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Why Bother Wednesday? Low Volumes Ahead of the Holiday

July 4th Week ProductivityThere's not much going on this week.

It's only a holiday for the US tomorrow but so may people take vacations this week and the people not on vacation are planning parties and such and no one is in the mood to work – so very little goes on.  Even as I go through the news I find a lot fewer articles being published – writers take time off as well.  So no one is making news and no one is reporting news and Trump is distracted by his parade – let's just sit back and enjoy the quiet...

I didn't find a chart for a Thursday July 4th but that's probably just a flatline into the weekend – this is usually the week I take my family on vacation but my girls are getting older and have plans with friends and we'll do a family thing next month (when it's less convenient for me).  Anyone who's been a boss knows this week is second only to Christmas in not getting anything accomplished but there is a Non-Farm Payroll Report on Friday, for some reason, so we can't completely ignore the markets.  

The Futures are up a bit this morning as Europe has nominated the IMF's Christine Lagarde to replace Draghi at the ECB.  I don't think Lagarde is going to be quite the dove they think she will be as she's been quick to lend money to struggling nations but does not sit on the lap of Goldman Sachs, as Draghi did (his previous employer).  A truly independend ECB would be a great thing – but not so much for the markets.  

Meanwhile, my theme of the week is gathering steam as now 82% of the companies pre-announcing earnings revisions are guiding down and Analysts have now downgraded the most stocks since June of 2017, though that's not really something to worry about since 2017 was a great year where we barely dipped.  It's the fact that we're getting worse and worse that should be a concern, not the comparison.

In June, 116 more companies had their earnings forecasts cut by analysts than raises – that's 20% of the S&P 500.  “There is some sagging in earnings,” said John Lekas of Leader Capital. “I’m not disputing that earnings across the board are priced to perfection. You know, you’re going to get some disappointments in there.”

The earnings headwinds have been plenty — from a relatively stronger dollar in the second quarter to lower oil prices, higher input costs and uncertainty from the ongoing U.S.-China trade war. While a recent truce between the two world superpowers was taken as a positive, the benefit is likely short-lived since company executives are still in the dark on what comes next.

Another big concern is Friday's Jobs Report and last month was a disaster at 75,000 with downward revisions to other months that netted us down to zero and now we're getting confirmation from ADP's Small Business Employment Payroll Report, which is now showing a second consecutive down month.  That's sure to put a damper on the President's party – but at least he got his tanks! 

We'll see if the market tanks again today.  So far, all dips have been bought – both this week and this year.  No matter what happens today, it won't matter as the volumes are so low that all can be reversed before the open the next day but a trend is a trend on a chart – so we'll see what sticks as the indexes continue to test their highs which would be, by the way:

  • Dow – 26,90, now 26,855
  • S&P 500 – 2,988, now 2,958
  • Nasdaq – 7,852, now 7,851 
  • Russell – 1,620, now 1,570

So the Russell has some work to do but the other indexes are at their marks though those are now the Sept Futures Contracts, which are a bit higher than the current reads on the indexes.  Still – it shows where sentiment is heading – no one seems worried and all-time highs are expected to continue for the summer.  

Have a happy holiday, 

- Phil


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  1. Earnings are for suckers Phil!

  2. See, earnings don't matter Phil:

    There are days I feel like I read dystopian statistics for a living. And then there are day when the dystopian statistics take even my jaded breath away. Here’s one: 43% of American households can’t afford a budget that includes housing, food, childcare, healthcare, transportation, and a cellphone. Translation: nearly half of Americans can’t afford the basics of life anymore.

    People don't earn enough yet MAGA!

  3. And this:

    There is nothing in these 2 articles to can support the current valuation. The economy is not the best that it has ever been unless you are in the top 1% in which case, it's booming.

  4. Morning All!

    We will not be doing our webinar this week. Back to normal next week.

    Enjoy the 4th! 

  5.  (Broadcom (AVGO) in advanced discussions to acquire SYMC, according to Bloomberg)

  6. .The VIX closed below the lower Bollinger Band.

    When this happens, historically risk-reward is tilted to the downside.

    Phil, as you've pointed out it is very difficult to trade VIX options, but at extremes like the present it might be worth putting on a VIX call spread.

