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Technical Tuesday – To Bounce or Not to Bounce?

These are the bounce lines on the S&P 500 (/ES):

I made this chart at yesterday's low at 3:21 pm, in our Live Member Chat Room and I said to our Members:

On the whole, it's very well-behaved.  Notice at the bottom, the MACD seems oversold.  That combined with we are testing 4,000 (which should be very bouncy) and the VIX around 35 means we are very primed for a bounce back up now.  

The Fed is kind of a wild card but there are no major earnings likely to rock the markets.  PFE is a relatively low-weighted Dow component since it goes by price and PFE is only $47.80.  COP is the next biggie on Thursday but how can they have bad earnings?  They are not even in the Dow – CVX is.  No mega-tech to pull the S&P down either.  

On the Calendar, nothing important tomorrow other than Fed rumors but it should be a bit bouncy and then PMI and ISM services and the Fed Wednesday but, if they don't disappoint, then good time to retest the strong bounce. 

I sent an alert out to all of our Members and we adjusted our Short-Term Portfolio (STP) just a bit more bullish by cashing in some of the gains we made on our hedges.  We were looking for at least a Weak Bounce to 4,160 and, as I said above, hopefully a Strong Bounce back to 4,320.  At the moment (8 am), we're at 4,141 and we need some decent news to provide a catalyst if we're going to make it over the Weak Bounce line and have any chance to get to the Strong Bounce.  Failing the Weak Bounce would be – BAD!  

So that's not helping and, meanwhile, over in Los Angeles, the tone at the Milken Conference is kind of doom and gloomy, with Citadel's Ken Griffin warning yesterday that the "West Faces Existential Problems," saying the Fed MUST have inflation down to 4% by the end of the year (less than half the current rate) or a 2023 recession becomes inevitable.   This is essentially what the Fed has been hinting at with their more hawkish recent tone.  

United States Fed Funds Rate - 2022 Data - 1971-2021 Historical - 2023  ForecastFor all that tone, however, the Fed has only raised rates once in the past 10 years and that was 0.25% at the last meeting – that's speaking loud BS and carrying a microscopic stick…  The Fed needs to be back at 2.5% by the end of the year and, in 2017, they only made half of that trip and they started in January.  You can't get from here (0.5%) to there without being a lot more serious about this over the remaining 6 meetings – including tomorrow.  

But, 6 x 0.5 is 3% so, I think the Fed has been floating the idea of 0.75% just to let the markets be relieved if they "only" hike 0.5% tomorrow.  I don't see them going over 0.5% after that -1.4% GDP Report but they have forward inflation data we haven't seen yet and Natural Gas (/NG) is back at $8 this morning and Oil (/CL) is back at $105 and Gasoline (/RB) is back to $3.50 wholesale, which is averaging $4.20/gallon at the Retail level – just in time for our next Holiday Weekend (28th).  

But tomorrow is Star Wars Day (May the 4th be with you) and we'll take things one day at a time.  With so many factors undermining stability, Griffin warned that investors will need to be "quick" and "nimble" to take advantage of trading opportunities. He added that the next couple of months will be "incredibly telling" and that we are in a "tough time" to deploy capital, as the overall "pie" has been shrinking.  

He's certainly right about that as a new Gallup Poll says Economic Confidence is now lower (-39) than it was in May of 2020 (-33), when Covid first hit and the markets were in free fall.  Inflation is the top concern of 17% of the people polled in April – up 70% from 10% in February – that is NOT a thing that's improving….

The overall Economy is the top concern of 12% and Oil Prices were mentioned by 6% but 7% of the people were more worried about Immigration vs only 5% who cite Russia as their top concern and only 4% listed Covid while a whopping 20% cited "Poor Leadership" – Fox Nation indeed!  Just 2% of the people surveyed said that Economic Conditions were "Excellent" after $11Tn was spent to improve them over the past 24 months.  There are many words for that but, on the Titanic, it was "ICEBERG!"  

As you know, we have an acute labor shortage in this country and part of the reason is we killed 1M citizens with Covid and half the population has now had Covid and many of those people are suffering long-term symptoms that are still not properly understood.  Labor Participation had been in decline for two decades but fell very sharply from 63.5% in 2019 to just over 60% when the Pandemic struck.  To what extent did the Fed engineer this inflation to force people to go back to work?

As renters are acutely aware, it's very hard to live on a fixed income when they keep raising your rents and groceries and fuel costs at alarming rates.  People who used to be able to make ends meet are now struggling (hence the poll above) and we're about 3M workers short at the moment – about 1% of the population.  So the Fed keeps turning the screws (while crying crocodile tears about it) to push 3M people out of Retirement and back into the Labor Force.  This is something they'll have to do more and more over time as our workforce ages anyway, so we may as well get used to the whip.  

The Crimson Permanent Assurance (Monty Python's) from EpicFilmsGlobal on Vimeo.

Be careful out there!  

 


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  1. Good morning! 

    Rejected right at 4,160 so far is not a good sign, we stand ready to re-deploy the cash we took off the table yesterday if we can't hold the weak bounce lines (which starts by taking them in the first place).  Dollar is over $103 still and can break higher if the Fed is hawkish – especially as other banks have not committed to raising rates in kind.

    That's got pressure on Gold (/GC $1,850) and Silver (/SI $22.50) both of which are playable long at those lines with tight stops below but, again, dangerous as the Fed is meeting now and will announce tomorrow but rumors can come out of the meeting at any time.

     

    Oil is enjoying it's last week before the SPR release hits it.  As I've said, it's a tempting short but the war is too random:

        

    The indexes, meanwhile, are all making lower lows so step one to recovery is getting back over the March lows.  If they can't do that – MORE HEDGES!

       

    The STP, as it stands now:

    We sold 100 TZA calls yesterday and pushed cash back over $400,000 and we have a $300,000 TZA hedge at $70,000 ($230,000 upside), a $250,000 DIA spread at $150,000 ($100,000 upside), a $600,000 SQQQ at $40,000 ($560,000 upside) and an $800,000 TZA at $200,000 ($600,000 upside).  So that's about $1.5M in protection but we'll give some of that back if it's a sharp drop and, of course, the 2024s won't show much of a profit in the short-term.

