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Fabulous Friday Finish

And the markets are back!

Well, back to where we were in the middle of July but hey, it does feel like we had a rally, doesn't it?  As noted yesterday, 4,400 on the S&P 500 is only the Strong Bounce Line as we have fallen from 4,550 so there's still 150-points to go before we are back to the August highs – so let's not get too excited that we're up for the week.

A strong bounce, however, was the minimum goal for this week to keep the rally alive – so we're forced to remain neutral now and see how next week will play out – but below that line is no longer an option for a "healthy" market.

Our 2-day rally has been on very low volume.  Next week we get CPI, PPI, Retail Sales and Consumer Sentiment reports, and Earnings Season kicks off Wednesday night with reports from BLK, DAL, FRC and JPM with many banks following Thursday and Friday.  Walgreens (WBA) reports on Thursday morning and I think they'll beat the $1.03 that's expected but, even if they don't – those are nice quarterly earnings against $47.85 shares in what is still one of our favorite value stocks:

We cashed in our WBA positions when the stock was $55, which was way over our targets but now I'm worried we won't see below $45 so, in the Long-Term Portfolio, we can sell 10 of the WBA 2024 $45 puts for $8.50 and that will net us in for $36.50, where we'd LOVE to own 1,000 shares of WBA for the long-haul.  If WBA does not go lower, we simply keep the $8,500 for prominsing to buy WBA at $45 over the next two years.  Easy money for any stock you REALLY would like to buy if the price goes lower.  

8:30 Update:  Jobs were a big miss, with only 194,000 being added vs 500,000 expected by leading Economorons and that leaves us still 5M jobs shy of where we were in 2019 but how could that possibly matter, right?  Certainly the market seems happy to ignore it.  There are supposedly 11M jobs available but that would indicate that the people who are not employed are not right to fill these jobs so we have a persistent Labor Shortage AND high Unemployment because we don't properly educate or re-train our workers in a dynamic work envirinment and these are the consequences. 

The jobless rate remains higher than the pre-pandemic level of 3.5%. But other measures – chiefly, wage growth – suggest the labor market is tight. The average hourly pay of private-sector workers climbed 4.6% in September compared with a year earlier, Labor Department data show, as employers raised wages to compete over a shrunken pool of workers.

One might wonder how Q3 Earnings could be on target when we're missing jobs numbers by 60% but worrying isn't something traders in this market are prone to doing – so we'll see what happens next week.  Meanwhile, less jobs means less demand for Dollars and that's knocking down the Dollar index, which is great for our Silver (/SI) Futures so let's not be greedy and set a stop at $10,000 and half off at $12,500 if we keep going higher – what a ride and congratulations to all who played!  

Have a great weekend, 

- Phil

 


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  1. Good Morning.



  2. Phil / WBA – trade alert does not show details of trade…..


  3. Good morning!  

    Nice bonus on /SI and /GC too, if you still have it.  Either way, take the win!  

     

       

    Oil tempting again for a short but scary into the weekend:

        

    I think at $80 I have to put my foot down with 1 short /CL and then – if it goes the wrong way over the weekend – I don't mind DD to bring up the average on 2 contracts as long as Brent (/BZ) hasn't popped $85.

    WBA/Batman – What details?  Just a short put:

    We cashed in our WBA positions when the stock was $55, which was way over our targets but now I'm worried we won't see below $45 so, in the Long-Term Portfolio, we can sell 10 of the WBA 2024 $45 puts for $8.50 and that will net us in for $36.50, where we'd LOVE to own 1,000 shares of WBA for the long-haul.  If WBA does not go lower, we simply keep the $8,500 for promising to buy WBA at $45 over the next two years.  Easy money for any stock you REALLY would like to buy if the price goes lower.


  4. Phil / WBA – see it now…. on the date it just said in progress – before….   Thanks


  5. Phil/SKT -

    I'm not sure if it's still in any of the portfolios — but I have a decent amount of the actual stock (relatively speaking) purchased back in the single digits.  I was selling covered calls and collecting dividends (once they resumed) so the position has been very kind to me over the past 18-24 months.  What is your outlook going forward?  The option premiums have collapsed recently so the covered calls hardly seem "worth it" anymore   Am I crazy to think the dividend will return to pre-covid levels around 0.30

    If so – I wil continue to hold the stock.

