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Faltering Friday (Again) – Ukraine this Time

Its Always Something GIFs - Get the best GIF on GIPHYIt's always something.

This week, "only" 113,964 people a day are catching Covid (2,306/day are still dying) and that's only a bit more than 1% of the population per month – so we should be (relatively) celebrating BUT NOOOOOOOO – now it's the Ukraine and the kind of "Will they or won't they?" thing that keeps TV viewers coming back for more every week.  

Putin already invaded Ukraine – in February of 2014, so this is the 8th anniversary of Putin's annexation of Crimea and in 2018, he built a bridge connecting it to Russia – so it's not like we thought he was going anywhere.  Now Putin wants the rest, especially Kiev, which used to be the capital of Russia.  More importantly, Putin has to pay Ukraine for land access for his oil and gas pipelines and THAT is the real reason all this is going on.  

Meanwhile, are you worred about the fate of the poor Ukranians or are you worried about the affect this has on your portfolio?  Well, if 2014 is any guide – the market doesn't care.  We had a great year in 2014, with the S&P climbing from 1,850 to 2,125 (15%) and oil topped out at $105 but collapsed all the way back to $50 by the end of the year.   

Our market is underperforming for other reasons (Inflation, Overvaluation, Supply Chain Issues, Government Gridlock, Lack of Stimulus, Fed Tapering, Rising Rates…), to start saying we are up and down based on the Ukraine is beyond over-simplifying things.  Ukraine is just another excuse now to cover the dumping of shares by the Banksters that has been going on since the fall, where we've had endless cycles of low-volume "rallies" followed by high-volume sell-offs – which is what we expect to see when institutions try to dump their shares on retail investors, who are brainwashed to "buy the dips."  

Never forget that, in 2008, the Financial Media was telling us to "Buy the Dip" all the way from -10% to -66% and I'm not saying not to buy anything – I'm just saying we need to be selective and we need to be well-hedged – just in case there is another 10-20% left to fall.  You really don't know where the bottom (or the top) is until you are looking at it in the rear-view mirror – trying to predict it is a very dangerous game.

Cramer is actually right in the above video, we were doing the same at PSW on that day, playing for the bounce.  The difference is that, after the bounce – we watched our Bounce Lines and they told us – and are still telling us – to remain cautious and here we are, right back where we were on January 24th after failing to clear the 40% strong bounce of the fall from 16,500 to 14,000 (2,500 points) which is 1,000 points back to 15,000.  The weak bounce line is 20% of the drop so 14,500 and you can see that didn't work either but what does work is our 5% Rule™,  which tells you EXACTLY what is going to happen long before it actually does:

My comments to our Members on that morning were:

What is hedging? | Advanced trading strategies & risk management | FidelityThank God for hedges!  

As of Tuesday morning's review, we had $800,000 worth of hedges in our Short-Term Portfolio and suddenly, on Friday morning – we're already wondering if that's enough, right?  This is why we ALWAYS hedge – especially in a toppy market and, as Fundamental Investors – we know when a market is toppy.  We also have RULES about hedging, like putting 25-33% of our unrealized gains into our hedges.  That's how our hedges rise proportionally with our portfolios – so we don't let ourselves get complacent in a rally.

So far, we haven't taken too much damage in our long portfolios.  That's because we mostly buy the kind of safety stocks people run to when there's a correction and also because, to some extent, our trades are self-hedging – as we tend to sell a lot of premium, which enables us to ride out small dips but, past 10% and things are still going to get ugly!  

We had been preparing for that dip long in advance and that happened to be a portfolio review day for our Members and you can see from our lack of changes that we were well-prepared for the dip and our signals told us we hadn't bottomed yet (Nasdaq dropped another 500 points the next week).  By Tuesday, the 25th, we had decided Russell 2,000 was the critical line on the Russell 2000 and below that we could get a major collapse.   This morning we're back at 2,028 – so have a nice weekend!  

We fell below it for a bit but recovered but any time the Russell is below 2,000, there really isn't a lot of support after 1,900 all the way to 1,500, which would be a tragic correction that would likely drag down all the indexes.  We did our Short-Term Portfolio Review this week, along with all of our portfolios and we're well-prepared for a 20% drop, if it comes.  If it doesn't, we'll still make plenty of money – just not as much as we could have if we ignored the danger.  I know I'll sleep a lot better with the hedges in place this holiday weekend.

Have a good one, 

- Phil


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  1. Good Morning!

