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Thursday Thrust – Powell’s Comments are Spun to Blast Market Higher

“The case for somewhat more accommodative policy has strengthened.” 

That is the phrase investors are taking to the bank from Powell's press conference yesterday.  While the Fed Chairman didn't bow to Trump's pressure to deliver an immediate cut – he did leave the door open to interpretation that he was willing to cut rates the moment the economy begins to falter – giving investors a "Powell Put" to the market.

It wasn't the US markets that took Powell's statement as bullish but overnight the spin was in and now the Dow Futures are up 250 points as the spin doctors chimed in overnight to take any stray word Powell said and treat is like it was policy:   

“The market now knows the Fed is going to ease unless the data dramatically reverse,” said Steven Blitz, chief U.S. economist at TS Lombard.

For the Fed to not cut rates at its July meeting, “it would take all of the data coming in to be consistently strong,” together with an end to trade-related uncertainty, said Seth Carpenter, chief U.S. economist at UBS.

The central bank’s rate-setting committee on Wednesday dropped language from its policy statement describing its stance as “patient”—which implied rates were on hold. Instead, it said uncertainties about the economic outlook have increased, a phrase it has used during past periods of rate cuts.  “The committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,” the statement said.

Of course that means that IF Trump makes a Trade Deal with China or tensions with Iran calm down or earnings or economic data improve – then the Fed will have no reason to cut so will good economic news be bad news for the markets going forward?  We'll have to see but, for now, the madness continues. 

Behind this morning's rally is a collapsing Dollar as we're back to testing the 96 line, down 1% from yesterday's open so of course the markets are up 1% and it's hard to get excited about a 1% pop in the markets that coincides with a 1% drop in the Dollars that stocks are priced in, isn't it?

Meanwhile, the yield on 10-year notes are back below 2% for the first time since 2016 and Oil blasted all the way back to $56 early this morning with Gasoline at $1.77, which is up 0.12 from our bullish play in yesterday's Morning Report and that's good for a gain of $ 5,040 PER CONTRACT so you're welcome on that one!  It's also good for the UGA spread we picked in the same report.

Remember:  I can only tell you what is likely to happen and how to make money betting on it – that is the extent of my powers…  

Gold (/YG) is also flying higher this morning, punching up to $1,390 while Silver (/SI) is at $15.40 and that should be great for our 2017 Trade of the Year, Wheaton Precious Metals (WPM), who are testing the $24 mark as well as Barrick Gold (GOLD), who are a holding in all of our Member Portfolios and will hopefully punch over $15 finally.  In our Money Talk Portfolio, for example, we have:

GOLD Long Call 2020 17-JAN 10.00 CALL [GOLD @ $14.48 $0.00] 25 7/19/2018 (211) $8,625 $3.45 $1.23 $3.45     $4.68 $0.00 $3,063 35.5% $11,688
GOLD Short Call 2020 17-JAN 15.00 CALL [GOLD @ $14.48 $0.00] -25 7/20/2018 (211) $-2,750 $1.10 $0.04     $1.14 $0.00 $-100 -3.6% $-2,850
GOLD Short Put 2020 17-JAN 17.00 PUT [GOLD @ $14.48 $0.00] -10 2/1/2018 (211) $-4,000 $4.00 $-1.06     $2.95 $0.00 $1,055 26.4% $-2,945

At $17 (our Jan target), the puts will expire worthless and the spread will net $12,500 and we only paid net $1,875 for it.  As of yesterday's close the net was $5,893 so still another $6,607 (112%) left to gain in just 6 months makes this still good for a new trade as you only missed the first $4,018 worth of gains from our Member selection, but those took a whole year – now we're into turbo mode! 

Certainly, as a day trade, I like shorting the Nasdaq (/NQ) at the 7,800 line as we expect some sort of rejection there as well as 26,800 on the Dow (/YM) - those will be fun day trades – especially if the Dollar bounces off the 96 line – as it's very likely too since it's reacting to rumors, NOT policy.

 


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  1. Posted yesterday afternoon that gold might be finally breaking out.

