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Thousand-Dollar Friday – Our Futures Shorts Pay off Nicely!


Are we having fun yet?

In Wednesday's Live Trading Webinar, we discussed using $58.50 as a shorting line for Oil (/CL) Futures and we had a couple of small dips but we finally caught the big one this morning.  We don't need to be so quick to jump back on and re-short as we'll certainly get a strong bounce AND it's a holiday weekend — so "THEY" are as likely to drive us back to $58.50 as they are to panic out and sell.   

That's why, last Friday, we went with the Ultra-Short Oil ETF (SCO), picking up the March $9 calls at 0.65 — to play for the post-holiday drop without having to worrry about the Futures over the weekend.  Those calls dropped to 0.55 on Thursday, as oil topped out, but finished the day at 0.72 and we have 35 days left to play, looking to make 0.25 x 50 contracts at 0.90 is $1,500 on our $3,250 outlay (50 contracts in our Short-Term Portfolio).  

Similarly, we played the Russell (/RTY) Futures short at 2,300 (as noted Tuesday in: "Tuesday Trouble at 2,300 on the Russell 2000") and, so far, that's been good for $1,250 per contract but were up $2,500 per contract on yesterday's dip and we should have taken that money and ran — but we didn't.  Though I still like them for a nice, weekend hedge.

Keep in mind that it's only a hedge when you have long positions that will gain as much or more than your potential loss on the (in this case) short position if the market goes higher — otherwise it's a BET and BETTING on the Futures is a very dangerous thing to do.   

As noted on Tuesday, according to our fabulous 5% Rule™, we've had a 10% run in 10 days on the Russell from 2,100 to 2,310 and that's 210 points so we expect a 20% (weak) retrace of that run or 42 points — back to 2,268 or a strong retrace back to 2,226.  If the weak retrace holds (has so far), then we may be consolidating for a move higher but, if the strong retrace fails — then it's very possible we go all the way back to 2,100 – which would give us some very exciting gains!

Remember, the 5% Rule™ is not TA.  TA can only tell you what did happen while the 5% Rule™ tells you what is likely to happen next — that is much more useful for trading purposes!   Of course the 5% Rule™ can only tell you where the resistance lines are, not which way the market will go but, in cases like this — on Tuesday we determined that the alternative (going higher) would be silly — it made the downside bet very obvious.  

At this stage you can eyeball it but it looks like, so far, we have just a weak bounce off the weak retrace line at 2,268 and that means we're more likely consolidating for a move down than up.  We then look to the news to see if there is anything that is likely to give us a lift into the holiday weekend to check our premise:

And I'm not cherry-picking.  Those are all front-page stories from the WSJ and Bloomberg this morning.  Just read them out loud and add "sending the markets to record-highs" and, if that doesn't sound right to you — then you should be shorting!  

See how easy investing is?  

Have a great weekend, 

- Phil


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  1. Good morning! 

    • The major averages are in the negative territory, but if this week's action is anything to go by, that means little about where they'll finish the day.
    • The S&P (SP500) -0.2%, Nasdaq (COMP) -0.4% and Dow (DJI) -0.1% are lower as strong leadership remains elusive.
    • There's more action in the bond market, where Treasuries are selling off, pushing yields back close to one-year highs. The 10-year yield is up 3 basis points to 1.19%. At the start of the week, it hit 1.20% for the first time since before the pandemic hit.
    • But the rise in long-term rates isn't helping any of the reflation sectors, aside from Financials (NYSEARCA:XLF). That, combined with all the Big 6 megacaps slightly lower, is leaving the broader market at sea.
    • But overall, stocks remain the place to be, with equity funds seeing record inflows.
    • The 11 S&P sectors are split, with lots of bouncing between red and green in the middle.
    • XLF is the leader, while Info Tech (NYSEARCA:XLK) is bringing up the rear, with chip stocks giving up some of the previous session's outsize gains.
    • In earnings, Disney is slightly lower, another stock seeing a selloff after what looked like a very strong quarter.

    See how they talked it up until that 10-year auction and then they let it come back down.  That's exactly what we thought Powell was scheduled for.

  2. Phil / NDX 5% lines-

    Can you re-post the NDX 5% lines? I went back through the posts this week but could not find them.  Thx!

  3. As a newbie, I've never really shorted anything. Primarily out of fear of not knowing how. I have participated in your SDS and SQQQ plays as hedges. Any tips for a first time shorter?

  4. It may not be evident the lackluster action in the broader market this week, but stocks have never been hotter.

    Global equity funds saw the largest inflows on record for the week ended Feb. 10, according to EPFR Global.

