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Faltering Thursday – Back to S&P 2,850 as Trump Opens New EU Trade War Front

Image result for madness trumpMADNESS!

As if there are not enough things going on, Trump announced just before yesterday's close that he would now be placing tariffs on European Union goods, including aircraft, clothing, whisky, cheese, yogurt and agricultural products.  Who buys aircraft from Europe?  US Airlines do, that's who.  And who ends up paying for the additional cost of the planes they buy?  I'll give you a hint – it isn't Mexico! 

So, as if the Dow Transports didn't have enough troubles, this is going to really put them in technical trouble – along with all the indexes as they are close to failing their 200-day moving averages which, on the S&P 500, is 2,850 – also the mid-point we've been telling you would true up on the S&P chart since the beginning of summer thanks to our Fabulous 5% Rule™:

Back in our August 8th PSW Report, we noted the following bounce lines for our indexes (colors reflect current positions):

  • Dow 25,000 is the mid-point and bounce lines are 25,550 (weak) and 26,100 (strong)
  • S&P 2,850 is the mid-point and bounce lines are 2,880 (weak) and 2,910 (strong)
  • Nasdaq 7,200 is the mid-point and bounce lines are 7,360 (weak) and 7,520 (strong)
  • Russell 1,440 is the mid-point and bounce lines are 1,472 (weak) and 1,504 (strong) 

I had to change S&P 2,880 and Russell 1,472 from green to black (we're right at the lines) but, otherwise, we're right where we are (2 boxes weaker) 2 months ago and that's right where we were two months before that and, in fact, 2 YEARS before that.  This market has gone nowhere during the Trump Error – nowhere at all!  

As you can see from the Big Chart – we've failed ALL of our 50-day moving averages and the Russell has already failed the 200 dma and the NYSE is on the edge so anything down today is VERY BAD and it won't be good until everyone takes back their 50 dmas – which is now 500 Dow points away.  

We noted on Monday that the Fed is lined up with speakers who are aiming to push the market back up with 7 Fed speeches over the next two days, including Powell at 2pm tomorrow so this week ain't over until it's over and, in yesterday's Live Trading Webinar, we played the Dow for a bounce above the 26,000 line with very tight stops below, risking a $25 loss on a 5-point drop against a potential $1,000 gain on a weak bounce to 26,200.  That's the kind of risk/reward play you want to look for when playing the Futures and it's still playable this morning.

Be careful out there.

 


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  1. It looks like we are forming the dreaded killer spider pattern :-)


  2. FWIW.  Stopped out of AMTD yesterday for a 1 point loss.


  3. Morning, All!

    Webinar replay is available!

    https://youtu.be/DwJvqo7ckJs


  4. Good Morning!


  5. Equity prices will go higher once the Fed decides to increase its balance sheet by another 400%


  6. And to go negative rates! See easy….


  7. Not going in the direction of a big bounce now!


  8. Just a heads up. Nothing is going to move those Canadian MJ stocks until after the elections. Looks like the US ones might move since the banking release might be a help. They can take off like a rocket even though everything else is under pressure.


  9. Phil/Market direction

    Where do you think is the market headed? more to fall from here or side movements due to fed speaks?

    regards


  10. Good morning!

    Big Chart/StJ – If we don't fall below 2,850 by Thanksgiving, we'll have to move the 10% lines of the Dow, Nas and S&P down to the Must Hold Lines (and we'll have to start buying again).

    Image result for venom  cartoon

    AMTD/Albo – I don't think any of these guys have done a good job of explaining their go-forward business plans with no commissions.  Everyone saying they hope to gain market share isn't a plan – it's delusion.

    Fed/Mike – They are certainly hinting that they are ready to fire.  I think the problem is it's not going to help much starting from this low with them already buying tons of bonds – less impact, even if they increase it.

    Bounces/StJ – Looking bleak and Trump is only 3 tweets into his day so far.  

    Good times with @seanhannity last night talking Adam #FullOfSchiff “Schiff is basically the Jussie Smollett of Congress on steroids. I’ve never seen anything so ridiculous.”

    Schiff is a lowlife who should resign (at least!).

    Also, Trump re-tweeted this article and I can't imagine why as it's not favorable to him at all.

