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Market Week Ahead – High Ho Silver Trading

Now silver is flying thanks to Reddit.

Silver rose by as much as 11% to $30 an ounce, its highest value since 2013.  The moves are the latest example of small-time traders buying stocks and other assets that large Wall Street funds bet against, resulting in large losses for major investors.  Some users in the Reddit forums WallStreetBets and WallStreetSilver argued that silver is a heavily manipulated market, and a surge in the silver price could hurt large financial services companies.  "If you don't care about the gains, think about the banks like JP Morgan you'd be destroying along the way," said Reddit user RocketBoomGo, in a widely circulated post.

Isn't it terrible the way these investors are manipulating the market.  Meanwhile, the Dow is being manipulated 600 points above Friday's Futures close by PROFESSIONAL manipulators (see the difference?) who have jacked the index up 2% in very thin, pre-market trading NOT by getting a bunch of retail investors to buy but but getting a bunch of professional analysts to upgrade the prospects of key Dow components so they will be re-pricied at the open forcing PASSIVE INVESTORS to pay higher prices when the index fund purchases are triggered on the open market.  

See?  That is the way the markets are SUPPOSED to operate.  Giving people an opinion in an open forum and leaving the action of the marketplace up to thousands of individual investors – now that is un-American!  

Despite what some retail traders had hoped, some of the biggest profiteers from last week's market action were said to be Wall Street giants such as asset manager BlackRock and the private equity firm Silver Lake.  However, other big investors have been hammered by the trading frenzy.  Hedge fund Melvin Capital – which bet heavily that shares in Gamestop would fall – lost 53% of its value towards the end of January, according to media reports.  The firm has since received commitments for fresh cash from investors, leaving it with around $8Bn in assets, but that is still down from $12.5Bn at the beginning of 2021, according to Reuters.  

Meanwhile, it's a slow data week with 10 Fed speakers but the attention shouls swing back to earnings as 1/3 of the S&P 500 reports this week.  We have PMI and ISM today and Non-Farm Payrolls on Friday but a pretty dull data week otherwise:

With no Fed speakers sheduled on Friday, I imagine they think the Non-Farm Payrolls Report for January will be pretty good.   Earnings are going to be jam-packed so we should have the lay of the land by the end of the week as we see which way the money has been flowing in the last 3 months of the pandemic.

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And here's an interesting chart to watch in the age of Robin Hood – Increased Short Interest ahead of Earnings:

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Given the rise of GME, EA may be an interesting play into their earnings.  EA is already trading at a high multiple (30x) and not a stock I would generally play but 12M shares are being shorted and that's 4 days' worth of volume so interesting things may occur.  A fun way to play this would be to buy the Feb $150 calls for $3.60 ($360) and sell the June $170 calls for $4.50 ($450) so that's a net 0.90 ($90) credit and the delta on the $150s is .36 vs .26 on the Junes so we should do well on a move up and not too bad on a move lower.  

Meanwhile, it should be a very interesting week.

 


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  1. Good Morning.



  2. Not super positive moving forward – after adding $7T to our debt in 4 years (half in tax cuts) we suddenly have to worry about giving too much money to the bottom 99% who surely don't deserve it. The hope this year is that vaccination and slowing down the virus will boost the economy, but we are still 3-4 months away and the average person has bills pilling on. Not counting cities and state hurting for cash.


  3. Speaking of vaccination – moving relatively fast and accelerating in fact. But dealt a weak hand from the previous admin:


  4. Good morning!

    Big Chart – Well we are in the midst of a 5% pullback it seems so we'll see what transpires here.  I'd rather see at least 10% to shake out some of the noise and 20% would actually get me bullish again.

    • Dow 31,200 to 29,650 is a 5% drop of 1,550 so call it 300-point bounces to 30,000 (weak) and 30,300 (strong)

    • S&P 3,860 to 3,666 is 5% down and 193 points so call is 3,705 (weak) and 3,745 (strong)

    • Nasdaq 13,600 to 12,920 is 680 points so I'd say 13,050 (weak) and 13,200 (strong).  Notice that harsh rejection at 13,050 – that does not bode well for the Nas.

    So it's a combination of failing the weak bounce, the lack of positive economic events and then our expectation of Nas company earnings that would lead us to bet the Nas down here.  

    • Russell 2,170 is a better line and then 2,061 would be the 5% and that failed but the bounce would be 22 points for 2,083 (rejected) and 2,105 (strong).

    Speaking of Fundamentals:

    Still 3,000 new deaths day = 100,000/month added to the pile.  Every day is 9/11 and we just go on about our lives… amazing!  At least cases are dropping off since Biden took control, hopefully deaths will follow lower.

    Vaccinations on a good track.  Amazing how fast we can move when we decide to.

    The job of vaccinating large swaths of the population will fall largely on retail pharmacies, with companies such as CVS Health Corp. CVS +0.57% Walgreens WBA -0.91% -Boots Alliance Inc., Walmart Inc. WMT -0.78% and Kroger Co. KR -2.78% saying they are prepared to give tens of millions of shots a month.

    “We’re going to have to look at ways to increase our access points. We’ve got to be able to step up the pace to vaccinate people across the country if we want to make a dent in this,” said Bart Buxton, co-chair of the Covid-19 vaccine taskforce for McLaren Health Care Corp. The Flint, Mich.-based hospital system teamed with Walgreens to administer doses to its 26,000 employees as part of the first phase of vaccinations.

    Hospitals and health systems, already overwhelmed by treating coronavirus patients, can’t also bear the brunt of vaccinations, Mr. Buxton said. “Health systems like McLaren can’t do this by themselves.”

