TGIF – Dow’s Down Week Comes to a Close
by phil - June 22nd, 2018 8:31 am
Well, 8 days in a row that the Dow has been down after topping out at 25,400 back on June 11th and having tested 24,400 for an even 1,000-point drop yesterday afternoon. That's right about a 4% correction on the nose and the 5% line is 24,130 so, if we assume that is the full pullback (not yet completed), then the fall is 1,270 points and we'll call that 1,250 and look for 250-point bounces so a weak bounce would be 24,380, which is the 4% line again and the strong bounce, to the 3% line, would be 24,630 so that's the line we need to see the Dow take and hold today in order to be impressed. In fact, 24,658 is the 50-day moving average on the Dow – so let's make sure we get those extra 28 points too!
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The Dow is down 1% for the year so up 1% (250 points to 24,750) is also very important to make. Meanwhile, as you can see from the chart above, the Nasdaq is still up 12% for the year – though we made a lovely $5,535 on Wednesday's short position (see yesterday's Morning Report) and we HOPE it bounces back towards our shorting line at 7,300 so we can do it again.
As I said to our Members in our Live Chat Room yesterday morning:
I'm still on the 6,500 bandwagon but I don't know when so better to make $1,000 80 times than spend 3 months waiting for a big drop!
Well, now we can cross 5 of those 80 times off the list! Overall, it's just been a small correction but it's more the failure at the top that we're watching, and we'll see if we can retest that next week. As I noted earlier in the week – nothing really matters unless the NYSE can retake 12,800 and I doubt we'll even get to test that today so it's a "watch and wait" day into the weekend.
The big news today is, of…
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The PhilStockWorld Weekly Webinar – 06-20-18
by clarisezoleta - June 21st, 2018 3:33 pm
The PhilStockWorld Weekly Webinar – 06-20-18
For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here
Major Topics:
00:01:44 – Market Highlights
00:06:14 – OPEC | Oil
00:12:05 – Trade Ideas
00:16:04 – NYC
00:21:56 – AT&T
00:25:15 – Disney
00:27:27 – Selling PUTS
00:30:00 – Selling Bonds
00:33:35 – June Portfolio Review
00:35:00 – More Trade Ideas
00:47:52 – GIS
00:51:08 – Long TermPortfolio
00:52:30 – Selling Premium & other trade tips
01:05:46 – Gold
01:15:08 – Trade & Tariffs
Phil's Weekly Trading Webinars provide a great opportunity to learn what we do at PSW. Subscribe to our YouTube channel and view past webinars, here. For LIVE access to PSW's Weekly Webinars – demonstrating trading strategies in real time – join us at PSW — click here!
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Thrilling Thursday – Asia Takes Trade War Seriously, Americans Oblivious
by phil - June 21st, 2018 8:32 am
As long as you are quiet, the monsters can't get you.
While it's a fun plot for a movie, it dosn't play out very well as a trading premise and just because we choose to ignore problems, doesn't mean they will go away – or leave us alone. The market was heading back up into the close and again in the Futures but then those dummies at Dailmer had to make a sound (a profit warning due to tariffs) that sent all the EU auto-makers lower.
This isn't about Trump's tariffs, this is about the Chinese tariffs that are a retaliation to Trump's tariffs to which he has threatened to retaliate with more tariffs which will, of course, cause China to retaliate with even more tariffs and so on and so on – we're only in the first inning of this game! Both Dailmer and BMW are down over 5% for the week now after dropping 4% this morning in EU trading and EU markets are down about 1% but the US Futures are flat because we still think we can sneak past all the monsters without getting hurt.
Yesterday, in our Live Trading Webinar, we discussed some of the many reasons we were not going to chase the indexes higher and, in fact, we took a short on the Nasdaq as it tested 7,330 and caught a nice dip back to 7,300 for a $600 per contract gain and this morning we'll look for a chance to short it again as it's up for no reason.