    Ch-ch-ch-ch-changes:

    I don't like how this morning is going and, as noted above, the news is not that good so where's the upside catalyst for the strong bounce other than the potential "only" 0.5% rate hike tomorrow?  Peace won't suddenly break out, Covid won't go away, Inflation won't slam on the brakes, Supply Chains won't untangle overnight, Jobs won't suddenly fill and Consumers won't get more confident if none of those things are happening SO – since we need to PROTECT our longs – we have to get more bearish (again) ahead of the Fed.  Being wrong to the upside our LTP can deal with but being wrong to the downside would be tragic.  

    Let's buy back the DIA Sept $310 puts.  We're down just a little and removing them gives us a clear path to roll the short May puts, which are in bigger trouble.  My key concern is the Dow is a lagging index and 20% on the Dow takes DIA to $264 and that would suck!  

    Both TZA and SQQQ pay 4:1 but the Nasdaq is already down over 20% and we think BioTech has been oversold and there's a lot of attractive tech at this point so I think $70 is a stretch as it's 52% higher than $46 on SQQQ and that would imply another 17.33% downside on /NQ to 10,700 and I don't see that happening AND the short Jan $70s are rollable against the 2024 $30/60 spread that's half in the money.  Taking the short $70s into account, it's the net $40,000 (ish) spread with $560,000 (ish) of upside so let's double down on those to 400 of the SQQQ 2024 $30/60 bull call spreads with 200 SQQQ short Jan $70 calls.  

    Now we have over $2M worth of downside protection and I will be much more relaxed next week in Vegas.  

    Best of all, we've spent less than half of the $200,000 we took off the table so we'll end up with over $300,000 in CASH!!! and 33% more protection on these recent adjustments.  


  2. By the way – notice that, when we DD on the SQQQ spread we add $500,000 worth of long calls ($1M total).  Let's say we're wrong and SQQQ starts falling as the Nas pops back over 13,500 (-20% line).   Then we can cash 1/3 of our longs for $250,000 and drop it back to CASH!!! and suddenly we're short-term bullish.  That's another reason I wanted more, it allows us to make those adjustments if we need to and not worry so much about the short calls (as it would be $800,000 upside plus $250,000 cash covering 200 short $70s, which we very much doubt would be hit.  


  3. Good Morning.


  4. Good Morning. So PARA earnings show decent MAU growth but revenues/earnings decreases.  I wonder longer term how well they fare in a rising interest rate environment. Thinking of cashing out the entire position    and break even. Then I can watch them explode to $45 after a big buyout announcement. This has been a serious exercise in patience.


  5. Phil/Weak bounce – Is that just an indication of improvement? I thought we would need a strong bounce in this environment before we fellt all is clear. 

    BTW, classic line made today "speaking loud BS and carrying a microscopic stick".


  6. It's a very rough trading environment.  First Aark and now this:

    May 03, 2022 10:05 AM ET2 Comments

    Tiger Global, the hedge fund managed by billionaire investor Chase Coleman, is currently on track for the worst year in its more than 20-year history, with year-to-date losses currently sitting at 44%.

    According to Bloomberg, citing people familiar with the matter, the 2022 losses intensified during April, with the fund losing 15% over the course of the month. Tiger Global reported a 34% slide in the first quarter.

    "Markets have not been cooperative given the macroeconomic backdrop," Tiger Global told investors in a recent letter, per Bloomberg. "But we do not believe in excuses and so will not offer any."

    The sharp declines so far in 2022 mark a rare setback, as Tiger Global has built up a stellar reputation for amassing winning years. Bloomberg reports that Tiger Global reported annualized returns of more than 20% through 2020.

    But while down years have been extremely rare over Tiger Global's history, a decline in 2022 would mark the fund's second consecutive year of losses. The fund lost 7% in 2021.

    In addition to the 44% year-to-date slide in its flagship fund, Tiger Global has seen an even worse performance in its long-only fund. According to Bloomberg, that investment vehicle has seen a 52% drop in 2022 so far, with April witnessing a retreat of 25%.

    For more on how high-profile fund managers are reacting to the current market, read why billionaire hedge fund manager Paul Tudor Jones is telling investors not to own stocks.

    May 03, 2022 10:02 AM ET

    • 11.549M March Job Openings vs. 11.27M consensus and M prior (revised from 11.266M).
    • Job openings rate 7.1% vs. 7% prior.
    • On the last business day of March, the number of job openings was little changed at 11.5 million, the highest level in the history of the series which began in December 2000.

    May 03, 2022 10:01 AM ET

    • March Factory Orders+2.2% to $557.3B vs. +1.1% expected and +0.1% prior (revised from -0.5%).
    • New orders for manufactured durable goods rose 1.1% to $275.8B, up from February's upwardly revised decline of 1.7%.
    • Shipments: +1.4% to $274.8B
    • Unfilled Orders: +0.4% to $1,294.8B
    • Inventories: +0.8% to $483.4B
    • Earlier this week, (May 2) ISM Manufacturing hit its lowest in nearly two years.

    LOGI -4.05%May 03, 2022 10:00 AM ET

    • Logitech (NASDAQ:LOGI) shares fell as much as 5%, Tuesday, an investors reacted negatively to the computer device company cutting its fiscal year forecasts, due in part to effects of the war in Ukraine.
    • Late Tuesday, Logitech (LOGI) said that for its 2023 fiscal year it expects sales to grow between 2% and 4% over the $5.48 billion it reported for its just-completed 2022 fiscal year. The company had earlier forecast revenue to rise "in the mid single digits" on a year-over-year basis.
    • Logitech (LOGI) also trimmed its operating income outlook, and now expects such earnings of $875 million to $925 million, excluding one-time items, compared to a prior forecast of $900 million to $950 million in operating profit.
    • The company said it cut its forecasts after removing estimates for sales to Russia and Ukraine, which had accounted for about 1.5% to 2% of Logitech's (LOGI) annual sales. Like many Western companies, Lausanne, Switzerland-based Logitech (LOGI) has halted business in Russia due to that country's invasion of Ukraine.
    • Logitech's (LOGI) sales outlook took some of the shine off of its fourth-quarter report in which the company beat analysts' earnings and sales forecasts.

