Will We Hold It Wednesday – Nasdaq 11,420 Edition

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Why 11,420 on the Nasdaq 100?  

NDX Dec 7 2022

That’s the 200 WEEK moving average – a very significant technical line and we’ve already failed our Strong Bounce Line at 12,000 and, below this, support is way down at 10,000 – a 20% drop from here.   

Today is Pearl Harbor Day – a day that may live in infamy for more than one reason if the Nasdaq fails to hold again.  It has failed before in the past few months but now we’re past earnings and there’s not much to save it if it takes another dive. 

We reviewed our Short-Term Portfolio (STP) hedges on what I called: “Mixed Signal Monday” in expectations of weakness and we’ve already cut half the long positions from our Long-Term Portfolio (LTP) in our last review, way back on November 15th, also in anticipation of a sell-off so we almost hope it will happen – though not for the sake of the average investor – who is ill-prepared for these events.  

We had more fun playing with Natural Gas (/NG) Futures yesterday but, as I told the Members on the first run to $5.60 – you have to take those gains off the table quickly or they tend to evaporate (this does not affect the UNG spread).  

NG Dec 7 2022

$5.50 is our bullish line and we play it when /NG is crossing OVER from below – so it has momentum heading up.  As you can see, that worked for our morning call to the tune of $1,000 per contract, then failed on the next cross for a $500 loss, then a $500 gain on the next cross and then, overnight, another cross for big money at $1,000 and now $2,000 for those who held on (we prefer to take 1/2 off quickly and stop the rest out if $5.50 fails). 

The Dollar tested 106 overnight but came back down when China finally announced some actual easing of their Covid policies.  That then strengthened the Yuan and pushed the Dollar back down but that’s why I’m now VERY CONCERNED that it isn’t cheering up our indexes – as that’s two strong positives.  The Hang Seng actually fell 2.5% as now investors are worried about soaring infection rates as the Chinese are allowed to go out and about.  You can’t win… 

China Dec 7 2022

  • The Covid Policy Changes do not dismantle the policy, but they represent a loosening of measures that have dragged down the economy by disrupting daily life for hundreds of millions of people, forcing many small businesses to close and sending youth unemployment to a record high.
  • Mass testing will no longer be conducted in areas that are not considered “high risk,” a designation for regions that have positive cases. The high-risk category is now limited to buildings, units, floors or households, rather than encompassing neighborhoods.
  • Those who are infected with mild symptoms are now free to isolate at home. Close contacts are also allowed to quarantine at home, and will be released with a negative test on the fifth day.
  • The measures circumscribe the power of local officials to impose lockdowns and ensure they are lifted quickly. Local authorities may still lock down buildings in the event that a positive case is detected, but they cannot restrict movement and suspend business operations in regions outside a specified “high risk” designation. For “high-risk” areas, the guidelines mandate lockdowns to be lifted if no new positive cases are detected for five consecutive days.
  • The government reiterated its pledge to do more to increase the vaccination rate of older people. But the new rules left unanswered questions about how officials will try to contain the inevitable wave of infections.

So, as you can see, this is not going to “Fix” China’s economy – there are still major restrictions and it’s inevitable that there will be some massive outbreaks – especially as China’s non-MRNA vaccines are nowhere near as effective as the ones used in US and Europe.  

China’s economy is still a catastrophe waiting to happen with property companies unable to repay Trillions in debt and housing speculators (EVERYONE!) are in BIG TROUBLE and the Chinese Government itself has gone from Zero debt in the 2008 crisis to $3.65Tn in debt as of last year – probably about $4Tn now.  

China National Government Debt

That’s nothing compared to the US’s $32Tn, of course but China has this funny idea that debt is real and they should be concerned about it, which means they are less likely to be in the mood to hand Trillions to their Banksters – like the US likes to do whenever there’s a chill in the air.  

