Entries by Phil

Which Way Wednesday – Rallying Back to the Highs (Again)

This is just amazing.

It doesn't matter what happens during the day, in the overnights, we rally to new highs.  Oddly enough, we've been making our money on the short side (see last week's Webinar) by playing the indexes short when they peak and selling on the dips so this morning we're doing it again at 9,240 on the Nasdaq (/NQ) Futures, 3,335 on the S&P Futures (/ES) and 29,280 on the Dow (/YM) Futures.

Meanwhile, we're stubbornly long on Natural Gas (/NG), which is now at $1.90 but our average entry is $1.962 and we already have 4 long so we either get back to 2 even or we wait for $1.80 to add 2 more longs and bring the average below $1.90 (with a $6,000 loss on 6 contracts).   It's a long-term conviction play and could get very painful as we're bucking the overall trend.

I reviewed our logic on the Natural Gas plays in yesterday's Live Member Chat Room and we're doing another Live Trading Webinar this afternoon at 1pm, EST, so I'm sure we can discuss it some more.  The strong(ish) Dollar hasn't been helping the commodities very much.  Oil is still down in the dumps at around $57.50, which is a nice place to go long (/CL) with tight stops below that line, which should match up with $64 on Brent (/BZ) – so if Brent fails to hold, don't play /CL long!

Not that the news seems to matter these days but President Trump is back to threatening tariffs on Europe in an attempt to force them to make a Trade Deal with him because he needs the distraction to take away from his impeachment trial.  One thing that's distracting everybody at the moment is the Chinese virus scare, with 50% more cases today than there were yesterday (now 470) so no, it's not at all under control.   The US case that panicked our markets yesterday was from a guy who was in China recently and it does seem to be contained (so far). 

In drugstores and at airports, and on the online…
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Trumped Up Tuesday – Let the Impeachment Begin!

Image result for trump impeachment cartoonImpeachment begins in earnest this week.

It may end just as quickly as the GOP-controlled Senate is looking to acquit Trump as soon as possible, preferably without hearing from any witnesses or reviewing any evidence.  This farce will be overseen by Chief Justice John Roberts – which is very sad for our rule of law, of course, as it legitimizes this behavior and sets a precedent for future dictators to rule our country by.  Nonetheless, at least it will be interesting.  

Trump, like Carlos Goshn, has already fled the country and is in Davos for the World Economic Forum, where he just gave the first keynote address in the 50-year history of Davos that did not mention the World at all – except to say how much better Ameirca is than the rest of it.  As noted by the NY Times:

In his 30-minute address in front of a global audience, Mr. Trump did not mention the impeachment trial back home. But he delivered what amounted to a version of his campaign speech minus the red meat to his base, speaking little of international alliances other than touting America’s supremacy in the world.

The president also took a swipe at people demanding action on climate change, the lead agenda item at this year’s conference. Mr. Trump announced that the United States would join the 1 trillion trees initiative launched at the World Economic Forum. But he also declared that “we must reject the perennial prophets of doom.”

The message at Davos was very clear to all but Mr. Trump.  So clear in fact that it was written on the roof of the building:

“Act on Climate” could be read in the snow near Davos as Mr. Trump arrived on Tuesday.

Global warming and climate change top the agenda items for the conference. A star speaker on Tuesday, alongside Mr. Trump, is the 16-year-old climate activist Greta Thunberg, who has said she wouldn’t “waste her time” speaking to Mr. Trump about climate change.  Trump has withdrawn America from the
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Happy Martin Luther King Day!

The Rev. Dr. Martin Luther King Jr. at the Lincoln Memorial during the March on Washington on Aug. 28, 1963.It's Martin Luther King day so the markets are closed.

It's a good day to read his "I Have a Dream" speech – really is amazing when you think of the great social change in this nation that was set in motion by one man with a vision.  Here's a great video of the actual event.

It is a testament to the power and effectiveness of Dr. King's movement that, even to those of us who were alive at the time, it seems like it must have been another world where a man had to speak out against such injustice as if it wasn't obvious to the majority of people that segragation, whether by law or by practice, was an outrage.

