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Whipsaw Wednesday – Low Volume Futures Rallies Mask Market Losses

Wheeee, what a ride!  

The indexes fell off a cliff in afternoon trading but, not to worry because, as soon as the markets closes, the little manipulator gnomes went right to work and prettied things up for the Asian (9pm) and European (3am) opens – so no one even knew that the US sold off into the close and the total flat-line since 5am isn't the least bit suspicious – just normal human beings trading normally…  Move along – nothing to see here folks…

The stock market is becoming a farce and that makes for dangerous trading conditions so caution is strongly advised.  We are right back where we started the day yesterday so I won't bore you with a repeat of yesterday morning's PSW Report but I will point out that it doesn't count to get over the Strong Bounce lines if you can't hold them for 48 consecutive hours so, according to the 5% Rule™ – we're still not our of the woods on the recent correction.

This afternoon we get the FOMC Minutes from their July 31st meeting (2pm), when they gave Trump a 0.25% cut with Rosengren and Quarles objecting but the Minutes will give us color as to how supportive the rest of the Fed was as it's now widely believed that they will cut AT LEAST 0.25% at the Sept 18th meeting and Trump is asking for a 1% rate cut – which would be uprecedented and unhinged! 

Image result for fed rate cuts 2019Of course, as usual, the markets are reading it wrong and, as usual, traders have absolutely no grasp of history as, historically, the Fed raises rates in a GOOD market and LOWERS rates in a bad market – ESPECIALLY at the top of a bad market as they attempt to forestall a looming disaster so the cut of July 31st was a warning – not a bullish signal!

And notice the key is the Fed generally cuts rates about 5% during a market correction and now we are starting at 2.25% so are we going to go for -3% when the market begins to tumble?  -3% means you get paid to borrow money, which sounds good but no one is actually going to lend you any money under those terms.  What will happen though is you WILL be CHARGED to LEND money and you WILL be CHARGED to SAVE money – in other words, money will become a use it or lose it proposition for the average American and "saving" for retirement will become impossible.

You would think that couldn't happen but it's already happening in Europe and Japan and there is already $16Tn invested in bonds that carry negative rates of return because THAT is how afraid of the stock market and the housing market some people are!  Not us, right?  Because we have faith!  Well, doesn't that just make us sound like idiots?  Yes, it does – don't put all your faith in the stock market – make sure anything you have in the market is very well hedged – you've seen how fast the market can drop based on a tweet from the President – imagine if something actually happened!

At the moment, we're still driving the market on rumors, like this morning the President said he's considering lowering taxes again to boost the economy he says is the best ever.  Why such a good economy needs so much boosting is a mystery, but lower taxes is how we got this thing started – so I guess it will be a nice bookend to finish us off.

We'll see how high they can drive things this morning but 26,300 on the Dow and 2,940 on the S&P 500 have been tough nuts to crack along with 7,775 on the Nasdaq and 1,535 on the Russell – despite the morning rally, we still have about 0.5% to go just to get back to those August highs, which are nowhere near the July highs of 27,400, 3,027, 8,027 and 1,600 so really, what is there to be impressed about at these levels?

We will discuss more hedging strategies in today's Live Trading Webinar at 1pm, EST.  Sorry but this one is for Members only (you can join here) as we'll be adjusting our Member Portfolios around the Fed Minutes.

Be careful out there! 


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  1. Morning, All!

    It's webinar day! 1pm (Eastern). 

    It's sure to be interesting!

  2. Busy days this week…

  3. Wednesday morning, and it was quiet on the PSW board. Too quiet. Not even a greeting from 1020….

  4. A couple of recently falling knives doing well, TWOU bought July 31 at 11.70.  Still have 2/3.

    GDOT bought and scalped on August 8th.  Phil, I also took a trade you recommended which is doing very well.  Thanks !

  5. Shhh…good morning…. :)

    It's my sleepy college kids last few days at home before reality bites once again…..

