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Just Another Manic Monday – Holiday Edition

Covid is spreading faster than holiday cheer.  

I don't care because Moderna (get 'em) had great lab results against Omicron and I was lucky enough to have 3 Moderna (MRNA) shots this year.  We sold 5 MRNA 2024 $200 puts for $25 in our Long-Term Portfolio (LTP), putting us in 500 shares for net $175 and, at $37.75 on Thursday, I pointed out that it was still good for a new trade.  MRNA pulled back to the $250 line but, as Fundamental Investors, we don't worry about the PRICE of a  stock – we only care about the VALUE of a stock and those are, strangely, two very different things.  Learning to take advantage of those differences is what PSW is all about!  

I was going to review our last 4 Member Portfolios over the weekend but the markets are down another 1% this morning as more and more countries go back to lockdowns over the weekend (and right before Christmas).  Things are so bad that Ireland has closed the bars (short Guinness).  Oil (/CL) is back down to $67.50, which can be played for a bounce into Wednesday's EIA Inventory Report (tight stops below).  Oil demand is at 99Mb/d, which is 2Mb/d below the pre-pandemic levels and oil traders tend to watch very short-term charts and don't realize holiday travel plans are not that likely to be cancelled in the US – as we're still in that denial phase (see Friday's useful sentiment chart).  

Oh and, once again, we did not pass the infrastructure bill – and that was supposed to improve demand as well.  Lack of stimulus in the US is making investors around the World nervous that other Governments can't afford to keep propping up the economy and GDP forecasts are coming down.  We're not terribly worried until we see more red on our bounce chart, which we've been using all month:

  • Dow  36,000 to 34,200 has bounce lines of 34,560 (weak) and 34,920 (strong) 
  • S&P 4,700 to 4,465 has bounce lines of 4,512 (weak) and 4,559 (strong) 
  • Nasdaq 16,500 to 15,675 has bounce lines of 15,840 (weak) and 16,005 (strong) 
  • Russell 2,400 to 2,080 has bounce lines of 2,144 (weak) and 2,208 (strong)

See, not so bad, is it?  We never hit 4,465 on /ES – it's just our projected 5% drop that hasn't happened yet.  Anything below 4,500 is a cause for concern as those charts like to form "M" and "W" patterns and if the right side of the "M" breaks 4,500, then perhaps the bigger M is in play for another 5% correction – all the way to 4,230.  Even if that happens though, it's still only a 10% correction and nothing to panic about.  So we're a long way from panic and ultra-light holiday trading isn't going to tell us anything for the next two weeks.  If you have your hedges in place (we do!), then this is an excellent time to take a nice two-week vacation and we'll see where things are on Janary 3rd.

There's no Fed speak this week and Friday is a holiday (the next Friday too), so only 8 market days until the 3rd.  We have Leading Indicators this morning, GDP on Wednesday is just the 3rd revision of Q3 , Chicago Fed and Consumer Confidence will be more interesting and then Thursday hits us with a lot of data we'll pay attention to:

Earnings reports are still trickling in and, before we know it – it will be time for Q4 earnings reports.

Image

Looking forward to a happy holiday season!  

 


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  1. …and a healthy one as well… Good Morning.


  2. Good snowy white morning. 60K people hospitalized now with 80% Omicron. It seems to be a never ending soap opera and the testing is MIA. Hmmm. Seems it is never going to end with people resisting the the shots. No such thing as taking too many precautions.


  3. Stock Markets are open this New Year's Eve, Bond Markets close at 2pm Eastern


  4. The CIDRAP that Snow recommended is very informative. They said that those who have been hospitalized had low Vit D levels and suggested taking more during the winter months as it seems to help immunity. It's all scientific research. Everything that might help is worth doing.


  5. An interesting CNN interview from this morning….Civil war, anyone?  :(

    https://www.youtube.com/watch?v=6AS11SbvLmM


  6. hi phil,

    i dont get it . i cant see how at least two months of global virus crisis will not have negative effects on markets.

    How come you seem so cool about it?




  7. pstas-No Manchin did not sign-total liar in the pockets of the coal industry. NO state needs more help than w Virginia. What a turd! 


  8. Phil / SPWR – the naked position…..   in one of the ports…..   are you still bullish on this ?…..   I left a 25% covered at a '24 $40 call.  which is not helping much…. 


  9. Civil War/1020 – It's amazing, isn't it.  US no longer qualifies as a Democracy and no one cares.

    Virus/Tommy – Because we have another $2Tn worth of stimulus tee'd up and ready to roll.  

    Infratructure/Pstas – I mean the BBB, of course.  It is very scary that the first $1Tn is already "poofed" without so much as an economic ripple. 

