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Testy Tuesday – Looking for a Market Bounce

Wheeee – that was fun!

As you can see, we made great money on our Russell (/RTY) Futures shorts on the way down ($5,410) and, this morning, I sent our a special alert to our Members at 6:30 am, saying about the Dow (/YM) Futures:

We failed at 28,200 and back to 28,000 on /YM, which is playable for a bounce but super-tight stops below.  Lined up with 3,220 on /ES, 9,100 on /NQ and 1,630 on /RTY – I'd make sure 2 are over at least and get out if there are any failures at all (in other words, the others should cross over shortly, not fail).

We're hoping to catch a strong bounce up to the 28,280 line and that would be good for $1,400 per contract but once we're over $1,000 we should put a very tight stop on half our contracts and then stop out the rest at $750 to lock in average gains of $875.  If we do fail at the weak bounce line – look out below!  Once we're over the weak bounce line – that becomes our stop.

We can go bearish below our lines with the same rules we went bullish with – that's what's fun about the Futures – our stops had us risking very little to make what is already (8:07 am) over $600 per contract – not bad for 97 minutes work!  

So far, this market has bounced back from everything so today will be a good test to see if its still got its mojo.  Still, we set our stop here at $500 per contract ($1,000) as that's nice gains for a morning so it would be silly to lose those just because we're greedy, right?  We already failed our first attempt to take back 28,200 at 3am (the EU open, Asia close) so the selling pressure is likely coming from Europe and may ease off when they close at 11:30 – we'll keep an eye on that as the day progresses.

The WHO said China’s unprecedented lockdown may have averted hundreds of thousands of cases. The United Nations agency also said that Gilead Sciences Inc.’s experimental drug that is being tested for coronavirus may be the only one that will work (we went long on GILD three weeks ago), but that would still be months away from rolling out – so not much help for the market today – but it's nice to have hope, isn't it?

GILD Long Call 2022 21-JAN 55.00 CALL [GILD @ $72.90 $0.00] 15 2/5/2020 (696) $19,500 $13.00 $7.23 $13.00     $20.23 $0.00 $10,838 55.6% $30,338
GILD Short Call 2022 21-JAN 65.00 CALL [GILD @ $72.90 $0.00] -15 2/5/2020 (696) $-12,300 $8.20 $5.20     $13.40 $0.00 $-7,800 -63.4% $-20,100
GILD Short Put 2022 21-JAN 62.50 PUT [GILD @ $72.90 $0.00] -5 2/5/2020 (696) $-4,500 $9.00 $-1.45     $7.55 $0.00 $725 16.1% $-3,775

Warren Buffett, who holds hundreds of Billions of Dollars in stocks is busy telling people not to panic (as it would depress the price of his stocks).  He thinks the coronavirus won’t die off with warmer weather. “It is scary stuff — I don’t think it should affect what you do in stocks. In terms of the human race, it is scary,” he said.  There may not be any people left – but at least his portfolio will be intact!  

Hopefully Buffett is wrong.  The virus is like the flu and the flu tends to die out in warmer weather but that, like GILD's proposed treatement, is still a few months away.  Meanwhile, China’s Central Bank said it will place more emphasis on keeping monetary policy flexible as it steps up support to the real economy, according to a statement on its website. The People’s Bank of China said also it will consider new measures at the proper time to counter the impact from the coronavirus outbreak.  More free money usually perks up the market – we'll see how that goes today.

 


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  1. Now we are staring to hear companies talking about the impact of the virus on their results. There might be temptation to kitchen sink a lot of crap now as we have the perfect smoke screen!


  2. Great medical advice from our medal of Freedom winner:

    If the common cold killed 2% of everybody who got infected, the human race would be extinct already! I hope that we don't get hit in the US because Trump and his followers believe stuff that comes out of this guy's mouth! We also now have televangelist Jim Baker selling coronavirus cures… We need help.


  3. Good Morning!


  4. NLS: Gapping up 17% after beating earnings estimates & receiving a broker upgrade (Lake Street raises to Buy with $6 price tgt).   Sold another 1/3 in pre-market.