We're still not a believer in the "rally" until we see the NYSE get back over that 12,800 line and we're about 1% away from it now and it's very, very doubtful that we'll get there today, no matter how quiet the US investors are.
In fact, on the NYSE, we are wathing for a failure at 12,600 (the 200-dma), which would signal the very strong possibility of a leg down for the indexes. We still have our long hedge on the Nasdaq and our 10 QQQ 2020 $220 calls from our June 12th Morning Report at $2,000 are already $2,550 for a 27.5% gain even though QQQ is only at $177.25, up $2.25 or 1.3% so we…
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Hostages
by ilene - June 20th, 2018 3:30 pm
Hostages
Courtesy of Joshua M Brown
Guys have price targets for where they think the S&P 500 will end the year. That’s nice.
A lot of these targets are clustered around 3000, which is a big, fat round level that looks great in headlines – super clickable – and is easy to remember. All you do is take what you think earnings will be for the next two quarters and then your best guess at where next year’s consensus estimates will fall out come this November and you can back into a multiple from there: “Where will interest rates be, what might sentiment look like, add a little bit for repatriation of cash, subtract a bit for increased interest expense, factor in Europe, a dash of oil prices, discount a bit for the political noise, carry the one….THREE THOUSAND!”
Wishing everyone luck with their targets. Some will win, some will lose. Some were born to _____.
Anyway, the big monkey wrench circa the summer of ’18 is the trade war. Sorry, “tariff debate.”
We’re all hostages to what might happen, who might get screwed, who might turn around and screw us back harder, whether or not it cools off, whether or not it escalates, will it include the EU, NAFTA and China, what concessions and exemptions and for which industries, and on and on. There’s absolutely no reason for you to believe that you can predict the outcome for any of these questions. But the outcomes will absolutely be material for the sales and earnings of US stocks and even the consumer economy in the second half of this year. We can argue about the degrees of materiality and whether or not the red-hot domestic situation will dwarf any impact from it, but it’s the big question mark.
I think it’s part of the reason you’ve seen money pour into technology stocks and the Russell small caps all year. People think they’ll be immune or less susceptible to whatever’s coming. Okay, maybe, maybe not.
The Dow Jones Industrial Average being down on the year slightly while the S&P 500 has gained 4% or so makes sense. The word “Industrial” is literally in its name.…
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Will We Hold It Wednesday – NYSE 12,800 Edition
by phil - June 20th, 2018 8:41 am
Coming back or just bouncing?
12,800 is the Must Hold line on the NYSE, meaning it's very bearish to be below that on the broad index and we finished the day yesterday at 12,638 and, so far, this morning's bounce isn't going to fix things. Back on May 26th, when the NYSE last tested 12,800, my notes from the Morning Report were:
It's still all about the NYSE and whether it's over or under that 12,800 line but I remember a time when the Dow and the NYSE would run completely neck and neck. That has gone completely out the Window as the headline index has been jammed 17% higher since Donald Trump was put in power by the USSR so thank you Putin – I guess…
The NYSE is right where we expected the market to be given that tax cuts, repatriation of capital and buybacks that have boosted the indexes over the past year plus. On the other hand, the Dow is silly and the Nasdaq is sillier and we're back to a 1998/1999 market, where Fundamentals don't matter (for now) and people are paying ridiculous forward multiples for stocks in the belief that this party is never going to stop and there's no piper to be paid. Is this time different? Don't bet on it!
The broad-market index has been trading in the lower part of a very tight range since February and, of course, the Dow is red for the year so the bulls are, at the moment, left with the over-priced Nasdaq and the narrowly-focused Russell 2000 Indexes to hang their hats on and we're still expecting a 10% correction in the Nasdaq, from 7,200 to 6,500 – before the summer ends. That's why we haven't been jumping in to buy things – we don't think these little "sales" are bargains at all.
