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TGIF – Ending the Week With a Whimper

Everything is proceeding as I have foreseen.

In Monday's "The Week Ahead – 200,000 Deaths Weigh Heavily on the Market," we knew the 200,000th American death would put Covid back in the news cycle and there wasn't much chance of Powell making us feel any better as the Fed is pretty much out of firepower and Congress is MIA as far as stimulus goes and NO ONE is actually doing anything about the virus except for claiming what a great job they've done fighting the China virus – but we won't name names as that would just embarrass a normal human being who had either empathy for their fellow man or the intelligence to realize their incompetence has killed twice as many peeople as the Vietnam war – and this one is still going on – and we've all been drafted!  

As we noted in Monday's Report:

“We have a very serious situation unfolding,” said Hans Kluge, the World Health Organization’s regional director for Europe. For the first time, he wore a mask at the press conference on Thursday. “The September case numbers should serve as a wakeup call for all of us.”

Relax Chicken Little, The Interoperability Sky is NOT Falling! - Great  Lakes Health ConnectI'm sorry, I know this is depressing and not what we want to talk about in a stock market newsletter but this is REALITY and, as an investor, you can't afford to put your head in the sand and hide from unpleasantness because denying the reality of the situation can lead to even more unpleasantness in your portfolio when ignoring a problem doesn't make it go away.  

As noted above, the global markets are only down 2% since Wuhan was first locked down on January 23rd yet the Global Economy has taken a 20% hit in Q2 and is likely 10% down in Q3 so, if we're not out of the woods as we begin Q4 on October 1st – what the Hell are the markets so happy about?

We saw this coming (early) back on August 22nd, in our first Newsletter, where my opening line was: "GET OUT!!!"  The S&P 500 was at 3,373 at the time and we did move up to 3,600 but now we're back at 3,254 and we'll be lucky to hold 3,200 with 3,000 being a more likely target for the next down move.  

Well, we held 3,200 SO FAR this week but 3,135 is the actual 10% line according to our fabulous 5% Rule™ and we don't even think that is going to hold in the end.  Most likely, we're just consolidating for another move down and that's just fine with us as our Short-Term is positioned very bearish and is up 200% since last Friday's review:

If you are looking for good hedges, these are working very well, on the whole plus we have our Tesla (TSLA) wild-card play that could be good for another $600,000 if we can thread the needle between $300 and $380.  The SDS spead is worth $240,000 at $22 and currently net $110,300 so $129,700 left to gain in a correction and the SQQQ spread is worth up to $300,000 over $30 (now $27.57) and the net is currently just $55,250 so $244,750 (442%) makes this a REALLY good hedge.   

So we've got a solid $355,050 of downside protection and our Long-Term Portfolio (LTP) lost about $100,000 this week so we're up net $100,000 (20%) in our paired porfolios in a bad market week so I'd say we're safely bearish going into the weekend but we've only got hedges to cover a 20% correction – back to 2,850 – so below the 10% line 3,135 we'll need to start layering in more protection or simply cashing out out longs.  

Have a great weekend,

- Phil

"We were waiting for the end of the world

Waiting for the end of the world, waiting for the end of the world

Dear Lord, I sincerely hope You're coming


'Cause You really started something" – Elvis

 


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  1. Good Morning.


  2. Good Morning


  3. Phil / WBA – taking another hit with RAD outlook…..  thoughts?  still have naked calls in portfolio


  4. Phil / HMY

    Can you please help me understand to logic and Math behind closing HMY on the portfolio review dated 13th Sep 2020.

    You said “HMY – $28,000 out of $30,000 so we’ll kill it but leave the short puts”

    I can’t figure out how you are 28 out of 30?

    Disregarding the PUTS as you’re going to leave them. If you kill the calls you have made 100% on the $1 long Calls, but would need to pay $20k to close the short calls. Even though you got a credit for the original short call sale, I can’t see how you did the math.

    Please explain as I still have this bull call spread on (never did the PUT sale)

    Have a great weekend!!


  5. Good morning!

    If the Dollar pops 94.75 then everything priced in Dollars is a short up to 95 and then we should bounce.

    $1,850 on /GC would be worth taking a bullish chance on if we test it again.  

    $110 on /KC

    Oil is unplayable here:

    Don't play things in the middle of the channel and you will become wealthy!

    Long opportunities in /NG are over too.

    Overall, this is just a normal pullback so far.


  6. Biotechs…adding a few other companies in small amounts — 1/4 entries.

    ARPO – 1.42ish

    KPTI – saw some options go through, so I am taking a flier on small stock position, but also Nov/Jan21 12.5 calendar for 55c.

    TCON – 5.05ish

    AXGT – 4.45ish


  7. phil, 

    forgive my newbie questions.. 

    when you talk about the dollar having a price of 94.75 – what currency is that in relation to? Im trying to wrap my head around the impact of the dollar price as it related to my trading.  thankyou!


  8. Pharm

    Thoughts on TRIL

    Thanks


  9. monkman  the dollar you follow is dx.


  10. Dollar/Monk – It's an index price against a basket of other currencies, so pretty much it's relative strength against other major currencies.  

    The U.S. dollar index was originally a geometrically weighted average of ten different currencies, with each currency representing a country that was a major trading partner with the United States. With the introduction of the euro, the USDX index became a geometrically weighted average of six currencies, which represent five major U.S. trading partners and the euro (source: InterContinental Exchange (ICE).

    It is a weighted geometric mean of the dollar's value relative to following select currencies:

    As expected, rejected at 94.75, that's helping to give the indexes room to bounce.


  11. TRIL/qc – in the portfolio.  Good drug…and PFE likes it as well!


  12. Phil / WBA – taking another hit with RAD outlook…..  thoughts?  still have naked calls in portfolio. Boots / London may get more painful…


  13. TCON    look at all the insider buying 


  14. Turning into a big up day to end the week.  

    WBA/Batman – Or an optimist would say holding $35 despite RAD outlook…  cool

    TCON/Stock – Worth almost $65Bn at $5.


  15. TCON/Phil   Huh?  finviz says something different. $54M  I was commenting on Pharm's call above


  16. Well very maybe Yahoo's wrong.

    Good finish stick saves the week, right at 3,300 officially. 

    Have a great weekend,

    - Phil


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