    Apparently, if you write a book with any title that hits one of Trump's talking points – he'll promote it.  Even ones that haven't been published yet.  That makes a very tempting idea….

    He also retweets really reprehensible things.  

    Oh no, ISM is bad, 52.6, not 55.5 expected – down we go again!

    PMI Services sucked too – that's supposed to be the saving grace. :

    • September US PMI Services Index50.9 vs. +50.9 consensus, 50.7 prior.
    • Composite: 51.0 vs. +51.0 consensus, 50.7 prior.
    • New business growth slides to lowest in survey history.

  11. "buying again"

    Was just about to ask about that- what is your thinking on  levels for a "bottomish" if we continue downward?

    I.e. , when to start nibbling again (although the must hold levels are still above the Dec 18 lows. Overshoot?


  12. Also, my hedges are doing OK and I often seem to hold these too long. When to take some off the table. After all, not only protection but hedges are supposed to be a fund source for bargain hunting.


  13. VIRT/ Phil    ?

    This firm was mentioned as one who could benefit from reduced trading commissions.  They have a horrible chart and questionable dividends, however they did make a recent acquisition. 


  14. The Dollar is trying very hard to prop up the markets too:

     

    MJ/Pirate – I'm off to CA the week after next and should be able to give a good report on the industry when I get back.

    Direction/Pat – I think the Fed has one more save in them but, after that – BIG TROUBLE!   The next Fed meeting is Oct 30th and then one more Dec 11th and then Jan 31st, March 21st and May 2nd so I'd say cut at next meeting as they can then skip Dec and change their minds in Jan if they have to.

    Last Nov 8th, they maintained rates at 2-2.25%, despite the market being in a sell-off and it was unanimous.  They had raised it 0.25% on Sept 26th, also unanimous.

     Boy, it's scary how fast we give up 1% now. 

    Again, this was my concern about going up (most in pre or post market) on thinly traded volume – it doesn't form a proper base and you can go down very fast as there's nowhere near enough buyers if people decide they want to sell.

    Bottom/Pstas – It would take a lot for me to want to buy before Thanksgiving.  I'm sure there will be individual stocks but there were in 2008 too and that turned out to be a mistake – as we started "bottom-fishing" way too soon.  AAPL was over $200 so $150 looked like a great deal when we hit it but $85 was better a year later.  I remember being in Vegas in Nov of 2008 and literally banging the table for AAPL, INTC, GE, CSCO, C, BAC, F, GM – the big blue chips that were stupidly undervalued but it still took until March for things to bottom out completely.  

    As I said in the Webinar yesterday, we have to find stocks that we're THRILLED to buy more of if they drop another 40% and we have to be 90% CERTAIN they are not going BK in the next 5 years.  Those will be the attractive ones in the coming market.

    As to the hedges – If you made good money on short-term hedges, maybe take them off the table and trade them for cheaper, long-term hedges.  If you have an example I could go over possible changes.

    Time to celebrate mediocrity!

    • August Factory Orders-0.1% to $499.8B vs. -0.2% consensus and +1.4% prior.
    • Follows two straight months of increases.

    Tomorrow:


  15. Markets re-energized. Strange days.


  16. Phil,

    I was not at the Vegas 2008 event. But I was there with you & others on 10/8/2011.

    I have fond memories of the mini poker tournament and receiving weird looks from the hotel crew when rolling out of the hotel predawn for futures trading. They were used to people coming in then,

    Not starting their day!  We also made enough on some of your table pounders to pay for the trip..


  17. Evans was on Bloomberg making nice noises. 

    Trump is on the WH lawn talking about his "perfect" phone call.  Wants whistle-blower bought to justice.  Will meet next week with China – also boosting markets.  We knew that was going to happen.  Says CHINA should start an investigation into the Bidens right after saying "We'll see what kind of trade deal they want."  He's F'ing amazing!  

    • Trump claims Biden's son took Billions of Dollars out of China after being kicked out of the navy – WOW!  
    • Says Mitch McConnell told him it was "the most innocent phone call" he had ever read (the transcript of).  
    • "China gave Biden's son $1.5Bn in exchange for easy trading terms" – Trump

    Oh no, and hes' coming to Florida!  