    NIO

    Stock gapping up 36% to $5.29 on news it is working with Hefei municipal government on expansion agreement that appears to include financial support.


  5. Good morning!

    Been a long time since we saw a move like that on the Big Chart.  So much for the 50 dmas.  Nasdaq is still holding on at 9,050 so that's our LINE OF DOOM!!! and, hopefully, they don't fall under or everyone is likely to test those red 200 dmas that are about another 5% down from here.

    Good point on smoke screens StJ.

    Common cold/StJ – 3% of the people infected in Italy are already dead (6/200).  If that were the common cold it would kill millions each year in the US.  This is how idiots like Limbaugh are actually very dangerous people – he is why there are anti-vaxers (including our President!) and telling his listeners not to listen to the Government when they warn you of something because it's some kind of conspiracy puts people's lives at risk as well.  China contained the virus (to some extent) due to swift action and almost total obedience to the guidelines they set – if people like Limbaugh sow dissent and have people ignore best practices – this thing could get out of control very quickly.

    Remember when I said at least you could still read "Tokyo" – that's almost gone and now we lost Hong Kong, Bangkok and Singapore seems to be next.

    And China, by the way, is "under control".


  6. Wow, I didn't even see South Korea buried under all that red!  That was totally clear when there was just a small dot in Tokyo…  

    2016. 


  7. Oops, stopped out of the longs already – /NG did better than /YM – that's not a good sign!


  8. Limbaugh / Phil – And remember, these are the same people advocating cutting government programs to help pay for tax cuts! 

    Image


  9. Is Technology Subsuming Marketing?


  10. Ten Trends That Will Shape Science in the Decade Ahead



  11. Is it to late to trade SQQ. If not what would be a good trade to get in.


  12. New cases outside of China graph

    Is China back to work yet?


  13. Sorry I was asking about trading  SQQQ and not SQQ. 


  14. WHR now down to 139.80 Is it time to act?


  15. StJ- What strike & exp. month are you trading your VXX shorts calls?  Thanks!


  16. VXX / Mike – I have been selling Jan 21 30 calls. Yesterday I also sold some Jan 22 30 calls as well because they were over $4!

    Match that with buying VIX calls for protection as outlined by Palotay!


  17. I am usually trying to get at least $2.50 per contract is possible although would take less depending on context. You can sell the Jan 21 35 calls for like $2.20 and that gives you more room to breathe.


  18. Gonna be testing the Must Hold lines soon! On the NYSE, it's also the 200 DMA! 


  19. Working on filling the short sides of some UNH downside put spreads today – in case Bernie wins. 


  20. Ouch and down we go again! 

    Well, I have to get back to the conference but the 5% Rule goes both ways so 28,000 is the line we should use and 1.05 x 28,000 makes 29,400 on the button (there are no coincidences, only the 5% Rule) so that makes the bounce lines 280 points up or down from there so 27,720 is a strong retrace, 27,440 is the strong retrace, 27,160 is the strong bounce off the -10% line (and the 200 dma) and 26,880 is the weak bounce off the -10% line, which must be 26,600.  

    Since the 200 dma lines up (about) with the strong bounce line of a 10% drop – we need to take that area 27,223-27,160 very seriously.  It would be very bad to lose that.

    China/BDC – They are trying to get essential industries back to work and testing the hell out of every worker – we'll see how it goes.

    WHR/Yodi – Like the indexes, still a falling knife at the moment.

    /NQ 9,000 and /RTY 1,600 – those better be bouncy!   Lined up with 3,180 and 27,600 can be played bullish but VERY tight stops below and above!

    SQQQ/Rookie – A bit chasey now but you can still play a smart spread. 

    In the Earnings Portfolio:

    SQQQ Short Put 2020 19-JUN 22.00 PUT [SQQQ @ $19.89 $0.48] -15 1/17/2020 (115) $-6,450 $4.30 $0.50 $-0.29     $4.80 $-0.22 $-750 -11.6% $-7,200
    SQQQ Short Call 2021 15-JAN 30.00 CALL [SQQQ @ $19.89 $0.48] -30 1/24/2020 (325) $-7,650 $2.55 $0.58     $3.13 $0.02 $-1,725 -22.5% $-9,375
    SQQQ Long Call 2021 15-JAN 15.00 CALL [SQQQ @ $19.89 $0.48] 30 2/10/2020 (325) $12,750 $4.25 $2.35     $6.60 $0.60 $7,050 55.3% $19,800

    This one is fine and it's a $45,000 spread at net $3,225 so tons of upside potential. 

