CELG/Taihu – No way to tell as there are many approvals to get through.  BMY doesn't even have the cash yet, they are working on a $20Bn raise.  I'm fairly sure they'll get it done eventually (Q3) but I wouldn't touch the combined company with close to $60Bn in debt!  

    AAPL/Wing – You can do that, you'll just have to keep an eye on them.  If AAPL is deep in the money, then the premium runs off the 2021s and you are in good shape but if AAPL is at the money, the 2021s will keep a lot of premium while the 2020s end up with none – that's your primary risk.  Of course, if you then intend to leap-frog and pick up 2022 or 2023 spreads to cover the 2021s – then it's all fine and a strategy I often employ but difficult to teach as it takes 3-5 years to play out examples.  

    In your example, you have AAPL 2020 $150 calls at $46.75 and you don't want to cash them to avoid higher taxes so, instead, you are considering selling the 2020 $160 calls for $39.40, which captures all but $7.35 of your max and you still have a $10 spread which is very likely to pay in full.  

    If, instead, you sell June 2021 $160 calls, they are $45 and that's fantastic and that's about $16 in premium that will run maybe 1/3 down by Jan 2020 so you pick up $5 hopefully from selling the longer spread.  In theory, there's not much downside as your 2020 150s will have no premium and if AAPL is $190 (like it is now) the June 2021 $160s should price like the June 2020 $160s, which are $39.20 while the Jan 2020 $150s would be $40.  So there's no free lunch, you end up with about the same spread you would have had and the trick is to identify the sweet spot to roll to eventually.

    Rather than play games like that, perhaps sell the June 2021 $170 calls for $40 and now you have the same $40 off the table you would have had with the Jan 2020 $160s but now a $20 spread that gives you more potential profit with an upside you believe in.

    The key to making money doing this though is TIMING and you are specifically not timing your trades with AAPL's cycles because you are more worried about tax consequences than positioning for maximum profit - so it's a bit dangerous as you will face these choices often.

    TSLA/Dawg – They are too low in the channel to make a good play in my opinion.  If something good does happen, they can squeeze right over $300 again.  While I doubt it – it's not what I'd consider safe.  

  23. Some folks say one of the problems with bitcoin adoption are the long blockchain confirmation times which is wrong, that's not relevant because bitcoin and its underlying technology blockchain (as described here for 7 years now) is NOT a "currency," it's a system of trust. With fiat currency we don't make a phone call to the FED every time we want to spend a $10 bill. We simply trust it, as long as the $10 doesn't look like someone made it with crayons. With Bitcoin, this inherently isn't a problem either because, like fiat, it is a platform technology and therefore it supports development on the platform, such as Flexa's "Spedn" application.

    IMO, one of the major problems with bitcoin adoption is the fact that the IRS considers it an asset and therefore every transaction is a capital gain or loss which is a reporting nightmare. There's an interesting concept call nexo that loans you money from your own asset base, which is a creative solution. It also has the tangential benefit of forcing savings: your crypto because a pile of coins you sit on and the interest is what you actually spend. 

  24. TLT working out already:

    I hope people got this morning's Alert, I forgot to mention it again at the open:

    May 14th, 2019 at 7:13 am | (Unlocked) | Permalink 

    TLT is getting interesting again at $126.  $130 is my usual shorting line but we haven't hit that for years so maybe $126 is worth a toss?  In the STP, let's add:

    • Buy 20 TLT Sept $129 puts for $5 ($10,000) 
    • Sell 20 TLT Sept $125 puts for $2.50 ($5,000) 

    That's net $5,000 on the $8,000 spread so $3,000 (60%) profit potential but we are likely to roll this one to build it up over time unless it just goes out way right away, in which case 60% in 4 months doesn't suck.