    SPWR/Batman – Yes, it's down with all solar at the moment as there's no funding for solar yet but CA is still mandating it for new construction and other states will follow – incentives or not.  

    SunPower (SPWR -4.1%) plunges after J.P. Morgan downgrades shares to Underweight from Neutral with a $27 price target citing relative valuation, 

    SunPower recently made clear its plans to focus exclusively on the residential solar market, as it will look to sell its commercial and industrial business.

    "The U.S. solar market has never experienced this many opposing dynamics," said Michelle Davis, principal analyst at Wood Mackenzie. "On the one hand, supply chain constraints continue to escalate, putting gigawatts of projects at risk. On the other, the Build Back Better Act [and extension of the Investment Tax Credit] would be a major market stimulant for this industry, establishing long-term certainty of continued growth."

     

    Could solar power 40% of the U.S. electric grid by 2035? The Biden administration thinks so.

    • Pandemic and legacy issues restricted SunPower's earnings growth in recent quarters.
    • SunPower should see increased earnings leverage as sales of companion storage products increase after a slow introductory period.
    • Two new lines of solar modules could renew SunPower's installation growth rates in 2022.
    • Recent technical consolidation in SPWR could provide a strong base for the stock's next move higher.

    By the way, I'm holding off on reviewing the other portfolios as we need to see where the market settles down first.  No sense in changing thing without proper information.

    Like /NG.  I was "stuck" with my 2 longs this morning but all better now because I waited and did nothing.  Now $3.85 is the stop.  



  10. That's because I forgot to cash them out on Friday when I left early – never do that!    Could have made that money twice…





  11. A one-two punch for the US economy


  12. hi phil

    Do you consider oil down 6 percent at 66.50 abit overdone?




  13. Revealed: the Florida power company pushing legislation to slow rooftop solar


  14. T and ABBV are one of my  shining stars today!!!!


  15.    

    • Dow  36,000 to 34,200 has bounce lines of 34,560 (weak) and 34,920 (strong) 
    • S&P 4,700 to 4,465 has bounce lines of 4,512 (weak) and 4,559 (strong) 
    • Nasdaq 16,500 to 15,675 has bounce lines of 15,840 (weak) and 16,005 (strong) 
    • Russell 2,400 to 2,080 has bounce lines of 2,144 (weak) and 2,208 (strong)

    Lost a lot of ground this morning.

        

     

  16. Phil/NQ

    Thoughts on shorting NQ below 15675?


  17. looks like we have some volume today


  18. Not sure if we still have the BBY in one of the Ports, but I left with the Jan23 80 long call.
    I plan to roll my Jan 23 long 80 call to Jan 24 80 long call for a cost of about 4.00. I should cover the cost by selling half the a mount of Jan 24 60 puts for about 7.50. This is my present offer. This gives me more than 2 years to sell shorter months calls against my long call position.
    In case I wish to buy the stock now at a reasonable bargain price for 95$, I would still sell the 60 or even 65 Jan 24 put only, reducing my cost of stock purchase, and wait for the stock to recover, then I would be selling shorter month calls against the stock. Not forget the stock has a yield of 2.92 %.
    Just my way of thinking not a recommendation, for that always do your own researches before you spend real money.


  19. SPWR/Phil   Had already rolled down to '23 $15calls, would you still buy back the short calls and roll out to '24?

    20 '23 SPWR $15c ($9)

    -20 '23 $40c ($3.38)

    -10 '23 $30p ($11.22)

    Thx.




  20. Science fiction revisited: Ramjet propulsion


  21. May Build Back Better back on?

     

     

    Manchin Outlines Tax, Policy Changes He’d Want in Biden Bill

    Revisions he wants may drain support from other Democrats

    West Virginian lashes out at White House staff, colleagues

    https://www.bloomberg.com/news/articles/2021-12-20/manchin-outlines-tax-policy-changes-he-d-want-in-biden-bill?srnd=premium&sref=6nxHgiEt


  22. Oil/Tommy – I thought $67.50 was overdone but that didn't stop it from going lower – still a good line to be long at.

    T/Yodi – I think $22 may have finally found a bottom.

    /NQ/Jij – To me, it's too dangerous to short after already falling 6%.  Below 15,500 is a better line – by then we're pretty clearly on the way to -10% (14,850).

    Of course the real line for /NQ is 16,000 so a 5% pullback is 15,200 and 16,500 was just an overshoot.  Either way, around 15,000 is a critical area and, if we use 15,200, that's an 800-point drop so 160-point bounces to 15,360 (weak) and 15,540 (strong) and that's where we're bouncing now – at 15,540 – the strong bounce line off the fall to 15,200 (which hasn't happened yet). 