    LOGI Long Call 2024 19-JAN 70.00 CALL [LOGI @ $63.00 $-3.34] 20 3/28/2022 (626) $34,000 $17.00 $-7.85 $17.00     $9.15 - $-15,700 -46.2% $18,300
    LOGI Short Call 2024 19-JAN 85.00 CALL [LOGI @ $63.00 $-3.34] -20 3/28/2022 (626) $-20,900 $10.45 $-5.25     $5.20 - $10,500 50.2% $-10,400
    LOGI Short Put 2024 19-JAN 70.00 PUT [LOGI @ $63.00 $-3.34] -10 3/31/2022 (626) $-9,500 $9.50 $5.20     $14.70 - $-5,200 -54.7% $-14,700

    Net $60.50 on the short puts doesn't worry me.  The cut is due to the war, not operating mistakes or loss of interest by customers.  And current valuation is $11Bn at $63 and they are guiding to $750M in net profits for the year ahead (p/e is 14.6).  That's how they're doing in a bad year so this reaction is a mistake, which means we'll roll the longs and keep the short calls at target.  

    Let's roll our 20 LOGI 2024 $70 calls at $9.15 ($18,300) to 30 of the 2024 $60 calls at $14 ($42,000) so we're spending $23,700 to drop $12,000 into the money, widening the spread to $75,000 with a net net cost basis of $27,300 and, since we have 10 extra longs, we can sell 15 of the Sept $75 (not yet) for $2.50 and that's $3,750 using 136 out of 626 days so we can make about 1/2 our money back selling calls while we wait.  


  7. PARA/Jeddah – I am getting so tired of these fickle traders.  They are transitioning, this was expected.  Revenues were down 1.1% (and again, whose weren't post-lockdowns?) but direct-to-consumer, which is what they are trying to grow, was up 82%.  Adding 6.8M (10%) subscribers while NFLX dropped 2M subscribers – how is that bad?   Streaming revenues up 95%!  Also, it was a weak quarter for films with no major releases – that's just how the industry goes.  Keep in mind there's a tremendous up-front acquisition cost to customers.  VZ and T pay $500-$1,000 to get a new customer and they reap the benefits down the road – so does PARA and adding 6.8M new ones incurs a lot of costs.  

    • Paramount Global press release (NASDAQ:PARA): Q1 Non-GAAP EPS of $0.60 beats by $0.08.
    • Revenue of $7.33B (-1.1% Y/Y) misses by $60M.
    • Global streaming subscribers rose to more than 62M, adding 6.3M total subscribers in the quarter.
    • Expanded Pluto TV Global Monthly Active Users to nearly 68M.
    • Robust Monetization in DTC, with revenue up 82% Y/Y to $1.1B.
    • Achieved 95% growth in DTC Subscription Revenue, Fueled by Paramount+ – generated a 59% increase in DTC Advertising Revenue, driven by Pluto TV.

    At $29, PARA is $19.6Bn and they just BEAT on earnings, which are projected to be $1.8Bn this year so P/E is 11 for a company that is generally growing.  It is a long-term play unless someone buys them.  AMZN would be a good fit or AAPL as both could use a nice content-creating studio with a nice library (and getting Star Trek and Star Wars together for DIS would be huge).  I guess CMCSA would also be a logical buyer.  All these guys have 2 to 3x higher p/e than PARA so the purchase would benefit their main stock by adding lower p/e earnings – even if they paid a 50% premium ($45).  

    Weak bounce/Seer – It's an indication of physics, just like a ball bouncing off the floor doesn't indicate it will end up higher than it was – it's just the way objects fall.  Stock have the same kind of physics as there were obviously people who believed along the way up and the question is how many of them still believe compared to how many are trying to sell and that's why you hit certain spots where people start buying and then either the buyers or the sellers run out of conviction and the stock starts moving again.  The bounce lines just tell you where the resistance points are – you have to figure out which way the sentiment will break on your own.  

    What's also important is that you don't count a crossed line as support (or resistance) until you see the index spend at least two full days above it UNLESS it gets over the next line – THEN you can assume the initial line will be strong support next time.  


  8. Strong economy?  

    HG1:COM +1.00%May 03, 2022 9:59 AM ET

    Copper and aluminum prices fell to three-month lows on Tuesday, on worries over softening demand in light of slowing manufacturing activities in China and the U.S., along with a stronger dollar, expected interest rate hikes in the U.S., and the war in Ukraine, which is pushing up energy prices and hurting industry.

    London Metal Exchange benchmark copper (HG1:COM) recently traded -2.5% at $9,525.50/metric ton, and aluminum (LMAHDS03:COM) also -2.5% at $2,975/ton; copper is now down 12% from its March high of $10,845 and aluminum has dropped 25% from its peak of $4,073.50.

    Potentially relevant tickers include (RIO), (BHP), (VALE), (FCX), (TECK), (SCCO), (HBM), (AA), (CENX), (OTCQX:FSUMF), (OTC:ANFGF), (OTCPK:GLCNF), (OTCPK:GLNCY), (OTCQX:AAUKF), (OTCQX:NGLOY)

    ETFs: (COPX), (CPER), (JJCTF), (JJC), (JJU)

    "Sentiment has become gloomier," Commerzbank's Daniel Briesemann said, according to Reuters.

    Zinc, nickel and lead also trade lower in London while tin ticks higher.

    The International Copper Study Group issued a new forecast for a global copper market surplus of 142K metric tons this year and 352K tons in 2023.

    "World mine production this year is expected to benefit from additional output from new and expanded mines as well as an improvement in the general situation regarding the pandemic," the ICSG said.

    Goldman Sachs analysts said last month that higher copper prices are "an inevitability," forecasting new record highs by mid-year.