    Thanks


  6. Wide spread on WBA but the puts just sold for $8.25 so be patient.  If it doesn't fill, we can always pick a new one.  

    SKT/Jeff – We have a ton in the LTP:

    SKT Tanger Factory Outlet Centers Inc. 8000 2/12/2020 604 $57,360 $7.17 $9.53 $4.84     $16.70 $0.12 $76,240 132.9% $133,600
    SKT Short Call 2023 20-JAN 15.00 CALL [SKT @ $16.70 $0.12] -60 5/21/2021 (469) $-24,000 $4.00 $-0.10     $3.90 $0.34 $600 2.5% $-23,400
    SKT Short Put 2023 20-JAN 10.00 PUT [SKT @ $16.70 $0.12] -40 10/16/2020 (469) $-21,960 $5.49 $-4.79     $0.70 - $19,160 87.2% $-2,800

    Going forward, I think they are a solid operator and expect them to keep making money.  They just paid 0.178 and that's 1/2 of 2019 so I expect them to raise it over time and, since we're in the stock for net $1.425/share – getting paid even "just" 0.712 is a nice, annual, 50% dividend so my plan is to collect the money!  

    Aren't options fun?!?


  7. Don't get me going on WBA again, the great loss of the year.


  8. WBA/Yodi – Only because you had no faith. 

    Nasdaq lost faith today:

    That pre-market pump job was pretty good though….

    Good move on /SI getting out on top:


    • WTI crude oil crosses $80/bbl for the first time since November 2014 and is poised for a seventh straight weekly gain – the longest stretch of advances since December – as demand rebounds while supply remains tight.
    • Front-month WTI futures (CL1:COM) have since pared gains after hitting an intraday high of $80.11/bbl but still +1.6% to $79.59, while Brent crude (CO1:COM) +1.3% to $83.01.
    • ETFs: USOUCOSCOBNODBOUSL
    • Energy stocks (XLE +2.9%) dominate the top of today's S&P 500 leaders: APA +5.3%PXD +4.8%FANG +4.7%HES +4.7%COP +4.3%EOG +4.1%OXY +4%MRO +3.9%.
    • "Despite the rise in U.S. crude oil inventories in this week's report, the global market remains tight and in a supply deficit," Again Capital's John Kilduff tells CNBC. "Unless and until OPEC+ acts to meaningfully increase supplies, prices will grind higher still."
    • "In view of the current robust demand, which is likely to be additionally boosted by the switch from gas to oil, plus the restrictive OPEC+ production policy, the oil market will remain tight until year's end," says Commerzbank's Carsten Fritsch.

    • Bitcoin (BTC-USD +1.4%), the largest digital token by market cap, ends the week on a strong note as digital asset adoption and usage continues to expand globally even as governments seek to impose regulations on the sector.
    • As of Oct. 8, bitcoin (BTC-USD) climbs 11.8% in the past week while the second largest token, ethereum (ETH-USD), rises 4.5%; on a M/M basis, BTC +17% still outpaces ether's +2.1%. 
    • Some main drivers behind the recent crypto rally include the resurgence of inflation fears in the U.S. and Securities and Exchange Commission Chairman Gary Gensler's recent assertion that the U.S. won't ban crypto; this past week, BTC's market capitalization crossed back over $1T.
    • However, regulators around the globe weigh in on the rising usage/adoption of digital assets — whether it's in the form of cryptocurrencies, stablecoins or central bank digital currencies.
    • The Bank of England, for one, considers the crypto markets' rapid growth and development and sees "limited" risks to the stability of the U.K. financial system, according to the BOE's October Financial Policy Summary and Record report.
    • Still, the central bank's Financial Policy Committee says regulatory and law enforcement frameworks need to keep pace with the fast-growing crypto market.
    • Similarly, Gensler says the U.S. will focus on ensuring that the industry is fairly regulated, while Federal Reserve Chairman Jerome Powell said he has no intention of banning cryptos, but stablecoins need more regulatory oversight.
    • South Korea's FSC chairman recently said a 20% tax on crypto trading gains of more than 2.5M won (US$2,125) will take effect next year, The Korea Times reports.
    • "The new law governing the digital asset, coupled with a revision to the existing one provides sufficient grounds for the government," said Rep. Yoo Gyeong-joon.
    • When BTC first surged to $20K in 2017 from just under $1K at the end of 2016, South Korea was already thinking about implementing a crypto tax; a year later, the country banned anonymous crypto trades.
    • Earlier, SEC approves a recently filed bitcoin ETF that provides exposure to crypto-based firms.
    • U.S. Commerce Secretary Gina Raimondo said Friday that September's lower-than-expected job growth came about in part because of the Delta variant and a lack of affordable child-care options.
    • That said, Raimondo told CNBC that the market shouldn't "overindex" the figures from a single month. Rather, data watchers should realize that "you're going to see ups and downs," and should insted look at the general trend.
    • "Recovery isn't a straight line," she said. "We are recovering. There is still growth."
    • The U.S. Labor Department reported earlier Friday that the economy added just 194K jobs in September. That was far below both the 475K expected by economists and the 366K increase seen in the previous month.
    • That saiud, the unemployment rate fell to 4.8%, below the 5.1% projected by economists.
    • In terms of COVID, Raimondo argued that increased vaccination rates were necessary to support longer-term job growth.
    • But even while supporting vaccines in general, Raimondo said the Biden administration wouldn't push for a so-called "green pass." That's a document used in other countries to indicate that a person has received vaccinations and is allowed to participate in certain restricted public activities.
    • "We're not going to have a federally mandated, organized green pass," the commerce secretary said.
    • Rather, the commerce secretary argued that companies should mandate vaccinations for employees.
    • As for child care, Raimondo pushed for government investment in both child and elder care in order to unlock new supplies of workers.
    • "You want women to go back to work. They have to be able to send their kids to high-quality, affordable places for child care," she said.
    • Raimondo also pushed for funding "digital apprenticeships" to improve training for higher-skill jobs.
    • Asked about the current computer-chip shortage, Raimondo called on Congress to allocate cash for the construction of domestic semiconductor capacity.
    • To see how the market is reacting to the latest jobs data, turn to SA's in-depth equity commentary.