  2. Good morning! 

    By the way, here's where we were the morning of Jan 25th, that was the day I decided we'd need the bounce chart for our anticipated worst-case 20% correction:

    • Dow 36,000 to 28,800 would be a 7,200-point drop with 1,440 bounces to 30,240 (weak) and 31,680 (strong).  We were below our predicted 33,120 mid-point at yesterday's lows.  
    • S&P 4,800 is 20% above 4,000 and that makes it an 800-point drop with 160-point bounces so 4,160 (weak) and 4,320 (strong) is where we are this morning (again).
    • Nasdaq is using 13,500 as the base and we bottomed yesterday at 13,706.  14,100 is the weak bounce and 14,700 is strong.  
    • Russell 1,600, would be about an 800-point drop with 160-point bounces to 1,780 (weak) and 1,960 (strong).

    The Strong Bounce lines on the S&P and the Russell were black that morning (on the cusp) and now they are green so hopefully they stay that way but again, this low-volume market won't take much bad news before panic sets in – so be careful.  As I said that day:

    So not much green on our bounce chart and ANY red on a chart which shows a 20% correction that hasn't happened yet is very bad indeed but that's how this chart is supposed to work – it's  a quick warning indicator that tells us when it's time to hedge – or when it's time to buy (a LOT more green than this!).  

    "Waiting to cut out the deadwood

    Waiting to clean up the city

    Waiting to follow the worms

    Waiting to put on a black shirt

    Waiting to weed out the weaklings

    Waiting to smash in their windows

    And kick in their doors

    Waiting for the final solution

    To strengthen the strain" – Pink Floyd

    And that is exactly what we've been doing with our portfolios – cutting the deadwood, weeding the weaklings, strengthening the strain….

  3. February 17th, 2022 at 4:06 pm Ignore this user

    GOLD/Phil   Am in mid-roll with GOLD into '24s, so now have:

    30 '23 $15 calls ($7)

    30 '24 $15 calls ($8.20)

    -10 '23 $20 puts ($3.2)

    Both longs have done well with the pop in GOLD so am thinking maybe keep the two spreads active for this run and sell '23 and '24 $25 calls against both rather than just selling the '23s and covering the '24s. Any thoughts?


  4. Not too pretty so far:


    Oil $88.50!



    /SI finally got over $24.

  5. GOLD/Wing – I think GOLD could do much better so I'd sell 30 of the 2023 $27s at $1.85 as the $25s are only $2.40 so 0.55 for $2 in strike is not worth taking the money for.  That's $5,550 you can spend to roll your 2023 $15s to 2024 $15s ($3,600) and then see how things go.  If GOLD turns down, you can always sell 30 2024 $25s (now $3.80) for $3.50, let's say, and that's $10,500 and that's can go towards the roll of all 60 2024 $15s down to the $10s, currently $13, if that drops down below $3 ($18,000).  If gold goes up, you can cover the rest when it's over $26.

    INTC/Rn – This is why they missed Trade of the Year – no immediate catalyst.   I certainly do want to be in for the long-term though.

    Feb. 18, 2022 10:04 AM ET
    • Q4 E-Commerce Retail Sales+1.7% Q/Q vs. -3.3% in Q3.
    • Total retail sales for the Q4'21 were estimated at $1,688.6B, an increase of 2.5% (±0.2%) from Q3'21.
    • Q4 e-commerce sales in the accounted for 12.9% of total sales.
    Feb. 18, 2022 10:04 AM ET
    • January Leading Indicators-0.3% to 119.6 vs. +0.2% consensus and +0.8% prior.
    • The Conference Board Coincident Economic Index for the U.S: +0.5% to 107.9 vs. +0.2% in December.
    • Lagging Economic Index: +0.7% to 110.2 vs. +0.1% in December.
    • “The U.S. LEI posted a small decline in January, as the Omicron wave, rising prices, and supply chain disruptions took their toll,” said Ataman Ozyildirim, senior director of economic research at The Conference Board.
    • Meanwhile, The Conference Board forecasted first-quarter GDP growth to slow somewhat from the "very rapid pace" of Q4 2021.
    • Previously, (Feb. 19) Philly Fed outlook rose to 16 in February.
    Feb. 18, 2022 10:01 AM ET

    January Existing Home Sales+6.7% to 6.50M vs. 6.088M consensus and 6.09M prior (revised from 6.18M). The surge comes as mortgage rates approach 4%, indicating buyers may be closing now before rates creep higher.

    At the end of January, the inventory of unsold homes fell to a a new all-time low of 860K, equal to 1.6 months at the monthly sales pace, also an all-time low.

