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Friday Flip Flop – Market takes back SOME of the Losses – Still Down 5% for the Month

Up and down we go – but mostly down

We're still stuck in that range but at least we haven't failed the 200 dma – yet.  The Russell has already failed and the NYSE was on the line yesterday but recovered to hold 12,500 and this morning the Futures are up a little so it doesn't look like it will be a total catastrophe into the weekend – so we still have that to look forward to.

As you can see from our S&P 500 chart, we're stuck in a range between the 5% and 10% lines on our Big Chart as well as between the 50-day moving average and the 200 dma and whichever way this resolves itself should set the tone for the 2nd half of the year but first, it may be a summer where we drift in-between.  That's why we're so easily swayed by any news item – when you are trading between major support and resistance – it takes very little to change your course. 

We're still playing for Gasoline (/RBN19) to change it's course and we're very surprised to be losing $1,250 per contract at the moment on our long position from Wednesday's Live Trading Webinar and we now have 4 long contracts at an average entry of $1.935 with /RBN19 at $1.905 and the good news is it will be cheap to fill up our tanks ahead of the holiday weekend and the better news is we are still expecting a run up – maybe not until next week though…

Our theory is that the rollover of /RBM19 (June contract), which expires on Tuesday, is putting downward pressure on /RBN19 (July contract) and that the timing of the last EIA Report (through 5/17) failed to capture the orders for gas stations who are topping their tanks off this week – ahead of the holiday driving.  AAA expects this to be the busiest holiday driving weekens since 2005, when we were still a care-free nation who thought housing was a great investment.

The markets were high in 2005 also and they kept going higher for 3 more years before finally collapsing.  This morning, Durable Goods are down 2.1% for April but a lot of that is from BA and core Durable Goods are only down 0.1%.  Still, it's not a good trend over the past 6 months nor has it been very good since Q1 of last year so this economy, despite the President's claims, is not exactly humming along.

It's the same with the Sentiment Polls – TELLING people how GREAT things are can fool them for a while but, at some point, people begin to realize that things aren't all that great and that change in sentiment can be very dangerous – for the people in power as well as for market investors.  What we've been seeing recently is lower and lower volumes and lower and lower bounces each time the market falls.  Today will mark the 5th straight week the Dow has closed lower than where it started – at what point should we actually worry that the trend has changed?

We're already well-hedged but that doesn't make our portfolios loss-proof – it only mitigates the blow on the way down.  In an ordinary market we would have more short positions but this is a twee-driven market, not a Fundamental one – and it's very dangerous to take short positions so we mostly use the Futures for quick gains and the Ultra-ETFs for our more serious hedges.  

As you can see from our Big Chart, the Dow and the NYSE are both bouncing off their 200-day moving averages and we can use our 5% Rule™ to see where their weak bounce lines should be:  

  • For the Dow, the fall from 26,700 to the 200 dma at 25,434 was 1,266 so we expect a 20% bounce and we'll round that off to 250-points and call the base 25,450 and that means 25,700 would be the weak bounce line for today and 25,950 would be a strong bounce and I very much doubt we'll see that but making the weak bounce line and holding it into the close would keep us from getting more bearish into the weekend.  
  • For the NYSE a top at 13,069 to the 200 dma at 12,515 was a 554 point drop so 20% of that is 110 and we'll call that a weak bounce at 12,625 and a strong bounce would be 12,735 and you can see that's right where we topped out earlier in the week.  That's a good sign, as it means the 5% Rule™ is working very well in this market:

Aside from Trump's fight at the playground with Nancy Pelosi, the big news this morning is Theresa May finally resignining (effective June 7th) as she fails to put forth a Brexit deal – so that's still up in the air for at least another month.  Japan lowered its ecomomic outlook as well.  In its monthly report, the government said that “weakness is seen recently in machinery investment” and that industrial production is “in a weak tone recently.” Both phrases reflected a somewhat more negative view of the economy than in the previous report in April.  Oddly enough, we have those exact same weaknesses but our Government says everything is GREAT (again). 