    About $58.1B flowed into equities, while $13.B went into bond funds. 

    "The big surprise has been that part of the fiscal stimulus checks that went out ended up in the market," Mohamed El-Erian, chief economic advisor for Allianz, told Bloomberg. "There is a lot of liquidity sloshing around and it's just looking for a home."

    For the U.S., it was the second-biggest week of inflows to large-caps at $25.1B, while small-caps saw $5.6B coming in, the third-biggest week ever.

    The five largest U.S. large-cap funds by total assets are (NYSEARCA:SPY)(NYSEARCA:IVV)(NYSEARCA:VTI)(NYSEARCA:VOO) and (NASDAQ:QQQ)

    Tech continues to dominate, with another record. Tech stocks saw inflows of $5.4B in the week into Wednesday. Financials saw inflows of $1.8B, while $1.9B went to energy and $1.3B went to healthcare. (Chart below from BofA via @PriapusIQ.)


    Across the rest of the globe, $600M went into European equities, $1.7B flowed into Japanese funds and $5.4B went to emerging markets.

    BofA highlighted reasons to be cautious because of the record numbers in a note today.

    Policy stimulus continues to flow to Wall Street assets, not Main Street, “inciting historic wealth inequality via asset bubbles,” strategists led by Michael Hartnett wrote, according to Bloomberg.

    They also noted that Main Street inflation will come after the vaccine programs are rolled out and said the BofA Bull & Bear indictor is up to 7.7, close to a sell signal at 8.

    One of the people benefiting greatly from the flows into large-caps, and tech in particular, is ARK Investment Management CEO Cathie Wood, who runs the ARK Innovation ETF (NYSEARCA:ARKK) among others.

    Wood said this week the bubble is in fixed income, not equities, and pointed to net outflow from equities since 2018.


    • Bite Acquisition (NASDAQ:BITE) has priced upsized initial public offering of 17.5M units (from 15M) at $10/unit.
    • Units kicks-off trading today on NYSE.
    • Each unit consists of one share of common stock and one-half of one redeemable warrant at $11.50 /share.
    • SPAC intends to focus search on the traditional and non-traditional restaurant sectors in North America.
    • Underwriters' over-allotment is an additional 2.625M units.
    • Offering is expected to close on February 17.
    • Albemarle (NYSE:ALB) +2.4% and Sociedad Quimica y Minera de Chile (NYSE:SQM) +1.6% pre-market after both are upgraded to Buy from Neutral with respective $184 and $62 price targets at Citi, which says it is turning more bullish on the lithium companies due to stronger electric vehicle momentum.
    • Citi's P.J. Juvekar cites "EV momentum in China and Europe, the dissipation of excess lithium inventory, and announcements by OEMs like GM to go all-electric by 2035" for his bullishness, with momentum to continue as several lithium projects were delayed over the last two years.
    • Juvekar expects 2021 will be "the year of volumes" and 2022 will be "the year of price" in lithium.
    • SQM has the most exposure to spot prices and should benefit first; for ALB, in addition to lithium, Juvekar like its Bromine and Catalysts divisions, which are "cash cows" that should support lithium growth.
    • Lithium stocks have drifted lower since Australia's Orocobre announced a stage 3 scoping study into a further expansion at its Olaroz mine in Argentina.
    • Squeeze stocks that have been in the sights of Reddit's WallStreetBets board are seeing less volatility, with premarket share moves relatively smaller.
    • Pot stocks, which plunged yesterday after becoming the latest target of retail traders and options buyers, are mostly higher before the bell.
    • Yesterday's selling in the group was enough to move the Canadian benchmark index (SPTSX), despite the small weighting of pot companies.
    • Tilray (NASDAQ:TLRY) is up 5%, Sundial Growers (NASDAQ:SNDL) is down 4%, Aurora Cannabis (NYSE:ACB) is up 1%, Hexo (NYSE:HEXO) is up 2%, Cronus is up 4% and Canopy Growth (NYSE:CGC) is up 1%. OrganiGram Holdings (NASDAQ:OGI) is looking the most volatile, up 8%.
    • Among ETFs, the ETFMG Alternative Harvest ETF (NYSEARCA:MJ), is up 1% premarket after a drop of nearly 25% yesterday. The AdvisorShares Pure Cannabis ETF (NYSEARCA:YOLO) is up 2% and the Global X Cannabis ETF (NASDAQ:POTX) is up 2%.
    • The original squeeze and gamma stocks are also seeing much more muted moves.
    • GameStop (NYSE:GME) is off 0.4% after holding above $50 for three-straight sessions.
    • AMC (NYSE:AMC) is up 0.7%, Koss (NASDAQ:KOSS) is down 4% and Express (NYSE:EXPR) is down 2.5%.
    • The Justice Department and other regulators are investigating actions of investors that led to the squeeze rallies, subpoenaing information from social media companies and brokerages, including Robinhood.
    • Virgin Galactic (NYSE:SPCE) falls 7.44% in premarket action after providing an update on its test flight.
    • "We have been progressing through our pre-flight preparations and, during that process, we have decided to allow more time for technical checks. We are working to identify the next flight opportunity."
    • The FAA opened up a flight restriction yesterday near the launch site to raise expectations that the flight was a go.
    • Morgan Stanley initiates research coverage on Fisker (NYSE:FSR) with an Overweight rating and price target of $27.
    • The firm calls Fisker its EV sleeper pick.
    • Analyst Adam Jonas: "FSR is a play on an all new, asset-light, design-centered EV business model that improves time to market and break-even points. In a very crowded EV startup field, we think FSR stands out as one of the more de-risked and strategically underpinned business models."
    • Jonas and team think investors underestimate that FSR's path to commercialization is significantly aided by Magna, which is said to have a mastery of bringing high quality vehicles to market on time, with high quality and good economics.
    • Valuation is seen attractive at 6.2X estimated 2025 EV/EBITDA and 0.6X estimated 2025 EV/sales.
    • Shares of Fisker are up 15.28% premarket to $17.81.
    • Read the latest Seeking Alpha author breakdowns on Fisker

