Federally Forgiven Thursday – Light at the End of the Tunnel?

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phil
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The Fed Minutes: Explained - marketfeed.newsThe Fed Minutes were not so bad.  

The Fed was expecting to raise rates another 0.75% at their July 27th meeting but, in our Live Trading Webinar, we noted that there were enough changes in the data they were pointing to at the time (June 15th), that we felt there was no way they would go to 1% and even a possibility that the Fed would only raise rates 0.5%.  

They still have 3 more meetings: Sept 21st, Nov 2nd and Dec 14th and we are currently at 1.5% and the target is 3.5% so 0.5% x 4 gets us there – even if they are sticking with 3.5%.  What has changed is that commodities, including oil have calmed down and the economic outlook has gotten considerably worse (see yesterday’s report) and the Fed is attempting to make a “soft landing” – another 0.75% could put us into a power dive and the last thing the Fed wants to do is reverse itself at the September meeting.

US House forms panel to probe January 6 attack on Capitol | Politics News | Al JazeeraOver in England (calling it the “United” Kingdom seems wrong at this point), we finally found out how many scandals it takes to get Boris Johnson to resign and the answer is 157 but, finally, after HALF of his cabinet resigned in protest – the Prime Minister is stepping aside.

Imagine if Republicans had that kind of honor?

We’re still drifting along in the Indexes but, with the Dollar still at 107, drifting along is pretty good.  May 18th is the last day we had an up day with strong volume – so we’re still waiting for better technical signals but we’re also still picking up opportunities.  Yesterday, in our Future Is Now Portfolio, we spent $36,360 (25% of our cash) adjusting 5 of our positions (also 25%) as we set ourselves up for HOPEFULLY a move higher into earnings.  

Not much going on otherwise – we’re just waiting on tomorrow’s Non-Farm Payroll numbers – something the Fed will also be watching closely.  As long as we’re holding 3,840 (weak bounce) on the S&P 500, we’re out of the danger zone.

Our Gold (/GC), Silver (/SI) and Copper (/HG) plays are bouncing this morning as China is reportedly considering a $220Bn stimulus package to counterbalance another round of Covid Lockdowns.  That’s like the US doing $500Bn but even more powerful as China doesn’t give 90% of the money to rich people.   Copper is already up at the 5% line for the day.  

MRK is looking to buy SGEN for $40Bn, which is 33% over yesterday’s close.  That’s going to be good for the undervalued Biotech Sector and M&A activity like that can often tell you where the bottom is going to form.  We have a good amount of Biotech in our portfolios – including the long-suffering Biotech ETF – LABU.   

SGEN lost $674M last year on $1.5Bn in sales and expects to lose about the same this year on $1.8Bn in sales so MRK is paying over 20x sales for SGEN so imagine what some of these other Biotechs might be worth?  We have AMGN, BNTX, GILD, LABU, MRNA and PFE representing Pharma/Biotech in our Long-Term Portfolio and we’re going to add Walgreens (WBA) as they are back to stupidly cheap at $37.78:

  • Sell 10 WBA 2024 $45 puts for $10.20 ($10,200)
  • Buy 30 WBA 2024 $35 calls for $6.25 ($18,750)
  • Sell 20 WBA 2024 $50 calls for $1.50 ($3,000) 

That’s net $5,550 on the $45,000 spread so we have $39,450 (710%) of upside potential at $50 but we’re only 2/3 covered so we’ll be able to reduce the basis along the way when we get a good bounce to sell into.  If it goes the other way, our worst case is owning 1,000 shares of WBA at net $50.55, which is way over the current price but we’re happy to double down if WBA gets cheaper as we like it for the very long-term.  

See, plenty of things to buy in this market!  

 

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Good morning!

Nice spike in /NG to $5.80+ – that’s a stop line now!

It’s also the 5% line for the day and that’s up 0.25 so another 0.05 is an overshoot and 0.10 ($5.90) is much less likely to be hit without a retrace. Obviously, the retraces are 0.05 and 0.10 ($5.70) the other way and holding those would be bullish.

And just like that Oil is back at $102.50.

comment image&rev=637927828724742041 comment image&rev=637927828724742041 comment image&rev=637927828724742041 comment image&rev=637927828724742041 comment image&rev=637927828724742041

IEA warns China will soon produce 95% of the solar supply chain

BYDDY +0.16%
Jul. 07, 2022 4:05 AM ET

Many in the West are fearful of losing a global technology race to Chinese dominance, especially with regards to the transition to cleaner energy. The International Energy Agency was the latest to warn about the consequences in a special report on the solar sector, a key element in plans for the world to reach net zero emissions by 2050. In fact, China’s share in all the manufacturing stages of solar panels currently exceeds 80%, and for key elements including polysilicon and wafers, it is set to rise to more than 95% in the coming years.