    • SpaceX (SPACE) reaches a valuation of $100.3B after existing shareholders agreed to sell up to $755 million in stock at $560 a share, according to CNBC sources. That means that SpaceX's valuation has risen 33% since February when it raised $1.2B at a valuation of $74B.
    • Elon Musk's space company now claims second place on the world's most valuable private companies list after surpassing payment processing firm Stripe (STRIP). China's ByteDance (BDNCE) holds the top spot with a valuation of $425B in its latest funding round.
    • SpaceX has acquired billions in funds to invest in its two major projects: Starship and Starlink. Starship is expected to replace SpaceX's current Falcon 9 lineup once operational and potentially carry astronauts to Mars. Starlink is Musk's plan to expand high-speed commercial internet service to millions of new users using 30,000 satellites.
    • SpaceX has shown more success than other private companies lately, as NASA said it would move two astronauts from Boeing's Starliner project to a SpaceX flight after Boeing delays.
    • Apple (AAPL +0.1%confirms that it will add two new complexes to its Apple TV+ headquarters located along the border of Culver City and Los Angeles, adding 550,000 square feet to the area.
    • The campus currently employs over 1,500 Apple TV+ and Apple Music team members and other staff in about 500,000 square feet of office space. The number of workers at the location is expected to double in size by 2026.
    • Apple said that the complex would serve as its headquarters for the region and be a "mixed used" facility but declined to offer specific details on operations there or a timeline for construction. The new facilities will incorporate environmentally sustainable building features and be powered by 100% renewable energy.
    • Check out details about Apple's iPhone 13 and other new products which were unveiled at a streaming event last month.
    • Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) are trading lower Friday morning after Loop Capital downgraded both of the stocks to Hold from Buy, citing supply chain risks and a chance for the Fed to raise interest rates sometime in the next year.
    • For Home Depot, analyst Laura Champine lowers revenue forecasts by $700M in Q3 and $300M in Q4. “We believe our estimates for HD had been too aggressive given challenges the company is facing in maintaining in-stock positions in key categories,” she writes, also raising concerns over management's choice to set stores for Christmas after Lowe's will. She predicts "roughly flat" sales growth in the second half.
    • For Lowe's, Champine expects a 3% fall in sales on the basis that the company faces tougher Y/Y comparisons than Home Depot.
    • Champine writes that she was wary of downgrading the home improvement retailers because of rising home prices, but that she expects COVID-related buying to "cool" and believes that the overall retail environment is now "more fraught with risk."
    • Home Depot price target lowered to $325 from $375. Lowe's price target held at $220.
    • HD shares are down 0.78% and LOW shares are down 1.03% pre-market.
    • Just last week, Home Depot made Evercore's Best Core Ideas list along with three other stocks.



