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Friday Failure as S&P 3,000 – What Next?

Well, you can't say we didn't see this coming.

On Feb 27th, I said to our Members in our Live Chat Room:

I think we'll languish around 2,850 (100 points lower) on /ES for a couple of weeks and things will either get worse or better on the global front but that's mid-March and then we're about to get Q1 earnings, which will suck so, if the virus isn't significantly better in 2 weeks, we could be heading into a real catastrophe.

We're right on track and no, it's not me that's great at making these calls, it's or Fabulous 5% Rule™, which also told us to ignore the bounce off the -7.5% line (which was a 10% drop with an overshoot) and the quick recovery to the 5% line meant we ignored the additional 2.5% spike down and watched for 2% bounces off the 3,000 line which would take us to 3,060 (weak) and 3,120 (strong) and then the rule is that we don't believe in the strong bounce unless we close over it and then hold it for 2 full sessions without going under.  

THAT is what keeps us out of trouble.  So we haven't added many new posiitons in this downturn but, yesterday, we did add to some of the positions we already have, taking advantage of cheap rolls and cheap double-downs on value plays we believe have gotten too cheap.  Not that they can't get cheaper – of course – but if we already doubled down we'll be happy to roll lower and if we only rolled lower, we'll be happy to doubled down – but not until we're a good 10% lower – which we don't think is very likely unless the virus gets much worse.  

Fortunately, our portfolios are full of fantastic value positions and, for example, our Money Talk Portfolio, is only down 4% after being up as much as 10% for the year but the positions are very solid.  We can't touch them unless we're on the show (next is April), so they are positions that are meant to be bullet-proof and this is a good test but also a great time for new Members to follow along so let's do a quick review.

  • Sunpower (SPWR) – We would love to own them for net $4.90!  Selling puts to initiate a position is a great way to put money in your pockets.  We are promising to buy 1,000 shares of SPWR for $8 between now and Jan 2022 and, for the right to make us do that (at their discretion) the put seller is PAYING US $3.10 per share or $3,100 up front.  If they assign us the stock (it would have to be below $8 for that to make sense), we end up owning it for net $4.90 or, if SPWR stays over $8, we get to keep the $3,100.  This is our favorite way to enter a position as we either end up owning the stock for a big discount (38% in this case) or we get FREE MONEY!!!  We expect this position to make the full $2,625 remaining.

  • Freeport McMorRan (FCX) - They make about 1/3 of their income from Gold and Molybdenum mining, which are doing great and 2/3 from Copper, which is in the doldrums but that's no reason not to own them for the long-run and this trade is currently losing and would be a net $1,210 credit to initiate now and we do expect it to pay $10,000 for a gain of $11,210 by Jan 2022 as things get back to normal.

  • Barrick Gold (GOLD) – Our Stock of the Year is doing well and we are on-track to make our full $12,000 on what is currently a net $5,145 position so $6,855 (133%) left to gain and all GOLD has to do is hold $17, which is $4 (19%) lower than it is now – how crazy is that?  Aren't options fantastic?!?


  • IBM (IBM) – Last year's Stock of the Year is still a good one though it took a big hit (better entry!) and it's still right in the middle of our range (we were conservative) at net $3,320 credit on the $16,000 spread so this position will make $19,320 at our $140 goal and we're very confident about that. 

  • IMAX (IMAX) – Back to the bottom of our range and I'm not sure we're going to fully recover by September – it depends how things play out into the rest of March but the box office is down almost 50% world-wide from last year and China, which is IMAX's biggest base, is effectively closed so they are going to have a very rough Q1 and Q2 so we're very likely to adjust this position in April to a lower, longer-term spread but, long-term, I still like them but we're not going to count on any profits from this spread, which is currently a net $3,350 loss.  

So, despite IMAX, our other 4 positions are likely to make $40,010 over the next 2 years and we still have a ton of cash to deploy on new positions and hopefully there will still be some bargains to be found in April, when I'm back on the show.  

At the moment, things are getting cheaper and cheaper and we're doubling down on Oil (/CL) at $43.50 to bring our average down to about $45 (down $5,000 on 4 contracts at the moment) and we can play the Nasdaq (/NQ) to bounce off 8,350 but tight stops below.  I'm not expecting a big recovery, just bounce this morning and we might finish the day very close to that 2,850 line.

As we discussed during Wednesday's Webinar, we now have over 100,000 infections (with an alarming jump of infections outside of China) and that's going to make for lots of headlines over the weekend so the panic will continue BUT we can also expect some big Government action over the weekend to calm the markets down next week.  Whether or not it will be effective remains to be seen.

Have a great weekend, 

- Phil


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  1. Looks like it might be time to start rolling these short VXX calls! We'll see where we open and how the day goes but the spot VIX is now close to 50! Thanks to Palotay, my long VIX calls will more than pay for the rolls it looks like. Might in fact have a cost free roll anyway. And might take the money from the VIX calls..

  2. Good Morning!

  3. I cashed out the vxx calls yesterday for good profits even though I had to roll the calls twice. Look to see if we have a bounce this am. Back into M again but now @ 10. Waiting to sell calls. Am going to venture into IMAX too long dated. Been waiting forever for this correction. Have a good and profitable day everyone and a safe one.

  4. Good morning! 

    Big Jobs Number but not much help so far.  Maybe because it pressures the Fed not to ease again?

    • February nonfarm payrolls+273K vs. +177K consensus and +273K previous (revised from +225K).
    • Unemployment rate: 3.5% vs. 3.6% consensus and 3.6% prior.
    • Average hourly earnings increased by 3.0% over the past 12 months; average workweek rose by 0.1 hour to 34.4 hours.
    • Change in total nonfarm payroll employment was revised up by 37K to 184K in December and by 49K to 273K in January.
    • Notable gains were in health care (+32K), and social assistance (+25K) increased the most; food services and drinking places added 53K last month and government employment increased by 45K, led by a gain in state government education (+16K).
    • Of course, it's too soon to gauge any effect from the coronavirus; that may start to show up in March's numbers.