    Y/Y, sales fell 2.3% from 6.65M in January 2021.

    "Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers," said National Association of Realtors Chief Economist Lawrence Yun. "Consequently, housing prices continue to move solidly higher."

    Homes priced at $500K and below are disappearing, Yun said, while supply has risen at the higher price range.

    Median existing-home price for all housing types in January was $350.3K, down from $358K in December, but up 15% from $303.6K in January 2021. That's the 119th straight month of Y/Y increases, the longest-running streak ever.

    First-time buyers were responsible for 27% of sales in January, falling from 30% in December and 33% in January 2021.

    On Wednesday, mortgage applications fell for the second straight week

    SP500 +0.03%Feb. 18, 2022 9:48 AM ET3 Comments

    The stock market is looking indecisive Friday as it contends with the major themes of the week: geopolitics and interest rates.

    The Nasdaq (COMP.IND) -0.3%, S&P (SP500) -0.1% and Dow (DJI) -0.3% are a little lower.

    The 10-year Treasury yield is down 4 basis points to 1.93%.

    "The level of tension in Ukraine that drives the day-to-day market mood is marginally more positive, because Sergei Lavrov and Antony Blinken plan to meet next week," SocGen's Kit Juckes said.

    There is a host of Fed speakers later on that could give the market firmer direction.

    Chicago Fed President Charles Evans, New York Fed President John Williams and board member Lael Brainard all weigh in.

    "One of the effects of developments in Ukraine has been to make investors more cautious about the prospects of aggressive central bank action to tackle inflation," Deutsche Bank's Jim Reid said. "Immediately after the very strong CPI report from the US last week (+7.5% year-on-year), fed funds futures were basically fully pricing in a 50bp move in March at the intraday peak. But since the Ukraine situation escalated last Friday, that’s almost continuously fallen back, with futures only seeing a 38% chance of a 50bp move next month."

    See the stocks making the biggest moves this morning.

    IVV +0.04%Feb. 18, 2022 9:20 AM ET6 Comments

    ETFs and conventional funds experienced net retractions for the week ending Feb 16, with investors removing a total of $46.4B in funds, according to the latest Refinitiv Lipper weekly fund flow report.

    Money markets led the outflow charge with $41.9B exiting the door. This marked another significant outflow from this category, following the previous week’s loss of $33.4B.

    Aside from money markets, taxable bond funds also observed net outflows, totaling $8.1B, along with tax-exempt bond funds, which lost $1.3B. On the other side of the spectrum, equity funds were the weekly winners as they attracted $4.8B of new money.

    Equity-based ETFs pulled in capital for the week, $5.3B in total, making it the segment's third positive week of inflows out of four. The iShares: Core S&P 500 (NYSEARCA:IVV) led all ETFs, garnering $5.6B on the week. The VanEck: Semiconductor ETF (NASDAQ:SMH) came in second place, attracting $1.3B.

    However, the SPDR S&P 500 ETF (NYSEARCA:SPY) and the iShares: MSCI Kokusai (NYSEARCA:TOK) were the two major equity funds that witnessed the largest weekly capital outflows, with $3.9B and $3.8B leaving the funds, respectively.

    From a fixed income vantage point, the space lost $4.3B on the week. The largest ETF retractors were the SPDR Bloomberg 1-3 Month T-Bill (NYSEARCA:BIL) and the iShares: IBoxx $Investment Grade Corporates (NYSEARCA:LQD) which lost $1.9B and $1.6B, respectively.

    The largest fixed income ETF inflow leaders were the iShares 7-10 Year Treasury Bond ETF (NASDAQ:IEF), attracting $607M, and the iShares: 20+ treasury Bond ETF (NASDAQ:TLT), taking in $366M.

    On a broader ETF front, data shows that 60% of the assets inside the $7T U.S. ETF market fall inside funds that have expense ratios under 0.10%.

  6. MPNGF -15.31%Feb. 18, 2022 9:19 AM ET6 Comments

    • Chinese food delivery co. Meituan (OTCPK:MPNGF) dropped 12% after reports that Chinese regulators called for lower fees for food delivery. Shares of Alibaba (NYSE:BABA), which controls Meituan rival, fell 4.4%.
    • China's National Development and Reform Commission and 13 other agencies came out with proposals that push for delivery platforms to “take another step to lower the service fees charged to restaurants in order to lower their operating costs," according to an FT report, which cited the NDRC proposals.
    • Meituan has been a big target for Chinese regulators in the past year and the latest crackdown comes after the Chinese government fined the food-delivery giant $533M for allegedly violating anti-monopoly laws in October.
    • Meituan controls about 70% of China’s food delivery market, according to the FT report. Meituan shares shed $26B in market value in trading in Hong Kong on Friday.
    • Meituan (OTCPK:MPNGF) first was targeted by Chinese antitrust regulator in late April when the authority started a probe into POFT practices at the food company in response to complaints filed against Meituan.