    Meanwhile, Obama's on safari:

    Image

    Consumer comfort among Republicans drops to its lowest level since July, a possible signal that the impeachment inquiry is weighing on Trump's supporters’ economic outlook

    Although President Trump “used Pence to tell [Ukrainian president Volodymyr] Zelensky that U.S. aid was still being withheld,” the Washington Post reports, Pence’s aides insist he had no idea what he was actually being used for. “Officials close to Pence insist that he was unaware of Trump’s efforts to press Zelensky for damaging information about Biden and his son,” the Post notes. Pence, by their accounting, is like a man who delivers a ransom note to a bank teller, failing to place any significance in the fact that the tellers have their hands in the air, the bank patrons are lying on the floor, and the guy who asked him to bring the note to the bank had a mask and a gun.

     

    Pence’s involvement in the plot was extensive. White House officials had him cancel a planned trip to Zelensky’s inauguration. One of Pence’s top advisers was on the July 25 call when Trump made clear his demand that Zelensky open investigations into various Democratic officials, including Biden, whom Trump named on the call. Pence was given the transcript of the call before his September 1 meeting with Zelensky, when he reiterated Trump’s threat.

    Pence’s defense is that, even though the readout of Trump’s call with Zelensky was in his briefing materials on his trip to Europe, he did not bother to read it before the meeting. “Officials close to Pence contend that he traveled to Warsaw for a meeting with Zelensky on Sept. 1 probably without having read — or at least fully registered — the transcript,” the Post records.

    So Pence didn’t read or understand the vital background information he needed before this important national-security meeting. He didn’t hear the widespread alarm rippling through the administration that Trump was acting improperly. He somehow failed to pick up on Rudy Giuliani’s repeated public boasts — in the New York Times, on Fox News, on Twitter, and in any media he could find — that he was pressuring Ukraine to investigate the Bidens in his personal capacity as Trump’s lawyer. He somehow accepted at face value Trump’s claim of being deeply concerned with corruption in Ukraine despite Trump’s record of greeting corruption in almost every other country he deals with with something ranging from indifference to enthusiasm.

    Most amazing, Pence’s defense is that when he delivered Trump’s threat in the meeting with Zelensky, Pence had no idea that “corruption” was code for ordering up investigations of Trump’s domestic enemies. “A top Pence staffer rejected the charge that the vice-president was conveying an inappropriate — or coded — message from the president,” notes an obviously skeptical Post.

    And we're only days into this thing!  


  18. Haha   just got the "stay the course " email from my broker.   They want my assets  


  19. NG. Phil, which month contract would you go long on nat gas? 


  20. Hedges:

    DXD-long Jan 25 calls. Remainder from earlier spread-bought back the callers. Cost basis is 3.08

    SQQQ-Long 75 20-Mar 30 Calls; Short 40 20-Jan 45 Calls. Net cost basis after some rolls-6.35

    TNA- Long 20 Jan 65 puts; Short 20 Jan 35 puts-net cost basis 9.42


  21. That's right, when you cash in the brokers get really nervous.  

    Sven Henrich: Market lesson: If you chase multiple expansion and ignore all weakening data hoping the Fed will bail you out….eventually you'll get spanked.

    Just prior to the release of the phone call summary, major media outlets reported that during the course of the call, Donald Trump had asked the President of Ukraine eight separate times to work with Rudy Giuliani on promoting the fake Biden scandal. But the summary only included two of those eight times. We figured that since only one-fourth of the Rudy mentions were present, the other three-fourths of the phone call must have been omitted from the transcript.

    Senator Angus King had his staff read the phone call summary aloud, and it took them barely ten minutes. But the phone call is said to have lasted thirty minutes. So by Senator King’s math, roughly two-thirds of the phone call has been omitted from the transcript.

    What matters is that this is another data point that suggests the Trump White House is trying to trick us into believing that most of the phone call didn’t happen. If the damning summary is what they were willing to admit to, just how ugly were the parts they omitted?

    Related image

    Image

    Image

    Computers are taking control of financial markets. econ.st/2nckzik

    Image

    /NG/Lionel – As I said yesterday, the current contract at $2.25 was a good line to go long at as it has a month to go and hurricanes look strong this year.  I'm just looking for a quick pop on that, prefer UNG spread (Jan 2021) for longer-term bets.