    I think it's a good indication that our economy has had virtually no effect from the virus so far and, if it comes and goes in 6 weeks like China (assuming they are not lying), then long-term damage will be minimal.

    /NQ longs are working so far. 

    /CL huge disappointment so far but we knew it might get worse (just not this much worse). 

    • A Russian high-level source told Reuters on Friday that the country would not back an OPEC call for extra reductions in oil output, saying, the "position won't change."
    • OPEC ministers told Moscow on Thursday that if it doesn't join them in slashing crude output by another 1.5M barrels a day, then the cartel could abandon its reductions altogether.
    • It's a high-stakes move in a market already slammed by the coronavirus and triggered Saudi Aramco (ARMCO) to delay announcing its monthly crude pricing.
    • Crude futures -4.6% to $43.78/bbl.

    /NG back where we like them:

    /RB interesting at $1.45 too.

    VIX be crazy!

    Dollar down another 1% today

    • Exxon Mobil's (NYSE:XOM) investments in Guyana and the Permian Basin "are all robust even below $40/bbl," CEO Darren Woods tells CNBC.
    • "It's easy to get caught up in the short term, [but] we've seen these price swings before, we've been in this territory before, and that's why when we're making investments, we make sure they're robust to those down cycles," Woods says.
    • "Oil tends to move over time between $50 and $70," the CEO notes. "It will drop down for periods but it doesn't last very long down there."
    • But XOM -3.9% pre-market as Russia rejects OPEC's proposed steeper production cut, sending WTI -4.9% to $43.61/bbl and Brent -4.6% to $47.66/bbl
    • Nomura Instinet says all things aren't equal in the beat-up cruise line sector.
    • "RCL and NCLH have taken more active steps to protect their guests, while CCL has been slower to react. For example, RCL and NCLH have pulled all ships out of Asia. CCL maintains that its health and safety protocols are in line with CDC and WHO. However, when the industry is threatened with such an infectious disease, customers should expect precautions in excess of the industry standard, which we believe NCLH and RCL are implementing," reports analyst Harry Curtis in an important distinction.
    • Curtis notes that CCL was quick to blame the Japanese government for procedural failures around the Diamond Princess quarantine. While Curtis thinks CCL may be partially accurate with that contention, he also states that CCL could have taken more aggressive steps to protect the welfare of its guests. Looking ahead, he has ongoing concerns industry leader CCL will not be as forward-thinking as it should be.
    • Carnival is rated Neutral by Nomura, while NCLH and RCL are still tagged at Buy.
    • Premarket action: Carnival (NYSE:CCL-2.30%, Royal Caribbean (NYSE:RCL-5.14%, Norwegian Cruise Line Holdings (NYSE:NCLH-4.65%.
    • YTD scorecard: CCL -45%, RCL -51%, NCLH -50%.
    • Cowen forecasts Starbucks (NASDAQ:SBUX) will see an improvement in same-store sales in China to -33% Y/Y in March from the -78% recorded in February (which was highly anticipated).
    • The path ahead for Starbucks in China is expected to get better with 95% of store due to open at the end of FQ2, although challenges remain.
    • "Encouragingly, stores have gradually reopened, with less than 10% of stores currently closed, and anticipation for only 5% of stores to be temporarily closed at the end of 2Q. Starbucks noted the majority of locations are operating on reduced hours and with elevated safety protocols inside of stores, that has led to a concentrated amount of sales placed digitally. Indeed, in the last week of February, 80% of sales were derived digitally, including 50% through mobile order and 30% for delivery, to limit customers' time spent in stores," notes Andrew Charles.
    • Charles and team now see 2020 EPS from Market Perform-rated Starbucks of $2.90 vs. $3.05 prior and $2.91 consensus.
    • Shares of SBUX are down 2.81% premarket to $74.05 vs. the 52-week trading range of $69.03 to $99.72.
    • William Blair hikes Chipotle (NYSE:CMG) to an Outperform rating from Market Perform on its view the chain is still seeing strong traffic amid the coronavirus outbreak.
    • The firm also points to the more "palatable" valuation following the sharp drop in share price over the last four weeks and predicts that Chipotle will display restaurant-level margin in Q1 that is the highest in five years.
    • Shares of CMG are down 2.26% premarket to $711.13 vs. the 52-week trading range of $604.64 to $940.28.
    • India's central bank says it will be in charge of Yes Bank (OTC:YYBKY) for 30 days due to "serious deterioration" in the private lender's financial position.
    • Yes Bank shares plunged 56% in Bombay trading, and the S&P BSE Sensex Index dropped 2.3%.
    • During that period withdrawals will be limited to 50,000 rupees ($680) and Yes Bank's lending and investment activities will be curbed.
    • It's unclear how clients and counterparties will handle those restrictions. Bloomberg reports that a Walmart (NYSE:WMT)-backed Indian payments service that relies on Yes Bank to process more than 175M users went down late Thursday.
    • During that time, the Reserve Bank of India may "frame a scheme of reconstruction of amalgamation" of the company if it's considered "necessary in public interest or in the interest of the depositors or to secure the management of the banking company."
    • Barrick Gold (NYSE:GOLD) says supplies to its mines have not been affected by the coronavirus, and placed and forecast orders remain unchanged, but it will increase its inventory of key commodities to above their normal level.
    • CEO Mark Bristow says the company is drawing on its experience from during the Ebola 2014 outbreak, as its operations are located near areas in Africa that were affected by the deadly pandemic.
    • Bristow says Barrick has increased its emergency medical procedures and facilities in place and is screening employees, contractors and visitors at each site, and has not yet deemed it necessary to restrict travel.
    • GOLD +1.8% pre-market.
    • Deutsche Bank cuts its Apple (NASDAQ:AAPL) target from $305 to $295, citing the "considerable uncertainty" surrounding the coronavirus outbreak.
    • The firm lowers its March quarter estimate due to Foxconn's "incremental production-related disclosures" this week.
    • Deutsche notes that the valuation has become more attractive since the virus-related selloff, but the stock is still trading at a premium to the S&P 500 and tailwinds like AirPods demand and Services don't justify the difference.
    • Deutsche maintains a Hold rating on Apple. The company has a Bullish average Sell Side rating.
    • Apple shares are down 3% pre-market to $283.71.