    Got lucky in /GC overnight.


  2. Good Morning!


  3. Good morning from New York City! 

    One good thing about moving away is NYC is exciting to visit again.  Sadly, I don't have time for fun on this trip as the show is on Sat and Sun as well.  I did leave Sat night open though as I HOPE to get tickets to Much Ado About Nothing in Central Park – Shakespeare in the Park is one of my favorite summer things to do in NYC.  

    Big Chart is back to where we decided we needed bigger numbers and we'll need bigger ones if this keeps going.  BYND is still going (up almost 600%), so why not?  

    Gold/Albo – Good job.  About time we got "lucky" on that play.  

    GOLD up 5% this morning!


  4. Didn't take long for our index shorts to start working! 


  5. Keep in mind we're just playing for the technical rejection so don't be greedy – nice quick money and we're done.


  6. Phil / fcx.  I picked up the “21 10 calls at 2.8.   I’m debating whether to sell the 21 15 or 17.  Shot would u recommend?  Thanks 


  7. Phil 

    Any thoughts on /ng?

    I am getting killed on two long contracts (October) and I already doubled down once. Any end in sight to the pain?  I tried to lower my basis several times but got stopped out with more losses.  Not sure what to at this point…


  8. FCX/Batman – You are considering whether to collect $1.25 or 0.90 per $2.80 long but I'd sell 1/2 the Jan $12s for $1.20 because you can roll those to 2x the 2021 $20 calls (0.50) if things go well or you can sell the other half if things go poorly.  If things go poorly or mediumly, you can then sell more 2021s and you'll have collected far more than just selling either of the 2021s.

    /NG/Jeff – Crazy drop today on not a huge inventory build.  Oddly enough, CHK is up 5% this morning too.  The point of the long contracts is to wait for hurricane season.  I mentioned last week, we might see $2 before we hit a proper bottom and I sure wouldn't add more until then.

    Natural gas inventory build tops estimates

    We've been playing /NGZ19 (Dec), which is still hovering around $2.50, which we thought would be the bottom.  /NGV19 (Oct) is $2.20 and that really concerns me as that's a big spread for 2 months so one of them is wrong and I really hope it's the October contracts!  


  9. This is a very interesting article on housing.  Changes in housing have massive effects on the economy:

    The Future of Housing Rises in Phoenix.



  10. Democrats Can Win Florida in 2020





  11. Phil / FCX – thanks….  did not see those '20 that makes sense….   I also have some $$ allocated to adding more longs on a dip


  12. Phil/ng

     

    Thanks – I’ll guess I’ll stay put and “hope”.


  13. two   666   SOMETHING  IS LOOKING SUSPICIOUSLY IMPORTANT TODAY  I WONDER HOW LOYD IS DOING TODAY


  14. /NG/Jeff – Also, I think money tends to flow out of /NG when /CL is hot ($57 now) so hopefully when it calms down /NG will come back a bit.


  15. /KC blasting off too:

    Soy testing $920 again:


  16. Well, so much for that rally, back to 26,550 already.  

    Trump talking about attacking Iran.  

    666/Tommy – As I've been saying, it all looks suspicious to me.

    Would not be good if we can't hold 1,550 on /RTY.