    Action like this lets you know you are using the right sequence for the 5% Rule – so this just confirms that 16,000 is the right level for our base calculations.  

    Volume/Tommy – Not so much.  Notice /ES just paid a dividend.

    Date Open High Low Close* Adj Close** Volume
    Dec 20, 2021 454.48 454.95 451.14 453.36 453.36 53,474,607
    Dec 17, 2021 461.55 464.74 458.06 459.87 459.87 135,511,600
    Dec 17, 2021 1.636 Dividend
    Dec 16, 2021 472.57 472.87 464.80 466.45 464.81 116,568,600

    BBY/Yodi – Not for a while.  It did get cheap though.  I like them down here,

    In the LTP, let's sell 5 BBY 2024 $70 puts for $10.25 ($5,125) to remind ourselves to keep an eye on them and net $59.75 is pretty much free money to me!

    Yodi's spread is also very nice.

    SPWR/Wing – Yes, I would as it's something we want to do at some point and maybe it won't get lower than this.  If it does go lower, we can always roll again.

    Manchin/Batman – He's on a huge power trip now.   He's got 2 years to go so he does not give a crap.  He'll be 77 by the time he's up for re-election so he's just cashing in on his last term – making sure he gets paid for every vote.  West Virginia probably did more damage to the Democrats by electing this jackass than they would have done if they'd just voted Republican.  

    "The Green New Deal is a dream, it's not a deal. It's a dream. And that's fine. People should have dreams in the perfect world what they'd like to see. I've got to work in realities and I've got to work in the practical, what I have in front of me. I've got to make sure that our country has affordable, dependable, reliable energy 24/7, but you can't just be a denier and say, 'Well, I'm not going to use coal. I'm not going to use natural gas. I'm not going to use oil.'"[142]

    It seems an assault on the English language to call Manchin’s coal stake “a blind trust” — especially when the nation’s most prominent newspaper, the New York Times, reported in 2011 “Sen. Manchin Maintains Lucrative Ties to Family-Owned Coal Company.” Presumably Manchin noticed the name Enersystems or a second coal company, Farmington Resources, as he cashed their checks for $4.5 million since getting elected to the Senate.

    Virginia Canter, who was White House ethics counsel for presidents Barack Obama and Bill Clinton before becoming chief ethics counsel for Citizens for Responsibility and Ethics in Washington, or CREW, repeatedly used the word “stunning” when describing Manchin’s conflict of interest, noting that his coal income — a reported $491,949 in 2020 — is nearly triple his Senate salary of $174,000.

    Ms Omar delivered a sharp rebuke to the West Virginia senator in a series of tweets after the shock announcement on Sunday, in which Mr Manchin said he was against the legislation, calling it “bulls***”.

    The congresswoman derided the move in one of her tweets as being about the “corruption and self-interest of a coal baron”.

    “West Virginia is 50th in public health, 50th in childcare, 48th in employment. They support Build Back Better by a 43 point margin,” she said in a tweet.

    “This has nothing to do with his (Manchin’s) constituents. This is about the corruption and self-interest of a coal baron,” she added.

    That about sums it up.


  23. SP500 -1.46%Dec. 20, 2021 2:11 PM ET75 Comments

    • Stocks remain under pressure but off their lows for the session as reflation sectors struggle the most.
    • The Nasdaq (COMP.IND) -1.4%, S&P (SP500) -1.4% and Dow (DJI) -1.4% are all lower.
    • All 11 S&P sectors are down, with Energy the weakest as WTI crude drops 4%. It is followed by Financials and Materials.
    • All six megacaps are down, with Tesla the weakest.
    • Selloffs don't typically end until larger stocks are hit, so megacaps starting to roll over supports the idea that then end to the decline is nearing, Christopher Verrone, head of technical and macro strategy at Strategas, said on Bloomberg.
    • "Take some comfort that they're done selling the weaker players and they're moving on to the bigger weights," he says.
    • Rates are now higher, although there are growing worries from Omicron and now Sen. Joe Manchin's opposition of the Build Back Better spending bill. Goldman Sachs cuts its 2022 GDP forecast after Manchin's weekend announcement.
    • The 10-year Treasury yield is up 1 basis point to 1.41%, while the 2-year is down 1 basis point to 0.63%.
    • Fiscal and monetary policy and COVID "have been big drivers of risk asset performance for almost 2 years now (since the start of the pandemic)," Goldman Sachs' Chris Hussey says. "For most of the period since March 2020, however, both fiscal and monetary policy have been ultra-supportive. In the face of looming inflation pressures, however, that support appears to be fading."
    • "So perhaps the key variable to watch is not the virus or policy but rather inflation. And the underlying factors driving inflation include a tight labor supply and persistent supply chain bottlenecks."
    • Among active stocks, Carnival is the surprise gainer for the S&P after booking enthusiasm trumped shutdown worries.
    VIXM +1.55%Dec. 20, 2021 1:15 PM ET