    In the STP (which is now up 15.8% – you're welcome!):

    SQQQ Short Put 2021 15-JAN 20.00 PUT [SQQQ @ $19.89 $0.48] -15 1/17/2020 (325) $-6,900 $4.60 $0.60 $-3.47     $5.20 $-0.20 $-900 -13.0% $-7,800
    SQQQ Long Call 2021 15-JAN 15.00 CALL [SQQQ @ $19.89 $0.48] 60 2/10/2020 (325) $25,500 $4.25 $2.35     $6.60 $0.60 $14,100 55.3% $39,600

    We bought back the short June $20 calls for $1 last week and we can sell 20 of the June $26 calls for $2 to make up that money.  I don't want to over-cover but it would take a 10% drop in /NQ to hit that mark on SQQQ so I'd rather have the money from the 1/3 cover.  

    Very pleased with TSLA comeback in the STP:

    TSLA Short Put 2021 15-JAN 550.00 PUT [TSLA @ $796.68 $-37.11] -5 1/30/2020 (325) $-32,000 $64.00 $-3.20 $15.45     $60.80 $5.80 $1,600 5.0% $-30,400
    TSLA Short Call 2020 18-SEP 900.00 CALL [TSLA @ $796.68 $-37.11] -6 2/4/2020 (206) $-115,500 $192.50 $-68.28     $124.23 $-27.60 $40,965 35.5% $-74,535

    As I said, I'm more worried about $550 than I was about $900.

    CMG on track again (and we bought back the short Jan puts with a nice profit last week and we can already almost sell them again for their original $95):

    CMG Long Put 2021 15-JAN 920.00 PUT [CMG @ $872.97 $-12.03] 2 12/6/2019 (325) $30,000 $150.00 $-31.85 $101.00     $118.15 - $-6,370 -21.2% $23,630
    CMG Short Call 2020 06-MAR 900.00 CALL [CMG @ $872.97 $-12.03] -2 12/6/2019 (10) $-4,400 $22.00 $-12.15     $9.85 $-4.95 $2,430 55.2% $-1,970
    CMG Short Put 2020 20-MAR 750.00 PUT [CMG @ $872.97 $-12.03] -2 12/10/2019 (24) $-4,400 $22.00 $-18.25     $3.75 $0.95 $3,650 83.0% $-750

  21. Phil/FAS,

    I have a 95/85 April BPS at $2.8 cost. Currently they are around 4.28. What can be done at this stage? Just wait for the spread to play out. or can this we changed to more profitable without missing on further down movement in FAS. how about move the short April 85 to March 90 for about even so that it gets expired before the long side.

    regards


  22. Phil/FAS,

    I have 10 of those spreads.

    regards


  23. StJ / VXX – Much appreciated!


  24. SKT just getting scorched.


  25. Phil / XOM – Now trading with about a 6% dividend and lowest price in over a decade.  RSI at about 11 so about as oversold as it can get. Dividend should keep this from dropping much more I would think. Any recommendation on a play here?


  26. Pompeo blasts China, Iran for response to virus outbreak


  27. New Delhi Streets Turn Into Battleground During Trump’s Visit



  28. Phil/ET

    close to 52 week low and dividend yield is 10.56%. it is a energy transfer company so should not have a big impact with low energy prices. What is your advice?

    regards


  29. NYSE and Dow just erased the last 4 months of gains! Back to reality it seems. We are going to hear now that fundamentals are important.


  30. pat_swap    For what its worth…ET's CEO Kelsey Warren sure believes in the company.  He just bought $45M worth of stock. 