  7. Good Morning!

  8. Good morning!

    Earnings are indeed for suckers – just ask Canopy's (CGC) CEO, who just got fired.  That's what happens when you take $4Bn from a real corporation (STZ) and they look at your books and your operations and say WTF???  How can you not make money in the pot business?  

    For the fiscal year ending in March, Canopy posted net revenue of $226.3 million, while its adjusted EBITDA amounted to an annual loss of $257.0 million.

    MedMen (MMNFF) is the next to go, I think – another ridiculously mismanaged operation.  

    Those stats on the bottom 50% are very depressing but I've been talking about it for years and no one seems to care. 

    Good notes from that employment article:

    In his telling, the underemployed today include those who might be working fewer hours than they would like. Then there are those with multiple part-time jobs and working as many as 80 hours a week, but because they are not with a single employer, they receive no retirement plan or health-care benefits. The gig economy was supposed to create lots of well-paying, independent jobs; these Uber expectations have been dashed by the reality of long hours, mediocre pay and no benefits.

    The shift to lower wage jobs for entire groups of workers is similarly problematic. Working full time while earning much less than in the past has profound ramifications. Entire industries have been disrupted, and often employees find taking a new job in a different sectors leads to near-entry-level pay — equivalent to a 30, 40, even 50% salary cut. These folks may be working full time but they clearly are underemployed relative to their experience, skills and past work. This is not captured in economic data.

    Blanchflower explains how underemployment manifests itself in a variety of data points outside traditional economic measures. He notes that the plight of the underemployed is contributing to widespread despair, a worsening drug epidemic, and increased suicide rates. These were memorably highlighted in the research of Nobel winning economist Angus Deaton and his wife, Anne Case, who documented the rise of "death of despair" among working class whites. Blanchflower even ties the phenomenon of underemployment to the rise of far-right populism, both in the U.S. and Europe.

    Blanchflower also studies happiness and points out that being poor in America often leads to stress, insecurity and hopelessness. In "Unhappiness and Pain in Modern America," he and his co-author, Andrew J. Oswald of the University of Warwick, probe the disquieting idea that not only are Americans in greater pain than citizens of other countries, but that self-reported levels of happiness are falling.

    This is bad for Trump's re-election because it's one thing to tell people how great things will be if you elect me but quite another to tell people how great you have made things when they aren't seeing any difference at all.

    BRCM/Albo – That's a good buy for them. SYMC is breakeven with $4Bn in sales and AVGO has $20Bn in sales and makes $2Bn so $15Bn is 40x potential earnings but cyber-security is going to get bigger and bigger next decade.  Good time for people to read Gibson novels and get ready for the age in which you'll start choosing who you deal with based on how good their security is as automated hacking (with AIs) will mean every system, everywhere, is going to be under constant attack.  SYMC already has tons of patents and the talent to get more – AVGO must be cutting edge on security in order to grow.  

    VIX/Albo – The problem with VIX spreads is you are picking a very arbitrary date for a very arbitrary target and, unless you nail it, you are unlikely to get a favorable exit on the spread since the short calls you sell will have more premium than your own calls and could ruin the spread if you try to get out early (which you would only be doing if VIX were going higher, which would boost the short call prices).  

    VXX pretty much tracks the VIX and the moves are drastic enough to make money with long calls and $25 does tend to hold.  The Sept $18 calls are $6 so not much premium in those so I'd go with 10 of those long at $6,000 and sell 3 of the Aug $25s for $1.50 ($450) to cut into the premium and worst case going up is you cap the gains of 3 of the 10 longs.  If the VIX fails to hold $25 ($24.77 now) then you could cover 3 more for another $450 and the Jan $18s are only $7.50 so most of the roll is paid for and, eventually, you might get your spike.

  9. VXX / Phil – $25 will not hold long term! We can't see long terms charts of VXX because they just changed the name but trust me on that, it's on its way to 0 and they will simply do a reverse split like they do every 2 years or so. And it moves at about 1/2 the speed of the VIX. But you can certainly use it as a substitute for the VIX in spreads like you did for short term. And you should not have too much trouble getting your price. Also, for the short calls, it's really easy to roll them (been there) so little risk there. But simply be aware that decay works against you. That was my discussion with Palotay the other day – I think that the only buyers of VXX options must be people using to hedge as it's not a bad place to do it. 