    Wow:  

    Job openings hit all-time high of 11.549M in March; quits rise to high of 4.5M

    May 03, 2022 10:02 AM ETBy: Gaurav BataviaSA News Editor6 Comments

    • 11.549M March Job Openings vs. 11.27M consensus and M prior (revised from 11.266M).
    • Job openings rate 7.1% vs. 7% prior.
    • On the last business day of March, the number of job openings was little changed at 11.5 million, the highest level in the history of the series which began in December 2000.
    • The quits rate rose to 3%, with the number of quits at 4.5M, another all-time high.
    • Retail trade posted a big rise in job openings.
    • Retail, hospitality and professional services saw a large quits numbers

    FIS +3.10%May 03, 2022 10:58 AM ET

    • Fidelity National Information Services (NYSE:FIS) on Monday has reiterated full-year guidance as Q1 earnings came in stronger-than-expected, highlighting growth in its Merchant Solutions unit.
    • "Our team’s focus on execution and robust cash flow enabled us to pay down debt more quickly than anticipated, which will allow us to resume share buybacks a quarter ahead of schedule,” said CEO and Chairman Gary Norcross.
    • Q1 revenue of $3.49 beat the average analyst estimate of $3.44B and rose from $3.2B in the year-ago period. Its Merchant Solutions segment booked revenue of $1.1B in Q1, up from $966M in Q1 of last year.
    • Q1 adjusted EBITDA of $1.42B climbed from $1.31B in Q1 2021.
    • Adjusted EPS of $1.47 in Q1 compares with consensus of $1.46 and increased from $1.30 in Q1 a year ago.
    • Net earnings from operating activities of $121M jumped from a loss of $370M in Q1 2021.
    • Shares of FIS are inching higher by 0.5% in Tuesday morning trading.
    • Previously, (April 21) Fidelity National declared a quarterly dividend of $0.47 per share.

    CVX +1.94%May 03, 2022 10:41 AM ET2 Comments

    Talos Energy (NYSE:TALO+6.7% in Tuesday's trading after Chevron (NYSE:CVX) said it would partner with the company in an expanded joint venture to develop the Bayou Bend offshore carbon capture and sequestration hub off the Texas coast currently held by Talos and Carbonvert.

    Chevron (CVX) signed a memorandum of understanding with Talos (TALO) and Carbonvert to take a 50% stake in the project that would take carbon produced from industrial facilities near Beaumont and Port Arthur and sequester them in rock formations beneath the Gulf of Mexico; Talos (TALO) would own 25% and remain the operator, while Carbonvert also would hold 25%.

    The Bayou Bend CCS lease is the first and only offshore lease in the U.S. dedicated to carbon sequestration; based on Talos and Carbonvert's preliminary estimates, the venture could potentially sequester 225M-275M metric tons of carbon dioxide from industrial sources in the area.

    Chevron (CVX) "is in the best place to take advantage of the widespread energy crunch," Cappuccino Finance writes in a bullish analysis newly published on Seeking Alpha.

    NG1:COM +9.03%May 03, 2022 10:34 AM ET32 Comments

    Natural gas (NG1:COM) prices crossed $8.00 per mmbtu Tuesday, putting the fuel on pace for its highest close since 2008. An increase in export demand, mitigated US supply response, warm weather, and rising coal prices have all contributed to the rally.

    LNG maintenance reduced gas export volumes in April by 8%, according to Refinitiv vessel tracking data, as Sempra (SRE) and Freeport LNG both took trains down for 2-3 weeks of maintenance. However, as maintenance wraps up in May, export volumes are set to accelerate. Outside the US, Chevron (CVX) and BP (BP) both flagged falling international LNG production volumes in Q2. Maintenance outside the US is likely to increase reliance Gulf of Mexico exports into Europe during the quarter.

    Domestically, it's still early in the earnings season; however, gas producer SM Energy (SM) flagged falling Q2 production volumes. Pioneer (PXD), Diamondback (FANG) and Hess's (HES) US business all flagged declining Q2 volumes as well. While the latter three are more economically exposed to oil, each company produces a significant portion of associated gas.

    Although US natural gas supply growth is curtailed, or declining temporarily, demand is strong. A heat wave has led the Energy Reliability Council of Texas "ERCOT" to forecast record seasonal demand for power this weekend. Meanwhile, alternative fuel sources, namely coal, are becoming increasingly expensive. It's well understood that seaborne thermal coal prices have reached record levels following Russia's invasion of Ukraine; however, US in-basin pricing is also hitting decade highs east of the Mississippi (ARLP) (ARCH).

    A handful of US natural gas producers have already reported earnings. With EQT (EQT), Antero (AR) and SM (SM) all reporting record profits, while generating double-digit free cash flow yields and recommitting to shareholder returns. The stocks have all run year to date, but rising natural gas prices (NG1:COM) are likely to be a strong tailwind for the space if sustained throughout Q2.

    EXPE -14.07%May 03, 2022 10:20 AM ET11 Comments

    Expedia Group (NASDAQ:EXPE) turned around after an initial post-earnings rally and fell 11.33% in early Monday trading. Some traders have said that weak guidance from hotel heavyweight Hilton Worldwide is factoring in to the reversal.

    Other travel-related stocks like Booking Holdings (BKNG -5.2%), Airbnb (ABNB -4.8%), Marriott International (MAR -3.7%) and TripAdvisor (TRIP -2.4%) also moved lower.

    On Wall Street, Bank of America remained constructive on Expedia (EXPE) on multiple signs of latent travel demand from airlines, hotels and Visa earnings calls. The firm expects a big summer 2022 for travel. BofA kept a Buy rating on EXPE and clipped the price objective slightly to $225, which is based on a 50-50 blend of P/E and SOTP valuation, based on slightly lower 2023 estimates.

    Elsewhere, Deutsche Bank raised its price target on EXPE to $235 from $218, while Mizuho Securities upped its PT to $172 from $155 on the view that inflationary tailwinds will continue to support EBITDA in the near term.

    Dig into the Expedia earning call transcript.


  9. Is PARA good for  a new trade here if you do not have position?


  10. CL -0.33%May 03, 2022 9:40 AM ET3 Comments

    Colgate-Palmolive Company’s (NYSE:CL) cost increases are a worrying sign for margins across consumer products, according to Atlantic Equities analyst Edward Lewis.