  17. Back in /GC in case we get a follow through here,  Close stop.


  18. Finally news we've been waiting for on OIH (still cheap but maybe last chance):

    • After years of struggling, oilfield service companies are beginning to raise prices for their products and services, according to a new report from research firm Rystad Energy.
    • "After losing pricing power in 2015 and 2016, oilfield service companies have since regained some of the lost ground, thanks first and foremost to industry consolidation among players that has concentrated the market over the past couple of years," saying Rystad's chief of oilfield service research.
    • Although the Big Four service companies – Schlumberger (SLB +4.8%), Halliburton (HAL+4.8%), Baker Hughes (BHGE +4.5%) and TechnipFMC (FTI +2.9%) – have won back market share and begun to raise prices, Rystad warns of remaining uncertainty in the industry.
    • "Even though the oilfield service market has become more concentrated at the same time as the buyer side has become more fragmented, there are also other factors which impact pricing power," Rystad says. "Some segments, despite being more concentrated, are still heavily challenged by oversupply, forcing companies to adjust their capacity before prices improves."
    • The S&P 500 retreats from its all-time intraday high after President Donald Trump tweets that Iran made "a very big mistake" in shooting down a U.S. drone.
    • The S&P reached a record of 2,956.20 early in trading as central banks in the U.K. and Japan joined the Federal Reserve in keeping rates unchanged.
    • S&P, Nasdaq, and the Dow each rise 0.6% in midday trading; earlier the S&P had risen as much as 1.0%, the Nasdaq as much as 1.3%, and the Dow as much as 1.0%.
    • Crude oil surged 5.4% to $56.68 per barrel after Iran shot down the U.S. military drone that it claimed was over its airspace.
    • By S&P 500 industry sector, energy (+2.2%) information technology (+1.3%) make the biggest gains, while financials (-0.3%) and utilities (-0.3%) are the only sectors in the red.
    • 10-year bond rallies pushing yield down 4 basis points to 1.987%.
    • The U.S. Dollar Index falls 0.4% to 96.73.

    • Comcast (CMCSA +1%) plans to launch Amazon Music (AMZN +0.1%on its Xfinity interfaces, marking the first time the music streaming service will be available directly on TV through a pay-TV provider.
    • Over the next few few weeks, Comcast will integrate the service into its Xfinity X1 and Xfinity Flex platforms.
    • Customers will be able to say "Amazon Music" into voice remotes to call up the service and browse, discover and listen to its music.
    • The two had launched Prime Video on X1 last year; the X1 platform is now in a majority of Xfinity customers' homes.
    • Del Taco Restaurants (TACO +3.9%) says it will expand its partnership with Beyond Meat (BYND -2.8%) after positive response to the menu addition.
    • The chain plans to offer Beyond Meat's 100% plant-based protein option in two new signature protein-packed burritos, the Beyond 8 Layer Burrito and the Epic Beyond Cali Burrito, at its more than 580 locations across the U.S.
    • Del Taco has sold nearly 2M Beyond Tacos and Beyond Avocado Tacos, with close to 100,000 hand-sliced avocados used for the Beyond Avocado Taco alone.
    • Source: Press Release
    • The U.S. manufacturing economy "has been slowing and it really feels a little soggy," Blackstone CEO Stephen Schwarzman said on Fox Business Network's Mornings with Maria.
    • However, "the service economy is doing quite well," he said.
    • (Note that the service economy is much larger than manufacturing.)
    • He expects U.S. economic growth between 2% to 2.5% his year, lower than 2.9% real GDP growth last year.
    • Schwarzman says it's difficult to estimate Chinese economic growth, saying it could be from 5% to 6.5%.
    • "Europe will probably stay as a relatively flattish economic area," he said, citing current softness and uncertainties over Brexit.