    Pharmacies are well-positioned to play a major role in Covid-19 vaccination efforts, industry executives say, because they are among the most-accessible health-care providers for many Americans, including people 65 and older who often pick up medication from local supermarkets or drugstores. These businesses say they also can draw from their experience in providing shots for flu, shingles and other illnesses.

    CVS and Walgreens combined have 19,000 U.S. stores, while Walmart, Rite RAD -0.53% Aid Corp., Kroger and Publix Super Markets Inc., together have another 11,000 locations. Add to that dozens of regional grocers with pharmacy counters.

    CVS says it can vaccinate 20 million to 25 million people a month once supplies are available. Walmart said in January that it would be able to vaccinate 10 million to 13 million a month.

    President Biden said last Monday that his target of administering 100 million Covid-19 vaccines in his first 100 days in office might rise to 150 million. As of Friday, 27.9 million shots had been administered, out of 49.2 million distributed since mid-December, according to CDC data.

    Drugstore chains and retailers with pharmacies say they have the manpower and physical space to handle mass vaccinations and, in some areas, have already stepped in to help local and state officials. Big chains say they have online scheduling tools capable of handling an influx of appointments.

    Walgreens has said it plans to hire about 25,000 people across the U.S. to administer the vaccine. It employs 75,000 pharmacists and technicians. CVS, which employs 34,000 pharmacists and 65,000 technicians, declined to say how many workers it is hiring.

    Among the biggest challenges now for retailers is dealing with customers eager to know when it’s their turn.

    “We’re doing everything in our power to avoid confusion about how to get vaccinated,” a CVS spokesman said. In addition to long-term care facilities, the drugstore chain is offering shots to select groups in Indiana, Massachusetts, New York and Puerto Rico. People eligible for a vaccine must make an appointment.

     

    “We answer that question dozens, hundreds of times a day,” Charlie Hartig, chief executive of Hartig Drug Stores, a small Midwestern chain, said of the question of vaccine availability. “Education is taking up time.”

    News/Batman – It's not news to us, there's a vaccine, it will be distributed at WBA and CVS – how else are you going to vaccinate 300M people?  Doctors don't have the storage equipment, it's impractical to do it that way, hospitals would crowd up but we can subsidize drug stores who are already logistically deployed to service pretty much every community in America and WBA and CVS already have strong vaccination programs in place (not to mention robust databases) so they have everything they need to implement a mass vaccination. 

    And, while people are there – they may buy a candy bar too!  

    If I had put out that research note for Goldman Sachs, I'd be collecting my $1M bonus right now!  cool


  5. Big Chart / Phil – That 10% difference between the 50 and 200 MA has to give somehow. 





  6. Vaccinations/Phil – my provider is Kaiser Permanente (southern California branch), and they're saying, hang on, supplies are short, we're working our way down the priority list and will let you know when you're due. Kaiser Permanente has 12.4 million members, over half in California.






  7. US corporate sentiment is increasingly upbeat – The Daily Shot


  8. How the Stock Market’s Relentless Rise Saved Companies


  9. 10 year bull market in commodities coming? Let's play natgas and commodities. NAK CLF UNG?


  10. which one of you guys is pumping nak today?


  11. XRT / Phil   GME is now 19% of XRT   What do you think of a put spread in XRT as a way to play a short in GME


  12. GME is down 88 points (-27%) and the weekly 240 puts are CHEAPER (by 25%!). Now that was some volatility priced in last Friday.

    willsons/NAK – I'm in. Also AMYZF, PZG, UNG, and CLF


  13. GME – redditors, or someone, have bought 11,219 contacts of the weekly 800 calls, currently at 10.

    THAT'S NUTSO.


  14. Reddit seems to be targeting some other names as well, AMC, BB, SNDL (not so much Silver even though this is in the headlines, they seem to be revolting against that one) 


  15. 10-year bull/BDC – Where have I heard that before?

    NAK/Willsons – That would be my kids now that they've discovered Reddit can manipulate the market.  LQMT is next.

    Jackie seriously asked me this weekend what the risk of going to jail is as she understands the markets and Reddit well enough to be able to pretty much do what she wants with penny stocks.

    XRT/Stock – Would have been a much better idea last week!  

    I'd sell 5 March $80 puts for $9 ($4,500) against 5 long Jan $70 puts at $9 ($4,500) for net zero and play for the premium decay.  In theory, you have 354 days to sell and March is 46 days to expiration so you're selling $4,500 worth of premium in 13% of your time so 7 more chances to collect $4,500 certainly makes up for the $5,000 difference in strike.

    GME/BDC – People get way too cocky on these things.


  16. American eagles selling for like $50 on ebay. NUTSO



  17. A quick scan of WSB:

    - they're holding GME

    - "reddit buying silver" is fake news / Citadel manipulation


  18. SLV trades today

    7000 April $28 puts sell to open ITM around $3.70

    July $25/$35 call spreads ,   something like 20,000X

     

     


  19. Professional manipulation is much easier to predict! 

    I don't believe in conspiracy theories generally but I got to think that some big fish are involved in that Reddit deal! If you have a chance to kill the competition and not leave any fingerprints, the temptation must be too good. And make 1000% doing it!


  20. Speaking of manipulation.  Damn it looks like GME faced some shady BS today.  Almost no volume throughout the day despite a steady decline in share price with a big drop at the open and another big drop after the close.  We'll see what happens but looks awfully manipulated.


  21. The Mar GME 25 puts went from around $7 to $4.  The Implied vol. was insane.  The smart move was probably to sell puts into the drop.  I guess thats why Phil always says "sell into the excitement".