  6. Wow, nice timing on coffee yesterday – got the bottom tick in that one thanks to Phil's alert.

  7. Would have been nice to have been trading TGT instead of BBBY, M, & SIG.

  8. Is anyone using interactive brokers? Any feedback on the platform and service? Thanks,

  9. Good morning! 

    I know how that college thing is, my kids are more exhausting now than they were when they were little (or maybe I'm older).  

    Big Chart – Nasdaq ran right up to the death cross but now we're pushing over at 7,750 with AAPL up 1.4% on the official release of their credit card.  V is $400Bn and MA is $300Bn so I would think AAPL could add at least $100Bn (10%) to their market cap with CC revenues but then you have to consider that AAPL customers are generally the World's top 20% of the CC spenders and things get interesting. 

    I haven't been motivated to sign up as I'm sick of giving people my identity info though AAPL already has it so I guess that's silly.  I already buy things with my phone all the time – it is better than using a CC but I still use AXP ($100Bn) more often though I wouldn't if more people took Apple Pay, which they probably will now. 

    I guess that's why Amex just sent me a $1,000 gift card (for David Yurman jewelers) – I thought they were just being nice but I guess they are very afraid of losing top-level accounts.  Maybe this will finally prod them to get off their asses and fix the Centurian program, which doesn't provide anything near the benefits they used to.

    I don't know if Platinum people notice the difference but the Travel Services have gone way downhill and Concierge is a joke – seems to be just a kid with Google who can't get you anything you couldn't save time getting yourself.  They lost their upgrade deal with Continental on the United Merger and never replaced it (still have Delta) and the Hotel Deals are nowhere near what they used to be either.  Used to be that a room upgrade was exciting – now they say "Oh we gave you the park view instead of the city view – enjoy your upgrade!"  That's BS and I've gotten the impression Amex never fought hard enough to get that back but now maybe they don't have the pull they used to have as they've lost people to other premium programs.  

    GDOT/Albo – Great timing on them!  You played it perfectly, selling half with a quick gain to take the pressure off.

    Bought some GDOT at $24.80.  Just looking for a scalp.

    GDOT – Sold 1/2 up 2 points.

    Phil Submitted on 2019/08/08 at 10:12 am

    GDOT/Albo – Wow, they really got clobbered…

    Sounds like a fun gamble.  I like the March $25 puts at $4 to net in for $21 and the $35 calls are only $2 so I'd play those but 1:1 to keep the $2 credit.  

    GDOT – Out of balance up 3 points.   Phil will look at your trade.

    So class, Albo took his initial $24.80 trade off the table with a $2.50 avg profit (10% in a day) and flipped to the net $2 credit spread where the worst thing that could happen is that he'd be assigned back at $21 and already they March $25 puts are $2.50 and the $35 calls are $3.70 for net $1.20 and that's a $3.20 profit so not much behind where he would have been had he kept all his risk on the table.

    TWOU down 25% today.  Bought some at $11.70.  Looking to scalp a couple of points.

    He's very good at these – we all need to pay more attention!  

    /KC/Ati – It's amazing how many times the same contract can pay us…

    TGT/Albo – They are in the LTP from 11/20/18 with a big, $43,750 $65/82.50 spread we paid net $4,275 for.  We may lose some but we certainly win some too!   Of course, when we bought TGT, they had crashed and no one had faith in them either – and they even went lower after we bought them – the horror!  

    Shares of Target Corp. rocketed 18.2% in morning trading Wednesday, which puts them on track for the biggest one-day gain in its history, after the retailer reported better-than-expected fiscal second-quarter results and raised its outlook. The stock was trading well above the Sept. 10, 2018 record close of $89.26 and all-time intraday high of $90.39. The stock's percentage gain would be bigger than the current record rally of 17.8% on Oct. 28, 2008. Target went public in October 1968. The current price gain of $15.61 is adding about $8 billion to the retailer's market capitalization, which would lift the market cap to about $51.9 billion. That's still well below the market cap of rival Walmart Inc. of $323.1 billion. Target's stock has gained 2.7% over the past 22% over the past months, while Walmart shares have advanced 18% and the Dow Jones Industrial Average has tacked on 1.5%.