    FXI -2.51%Feb. 18, 2022 9:16 AM ET

    • China's central bank is expected to keep its benchmark lending rate unchanged at its monthly rate-setting on Monday after the People's Bank of China left its medium-term lending facility loans unchanged this week, Reuters reported.
    • Separately, Yi Gang, a PBOC governor, said inflation is "generally mild," Bloomberg reported, citing a statement posted to the bank's website late Friday. Yi also repeated that the PBOC will keep prudent monetary policy flexible and appropriate. That reiterates a statement he made earlier this week to G-20 finance and central bank chiefs.
    • Earlier this week, analysts said data that came out this week indicating slower inflation could provide room for more policy easing. All 24 financial institutions surveyed in a Reuters poll expected that the one-year loan prime rate will stay at its current rate at the February decision.
    • The Chinese yuan is rising 0.2% against the U.S. dollar on Friday, and has increased almost 1.0% against the greenback over the past three months. WisdomTree Chinese Yuan Strategy Fund (NYSEARCA:CYB) edged down 0.1% in Friday premarket. iShares China Large-Cap ETF (NYSEARCA:FXI) are down 1.4% in Friday premarket trading, KraneShares CSI China Internet ETF (NYSEARCA:KWEB) is falling 2.6%.
    • In January, the PBOC cut the overnight SLF rate by 10 basis points to 2.95% to mitigate economic headwinds.

    MRNA +2.34%Feb. 18, 2022 9:05 AM ET3 Comments

    • Moderna (NASDAQ:MRNA) said it is expanding its mRNA pipeline with three new development programs.
    • The programs are for herpes simplex virus (HSV) vaccine candidate mRNA-1608; varicella-zoster virus (VSV) vaccine candidate mRNA-1468 to reduce the rate of shingles; and a new checkpoint cancer vaccine candidate (mRNA-4359).
    • The company said HSV and VZV are latent viruses that remain in the body for life after infection and can lead to life-long medical conditions. Moderna (MRNA) now has five vaccine candidates against latent viruses in development, including against cytomegalovirus (CMV), Epstein-Barr virus (EBV), Human immunodeficiency virus (HIV), HSV and VZV.
    • In the cancer vaccine program, the company is planning to explore initial indications for advanced or metastatic cutaneous melanoma and non-small cell lung carcinoma.
    • MRNA +0.1% premarket to $146.50

    DE -2.16%Feb. 18, 2022 7:23 AM ET5 Comments

    Deere (NYSE:DE) +0.9% pre-market after easily beating FQ1 earnings and revenue estimates and raising its full-year profit forecast, anticipating strong demand for its farming and construction equipment.

    The company guided for FY 2022 net income of $6.7B-$7.1B, up from its prior forecast of $6.5B-$7B, in line with $6.9B analyst consensus estimate.

    But Q1 net income fell to $903M from $1.22B in the year-earlier quarter; the company said the UAW work stoppage contributed to inefficiencies in certain factories and higher production costs.

    Q1 total sales increased 6% Y/Y to $9.57B, while cost of sales jumped 15% to $6.7B, citing production issues related to the delayed ratification of the UAW labor contract and "persistent challenges" posed by supply chain issues and COVID-19.

    Q1 sales by segment: Production & Precision Ag +9% to $3.36B, but operating profit declined 54% due primarily to higher production costs and an unfavorable sales mix; Small Ag & Turf +5% to $2.63M, while operating profit fell 21% Y/Y; Construction & Forestry +3% to $2.54B, as operating profit gained 1% due mainly to price realization.

    For FY 2022, Deere forecasts Production & Precision Ag net sales will increase 25%-30%, Small Ag & Turf revenues will rise ~15%, and Construction & Forestry is seen gaining 10%-15%.

    "Looking ahead, we expect demand for farm and construction equipment to continue benefiting from strong fundamentals," Chairman and CEO John May said.

    Deere shares have gained 21% over the past year and 11% YTD.

  7. Disney World Has a Big Problem

  8. Phil/BABA – Can't get off the ground!

  9. BABA/Seer – But at least it stopped falling.  

    Not the Nasdaq though – 14,033!