    • Update: Slack shares open at $38.50, 48% above the pricing.
    • Slack's (NYSE:WORK) direct listing is indicated to open at $36-37 per share after pricing at $26 per share.
    • Facing slowing e-commerce growth, Alibaba (BABA +1.4%) and JD.com (JD +2.1%) are competing over merchant data services deals that promise seas of new shopper data in return for closer ties.
    • Those deals have been enabled by a number of factors including widespread use of smartphone payments, facial recognition technology and a greater Chinese tolerance for data sharing among companies.
    • The two companies are facing saturated markets in China's biggest cities, not to mention trade-war concerns and hotter competition. Data partnerships are giving them a route to diversification and potential new revenue.
    • For example, JD says it's used data to help Kimberly-Clark diaper brand Huggies find out why Chinese rivals were gaining ground, prompting the company to switch to a new material that has boosted JD's sales of the diapers.
    • The two say they're not charging companies for most data services just yet, noting the partnerships promote sales of other services like cloud computing and logistics.
    • U.S. companies brought back to the U.S. $100.2B in foreign profits in Q1 2019, bringing the total to $876.8B since tax reform was enacted at the end of 2017.
    • The total hasn't reached the $4T of overseas profits that President Trump expected to be returned as a result of the tax overhaul.
    • The amount returned in Q4 2018 was revised up to $146.6B from the prior estimate of $85.9B.
    • The pace of profit repatriation has slowed; in Q1 2018, companies brought back $285.9B of overseas profits to the U.S.
    • The repatriation figures are part of the Department of Commerce's U.S. current-account balance report, which showed the deficit narrowed to $130.4B from $143.9B in Q4 2018.
    • May Leading Indicatorsflat at 111.8 vs. +0.1% consensus, +0.1% prior (revised from +0.2%).
    • Coincident Economic Index +0.2% to 105.9.
    • Lagging Economic Index -0.2% at 107.0.
    • GE Aviation (GE +1.7%) has published a press release stating its joint venture with Safran (OTCPK:SAFRY +1.2%), CFM International, scored $55B worth of new orders at the Paris Air Show.
    • That's way above expectations. CEO David Joyce said on Tuesday that he expected to bag orders worth $35B at the expo.
    • With three more days to go, there could even be more additions to GE's orderbook.
    • #ParisAirShow2019
    • China iron ore futures soared to a new record overnight after Rio Tinto cut its Pilbara shipment guidance, indicating that supply could remain tight even as Vale resumes full operations at its Brucutu mine.
    • The most-actively traded September iron ore contract on the Dalian Commodity Exchange settled +3.9% to 831 yuan/ton ($121.01) – the highest level for the benchmark since trading of China's iron ore futures started in 2013.
    • Spot prices of iron ore for delivery to China were at five-year peaks of $114/ton for the 62% grade, $128 for the 65% grade, $102 for the 58% grade, and $82.50 for the 52% grade, according to SteelHome consultancy.
    • FCX +3.2%BHP +2.5%VALE +2.3%RIO +1.1% premarket
    • Ocean Power (NASDAQ:OPTT+15.5% premarket after receiving a new U.S. patent for its Power Take-Off System which is the mechanical heart of the PB3 PowerBuoy.
    • The PTO system has a mechanical efficiency of more than 90% and an expected minimum three years between service for continuous operation in the most severe environments, including the North Sea
    • Goldman Sachs drops its price target on Tesla (NASDAQ:TSLA) to $158 from $200 to adjust for lowered volume expectations for the second half of 2019.
    • Looking further down the road, GS analyst David Tamberrino asks what are the sustainable demand levels for Model S, Model X and Model 3? Even factoring in the Model Y, Roadster 2.0, Semi and pickup truck product – Tamberrino and team don't see Tesla as a 1M unit per year player.
    • Goldman Sachs keeps its entrenched Sell rating on Tesla.
    • Shares of Tesla are down 0.34% premarket to $225.57.
    • Carnival (NYSE:CCL) falls sharply after dropping its full-year profit forecast to a range of $4.25 to $4.35 per share vs. $4.35 to $4.55 prior and $4.54 consensus. Q3 EPS of $2.50 to $2.54 is anticipated vs. $2.69 consensus.
    • The cruise line operator warned that pricing on bookings since March have been running below last year's pace. "Recent booking trends have been impacted by ongoing geopolitical and macroeconomic headwinds affecting our Continental European brands. We continue to expect higher yields in our North America and Australia brands offset by lower yields in our Europe and Asia brands for the remainder of the year," says Carnival CEO Arnold Donald.
    • Shares of Carnival are down 6.43% in premarket trading to $49.44. Norwegian Cruise Line Holdings (NYSE:NCLH) is off 4.21% and Royal Caribbean (NYSE:RCL) is 5.18% lower.
    • The Bank of England's monetary policy committee voted unanimously to keep the bank rate at 0.75%, but signals future rate hikes if there's a smooth Brexit and if the economy develops as expected.
    • The pound rises 0.5% against the U.S. dollar to $1.27, and the U.K. 10-year Gilt rallies, pushing yield down 5.5 basis points to 0.812%.
    • Also votes unanimously to keep the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves at £10B ($12.7B).
    • Also to maintain the stock of U.K. government bond purchases, financed by the issuance of central bank reserves at £435B.
    • Says underlying growth in the U.K. appears to have weakened slightly in H1 2019 vs. 2018.
    • If there's a smooth Brexit and the economy develops as expected, the central bank's committee may tighten monetary policy "at a gradual pace and to a limited extent," the statement said.
    • The economic outlook will depend "significantly on the nature and timing of EU withdrawal."

