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Weak Bounce Wednesday

Not much is happening.

Powell and Mnuchin's testimony to Congress did not help or hurt the markets, which are still bouncing from September's 10% drop (what, you forgot that happened already?).  Economic data has been blah and even politics has been blah this week so the market is just drifting back to test the weak bounce line – which it still hasn't reached yet and probably won't because, as we pre-noted on Monday, the 100-hour (weekly) moving average is about to death cross under the 400-hour (monthly) moving average and that's going to form significant upside restistance at the weak bounce line.

Failing to get back over the weak bounce line in the time it took you to fall below it (call it two weeks) means you are consolidating for a move below it – not recovering.  This is a market that is only propped up by external (stimulus) forces, swimming in a pool of very low reality that operates in a Nation that is dumb enough to still possibly be re-electing Donald Trump AFTER seeing the evidence of the damage he's done in just 3.5 years in office.  

Pin by Ideen Solhtalab on LOL | Funny quotes, Stupid people, Funny jokesI really can't believe there's even a discussion about Trump being re-elected, let alone it being close but it does seem close – or at least that's what the media say – and we can't trust them to tell us the truth anymore, can we?  See!  You don't know if we can – that's TERRIBLE!   

The same people that are actually considering inflicting humanity with 4 more years of Trump are trading the markets and, if they don't see that the last 3.5 years have been a stain on the history of our Nation – they sure can't see that Tesla (TSLA) is on over-valued piece of crap or that paying close to 30 times earnings for the average S&P 500 compay is clearly an historical abberation that is certainly going to correct itself as soon as "THEY" stop pumping it up like a carnival baloon.

Elon Musk held his "Battery Day" at a drive-in yesterday and that was cool but not actually having a battery was not cool  Battery Day was, as usual, full of empty promises designed to pump up the stock prices but it sounded a lot like "Next Year in Jerusalem", which Jews say every Passover but we never actually go.  Musk says it would be great to have a battery that's 50% more powerful and 50% cheaper – and it would be – but he doesn't have one.  He's "working on it" and I'm sure he is but a lot of people work on a lot of things and we don't pay them 300 times earnings for trying.  

"One of the things that troubles me the most is that we don't yet have a truly affordable car," Musk said. "That is something that we will make in the future."

$400 is our October target price for TSLA so we don't want people to realize what a sham this thing is too quickly or it might go too low but yesterday's battery day disappointed even me – and I'm the one that keeps shorting them!  As noted by Wired, one of the few tech magazines not in Elon Musk's pocket: "Elon Musk made big promises at Tesla’s highly anticipated event. But a prototype never appeared, and it was unclear what the company had actually achieved."  Or, as noted by Electrek, which is so deep in Elon Musk's pockets it is covered in lint: "Tesla unveils new 4680 battery cell: bigger, 6x power, and 5x energy."

Of course, that's because the battery is 6x BIGGER than the previous battery - NOT because Musk actually invented anything.  He's claiming a 14% cost reduction and that does make some sense as he's cut the need for casing by more than 14% (one cylindar instead of 5) but there's no indication of any improvement in energy density.  Still, the consumers don't care how many cells are powering their car – they care about how much their car costs so any cost savings is a good thing, as long as the batteries don't explode more easily, of course. 

Tesla Model S On Fire In Shanghai - 2019 GIF | GfycatTaking the tabs out of the equation will allow you to have more coated area on your electrode, increasing the capacity of the cell without changing anything else about the design,” says Greg Less, the technical director of the University of Michigan’s Battery Lab. “It's not a new idea, but there are a lot of engineering challenges to making something like this work reliably and reproducibly.”

Elon Musk is a risk-taker and, as we learned from Boeing, radical design changes coupled with the stock market's relentless pressure to perform can cause even well-meaning companies to rush products (including vaccines) to market, sometimes leading to adverse outcomes for consumers of these radical products so please – be careful out there!  

I said to our Members on Monday:

September 21st, 2020 at 1:38 pm | (Unlocked) | Permalink 

Actually, if you see /GC bouncing and /SI and /HG are lagging, you wait for the next one to confirm and then go long on the laggard.  See how easy these lessons are to apply?

/NG is the bargain of the day, testing $1.80.

Back over $2 now is a $2,000 PER CONTRACT gain in just 2 days and that's now our stop line.

 


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  1. interactive brokers increasing margin requirements by 35 % they must know something.


  2. RMED/pat_s – my spreadsheet notes the total I have purchased since recommending to the PSW audience. I am a founder as well as I noted to the group on several occasions, so that is my disclaimer. Others here in PSW think the technology is not up to snuff, and I respect/understand that.  It is a play right now to show efficacy early next year.  When that happens, they could double (ha) and then I would be out.