  9. California’s Giant Sequoias Are Burning


    • As the market moves into third-quarter earnings season, Credit Suisse looks at how the markets and U.S. economy are stacking up compared with before and during the pandemic.
    • "The past year and a half has been a wild ride with market and economic metrics swinging chaotically," strategists led by Jonathan Golub write in a note. "While some measures such as Treasury yields and P/E multiples – might be similar to pre-Covid levels, their journeys have been quite tumultuous. Others, by contrast – such as CPI and oil prices – remain quite dislocated, with readings at multi-year highs."
    • Here are the key metrics they highlight from the past 20 months:
    1. The S&P 500 (SP500) (NYSEARCA:SPY) is 27% above pre-pandemic highs and 93% above post-pandemic lows.
    2. Forward earnings expectations are 21% above pre-pandemic levels.
    3. The market is at a forward P/E of 20x, down from the September 2020 peak of 23.2x, but up from pre-pandemic level of 19x.
    4. The S&P dividend yield is 1.3%, down from 1.8% pre-pandemic.
    5. The 10-year Treasury yield (NYSEARCA:TBT) (NASDAQ:TLT) is back around its pre-pandemic level of 1.6% after troughing at 0.51% in August 2020.
    6. "While IG and HY spreads blew out during the pandemic, at 0.88% and 3.60% today, they are below their pre-pandemic levels of 1.07% and 4.15%."
    7. The jobless rate of 5.2% going into today's payrolls report is well down from the 14.8% peak, but above pre-pandemic level of 3.5%.
    8. "The recent 61.1 ISM reading signals robust economic growth, and is well above its prepandemic level of 51.1."
    9. CPI of 5.2% is the highest it's been in 13 years.
    • Moderna (NASDAQ:MRNA) is investing to deliver another 1B doses of its COVID-19 vaccine to low-income countries in 2022, out of a total capacity of 2B – 3B doses targeted for the year, CEO Stéphane Bancel said on Friday in a letter posted on the company website.
    • “Given that fewer than 1 billion people live in OECD countries, this was done solely to provide more doses to low-income countries,” he added.
    • The latest delivery target is in addition to the recent commitments made by the company to improve the vaccine availability in low-income nations, Bancel explained.
    • They include an agreement to deliver 500M doses to the WHO-backed COVAX Facility from Q4 2021 through 2022 and a decision to build a manufacturing plant in Africa to produce up to 500M annual doses.

    • General Motors (GM +3.1%) trades higher after Credit Suisse reaffirms its Outperform rating on the stock following the automaker's Analyst Day presentation.
    • Analyst Dan Levy writes that GM showed investors the "potential for growth, EV leadership, and significant revenue outside core vehicle sales." Levy believes that the "aggressive" presentation showcases GM's goal to move on from its perception as a zero-growth company lagging in innovation.
    • GM wants to triple earnings by 2030 which would imply a case for the stock to be valued over $100 today, writes Levy. He believes it will take some time investors to fully underwrite the stock and maintains his price target of $75.
    • Other analysts were also impressed by the presentation, with both Wedbush and Bank of America making positive comments.
    • The number of active drilling rigs in the U.S. continues to rise, adding another 5 to 533 in Baker Hughes' latest weekly survey.
    • U.S. rigs targeting crude oil rose by 5 to 433, while gas rigs were flat again at 99 and one rig was classified as miscellaneous.
    • Rigs targeting oil in the Permian Basin gained 3 to 265.

  10. Now this is a good day:

    STP Value Change Today: $10,354

    LTP Value Change Today:$1,160

    That's the benefit of selling premium – time is on our side so our default position is to gain money via time decay.  If things happen to go in our direction – so much the better!

    Oil (/CL) hit $79 so up $1,000 per contract – not bad for a day's work!  


  11. I still tinkering to buy more stock of VZ any comments?


  12. Phil:  It seems that the Virtual Portfolio tab was eliminated.  How does one find the Monthly Portfolio Reviews?  Are they posted anywhere, or is it necessary to search through the daily chats to find them?  Thanks.


  13. VZ/Yodi – I like T better but VZ is good too.

    Both look terrible.

    Portfolio Tab/John – That's strange, I have no idea why it disappeared – I'll find out.

    Have a great weekend, 

    - Phil