Sadly, many of the lessons he taught us have already been forgotten, some great quotes:

  • Nonviolence is a powerful and just weapon. which cuts without wounding and ennobles the man who wields it. It is a sword that heals.
  • Nonviolence means avoiding not only external physical violence but also internal violence of spirit. You not only refuse to shoot a man, but you refuse to hate him.
  • It is not enough to say we must not wage war. It is necessary to love peace and sacrifice for it.
  • The hope of a secure and livable world lies with disciplined nonconformists who are dedicated to justice, peace and brotherhood.
  • Human progress is neither automatic nor inevitable… Every step toward the goal of justice requires sacrifice, suffering, and struggle; the tireless exertions and passionate concern of dedicated individuals.   
  • Never forget that everything Hitler did in Germany was legal.
  • We will remember not the words of our enemies, but the silence of our friends.
  • The past is prophetic in that it asserts loudly that wars are poor chisels for carving out peaceful tomorrows.
  • A nation or civilization that continues to produce soft-minded men purchases its own spiritual death on the installment plan.
  • A nation that


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400 Point Friday – Another Week, Another Record High

Will this rally ever stop – or even pause?

We've already added 400 points this week and, as you can see from the chart, almost the entire move came at the open yesterday and Wednesday and this morning the Dow (/YM) Futures are up another 66.6 points (0.25%), capping off a 1.5% move higher for the week (if we hold it).  It's a bold move into earnings season, as it will be very hard to justify these price increases for the average component but we'll just have to wait and see as this rally shows no signs of slowing – despite all logic

I know no one wants to hear about boring old macros but, while we were sleeping, China announced that their economy was growing at a 30-year low 6.1% as Trade, Investment, Consumer Spending and Business Confidence all come under pressure.  The country also faces longer-term stresses like an aging population, which was highlighted by Friday data showing births had fallen to their lowest level since 1961.  Nomura economists calculate the trade war, coupled with slower global growth, shaved one percentage point off China’s 2019 GDP figure. 

Nontrade factors, too, weighed on sentiment, including mass protests that roiled next-door Hong Kong for more than half a year, clouding the business outlook and drawing global attention to the risk of social unrest in the authoritarian nation. Shenzhen’s celebrated technology sector, including hometown companies like telecommunications equipment maker Huawei Technologies Co. and drone maker SZ DJI Technology Co., is facing new scrutiny from the U.S. and elsewhere.

Despite the slowing growth, trade issues and 6 months of protests in Hong Kong, the Shanghai Composite Index rose 22% last year because – why not? – everyone else is ignoring the macros, why shouldn't Chinese Traders too?

Increasingly, Chinese industrial prices have also headed downhill in a sign of weak demand, and producer prices overall last year fell 0.3%. Car sales slumped 8.2% in 2019, while consumers – whose incomes expanded slower than the economy at 5.8% – were squeezed by pricey pork and an upward creep in crude oil.  In cities like Shenzhen and Shanghai, office vacancy rates are solidly in the double-digit percentage points as companies quietly downsize. Property is a
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Fallback Thursday – Tesla (TSLA) Down 10% Already – Where Will Reality Strike Next?

Wheee, what a ride!  

Tesla stock hit peak stupidity Tuesday at $550 per share in mid-day action but it finished the day at $530 and, this morning, we're down to $500 after I ranted about it in our Weekly Webinar (we are short TSLA).  No, I don't think I caused it – I think Tesla, having kissed a $100Bn market cap, had a run-in with reality two weeks ahead of an earnings report that will theoretically show them making $150M for the Quarter (though I think they miss), which is still a run rate of $600M for 2020 or 1/166.6 of $100Bn.  

Even if you assume amazing growth on the top and bottom line, it will be 2025 before you could concievably be close to justifying $100Bn – even if every Musk fanboy's wildest fantasies come true.  I REALITY though, there ARE real, live other car companies and real, live other battery companies and real, live other solar panel makers who run real, live businesses with real, live profits and NONE of them come close to the kind of valuations given to TSLA who, so far, have proven to LOSE money in all 3 of those ventures. 

See – I'm still ranting.  These guys just annoy me!  

Related imageI mean, seriously, TSLA is delivering about 100,000 cars in Q4 and about 350,000 cars for the year while Nissan delivers 350,000 cares PER QUARTER – and they are in 5th place in US Sales (where Tesla only sold 36,000 cars as the rest are global sales).  This is part of the problem traders have as they don't differentiate numbers when they hear about Tesla's "amazing" market share.  It's not amazing at all – it's only slightly better than Volvo in the US and, internationally, Volvo kicks their ass!