    • Volatility ETFs and ETNs experience a topside surge on Monday as volatility levels in the S&P VIX Index (VIX) jumped up 15.7%, touching a two-week high of 27.39 before settling down slightly to the 25 handle.
    • Volatility levels increase as markets continue to sell off due to the growing global concerns around the Omicron COVID-19 variant. Fueling further volatility is the distressing setback President Joe Biden’s Build Back Better Plan felt by West Virginia Senator Joe Manchin, who outright rejected the nearly $2T plan.
    • Below is a year-to-date VIX chart showing the recent spike.

    CVNA -6.45%Dec. 20, 2021 1:43 PM ET3 Comments

    • Carvana (CVNA -7.3%) shares drop on reports that Florida has threatened to suspend the company's dealer license after issues with title transfers.
    • In an email, the Florida Department of Highway Safety and Motor Vehicles wrote that it “remains concerned with Carvana’s apparent inability to comply with the provisions of Florida law requiring a dealer to apply for title within 30 days of the sale and the impact that has on Florida consumers.” The email gives a deadline of Jan. 31, 2022 before the FDHSMV warns that it may commence administrative action to suspend Carvana’s dealer license in Florida.
    • The email exchange included a list of 300 vehicle sales where the title is still awaiting transfer, including 100 in Florida. Seeking Alpha previously reported on customer complaints and state disciplinary actions against Carvana.

    BBBY -5.38%Dec. 20, 2021 1:32 PM ET3 Comments

    • Bed Bath & Beyond (BBBY -5.5%) falls to its lowest level in about eight weeks on strong volume.
    • The retailer is seeing selling pressure on a day that the apparel store sector, in general, is out of favor due to concerns on the impact of the omicron COVID variant. Investors are also lightening up once again on some of the meme stock favorites from the early part of 2021.
    • The Seeking Alpha Quant Rating on BBBY dropped to Bearish from Neutral on December 8.
    • Compare valuation marks on BBBY to peers in the retail sector.

    WGO -3.08%Dec. 20, 2021 12:53 PM ET4 Comments

    • Winnebago Industries (WGO -4.4%) is slotted as BMO Capital Markets' top pick in the leisure sector. Analyst Gerrick Johnson and team point to WGO's strong execution, product innovation, market share opportunities, smart acquisitions and exposure to the outdoor lifestyle.
    • "While current trajectories of growth should level off, we think the market is under-appreciating the new legion of outdoor enthusiasts the pandemic has created who should support sustainable sales and profitability well-ahead of pre-pandemic levels," writes Johnson.
    • It is also noted that each peak earnings report has been better than the last and the firm thinks that even bearish investors will need to recalibrate higher where they think normalized earnings will be.
    • BMO has an Outperform rating on WGO and price target of $115 to rep more than 75% upside for shares.
    • The Seeking Alpha Quant Rating on WGO stepped up to Bullish from Neutral on October 28.

    SQM -16.04%Dec. 20, 2021 10:58 AM ET12 Comments

    • Bank of America out with a ratings cut on Sociedad Quimica y Minera de Chile (NYSE:SQM), taking the Company down to sell following last night's landslide victory for "far left" presidential candidate Boric.
    • Fears include higher taxes, interference in existing concessions, and the creation of a state-owned enterprise in charge of developing the lithium industry; all leading the analyst to reduce her EBITDA-valuation multiple from 14x to 8x 2022 earnings before interest, taxes, depreciation and amortization.
    • The analyst is 30% above consensus EBITDA estimates for fiscal year 2022, but feels the policy overhang will drive shares lower medium term, regardless of financial performance.
    • The market appears to agree with BofA, as the stock is off 14% this morning, with local index (BATS:ECH) down ~10%.
    • This follows a bearish lithium pricing note, and downgrades from Goldman just last week. 