      • The Bank of England's monetary policy committee voted unanimously to keep the bank rate at 0.75%, but signals future rate hikes if there's a smooth Brexit and if the economy develops as expected.
      • The pound rises 0.5% against the U.S. dollar to $1.27, and the U.K. 10-year Gilt rallies, pushing yield down 5.5 basis points to 0.812%.
      • Also votes unanimously to keep the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves at £10B ($12.7B).
      • Also to maintain the stock of U.K. government bond purchases, financed by the issuance of central bank reserves at £435B.
      • Says underlying growth in the U.K. appears to have weakened slightly in H1 2019 vs. 2018.
      • If there's a smooth Brexit and the economy develops as expected, the central bank's committee may tighten monetary policy "at a gradual pace and to a limited extent," the statement said.
      • The economic outlook will depend "significantly on the nature and timing of EU withdrawal."

     

    • Amazon (NASDAQ:AMZN) Ring may soon have a buddy in the sky.
    • Called "surveillance as a service," the company wants to use its network of delivery drones to keep watch over customers' houses by forming a flying Neighborhood Watch scheme, according to a new patented system.
    • Customers could request that Amazon's drones visit their property hourly, daily, or weekly, while the drones would look for signs of break-ins, such as smashed windows, doors left open, and intruders lurking on people's property.

  19. Following my plan- the gap up this morning triggered my latest cash raise move. Now am about 45% cash across all portfolios/accounts. Some say this is the start of the next leg up for the bull. Color me very skeptical. I am happy to forego some potential upside for increased peace of mind. Someone wake up the bear :)


  20. Sold 1 /GC up 6.  Stops to entry.


  21. I am with pstas… I look at the econ numbers I posted yesterday and nothing leads to me think that we can justify the current market valuation.


  22. Hmmm, we are up, but the VIX is up as well!


  23. Skeptical/Pstas – I agree, look how easily 200 points evaporated based on one sentence from Trump – is that really what we want to risk our money on?

    /GC/Albo – Good timing, /SI just got rejected at $15.50 and /YG close to $1,400 should also retrace but, on the whole, I think w'ere heading higher.  

    VIX/StJ – Well it certainly has been a volatile day.


  24. Housing/Phoenix- I read that article the other day and also found it of interest. While there is something to be said about convenience in selling they charge some hefty fees to do so. Of course, housing prices never decline so all is onward and upward for the flippers. A real test to see is AI/algos can have a sustainable impact on the industry. 

    I note that Berkshire has established sizable stakes in R/E sales over the past few years. Probably not likely to see major disruption near term but worth watching. 


  25. Housing/Pstas – I think it's going to encourage a massive wave of investing in real estate through these systems – for good or ill.  There are a lot of schemes like these now – investors seem willing to take a computer's word for it and blindly buy homes in bulk for resale.   All lots of fun until it collapses, I suppose – and then we'll have to bail them out.

    Looks like a strong finish, Dow being pushed back over 26,700 again.  

