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Monday Market Movement – Futures Can’t Hold Gains

First you go low on high volume, then you go high on low volume.

That's one of the tricks "THEY" do when "THEY" want to reel in retail suckers to take stocks off their hands at high prices.  Keep the headliners like Apple (AAPL) rolling up the market while doing massive selling like we saw into Friday's close – a 100-point drop in the S&P 500 (3.2%) during the trading session but then a 60-point "recovery" when the markets closed and there was no volume – a time when it's MUCH easier to manipulate the markets, as well as the news.

Yes, we used to only have to worry about fake Financial News, the kind Jim Cramer boasts about routinely placing in this video.  As Cramer says, if you are running a hedge fund and you are not manipulating the markets – you're just not doing your job.  If you think that's not true today – just look at that action on the S&P and read the headlines of SOME papers and you tell me if we're still being manipulated or not.

ImageDoes what you hear about the markets and the economy make sense when you walk on empty streets and eat in empty restaurants?  Will it makes sense when we get those quarterly reports for Q2?  Does it make sense when you look at the Atlanta Fed's GDP Now forecast, that shows Q2 (the one we just finishing next week) GDP is projected to be DOWN 45.5%. 

I know not all of you are Economists but I'll save you 2 years of graduate school by saying down 45.5% is BAD!  What's also bad is that the average range of pundits is more like -35% so the public is in for a big disappointment if the Atlanta Fed is right and the random idiot on TV is wrong.

We get the final GDP Report for Q1 on Thursday (8:30) and that will be down 5% with Consumer Spending down 6.8% and that only reflects the last two weeks of March when we were locked up (hey, Trump did it, he locked us up like he promised!).  If we were down about 50% for two weeks and the other 10 weeks of the quarter we were flat, then 50/10 = 5% – wow, math!  So, in Q2, we began locked up on April 1st and we stayed locked up until late May so let's call that 7/12 weeks of VERY BAD GDP and, of course, 30M people lost their jobs during that period too but, don't worry, 2.5M (maybe) got their jobs back – so all fixed according to the President.  

I went out for dinner on Thurday and the very nice restaurant I was supposed to eat at was gone.  It was there last week and now it's gone.  I went to another restaurant and, because this is Floriday, the staff had neither gloves or masks on – I was not happy!  As I predicted on Friday (again, math), 10,000 more Floridians caught the virus over the weekend and by tomorrow we will celebrate our 100,000th infection – come on down and enjoy the beaches!  

Look at the headline on the chart from the Tampa Bay Times.  Isn't that the whole problem that they put it in the form of a question when only DJ Trump could ignore this FACT.  Keep in mind that's the 7-Day AVERAGE – it's much slower to move than the actual graph, with 4,700 new infections on Saturday and 3,494 new infections.  1 in 200 people in Florida are now infected, that's double in the last 10 days.   Go out to a store and try not to be in contact with 200 people or the things they've touched (door handles, credit card machines, counters, chairs…).  I have said before that 1/200 is the critical juncture because, once you get to 1/100 – you may as well get it over with and kiss infected people…

Yes, that's right, someone actually said that.  Disney Springs (the mall/restaurant area) has already re-opened, allowing people from all over the World to literally shop 'till they drop in a state that now has 25% more infections than all of China.  And nobody tries to stop this because this is America and, even worse, Florida and people do whatever the F they want regardless of the consequences.  The park itself is scheduled to re-open on July 11th, just 3 weeks away and, at this rate, Florida could have 200,000 cases and that would mean 1/100 people you see at the Magic Kingdom may be magically infecting you!  

We own Disney stock but from the crash prices, because, well because, for example, they are already selling Disney Character Face Masks – these guys will make money in any Apocalypse…  Capitalism aside though, WTF are we doing here people?  We are opening a global tourist attraction in one of the most infected places on Earth?  We are enticing children to come to a state that has 3 times more infected people in it than China did when Trump proudly "banned" China travel to save us from the virus.  

Hong Kong Disneyland closed January 26th and, to this date, Hong Kong only has 1,131 TOTAL infections.  Florida has over 100,000 infections, that is 100 times more than 1,000 (math) yet Florida Disney World thinks opening now is a great idea.  How much more clearly does it have to be illustrated that we live in a World where your life matters much less than a rich person's money.  Isn't that kind of the theme of the 21st Century so far?