  25. TEVA / Phil – The saving grace is that they are too big to fail in Israel!

  26. True, StJ.  

    • Cowen's John Kernan sizes up the impact of new tariffs on the retail sector
    • In apparel and footwear, the analyst notes that there is no replacement region for the cheap, low cost sourcing from China that backstops the financial model of many of the companies,
    • Skechers (SKX +1.4%), G-III Apparel Group (GIII -4.6%), PVH (PVH +0.6%), Carter's (CRI) and Ralph Lauren (RL -3.5%) are identified as having the most outsized risk to earnings per share due to their inability to raise prices enough to absorb all of the tariff hit.
    • (NASDAQ:STMPgains 1.6% after a U.S. Army contract awarded in April appeared on the FBO website.
    • Under the contract, Stamps will continue to provide postage stamp subscription services.
    • ACT Research warns that trucker profitability could "roll-over" in the second half of this year
    • "We continue to believe the accelerating supply-demand imbalance and large new vehicle inventories will trigger a correction sometime in the latter half of this year," observes ACT analyst Kenny Vieth.
    • Other factors seen impacting rates are slowing freight growth, an easing of driver supply constraints, the resumption of the long-run freight productivity trend and strong Class 8 tractor fleet growth.
    • While maintaining a cautious tone, Vieth notes that the heavy commercial vehicle market continues to benefit from key supply and demand-side triggers, including a freight rate markdown that is from record highs, desirable new technologies, better fuel economy and for trailers increased demand for drop-and-hook to keep drivers moving.
    • Related stocks: Navistar (NYSE:NAV), Cummins (NYSE:CMI), Meritor (NYSE:MTOR), Alison Transmission (NYSE:ALSN), WABCO (NYSE:WBC), Wabash National (NYSE:WNC), PACCAR (NASDAQ:PCAR).
    • Barrick Gold (GOLD +1.1%) is preparing its Lumwana copper mine in Zambia for a sale in the second half, with an eye toward Chinese buyers, Reuters reports.
    • It's part of a set of moves to shed less productive mines to focus on higher-expansion possibilities, and Zambia's new mining code and import duty could press Lumwana margins.
    • Barrick is talking with investment banks and a bank with links to Chinese companies is more likely to get an advisory role, according to the report.
    • The mine is valued at up to $500M.
    • Security researchers found a new class of Intel (NASDAQ:INTC) chip flaw dubbed ZombieLoad, which is made up of four bugs, affects nearly all Intel chips going back to 2011, and can allow a hacker to access sensitive data straight from the processor.
    • AMD and ARM aren't vulnerable to this attack.
    • The researchers informed Intel, which released microcode to patch the vulnerable processors. Consumer PC and device makers including Microsoft and Google are also issuing patches to serve as an initial defense.
    • Intel tells TechCrunch that its patches could slow processors as much as 3% (consumer) to 9% (data center) but says the difference shouldn't be noticeable in most situations.
    • Uber (NYSE:UBER) underwriters deployed the tactic to bolster the stock ahead of last week's IPO, according to CNBC sources. Uber shares are down nearly 11% since going public.
    • In a naked short, underwriters can sell shares above the greenshoe portion and then repurchase in the open market.
    • The size of the naked short isn't known, but bankers reportedly consoled investors before Uber's open by saying there would be additional support from the short.
    • Uber warned this could happen in its prospectus: “A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering.”
    • In other Uber news, Mark Cuban isn't surprised by the IPO performance saying the company "waited too long."
    • Nomura Instinet forecasts flat gross gaming revenue growth in Macau for May after factoring in the first part of the month that included the Golden Week holiday. GGR was down 8% in April and was 0.4% lower in March, but second half comparisons will become easier to match.
    • Analyst Harry Curtis notes the significant upside on MGM Resorts (MGM +2.1%), Wynn Resorts (WYNN +1.9%) and Melco Resorts & Entertainment (MLCO +1.8%) after the recent selling pressure. "Although heightened trade war concerns have driven the U.S.-listed Macau stocks down ~12% on average over the past month (vs. -4% for the S&P 500), we view investors’ mostly negative sentiment toward the sector as an incremental positive for the stocks. It sets a lower bar," he notes.
    • Financials, among the worst-performing stocks on Monday, regain some ground on Tuesday.
    • The Financial Select Sector SPDR ETF (NYSEARCA:XLFrises 1.4% compared with its 2.9% decline yesterday and the SPDR S&P Regional Banking ETF (NYSEARCA:KRE) also gains 1.4% vs. a 4.1% descent in the previous session.
    • Among the big banks, Bank of America (BAC +2.1%) and  Citigroup (C +1.9%) rebound the strongest, followed by JPMorgan (JPM +1.8%), Goldman Sachs (GS +1.4%), Wells Fargo (WFC+0.8%), and Morgan Stanley (MS +0.5%).
    • For regional banks, Comerica (CMA +1.8%), KeyCorp (KEY +2.1%), and CIT Group (CIT+2.2%) log in the strongest gains. Others: Regions Financial (RF +1.4%), PNC Financial (PNC+1.4%), Fifth Third (FITB +1.5%), Huntington Bancshares (HBAN +1.4%).
    • Credit-card financial institutions make an impressive comeback: Synchrony Financial (SYF+2.4%), Alliance Data (ADS +2.1%), Capital One (COF +2.2%), Discover Financial (DFS+1.7%), American Express (AXP +1.2%).
    • Life insurers also notch up gains: Brighthouse Financial (BHF +3.5%), Prudential Financial (PRU+2.5%), Principal Financial (PFG +2.1%), and MetLife (MET +2%).
    • In the year through April 30, Boeing (NYSE:BA) is reporting net new orders of -119, with 737 net new orders of -171. Current year deliveries of 172, with 98 of them 737s.
    • Backlogs of 5,582 were down 119 jets in April.
    • Shares are rebounding a bit today, currently up 2.1%.
    • Caesars Entertainment (CZR +2.4%) and Disney's (NYSE:DIS) ESPN plan to collaborate in a number of areas.
    • The deal includes building a new ESPN-branded studio at The LINQ Hotel & Casino in Las Vegas to create sports betting-themed content. The studio will serve as a Vegas hub for odds-related content and will contribute to a number of ESPN linear, digital and social shows as well as and the ESPN app. The new studio will launch in 2020.
    • Caesars will also serve as ESPN's official odds data supplier across TV and digital, receiving associated attribution across ESPN. Additional advertising and sponsorship activations will roll out in the coming months and throughout the deal term
    • "We are poised to expand our coverage in a big way and working with a category leader like Caesars Entertainment will help us serve these highly engaged, diverse sports fans with the best and most relevant content possible," says ESPN Business Development exec Mike Morrison.
    • Source: Press Release
    • U.S. trade tariffs are starting to increase inflation and will go up more as levies rise, New York Fed Bank President John C. Williams said in an interview on Bloomberg Television.
    • Still, the U.S. economy "is well positioned to deal with whatever events happen in the future," he said.
    • Separately at a speech in Zurich Tuesday morning, Williams sees lower interest rates are the new normal.
    • Shifting demographic trends--i.e. lower birth rates--and slower productivity growth "are driving slower trend growth and historically low levels of real interest rates across the globe," he said.
    • Given that central banks will have limited ability to cut interest rates, they should "revisit and reassess their policy frameworks, strategies, and toolkits to maximize efficacy" in a lower neutral rate world, he suggested.
    • Outside of monetary policy, there are a number of fiscal actions that can be taken including strengthening "automatic stabilizers" to provide an economic boost during a downturn.
    • Another potential move is to align debt management more with monetary policy.

