Thursday Bounces – Weak or Strong?

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SPX Dec 8 2022We’ve had quite a fall.

We began the month at 4,100 on the S&P 500 and we closed yesterday at 3,933, which is a 167 (4% drop) and usually we’ll look for 5% drops but, in this case, the Nasdaq already had a 5% drop from 12,100 to 11,500 (600 points) so that’s going to bounce, according to our 5% Rule™, in increments of 20% of the drop so 120 points will take the Nasdaq up to it’s -4% line at 11,620 (weak bounce) and, hopefully, 11,740 (strong bounce) at the -3% line.

NDX Dec 8 2022

In this case, for the S&P, we’re going to look at where it WOULD HAVE hit on a 5% drop, which is 3,895 and that’s down 205 from 4,100 but let’s call it 200 and call the bounces 40 points so 3,940 would have been the weak bounce and 3,980 is the strong bounce line:  

SPX 2 Dec 8 2022

Overall, it’s a good thing that the weak bounce line on /ES has been holding but the S&P needs to be over 4,000 for us to be at all happy and not even the Strong Bounce line gets us there.  The Dollar is down a bit this morning – back at the 105 line – and that’s giving the indexes a small lift (0.5%) but the bounce lines are 1%, so we need a better response than we’re getting and 105 has been strong support on the Dollar as it’s the halfway point between 100 (too low) and 110 (too high) and that makes its bounces 106 (weak) and 107 (strong) but there’s nothing really preventing it from hitting 104 (weak retrace) either.  

That then brings us to the Macros and today we had the usual 230,000 Jobless Claims with a small uptick in Continuing Claims from 1.61M to 1.67M and that is NOT what the Fed is looking for so there’s no reason the Dollar should fail 105 based on today’s data.  Tomorrow we get PPI, which is expected to be 0.2% and the Dollar will bounce if it’s higher than that.  

Logically (and that’s something my fellow analysts use sparingly), if China is opening back up won’t that cause inflation the way the US re-opening did last year?  Won’t that put pressure on Commodities, Goods and Services and won’t 1.4Bn people being released just in time for Chinese New Year (Rabbit – which starts on Jan 22nd and goes on for 16 days) cause a massive spike in Global Q1 Inflation?  

And then, when 10M people (0.7% of the population) get Covid and everyone freaks out in February – won’t that crash the markets again?  Hence, LOGICALLY, the checkered flag remains on the field and we’re going to proceed with extreme caution into our own New Year.  

Yesterday, in our Live Member Chat Room, we decided AAPL was going to determine what the market would do and I said:  

“So AAPL is pretty much obeying the 5% Rule around the $140 line and playing stronger than the rest of the Nas (which are 80% of the index). RSI and MACD do not indicate that AAPL is particularly oversold here and they weren’t in our TotY finals because $2.3Tn is still 22.5x ($100-105Bn) and AAPL is usually lucky to get to 15x which would be a 33% contraction in AAPL and could easily be part of a 20% or more correction on the Nas.

“In other words, don’t look for AAPL to save us and, at the moment, we have the short-term $15 drop so $3 bounces to $143 and $146 will let us know if any recovery is serious down here while anything below $140 is likely to break 11,420 and then – DOOM!!!!”

AAPL Dec 7 2022 A.jpg

That’s going to be more important than what the S&P or the Nasdaq do as AAPL is driving them both with it’s $2.3Tn market cap.  We need to see AAPL get over that $143 line at minimum this morning and $146 is a tough nut to crack as we first run into that declining 50-day moving average at $145.   Yesterday MS cut estimates for IPhone deliveries and that’s what got them down and we’ll see what manipulation today’s news cycle brings.  

 

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Good Morning.

AVGO earnings today at COB – good pulse on the phone, storage and servines ( SAS) world.

Phil –

Hong Kong Rules – moving pretty fast

and shorten the isolation period for people who test positive for Covid, local media reported. The government is also considering using rapid-antigen tests to replace the two PCR tests currently required for inbound travelers, and the Hospital Authority may explore relaxing discharge criteria for patients, pro-China newspaper Wen Wei Po reported Thursday, citing people it didn’t identify. The potential moves, which coincide with a rise in the daily Covid tally to the highest since the city’s deadly wave in March, would be the biggest relaxation to virus rules since Hong Kong scrapped hotel quarantine for inbound travelers in September. 