Quote: “The world will almost completely rely on China for the supply of key building blocks for solar panel production through 2025,” the agency wrote in the report. “This level of concentration in any global supply chain would represent a considerable vulnerability.” Biden to waive solar panel duties, eyes other tariff relief.

It’s not the only area of concern. China’s BYD (OTCPK:BYDDY) just dethroned Tesla (TSLA) as the world’s biggest electric vehicle maker and surpassed South Korea’s LG as the planet’s second-largest producer of EV batteries. The development comes as much of the West rolls out policies to convert their ICE fleets to EVs in the near future, but those initiatives will depend on raw materials processing that are highly concentrated in Asia. China’s market share for battery components even climbed from 43% in 2014 to 60% in 2020 due to tight control of critical elements like lithium, nickel, cobalt and palladium.

Go deeper: The worries aren’t limited to the energy landscape of the future. The war in Ukraine has seen power prices in Europe soar to record highs this week as the effects of Russia’s gas supply cuts ripple through the continent. German power, the European benchmark, rose to a record of €337/MWh ($343.25), while French prices neared an all-time high of €398, triggering real fears for the manufacturing economy and heavy industry. The U.S. is also discussing price caps on Russian oil and gas with its allies, but the concept would need to garner widespread adoption to be effective, while Vladimir Putin could cut supplies even further if he felt that Moscow was being threatened. Winter is coming, and Europe may be out of gas when it arrives.

Related: First Solar (FSLR), SunPower (SPWR), Tesla (TSLA), Enphase Energy (ENPH), Sunrun (RUN), SolarEdge (SEDG), Canadian Solar (CSIQ), JinkoSolar (JKS), Bloom Energy (BE), NextEra Energy (NEE), Azure Power Global (AZRE), Sunnova Energy (NOVA), Brookfield Renewable Partners (BEP), Ormat Technologies (ORA), SolarWindow (OTCPK:WNDW), Daqo New Energy (DQ), ReneSola (SOL) and Maxeon (MAXN), PG&E (PCG), Consolidated Edison (ED), Dominion Energy (D), Duke Energy (DUK), American Electric Power (AEP), Exelon (EXC), Entergy (ETR), Alliant Energy (LNT), NextEra Energy (NEE), and Southern California Edison (EIX).

Samsung sees ~11.4% growth in Q2 operating profit but still falls just short of expectations – Reuters

Jul. 07, 2022 2:16 AM ET

The electronics giant Samsung Electronics (OTC:SSNLF) reported a lower-than-expected rise in its fiscal second-quarter operating profit, with reduced smartphone sales dragging down its bottom line despite strong demand for its server chips, according to Reuters report.

The South Korean tech giant estimated its operating profit at KRW14T, up 11% from a year earlier but just below the analyst consensus of KRW14.6T (consensus estimates are according to Bloomberg).

It projects quarterly sales will increase 20.94% Y/Y.

South Korea’s biggest company said in a statement, it expects Q2 consolidated sales of about KRW77.00T compared to KRW63.67T last year. It reported consolidated sales of about KRW77.78T in Q1.

Q2 earnings results will be released later this month.

EU Parliament approves ‘green’ label for nuclear power, natural gas

UNG +5.68%

Jul. 06, 2022 8:06 PM ET

The European Parliament voted Wednesday to include nuclear power and natural gas in the bloc’s list of investments deemed sustainable, a move that could trigger more funding of those sectors but that critics said would slow Europe’s shift to greener energy sources, The Wall Street Journal reports.

The vote paves the way for the proposal to become law, and would add nuclear plants and natural gas to the European Union’s “green taxonomy” rulebook starting in 2023 if they meet various conditions such as limits on greenhouse gas emissions.

ETFs: (NYSEARCA:UNG), (BOIL), (KOLD), (UNL), (UGAZF), (DGAZ), (FCG), (NYSEARCA:NLR), (NYSEARCA:URA)

The action comes as Europe tries to cut its dependence on Russian fossil fuels and lean on nuclear and natural gas to help bridge a transition to renewable energy, but environmentalists and some lawmakers and investors say the plan risks diluting investments in other projects such as renewable energy.

The European Union said the vote was “recognition of our pragmatic and realistic approach in helping many member states on their transition path towards climate neutrality,” as the continent faces a potentially dire gas shortage next winter.

U.S. crude stockpiles rose 3.82M barrels last week, API says

USO +3.95%

Jul. 06, 2022 5:15 PM ET

The American Petroleum Institute reportedly shows a surprise build of 3.82M barrels of oil for the week ending July 1.