    For its recent first quarter report, the New York-based consumer goods company saw gross margins cut by 220 basis points from the year prior. Meanwhile, operating profit margin fell to 19.5% from 23.1% due to both the supply chain and inflation issues cited by Wallace and significant foreign exchange headwinds.

    “These are unprecedented times,” Lewis wrote in a note assessing the consumer staples standby. “The reality is that despite its strong track record, [Colgate] (CL) is not immune from the gross margin pressures that all companies are facing.”

    Lewis pointed to the recent earnings report from Unilever (UL) which cited “unprecedented” price increases in its own right, as illustrative of the extent inflation is impacting results at every company. The broad double-digit price increases across commodities are driving concern as even purveyors of essential goods like Colgate (CL) are confronting execution issues.

    Lewis noted that while Colgate (CL) is generally better positioned and diversified in its commodity mix than peers like Kimberly Clark (KMB) and Clorox (CLX), there is little room to maneuver in the present environment

    “Coming away from Q1 results, the realities of the global economy at present, with the unprecedented levels of commodity cost inflation and extensive supply chain disruption, have derailed even Colgate,” he concluded.

    Lewis downgraded Colgate to “Neutral” on the tougher outlook ahead, cutting his price target to $80 from $92. Given his still-confident tone on Colgate (CL) and promotion of the company as a stalwart protector of margins, the reined-in review is arguably even more cautious for Colgate's peers.

    Read more on the myriad of margin pressures confronting Clorox.

    ARKK +0.02%May 03, 2022 9:29 AM ET19 Comments

    Popular fund manager Cathie Wood finds her flagship exchange traded fund down nearly 50% in 2022, yet she has seen more than $800M in investor capital pour into the fund.

    Over the course of 2022, ARKK has declined 47.8%, as concerns about higher interest rates have squeezed valuations for the kinds of tech and growth stocks that the ETF favors. Yet, at the same time, the fund has attracted $842.57M year-to-date.

    Wood’s ARKK lost 25% in April alone, marking the sixth straight month of negative returns. Over that six-month period, the ETF has dropped 61.4%, dating back to the beginning of Nov. 2021. The fund, which closed Tuesday at $50.13, reached a peak of $159.7 a share in Feb. 2021

    All of ARKK’s 35 holdings have dropped more than 10% over the past month. ARKK’s top performing stock over the past month has been TuSimple Holdings (TSP), which was -10.9% over the past month period.

    Still, during April, ARKK has attracted $177.96M in new funds.

    For those who feel the recent decline in disruptive innovation stocks has gone too far, AXS Investments has debuted its AXS 2X Innovation ETF (TARK), a leveraged ETF that tracks the performance of the well-known technology- and disruptor-focused fund.

    May 03, 2022 8:38 AM ET49 Comments

    Billionaire hedge fund manager Paul Tudor Jones said we are currently in uncharted territory for the Fed and investors shouldn't own stocks and bonds now.

    "Clearly you'd don't want to own bonds and stocks," Tudor Jones said in an interview with CNBC. "You start with that. It's going to be a very negative situation for either one of those asset classes. You can't think of a worse macro environment than where we are right now for financial assets."

    Jones also said the Federal Reserve is an extremely tough period right now.

    "I think this is one of the most challenging period ahead for the Fed board in its history," Jones said. "It's really unchartered water."

    Tudor Jones' comments come as the Federal Reserve is scheduled to meet Tuesday and Wednesday is poised to hike interest rates and shrink its balance sheet to fight inflation.

    “I think we’re in one of those very difficult periods where simply capital preservation is I think the most important thing that we can strive for,” Jones said. “I don’t know if it’s going to be one of those periods where you’re actually trying to make money.”

    "I think there's probably huge volatility straight ahead," Jones added.

    On Monday, the 10-year Treasury yield hit 3%, the first time since 2018, ahead of the Fed meeting.

    "That's the scary part for Jay Powell," Jones said. "The genies out of the bottle. We've seen in history when the genies gotten out of the bottle it's really really hard to put it back in there. I wouldn't want to be in his seat right now."

    "If there was a strategy that I would want to employ right now, if someone put a gun to my head, I'd say simple trend following strategies are not too popular today," Jones said. "They haven't worked really that well for the past decade. They didn't work when central banks were at zero rates. They'll probably do really well I think in the next five or ten years."

    Recall in October, Paul Tudor Jones said. inflation picture is 'very bleak,' crypto offers great hedge.

    IVV +0.80%May 03, 2022 8:23 AM ET4 Comments

    Benchmark ETFs led by BlackRock (BLK), State Street Corporation (STT) and Vanguard that track the S&P 500 index watched more than $30B of capital exit the door in April. The move came as investors fled for safety as the market moved sharply lower during the month.

    iShares Core S&P 500 ETF (NYSEARCA:IVV), Vanguard 500 Index Fund (NYSEARCA:VOO), and SPDR S&P 500 ETF Trust (NYSEARCA:SPY) are the world’s three largest ETFs, with a combined $910.04B assets under management. During April, they experienced a combined $32.38B of investor outflows as the S&P 500 lost 9% on the month.

    Leading the outflow charge was IVV, as the fund saw $11.68B head for the doors. VOO and SPY lost $10.49B and $10.21B, respectively.

    Year-to-date price action: IVV, SPY, and VOO are each -13%.

    Looking at 2022 as a whole, the three leading ETFs have also seen nearly $9B in outflows for the year, -$8.93B to be exact. On the other hand, VOO and IVV have taken in $14.44B and $2.40B in 2022.

    SPY, the world’s largest exchange traded fund, has lost $25.77B in investor capital YTD.

    PFE +2.23%May 03, 2022 7:45 AM ET8 Comments

    Pfizer (NYSE:PFE) shares are trading lower pre-market despite Q1 beat.

    Q1 non-GAAP EPS rose +70.53% to $1.62, while revenue grew ~77% Y/Y to $25.66B.

    Direct sales and alliance revenues of COVID-19 vaccine Comirnaty, which is developed with BioNTech (BNTX), amounted to ~$13.23B, compared to $3.46B in Q1 2021.

    The company continues to expect Comirnaty revenues of ~$32B in FY22, despite a ~$1B unfavorable impact from foreign exchange.