  5. Phil// You had mentioned about rolling the long calls on TD.  How about the july $55.00 puts we sold?  Do we need to roll them out?


  6. This looks more and more like a confidence crisis! Idiotic statements made every day from the White House don't help calm down people. Carnival barkers don't make good grief counselors!

  7. Phil/TLT



  8. CNQ and XOM – As much as XOM looks like a deal CNQ looks like really good value.  IB says P/E of  6.9 and Yahoo 10.2 so maybe not reflecting earnings yesterday.  XOM is at 15.3 P/E. $27.8B market value and NPV of proven reserves is about $80B  ($107.6B Cdn) and proven and probable about $95B.  Increased dividend 12% in 2019 and 13% div increase in April 2020.  20 years of increasing dividends.  Debt/EBITDA of 1.9X.  Improving pipeline picture in coming year/s, more savings from Devon Energy asset integration.  Looks good to me but options not as liquid in this name so fairly wide spreads. 

  9. Phil / AVGO – I know you just entered a play yesterday – is the BCS '22 270 / 320 a better play? or would you stick to the 280 / 320 from yesterday?

  10. NGL -Added more at 6.53

  11. Phil,


    Don't you think this TLT at 167+ is a bit over the top? Even if some anticipation of a joint governments support package?

  12. Saudi-Russian Deadlock Pushes Oil Sharply Lower

  13. The Fed’s emergency rate cut was a big mistake

  14. They really shouldn't let Kudlow speak – the market went lower and lower while he tried to reassure people.

    TD/Rookie – In the LTP, we did this yesterday:

    TD – Let's roll the 15 July $52.50 calls at $1 to 25 Oct $45 calls at $5.50 ($13,750) and see how things play out.  

    We didn't move the puts but the July $55 puts are $6.50 and so are the Oct $52.50 puts so that's a free roll or you could roll 10 Julys ($6,500) to 14 of the Oct $50 puts at $4.50 ($6,300) to drop the strike 10% to a very reasonable target.

    White House/StJ – They are all so unwilling to admit they were wrong they spend half their time covering up past statements.

    TLT/Pat – This too shall pass.  With CMG and TSLA we would have made more money ignoring the idiocy.  TLT certainly isn't hurting us enough to get us to capitulate but HOLY CRAP!

    I'm surprised AMZN is this low, I think they will be huge winners this Q.

    Check out MSG – Events getting cancelled.

    I think anyone who owns sports teams is vulnerable.

    That's the Atlanta Braves.

    CNQ/Stu – That's certainly a good one value-wise but you can drive a truck through the 2022 spreads, unfortunately.  The 2021s are tighter so I'd use those and add about 50% to guess the right price for the 2022s in which case, my play would be:

    • Sell 5 CNQ 2022 $20 puts for $3.40 ($1,700) 
    • Buy 10 CNQ 2022 $15 calls for $9 ($9,000) 
    • Sell 10 CNQ 2022 $25 calls for $3.80 ($3,800)

    That would be net $3,500 on the $10,000 spread but I'm not feeling in a hurry to get in with oil in free-fall.

    AVGO/Batman – I like the $280/320 as I'm always happy to spend money to roll lower if it falls but why spend it in advance?  It's a nice return as is.  In a more certain market, I'd go wider but too much craziness at the moment.

    TLT/Horace – Way over the top, a bit of a short squeeze I imagine.  Now we're pricing in 0%.

    Upside Whee!

    Makes up for /CL:

    Of course we can cash /NQ (tight stops at $10,000) and ride out /CL and hopefully both win.  I'm adding 2 more /CL at $42.50(ish).

    Also got great entries on those portfolio adjustments too!

  15. Phil;

    ALK looks good for entry, better than DAL or RCL…

  16. Holy crap, Nas up another 100! 

    ALK/Advill – And they were my favorite last year but all 3 are worth picking up (not today!).

  17. Be careful STJ. The double down and roll up makes me very nervous. Right now the /vx is only at 38, with the spot VIX at 48.  Over the next 12 days, if the VIX stays at 48, the /vx will rise from 38 to 48, adding another 20-25% to VXX.  It will be worse if the vix is higher than 48. Over the next couple weeks, it is likely going to be discovered that the virus has been spreading undetected (some may say intentionally undetected) in the US as more people are finally tested, then businesses will start closing, etc.  What is that going to do to the market?  

  18. Taking 8,600 and running on 2 (of 4) /NQ and stop on the other 2 will be 50-point trailing. 

  19. Oops, Nas Futures not as high as index TV, maybe 50 points behind – same strategy though.

  20. Palotay – I have not doubled down! I am being super careful – I rolled for time straight up! 

  21. OXy – Looking undervalued.  Down 35% in just a few weeks. Yielding 11.4%.

  22. Palotay – Also, margin requirements are expending much, much faster than the actual loss! I am looking at a 3% hit on my portfolio with a market down 15%! I can reset all my position and free up that margin quickly!

  23. IWM is up so we could run into the close.

  24. /CL – OPEC and the Russians are in talks right now. Russia is saying no and OPEC is saying if not then they might just start pumping like mad and try to break the backs of the shale producers again. If that comes to pass we're going to be hating our oil longs. 