It does look like we're going to get a pop into the holiday as it's very easy to manipulate the markets on such a low-volume day and next week we're closed on Monday and there is not likely to be any pick-up on volume into the end of the month so we're probably stuck in this range until June – making it an ideal time to have a 3-day holiday.

Have a great weekend, 

- Phil

 


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  1. Interesting chart:


  2. Trade war still at the top of the tail risk:


  3. Good Morning!


  4. Good morning!  

    Dollar holding 96.50 so far but no looking like it's going to pop so we won't have that headwind today.  Dow up 200 at the bell and we'll have to see what sticks.

    /RB was just rejected at $1.93, which is really pathetic and $1.92 looks shaky too.  Oil is at $58.50 and Brent is $68.50 so we'll have to hope for war to break out over the weekend or something…

    I like StJ's Top Worry chart as it goes to show you it's always something and usually it never comes to pass.  Sadly, no one's worried about Global Warming – the one thing that is actually happening!

    This interactive Corporate Bankruptcy Chart in the WSJ is Fantastic.

    The whole thing is good, lots of great charts.


  5. CTL – In the past week I've accumulated 100 CTL Jan 2021 calls at an average price of $1.90.

    Still available for about the same price.  


  6. I'm on Etrade and I don't see any new quotes for SQQQ options. Any word on when they will open back up for trading? Are the new 4 for 1 options available yet?


  7. SQQQ/Den – The new options are available on thinkorSwim now.


  8. https://seekingalpha.com/article/4265885-buying-centurylink-yielding-10-percent-today

     

    From the article :

    "While some hedge funds and banks are in panic, others are backing up the truck and massively taking new positions like Capital Research Global Investors.

    They increased their position by 140% to 8.43M shares. Think they are buying or selling today?"

    They are a conservative money manager.


  9. Dang

     

    How low can Macy's go???  


  10. albo – my theory is cable/DSL landline co's are the Sears and Penny's (and Macy's) of tomorrow. They are becoming inevitably obsolete. That's a tide that, when it goes out, strands all boats.


  11. Global warming / Phil – Too far in the future for our pico-second trained algos!


  12. Cable / BDC – I think that with the advent of 5G (and eventually 6G), there will probably be no need to have any wires run anywhere. Sure they will might need to add more towers (it seems that signals don't travel as far for now) and such but I am not even convinced of that. But the major telcos will be there – VZ, T, TMOB. Might be harder for a company like Comcast but they have the money! Maybe that means more competition for some of these services that cable provides now but on the other hand, these telcos are consolidating anyway! And it will be all streaming soon anyway! But it's probably bad news for the smaller players – VZ and T will have services in places where they don't need to run new wires. So instant competition.


  13. This should be scary to anyone:

    https://talkingpointsmemo.com/edblog/the-other-shoe-dropping

    This level of power basically gives Barr a whip hand over the entire Intelligence Community. And he seems to want to get his hands on the Russia desks especially. As the Times notes, “Mr. Barr wanted to know more about what foreign assets the C.I.A. had in Russia in 2016 and what those informants were telling the agency about how President Vladimir V. Putin of Russia sought to meddle in the 2016 election.” These are likely among the most closely held secrets the US government has. They will all but certainly be communicated directly to the President.

    Expect some people to disappear in Russia!


  14. SQQQ/Den – It may take a while (hours) for the new options to post – they picked a bad time to do it.  Sometimes it goes right away but sometimes there are delays. 

    M/Jeff – It amazes me how people just turn against certain stocks and it doesn't matter what the company does or says – no one seems to want them.  

    DSL/BDC – But they aren't staying DSL, they are transitioning customers to fiber, 5G and such.

    Too far/StJ – Sooner than we think.  It's going to be 2020 next year, things turn ugly by 2050 and ugly isn't just an inconveniently hot summer…

    Oil $57.50 yet again, /RBN19 back to $1.885.  