    Submitted on 2018/11/20 at 10:37 am

    TGT/CRS – Well, we do have 10 left from Sept when we cashed out our longs and left a 2021 $80/95 bull spread covering Jan $85 short calls so now it's time to sell puts and roll the long calls down.  Fortunately, we're up to that in the LTP.  So silly that people treat retails stocks like this with over-reactions to each quarter.  

    I mean really people (not you guys, just PEOPLE), if you don't understand how business work, you shouldn't be buying stock in them.  There's a poison that's corrupted the view of "investors" for the past two decades that a company isn't successful unless it beats the prior year or quarter's earnings EVERY SINGLE TIME.  That's like your boss expecting you to be more and more productive every single day and firing you if you slow down – no matter what the reason.  That would be an idiotic policy that's insulting to you and bad for the company.  WHY would you think it's good for your portfolio to act the same way?

    TGT is investing in on-line stuff to keep up with WMT and AMZN and they acquired Shipt and have made incredible stride providing same-day groceries and one-day item delivery.  The ramp-up has cost them money and taken time away from other things but, since they are making $5.50 per $80 share (as of yesterday), you would think people would cut them some slack but Noooooooooooooooooooooo………….

  10. CC companies, as many others, need a good recession to once again realize how difficult it is to gain and keep customers. I do miss how customer service was all the rage in 2009. :(

  11. No, WeWork Isn’t a Tech Company. Here’s Why That Matters

  12. Thank you, Phil.  But very mixed track record on these.

  13. Retail/Albo – What TGT and WMT did is what M and others have to do – they have to integrate ECommerce into their overall experience.  I think AMZN's weakness is lack of consistent experience.  A lot of the vendors on AMZN are crap quality so, if anything, they are teaching kids the value of name-brand retailers.  What would really kill AMZN is a platform that simply front-ends multiple name-brand retail operations so you can create a single basket and track all orders in a single place but, ultimately, it will be fulfilled by the underlying retail vendors as long as they all provide the same 2-day service, return policies, etc.  The problem is that you'd have to get hundreds of retailers to work together, instead of trying to kill each other fighting over diminishing market share.  

    Wow, almost webinar time already?