  31. Finished legging into Bernie insurance… 2021 UNH 155/135 spreads, .50 each. Accommodating market. 


  32. thanks stockbern. good to know.

    regards


  33. other recent insider buying in :

    PGAP, VIAC, SMPL, LYFT, TEX, VSAT BG, MS 


  34. Phil, is a question;  why no don´t play the downside? in theory, looks attractive to operate shorts or have put spreads 


  35. oops, PAGP


  36. StJ - all must hold lines have failed. Naz 8991 is the closest



  37. Real IDs, explained


  38. Looks like another 2% down day! Another 50 like this and we'll have some good entry prices :-)


  39. Must Hold / BDC – Yeah, but there is not much support anywhere right now. That's the problem with these parabolic moves!


  40. We are so screwed if we depend on these people to manage the crisis:

    The guys is incapable to realize how stupid his answer is! 


  41. Spot VIX closing on 30 now! If it weren't for the falling machetes, would be fun to sell some put premium. But what you buy today could be 10% off by end of week!


  42. An A player will attract and hire a and b Players.  A 'B' player will attract and hire C / D players…

    Trump would be a stretch to be a C player – so he can only attract C/ D players at best ….. Hopefully people see the idiocy of this president and his staff during C virus and understand this is permeating throughout the Whitehouse staff.    This is scary – they are lying at every turn….  and or so ignorant they can't ask the right questions to understand issues and take logical / reasonable paths …..


  43. Holy crap, another 900-point drop!   What do you guys do when I'm not here?


  44. Phil / you can't leave anymore..


  45. Trump will be harping on the fed to lower rates ASAP.  That will give us a pop at some point


  46. Phil..yes you cannot leave …at least for the bottom 99%. you are the only hope….:-)


  47. So, where are we?  

    27,000!  That can't be good, can it?  We failed that 200 dma already, 26,600 is the next support and I'm sure we'll see that tested by tomorrow at this rate.  3,100 on /ES is our next potential support and 3,126 now.  8,800 on /NQ should be supportive and 1,565 was old support on /RTY but what a disaster this is!

    Or, as Trump says – "The best market in history…"

    I'm sure this is somehow Obama's fault.  blush


  48. FAS/Pat – Good all on the hedge but those ultras don't pay well unless you get the timing right as the out of money position tends to pick up too much premium.  If it's REALLY a hedge, offsetting losses on financial stocks you own, then I wouldn't mess around with it.   The April $95 puts are $12.20 and the $85 puts are 7 and at the money so really $5.20 net.  You could take the $12.20 off the table and take a chance on rolling the $85 puts but FAS fell $10 today so tomorrow we could be at $75 and $65 the day after (shades of 2008, when everything was fine until it wasn't).  I do like your April to March idea as you lock in the gain and only risk having $5 instead of $10 if FAS drops hard but flat or up you do a lot better so – great idea.  And, don't forget, you can do 1/2 and see how that goes. 

    SKT/Palotay – Wow!  And consumers are holding up pretty well for now.

    XOM/Stu – A little falling knife today but sure I like them down here.  We can sell 10 XOM 2022 $50 puts for $6.40 ($6,400) in the LTP and see how that goes before committing to a bull call spread we'll probably sell shorter-term calls against (when and if they get back to $70) but net $43.60 is a good start!

    See it's good to get the puts first because the LEAP spreads don't change all that much.  The 2022 $50 ($7.40)/$60 ($3.20) bull call spread is $4.20 on the $10 spread and we could do 20 of those for $8,400 against the $6,400 put sale and that's net $2,000 on the $20,000 spread.  As long as we do the spread under net $5 ($10,000 – $6,400 = $3,600) it's still a fantastic return so no need to take a great risk by pulling the trigger too early.  

    ET/Pat – Lots of attractive things down here but how many things do we want in the energy space?  The dividend is $1.22 and we can sell 20 ET 2022 $10 puts for $2.20 ($4,400) in the LTP so we get 2 years' of dividends up front and the only risk we are taking is getting assigned at net $7.80 ($15,600) – there's a good way to watch that one!  