On January 26th, all of China had 2,075 infections and they were already shutting everything down, including Disney.  Nonetheless, by Feb 26th, there were 78,166 infections in China but, fortunately, the mostly had their virus under control at that point and, 4 months later, there are 84,573 total infections in all of China – 20% less than Florida alone and 1/100th of the global total (8,975,776), despite having 20% of the World's population.

America, on the other unwashed hand, has 2,280,969 KNOWN infections (we don't really test people) and that is 25% of the World's total infections shared among 4% of the World's population.  That is, as we say in the science world – not good.

Brazil had their 1,000,000th infection this weekens.  At that pace, they won't be in second place for long but the US has kicked it up again so it's going to be a race for the bottom but I have full confidence in the Trump Administration to keep it great and win this virus race for America.

Data this week includes the Chicago Fed, Housing Data, Richmond Fed, Investor Confidence, GDP the KC Fed, Consumer Sentiment and Personal Income.  Only two Fed speakers are scheduled around the 5-Year Note Auction – no auctions can fail or we could turn into Greece overnight, of course.  


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  1. Good morning!

    My bad, I thought I hit publish earlier.  Totally had this mostly written before 8:30 and just finished the end.

    Bad way to start the week.

    Nas flying back to test 10,000 again.  /RTY still 1,400 – not impressive at all.  NYSE below 12,000 – just as bad.

  2. Good Morning Phil  :)

  3. Hi!

    I hope everyone had a nice Father's Day weekend.  

    Oil $39.85 (/CL) and I'd feel better about shorting it of /BZ wasn't at $42.17 – not a good resistance for them.   /RB is $1.27 and it topped out at $1.288 on Friday.

    /NG popped back to $1.682 but was rejected at $1.70.

    Gold and silver climbing again.

    I saw a quick note that Fisher or some other Fed guy said Fed balance sheet going to $10Tn – but like that was a good thing…

  4. Good Morning!

    Phi / TQQQ

    Reposting from the other page.

    I listened to your answer on hedging as to why you prefer TQQQ. 

    What do you think of this trade?

    Buy 50 Jan 90 Puts @ 20.65
    Sell 50 Jan 65 Puts @ 10.77
    Sell 50 Jan 130 Calls @ 8.57

    Net $6,550 for $125,000 hedge. 

    What can go wrong? What are the chances TQQQ hitting 130 before Nasdaq goes down 10%? 

  5. Has there been a more corrupt and incompetent administration before in history! Really… And now, looking at polls and rally attendance, they will start looking are more ways to profits before the cookie jar closes. I predict a bad 5 months!

  6. And BTW:

    It’s a question that has haunted scientists since the pandemic began: Does everyone infected with the virus produce antibodies — and if so, how long do they last?

    Not very long, suggests a new study published Thursday in Nature Medicine. Antibodies — protective proteins made in response to an infection — may last only two to three months, especially in people who never showed symptoms while they were infected.

    The conclusion does not necessarily mean that these people can be infected a second time, several experts cautioned. Even low levels of powerful neutralizing antibodies may still be protective, as are the immune system’s T cells and B cells.

    But the results offer a strong note of caution against the idea of “immunity certificates” for people who have recovered from the illness, the authors suggested.

    So herd immunity might not even work!

  7. Speaking of incompetence:

    America #1 baby – MAGA!

  8. Who needs 2 waves – we simply have a big rolling one here! Innovation…

  9. I predict the rats will soon start jumping ship as the polls remain wide in favor of Biden….


    What will be ugly, is the aftermath until inauguration day!  :(

  10. Indeed 1020! If Trump loses, it will be chaos…

  11. Wow, quiet day today!

  12. The new crop of transmissible disease experts (highly correlated with the new Robinhood master traders) have decided that since cases are rising and deaths are still dropping that COVID isn't as serious as it once was, and probably it's all a function of more testing anyway. Just a stout case of the flu, and stuff. 

  13. Of course, there could be a delay between new cases and death… Or we could also be getting better at treating them. But hospitalizations are also up! Not just the common cold when people end up in the ICU.