  22. Thanks Phil


  23. what happened to those wonderful Vegas trips that were planned by some wonderful person ;-)


  24. Put/Call Ratio hit 1.60 this morning.


  25. Phil/LABU

    Those premiums are very rich.  The Nov. 22 $30 calls paying ~$4.60.  However, there may be enough reasons to wait for it to fall to $25.


  26. More LABU

    Going out to JAN:  Buy the stock ~$30.50 sell the JAN $30 calls ($6.00) and the puts ($8.60).  If it holds $30 49% in roughly 3 months!  But it's LABU, and it is priced that way for a reason.  Just thought it was interesting and getting close to the lows of 2016 and 2018  around $25. 


  27. Speaking of hurricanes – one is about to his the UK – very rare.  Only 1 hit (as a hurricane-force) in past 25 years.

    Vegas/Savi – I think we should do a cruise. 

    Hedges/Pstas – Well, the DXD Jan $25s are even and I'd sell the $28s for $2 and roll to the April $24s at $4.40 so you pocket net 0.70 and get 3 more months of time and $1 in position and you'll get another $2 back when Jan expires and you sell April whatevers which will end up being the same as cashing out completely now but you maintain a $4 spread (and you can roll the short Jan calls higher if the Dow crashes).  

    SQQQ – The March $30 calls are now $8.20 and the Jan $45s are a ridiculous $2.75 – no way I'd pay that.  I would cash the extra 35 longs and take $28,700 off the table and I'd buy 40 of the 2021 $30 ($13)/45 ($9) bull call spreads for $4 ($12,000) so you can put a stop on your other 40 longs at $7 to get another $28,000 off the table and that would leave you with the short Jan $45s fully covered by the new 2021 spread.  And, of course, if that triggers, you should keep stops on 1/4 of the short calls at $2.50 (they would be lower too) and 1/4 at $3 to get back to a better ratio if the Nas starts falling again.

    TNA – Jan $65 puts are $16 -  that's great, I'd take that and run and the $35 puts are $1.50 so I'd put a stop on 1/2 at $2 and probably just roll the rest (the April $25 puts are $1.30).  TNA and TZA are crossing – that's interesting.  You could probably do well shorting them both as they are likely to both go to $0 eventually.

    You can sell the TZA 2022 $60 calls for $14 and the TNA 2022 $60 calls for $12 (shows you which way sentiment is running) so that's $26 collected against the risk of one of them hitting $90, where you start to get in trouble.  If you could ride out a spike against you – it's a very high-probability play!  

    LABU/DC – I'd make it an income play:

    • Sell 5 LABU 2022 $25 puts for $11 ($5,500)
    • Buy 15 LABU 2022 $30 calls for $13 ($19,500)
    • Sell 15 LABU 2022 $45 calls for $9 ($13,500) 
    • Sell 3 LABU Jan $34.87 calls for $3.80 ($1,140) 

    That's a net $640 credit on the $22,500 spread and you should be able to pick up at least $1,000 a quarter for 8 quarters so $8,000 even if you don't end up making money on the long spread.  

    That's good enough for a Top Trade!  


  28. It’s Time to Worry About Some Corporate Bonds Again

    I am not  a bond guy but from past readings I buy the notion that the junk bond category may be the true coal mine canary signalling trouble ahead. HYG index is a suitable proxy for tracking purposes. Presently HYG has dipped below its 50 dma;and bouncing off the 200. 


  29. Phil/LABU

    The only thing I don't like about your trade is the headline risks of the upcoming election.  If it's Warren, I can't imagine that's good for LABU.  It did actually get as low as the high teens in 2016.  What say you?


  30. Bonds/Pstas – That's something we noted a couple of weeks ago – one of my last straws for cashing out.

    LABU/DC – As I noted the other day, LABU is a diverse set of Biotechs, mostly in early stages, not like Big Pharma, who will suffer from earnings caps.  Yes, LABU companies may make less money down the road but they make none now so it won't change things much.  And, don't forget, we're increasing the total amount of people covered – that's good for sales.  Also – that's why I set it up as a default income play – it doesn't need to go up to make money.