Phil / AMZN –
What would you recommend for a short call for march ( I’m about to roll some from Jan)

was looking 100 or 105 thoughts?

got it thanks….

Yesterday I was asked about armchair trades. Hard to come by today. Last good one came from Phil with JXN, for me an excellent pick but you had to due it at the day it was offered. Stock I closed at 28 look where it is now.
Yesterday I selected some leap put to sell, as I would like to add more stock at the put price, and the premium exceeds the div. you would collect, BX at Jan25 65 or 70. VLO at 95 ,T at 25,XRX at 13. The premiums should here always exceed well the div you would collect by holding the stock.
Today , on an up beet is not the best day to look for fills, so be patient.

Speaking of trading, forget the U.S. buying Alaska from Russia for 7.2 million or the Louisiana purchase for less than 3 cents an acre…We just scored a basketball player for an arms dealer!!!

USA! USA! 🙁

I get it. Her medical card would not work in Iowa and many around the world are still incarcerated for ‘possession’
I just don’t like trading for anyone that could just mean more death and mayhem.

Why not just do the trade for 10 lords a leaping – who violated their visas!

It was a terrible decision. Like every thing this president attempts. A tranny for a huge arms dealer.

EPD was mentioned the other day a good contender for an armchair trade. Regret I hold it as I am forced to sell it. The US Gov. does not permit foreigners to trade it, so I have to close my play, before Jan 1st.

Dear Valued Client,

We would like you to know the U.S. Department of the Treasury and the Internal Revenue Service (IRS) have introduced new regulations under section 1446(f) regarding Publicly Traded Partnerships (PTPs) held by foreign persons. The new regulations could impact specific securities that you may hold in your account.

I guess you can carry on with the stock but the tax involvement will get too difficult. PTS they already deduct up to 35 % of your div. now an other 10 % that is not worth it

Good Morning Phil- I like using the Butterfly portfolio concept, but I am messing up at times.
Good example is the UL trade i followed. 20- Jan 24/ 42.50 call @ 7.93 (after roll from 47.50)
-15- Jan 24/ 57.50 call @ 2.21
-10- Jan 24/ 45.00 put @ 5.20
-10- Dec 22/48.00 call @ .60
I felt relatively safe covering with the 10 shorts in early november as the price was not making any significant moves since the spring and i got impatient. Would like your opinion if this is salvageable.
PS . I don’t mind being an example for other students.  😉 

would be nice to know what stock it is

haha sorry UL

still early out west

UL try to follo this how can you roll an OTM 57.5 short call to a Jan 25 45 short call which is more than 5 $ ITM. Dont get it???

Got it, thx . Do I roll the long 42.50 calls to 2025 now or wait?

Tah was a real Phil short hand situation, we had this a long time ago with ”Ilike” instead of sayin buy or sell 😜 

was trying to grasp that as well?

OK 5PM here!!!

Phil/PFE Wondering about selling some PFE premium soon, would you roll out the ’24s and sell 40 ’25 calls or sell 20 ’25s and let the ’24s run out some more?
Thx!

40 PFE ’25 $40c ($10.7)
-20 PFE ’24 $65c ($7.5)

Phil/HPQ Would you suggest to lock in some short calls with HPQ?

40 HPQ ’25 $25c ($7.4)
-20 HPQ ’23 $27p ($3.73)

Thx!

I have been following you since the 08 crash. I opened an options account today and I am going to learn the lingo and structure and make sure it is properly funded. I have followed a lot of your plays but only from a long position. I clearly see how options is the way to go. The LTP and STP are proof that your methods work. Once I get the training completed I am going to become a member. There is really no excuse other than fear of the unknown i.e learning the options game. The 5 % rule works like an effing charm. I also appreciate how you cash out and go to cash at opportune times– like just before covid hit. You were calling the market toppy then. Just wish I would have hit PARA and M like you kept saying –even from just a long position they would have hit big after March 2020. Tired of missing out on the fun.

Last edited 1 month ago by ce

Looks like LOVE exited the bathroom today.

Was I wrong? FTC said to sue Microsoft over Activision as soon as today

Planetary health diet – is the recommendation seriously 84 gm of animal protein and 125 gm of plant protein every day

1 oz of a filet doesn’t contain 100% protein; 1 oz of lean beef contains ~7-8 gm protein. Unless they mean 28 gm of protein rich animal products.