    • Toll Brothers (TOL -3.8%sank as much as 6.3% after the builder of luxury homes reported Q3 orders down 3% Y/Y, falling short of analysts' expectations.
    • The California market was especially brutal; purchase agreements there slumped by 36%.
    • Initially, Toll shares advanced in after-hours trading as it reported better-than-expected earningsafter the close yesterday.
    • The stock action contrasts with the iShares U.S. Home Construction ETF (ITB +1.5%), which is rising after July existing home sales rose of 5.240M exceeded consensus of 5.385M.
    • Apple's (AAPL +1.4%) streaming video service needs to attract millions more subscribers than expected to even modestly boost the company's earnings, says Cowen analyst Krish Sankar.
    • Sankar conservatively expects 12M TV+ subscribers in 2020 and 21M the following year, which could translate to an earnings contribution of $0.11 and $0.32, respectively.
    • Cowen affirms its Outperform rating and $250 price target. Apple has an Outperform average Sell Side rating.
    • Related: Apple TV+ is expected to debut in November with a price of $9.99/month.
    • China threatens to impose sanctions on U.S. companies involved with the planned sale of 66 F-16 fighter jets to Taiwan if Washington goes ahead with the deal.
    • China's actions are not expected to have much impact on the plane's manufacturer, Lockheed Martin (LMT), but could complicate efforts to resolve the U.S.-China trade dispute.
    • U.S. defense companies are mostly barred from making military sales to China, although LMT has sold civilian helicopters to Chinese buyers through its Sikorsky Aircraft unit.
    • Taiwan last purchased F-16s in 1992, when the U.S. agreed to sell 150 of the fighter jets; the fleet remains the backbone of the island's air force.
    • The International Monetary Fund warns that focusing on weakening a country's currency exchange rate, though likely to help its trade balance in the short term, is unlikely to "bring a lasting improvement in its trade balance."
    • Escalating trade tensions are taking a toll on the global economy and are partly to blame for recent cuts to growth forecasts for 2019 to 2020, write IMF's Gustavo Adler, Louis Cubeddu, and Gita Gopinath.
    • Many advanced and emerging market economies "have appropriately eased monetary policy," but this has prompted fears of a currency war, they write.
    • Imposing tariffs to tackle currency overvaluation concerns aren't the answer, either, they say. "Higher bilateral tariffs are unlikely to reduce aggregate trade imbalances, as they mainly divert trade to other countries."
    • Deficit countries like the U.S. and the U.K. should "reduce budget deficits without sacrificing growth and strengthen the competitiveness of their export industries," the blog writers said. Such options include investing more in skills of workers and encouraging old-age saving.
    • Meanwhile surplus countries, like Germany and Korea, "should use fiscal policy where possible to invest more in infrastructure and adopt reforms that encourage private investment."
    • MSG Networks (NYSE:MSGN) has slid 13.4% today, tagging a six-year low, after fiscal Q4 earnings where it missed on top and bottom lines and logged a heavy drop in subscribers.
    • Revenues dipped 1.8% to $168.4M, and operating income fell 13%, to $70.2M (adjusted operating income fell 11% to $76.4M).
    • Affiliation revenue fell by $3.3M mainly due to a drop in subscribers of more than 6.5%. Ad revenues rose $0.9M, mainly due to higher sales from live sports telecasts.
    • Net income dropped 9%, to $41.2M, amid higher expenses in rights fees, as well as a 33% jump in selling, general and administrative costs.
    • Cash and equivalents were $226.4M as of June 30, up from a year-ago $205.3M.
    • Press release
    • EIA Petroleum Inventories: Crude -2.7M barrels vs. -1.9M consensus, +1.6M last week.
    • Gasoline +0.3M barrels vs. +0.2M consensus, -1.4M last week.
    • Distillates +2.6M barrels vs. +0.3M consensus, -1.9M last week.
    • Futures +1.02% to $56.7.
    • Goldman Sachs (GS +0.5%) charms its way into contention for a role in Saudi Aramco's (ARMCO) planned stock market listing, after months of wooing by top executives, including former Trump administration official Dina Powell, the Financial Times reports, citing several people briefed on the matter.
    • A person close to Goldman emphasizes that the progress made by the Wall Street bank in Saudi Arabia was through a team effort, which included Goldman CEO David Solomon traveling to the kingdom this year.
    • Goldman is doing some preparatory work for the Saudi Aramco offering, before it makes its formal pitch, FT reports, citing several people familiar with the matter.
    • Goldman had a role as bookrunner for Saudi Aramco's bond offering has has been involved in sovereign issuance.
    • Previously: Saudi Aramco asks banks to pitch for roles in IPO (Aug. 20)
    • Shares of Tesla (TSLA -1.8%) are having a rough day after Bernstein warns that Model S and Model X sales are being negatively impacted by new EV competition from Jaguar and Audi.
    • New models like the Audi E-Tron and the Jaguar I-Pace have entered a luxury EV market that is only showing modest overall growth.
    • Tesla is also feeling a little bit of heat after Walmart sued the company over a breach of contract for solar panels that allegedly caught fire.
    • Tesla traded at a session low of $220.08 earlier.
    • Credit Suisse cuts Chimera Investment (CIM -0.9%) to neutral from outperform, citing lack of catalysts to support further upside.