As you can see, the Nasdaq is way up in its range, over our 7,200 mark but we're not putting on the 7,500 hats just yet as that requires Apple (AAPL)…
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Chart o’ the Day: US Stocks > Everything
by ilene - June 20th, 2018 3:45 am
Chart o’ the Day: US Stocks > Everything
Courtesy of Joshua M Brown
Last year was a great year for US stocks but an even better year for markets around the world.
So far, at almost the halfway point of 2018, this has mostly reversed itself. The world is being led by the Nasdaq 100, followed by the Russell 2000 index of US small caps, followed by the S&P 500’s US large cap index.
Just about everything else has reversed into the negative.
Here’s what it looks like:
Only the US has seen massive tax cut activity and the economic stimulus that’s come along with it. The question becomes whether or not this ends up being a transitory boost that wears off when we begin lapping this data in the first quarter of 2019 – or, if it becomes a self-sustaining “virtuous cycle” where people and corporations spend more because they’re making more.
It’s interesting to see this considering the fact that the US is the only major economy to have hiked interest rates and a complete cessation of emergency stimulus measures. Japan and Europe are still engaging in extraordinary measures and god only knows what China is doing.
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Trade War Tuesday – Trump Fires off Another $200Bn in Tarrifs, China Fires Back
by phil - June 19th, 2018 7:54 am
Wheeeeeeee!!!
Isn't this fun? Diplomacy via twitter is a case of voters getting exactly what they deserve and we'll see how much the market suffers for it. We gave you hedges yesterday that can turn $2,000 into $10,000 and it's the same hedge I gave you two weeks ago that could turn $500 into $10,000 so I don't feel at all bad when I say "I told you so" as I ranted on and on all month about how this was going to escalate and end badly.
This, by the way, is not the end, this is just the beginning as Trump the First has asked for ANOTHER $200Bn worth of tariffs on Chinese goods in retaliation for the $34Bn worth of tariffs they put on our goods which was a retailiation against the $50Bn we put on their goods first.
The new duties will go into effect "if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced," the president said in a statement provided by the White House late on Monday. Meanwhile, Trump is fighing Congress tooth and nail to REMOVE sanctions against ZTE – because he was paid $500M to do that, so the real message to China is "PAY ME!" This is why you don't negotiate with terrorists – it only makes them come back for more…
Beijing has already said they will retailiate, saying: "This practice of extreme pressure and blackmail deviates from the consensus reached by both parties on many occasions and is disappointing for the international community. The United States has initiated a trade war that violates market laws and is not in accordance with current global development trends," the Commerce Ministry said.
Seriously people, let's step back for a second to consider that CHINA has just accused the US of BLACKMAIL and of violating International Laws and undermining diplomacy – all in one paragraph! President Trump is undoing 70 years of hard-faught diplomatic steps that have given us 70 years of relative peace and prosperity. Who actually benefits from Trump single-handedly upending the World Order?
The clock is now…
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These Are the Goods
by ilene - June 18th, 2018 8:46 pm
These Are the Goods
Courtesy of Michael Batnick
Articles
What I thought was a major career failure turned out to be the best thing that ever happened to my career ~ by Blair duQuesnay
Learn to love the micro-stakes arena ~ by Tommy Tranfo
If things like research department headcount or manager tenure had any predictive value, then you could throw away your Bloomberg terminal and just use LinkedIn ~ by Josh Brown
Capital gains is a hell of a drug. ~ by Nick Maggiulli
Debt is a perennial worry ~ by Urban Carmel
We all begin as novice investors ~ by Barry Ritholtz
Social Security is the greatest source of income for the typical American household ~ by Tony Isola
He didn’t care who’s son I was and for that, I thank him ~ by Phil Huber
Needless to say, “staying away” from positive returns is not the best investment strategy ~ by Charlie Bilello
The only difference between the lucky and the rest is that the lucky just live a little farther inland ~ by Damon Young
Then in the summer of 1915, something unexpected happened — the economy took off like a rocket. ~ by Ben Carlson
Investment mythology is littered with Ragnarok-styled blow-ups ~ by Corey Hoffstein
The rhymes between today and the late-’90s are close enough that some veteran market participants are singing along ~ by Michael Santoli
Podcasts
There’s a lot of information in the world that’s not in the market ~ with Patrick O’Shaughnessy and Michael Reece
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There is our memory and there is the truth, and the two are not the same ~ with Malcolm Gladwell
One dollar is the best price point god ever made ~ with Barry Ritholtz and Cal Turner Jr.