  10. Markets close at 1 ET today

  11. Bond Funds Drift Into Risky Debt, Adding to Angst Over Liquidity

  12. Hi all of you Guys in the US, you all have a happy thanksgiving with your families and friends.
    And let's hope the leader in chief does not crew it up.
    Enjoy yourself!
    From the other side of the pond

  13. SCREW it up

  14. is it true does market close today at one does anyone know for sure

  15. VXX/StJ – Good point, history is against you there. 

    1pm/Pstats – That's great because I'm in no mood…

    Thankgiving/Yodi – That's November.  This is the celebration of our independence from you horrible Europeans – the original Brexit!  Back in those days, the average colonist paid 12 pence per year in taxes and in Viginia it was just 5 pence while people in Britain paid an average of 312 pence per year but when the UK raised taxes by 8 pence (stamp taxes) – we murdered them and went to war.  I guess nothing ever changes…  

    Image result for signing declaration of independence

    Seems like even farm hands made about 100 pence a year so I guess that was "minimum wage" at the time.  

  16. Wow!  Are they going to ring the 3000 S&P bell????

  17. taxes/Phil, and Americans basically held off the tax man until 1913 and the 16th amendment

  18. Thanks Phil I knew the market was closed for something so the same you all have a happy 4th of July!!!

  19. Hours / Tommy – It seems to be confirmed here:

    * Each market will close early at 1:00 p.m. (1:15 p.m. for eligible options) on Wednesday, July 3, 2019. Crossing Session orders will be accepted beginning at 1:00 p.m. for continuous executions until 1:30 p.m. on this date. NYSE American Equities, NYSE Arca Equities, and NYSE National late trading sessions will close at 5:00 pm on Wednesday, July 3, 2019. All times are Eastern Time.


  20. thankyou stjeanluc

  21. 3,000/Robert – Looks like they are going for it, 26,900 crossed.  Right in time for Trump to take credit in tomorrow's rally – what a coincidence!  

    We forgot about oil inventories but they were not exciting and no actual reaction:

    • EIA Petroleum Inventories: Crude -1.1M barrels vs. -3.0M consensus, -12.8M last week.
    • Gasoline -1.6M barrels vs. -2.2M consensus, -1.0M last week.
    • Distillates +1.4M barrels vs. -1.0M consensus, -2.4M last week.
    • Futures +1.1% to $56.88

    /BZ holding $62.50 line, we held $56 and we're both +0.50 from that.  /RB $1.90 and climbing, right at our /RB target for July 4th – but what a ride!

    Taxes/Mike – My point is that taxes weren't actually high but the Top 1% Colonists used the increase in taxes to rile up the original Tea Party and get them to fight and die so the Top 1% Colonists could take over an entire nation and, to this day, many of those same families are still in the Top 1% – only much, much richer while the idiots who fought and died for them are still working paycheck to paycheck….

    • The Forbes family of Boston made their fortune in the shipping and later railroad industries as well as other investments. They have been a prominent wealthy family in the United States for 200 years.
    • The Astor family made their fortune in the 18th century, through fur trading, real estate, the hotel industry and other investments.
    • The Griswold Family of Connecticut made their fortune in shipping, banking, railroads, and industry. They have been prominent in American politics, producing five governors and numerous senators and congressmen.

    Things never change. 

    Thanks Yodi – now you are singing the right tune! 

    Terrible Factory Orders, terrible ISM numbers and up and up we go….

  22. Related image

    • President Trump urges the U.S. to pour more money into the system to lower the value of the dollar.
    • "China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA. We should MATCH," he writes on Twitter.
    • This comes about 10 minutes after Trump crows about the S&P 500 reaching a new high.
    • Dollar Index ticks down 0.1% to 96.66.
    • Nasdaq rises 0.5%, S&P +0.4%, and Dow +0.3%.
    • 10-year Treasury yield is down 3 basis points at 1.95%.

    Happy 4th of July indeed!

  23. taxes/Phil, when in human history were wars fought by the rich and not the working man/poor?