Gasoline inventories reportedly show a draw of 1.81M barrels, distillate inventories show a draw of 635K barrels and Cushing inventories show a build of 459K barrels.

Data to be released tomorrow from the Energy Information Administration is expected to show crude inventories fell by 1.2M barrels last week, according to S&P Global Platts.

August WTI crude oil (CL1:COM) recently traded at $98.06/bbl in electronic trading after settling Wednesday at $98.53 on the New York Mercantile Exchange.

And we just added it to the Future is Now Portfolio:

Canaan lands Buy rating from HCW on improved performance of bitcoin mining machines

CAN +3.56%
Jul. 07, 2022 9:29 AM ET

  • Canaan (NASDAQ:CAN) ADRs rose as much as 2.4% in Thursday premarket trading after HC Wainwright launched coverage on the China-based manufacturer of bitcoin (BTC-USD) mining machines with a Buy rating.
  • “The performance consistency of key component ASICs greatly improved through the course of last year,” HCW wrote in a note to clients.
  • Nevertheless, shares of Canaan (CAN) are down over 55% in the past year in a move that “may have SEC de-listing threats to blame, among the crypto-verse tumble and sundry stock market crushing macro forces,” according to the note.
  • Furthermore, “we see Canaan’s business generating solid economics,” as the company builds a presence in the U.S. (the world’s most popular crypto mining hub), as well as its improved operating performance of its machines, the note said.
  • HCW’s Buy rating diverges from the Quant Rating of Hold with the poorest marks in revisions and momentum.
  • Take a look at why SA contributor GI Research is bullish on Canaan.

First the image, then the adjustments:

Income July 8 2022.jpg

Earnings Portfolio Adjustments: $262,828 is up about $50,000 from our June 16th review – another case of just leaving things alone (2 adjustments) and being PATIENT!

Over 80% cash means we have money to spend – especially as this is a self-hedging portfolio.

  • FL – Let’s buy back the short $40 calls for $3,000. They are already up 60% and we can do better on a bounce – cheaper than rolling.

https://charts2.finviz.com/chart.ashx?t=fl&p=w&s=y

  • GOLD – Let’s roll the 10 2024 $20 calls ($2,095) to 20 of the 2024 $10 calls at $7.75 ($15,500) for net $13,405.

https://charts2.finviz.com/chart.ashx?t=gold&p=w&s=y

  • JACK – Let’s buy back the short 2024 $100 calls for $2,025 as they are already up 80%.

https://charts2.finviz.com/chart.ashx?t=jack&p=w&s=y

  • PARA – Let’s roll the 40 2024 $25 calls ($25,200) and the 20 2023 $35 calls ($2,110) to 60 of the 2024 $17.50 calls at $10 ($60,000) for net $32,690.

https://charts2.finviz.com/chart.ashx?t=para&p=w&s=y

So that’s spending $51,120, mainly on PARA, which I love down here.

Paramount Global: A Rebranded Conglomerate With A Deep Margin Of Safety

We don’t need to adjust the Dividend Portfolio as it’s just clunking along – up $10,000 from last month, plus whatever dividends came in. We only have $100,000 out of $400,000 cash so not inclined to spend it anyway as it’s an expensive portfolio with lots of stock positions that use up our cash.

The Butterfly Portfolio will be fun as we’re half cash and up massively (563.8%) as it’s from back on Jan 2, 2018 – our only survivor from the last purge.

Butterfly July 8 2022.jpg

/NG just blasted to $6.20!

See how $5.75 (weak retrace) held – that was a good sign.

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Massive build in EIA but oil kicked up to $104 anyway. Gasoline had a much bigger draw than feared and distillates they were 200% wrong about.

That’s why the spike – a lot of people on the totally wrong side of these.

EIA inventory report – Crude inventory builds unexpectedly

CL1:COM +4.74%
Now!

And this is all it took to send /NG back to the moon:

US natural gas inventory builds lower than estimates

NG1:COM +9.78%
Jul. 07, 2022 10:30 AM ET
2 Comments

Such silly things to trade…

Butterfly Portfolio Update: $1,327,694 is up $175,000 from the June 16th Review – where we made some pretty aggressive moves. We still have tons of cash though so let’s see if we can deploy a little:

  • AAPL – The problem with an outsized position like this is a single mistake can wreck your portfolio. We have faith in the short puts and we are 100% covered but let’s knock that back to 50% and buy back 80 of the Jan $150 calls for $12.50 ($100,000 on the button). This is where the time advantage we worked into really shines as we can sell 2024 or 2025 calls now – depending on whether $140 holds ahead of earnings.
  • If things go well, we sell 80 2024 whatevers (for more money) and we’re back to fully covered and if AAPL falls lower, we can sell 160 short calls and leave the 80 extra Jan calls as over-coverage (protecting our short puts).
  • So we’re investing $100,000 to gain flexibility and make it less likely we screw up our $1.3M portfolio.