  25. Phil / AVGO Thanks I picked up the 15X 280 ( 38.8) / 320 (24.4) and sold 3 for the '22 270 Putters for (60) – we'll see how it goes

  26. I had AAL UAL ALK and CCL Jan puts that I closed out yesterday. The idea was to buy them back today after the stock prices rebound.

    Well, the stock prices rebound like I wanted, and…. the puts are higher! Crazy times. UAL Jan 40 puts are 7.

    One of my best positions percentage wise has been BND March 87 calls I picked up for 10 cents on a whim. This bond run has been nuts.

  27. CNBC talking about Bloomberg could have given every American over $1M for what he has spent on the campaign.  So lets extrapolate and have every American multi-billionaire do the same so every American is a multi millionaire.  All the jobs people do because they have no choice get abandoned, nothing gets produced, prices skyrocket, inflation goes to 10,000% or more, only the ultra rich can get anything, martial law declared, Trump makes himself king?

  28. Phil/Testing Kit Stocks,

    Any stocks you think would benefit from the testing kits they develop and the demand for it.


  29. Tangled-thanks my laugh for the day!!! Thinking of a very short term Fri-Mon but do not trust this market! Summer USO maybe? And if I should get out of Fla early b4 they shutdown all the airlines!! We have two healthcare facilities shut down because of a positive covid-19 who went all over to get help. Sarasota Co. I'm in the pool every day in clorene so hoping it kills the  virus if it is around!

  30. chlorine ie bleach.

  31. At what point do we sell AAPL OTM puts just because…  well it's AAPL

  32. Tesla still at $688, and most likely going to report sales/Revenue down 50%++ QOQ.  They should be warning about their quarter, but they aren't going to, because Musk's options vest in March if the stock stays high like this.    

  33. Bloomberg/1m  Would that not be over $1 dollar for every American?  (331M)

  34. IWM turned down right when I said it was up. Bad market day. What's the weekend play? Up Monday or black monday? Any takers? The VIX bolting up to 50 = lot's of volatility priced in. 

  35. SVXY @ 42. Calls way to expensive but maybe long stock outright?

  36. Phil, Yodi, or anyone else;

    Anyone looking to sell WHR  2022 $90 or $100 PUTS? Some nice premiums can be banked! Phil, of  course your input most appreciated. Thanks as always…..

  37. Well my /NQ profits (off the table) and my /CL losses (in progress) are neck and neck so far.  Adding 2 more longs at $42 will bring me to $43(is) in the set so that's the logical move though 8 long is scary.

    OPEC meeting broke up with no deal so total chaos but I think it will subside.  Saudis threatened Russia they would flood the market if Russia didn't agree to cutbacks – it's like negotiating with toddlers…

    And what Dawg said! 

    AVGO/Batman – Hard to imagine they won't have a good year overall with 5G rolling out.

    Broadcom, unlike Qualcomm, doesn't sell mobile applications processors or even standalone cellular modems. It does, however, sell a wide variety of chips that are key to enabling wireless capabilities in smartphones, including Wi-Fi, Bluetooth, and cellular. Like Qualcomm, it stands to benefit from the transition to 5G.

    On Broadcom's Sept. 6 earnings call, CEO Hock Tan cited the industrywide shift to 5G as something that will push its key customers — including Apple (NASDAQ:AAPL), which makes up north of 60% of Broadcom's overall wireless revenue -- to keep buying its more advanced cellular chips. Those chips tend to cost more, boosting the amount of revenue the chip giant generates from each iPhone sold. 

    Also worth noting is that the shift to 5G isn't likely to be a one-time thing for the industry. Just as 4G LTE has become more complex over time — something Broadcom has profited handsomely from — the 5G standard is set to evolve, too. As long as Apple continues to endow its iPhones with increasingly capable cellular subsystems as 5G evolves, something it's likely to do to keep up with the competition, Broadcom's wireless business should continue to prosper.

    Puts/BDC – Yeah, the VIX is going crazy, driving everything higher.  Good time to sell premium – as long as you can stand short-term pain if the VIX hits 50.

    Every American/Tangled – That would be $300Tn so, no, he could not have done that.  Who do we thank for that math?   Only Jeff Bezos can do that….  cheeky

    Image result for jeff bezos pile of money cartoon

    Test kits/Pat – I'm not sure who's making the test kits.  MRNA is working of a vaccine, as is GILD but both already moving fast:

    CODX seems to be involved in the kits

    Shut-downs/Pirate – And this is how we're handing a few hundred US cases.  Imagine what will happen when there's over 10,000…

    AAPL/Tangled – To me it's a reverse triage.  Airlines, hotels, retailers down 40% are more exciting than AAPL down 10% at the moment.  

    Weekend/BDC – I think massive, coordinated stimulus announced Sunday night.

    WHR/Jasu – I love them long-term but you don't want to over-commit when we're in this super-early stage of the global spread:

    Those "other" cases were 6,800 last Friday, now over 20,000 so, unless that thing suddenly flattens out when Trump comes up with a cure in his bathroom lab, we're looking at 40,000 next Friday and possibly worse as we have so many vectors to deal with (plus more testing will reveal more infections). 

    240 US

    That's what people are freaking out about today!  

    6,593 South Korea

    4,747 Iran

    3,858 Italy

    578 Germany

    577 France

    381 Japan

    360 Spain

    214 Switzerland

    163 UK

    130 Singapore

    128 Netherlands

    109 Belgium

    108 Norway

    106 Hong Kong

    101 Sweden

  38. 300T , yeah I get it.  But while I was watching people seemed to be buying it.  Seems like somebody on a show about money should be able to do math.

  39. jasu1 WHR

    As Phil said already I think we are still not at any Bottom, wait and see.

  40. I buy stock, which I think are low enough but it is still cheaper tomorrow. Only one thing I bought yesterday was VLO and it is up today! Miracles happen

  41. Not a political comment, but the US is actually well-positioned to take a leadership role to coordinate efforts with its resources, scientific knowhow and still a time window. With the right leadership, they can still mobilize resources and focus to scale up strategies and "things" needed to handle the crisis. And help the rest of the world. 