Some good news this morning as Productivity finally stopped falling – up 0.8% for Q3 vs 0.6% expected and -4.1% in Q2.  Of course that means we’re still down 3.3% from Q1 – so let’s not spend too much money on Champagne.  Unit Labor Costs are still far ahead of Productivity Improvements, which is still bad for the S&P 500 – they were up 10.2% in Q2 – so at least they are calming down but this is not the chart of a healthy economy by any stretch:

Be careful out there!  

 

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Good morning. Here is the link to today’s webinar.
https://attendee.gotowebinar.com/register/3005601224060461152

Good Morning.

feels like oil is heading below $70

I noticed T is just about creeping up every day. should have bought even more in earlier days!!!!

same thoughts

MO hanging in there while PM is up over 100 again!!!

JUUL settled 5000 law suits today. I think MO has room to run to $50+ now
for a new trade you can buy the stock for the dividend and sell the 2025 $47.50 or $50 calls and the $37.50 puts for a nice return

I put in my toe to set up a play on AMZN Vertical 80/110 Jan 25 and sell 1/2 Jan 25 80 puts

Yodi,
thanks for sharing. What prices did you get ?
Maybe there’s a way you can start sharing your armchair portfolio again.

I still hold a good amount of old established armchairs. Stocks go up and down but good once are hard to find now and these days. So keep on looking
AMZN vertical cost 12.80 and the put sold for 12.40

Phil,
if you haven’t decided on an agenda for today’s Webinar, I would be interested to hear/see your process to determine:
1) What a good company is, especially companies you say you “love”.
2) How you determine what fair value is.
3) How you determine at what price you would initiate a trade.

I know you have done this before but I always learn something new when you do it.

Suggestions for companies you could to review are: AMZN, BAC, WDC, QCOM, CSCO, RTX, VZ.
I just want to see your process, especially what makes you NOT to like a company.
Other people might call out other companies to review too.

Just a suggestion

Thanks

Phil,
I did not mean to dismiss your reviews you have done in the past. With all the portfolios it’s been a big job. I’m still reviewing all of it.

Phil/Love
your thoughts on earnings? And any adjustments?
thanks

LOVE is in the toilet this morning!!!

Time to Buy!

I doubled my position around 18 and am loving it today. Already up around 7%.

i agree with analysis on oil consumption. However we need to also look into india which is now most populated country in the world and it is growing at 8% and also some of the african countries. i am from india and i can see how fast it is growing. so oil might fall but it may not fall as much. i think 60–70 dollar. just my thought.

phil, are you going to buy nat gas here again?

Phil, Which month’s future do you use for trading NG? Is it the front month or do you trade a couple of months out?

Last edited 1 month ago by jijos

Phil also wondering what you think of natural gas companies. i used to own antero resources. they produce oil and natural gas liquids. they have significantly deleveraged and benefitted from high natural gas prices which were unhedged. if you were to play with them on options, how would you do it. thanks in advance

also maybe EOG resources

kakaluck / EOG my option screener shows there was a massive trade on 11/30
6500 April $115 puts were sold and 6500 April $160/ $180 call spreads bought. Its hard to see that being profitable but its a big trade just the same.

EOG as no debt and they make money at 40$ oil. they are exposed to natural gas. i follow a lot of oil analysis guys. they are saying that because of ESG regulations, the credit available for oil exploration is being reduced. we need CAPEX to sustain oil production. baring a deep recession , oil should be sustained at high levels. also if Fed pivots, then commodities will spike as the dollar falls. i was long EOG in the past but i closed them much too soon. i want to just have my portfolio with some exposure to oil. currently i dont have any. hence i am looking to add if we have a nice fall

I still like ET, a finalist in out ToY. They make money no matter what the price of oil / gas is . ( K-! for the dividend, if you dont mind that )

thank you very much phil

MSFT made a deal to bring Call of Duty ( ATVI ) to Nintendo for 10 years. I think that was one of the anti-trust issues with the MSFT / ATVI deal. I feel pretty confident the takeover will happen now. There is still some nice premium to be had in ATVI options.