    Q1 sales of COVID pill Paxlovid amounted to $1.47B. The company reconfirmed its revenue guidance for Paxlovid at $22B, despite a $0.5B unfavorable impact from foreign exchange.

    Pfizer (PFE) Chairman and CEO Albert Bourla said that the company was on track to fulfill its commitment to deliver at least 2B doses of Comirnaty to low- and middle-income countries in 2021 and 2022, including at least 1B doses this year.

    Sales from Prevnar family of vaccines grew +21.88% to ~$1.57B.

    The Hospital segment sales, which included Paxlovid, grew +69% Y/Y to $3.19B.

    Oncology segment revenue increased +3.67% Y/Y to ~2.97B. Breast cancer therapy Ibrance saw a slight decline of -1% Y/Y to ~$1.24B.

    Internal Medicine segment saw a ~6% Y/Y to 2.44B. Blood clot preventing drug Eliquis' revenues grew +9% Y/Y to 1.79B.

    Rare Disease segment revenue increased +17% Y/Y to $963M.

    Inflammation & Immunology segment sales declined -23% Y/Y to $821M. Sales of rheumatoid arthritis therapy Xeljanz declined -31% Y/Y to $372M.

    On the War in Ukraine Bourla commented: "In response to the devastating war in Ukraine, and as a company that is dedicated to promoting human health, we have chosen to continue to supply the people of Russia with the medications they need, and are donating all profits from our Russian subsidiary to humanitarian efforts in Ukraine."

    Outlook:

    Pfizer reaffirmed FY22 revenues outlook, which remains below consensus. The company expects revenue between $98B and $102B, which includes operational increases offset by ~$2B of negative foreign exchange impacts. Consensus Revenue Estimate for FY22 is $105.90B.

    The company lowered its Adjusted EPS to be in the range of $6.25 to $6.45, from prior estimate of $6.35 to $6.55, to reflect an $0.11 negative impact for an accounting policy change to include all Acquired In-Process R&D Expenses. Consensus EPS Estimate is FY22 is $7.13.

    PFE -1.22% to $47.75 premarket May 3

    FXI +0.82%May 03, 2022 7:07 AM ET30 Comments

    U.S. tariff relief on China is now under consideration at the White House as the Biden administration confronts the strongest U.S. inflation readings since the early 1980s. At a basic level, some economists have found that Chinese exporters generally didn't lower prices to keep their goods competitive, meaning tariff duties were mostly paid by U.S. companies and consumers. Others say the move would not target inflation at its core (tariffs have been around since 2018) and would do little while rewarding a "human rights-abusing, communist government."

    Quote: "Are they on the table or not? All tools are on the table," U.S. Trade Representative Katherine Tai said during an interview at the Milken Institute Global conference in Los Angeles. "The question is 'What do you do with them?'"

    Last week, Treasury Secretary Janet Yellen also proposed the phasing out of Trump-era tariffs on merchandise imports from China to provide price relief to Americans. "While they may have created negotiating leverage, they serve no strategic purpose," added Daleep Singh, deputy national security adviser for international economics. "From the beginning of the administration, we talked about how some of the tariffs implemented by the previous administration were not strategic and, instead, raised costs on Americans," White House Press Secretary Jen Psaki further announced at a press briefing. "And our effort – which has been ongoing, of course – has been to ensure current Section 301 tariffs align appropriately with our economic and trade priorities."

    Commentary: "The trouble with China is that it continues to act like a small country. Its policies often have the desired effect at home – say, reducing input costs to industry or one set of Chinese farmers or by increasing returns to another," wrote Chad Bown and Yilin Wang, analysts at the Peterson Institute for International Economics. "But they can also be beggar-thy-neighbor, with China selecting the policy that solves a domestic problem by passing along its cost to people elsewhere."


  11. PARA/Millard – Yes as a long-term play.  In the LTP, we have:

    PARA Short Call 2024 19-JAN 47.50 CALL [PARA @ $29.62 $-0.65] -50 11/18/2021 (626) $-17,750 $3.55 $-0.81 $-3.65     $2.74 $0.21 $4,050 22.8% $-13,700
    PARA Short Put 2024 19-JAN 35.00 PUT [PARA @ $29.62 $-0.65] -10 11/18/2021 (626) $-7,500 $7.50 $3.10     $10.60 $0.10 $-3,100 -41.3% $-10,600
    PARA Short Put 2024 19-JAN 40.00 PUT [PARA @ $29.62 $-0.65] -10 3/29/2021 (626) $-12,300 $12.30 $1.98     $14.28 - $-1,975 -16.1% $-14,275
    PARA Long Call 2024 19-JAN 15.00 CALL [PARA @ $29.62 $-0.65] 50 2/18/2022 (626) $72,500 $14.50 $1.10     $15.60 - $5,500 7.6% $78,000

    So we're $75,000 in the money and up a little at net $39,425 on the $162,500 spread.  Plenty of upside still to be had as a new trade.  Of course the put sales are, unintentionally, aggressive but I'm comfortable with $40 as a target for Jan, 2024.


  12. Comment content omitted because it is too long.


  13. May 03, 2022 12:01 PM ET

    Federal Reserve policymakers have explained what they plan to do on Wednesday in their comments up through April 23. They're set to hike rates by 50 basis points at this meeting and likely subsequent ones, and they'll start shrinking the central bank's balance sheet in June.

    The federal funds rate target range currently stands at 0.25%-0.50% after the Federal Open Market Committee hiked the benchmark rate range by 25bps at the March meeting, its first increase since 2018.

    "For the first time in 22 years, the Federal Reserve is poised to raise interest rates by more than a one-quarter percentage point increment, and at consecutive meetings for the first time in 16 years," Bankrate Chief Financial Analyst Greg McBride said. FOMC consensus points to a half-point rate hike, with more to come if the Fed seeks to push benchmark rates to 2.5% by year-end, he added.

    The question isn't whether the Fed needs to be hawkish, it's "only a debate as to what the right hawkish approach is," wrote Evecore ISI's Krishna Guha and Peter Williams in a note to clients.