    Now it's like either one of two movies at play, a zombie apocalypse or a "day after tomorrow". We should really unite mankind against the challenges we all face.    

  42. Again, if we can believe the China number, Hong Kong has done a fantastic job of controlling the outbreak – so it is possible.

    Trump only asked for $2.3Bn and Congress gave him $8.3Bn which confused him because he thought Dems would only give him less if he asked for it.  At least there are still some mature adults left in the room.

    That's still only $25 per citizen for prevention and treatment so don't spend it all in one place…

    Image result for coronavirus cartoon

    And Trump cancelled a trip to the CDC because they were testing one of the employees for the virus (he's clear).

    Image result for coronavirus cartoonImage result for coronavirus cartoon


    Image result for coronavirus cartoon

    "With the right leadership"/Mito – Well that ship has sailed…

  43. Pence and Inslee (WA Gov) were manning up with bipartisan politician speak on the local news last night, so that is good to see. Meanwhile, Trump's still going on about "sanctuary cities." That's tone deaf hopped up on Rush's oxy pills. There's nothing like a non-discriminatory virus to make everyone feel equal all of a sudden. Well, it is somewhat discriminatory: it kills octogenarians with 10-15% efficiency and septuagenarians are not too far behind. The average age of Congress and certain members of the executive branch being what they are, I bet a lot of folks are starting to feel the inevitability of Real Equality all of a sudden.

    I think the infantile name-calling and brash arrogance routine has run its course.

  44. The Bug/mito – couldn't agree less. just hope the rest of the world is willing to help the US.

  45. Help/all – little-known fact – the Korean version of the Peace Corps, KOICA, has rapid response disaster teams. They were in Haiti after that disaster, and in New Orleans after Katrina.

  46. Snow,

    Are you saying maybe KOICA will come save us from Covid-19?

  47. lol, danos!

  48. Seems like the airlines could be hedging their fuel purchases now for some good savings when travel picks up again?

  49. Massive stimulus weekend (tax cuts + another surprise rate cut + a "timely" favorable announcement about vaccine/cure) = run up Monday. Else, black monday.

  50. Tangle / fuel


    Yes , I think the rebound will be very strong because they will combine a lot of passengers with cheap fuel, but they need a good cash account in hand now.

  51. Phil / CSCO – one the roll down from to the '22 $35 Calls – are they are uncovered now, are you looking to sell some. 50 callers or 45 callers on a pop?

  52. First U.S. Colleges Close Classrooms as Virus Spreads. More Could Follow.

  53. /NQ – anyone think 8350 is still good for a bounce?

  54. My long-held F stock is down 30% in the past couple of weeks but I'm not losing money yet – the hedges are helping but the dumb lotto ticket FB puts that I purchased a month ago are up 1400%!  FB P/E still at 28…

  55. Phil, we're back at the lows of next week, presumably if this doesn't hold then /ES is a ski slope?

  56. Albo, you were playing WLL at a higher price, like it more down here or it's toast?

  57. TSLA/Advill – They may be in a World of their own with people waiting for deliveries but it's got to hurt somewhat.  Not even sure they can deliver in parts of China. 

    Airlines/Tangled – I'd be buying 3 years out at these prices.  

    CSCO/Batman – We bought back the short callers and either the floor holds at $38 or we'll be selling $35 calls to some other sucker and rolling $10-15 lower on our longs.  Buying back the short calls is sort of stage one on a roll we'll have to do anyway if things get worse.  And yes, of course we WANT to cover, probably around $45 we'd sell half.

    /NQ/Dawg – Super weak now, I wouldn't bet on a bounce.  Just as likely we get hit by a selling wave into the close as things not that likely to improve over the weekend – only the hope of stimulus but that didn't work out too well when the Fed tried it this week, did it?

    Good hedging Ati.

    Oil $41 – amazing!  

    Saudis just got $150Bn from Aramco and their entire GDP is only $700Bn so I'm sure they think they can weather the storm better than Russia but you can't back Putin into a corner so this will be an interesting face-off. 

    • Energy sector stocks (XLE -5.6%) plunge after Russia shot down OPEC's plan to cut production by an additional 1.5M bbl/day in the wake of the coronavirus.
    • Crude oil futures crash as much as 9%, with April WTI recently -8.4% to $42.04/bbl after hitting its lowest level since August 2016 and May Brent -8.3% to $45.82/bbl for its weakest since at least June 2017.
    • "Russia's refusal to support emergency supply cuts would effectively and fatally undermine OPEC+'s ability to play the role of oil price stabilizing swing producer," says Rapidan Energy's Bob McNally. "It will gravely rupture the budding Russian-Saudi financial and political rapprochement. The result will be higher oil price volatility and geopolitical volatility."
    • Existing production cuts will remain in place until the end of March as planned, but it is not known if they will extend beyond this month.
    • The five biggest losers on the S&P 500 are all oil and has names: FANG -13.2%DVN -12.9%HP -12.7%OXY -12.3%NOV -11.4%.
    • Among the Big Oil names: XOM -4.4%CVX -3.1%BP -4.5%RDS.A -3.8%.
    • Midcap names are punished: OAS -25.7%SM -23.3%CPE -19.7%CLR -12.4%EOG -10.2%.