  14. TQQQ/SK – I like it but keep in mind if the Nas goes up 10%, TQQQ goes up 30% so it's not impossible you get crushed on the short calls.  That's a lot of them, be careful, use stops.  

    Big Chart – Getting technically bullish again.

    Bad 5 months/StJ – As opposed to the last 3.5 years?

    No immunit/StJ – So life expectancy takes a giant step backwards for humans. 

    And the EU has 450M people vs 330M in US.  And the EU includes Bulgaria, Croatia, Poland, Hungary, Romania…  all countries that are better than the US at controlling a virus.  

    Mild/Dawg – Wow, do you really have a Fox talking point of the day calendar?   119,997 US citizens are dead since March (3 months) and infections are spreading faster than they were in March with less than 1M recovered so 10% of the people who got it have died (OK, who got serious cases) and about 5% of the population has had it based on sampling but, even if 10% had it and you allow it to spread, you are talking about 1-2M dead from "a stout case of the flu…. and stuff."

  15. My understanding from recent reports is that the infection rates are skewing younger than a couple months ago which is probably driving the lower mortality rates.  After a few months of quarantine younger people are thinking "YOLO" while older people are thinking "FOMO" (on a longer life!).

  16. I would have thought the sarcasm in my post was obvious when I compared the new disease experts with Robinhood traders. Guess not. LOL

  17. BTW, I don't watch Fox.

  18. The Bug/Dawg – biting my tongue.

  19. Phil / TQQQ

    It took only 6 months in a pandemic for NASDAQ to go from 9000 to 10000. I guess it could get to 11000 in another 6 months before Jan 21. 

    What would be a reasonable STOP for the 130 calls? 

    Would rolling be an option if Nasdaq were to go up 10%?


  20. Phil,

    When you get a chance could you please explain the TSLA hedge from last week.

  21. Dawg-I picked up on your tongue in cheek about just the flu. Did you hear about the Robinhood trader only 23 I think that committed suicide? He blamed them for over committing his resources. Amazing.

  22. LOL Dawg – Got to use the </sarcasm> formatting!

  23. Getting closer to home:  previously I did not personally know anyone with Covid.  In the last week 2 people I know (one a nephew) have tested positive with symptoms though not needing intervention as of yet.

  24. Phil/tech stocks going forward

    i am relatively underweighted in the big names- aapl, GOOGL, AMZN, the latter only because of its high price, relative to earnings. I did not see the move up from the March lows, believing that the fed stimulus would not be enough to counter the virus effects.

    So, question: would you leg in here into aapl and possibly GOOGL or wait for a pull back? (We had one minor pullback from 350 to 333 in aapl a couple weeks ago but that's not much of one).

    Can you come up with a strategy that takes advantage of a continued move up and also mitigates some of the risk of a 10-15% move down?

    any ideas appreciated. I don't have any short puts yet, been waiting for opportunity that has not arisen over the past 4 weeks.

  25. You mean like this:

    Phuket Friday – Carnival of Madness

    No Dawg, it wasn't so I apologize.  Too worried about my family now to have a sense of humor about this.  Madeline's roommate is immuno-compromised so it's a tragedy trying to keep her safe and Jackie is supposed to start school in Hoboken in August, which is now 60 days away and I don't know what to do as a parent.  Add to that my Mom is turning 80 this November and it's going to be a somber occasion with no guests at best and all I hear from the media is a parade of idiots saying "we have a cure any minute so don't worry about the rampant spread of the disease."  Sorry, my funny bone is not there at the moment as this self-inflicted tragedy unfolds.

    Stops/SK – With 50 short $130s at $9.25 that have a Delta of 0.36, it's 3 points on the Nas per $1 ($5,000) and you are in the $125,000 hedge for $6,550 so I'd say a stop at 100 costs $5,000ish so over 100 I'd stop out 15 at about $11 so $5,500 puts you in for $12,000 with 35 short and then again at $15 cost you $7,500 so $19,500 on the spread with 20 short and then you'd have to roll both legs and try again.  

    TSLA/Jij – This one?