  5. Good morning! It's raining in Altadena, yahoo!

  6. NDX/EMike – I haven't done those in ages, that's why.  There's no reality to the Nasdaq so the lines aren't going to mean much.  /NQ tends to range in 5,000s so 5,000, 10,000 and 15,000 are most significant and therefore 12,500 is an important line, but we blew right past that.  Still, the math from 10,000 to 15,000 simply puts you in 1,000-point segments and each segment has 200-point retraces so, at the moment, we're at 13,600, 13,800 and 14,000 are the lines in play.

    See the first time we hit 10,000 (Feb) we pulled back a lot but that was the virus, of course.  Then we consolidated a bit at 10,000 and shot right up to 12,500 and that's a 2,500-point run so retraces should be 500 points to 12,000 and 11,500 and that happened and then on to 15,000 where we still have the same 500-point retraces but, since we had such a fast move up – it's very likely we'll get a strong, 1,000-point retrace off 15,000 which means 14,000 should be a tough line to cross as it's the strong retrace anyway. 

    Meanwhile, in a broader perspective – the whole rally is insane and we should be back around 10,000, not 14,000.

  7. Shorting/Swamp – In this market, shorting is very dangerous.  As I said above, it's mainly for hedges.  The hedges are insurance policies you expect to lose money on as they protect the gains on your longs.  If anything, start small and get used to the idea.  

    We shorted CMG and TSLA – not good so far!

    Oil back to $58.50 – have to short that again (/CL).

  8. So TSLA went from $100Bn at the start of the year to $760Bn now – gaining $660Bn in market cap.   They sold 500,000 cars.  Let's give them 50x earnings, that would require $13.2Bn in profits at some point.  Let's say that point is 4 years from now (2025) and that they go from 500,000 to 1M to 2M to 4M cars in 2025.  They have to make $3,300 per car on 4M cars in 2025 just to be at 50x earnings.   This past year, they made $690M on 500,000 cars so $1,380/car.  I guess if they never have competition and never make a mistake and double every year – sure, why not?

    CMG made $356M in 2020 and their market cap is "only" $43.5Bn and that's just 122x sales so a real bargain compared to Tesla.  CMG is not a tech company, you say?  Why should only tech companies trade for 100s of times earnings?  Is TSLA really a tech company when they kind of manufacture everything?  AAPL "only" trades at 37x earnings – where's that logic?  

    Bottom line – the markets are silly.

  9. swampfox

    Your safer plays are Leap BCS (bull call spreads) like AMGN buy the Jan 23 210 call and sell the Jan 23 245 call cost about 16 to 16.20 sell the Jan 23 210 put for 27.70 in proportion of 2x BCS 1x put and sell 1x the April 21 for about 3.25. Cost 32 – 27.70 – 3.25 = 1.05 or 105$ If AMGN reaches 245 in Jan 23 you have a spread of 35 x200 = 7000 $ for a cost of 105 $. Further you can continue selling short term calls until the end of 2022. Obviously you can do this play in multiple of the above, but never bet the farm on it. The above was my additional play of this morning.

    If this is not clear to you come back and ask. 