  3. Citibank is also closing down its options operations….here.


  4. Good Morning.


  5. Good morning!  

    Yes, brokers raising margin requirements are a big warning sign.  Ostensibly, it's over the election uncertainty:

    Dear Client,

    As you’ve likely observed, elevated option implied volatilities indicate that the markets will be confronting elevated volatility both before and after the November 2020 election. IBKR shares that sentiment and believe it’s appropriate to start controlling leverage in a measured fashion in advance.

    Consequently, to protect IBKR and its customers, IBKR will increase margin requirements by as much as 35% above normal margin requirements leading up to the November U.S. election. To illustrate, consider a Reg. T margin account with stock XYZ having an Initial Margin requirement of 50% and a Maintenance Margin requirement of 25%. With the increase fully implemented, the new requirements would be 67.5% Initial and 33.75% Maintenance. Accounts subject to risk based margin will have their scanning ranges increased in a similar manner.

    This will be implemented gradually each day, increasing Initial margin requirements from normal levels starting September 28th to a rate that will be 35% higher by October 23rd. Maintenance margin requirements will increase in a similar manner between October 5th and October 30th. The new requirements will be implemented each day, after the market closes in New York, and will be effective the next trading day.

    IBKR may make additional changes to the margin on certain products, or all products, depending on volatility. This includes changes built into the standard margin model as well as any new house margin requirements that may be imposed.

     
    Interactive Brokers Client Services

    Don't forget we're looking to short /NQ if it ever crosses back below 11,100.


  6. Good morning everyone!!!! Lots of market movement this week. Tune in to today's webinar for all the how what and why's.

    Here is the link to today's webinar…

    https://attendee.gotowebinar.com/register/8944832066501416463


  7. Phil / SQQQ ,

    Since it looks like NQ is on the way down, should we be worried about the Short SQQQ Jan 2021 35 Calls that are not covered by any SQQQ long calls?


  8. phil / NQ, stopped out for a quick 1K, thank you!! 


  9. Phil// Any idea why CHL and WBA continue to go down?  Thanks.


  10. 11,050 is a nice $1,000/contract gain so we lock that in selling (buying back) 1/2 and stop the other half at $500 (11,075) to lock in $750 on /NQ.

    SQQQ/Jij – It's at $26 and $35 is +$9 so + 25% needs an 8% drops in the Nasdaq to hit $35 (where it's still $0) and we are covered by 200 June 2021 $15/30 bull call spreads that would be worth $300,000 before we have to pay out a penny to the rollable short Jan 35s.  I'm sure not going to pay them $4.25 ($42,500) out of fear of them going in the money.  

    You're welcome Monk!  Good job getting out.

    CHL/Rookie – No idea why people are selling them but a good time to buy at $32.50.  

    WBA/Rookie – Simply an out-of-favor stock but what a bargain.


  11. Well, so much for the bounce.


  12. With the new exchange on line now (MEMX), that should really help transparency….huh?  They can hide their orders from the public….nice.


  13. Phil / ANTM – looking like it's takin a hit on the ACA risk….  I think this does well either way – I had them on a watch list prior to ACA, my target  is at 330 to 350 for this one.  They are also dealing with litigation that may be resolving in the near term which I think may help.  Thoughts?






  14. Rand Paul was just slapped….https://twitter.com/i/status/1308803782587879426


  15. Analysis: This Senate race shows you can *never* be too extreme in Trump’s GOP




  16. Besty DeVos is now under investigation…. 


  17. Only the best people Pharm!


  18. Pharm / Betsy

    Unfortunately, all these investigations don't seem to make much of a difference. I don't know if any one in this administration is not being investigated. 


  19. Wow, things are falling apart.  

    Sorry to have a depressing Webinar but things are simply not good and not getting better either. 

    Hiding/Pharm – That's why ICE was established.  

    ANTM/Batman – These insurance companies make their money off interest too and that's a hard occupation these days.  

    I think they are reasonable at this price but, looking at the dip below $200 – I'd rather wait for another one than jump in at $250.

    Investigations – Like water off a duck's back with these people.  


  20. futures – where are the new shorting lines, Phil?

     

    thx


  21. Not yet, just the lines we're bouncing off now are short-term support.  

    It's very rare for indexes to fail S2.


  22. /NG marching on:


  23. Let's keep in mind that these corrections are happening with the dollar still relatively low. It was 6-7% higher at the beginning of the year. 


  24. And no saving stick today!


  25. Here is the replay of this week's webinar.

    https://youtu.be/dN_4scK4Gdg


  26. What is going on with /NG? Up 35% as of 3am EST. Any suggestions for our UNG position? The current move places NG to last year's max reached in early Nov (and considering supply-demand mismatch and mild winter forecasts), although still low by historical standards. TIA