  49. Phil/FAS,

    Thank you! and good to know that you liked my idea…feels good.

    btw I ended up getting out of 5 of those spreads since I was not sure what to do and as a rule sell half when in doubt. I will try to do the april to march if FAS keeps going down.

    regards


  50. Phil – isn't SKT at risk because of all the closures of Macy's JC Penny etc

    Isn't there a worry that if these type of stores keep closing the renters will dry up??


  51. Bernie Insurance/Ati – People were freaking out about UNH when Obama came into office too – we bought them like crazy and did very well at the time.  

    Playing the downside/Advill – That's been a terrible bet for a decade and, other than the virus, things are pretty good.  We're just getting rid of some excess, I think and the virus is a good excuse.  Only thing I'm really worried about is China collapsing as the virus is piled on top of their bad debts.  

    2%/StJ – Chat was wrong?  Who'd have thought?  Of course he's the "Acting Secretary" of DHS because Trump fired all the competent people and replaced them with toadies but most of them are either in jail of so incompetent they can't even get passed in Trump's own Senate!  

    Wolf is originally from Plano, Texas.[2] He graduated from Plano East Senior High School and then attended Collin College on a tennis scholarship.[3] Wolf then earned a B.S. in U.S. history from Southern Methodist University. Soon after graduation he drove from Texas to Washington, DC, and approached Congressional staffers for a job.[3] He worked in the U.S. Senate for Senators Phil GrammKay Bailey Hutchison, and then Chuck Hagel, for whom he worked for two and a half years.[3][4][5]

    In October 2005 he became Vice President and Senior Director at Wexler & Walker,[4][5] a prominent bipartisan lobbying firm,[6] a position he held for over 11 years.[2] He focused on homeland security and aviation security issues.[3] In 2013 he received a Master Certificate in Government Contract Management from Villanova University.[4]

    That's the guy in charge of keeping us from being attacked by terrorists.  

    The administration waited for Wolf's confirmation as Under Secretary before appointing him to the Acting Secretary role,[16] to avoid appointing him as a principal officer from a non-Senate-confirmed position, which many scholars and former government officials have argued is unconstitutional.[13][17][18] DHS then had to move the Under Secretary position earlier in the line of succession, because the 210-day period in which an acting official may be named without a pending permanent nomination had expired, mandating that the duties of the Secretary must be performed by the department's seniormost confirmed official.[16][19]

    And, of course, he has no medical background at all yet he's now in charge of preventing a viral epidemic from sweeping over the country.  But he got his masters 6 years ago – I'm sure they covered all that!  

    Players/Batman – Good point.

    Leave/Batman – Actually I was thinking of not coming back!    I was only 90 miles from Cuba – Bernie says it's nice (it is, I was there last year, actually) – I could have rented a boat and gone to a land of free medical care where the virus is much less likely to spread through an uninsured population.  

    Coronavirus can already be diagnosed in Cuba – OnCubaNews

    Cuba: Entry restrictions implemented amid the coronavirus

     

    Image result for bernie cuba cartoon

    Image result for bernie cuba cartoon

    You're welcome Pat – good instincts.

    SKT/Coulter – They don't have those kinds of stores.  They are more of an outdoor outlet mall but upscale.  

    Image result for tanger outlets

    Image result for tanger outlets

    Image result for tanger outlets

    That's actually their plan – NOT to rely on big box retailers to fill their outlets.  Unfortunately, they get indexes with the other mall REITs and get sold off as people dump out of the sector.  

    We're going to end up owning a lot of them!   SKT 2022 $13 puts can be sold for $3.50 to net in for $9.50 – that's a no-brainer if we didn't already have them. 


  52. Phil//  Any suggested trades on Airline stocks since they are being beaten down with the other sectors?

    Thanks.


  53. Yeah, I don't think UNH is going anywhere – people will still want private insurance even if public healthcare is ever an option here. I do expect it to sell off pretty heavily as Bernie continues to move ahead though but I'm usually wrong!

    Hey SPCE stayed strong on earnings. Sad I missed that one… I was offering $7.50 puts and they never filled, and never came close to it again.


  54. StJ – what is the math on the ratio of purchased VIX long contracts to sold VXX put contracts?


  55. StJ – also, why buy futures instead of just VXX long calls?