  10. ‘They’re unrecognizable’: One woman reflects on losing her parents to QAnon

  11. Yodi – Thanks. For AMGN what strike April call are you selling?

  12. Yikes, they are blasting oil up into the long weekend.

    Indexes popping too.

    $1.68 could be a nice short on /RB too if you are feeling brave.

  13. vkat_mn AMGN Apr21 255 call

  14. vkat_mn put a GTC order it might go up still to 4.00!!!

  15. Limited credit spread on MRNA Apr21 140/130 for 2.40 credit.

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  17. If wti makes it to 60.37 it will have had a 15 percent move in a week and a half. wow

    swampfox  futures trading is not something to just jump into. If you havnt already read all phils valueable advice in past blogs and videos. And then before trading with big leverage real money use a paper trading account or trade index micro futues so that you learn without getting major losses.

  18. Oil/Tommy – Crazy – I certainly wasn't expecting $60 to be tested.

    Good example though as I'm down $1,000 per new contract and not much do do excelpt DD at $59.50 to raise my average short to $59 and hope we get a pullback next week.

  19. Phil/PSW/Market data,

    has anyone subscribed to market chameleon or similar websites to get options activity report. There is one Market Beat website as well. So many out there…so wanted the guidance.


  20. pat_swan,

    FWIW, I looked at one guy who runs a system that uses option breakouts (days when call volume exceeds open interest in a security) supposedly to identify six sigma trades (Blitz Alerts found on Not very clear up front on system's annual returns – fair amount of hype.

    Caveat Emptor

  21. This morning's play on AMGN, I comment to raise the April 255 call from 3.50 to 4$. Now the option is already up to 3.70. Possible we should wait till 5$ !!!!

  22. Market data/Pat – I used to use Trade Monster but I didn't think it was that good of an indicator.  That was in the early 00s

    • Longer-term rates are back at one-year highs, despite the latest CPI showing little retail inflation pressure and Federal Reserve Chairman Jay Powell doing his best to dismiss the idea of "actual inflation" right now.
    • The 10-year Treasury yield hit 1.2% and the 30-year yield topped 2%. Both matched levels they hit Monday, the highest since before the pandemic surge in bond prices.
    • (NASDAQ:TLT) -1% (NYSEARCA:TBT) +2%
    • Yields eased back in the middle of the week, especially after Powell's speech to the Economic Club of New York where he said the Fed had no plans to change asset purchase, quelling worries about a taper tantrum.
    • GDP projections are ramping up in anticipation of a $1.9T fiscal stimulus package. Economists, on average, are forecasting Q2 GDP rising at a 5.6% annualized rate, with Q3 at a 6.2% rate, according to the latest Bloomberg survey.
    • Those rates are both 1.6 percentage points higher than the average forecasts in January.
    • American Express (NYSE:AXP) pared some earlier gains after revealing in 10-K filing that it received a grand jury subpoena last month from U.S. Attorney for Eastern District of New York related to sales practices for small business cards.
    • It also received Civil Investigative Demand from the CFPB  seeking information on sales practices related to consumers.
    • AXP is cooperating with the inquiries and doesn't believe the matter will have a material adverse impact on its business or results of operations.
    • Recall Feb. 5, Consumer credit rises 2.8% in December, driven by nonrevolving debt.
    • Rising pricing pressures over the course of the year wouldn't surprise Dallas Fed President Robert Kaplan, he said in an interview with Yahoo Finance.
    • Some inflation will come from shortages in such things as semiconductors, wood products, packaging products, and metals, which "will be resolved over time."
    • Crude oil prices could also add to inflationary pressure as he expects global oil prices will "firm further."
    • "The jury's out on how much of this inflation pressure is going to be persistent," Kaplan said. Structural forces, such as technology and globalization, help to offset rising prices.
    • Asked whether President Biden's $1.9T stimulus plan risks overheating the economy and leading to higher-than-wanted inflation, he said structural headwinds of technology-enabled disruption is a counter-balancing force against inflation.
    • Note: Personal consumer expenditures, a measure that the Fed watches closely to gauge inflation has stayed consistently under 2%, except for the short spike that occurred after the sharp drop in March-April 2020.
    • Predicting the path of inflation is "not going to be as clear as it might have been 10 years ago or 20 years ago, where you'd be confident that you'd have strong growth, tighter labor force, wage pressure," he said.
    • "I think the jury's out on how the cyclical versus structural forces play out," Kaplan said.
    • On Wednesday, the Bureau of Labor Statistics said January's core Consumer Price Index increased 1.4% Y/Y, still below the Fed's 2.0% target. On the same day, the Atlanta Fed said businesses see year-ahead inflation at 2.2% in February, unchanged from the January measure.
    • The broader market has gained enough traction to get into positive territory, with only defensive sectors falling. But the gains are slight, with megacap weakness weighing on the averages.
    • The Nasdaq (COMP) +0.11% is slightly outperforming the S&P (SP500) +0.1%. The Russell 2000 (RTY) +0.1% is up slightly.
    • The Dow (DJI) -0.1% is lower, with Disney dragging. Disney came through with strong streaming numbers, but investors look to be locking in some gains with shares up about 30% into earnings.
    • All the Big 6 megacaps are lower, with Tesla the weakest. It's off about 6% for the week.
    • Six out of 11 S&P sectors are higher, with the low-weight, high-volatility Energy (NYSEARCA:XLE) sector in the lead. Utilities (NYSEARCA:XLU) is the worst performer. Info Tech (NYSEARCA:XLK) is fighting the flatline and could be the difference between a positive and negative close today.
    • Longer-term rates remain elevated, with the 10-year Treasury at 1.19%.
    • Among active stocks, Twitter is on track for its 10th-straight winning session. Up 6%, shares are less than $1 away from its all-time high of $73.31.
    • Newell Brands is the biggest S&P decliner after weak results, although the stock did get some sell-side support today
    • The FDA has informed Moderna (MRNA -0.3%) that it can store up to 40% more volume in each vial of its COVID-19 vaccine, The New York Times reports.
    • The decision will allow the company to supply 14 doses from each vial compared to the 10 previously which was the industry standard.
    • In Late January, CNBC reported the company had requested the regulatory approval to raise the per vial doses to 10 from 15, a change that could alleviate the pressure on its fill/finish component in manufacturing.
    • The change in vaccine supply comes after Moderna confirmed a new deal with the U.S. government to deliver additional 100M doses of its vaccine bringing the total to 300M.
    • Total active drilling rigs in the U.S. rose for the 12th consecutive week, adding another 5 to 397, according to the latest monthly report from Baker Hughes.
    • U.S. drilling rigs targeting crude oil jumped by 7 to 306 – also its 12th gain in a row – while gas rigs fell by 2 to 90 and one rig was classified as miscellaneous.
    • Rigs targeting oil in the Permian Basin added 5 to 203.
    • February University of Michigan Consumer Sentiment (preliminary): 76.2 vs. 80.9 expected and 79.0 in January.
    • Current Economic Conditions: 86.2 vs. 86.7 prior.
    • Index of Consumer Expectations: 69.8 vs. 74.0 prior.
    • All of the decline in consumer sentiment is a result of the loss in Expectation index and among households with incomes below $75K.
    • Notes that consumers, despite the expected passage of a massive stimulus bill, viewed prospects for the national economy less favorably in early February than last month.