    We have a good, solid group of positions here that have the potential to gain another $67,543 (67.5%) if all goes well but we need a hedge and, on the show, we're going to discuss how over-priced TSLA (TSLA) is compared to Toyota (TM) so why not combine them into a single hedge like this:

    • Buy 4 TSLA Jan $1,090 puts for $300 ($120,000) 
    • Sell 4 TSLA Jan $1,015 puts for $250 ($100,000)
    • Sell 5 TM Jan $120 puts for $9 ($4,500) 

    That's net $15,500 on the $30,000 spread so we make $14,500 (93%) if TSLA fails to stay over $1,015 into January and, in theory, if TSLA is doing that well, TM should not be doing bad either so the risk should be no more than $15,500 but I very much doubt we'd lose that and, if all goes well, we win on both ends.

    Conceptually, I don't think TSLA is worth $1,000 – especially not if the broad market tanks and, on the other hand, I think TM is worth more than $120 – even if the market tanks (though it may take time to recover).  So, if logic prevails, TSLA will be less than $1,015 and TM will be over $120 and we get $30,000 for the spread and that's that.

    We sold a lot more premium than we bought so time works to our advantage along the way.

  26. Ha, that was the wrong Phuket article…  I meant this one from 4/27:

    Monday Morning Math Notes – Looking Ahead in a Viral Market

  27. Phil. / Oil  into July 4th weekend.   I'm hearing from many people that more families are looking at traveling this summer via cars – those who would normally fly….  I've rented my beach house out for the end of June and second week of July and those families are driving in from Oregon, Colorado  and even as far as Texas.   Yesterday talking to family in GA they indicated they would be driving for family vacations this year…  staying around the area….

    I think this will be a trend this summer, is there any set-up that could take advantage of 4th of July weekend?  Something not using futures preferably  


  28. Wirecard (WRCDF) – have you guys been following this? If I understand the situation, they "lost" as in misplaced (or never had) $2 billion in cash. And if it cannot be found, and that's what it's looking like, then that wipes out about half of the asset side of the balance sheet. Has anyone in Germany been following this? Are these guys toast?

  29. Dawg / WRCDF – not following this but CEO resigned this weekend

  30. /WRCDF – well it's kind of a confusing mess but apparently they had a 3rd party acquirer based in Dubai that was booking revenue from companies that were either no longer in business, had never heard of them, or whatever, and the supposed revenues were going to two banks in the Philippines that say they do not have Wirecard or it's 3rd party acquirer as a client. And to make it even more fun, Wirecard has been accusing the Financial Times of collusion with short sellers and publishing false information, which now appears to be mostly or wholly true. And these guys were just put into the DAX. So just goes to show you that there are Adam Neumanns in Germany too. I wonder if SoftBank had a stake. haha

  31. batman – Where's your beach house? 

  32. 1020 – Northern CA,  Aptos CA, just south of Santa Cruz 

  33. Close/Tangled – My niece is a school counselor in NJ so she got it and her husband and young kids all got it.  All better now but scary.  

    Legging/Maya – No, I wouldn't chase the tech but I would have said that in mid 1999 and missed a 100% run too.  They were all 90% lower a year later so I was right – but, in between, there was money to be made.  Still, it's just not for me – just because everyone else is being an idiot doesn't mean we have to be idiots too.  There's no magic strategy that let's you pay 30x earnings for AAPL and GOOGL and "be protected" from your lunacy on the way down – that's just not how it works.

    PATIENCE is the strategy that works.  WAIT for it to be cheap and then buy some.  I'm sure earnings will send some companies into a tailspin.

    Oil/Batman – But is more oil used if people drive than fly?  Not sure.   Prices are already back at $40, I'm not gung-ho bullish at $40 but the play would be USO, of course. 

    WRCDF/Dawg – Yeah, quite the mess over there this weekend.  Scary that they can be so wrong or maybe just a total fraud.

  34. Close/The Bug – my 62-year-old sister, who has a busy career as a first assistant director in TV and movies (The Romanoffs, Falling Water, Orange is the New Black and a ton of others) caught the bug back in February. Really sick but no hospitalized for about two weeks, very weak. Over it and back to her usual self now, but work is way down. And she gets a lot of work normally – she's good at it, and she has a reputation of working well with difficult people (I hear some stories, let me tell you).

  35. batman – nice. know Aptos well.

    My wife has family in Santa Cruz and we grew up over the hill in San Jose  :)

  36. 1020. Small world