I'm including all of my morning comment here from the PSW Chat Room in case you are interested in the general market commentary, trade ideas are highlighted in blue.
Good morning!
Well, same old, same old up and up action. Oil is up to $51.50 ahead of yet another OPEC meeting where they are trying to get Russia to get on board with cuts. At $52, I start liking the shorts.
And, of course, we're watching 2,050 on /ES, it's already broken on SPX so /ES will confirm that we can't short anymore (not even /TF) until the market comes back under.
2,220 was the 20% line on the Big Chart for /ES and that's up 370 from 1,850 so figure 75 points up is the overshoot (2,295, which is also 10% up(ish) from 2,080 pre-election) and 75 points down is the weak retrace (2,145) but that seems like miles away now which means, even if we do get a correction over the weekend, it's not likely to be too severe so it doesn't make sense to hold index shorts and risk a bigger rally with /ES over 2,250.
As this point, it does seem more likely we overshoot (2,295) before correcting but I can't make an upside bet (other than the DIA play above).
19,600 on the Dow is another good line to watch and so will 4,900 on /NQ
And so much for our EWJ shorts!
Dollar very strong at 101.50 ahead of the Fed and post ECB.
Big Chart/StJ – If we do not correct by earnings, We'll have to move the Must Hold line up 10% anyway.
WYNN/Rick – It's old faithful in that channel.
Speaking of old faithful, AAPL chugging along at $113 but sometimes they take AAPL up to boost the Nas before a broad sell-off so we'll watch the net volume closely.
RH/Rick – I liked them when they were $30 years ago and I guess I should like them again at $33 but they are only making $1.25 per share for a p/e of 26.4 so really only priced right for that kind of business (and that's giving them some slack in this over-valued market). They are getting killed today after BEATING for Q3 but guided Q4 down severely and it's being extrapolated to DOOM FOREVER.
However, it's a good call on a stock I certainly wouldn't mind scaling into so, in the LTP, we can put a flag down and sell 10 of the 2019 $25 puts for $6 to put $6,000 in our pockets while we wait to see where these guys settle down. If they go lower (I very much doubt below $25), then we can add a bull call spread ($25/35, currently $5) but no rush at all.
"RH pointed to the delayed arrival of source books pushing revenue into 1Q17, disappointing Holiday Collection sales, and aggressive seasonal clearance as impacting 3Q16. FY16 earnings are expected to be impacted by SKU rationalization, customer accommodations, and deferred membership revenue," Barclays analyst Matthew McClintock said in a note.
"Longer term, we continue to watch RH opportunistically in the hope that operational controls at the chain will improve, allowing the company to release the power of its superior omni-channel model and merchandising acumen," the firm wrote in an analyst note.
But in the near term, Oppenheimer sees risks to sales and earnings forecasts and advises clients to stay on the sidelines "at least for now."
Essentially, people don't buy management's excuses but I do as they've certainly done a good job of doubling the business since 2013 and now we can buy it for the same price as it was then.
DBA/Hanj – The Dollar only has a short-term effect. Don't forget, those are US crops, priced in US Dollars. At the moment, the Fed is alone in tightening and the Dollar is strong but the ECB can't keep it up forever and any other CB that stops easing would be a major surprise – but that won't happen until GS is done loading up on cheap puts before they tell their drones to tank the markets.
WTW/Hanj – I'd sell 10 2019 $8 puts for $2.40 ($2,400) and consider that free money and pick up 10 2019 $5 ($6)/12 ($2.50) bull call spreads for $3,500 for net $1,100 on the $7,000 spread that's $5,000 in the money to start. In fact, that's such a good spread we will add it to the OOP (so much for cutting positions!).
Appointments/StJ – Don't forget Linda McMahon at SBA – what a prize she is! Yet another person who one might say is getting payback from the Trumpster – if we didn't know he had absolute integrity.
Between 2007 and 2009, Vince and Linda McMahon donated $5 million to the Donald J. Trump Foundation, making the couple the biggest outside donors to his foundation, according to Washington Post reporter David Fahrenthold.
NAK/Albo – Of course it is, what EPA. My kids will be able to skip college and retire (don't tell them)!
Trouble/Rustle – What can Trump possibly do to be "in trouble"? Will it be the Republican House, the Republican Senate who calls for an investigation and, if so, will his case be heard before the Supreme Court he picks? This guy will get away with everything. At least we have President Schwartzenegger to look forward to.
Shorts/Latch – We are not, on the whole, short, we have hedges that are sucking wind and we are making so much net money in our long portfolios that I've chosen to use index shorts to hedge a potential pullback and those are sucking too but that's what's supposed to happen at the point where we begin to cash in our longs and move to a net short position at the top of a rally. BALANCE – nothing is more important than balance.
I say it all the time – you should almost never be more than 60% bullish and 70% is really extreme but, even if you are 70% bullish and the market drops 50%, you go from 70/30 to 35/45 and you are down 20% (and that's assuming you suck at risk/reward too). Since we tend to give ourselves a 20% advantage in our spreads, even that should net you out about even, which is fantastic in a 50% market drop since you get to take what you have left and go bargain-shopping.
SGYP/CRS – They are all over the place but net up so I'm happy. They are ringing the closing bell today – that will give them some well-timed attention.