    5G/StJ – Well I'm still waiting for my WiMax and FIOS – both were promised to us ages ago.  I do have Comcast (XFinity), don't sell them short in this game, they cleverly made all of their desktop boxes WiFi hotspots for the Xfinity Network and there's almost nowhere in Florida I've ever been where I don't have Wifi.  In fact, my new IPad is a WiFi only model and I haven't regretted it.  If they can boost the range a bit on these things – I think they will have an easy way to cover a lot of states.  

    Scary/StJ – So Barr is demanding a list of all the CIA operatives who spy on Russia and details of their operations?  Gee, I wonder who else would have a huge interest in obtaining that list?

    Image result for putin spy cartoon


  15. BDC – Thanks.

    And what Phil said.



    • The Atlanta Fed's GDPNow model estimates Q2 real GDP growth at 1.3%, up from 1.2% on May 16, after factoring in the U.S. Census Bureau's data on new home sales and construction costs.
    • Q2 nowcast of real residential investment growth improved to -1.6% from -4.0%.
    • The model's initial estimate, on April 29, was 1.3%, which rose to 1.7% on May 3.
    Money down the drain:  New funding round at DoorDash
    • DoorDash (DOORD) confirms it brought in $600M in a new funding round with hedge fund Darsana Capital Partners.
    • The new funding round sets DoorDash's valuation at $12.6B.
    • DoorDash CEO Tony Xu says the recent Uber IPO hasn't impacted how DoorDash looks at its future.
    • The UK's telecom regulator has a draft decision that will open up more of the infrastructure of BT Openreach (BT -0.3%) to companies laying fiber-optic cable.
    • The order from Ofcom would open up those poles and ducts (built by the former monopoly provider) to more companies serving large businesses and building out to support mobile and broadband networks.
    • Last year Ofcom opened that access to companies serving residential customers: "Under these rules, Openreach, which maintains the UK’s main broadband network, must let rival companies use its telegraph poles and underground ducts to lay their own fiber cables to residential customers. This access can cut the upfront cost of building full-fiber networks by around half."
    • Firms including Virgin Media (LBTYA -0.9%), TalkTalk (OTCPK:TKTCY) and CityFibre (OTC:CFHLF) took advantage of those rules to build networks, it says.
    • Morgan Stanley might be talking a bear case price target of $10 on Tesla (TSLA +1%), but undaunted Ark Invest is still talking huge targets in a research note.
    • "Even if full autonomy turns out to be 'science fiction' and Tesla cannot produce an autonomous car, ARK estimates that the electric vehicle opportunity alone would boost its stock 2-6 fold from $195 today to $560-$1,200 by 2023. If Tesla does solve for full autonomy, however, and its electric vehicle production surpasses our bear case estimates, TSLA could scale significantly higher than our previous $4,000 price target during the next five years, thanks to our newly introduced bull case for electric vehicle volumes," write analysts Tasha Keeney and Sam Korus.
    • Ark's math: "At an average selling price of $48,250 (today’s ASP), Tesla’s EV revenue would total $82 billion at 1.7 million units and $145 billion at 3 million, respectively, in 2023. In the bear case, gross margins would average 25%, which is Tesla’s guidance, while selling, general, and administrative costs (SG&A) average 10% of sales, comparable to that of other premium auto companies even though its overhead should be much lower. ARK also assumes that Tesla will spend 13% of sales on research and development (R&D), its average for the past five years compared to the 4.3% average of GM, Ford, and Fiat Chrysler in 2018. ARK also expects Tesla to reinvest excess cash back into the business to fuel growth. We expect its multiple of EV to EBITDA/R&D to reach 8, slightly higher than the 7.3X average for the auto industry today despite the superior growth profile of EVs relative to gas powered cars. Taken together, based on the electric vehicle opportunity alone, these assumptions suggest that Tesla’s enterprise value will scale from $47 billion today to $120 billion in our bear case and $250 billion in our bull case, pushing its stock price up from roughly $195 into the $560-$1,200 price range."
    • Ark Invest has open-sourced its valuation model on Tesla with a spreadsheet available for download through GitHub.
    • Best Buy is canceling all preorders for Samsung's (OTC:SSNNF,OTC:SSNLF) premium folding device, according to an email sent to customers. The retailer notes that Samsung still hasn't provided a new release date for the premium folding device.
    • Last month, Samsung announced it would indefinitely delay the Fold's release after early testers encountered quality issues.
    • Earlier this month, the company said it would cancel any preorders on May 31 for customers who hadn't confirmed they still wanted a Fold. The move was made to comply with federal regulations.
    • Stifel adds Alibaba (NYSE:BABA) to its select list after the recent pullback on trade war concerns, the Altaba sale, and near-term growth concerns.
    • Key quote: "The stock now trades at 13x F2021 EBITDA, and is even cheaper on earnings from the company’s core marketplace-based businesses (primarily Tmall and Taobao; 55% of F2019 revenue)."
    • The firm notes that BABA expects to maintain organic growth in the mid-30% range in FY20, which is "significantly" above its peer group.
    • Alibaba shares are up 1.5% pre-market to $158.40.
    • Frequent work stoppages at Newmont Goldcorp's (NYSE:NEM) Penasquito gold mine in Mexico are costing "millions" every day to the country and the company, says the deputy economy minister responsible for mining.
    • Truck drivers have blocked access to Mexico's largest gold mine since March 27 and protesters say mining operations caused a water supply to dry up; NEM has since suspended production as well as payments and benefits to villages surrounding the site.
    • Urging a solution that would restart operations, the minister says it is not clear whether the water supply dried up as a result of the mine, but the company must be involved in resolving "legitimate demands" about water.

