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Terrific Tuesday – S&P 3,420 Yet Again

Up and up we go.  

As we discussed last week (when we failed at 3,420), 3,420 is our Strong Bounce Line and the 20% Line so we knew we were likely to re-test it – the question is whether or not the S&P passes the test and we may find that out this morning as the Futures are pointing up yet another 1% – just like yesterday when we made most of our gains in the thinly-traded pre-market session.

We do have some actual good news this mornng as China's Retail Sales picked up nicely in August, which is good for the Chinese Economy but that has nothing to do with whether Western economies are picking up – we get our own Retail Sale Report on Wednesday.  If that matches, then it's good but it's still not record-high good, is it?

China’s economic recovery accelerated in August, with retail sales, the last noncooperative component, returning to pre-coronavirus levels by showing their first month of growth this year.

Now, with no local cases reported in weeks, shopping malls, restaurants and gyms across the country are packed with consumers again. Movie theaters—the last major holdout among public venues—reopened in late July. During the last 10 days of August, official data showed box-office revenue returning to 90% of year-earlier levels.

“The retail sales data indicate that pent-up consumer demand was released in August when social-distancing rules were further relaxed,” said Larry Hu, an economist with Macquarie Group.

NO LOCAL CASES THIS WEEK!  Is that a situation we are going to have in America this week?  Next week?  Next month?  Then why would you react as if what's happening in China is going to happen here?  Also, keep in mind that Retail Sales are up but up from a catastophe – not actually UP:

Just because a coma patient twitches his finger, you don't sign him up to run the Boston Marathon the next day!  August data released Tuesday showed sales of retail goods moving back into growth territory for the first time this year, rising 0.5% from August 2019 levels. Private-sector investment, which tends to be tied to consumer-facing sectors, was still down in the first eight months of the year compared with the same period in 2019.

The data offer some vindication of China’s coronavirus-fighting strategy, which focused on tough shutdowns followed by substantial infrastructure investment and support for businesses, rather than measures to goose consumption. Western countries, with a larger portion of their economies tied to consumption, understandably have been more eager to support incomes – but we haven't stopped the virus and we haven't built any lasting infrastructure defenses – we're just hoping it all goes away still.

So we're sticking with our strategy of shorting the indexes (which didn't work yesterday) as we're likely to be rejected here (Dow (/YM) 28,100, S&P (/ES) 3,405, Nasdaq (/NQ) 11,475 and Russell (/RTY) 1,550) and, as usual, we can just short the laggards, which would be /ES crossing below 3,400 and /YM confirming below 28,000 – we should catch a quick ride down but the Fed goes tomorrow and that should give the marketsupport until they are disappointed by that so tight stops above!

Investors Push Back on Emerging Asia’s Record Borrowing Spree.

Oil Trapped Between Bearish Demand Outlook and Rallying Equities.

Citigroup to Resume Cutting Jobs, Ending Pause During Pandemic

Morgan Stanley Says a Stimulus Bust Delays Recovery Six Months.

Bill Gross Says Investors Should Play Defense as Stimulus Ebbs.

Amazon to Hire 100,000 in U.S. and Canada.

There’s $120 billion worth of commercial property debt threatened by West Coast fires.

BoJo Wins First Vote On Bill To Modify Brexit Deal, Infuriating Brussels. 

Sunday Night Football Ratings Post "Steep Decline" Compared To Last Year.

Nikola Slides On Report SEC Is Examining Hindenburg's Fraud Allegations.

Robinhooders Discover 3x Levered ETFs. 

 


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  1. Good Morning.


  2. Good smoky morning from NO Wisc. Hazy from smoke.


  3. You're welcome – California   :(


  4. Good morning! 

    Got a late start because I overslept – I never do that.  I don't even set an alarm, I'm usually up at 6 no matter what.  

    Can't find an actual good reason for the move up, the left side of the country is on fire, we're hitting 200,000 deaths and 30M Global cases with 22% of them in a country that has only 4% of the World's population – what could possibly go wrong?

    Apparently we've tested 90M people and 6.5M had the virus (so far) in the US but I imagine 90M tests includes testing some people over and over again for jobs, hopsitalizations, etc. as opposed to having actually tested 1/4 of the population.  So I'd say at least 10% of the people tested had the virus – that's not particularly a good thing.

    This is hugely disturbing too.  On the Hopkins Map, you can click on Active Cases and look at this statistic:

    336,104 ACTIVE out of 444,948 with 1/3 of the outcomes DEATH???  I simply have to believe that that is somehow in error or we are all just deluding ourselves going on with our normal lives.  Most of the states don't track it that closely but the ones that do seem to confirm that this is much worse than inicated: 

    Virginia, US
    Cases: 134,493

    Deaths: 2,743

    Recovered: 16,361

    Active: 115,389

     

    Nevada, US
    Cases: 73,814

    Deaths: 1,456

    Recovered: 1,938

    Active: 70,420
    Connecticut, US
    Cases: 54,895

    Deaths: 4,485

    Recovered: 9,142

    Active: 41,268
    Arizona, US
    Cases: 208,725

    Deaths: 5,322

    Recovered: 32,975

    Active: 170,428
    Colorado, US
    Cases: 61,667

    Deaths: 1,990

    Recovered: 6,162

    Active: 53,515
    Michigan, US
    Cases: 124,287

    Deaths: 6,921

    Recovered: 85,513

    Active: 31,853
    Massachusetts, US
    Cases: 125,080

    Deaths: 9,219

    Recovered: 107,501

    Active: 8,360

    Why would there be such disparities?  It's just so strange.