  31. Hedges-thx


  32. cruise —not a bad idea although have to talk my hubby into it


  33. Up 1% on the Nas now, got our first 100 points on /YM but out if 2,900 on /ES fails (it's right there).

    • Bank of America Merrill Lynch is out with an early earnings preview on Netflix (NFLX -1.1%) that tilts to the cautious side.
    • "We see a make or break quarter for Netflix in the wake of a 25%+ sell-off since 2Q paid subscriber adds trailed Netflix’s own guidance. While Netflix has never missed its own guidance two quarters in a row, we flag the company’s CFO transition as a risk, because at this point," write analyst Nat Schindler and team.
    • BAML sticks with a Buy rating on Netflix as it notes valuation on a price-to-sales multiple is below video game companies and with contribution margins increasing.
    • Netflix is due to report earnings on October 16.
    • Anglo American (OTCQX:AAUKFOTCPK:AAUKY) reports the value of rough diamond sales at its De Beers unit rose to $295M in the eighth sales cycle this but well below the $482M sold in the prior-year period.
    • The diamond industry is suffering through a dismal year, stemming from an oversupply of polished gems, which has depressed demand for rough stones; much of the polishing and trading industry is based in India, where companies have been squeezed by tight bank financing and currency fluctuations.
    • RBC Capital analyst Tyler Broda says the firm has "brought our numbers down again for De Beers and now assume an H2 revenue figure of $1.57B… We now forecast full year EBITDA of $749M, which is 40% lower than 2018."
    • Snap (NYSE:SNAP) has made a sudden leg down, -5.5%, after Instagram (FB +1.5%) announces worldwide availability of its "new camera-first messaging app."
    • Targeted at a "smaller circle of friends" than Instagram's other visual sharing efforts, the new Threads is a stand-alone app aimed at privacy and speed.
    • "You can share photos, videos, messages, Stories and more with your Instagram close friends list," Facebook says of the new app. "You are in control of who can reach you on Threads, and you can customize the experience around the people who matter most."
    • It begins global rollout today.
    • Snap shares similarly dipped in August on reports that Facebook was working on the Threads app.

  34. /NG and /KC popping back up, /SB holding up well, /ZS back off the bottom:

    We'll see how they do if the Dollar has found a floor.


  35. CLF – Up 9%

    Selected to join the S&P SmallCap 600, effective prior to the open of trading next Tuesday, October 8.