  27. Some improvement from this morning but not really enough to call this a positive move today:

    • 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)

    And that's after the best one-day move on the Nas since March!    The only box that changed is the Dow, which was on the mark this morning, turned green (by 125) and the Dow is our least reliable index.  

  28. I just don't know that we should be surprised – these guys all took victory laps with Trump after the tax cut was signed, talking about all the new jobs they would create. But the opposite happened:

    AT&T has cut more than 23,000 jobs since receiving a big tax cut at the end of 2017, despite lobbying heavily for the tax cut by claiming that it would create thousands of jobs.

    AT&T in November 2017 pushed for the corporate tax cut by promising to invest an additional $1 billion in 2018, with CEO Randall Stephenson saying that "every billion dollars AT&T invests is 7,000 hard-hat jobs. These are not entry-level jobs. These are 7,000 jobs of people putting fiber in ground, hard-hat jobs that make $70,000 to $80,000 per year."

    The corporate tax cut was subsequently passed by Congress and signed into law by President Trump on December 22, 2017. The tax cut reportedly gave AT&T an extra $3 billion in cash in 2018.

    But AT&T cut capital spending and kept laying people off after the tax cut. A union analysis of AT&T's publicly available financial statements "shows the telecom company eliminated 23,328 jobs since the Tax Cut and Jobs Act passed in late 2017, including nearly 6,000 in the first quarter of 2019," the Communications Workers of America (CWA) said yesterday.

  29. PHIL

     Do you know anything about this fund

     Renaissance Technologies' hedge funds,

     My IT brother-in-law asked about it

    Renaissance Technologies LLC is an American hedge fund firm based in East Setauket, New York,[5] on Long Island, which specializes in systematic trading using quantitative models derived from mathematical and statistical analyses. The company was founded in 1982 by James Simons, an award-winning mathematician and former Cold War code breaker.


     Simons' Renaissance Technologies' hedge funds,

  30. Nasdaq Composite is almost 300 points higher than /NQ. Not sure why the spread but the actual index is over 7700. /ES and /YM are trading relatively close to the actual index. 

  31. Good morning!

    Markets down a bit, not much happening.  

    Fund/QC – No, there are so many.  There's a site that gives you an idea of what they hold @

    Composite/Dawg – Composite is 2,000 stocks, /NQ is the 100.