    Market turning down already – don't be greedy, take half off with a quick profit as soon as we see support.


  5. Phil / Cases

    my father is a (soon to be retired) pulmonologist in Wisconsin. I raised this exact question with him recently – his outlook is that 'recovered' only applies to those who were hospitalized and then released after recovery.  Not counting positives that received the bad news by phone, followed the guidelines to quarantine and then were never heard from again ('presumed recovered' doesn't sound great either though) He made his usual point though about how hospitalized recovery from this disease is not a fun journey. There's very little middle ground apparently.  You get sick, go to hospital and either die there or leave with scarring a long road ahead of you.  He's a very pragmatic and perhaps stubborn father but when he said, 'trust me, you don't want to catch this' it sent chills down my spine. 

    It's an imperfect system with likely some dark corners that harbor very sad numbers. The truth will come out in the end. Depending on November, i suppose. 

    MM


  6. What I worry about is you have an election where people have to decide whether to vote for the guy who says we have a serious crisis to deal with and the guy who says everything is fine.  Of course, only a person living in a nation of immature idiots would be worried about that choice, right?


  7. /Phil/CMG- Reminder to roll STP short call expiring this friday. 


  8. https://www.bloomberg.com/news/articles/2020-09-15/house-moderates-to-release-bipartisan-stimulus-compromise?cmpid=BBD091520_CORONAVIRUS&utm_medium=email&utm_source=newsletter&utm_term=200915&utm_campaign=coronavirus&sref=6nxHgiEtIf this stimulus plan passes I don't see a reason for markets to pull back prior to elections……

     

    House Moderates Plan $1.52 Trillion Bipartisan Relief Compromise

    By 

    Erik Wasson

    September 15, 2020, 3:00 AM PDT

     

    Problem Solvers Agree on $1.5 trillion in virus relief

     

    Proposal offers glimmer of hope in stalled negotiations


  9. idiots – I'd say there's a whole lotta 'cognitive dissonance' going on….

    https://en.wikipedia.org/wiki/Cognitive_dissonance


  10. Phil – say there is a stock that goes ex div on Friday and has options expiring next week.   Stock at $10 and you can sell $8 strike calls for $2.02.  Dividend is $0.25

    Would buying shares at $10 and selling $8 calls for $2.02 to strip the dividend work with expectation of being called away at expiration?  Or would I get called away by another wanting the dividend?  Seems worst case on being called early is I make $0.02 per share.  Or am I completely missing something?


  11. Tangled – I think the buyer of your call would exercise and you would have to pay the dividend.


  12. Phil:  Is there some reason that the news feed no longer appears every day?  It is a feature of PSW that I find particularly useful.  Thanks.

     


  13. Hey Phil – any thoughts on Citigroup?


  14. Tangled – On second thought, the owner of the call would exercise and your shares would be sold to cover. So, yes you would probably be called away by someone else wanting the dividend.

    If would have helped if I had read your entire post ;)


  15. CMG/Ravi – Thanks.  Lots do do in the next few days.

    Stimulus/Batman – Still less than they need.  We'll see what Powell says. 

    Brain-teaser/Tangled – If the stock is at $8 and you sell calls for $2.02 and the dividend is 0.25, then the caller can exercise the right to buy your stock for $8 on ex-dividend day and steal your 0.25 dividend for 0.02  So yes, worst case is making 0.02 instead of 0.25 but hopefully the stock goes down 0.25 and you can buy it back, I guess…   Too much bother for me.  

    News/John – It's about whether or not I get to it.  It's been a very busy summer juggling our various projects (PSW Investments) which usually run on auto-pilot but have all gone into a bit of a crisis mode due to the virus.   It's taking up more of my time than usual and hopefully things will calm down soon but I do have far less time to sit and read than I used to.  And the news is kind of depressing these days, isn't it?  

    C/1020 – Good bank, well-diversified, reasonably priced.  Lots of free money around and this is not a financial crisis, this is a real crisis (pandemic) and bankers love to make money in times like these.


  16. Thanks Phil.


  17. phil/COVID

    Some American people are now circulating ballots proposing ‘Trump for life’. It is unknown if these people follow the COVID data, as science is not their strong suit
    They have had almost 200,000 deaths in 6 months from COVID.
    Extrapolating the deaths gives a population of 1 in 10 years in the USA! Trump will be left to govern himself and maybe his family.
    Put another way, the current number of deaths is 68% of all US combat deaths in WW2 but at a 8 times faster rate.
    Third world dictators have, in the past, killed 200K of their citizens, but never at a rate of 400K/year.


  18. Maybe Stalin?

    That was easy money on the /YM Futures:


  19. WHO reports highest one-day increase in global coronavirus cases since pandemic began







  20. Container Shipping Fundamentals


  21. Water shortages in US West likelier than previously thought