  16. More bad news today as Theresa May is leaving the Prime Minister job in June and it only gets worse from there! Boris Johnson? 


  17. TSLA getting no traction – not even a weak bounce:

    CMG still falling:

     

    LB still rising:

    I think we're just consolidating on LB for a move over that declining trendline (20 dma) but the 200 dma is way up at $28 – that would be my goal for re-covering.

    This is a new thing – now all the Feds have GDP forecasts.  




  18. hi phil  if us markets are closed Monday but Canadian markets open is it possible for the powers that be to pop oil and gas and essentially cause people that are not already in to miss being able to participate in the move.

     

    thanks and have a great long weekend 


  19. Oil/Tommy – It's very possible.  A move up on Monday could cause a short squeeze on Tuesday.  I'm certainly expecting a move up next week but the EIA will be delayed until Thursday so very close to the wire.

    If we consider that $2 is the major line on /RB then $1.90 is the 5% line and $1.95 is the 2.5% line and $1.88 is just an overshoot.  If that's the case, we should have a weak bounce to $1.92 and then a strong bounce to $1.94 by early next week.  

    The long-term case for $2:

    And even longer:  $2, $1.50, $2.50, $3 – those are the key levels for /RB

    At least /NG is feeling better.  We have more bets on that than we do on /RB.  

    My Christmas gift is almost ready:

    • BMW (OTCPK:BMWYY) plans to sell a premium electric scooter similar to those offered by sharing services Bird Rides and LimeBike.
    • The company developed the scooter with Micro Mobility Systems. The BME E-Scooter will feature a range of 7.5 miles and top speed of 12 mph.
    • BMW press release

  20. JPMorgan Chase & Co. cut its forecast for second-quarter economic growth to 1% from 2.25% and said the Federal Reserve’s next interest-rate move is equally likely to be a hike or a cut, instead of an increase, chief U.S. economist Michael Feroli said in a note Friday. Oxford Economics lowered its estimate to 1.3% from 1.6%, while Barclays Plc's tracking forecast went down to 2% from 2.2%.