    Ugly finish in Europe:


    DAX is pretty similar to our indexes – 10,000 to 15,000 with an overshoot to 16,000 so back to 15,000 is a CORRECTion, more than a pullback.

    Very bad if they fail to hold 15,000 – then we're looking at another 1,000 points down easily.

    TSLA 2x ETFs coming!

    TSLA -2.76%Feb. 17, 2022 5:53 PM ET24 Comments

    Whether investors are bullish or bearish on Elon Musk's Tesla (NASDAQ:TSLA), Direxion Funds plans to have them covered. The issuer has filed for three ETFs that track the electric vehicle maker.

    According to the U.S. Securities Exchange Commission prospectus, the three funds include Direxion Daily TSLA Bear 1X Shares, Direxion Daily TSLA Bear 2X Shares, and Direxion Daily TSLA Bull 2X Shares.

    The Bear 1X Shares fund plans to deliver investors a -100% daily return on TSLA, meaning that if shares of the EV maker drop $1, the fund will rise by $1 for the single day.

    Meanwhile, the Bear 2X Shares and Bull 2X Shares will provide daily -200% and +200% returns on the price of TSLA. So if the stock gains $1 on a particular day, the Bear 2X shares will fall by $2 and the Bull 2X shares will rise by $2 for the single day.

    In order for the exchange traded funds to achieve their investment objectives, the funds will invest primarily in financial instruments, such as swap agreements, that provide leveraged and inverse exposure to TSLA.

    At this current juncture, none of the ETFs have formal ticker symbols or expense ratios attached to them.

    Tesla’s price action: -5% on Thursday, -23.6% year-to-date, and +15.9% over a one-year period.

    Direxion is not the only issuer that looks to capitalize on the popularity of TSLA. Innovator ETFs Trust intends to launch the Innovator Hedged Tesla ETF, which will provide a risk-managed investment approach to the share price of Tesla.



  10. Phil – what did you think of YETI earnings? Looked ok to me, guidance is $1.66B (against a market cap of 5.4B), and FY 2022 EPS of $2.82 (so a PE of 22). Nothing concerning, and should climb back up to 80+ ?

  11. CROX fans,

    Could this (79) be the elusive bottom ?

  12. Phil – what type of spread + Naked Put would you recommend for SWAV.  I believe it is a grower with high probability of a takeout within the next year. Thanks

  13. YETI/Rn – Guidance was off but silly reaction, revenue drop to $1.665 from $1.693 and EPS down from $2.95 to $2.84 – I kid you not.   And it's over supply chain issues, nothing that's going wrong in the company.  Overall, they are expected to hit $250M in profits this year, up from $213M last year and, at $62, you can buy the whole company for $5.4Bn so call it 22x earnings but the earnings are growing fast.

    CROX/8800 – So far, it looks like someone huge is dumping until -$20, then pausing…  May not stop here.  

    SWAV/Dan – Gee, $5Bn for them?  Seems a bit much.  I assume you have expertise in what they are bringing to market?  SWAV is trading at 20x book and 25x sales vs maybe 5x and 4x for the average company.  I think they got miles ahead on valuation and are only coming back to reality.  

    So, when you say "recommend" – I don't.  Options only go out to December and you can sell December $100 puts for $7.50 and that nets you in for $92.50 but that's still $3.5Bn and still not for me.  If you consider that free money and you REALLY want to own 500 shares for net $100 ($50,000), then you could take the $3,750 you get from selling 5 puts and buy 5 December $140 ($33)/160 ($25) bull call spreads for $4,000 and, if all goes well, you'll get $10,000 back over $160 – which is a nice 166% in 300 days – if it works…

  14. RUT held 2,000 (on the nose) and /NQ held 13,900 – which wasn't a goal.  At least we're not getting worse.

  15. Phil – thank you … understand it is not a "recommendation". 

  16. Any reason you like them?

    Yikes, finishing on a down note – not a good sign.  

    I'm happy enough with our hedges but was hoping not to have to test them so soon!

    Have a great weekend, 

    - Phil

  17. Have a good weekend.   Will there be a post Monday ?  

  18. Credit Card/Phil – sent an email to Admin, but still haven't heard anything about this. Thanks.

  19. ‘We get the raw deal out of almost everything’: a quarter of young Australians are pessimistic about having kids

  20. Saudi Oil Minister Urges OPEC+ to Keep Building Consensus

  21. Good read: The Comedian-Turned-President Is Seriously in Over His Head

    We forget that's how this guy got the job!

  22. Oh, I remember – It's a little like what we've seen from Italy, and let's not forget the clown elected in 2016!