  36. CLF/Albo – 9% only a dent at the moment.

    • Morgan Stanley expects GoPro (GPRO -19.8%) to "recoup some of this lost demand in early 2020."
    • The firm says the HERO8 Black delay will will create a significant headwind for Q3 results, but a tailwind for Q4.
    • Morgan maintains an Underweight rating and lowers the PT from $5 to $4.50.
    • Citi says "investors will view the production delay as a negative which will partly overshadow some of positive shine of the new products launched." Analyst Jim Suva says the delay should be resolved within weeks with no effect on Christmas shopping and no material change to Citi's longer-term model.
    • Citi maintains a Neutral rating and $4.50 price target.
    • Zereo commission momentum continues to build speed. This time its TradeStation Securities offering commission-free trading to customers who use its web and mobile platforms for exchange-listed stocks, options, and ETFs.
    • Customers trading options will continue to pay 50 cents per contract without a commission charge.
    • Among publicly traded on-line brokers, Schwab (NYSE:SCHW) is down 3.9%, TD Ameritrade (NASDAQ:AMTDfalls 2.0%, Interactive Brokers (IEX:IBKRslips 1.0%, LPL Financial (NASDAQ:LPLAslides 2.6% and E*Trade is flat.
    • Previously: Fidelity may soon follow with price cuts, Morgan Stanley says (Oct. 3)
    • European Commission President Jean-Claude Juncker says that U.K. Prime Minister Boris Johnson has more work to do on his proposal for an all-island regulatory zone instead of the contentious Irish backstop that would keep prevent hard borders between British-ruled Northern Ireland and EU member Ireland.
    • He "welcomed positive advances" in the U.K. text, but pointed to some "problematic points."
    • The withdrawal agreement must have "a legally operational solution, not arrangements to be developed and agreed during the transition period," the EC President said in a statement.
    • This solution must achieve the same goals as the Irish backstop by "preventing a hard border, preserving North-South cooperation and the all-island economy, and protecting the EU's Single Market and Ireland's place in it," the statement said.
    • Bloomberg, though, reports that Johnson's Plan B would keep the backstop arrangement, but with an explicit time limit on it.
    • The Invesco Solar ETF (TAN +0.5%) has returned more than 50% YTD, far outpacing the broader market's 15% gain and the S&P energy sector 2% loss so far this year, and the group is up again today even as most sectors trade in the red.
    • The top YTD performers in the ETF are Enphase Energy (NASDAQ:ENPH), SolarEdge Technologies (NASDAQ:SEDG) and SunPower (NASDAQ:SPWR), up 363%, 131% and 104%, respectively.
    • "Market prices are following fundamentals rather than getting way ahead of them," says Invesco director of global macro ETF strategy Jason Bloom. "When you look at upside momentum in the past year, it has been driven by earnings surprises, not by investor sentiment around the future of the sector."
    • Bloom believes the phaseout of the federal tax credit for installing a solar energy system "isn't that much of an issue" given that solar is now "cost competitive without subsidies."
    • Adoption of solar power has been rising: Residential adoption of solar panels is growing 8% Y/Y, according to Wood Mackenzie, and publicly traded companies are increasingly viewing renewable energy as beneficial from an economic standpoint as well as a public image perspective.
    • Solar stocks are at an inflection point of sorts, Bloom says: While Wall Street initially underestimated "how hard it was going to be to be profitable," fundamentals are stabilizing and companies are starting "to grow profits while growing unit volume."
    • Sales for BMW's (OTCPK:BMWYY) Mini brand in the U.S. have fallen by more than 30% over the last five years as most drivers remain focused on trucks and SUVs, but the German automaker is sticking it out.
    • The German automaker hopes that sales will improve with other competing small car models being pulled from the market
    • BMW has sold 260,180 Mini cars in the U.S. this year through the end of September, up 0.4% from a year ago.
    Same as BA – a person is worth about $500,000 - MGM reaches comprehensive settlement in Vegas shooting case
    • MGM Resorts International (MGM -0.6%) announces that it reached a settlement with substantially all plaintiffs involved in litigation over the 2017 mass shooting in Las Vegas.
    • The total settlement amount is expected to be between $735M and $800M, subject to and depending on the number of claimants who choose to participate in the settlement.
    • The company expects the entire process to be completed by late 2020.
    • Source: Press Release
    • Chicago Fed President Charles Evans says he's "very concerned" about inflation lagging the central bank's 2% target.
    • Even before concern about headwinds this Spring, "There was a good argument for more accommodative monetary policy just to ensure that we get inflation up to 2%," he told Bloomberg Television. "I think we should overshoot for 2% at this point in the economic cycle."
    • He said he'll keep an open mind about if any further actions are needed.  At the Federal Open Market Committee's meeting at the end of this month, Evans said he'll listen to everyone's perspectives on the outlook then ask himself: "Do we need still more accommodative monetary policy to achieve" the Fed's objectives?
    • Wedbush Securities analyst Dan Ives sees Tesla's (NASDAQ:TSLA) Q3 deliveries report as a step in the right direction.
    • "The most important number in the release was the key Model 3 deliveries which came in at 79,600 and were above the Street’s 77,010 estimate as this remains the linchpin of the Tesla growth story for the coming years," says Ives.
    • "While the doomsday scenario is off the table with cash in the coffer (convert) and Model 3 sales ramping, the question on the minds of investors is around profits into 2020. The stock will be range-bound in our opinion until Musk & Co. update the Street with the financial results, profitability picture, and 4Q guidance later this month trying to regain the credibility of the Street," he adds.
    • Wedbush sticks with a Neutral rating on Tesla and price target of $220.
    • Elsewhere on Wall Street: JMP Securities lowers Tesla to a Market Perform rating from Outperform. The firm says it's concerned that demand for Tesla cars is levelling off. "We know of no operational issues that could have prevented TSLA from delivering more vehicles if demand were available," notes the firm.The consensus sell-side rating on Tesla is Hold.
    • Shares of Tesla are down 4.73% premarket to $231.73.
    • Previously: Tesla -5% after Q3 deliveries fall short of 100K (Oct. 2)
    • Morgan Stanley analyst Michael Cyprys writes that the likelihood that Fidelity will reduce prices after E*Trade (NASDAQ:ETFC), TD Ameritrade, and Schwab (NYSE:SCHW) cut online trading commissions to zero.
    • Potential areas of pricing risk include per-contract fee on options (which will have more of an impact on ETFC and AMTD), commissions on futures, foreign currencies, and margin lending.
    • Schwab may rally if Fidelity "responds in a manner that leads to minimal to no EPS impact for Schwab," Cyprys writes.
    • Estimates ETFC EPS will be hurt by 23%, in line with Morgan Stanley's previous expectation.
    • If LPL Financial (NASDAQ:LPLA) matches, will hurt its EPS by 26 cents.
    • Sees Virtu Financial (NASDAQ:VIRT) as potential winner from e-broker commission war, as trading activity may rise.
    • Via Bloomberg First Word.
    • More than two dozen major companies have filed suit against the four biggest U.S. railroad companies – BNSF Railway (BRK.ABRK.B), Union Pacific (NYSE:UNP), CSX Corp (NASDAQ:CSX) and Norfolk Southern (NYSE:NSC) – alleging they engaged in a price-fixing scheme.
    • The lawsuits say the companies conspired to raise prices starting in 2003 by imposing coordinated fuel surcharges, ultimately pocketing billions of dollars in profits.
    • Attorneys had sought class-action status on behalf of 16K shippers against the four railroads, but earlier this year a judge said the cases should be brought individually or broken down into groups of similar shippers with similar situations; Monday was the deadline for filing those individual cases.
    • In previous stages of the lawsuits, the railroads contended that fuel surcharges are common across the transportation industry, that they were legal and needed to recover rising fuel costs at the time.