    The strength of the labor market supports the expected larger-than usual hike. On Tuesday, the U.S. Department of Labor said job openings in March reached 11.5M, the highest since it started collecting the data in 2000, from 11.3M in February. The job openings rate of 7.1% edged up from 7.0% in the previous month.

    Balance sheet matters: The rate hikes "will occur as the Fed simultaneously embarks on the long-awaited reduction in its balance sheet, which we think will shrink by nearly $3T through the end of 2024, from $8.93T today." wrote RSM chief U.S. economist Joseph Brusuelas in a note. He also expects the Fed to increase its policy rate to at least 2.5% by year-end.

    So far, the Fed appears only willing to let maturing Treasury securities and mortgage-backed securities run off of its balance sheet. If the FOMC feels the need to take stronger action to control inflation, it may consider selling some securities.

    "I think he (Fed Chair Jerome Powell) will say that asset sales are a tool that could be used in the future but remind us that the plan is to use interest rates as the primary policy tool; QT runs in the background and the path of rates will be adjusted as needed given QT," said Tim Duy, chief U.S. economist at SGH Macro.

    He expects at least four 50bp rate hikes in the Fed's quest to restore price stability. "Powell likely doesn't want to feed into any hopes of a 75bp hike, but if he lends any credence to that story, even accidentally, market participants will rush to price in 75bp for the June meeting," Duy wrote in a note to clients.

    Geopolitical risks: Will increased risks from the Russia-Ukraine war and Covid lockdowns in China lead the Fed to ease up on tightening? Not likely.

    "We think the Fed recognizes that the war/Europe and China/Covid lockdowns are important and present risks to both growth and inflation," said Evercore ISI's Krishna Guha and Peter Williams. "But the FOMC will stay focused on upside domestic inflation risk, respond up-front to potential further global inflation pressures and respond to spillovers from global growth weakness and related FCI tightening only as it materializes."

    For U.S. households, the implications of the rate increases are clear-cut. Borrowing will cost more and savings will earn more. "This hints at the steps households should be taking to stabilize their finances – pay down debt, especially costly credit card and other variable rate debt, and boost emergency savings. Both will enable you to better weather rising interest rates, and whatever might come next economically," said Bankrate's McBride.

    For banks, higher rates increase their net interest income, but "the rapid rise in the back end of the (yield) curve has hit GAAP book value," wrote a group of equity analysts led by Betsy Graseck. In addition, tighter financial conditions would ultimately slow loan growth. And the Fed shrinking its balance sheet will slow deposit growth as well. In addition, the sharply higher rates will hit banks' capital ratios.

    As such, the Morgan Stanley analysts are reducing their stock buyback estimates for banks. "We believe management teams will be more conservative with share repurchases going forward. We are reducing our buybacks for the rest of 2022 by 40%," they said.

    SA contributor John M. Mason sees a 50bp hike on Wednesday followed by at least two more moves this year.

    PFE +1.84%May 03, 2022 11:50 AM ET1 Comment

    COVID-19 vaccine makers have continued their recent momentum in the morning hours Tuesday after the leading vaccine developer Pfizer (NYSE:PFE) opted to keep 2022 outlook for its COVID-19 shot Comirnaty and antiviral Paxlovid unchanged.

    Vaccine developers Moderna (MRNA), Novavax (NVAX), and Pfizer’s partner in Comirnaty, BioNTech (BNTX), posted notable gains on Monday morning in reaction to data indicating that Paxlovid, approved for high-risk COVID patients, was not effective as a preventative therapy.

    Despite topline and bottom-line beats posted by Pfizer (PFE) for Q1 2022, Wall Street took note of the company’s decision to reaffirm its guidance at a time the COVID fears are receding in many countries.

    Moreover, the company declined to provide its 2023 outlook for the vaccine at the earnings call.

    “…we think investors will be cautious on the reaffirmations of guidance for Paxlovid and Comirnaty,” Bloomberg reported quoting BMO Capital Markets analyst Evan David Seigerman.

    Seigerman, who has an Outperform rating on Pfizer (PFE), thinks that the decision could “signal a slowing of any sort of COVID-19 benefit.”

    However, JPMorgan’s Chris Schott (Neutral) argues that “there was little expectation for a significant 1Q guidance raise.” Meanwhile, Wells Fargo analyst Mohit Bansal (Overweight) sees the decision to reaffirm full-year guidance as a “plus” given the company’s forex exposure.

    Ahead of the earnings, Pfizer (PFE) witnessed three downward revisions and one upward revision for its quarterly revenue over the past three months.

     

  14.  

    MRNA Financial Summary
    Year End 31st Dec 2016 2017 2018 2019 2020 2021 2022E 2023E CAGR / Avg
    Total Revenue
    $m

    108 206 135 60.2 803 18,471 22,119 11,021 179%
    Operating Profit
    $m

    -224 -269 -413 -546 -763 13,296      
    Net Profit
    $m

    -216 -256 -385 -514 -747 12,202 11,673 4,246  
    EPS Reported
    $

    -0.710 -0.832 -1.22 -1.55 -1.96 28.3      
    EPS Normalised
    $

    -0.710 -0.832 -1.22 -1.55 -1.96 28.3 27.3 9.28  
    EPS Growth
    %

                -3.44 -66.0  
    PE Ratio
    x

              5.02 5.20 15.3  
    PEG
     

                     
     

    $148 is $57Bn and they are going to make $11.6Bn this year, $4.2Bn next year (assuming Covid fades out) and they have $10Bn in the bank and no debt!   


  15. PARA – Thanks Phil for the feedback!  I agree it's a good long term bet.  My concern is PARA is swinging my portfolio balance more than I like.  From you're post above, looks like I'm pretty close to LTP so think I'll hang with it.  Been such a long road and would really hate to miss out on this one.


  16. Maybe Elon can buy PARA too .. what a great way to write off a bunch of Tesla's being used as stunt cars in the next action flick.


  17. Maybe Elon can buy PARA too .. what a great way to write off a bunch of Tesla's being used as stunt cars in the next action flick.