    • YouTube (GOOG +0.4%)(GOOGL +0.4%rolls out the AR Beauty Try-On program that lets viewers try on makeup while watching a beauty YouTuber try on or review the product. The viewer can then click through to purchase the product.
    • Makeup brand MAC (EL +1.6%) is the first to launch a campaign with the augmented reality program, which comes from Google's in-house branded content platform.
    • According to YouTube testing data, 30% of users chose to use the AR feature and spent an average of 80 seconds trying on lipstick.
    • Related: Earlier this month, Amazon and L’Oréal teamed to let mobile shoppers try on makeup before making a purchase.
    • PG&E (PCG +13.6%) shares shoot higher following a report that California Gov. Newsom is pressing lawmakers for a wildfire fund to be financed through bonds to help utilities pay for catastrophic fires ignited by power lines.
    • Newsom reportedly is proposing a liquid fund that would be seeded by at least $10B in Department of Water Resources bonds; he also may ask utilities to contribute ~$7.5B in equity.
    • Shares of Edison International (EIX +1.9%) also jump on the news.
    • Cleveland Research keeps a Neutral rating on Twitter (NYSE:TWTR) but is less optimistic on the company's net new customer gains in H2.
    • The firm cites channel checks showing that Twitter performing in-line with expectations, rather than above, and sees limited catalysts to drive an upside.
    • Twitter shares are down 2.4% to $35.43.
    • Twitter has a Hold average Sell Side rating.
    • Google (GOOG +0.5%)(GOOGL +0.4%) Maps has roughly 11M fake listings for local businesses on any given day, according to a WSJ survey of online ad experts.
    • The experts say the majority of the listings fall under contractors, electricians, towing and car repair services, movers, and lawyers, or what Google internally calls "duress verticals."
    • Google holds about 37% of the U.S. digital ad market, according to eMarketer data, but is losing ground to Facebook and Amazon. The search giant is turning more to Maps ads to keep growing the business.
    • Google Maps director Ethan Russell: "There is no single source of truth for all businesses in all categories."
    • Lifeway Foods (LWAY +32.2%) says it will enter the growing cannabis market after it is legalized at the federal level by the FDA.
    • The company plans to sell an infused version of its probiotic plant-based beverage called Platinful + CBD.
    • "We’re excited about the opportunity to create a plant-based probiotic beverage with CBD that helps consumers support their physical and mental wellbeing in a convenient and delicious drink," states Lifeway CEO Julie Smolyansky.
    • Source: Press Release

    • Analysts are expressing their surprise in the weak forecast issued by Carnival (CCL -8.8%) amid a loss of pricing power in some key markets.
    • Nomura sees the lack of pricing power extending into 2020 and thinks the cruise liner's ships are lacking some of the innovations of peers. Analyst Harry Curtis and team move to a Neutral rating from Buy.
    • William Blair drops Carnival to Market Perform from Outperform, warning it has weak expectations for yield next year (flat vs. mid single-digit for Royal Caribbean and Norwegian Cruise Line).
    • Stifel keeps a Buy rating on CCL with its eye on the long-term view, while summarizing the earnings report as a whole as awful.
    • Shares of Carnival are below $50 for the first time since early January.
    • Previously: Cruise line sector reeling after soft Carnival outlook (June 20)

  26. Housing- you may be correct about attracting investment funds especially considering that new money in the markets is not likely to return anything like the past decade. Some historical data suggest very low single digit to negatives for stocks. They will have to dig deep for returns. 


  27. Phil,  my view is that we will be in recession in 12-24 months, and I have been holding a decent allocation to 20 year treasuries in order to capture upside when the fed has to take rates back down to zero (or below).  (I have enhanced this strategy by selling VXX calls when volatility spikes in this account, to generate additional return).  My idea was to have fresh powder ready to bottom fish, once things started falling apart.  I caught a very good run, and have 8% gains in my 20 year treasuries already, just in the last 2.5 months.  My question, is that if my thesis is right, and the fed takes rates to zero, is it better to be in long dated or short dated bonds? I’m trying to resist the urge to trade around this position too much, I have plenty of trades in my PM account that is following the LTP/STP.  But I’m considering moving some of the money to shorter duration, like maybe 5-7 year.  I know this isn’t your specialty, but if you have any general guidelines about past recessions that would be helpful, I would appreciate it.

    Thanks!


  28. New record high but where is the volume?   Barely 5 billion shares traded.


  29. Sold the last of /GC up 12.


  30. When Trump visits his clubs, government agencies and Republicans pay to be where he is




  31. Americans’ plastic recycling is dumped in landfills, investigation shows


  32. President Trump ordered military strike on Iran, but reversed at last second: Sources


  33. Thailand Sees Foreign Investment Boom as Trade War Escalates