    Wow, that is horrifically low!

  23. Sold AMYZF at 1.54. 

  24. As usual, a big finish.  

    Have a great weekend, 

    - Phil

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  26. Sorry for the delay here. Spent the day on the slopes with the kids. You'd, Phil, and others. Thank you for the input. 

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  28. what a pump job

  29. Phil here one question to resolve my 18,500 stock loss on CCL.
    I am still holding 500 shares now worth 20.60 originally bought for 57.87.
    Actually due to option plays I could cut the loss to 12,000.00, but for the exercise we will take the stock loss only.
    Here my play: Buy a Jan 23 15/25 BCS 30 off @ 3.35 cost 10050.00
    Now I expect the stock will reach 25 by 2023, means I should have a net gain of 6.65 x 3000 = 19,950. This should cover my loss of 18,500.
    For good measure I as well sell Jan 23 10x 15 put for 4.35 = 4350.00, reducing my cost factor to 5,700.00, which in turn can be covered by selling 300 of the 500 non div paying shares. 6,180.00.
    So here I am looking at an anticipated gain of 19,950 to cover my 18,500 loss, and still holding 200 shares.
    Also a good exercise for new learning members.

    Any comments welcome.

  30. Yodi,

    Why don't you sell your stock (no div) for $10,000, so your loss is only $8,500$ And sell 4 put for $1740 and buy 11 x 15/25 BCS for $3.35=$3350

    If the stock is $25 by 2023 you will gain 6.65*1,100=$7,315+$1,740 for puts so $9,055 

  31. kgabor115, Thanks for your comments. The loss is 500x 57.87 = 28,935.00 less the present stock value 500 x 20.60 = 10,300.00 So even if you sell the 500 stock your loss is still 18,635.00 !!!!! That is what you have to get to get even.

  32. hopefully phil has electricity