  37. Phil, I asked about VIRT earlier today ( 10:28)


  38. Ah, that's because you asked at the same time as I published and I didn't look above my comment for new questions.  Anyway, VIRT is essentially an HFT operation but the arb system they us guarantees very thin profits (but hopefully no losses).  One thing I notice is that, in 2016, they took in $396M and SG&A was $181M and Net Income was $32M.  IN 2018, Revenues were $1.36Bn, SG&A was $650M and Net Income was $55M.  This implies that their costs climb about as fast as their revenues and $16 for them is $3Bn – 60x the earnings – even after the stock dropped almost 50% this year.

      

    So, even assuming VIRT can keep dropping 4% to the bottom line, to get to just $150M in profits will require a massive build-up in transaction and they are already playing in 10,000 asset classes so I'd say the only way they can expand is to increase volume but that means no longer going after the low-hanging fruit that's made them successful in the first place.  Also, of course, if anything goes wrong and they cause a "flash crash" with their algos – they could get regulated out of business.  That's a nasty risk to have hanging over you.


  39. VIRT/  Thanks.  4%margins, thats almost as thin as a grocery store. Also the dividend payout ratio looks iffy


  40. From Briefing:

     Kaplan (Non-Voter) throwing his hat into the dove ring; Says two rate cuts this year reduces likelihood of a slow down but does not eliminate; Would prefer to act sooner rather than wait for data to turn negative


  41. VIRT/Stock – Well they are thin because they are just using an algo to scalp pennies or 0.0001s when they can so they have to have tons of transactions for things to add up.  What if someone else starts doing it?  Too iffy for me.  Basically, they got investors to pay for all the computers and now they are distributing the profits back to themselves.  

    Markets ending a bit weak into the close but at least not down again today BUT not even a strong bounce in the group is BAD!  


  42. I flipped some CLF I bought yday at 6.80 sold today for 7.31  and get the dividend 


  43. The 43 strangest lines from Donald Trump’s bizarre press conference




  44. U.S. Slaps More Duties on Chinese Wooden Cabinets and Vanities

    https://www.bloomberg.com/news/articles/2019-10-03/u-s-slaps-more-duties-on-chinese-wooden-cabinets-and-vanities

    Antidumping duty rates of as much as 262% on Chinese companies

     

    Hmmmm…. doesn't feel like we are making progress with a China deal.


  45. 262% and they are still cheaper than what we can buy here!   

    Good morning!

     I apologize in advance for all the Trump news but holy crap, now they have text evidence.   




  46. The alarming employment trends that the jobs report won’t tell you


  47. Was WeWork Ever Going to Work?







  48. Trump’s Senate red wall