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Technical Tuesday – 3,000 or Bust on the S&P 500

Here we are again!  

2,978 on the S&P 500 is within spitting distance of 3,000 and today it will be all about Apple (AAPL) and the market's reaction to their event at 1pm today, where they are expected to announce yet another new IPhone and probably more watches and stuff about their TV Service and who knows what else…

Apple is 3.5% of the S&P – its largest component and it's 14% of the Nasdaq – by far the largest component and it's a Dow component where each $1 move in AAPL stock moves the Dow by 8.5 points.  So, to say there's a lot riding on AAPL today is a huge understatement.  

The Nasdaq, for it's part, is having a rough week – so they could use some good news from Apple, who are the only FAANG stock besides NFLX who are not involved in anti-trust investigations and NetFlix WISHES they were more of a monopoly because AAPL, DIS and a dozen other streaming companies are putting pressure on their bottom line and limiting their growth (our hedge fund is short NFLX). 

My early summer comments to our Members on NFLX were:

CMG/Sun – NFLX would be my top short, I just don't think they can keep their growth up, there's no moat to their business and costs are skyrocketing because they are a movie studio selling subscriptions (HMNY) when push comes to shove, not a tech company.

As I said in the Webinar, it's not really possible for them to sustain that ridiculous valuation.  They are no different than TWX or CBS and those companies trade at 15-20x earnings.  The same people who were convinced to subscribe to HBO over the past 40 years are the people subscribing to NFLX now and I very much doubt there's any magical thing they can do to entice more people that HBO hasn't already thought of and tried. 

In fact, it's disappointing subscriber growth (2.7M vs 5M expected) that's tanking them now as the profits were a 10% beat but who cares if a $320 stock makes 0.54 or 0.60 per share in a Q – that's still not even 1/100th (annualized) of what they are expecting you to pay for the stock. 

NFLX finding dip buyers at $320 and that's down from $380 (18.75%) but I'd call $300-400 the range as NFLX consolidated at $200 back in 2017, topped out at $400 ($423) in mid 2018 and then down to $230 and back to $370 still centers around $300 so it's messy but I think realistic so the run from $300 to $400 gets $20 bounce lines and $320 is the weak bounce line, $340 strong, $360 strong retrace and $380 weak retrace so, generally, they've been failing to get over the weak retrace all year and now they've dropped to the other end of the range but $320 should hold and $340 should be tough to get back over now without better news. 

Remember – I can only tell you what is probably going to happen and how to make money trading it – that is the extent of my powers!  

So today I am telling you that AAPL better not disappoint at their announcement event as they are trading at just about their all-time high and "only" $50Bn short of a $1Tn market cap so investors are going to want to see something that justifies that kind of price going forward although, with over $65Bn in anticipated earnings this year – I don't mind paying $1Tn for the company and we are long AAPL in the Hedge Fund and all of our Member Portfolios – it's still my favorite stock!

The Nasdaq needs a boost with 48 states (not California and, for some reason, not Alabama), the District of Columbia AND Puerto Rico ALL launching an antitrust probe into Google (GOOGL),  saying the search giant’s dominance has become a concern for consumers and businesses alike.  The investigation is probing concerns that publishers and advertisers have little choice but to advertise with Google.  Facebook appears to be the next target and then – Amazon?

This is why SQQQ is our primary short – the sky-high valuations on the these Nasdaq leaders doesn't allow for ANY kind of slip-ups and certainly not a Congressional inquiry and this isn't just Congress, 48 states and two territories are also suing so this isn't going to go away like the usually do – expect this to drag on into next year's election, where it will become a campaign issue and both sides have already called for some sort of tech break-up (and taxes from the Dems side).

Just a 10% correction in the Nasdaq takes us back to 7,000 and that's a $16,000 drop on /NQ shorts and a 30% jump in SQQQ, which is currently just under $32 so call it $40 at least so, for a current hedge that covers the end of the year, I'd go for:

  • Buy 50 SQQQ March $30 calls for $5.80 ($29,000)
  • Sell 50 SQQQ March $37 calls for $4.20 ($21,000) 
  • Sell 10 WBA Jan 2021 $47.50 puts for $4 ($4,000)

That's net $5,000 on a $35,000 spread that's $10,000 in the money at $32 so very good protection, you can only lose if the Nasdaq is over 3,000 in March, in which case your longs should be going well and, of course, Walgreens is a stock we've been banging the table on at the $50 line (now $55) so we're very confident with $47.50 holding and, if not, we'd love to own the stock.