  18. You have to let some stocks be your "sleeping beauties" and wait patiently for the prince to show up – could be years.  Just keep them in the glass and refresh them when you have to but, otherwise, don't touch…  

    Coffins – Glass and Otherwise | bronteheroine

    Actually that's Snow White…

    They had to do that because there used to be a Dwarf named "Handsy" – Disney edited him out of the cartoon version…

    Sleeping Beauty they just dropped on a bed and let randos kiss her.  

    Sleeping Beauty - Making your iOS app sleeping beautifully - Gerald Versluis

    BRILLIANT, Jeddah – I'd pitch that to Musk.  He could remake the Blues Brothers and have record sales.  

    Latest Blues Brothers GIFs | Gfycat

    And, by the way, what ever happened to Demolition Derbys?  I used to love those things…


  19. We have Demolition Derbys here in Kansas City Phil.  Every day during rush hour or just being on the highway.



  20. Derby/Jeddah – Apparently I just missed one near me:  https://www.stluciecountyfair.org/events/2022/demolition-derby2

    The "sport" is apparently still alive and well:

    Of course, I'd rather see BattleBots but apparently it's the wrong time of year in Vegas. 

    hey yo! — Just some more battlebots gifs.

    The kids and I used to love watching that show.  Still do, actually…




  21. DAL/Phil: I have DAL Jan'24 30/55 BCS-Would it make sense to roll the 30's up to 40, put $6 in my pocket and end up with a Jan'24 40/55 BCS?


  22. DAL/Tully – I don't know why you'd want to do that.  The surest part of the bet is the $30/40 and it represents $10 of your potential $25 and currently the spread is $18/6 so $12 total.  The $40s are $12 so $12/6 means you are leaving $6 in the game with $6 in your pocket.  If that makes you feel better – then great but unless you really need $6, the odds of that $6 making $4 (66%) is MUCH greater than the odds of the other $6 making $4 so it's not something I would do.  If you want to take $6 off the table, why not just sell some June $47 calls for $1.40?  It's just 45 days out of 626 so if you did a 1/2 sale (0.70 per long) 10 times, you'd be taking $7 per long off the table and you'd STILL have your $30/55 spread.  You could even combine it with the June $38 puts for $1, which would lower the margin requirement while possibly putting another $5 per long in your pocket. 


  23. Phil/DAL: Thank you Sensei! This is why I ask you…. 


  24. Are we heading down another 20%? Also want to play the NG and OIL reversal with BOIL and UCO


  25. Battle Bots was excellent.  Had the tension and excitement of a UFC fight without the blood and concussions.  I bet we see a resurgence of Battle Bots but with Drones.


  26. fyi , you can own UFC by way of Endeavor    EDR 

    It started as The William Morris Agency in 1898.  


  27. You're welcome Tully.

    Down/Pman – I think the Fed, Congress and Biden would all be willing to do what it takes to keep us from a 20% correction from here.  /ES 4,000 is what they are guarding as there's no clear indication we can come back from 3,600 easily if we fall that far (psychological damage, forced liquidations, loss if faith in the system, etc.).    There's still a held up stimulus bill and we saw how fast Congress gets together when it's already too late – who's going to notice another Trillion on the fire?  

    And no, I don't want to touch oil right now as you have Biden's 1Mb/d SPR release hitting the books in May so that's 7M/week of build baked into each report.  Will it "surprise" traders or will they have already expected it?  Then we have the holiday weekend in three weeks and the usual games will be played and there's a war on involving the World's 2nd largest oil producer.  No thanks.

    There's a nice range, if you are brave enough to play it:

    But these are hourly swings so unless you can afford to be up or down $1,000 per contract because you answered the phone – don't bother.

    As I often say, several factors need to line up for me to make an futures call.  With oil, there's an OPEC meeting going on – so terrible time to guess.   Also, the range is $108 to $95 and we're at $103 – almost dead center – the worst place to play.  If we were at $95 and OPEC said they were not adding more supply and Putin cut off two more countries and US production was down or we were having serious demand… then I'd bet it might be higher into the holiday.  At $103 – I have no opinion…

    Fighting drones/Jeddah – I've seen drone races but not fights.  Of course battlebots has some drones.  What's odd about this video is this guy has 3M views of his video and clearly he doesn't even know how Battlebots works.  The guy brilliantly put an attachment on his bot BECAUSE he was facing a drone that used fire to overheat his opponents from above.  Very fun.

    I want to make a Bot that spins like a top with lots of blades.  I have no idea how to engineer it but we used to have tops that would spin and spin and keep going even if you hit them really hard – seems like it could be fun.  

    I used to have one like this on my desk and it was fun to spin it before someone came in and, while they were sitting there, they would start looking at the top wondering why it didn't stop.  It's because there's a magnet in the base but it seems so unnatural – very fun.  Anyway, figure out a baseless version and add some sharp blades and a gyroscopic steering mechanism and I think we're in for a good time.

    Looks like we're just zig-zagging into the Fed – fun tomorrow. 


  28. LOL – Looks like we found our engineering team.  Friggin' Japan, I'm surprised they don't kick our ass at everything.


  29. Phil/SQQQ – I know I'm a little after hours so I may have to repost tomorrow but when you enter this trade "let's double down on those to 400 of the SQQQ 2024 $30/60 bull call spreads with 200 SQQQ short Jan $70 calls." Are you shorting the Jan "23" $70 calls?  I've seen you do something like this before. Are you concerned about these being naked and the risk associated with that? If not, why?


  30. The US is so dominant in engineering it's not even funny.  There's a reason a huge chunk (if not a majority) of engineering is still done in freedom units.


  31. Good morning!

    SQQQ/Swamp – Yes, if you look above I was saying that I don’t see $70 as a likely hit for SQQQ and, if the ETF does get that high, and our spread will be $600,000 in the money with a $500,000 profit so, whatever loss we have on the short 70s, we can deal with. Also, it’s not like we’re going to just let them kill us along the way – if we have to stop some out, we will. Essentially, we are hedging the hedge and, of course, it’s not our only hedge but it’s a bonus $560,000 worth of protection we can add on for $40,0000 when we’re feeling nervous WITHOUT risking much if we are wrong and the markets pop higher.  
     

    Freedon Units/JPH – LOL!