Yet TSLA is now valued twice as high as all of them, except Toyota (TM) at $200Bn, perhaps because they sell more than 50 TIMES more cars than TSLA in the US and 100 TIMES more cars than TSLA world-wide or maybe it's because TM MAKES $20Bn a year while TSLA loses $1Bn.  JUST the Prius sold 500,00 units in 2019 – mostly to Uber drivers…

 

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Working it Out Wednesday – Is the Trade Deal the Beginning or End of the Rally?

Image result for trump trade deal cartoonToday is the day!  

Trump will sign a deal today (11:30) with China that puts off the new tariffs he threatened them with until "after the election" and China agrees to buy $200Bn in US Goods and Services over 2 years, which is double their normal pace so, in theory, it could add 0.5% ($100Bn) to our GDP, assuming we actually produce more Goods and Services and don't just end up selling China things we would have sold to someone else.  Boeing (BA) has several hundred grounded 737s China can have – that's a good start!

It's onlly a start though as the deal does not address Cybersecurity or China’s tight controls over how companies handle data and Cloud Computing.  China rejected American demands to include promises to refrain from hacking American firms in the text, insisting it was not a trade issue.  The Chinese have also rebuffed requests for broader changes to the structure of their economy. That includes a pattern of subsidizing and supporting key industries, like solar and steel, that American firms say have allowed China to dump cheap products it makes into the United States.

In the interim, the remaining tariffs will continue to inflict financial pain on American businesses that rely on Chinese imports and the consumers who buy their products.  Is that going to be good enough to continue to boost the market or will the reality of the trade deal's mediocrity begin to weigh on forward-looking sentiment.  Pay close attention to Corporate Guidance, now that they are taking the signed deal into account.  

Earnings have been going well so far but Goldman Sachs (GS) missed this morning by almost 20% – that was a surprise.  BAC, BLK, PNC, USB and UNH all beat along with WAFD last night and only WFC screwed up yesterday so it's so good, so far in the Financial Sector but, of course, shouldn't it be with the market up about 30% in 2019 and up another 2% in the first two weeks of 2020?

The Producer Price Index came in weak this morning at 0.1%, half of what was expected and that indicates that, despite "strong" retail sales, the Consumers are unwilling…
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Just another Manic Monday

Image result for earnings season animated gifWhat a boring weekend!

For a change, there wasn't any news – things just sort of drifted along but, poof!, half of January is already behind us and already we're moving into the heart of Earnings Season with 10% of the S&P 500 reporting this week followed by over 20% next week and we'll be half done by the end of the month and then it's February already – boy time flies

This week we concentrate on earnigs from the Financial Sector and I find Schwab (SCHW) very interesting at $48 as that's $61Bn after they swalled Ameritrade but they are only making $3.6Bn this year, just $300M more than last year with Q4 likely to be down from last year – not too supportive of a record-high valuation.  

It will be a good test to see how rational traders are getting (if at all) in this ultra high-value market environment.  Bank America (BAC) and Wells Fargo (WFC) are also expected to be making less money than they did last year and they too are at year highs – might be an interesting time for a little correction?

 

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9,050 Friday – Is the Nasdaq Ever Going to Stop?

So much for shorting the Nasdaq.

After a very mild rejection, the Nasdaq 100 went a ahead and plowed over the 9,000 line yesterday, joining the broader Composite Index, which is now at the 9,200 line – up about 50% since Dec of 2018 – just 13 months ago at 6,190.  To be fair, we had fallen from 8,133 so an optimist could say that that was a fair price and the sell-off was silly – I'm sure that what they'll say about the next sell-off, despite the last one being 22.5%, which would take us back to 7,130 if something "silly" happens again

If we call 7,500 a good base to climb from, then the 9,000 line is the 20% mark and 9,300 is a 20% overshoot of that mark (20% of the run up, not 20% of 9,000) so that's the next mountain the Nasdaq will have to climb – not even 1% away these days – we should be able to do that standing on our heads if this rally is meant to continue.  