    • Natural gas producers including Cabot Oil & Gas (COG +8.6%), Southwestern Energy (SWN +5.2%), Antero Resources (AR +3.3%) and EQT Corp. (EQT +1.7%enjoy strong gains on speculation that plunging crude prices will force oil explorers in the Permian Basin to pull back and ease the current massive glut.
    • Gas producers still face obstacles to recovery, however, as prices are trading near four-year lows as output from shale basins continues to climb although at a slower pace, and the coronavirus has hurt global gas demand.
    • Not all gas-focused shares are gaining: CHK -11.3%, GPOR -10.9%, CRK -1.3%, RRC -0.2%.
    • Nymex April gas -3% to $1.718/MMBtu
    • Evercore ISI's Umer Raffat says that preliminary data from China-based study of Gilead Sciences' (GILD +3.4%) remdesivir for the potential treatment of COVID-19 could be available this month, ahead of the expected release in April. The study began in early February at Wuhan's Jinyintan Hospital, in the epicenter of the outbreak.
    • Health experts believe that the antiviral will show sufficient efficacy to warrant widespread deployment in an effort to corral the outbreak. A little over a month ago, the first confirmed case in the U.S., a man in Seattle, responded well to treatment. All symptoms, except his cough, resolved within a week.
    • Remdesivir (GS-5734), a nucleotide prodrug that blocks a key enzyme needed for viral replication, is also being developed for Ebola virus infection.
    • An until-now quiet Rajeev Misra, head of SoftBank's (SFTBY -4.6%) massive Vision Fund, is firing back against criticism in a CNBC interview - saying the fund shouldn't be judged by prominent mistakes such as the WeWork debacle, but rather by the success of upcoming IPOs.
    • Slip-ups at the fund became prominent news over the past six months (alongside some critical coverage of Misra as well).
    • “We’ve made many mistakes, which is normal,” Misra says. “We learn from our mistakes and are incorporating what we learn back into our process as we embark on Vision Fund 2.”
    • Of more than 90 companies in Vision Fund's portfolio, Misra says there will be dozens of IPOs in coming months: "I guarantee you will see the outcome of our investments will change."
    • That, even against looming economic threats from coronavirus, particularly in Asia where many Vision Fund investments are concentrated. “Overall, am I concerned about the business impact in China? Yes, definitely. I’m worried about what coronavirus will mean for our Chinese investments.”
    • But “Our fund life is 14 years,” he says. “When you invest in a company, you live with them for six to eight years on average. When you invest in midstage companies, the life cycle is such that the mistakes come out first … The successes will take a couple of years more."
    • Boeing's (BA -0.5%) 737 MAX was hurt by technical problems, a lack of transparency and other issues, according to preliminary findings of a House investigation released today.
    • The report from the House Committee on Transportation and Infrastructure says the Federal Aviation Administration's review of the planes was "grossly insufficient" and that the agency "failed in its duty" to find safety problems.
    • The panel has been probing how Boeing developed the planes and how regulators approved them three years ago.
    • Here's what economists are saying about today's better-than-expected February jobs report:
    • According to Jared Bernstein, senior fellow at Center On Budget, "This jobs report isn't the calm  before the storm. It's the beautiful day before the storm, at least re jobs, i.e., not re wage growth."
    • He points out that Y/Y wage growth remains stuck at ~3%, which suggests that the U.S. economy is not yet at full employment.
    • Daniel Zhao, economist and data scientist at Glassdoor, also points to the disappointment in wage growth, "This is a real concern & surprise that American workers aren't seeing faster wage gains when job gains have been so hot."
    • The strong gains made in February provide a buffer, though, for the expected coronavirus impacts.
    • The report details "confirm headline signal of a strong U.S. jobs picture," said Mohamed A. El-Erian, chief economic adviser to Allianz.
    • And, though the February numbers don't yet reflect the economic impact of the coronaavirus, "it does point to underlying economic resilience that will help underpin eventual bottoming out process," El-Erian said.
    • Joseph Brusuelas, RSM US's chief economist, sees the focus shifting toward weekly first-time initial jobless claims. Like El-Erian, he sees the strong February numbers implying that "the real economy is well positioned to absorb the supply shock that is now affecting the economy."
    • Previously: Job growth powers up in February (March 6)
    • UBS reports back from its meetings with retail giants on the issues facing the industry with the coronavirus outbreak.
    • "A consistent message was that while the coronavirus poses risks, these disruptions haven't really materialized yet," says analyst Michael Lasser.
    • Lowe's (NYSE:LOW) CEO noted "we see no short-term interruptions in the business, as a matter of fact our business trends are strong." Perhaps of even greater consequence, Wayfair's (NYSE:W) CEO stated "what we have seen in the last few weeks is…China production (is) ramping up at a pretty fast rate…back up to 70%…we think over the next 4 to 6 weeks it will get into the 90% range."
    • What about the largest retailer of them all? Walmart's (WMT -0.7%) CFO told UBS that "from a supply chain perspective, we haven't seen major impacts." Presumably, Target (NYSE:TGT) and Amazon (NASDAQ:AMZN) are in similar shape.
    • The general vibe is that certain customers are stocking up in earnest, but there hasn't been a tremendous change in customer behavior with quarantines very limited.
    • White House economic adviser Larry Kudlow says the administration may push for "timely and targeted" federal interventions to help workers, firms and industries hurt by the coronavirus.
    • Kudlow mentioned the hospitality industry in his comments, although it's unclear how deep into the sector the tax relief or cash flow assistance to companies and workers would go.
    • Related lodging stocks: Park Hotels & Resorts (PK +0.6%), InterContinental Hotels Group (IHG +0.7%), Extended Stay America (STAY +0.4%), Hyatt Hotels (H -0.4%), Expedia (EXPE -0.1%), Hilton Worldwide (HLT -0.9%), (TCOM -0.7%), Red Lion Hotels (RLH -1%), and Choice Hotels International (CHH -3.1%).
    • Related leisure stocks: Penn National Gaming (PENN +3.4%), Golden Entertainment (GDEN +0.7%), Boyd Gaming (BYD +1.5%), Vail Resorts (MTN +1.6%), MGM Resorts (MGM +1.2%), Caesars Entertainment (CZR -0.6%), Carnival (CCL -2.2%), Royal Caribbean (RCL -3.8%), Norwegian Cruise Line Holdings (NCLH -0.2%).
    • U.S. restaurant sales were up for the second straight month as a 0.3% increase in February followed the +2.3% mark in January.
    • A relatively warm month and strong to-go business helped to boost sales during the month, according to Black Box Intelligence.
    • Amid growing concerns over restaurant traffic as the coronavirus outbreak hits new parts of the U.S., only six restaurant stocks are showing a YTD gain. Habit Restaurants is up 34% after receiving a takeover offer, while Noodles (+31%), Domino's Pizza (+13%), Luckin Coffee (+4%), Luby's (+4%) and McDonald's (+0.4%) are also in positive territory.
    • Harley-Davidson (HOG -4.7%) trades at its lowest level since 2010 as concerns over the impact of the coronavirus in the U.S. adds to the worries over motorcycle demand and the lingering tariffs.
    • The dividend yield on HOG is all the way up to 5.80% for new buyers amid the share price decline.
    • Investors are dumping many of their favorite consumer stocks after the global coronavirus case tally was reported to have gone over 100K and magnified fear of an extended global economic downturn sours sentiment.
    • Some of the consumer heavyweights tracking lower are Home Depot (HD -4.8%), Coca-Cola (KO -3%), Nike (NKE -2.5%), Procter & Gamble (PG -2.7%), McDonald's (MCD -2.9%), Starbucks (SBUX -4.1%), Lowe's (LOW -3.6%), Lululemon (LULU -1.6%) and PepsiCo (PEP -2.7%).
    • Washington State and California have already mandated no cost-sharing on coronavirus testing and doctor visits, and CVS is going a step further, offering this nationwide for Aetna members, as well as zero co-pay for telemedicine visits for any reason.
    • It's probably a pretty good business decision, particularly in an election year, and also not a bad way to advertise the telemedicine business.
    • There will no doubt be pressure on other insurers to do the same.
    • Related names: Anthem (NYSE:ANTM), Cigna (NYSE:CI), eHealth (NASDAQ:EHTH), Centene (NYSE:CNC), UnitedHealth (NYSE:UNH)
    • In a wide-ranging interview on CNBC's Halftime Report, Doubleline's Jeff Gundlach spoke about coronavirus and its impact on the markets.
    • "I don't really think calling the direction of interest rates is all that meaningful right now. I mean you don't make any money regardless. I think you're just better off staying in cash than in owning a ten-year Treasury because the profit potential even if you're absolutely right and you do get lower ten-year rates, you just don't make any money."
      • The Fed slashing rates is clearly going to be dollar negative. Gold is already at a record high in terms of the euro and many other currencies. "And I feel like it's almost a certainty that gold is going to go to an all-time high vs. the dollar."
      • Claims for unemployment have been very low, and are the one thing that makes the economy seem like it has been holding up. "But if this situation with travel and leisure and non-social activity continues, you just wonder if you can keep initial claims down near 200,000 per week… But if they go above their five-year moving average you can just put a fork in the economy. It's almost definitional. So I think you have to watch the unemployment situation if this slowdown of small business and travel and leisure and the like sustains, it probably will lead to higher unemployment and that's just a really big problem for the economy."
    • "Financials of course are getting trashed thanks to the low interest rates… If you look at it the Japanese financial sector of the stock market, it is down like 80% since 1995. It didn't rally at all after the global financial crisis or going into the global financial crisis, it just stayed very very depressed. And why was that? Because Japan had zero interest rates, and with zero interest rates banks can't make any money."
      • "Fiscal stimulus doesn't make any sense at all in the long term because we're already running national debt growth at over 6% of GDP which is higher than nominal GDP."
        • "Business activity is pretty likely to contract. I mean the anecdotal evidence is getting pretty powerful. I received multiple emails today from clients that were planning on visits to DoubleLine saying we're canceling them, and I'm sure I'm not alone in that… Small business activity is going to is going to contract. I think it's foolhardy to think anything other than this is going to take a major hit to short-term economic growth."
        • "I think they (the Fed) cuts another 50 points at the next meeting." But Jay Powell will not go below zero.