  24. 1913 – The 16th Amendment got ratified on the back of government saying that only the rich would be taxed, and indeed, initially people got a $3000 personal exemption and the highest marginal rate was 7%. The vast majority of people paid no income tax and so it all seemed like a great idea at the time. But as usual the joke was on the middle class. And now we’re hearing the same thing – let’s bleed the rich. Lol! PT Barnum was right, but his estimate was far too low. Thousands of suckers are born every minute. 

  25. Phil,  What is your thinking these days regarding INFN?  This is one of our old trades.  I have shares that were put to me at $7, and a few remaining Jan 2020 $7 puts.  At today's price level of $3, is it worth holding, or would you advise taking the loss and moving on?  Thank you.

  26. Getting some conflicting info re: trading days/hours. 

    Looks like all day today and short day tomorrow, the 4th.

  27. Oops, my bad. Have to get better reading glasses for the fine print.

    Short day today. 

  28. Wars/Mike – Yep, that's the way of things, I suppose.  At one point, the strong became king but then the kings could not be sure their heirs would be strong so they changed the rules so titles were conferred to names and not deeds though they always like to keep the myths that deeds can let anyone be great (David and Goliath, Sword in the Stone, Horatio Alger, Dollar and a Dream) to keep the masses in line.  

    Suckers/Dawg – Well there were only 1Bn people in the world at the time.  We must be well over 8 suckers/min by now.  cheeky

    2,999 at the close on /ES and we did hit 3,000.  Tell me that wasn't coordinated?  S&P 500 seems to have closed 5 short at 2,995 but still good enough to have all the magazines say S&P 3,000 and, most importantly, for Trump to take credit for it. 

    INFN/John – They just keep losing more and more money.  We got out in 2017 and never went back in:

    2017/10/20 at 12:19 pm

    INFN – Earnings are 11/8, why risk it?  Let's cash these.

    And previously:

    Submitted on 2017/08/15 at 3:35 pm

    INFN/Scott – We sold the Jan $8 puts for $1.68 in the LTP at the beginning of the month. They are 0.70 now and I'm super-glad we didn't commit more as they keep dropping so, no thanks, I think we'll just ride these out for now.  

    Submitted on 2016/11/22 at 3:50 pm

    INFN/BDC – They don't make any money but I like them down here. 

    INFN/Jeddah – That's right, we wanted to sell 30 of the 2018 INFN $8 puts for $1.75 ($5,250) in the LTP.  

    We talked about this last week, they are a cyclical business in a down cycle so let the short-term traders sell you their shares.  Patient investors make most of their money from trades like this.  

    So it was never a stock I was in love with, just something I was willing to own for net $6.25 but nothing over the past year made me like them enough to risk earnings.  You came in way higher and certainly overpaid.  If your plan is just to ride it out and HOPE (not a valid investing strategy) to get back to $10, which is now up 50% – I don't endorse it.  As the CEO notes – it's certainly not going to happen next year.  They are not likely to go BK though, and you can sell 2020 $7 puts for $2 to net in at $5 so, if you take the loss on your stock at $6.66 (appropriate) you are down $3.33 and you can sell 1.5x of the $7 puts and have a much lower breakeven point and the worst case is you own 50% more stock another 0.84 per current share.  If you don't like them enough to do that – just get out and move along.  

    Submitted on 2018/11/08 at 1:51 pm

    INFN/John – I never loved INFN in the first place.  They are an OK niche player but they don't make any money and lost way too much of it last year for me to want to own them now.  We played them last year, selling the 2018 $8 puts for $1.75, which netted us in for $6.25 but we pulled them on 10/20 as I didn't want to risk our gains into earnings.  The Nov earnings sucked and I think we never got interested again.

    Those are my old notes and they have just gotten worse and worse.  I don't think I'd put good money after bad on this one.

    Trading/Pstas – That's it the bell rang.

    Have a happy 4th of July everyone, 

    - Phil

  29. Happy 4th of July!

  30. Why even bother listening to anything Trump says:

    But it seems a key federal agency isn’t following the perplexing order just yet. Reuters reports that Commerce Department staff have been told to continue to treat Huawei as blacklisted.