Our index shorts were a fail as Apple (AAPL) climbed up to $310 and the end-stage of bubble rallies can often be market by parabolic moves up and one has to wonder where all this money is coming from with FAANG Stocks gaining almost $2Tn in value in the past year, which is 10% of the US GDP and our GDP only grew 2% ($400Bn) so, even if every last cent of the entire US GDP expansion went into those 5 stocks, where did the other $1.6Tn come from?

US stock market in 2019The entire planet's GDP is about $90Tn and it grew at 3.5% so there's $3.15Tn, so I guess maybe the entire World put 2/3 of their 2019 growth into those 5 stocks but the rest of the markets did expand as well – up 24% Globally – and that means we're right about the $100Tn mark in global equities, having started 2018 at $77.5Tn.

Again, let's do the math and reflect, the Global GDP was $80.6Tn at the start of 2018 and we had a good year and hit $84.8Tn to start 2019 (up 5%) and 2019 was slower, up 3.5% (thanks Trade War) to
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Thrilling Thursday – Back to Nasdaq 9,000

Almost there!

9,000 on the Nasdaq 100 (/NQ) is so close we can taste it.  Well, not so much taste it as short it as big levels like this are usually excellent spots for corrections.  At 8,500 we pulled back to 8,200 and our first attempt at 8,000 (only 2 months ago) was rejected for 200 points before getting back on the bull train so the odds of getting a pullback here, at 8,995 are certainly worth the risk of stopping out at 9,001 with a $120/per contrract loss while even just a 100-point drop back to 8,900 would be a gain of about $2,000 per contract.  

Finding very positive reward/risk scenarios is the key to good Futures trading – something we discusssed in yesterday's Live Trading Webinar.  Where we shorted the S&P (/ES) at 3,258 and the Dow (/YM) at 28,740 and both of those had quick stop outs at 3,260 (-$100) and 28,750 (-$50) but our long on Gasoline (/RB) was 2 contracts at $1.646 and we're already at $1.657 for a quick $462 so far (they are good to next week's webinar) and now we can add an /NQ short at 8,990 and another at 8,998 to average 8,994 with a stop at 9,001 for a $140 loss against the potential $4,000 gain at 8,900 – that's a fair way to play, right?

If we're still testing 9,000 at the open, that should be about $20.50 on the Nasdaq Ultra-Short ETF (SQQQ) and we can play for a quick pullback by simply taking the Jan $21 calls at 0.40 so let's say we risk the same $140 by taking 14 of those for $560 and stop out at 0.30 for a $140 loss but hopefully we make well over $1,000 on a nice plullback. 

 

 

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Whipsaw Wednesday – Iran Attacks US – Peace Declared?

OK, now things are strange.

Iran fired missiles into Iraq last night and attacked US bases and the Dow fell 500 points and the S&P fell 60 points but they didn't kill anyone and, even stranger, Iran then indicated that that was their retaliation and they were satisfied and Trump seemed to feel that was fair as well and now the war seems to be over and the markets are right back to where we started yesterday morning.

Iran says it does not seek war after firing missiles at bases housing Americans.

Bodies lying near the site of the Ukrainian Boeing crash on the outskirts of Tehran.That's kind of crazy, but crazy is pretty normal these days so we'll just have to go with the flow and see what happens, I suppose.  In an unfortunate coincidence last night, a Boeing (BA) 737-800 (not Max) crashed shortly after taking off from Tehran, killing all 170 passengers.  Supposedly it was "technical problems" and that's got BA stock down 2% this morning – the day after it was announced that Warren Buffett was building a stake in the airline. 

Ukraine International Airlines, is partly owned through a network of offshore companies by Ihor Kolomoisky, an oligarch with close ties to President Volodymyr Zelensky, so of course there are rumors that this all ties back to Trump sending a warning to Zelensky to keep his mouth shut but hat would seem a bit much, even for Trump, though it is a crazy coincidence that outside inspectors won't be welcome due to the weekend war (that seems to be over) so "technical issues" it is and we'll all move on and accept it, right? 

All this peace breaking out has sent Oil (/RB) plunging back down to $62 from $65.65 yesterday morning and Gasoline (/RB) fell from $1.80 back to $1.70 as the President declares all is well and has, so far, failed to mention the plane crash – so it will be interesting to hear what he has to say this morning.

The markets don't need to wait, apparently, as it looks like we'll be up at
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