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  1. AAPL / Phil – Someone yesterday was making the comment that it seems that there is not as much buzz about the new iPhones this year as there was every year. Upgrade fatigue and possibly not very much that anyone can really add to the phones at this point. 

  2. Oh, and another day, another scandal in the administration. I miss the days of the tan suit scandal now.

  3. Good morning!  

    I won't be around today as we're doing a big presentation with Hemp Boca (one of our PSW Investment projects).   

    Watch the RUT, they need to take that 50 dma and the others need not to lose theirs.

    I don't think expectations are very high for AAPL in this cycle but I think, once they analyze it, Apple TV is going to look like a winner and services will be the story, not phones or even watches.

    Have a good day, 

    - Phil

  4. Was yesterday a turning point from growth to value:

  5. Good Morning!

  6. China’s Pork Prices Soar, Adding to Beijing’s Troubles

  7. Trump pronounces Taliban agreement ‘dead’ and peace talks over

  8. Everyone’s down but the RUT, I’d short /RTY below 1,525 with tight stops above.

  9. Anyone seeing a reason for CMG down so much?  I'm not seeing any news.  I'm not complaining, just trying to understand.

  10. I’m thrilled, big short bet for us in the Fund.  Been annoying waiting for this.  Not sure why today.  

  11. CMG / Palotay – Not seeing anything. There was even an upgrade yesterday! Burt these growth (can CMG be there) stock were hit yesterday.

  12. ULTA too 

  13. FTR up big. Any news? 

  14. Must be Opposite Day. 

  15. Phil that SQQQ hedge just above…  how much profit do you consider that protects?

  16. Ideally a hedge should cover 1/2 of what you expect to lose on the goal correction.  

  17. Value vs Growth – It continues into today.  St.J had the chart above.  There's certainly some rotation happening as the Fed approaches.  Is this kind of thing normal at the end of a cycle?  I thought it's more of something that happens at the beginning of a cycle, but this certainly isn't the beginning.

  18. Covered a little more of my GME.

    Not a fan of going through earnings with a trading position on, and not expecting a good quarter.  If the stock spikes, I'm willing to sell some at ~$5.80.  If it sells off I'll likely take off the cover and buy more.

  19. PSW/STT

    anyone know of any news regarding STT? the stock just jumped 4%


  20. Aimmune (AIMT +9%) — FDA Advisory Committee meeting for peanut allergy immunotherapy Palforzia (AR101) is Friday; Briefing Documents will be released tomorrow morning.

  21. John Bolton fired.  Oil selling off.

  22. It sounds like NY filed a lawsuit against CMG for labor violations.  The allegations don't seem that severe from my first read, but it seems like the market thinks otherwise.

  23. Could spread. 

    STT I think is just another value stock finally getting attention.  

    Cycle/Buckeye – Flight to value is normal when momo’s run out of gas. That’s why we hung tough. 

  24. Russell exploded higher. 

  25. Have you noticed on Gme that there is a 59% short interest? Over 12 and a half days to cover? This thing pops it will go up for awhile.

  26. MAT – Up 6% today.  Covered 1/2 with Jan $10 calls.

  27. Thoughts on RH earnings tonight? Seems like big mover historically.

  28. In his own Twitter message, Mr. Bolton offered a conflicting account of his departure, saying: “I offered to resign last night and President Trump said, ‘Let’s talk about it tomorrow.’”


    Surpised this is not moving the market


    John Bolton Ousted by Trump as National Security Adviser

    WASHINGTON—President Trump has dismissed his national security adviser, John Bolton, saying he told the controversial aide he was out of a job on Monday night.

    “I informed John Bolton last night that his services are no longer needed at the White House. I disagreed strongly with many of his suggestions, as did others in the Administration, and therefore I asked John for his resignation, which was given to me this morning,” Mr. Trump wrote on Twitter on Tuesday. 

    “I thank John very much for his service. I will be naming a new National Security Advisor next week,” he added.


  29. Boltons version – porobably the truth

    In his own Twitter message, Mr. Bolton offered a conflicting account of his departure, saying: “I offered to resign last night and President Trump said, ‘Let’s talk about it tomorrow.’”

  30. This is the first time in quite awhile that CTL closed at the high.  Big volume as well.

  31. GME misses by .10.  Also misses on revenue.

  32. Big stick at the close…

  33. Good morning! 

    Well, I know I said I'd catch up but I got home late, passed out and over-slept – so not a good start…