    • The market's current premium for CIM is justified due to its history of book value stability, continuing to earn more than its dividend, its accelerated pace of new securitization activity, and discipline in raising common equity.
    • Sees better potential for returns in outperform rated names including New Residential (NRZ+2.3%), PennyMac Mortgage (PMT), Redwood Trust (RWT), Two Harbors (TWO +0.4%), and Ellington Financial (EFC -0.1%).
    • In the past six months, Chimera has risen 6.4% vs. financial sector median performance of -4.0%.
    • Credit Suisse's take on CIM agrees with Quant rating Neutral; SA Authors' average rating of Neutral (2 Bullish, 1 Neutral, 1 Bearish).
    • July Existing Home Sales+2.5% to 5.420M vs. 5.385M consensus and 5.290M prior (revised).
    • Strong earnings reports from Target (TGT +17.7%) and Lowe's (LOW +9.9%) have swatted away some investors fears over the beginning of a recession in the U.S.
    • Notable gainers today off the positive tone from Target and Lowe's include Best Buy (BBY +3%), Bed Bath & Beyond (BBBY +5.2%), Abercrombie & Fitch (ANF +4.7%), Office Depot (ODP+3.5%), Signet Jewelers (SIG +3.6%), Floor & Decor (FND +3.7%), Lumber Liquidators (LL+4.3%), Express (EXPR +4.1%), Party City (PRTY +3.3%), Tilly's (TLYS +3.4%) and Burlington Stores (BURL +1%).
    • SPDR S&P Retail ETF (NYSEARCA:XRT) is up 1.65% to outpace the broad market.
    • Whole Foods (NASDAQ:AMZN) CEO John Mackey isn't convinced that plant-based meat products land on the healthy side of the equation as he calls them "super, highly-processed" foods.
    • Mackey didn't name Beyond Meat (BYND -1.1%) in his criticism, but Whole Foods gave the plant-based meat start-up one of its first major deals back in 2013. The exec does believe that plant-based food production is better for the environment than meat production.
    • Mackey's observations aren't unique. Some dietitians have stated that traditional beef burgers have the same amount of sodium and saturated fat as plant-based burgers.
    • The debate over the health benefits of plant-based burgers is relevant to Impossible Foods (IMPSBL) as well.
    • Negative yields may be taking their toll on investor demand, as the world's first 30-year bond offering a zero coupon struggled to find buyers.
    • Germany sold only EUR 824M ($915M) of the notes maturing 2050, falling far short of its EUR2B target.
    • Signals that the global bond rally may be sputtering out now that more than $16T of securities around the world have negative yields.
    • One of the arguments for not cutting interest rates now is that the Fed will have less room to cut when the economy does deteriorate.
    • Minneapolis Fed President Neel Kashkari, though, points out that the Fed has another tool that should be used before the economy sours — forward guidance.
    • The Fed can influence long-term rates by giving guidance about the future path of their short-term equivalents, he writes in the Financial Times.
    • "The firmer the Fed’s commitment, the more influence it can have," Kashkari said.
    • Though conventional wisdom says that a central bank should only use forward guidance once interest rates are cut to zero, Kashkari contends that that could be seen as a sign of weakness.
    • "If the global economy continues to weaken and the trade war between the U.S. and China intensifies, the Fed could find itself cutting rates aggressively. It would be better to deploy guidance now in an effort to avoid hitting zero," he writes.
    • The 10-year Treasury is down this morning, pushing yield up 3 basis points to 1.587%.
    • Kashkari isn't a voting member of the Fed's monetary policy-setting committee this year.
    • Stop parsing the details, says Jeff Gundlach. The Fed Funds rate is the biggest number across the entire yield curve – "What else do you need to call it an inversion," he asks.
    • Jay Powell "can’t put a back-to-back consistent message together," says Gundlach, reminding of the Fed chair's "mid-cycle adjustment" boner following July's rate cut.
    • Powell is keynoting the Jackson Hole conference on Friday, and is expected to signal another rate cut coming next month.
    • Shopify (NYSE:SHOP) is now the 10th largest publicly-traded company in Canada after an extended rally, notes The Globe and Mail in a positive article today.
    • Yesterday, Guggenheim noted that Shopify's fulfillment network initiatives are landing high marks from merchants and vendors.
    • Shopify is up another 1.34% in premarket U.S. trading to $380.00 to extend on its +170% YTD run that has given it a higher market cap than eBay.
    • Iron ore futures in China sank to their lowest in 10 weeks after BHP gave a downbeat outlook for steelmaking raw material prices and warned that global economic headwinds such as the U.S.-China trade war could hurt demand for iron ore.
    • Seaborne iron ore supply conditions for the remainder of 2019 and next year are "highly uncertain, both in aggregate and in terms of quality profile," BHP says in its latest economic and commodities outlook.
    • The most-traded iron ore on the Dalian Commodity Exchange, for January 2020 delivery, fell for the fifth straight session, closing down 4.3% at 589.50 yuan/metric ton, its weakest finish since June 10, after tumbling as much as 5.4% during the session.
    • Also, the most-active coke contract fell 1.1% to 1,963 yuan/mt, its lowest close in nearly five months.
    • BHP's outlook "suggested the market could see considerable volatility in prices ahead as the market continues to adjust to supply disruptions," ANZ Research says.