    CPT +0.14%Dec. 20, 2021 10:49 AM ET4 Comments

    • Average monthly rents in the U.S. surge 7% in November and 21% over the past year as "many people have been priced out of the for-sale market and are looking to rent instead, but that demand is pushing up rents," said Redfin Chief Economist Daryl Fairweather.
    • The national median monthly mortgage payment for homebuyers climb 20% annually, but gains just 1% in November, according to Redfin's report.
    • Rents are up more than 30% in many metro areas, the report says. The 10 metro areas with the biggest increases in rent prices – up 28% Y/Y or more – were almost exclusively in Florida and New York. The exception is Austin, Texas, where rents rise 30%.
    • "If you are looking to buy or rent now, there's nowhere to hide from inflation when it comes to housing costs," Fairweather adds.
    • Apartment REITs that may be impacted include: Preferred Apartment Communities (NYSE:APTS), Equity Residential (NYSE:EQR), AvalonBay Communities (NYSE:AVB), and Camden Property Trust (NYSE:CPT).
    • Previously, (Nov. 23) Average monthly rent increase lost some momentum in October.


  24. Dec. 20, 2021 10:29 AM ET3 Comments

    • In the wake of a widespread China-based real estate crisis that was first ignited by China Evergrande's (OTCPK:EGRNF) (OTCPK:EGRNY) liquidity crunch, property developer Kaisa Group Holdings (OTCPK:KKPFF) fails to make some dollar bond payments, and is talking to creditors about a restructuring plan, the Wall Street Journal reports.
    • Kaisa (OTCPK:KKPFF) has $11.8B of dollar bonds outstanding, compared with $20B for Evergrande. Kaisa did not pay the principal and interest on a $400M 6.5% note that matured on Dec. 7, and missed more than $105M in overdue interest payments on three other bonds, the company told the WSJ.
    • Additionally, the company is in talks with creditors who proposed ~$2B in financing to Kaisa (OTCPK:KKPFF) with options including equity rights, convertible bonds and bridge loans, a person familiar with the matter told the WSJ.
    • Meanwhile, Hong Kong-listed shares of Kaisa drop 14% on Monday.
    • Previously, (Dec. 17) China Evergrande's offshore financing arm gets downgraded to default.

    CCL +3.12%Dec. 20, 2021 9:30 AM ET6 Comments

    • Carnival (NYSE:CCL): Q4 GAAP EPS of -$2.31 misses by $1.04.
    • Revenue of $1.29B (vs. $34M Y/Y) misses by $250M.
    • Press Release
    • Adjusted net loss of $1.96B.
    • As of November 30, 2021, 61% of the company's capacity was operating with guests on board and it expects the full fleet to be back in operation in the spring of 2022.
    • Total customer deposits increased $360 million to $3.5 billion as of November 30, 2021 from $3.1 billion as of August 31, 2021. For the third consecutive quarter, the company saw an increase in customer deposits.
    •  

      Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted, "Booking volumes continue to build for the remainder of 2022 and well into 2023 and we are achieving those early bookings with strong demand and pricing. Cumulative advanced bookings for the second half of 2022 and first half of 2023 are at the higher end of historical ranges and at higher prices, with or without FCCs, normalized for bundled packages, as compared to 2019 sailings. Booking volumes for the same periods during fourth quarter of 2021 were higher than the third quarter of 2021. "

    AVGO +1.32%Dec. 20, 2021 9:17 AM ET10 Comments

    • Broadcom (NASDAQ:AVGO) shares were off slightly in pre-market trading, Monday, as investors continued to go back-and-forth with the chipmaker following reports about what Apple (NASDAQ:AAPL) might have in the works regarding its wireless semiconductor plans.
    • Broadcom (AVGO) was off by 1.6%, Monday, but that decline ran counter to the company's shares rising 2.3% on Friday. And that day's gains came after a 3% drop on Thursday.
    • What's been causing all this momentum with Broadcom (AVGO) is a report that Apple (AAPL) is building a team to make its own wireless chips. And such a move would reportedly leave Apple's (AAPL) current wireless chip suppliers like Broadcom (AVGO) on the outside looking in with regards to Apple's (AAPL) mobile device efforts.
    • However, on Friday, Bank of America analyst Vivek Arya wrote in a research note that the reports of Broadcom's (AVGO) Apple business demise are "overblown in the near to medium term." Arya said that Broadcom (AVGO) has a $15 billion contract with Apple (AAPL) that is good through 2023 and includes RF--or, radio frequency--parts such as amplifiers, filters and switches. Arya said that he's heard no reports of Apple (AAPLplanning to bring the production of such parts within the company.


  25. Phil / HBI – don't see any news ( there than it leaving the S&P and heading to madcap) wee any reason for the drop?


  26. HBI/Batman – Nothing in particular.  I think retail is just selling off on virus concerns.

    Could have been worse, could have been better:

       

    SPY volume ended up at 94M – so not a lot of conviction to the drop.