  58. At $41 oil, lots of countries including Russia in fiscal trouble! This is starting to look like a much bigger economic threat than we even realized.

  59. My guess is that the blood bath in these commodities will lead to some reaction over the weekend. Low oil prices are actually good for our economy but not when we need less of it!

  60. how about a QQQ stick? Pretty please?

  61. Is it worth rolling out GILD short '21 $70c to $80s for around $5?

    10 Jan'21 $55c @ $12.3

    -10 Jan '21 $70c @ $7.9

    -10 Jan'21 $60p @ $8.23


  62. From what I read, the most worrisome country now is Iran! It's looking pretty grim and add sanctions to the mix and we could look at an horror story there. 

    Of course, there is still the US where so few people have been tested yet. Who knows what we are facing.

  63. MrM – No on WLL.  There are too many energy companies with much better prospects.  I bought some NGL and some OXY today.

    I think WLL could go under.

  64. BDC ,FWIW, I've been trading TVIX today instead of  SVXY.

    Much wider swings .Range today of 28 points. Trading with close stops I managed to catch a couple of good swings. Every now and then luck wins out.

  65. If you look at coronavirus cases per 100,000 population, Iran Italy and South Korea all have more cases than China supposedly does.

  66. not bad cubes!

  67. Wow, things are all fixed into the close!  What an F'd up market this is….  About 600 points on /YM.

    GILD/Wing – If you plan to hold something long-term, it's always good to buy $10 of intrinsic value for $5 or less.  

    Still down around the 2.5% lines to finish is a TERRIBLE end to another TERRIBLE week in the markets but still, we're only down as much as we were last Friday so things are not worse – it's the expectation game that's driving people nuts.

    And to think, I was considering doing our PSW Conference on a cruise ship this year!  crying

    Have a great weekend, 

    - Phil

  68. Much better close than expected. Had to make some moves to reduce margin today and prevent a bad situation if nothing happens over the weekend. 