  14. Phil / FTR – has been moving up the last few days – any reason?

  15. FTR/Batman – Well, they tanked as Moody's lowered their credit rating but that was a big nothing (junk to junkier) and no major news otherwise so I'd say it's more a matter of that downgrade news not being worth a trip below $1 and the bargain-hunters have stepped in.  Also, FTR sold off assets in Washington, Oregon, Idaho and Montana for $1.35Bn that were generating $600M in revenues out of $8.6Bn so a 7% hit to revenues going forward in exchange for the cash.  On the bright side – that indicates the rest of the operation can be sold for $17.5Bn but, on the not bright side – they are $22Bn in debt!

    Closing suspiciously up almost exactly 1% for the day.

  16. But the volume is just too low to be credible?

  17. FTR / Phil – yep, I saw those items – both occurred 1 to 2 weeks ago so not sure there is a correlation, but there might be…..  unless they have cut a deal for some sort of convertible that is not public that might explain it….  Although I'm not sure they could swing anything with the debt load.

  18. Earth’s future is being written in fast-melting Greenland

  19. Good morning! 

    Volume/Mito – The volume this week is anemic.  Powell speaks at 10 am tomorrow, might finally get some action then but, meanwhile, this is what we usually have on a 1/2-day holiday like the Friday after Thanksgiving…

    Date Open High Low Close* Adj Close** Volume
    Aug 21, 2019 292.48 292.86 291.72 292.45 292.45 49,524,700
    Aug 20, 2019 291.77 292.36 289.95 290.09 290.09 51,596,400
    Aug 19, 2019 292.19 293.08 291.44 292.33 292.33 53,571,800
    Aug 16, 2019 286.48 289.33 284.71 288.85 288.85 83,018,300
    Aug 15, 2019 284.88 285.64 282.39 284.65 284.65 99,556,600
    Aug 14, 2019 288.07 288.74 283.76 283.90 283.90 135,622,100
    Aug 13, 2019 287.74 294.15 287.36 292.55 292.55 94,299,800
    Aug 12, 2019 289.96 291.61 287.02 288.07 288.07 62,629,500
    Aug 09, 2019 292.58 293.24 289.65 291.62 291.62 93,730,000
    Aug 08, 2019 289.62 293.62 289.01 293.62 293.62 87,713,900
    Aug 07, 2019 284.40 288.82 282.04 287.97 287.97 140,572,300
    Aug 06, 2019 285.91 288.04 284.28 287.80 287.80 120,711,700
    Aug 05, 2019 288.09 288.21 281.72 283.82 283.82 178,745,400
    Aug 02, 2019 293.85 294.12 290.90 292.62 292.62 116,749,700
    Aug 01, 2019 297.60 300.87 293.96 294.84 294.84 142,646,600

    Image result for turn those machines back on

    Very strange to stay this low for a week – even Christmas.

    FTR/Batman – There's also an increase in subsidies for rural broadband that FTR benefits from and Warren wants to jack it up to $85Bn to guarantee WiFi to all – that would be huge for FTR, who do a lot of rural services.

  20. Interesting article in Barron's.  Started a small position in pre-market at 3.85.