It wasn’t just making money, you were backing a horse ~ with Ted Seides and Tom Lydon
People get mad at inevitability ~ with Bill Simmons and Bryan Curtis
Books
The long term is fuzzy at best ~ by Brian Portnoy
All pictures via Pixabay.
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Monday Market Meltdown – Merkel Mayhem Makes Markets Morose
by phil - June 18th, 2018 8:29 am
Wheeeeeee!!!
It's about time our hedges made some money! As you know, we've remained cautious, even while making money on the long side and, just this weekend, in our June Portfolio Review, I said to our Members: "I'm still very risk-adverse in this market and yes, we could be making more if we were more aggressive but then again, we could blow it too – and that is what we're trying to avoid."
We're very well-hedged so a dip like this is simply amusing and it's miles to go before we even get back to the strong bounce line at 2,728, which had been the top of our range since February. Unless we fall back below that line on the S&P (/ES) this is just a minor pullback and we're still in bullish territory though failing at the 2,800 line (again), which is where we ran into trouble in March before pulling back 200 points (7%).
7% is right about the pullback we are expecting but we expected it from 2,728 – this move back to 2,800 has been a bonus round so far. Above the 2,800 line, we have to capitulate and get more bullish – no matter how much we don't trust the rally but that certainly isn't a problem we'll have to deal with today, as we're down around 2,764 so far in the Futures.
If you feel under-hedged, you can use a play similar to the DXD play we gave you in our 6/7 Morning Report, when I said:
That's how hedges are supposed to work – they are insurance policies and keeping our portfolios well-hedged is the only way we can sensibly keep long positions after they've already gained 20% for the year.
Maybe this is a full-blown 1998/1999 rally but we've got PLENTY of longs so all we're worried about now is whether or not we
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Philstockworld June Portfolio Review (Members Only)
by phil - June 17th, 2018 11:28 am
$817,961!
Now we're up $217,961 (36%) in our paired Long-Term and Short-Term Portfolios and that's up $44,185 from our last review, when I said I'd rather cash out than continue to risk our, at the time, 28.9% gains. Since we didn't cash out, we pressed our hedges AND since the market kept going up, we added more longs and, so far – it's all working out. As I said last month, as long as the indexes are holding their 50-day moving averages, we're not in immediate danger and this market seems to shake off everything that's thrown at it – so far.
On the whole, we haven't made too many adjustments to any of our portfolios this month as they are on a very good track and fairly well-balanced. Do keep in mind that we are failing (so far) at the lower high of 2,800 on the S&P (/ES), but once we're over that line – we have to seriously consider a whole new leg of the rally may be forming.
We still have $369,258 in cash and about $1M in margin remainin in our Long-Term Portfolio, so we're very flexible and that portfolio is our MOST invested. I'm still very risk-adverse in this market and yes, we could be making more if we were more aggressive but then again, we could blow it too – and that is what we're trying to avoid.
Long-Term Portfolio Review (LTP) Part 1: $643,761 is up an embarrassing $45,252 (9%) since our 5/17 review where I said I'd rather cash out ahead of the summer and come back in the fall. Luckily, you guys didn't let me take a nice vacation and we still have all these positions, which we hedged more heavily in the STP (see earlier review). Overall, we're up 28.8% for the year but that's 2% lower than yesterday – so it's a very volatile number and shouldn't be taken too seriously.
Since we decided to stay in and since we had a lot of hedges, we picked up a bunch of new trades in the past month (always try to balance longs and shorts while selling premium). …
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site