  69. Did roll short GILD '21 $70s to $80s for $$4.60. Could be good if their remdesivir works out to treat the COVID-19 this month, stock moving up.

  70. Big finish into the close – happened last Friday too. Maybe it's a new thing instead of Friday sell-offs to book long side profits, now Wall Street is now doing Friday buy-ins to book their short side profits.

  71. Phil or anyone else: Has anyone else ever run into a TOS issue with Vega Margin? Seems like I have no issues with regular margin, but the way TOS calculates Vega Margin is a negative in both directions – which makes no sense to me, and it has occasionally run me into trouble. Thx

  72. I'm thinking Monday is +8% or -12%. This virus is no longer an "over there" thing, abstractly affecting supply chains or the like. It's a here and now thing. We get to see how many of the 50,000 confirmed cases that we end up getting resolve with "recovered" versus "death." In china it's so far about about 5.4% death. The US is currently 12 for 20 (60%), hoping to see some better recovery statistics soon!!

  73. I wonder how many people are going to go out and buy cars and houses this quarter! 

  74. There are some doctors and experts thinking that this new coronavirus could come back every year and become a seasonal virus, like the flu.  So  being asked to stay home for a week or so in order to prevent transmission might also become a new normal.  That being the case, demand for retailers with a robust online presence and delivery process will be even greater in the future.  I would assume this should finally be the thing to light a fire under the asses of not just major retailers, but small businesses as well.  Any kind of service that helps small businesses to set up web ordering systems and deal with deliveries should also be in demand.  In addition to cashless payment systems because China and South Korea are literally BURNING their cash. 

  75. Buying cars/houses: Most people, even people with 401ks and IRAs don't follow the market, they don't watch the futures market whipsaw up and down, they don't watch oil tank, they don't even listen much to the idiotic punditry. They worry about their jobs and their kids and their paychecks and interest rates, maybe. They read Cosmo and M and hang out on Facebook and Instagram and Twitter. They watch cat videos and Netflix. They talk about their neighbors' new bbq grill. They don't fixate on economics and coronavirus statistics. They don't think about the worldwide debt bubble, the potential real estate crash in China, supply chains etc. 
    So I'd say a lot more people than you might imagine will buy cars and houses. Especially with interest rates as low as they are right now. In other words ignorance is bliss. 

  76. Well, I just got a disturbing take from the ground in China that things are not really getting better there but the Government has gone into cover-up mode in order tho get the planting done and the factories open.  That’s what I assumed they were going to do as the big picture is 100,000 dead from virus is better than 10M dead from starvation, and there’s no “certainty” to the virus deaths while cutting off 60% of the food supply to 1.3Bn people has an outcome that’s easy to model.  

  77. 340 cases in US this morning, up about 50% and we’re still not testing.  Italy and Iran adding about 1,000 each (33%).  

  78. SXSW is canceled over coronavirus concerns

  79.  Coronavirus:  Heres the new twist in the coronavirus saga. "Man in his 20's in Yamanashi Prefecture is hospitalized and in serious condition with meningitis and tested positive for coronavirus"  reports the Nikkei here (its in japanese sorry. Use google translate). 

    You'll remember I posted an 2016 study a few weeks back that found a link between coronaviruses (not CovID-19) and meningitis.  And there have been cases of CovID-19 attacking organs other than the lungs like kidneys and the liver — which is why I am personally scared because I have liver disease.

    Not sure if the meningitis was caused by the coronavirus, or a co-infection with some other bacteria, but here is one case.  

  80.  And now for something completely different: Lebanon about to go into default.

  81. Trump’s Crazy Fantasy World

  82. /cl/Phil- KSA vit osp by 7$ for April. Are you still holding cl contracts? What is the plan now?

  83. Wow… tomorrow will be busy. 

  84. Phil//CL

    For non futures opportunities, I know you like USO. Is there anything else to consider that would reflect oil's movement you'd recommend looking at?

  85. /CL is so far down the toilet, all we can do at this point is a)capitulate and book the tax loss, or b) hold on and possibly have to roll, and meanwhile cross fingers that the Russians see sense and sign onto the production cuts. I'm hanging on. Selling oil at $33 would be idiotic. But this is definitely not how I wanted to start the trading week. 

  86. Holy crap the futures got creamed! I wouldn’t capitulate on anything as it’s all coordinated. Probably because nobody came out with stimulus or anything else over the weekend so far.   

  87. Oil is bringing the market down. The Saudis and the Russians are both scuttling all production limits. 

  88. Price war in the middle of a major demand slump. Only the Russians and the Saudis would do something this irrational. And maybe my one of my ex wives. I read an estimate that this is going to cost the Russians $100M a day. 

  89. Damn. Automatic margin sell order just wiped out my futures account. So that's nice. 

  90. Geezus, 10yr yields down to 0.5%.  Was close to 2% in January.

  91. My guess is that there is going to be full-on panic when the market opens tomorrow. Trump is going to shit himself when all the gains since election day get wiped out. 

  92. I’d use the 2,850 line on /ES for a bullish play if it goes over. 

  93. Nikkei down 5.7% mid day. Dow -4.9% pre market 

  94. I think S&P futures are limit down.

  95. /ES is definitely limit down – look at that order book. 5400 sell offers at $2819, zero bids. Unless the bots start getting bored tonight trading is done til the open.

  96. OK, who is still holding VIX calls? The 50s were fillable at 50 cents on rate cut day last week.

    See you in the morning, hopefully the platforms are all up and running by 10am :P

  97. I rolled my March VIX calls to April 50's last week, which I'm regretting now. But I have 140 contracts. With a .25 basis. Should be $2+ tomorrow, but the March ones are going to be $4-5!

  98. As Phil says, it looks a coordinated cleaning of the sheet, find a support level and move from there, here in Europe recovery of indexes is strong …NY will confirm it?