     

    Reports out next week will give more color on consumer spending and the Fed’s preferred inflation gauge in April, along with trade and pending home sales. U.S. central bankers said in minutes of their most recent meeting that they expect to be patient on interest-rate moves for “some time” amid muted inflation.

    The weakness “does look relatively contained to the manufacturing sector,” said Jeremy Schwartz, U.S. economist at Credit Suisse Group AG. The labor market has held up well, suggesting that any contagion “does look limited for now and that’s the real thing we’re worried about,” he said.

    From the Hussman Report:

    Certainly some erosion in internals since last week, but borderline and not yet decidedly negative on our measures. Given potential whipsaws, tight and automatic safety nets allow a fuzzy threshold, but I'd give speculators more leeway before a clearly negative outlook kicks in.

    Sounds about right to me.

    Something exploded in France!

    relates to Florida Is the Big Winner as the Wealthy Move Out of Northern States

    Look at Florida sucking up the population – up 2.86%!  I guess that's why things look pretty busy down here. 

    NJ certainly lost my money:

    relates to Florida Is the Big Winner as the Wealthy Move Out of Northern States

    Big Winners

    relates to Florida Is the Big Winner as the Wealthy Move Out of Northern States

    The average gross incomes of people moving to Florida from 10 states and Washington, D.C. exceeded $100,000, with those from Connecticut averaging $253,000. That far outstripped those of Florida natives who migrated to the reciprocal states.

    Great point!

    Remember this guy – I really like him:  On the campaign trail with Yanis Varoufakis, in Germany

    This is from yesterday, they can now us AI to animate something from a single image – totally amazing:

    Actors are going to be totally screwed in 50 years.  Sound was a new thing when my Mom was born and now we have this.  Imagine what things will be like in 2070!  In theory, you can just draw the actor you want for your movie and the computer will do the rest….


  21. They already bought Dali back to life at the Dali Museum – I can't wait to go…


  22. /RB coming back , back over $1.90.  This chart is still showing /RBM19, which is about 0.02 more than /RBN19


  23. STOREY JEFFREY K

    President & CEO

    2019-05-23

    Buy

    50,000

     

    9.83

    491.50

    +3.05

    3,240,001 (Direct)
    by 401(k):5,654

    Dev Indraneel

    EVP and CFO

    2019-05-23

    Buy

    15,000

     

    9.81

    147.15

    +3.26

    474,153 (Direct)
    by 401(k):5,205

    PERRY HARVEY P

    Chairman

    2019-05-15

    Buy

    10,000

     

    0.92

    109.20

    -7.23

    124,293 (Direct)
    by Spouse:709

    CLONTZ STEVEN T

    Director

    2019-05-10

    Buy

    37,000

     

     

    10.93
     


  24. The above shows recent insider buying in CTL, including two purchases yesterday.

    Sorry for the formatting.


  25. Nice pop back in /RB and now down $3,000 on 4 so I'm going to cut back to 2 long /RBN19 over the weekend – just in case things reverse again. 

    CTL/Albo – Hopefully that's a sign we've finally hit the bottom on them.


  26. CTL – Hopefully… 


  27. Well the Nas finished red but we held up (though weak).

    Have a great weekend, 

    - Phil


  28. Capitalism Camp for Kids





  29. Young homebuyers scramble as prices rise faster than incomes


  30. what is downside if any of playing august rb contract at four cents lower than july   thanks


  31. No downside.  Might be a bit slower to pop but should rise with July.  

    /RB up .02 today.  



  32. ‘Wow, What Is That?’ Navy Pilots Report Unexplained Flying Objects


  33. Elizabeth Warren Gains Ground in 2020 Field, One Plan at a Time





  34. /RB – Nice to come back from a long weekend back in the green after all that work last week averaging down my position.  If the I-75 corridor between Atlanta and Cincinnati is any indication of the driving that took place across the country, there is going to be a huge draw down in this week's report.