https://charts2.finviz.com/chart.ashx?t=aapl&p=w&s=y

  • AMZN – Also getting big so let’s do the same, flexible play and buy back 60 (1/2) of the 2024 $145 calls for $15.50 ($93,000) and we’ll be able to sell more short-term calls soon but let’s spend $1,140 to buy back the short July calls – it’s unlikely but POSSIBLE they can burn us.

https://charts2.finviz.com/chart.ashx?t=amzn&p=w&s=y

  • DIS – The $100s are $17 and the $90s are $22 and I’ll spend $5 for $10 in position so let’s do that roll for $25,000. If DIS goes to $80, we roll to the $80s for another $5 and then sell calls for $10 to pay for both rolls (the Jan $120s are currently $9.10) – that’s why I don’t mind INVESTING the $25,000 now.

https://charts2.finviz.com/chart.ashx?t=dis&p=w&s=y

  • F – I think it would be a shame not to buy back the short Jan $15 calls for $3,713. We’ll cover back up when they pop.
  • GOLD – Also investing time as we can roll our 50 Jan $15 calls at $3.13 ($15,625) to 100 of the 2024 $13 ($5)/20 ($2) spreads for net $3 ($30,000) for net $14,375.

https://charts2.finviz.com/chart.ashx?t=gold&p=w&s=y

  • IMAX – I’m worried about the short Sept $16 calls so let’s take the small loss ($550) and buy them back for $3,550.

https://charts2.finviz.com/chart.ashx?t=imax&p=w&s=y

That’s it, the rest we are happy with. Spent $240,778, which is 1/3 of our cash so we’ll be a lot more conservative moving forward – unless this all works out and we hit $1.5M – then we can play a bit more dangerously.

We’d better be right – I’m doing Money Talk next Wednesday.

Went from $196,056 yesterday to $207,769 today (up 107.8%) so I’d say it’s doing just fine.

See – you don’t have to adjust them at all if you pick the right ones – we haven’t touched that portfolio since May.

We added SOFI and FL and we rolled BYD and LABU to more aggressive plays at the time.

Poor Jon Najarian is having a very uncomfortable discussion on CNBC as the voyager crypto exchange he has been pushing all year went bankrupt. There are a bunch of questions he can’t comment on due to pending legal action.

His friends at CNBC are getting very pissed off when he “no comments“ them.

he pulled a Cramer, telling everybody to buy all the way down.

THC is an old favorite and earnings are just around the corner (21st) and $55 is just $5.5Bn (100M shares) and they made $400M in 2020 and expect $750M this year and $875 next year and no reason to doubt them. UHS cut guidance last week and they all sold off but THC has always been my sector favorite.

  • So, for the LTP, let’s just sell 10 2024 $65 puts for $19 ($19,000), as we love to get paid to NOT buy a stock.
  • In the Earnings Portfolio lets:
  • Sell 5 THC 2024 $55 puts for $13.50 ($6,750)
  • Buy 15 THC 2024 $60 calls for $14 ($21,000)
  • Sell 15 THC 2024 $80 calls for $8 ($12,000)
  • That’s net $2,250 on the $30,000 spread so there’s $17,750 (788% upside) and I’ll point out in advance that yes, it would be great if we make 788% with no hassle but we take these positions fully expecting to spend more money improving it over time.

If earnings are good, we’ll go in the money and maybe we’ll actually make 788% but if they are bad – then we are HAPPY to roll the $60s to the $50s for $5 ($7,500) or the $40s for $15,000 and then, all we have to do is get back to $50 and we’re $15,000 in the money and the rest is bonuses.

The July $55 puts are $2 and the 2024 $30 puts are $3 so we have that roll ahead of us, which is why I don’t mind being aggressive on the puts – but not as aggressive as the much larger LTP.

This is how we play a stock that may be having troubles – but we’re very happy to be in them for the long haul.

Looks like we’ll be closing at the highs. Nas up 2.3%, RUT up 2.5%, S&P 1.6% and Dow poking along at 1.2%.

Vix is popping up though – that should cool things off here.

/NG up 14% for the day – congrats to all who played that one.

@everyone I am getting through the Tickets as fast as possible, Top trades will be worked on today/tonight. Last nights speed improvements took longer than expected.

I am still not getting all the daily chats with Phil, been spotty all week, and no friday is available right known my feed