So far the markets are staying "strong".
That's good for our longs, bad for our hedges but that's why we have both – along with plenty of CASH!!! on the sidelines – just in case. Unfortunately, the Fed action, along with the out-of-control Trump budget, took the Dollar down 1.5% and that made the markets seem stronger than they actually are (because the currency they are priced in got weaker). This also boosted commodites, which kept the materials and energy sectors from dropping and now we'll see if they can hold up as the Dollar comes off the floor at 100 (and yes, long USD at 100 is a good FX play with tight stops below).
Our target range for the Dollar is 100 to 103 so we expect to be back at 101.50 soon and THEN we will have a better idea of what the real reaction to the Fed was. So far, as we predicted (and you are welcome if you took yesterday's index shorts for huge wins), the post-Fed rally has pulled back a bit but the Russell (/TF) still makes a good short at 1,385, especially if the Dow (/YM) is below 20,900 and the S&P (/ES) is below 2,380 and the Nasdaq (/NQ) is below 5,420 AND the Dollar is over 100.
Today is option expiration day and quarterly expirations can be very tricky so a good day to take off and come back Tuesday (Mondays are pointless) to see what's up. By the way, if you don't feel comfortable walking away from the markets for a few days – you REALLY need our help because a good portfolio should run itself – not run you!
The weak Dollar has also pushed oil back to $49.50 into the weekend and, hopefully, they either test $50 today or hold $49.50 into Monday so we can short them again (/CL). Again, since we don't think the Dollar is going any lower then, other than the US manipulation into the weekend – we don't see any reason for oil to be stronger.
Tesla (TSLA) is another short we are licking our chops over as it heads back up. We had a good time shorting them last month with the following spread (2/9):
TSLA – On schedule? What kind of on schedule is that after 3 years of delays? I doubt they will delay further, Bolt and others are already out there and they have to show something. Getting to be a good short again.
In the STP, let's sell 3 TSLA March $270 calls for $13 ($3,900) and buy 5 TSLA March $295 ($30)/270 ($14.40) bear put spreads at $15.60 ($7,800) which is net $3,900 on $12,500 worth of shorts that are $12,500 in the money at the moment.
Despite the bounce, the spread will expire in the money and pay the full $12,500 for a nice $8,600 profit but we took $7,000+ (180%) and ran two weeks ago and we've been waiting for another run-up to short them again. It won't be today but tune in next week and we'll hope for some positive press over the weekend to get them back to the $270s so we can sell more premium to the dreamers.
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Amazon (AMZN) is another fun short at $850 which is over a $400Bn market cap on $150Bn in sales and $3Bn in profits, MAYBE $7 per share, which would still be a p/e ratio well over $100. Wal-Mart (WMT), meanwhile, returns $4.50 per $70 share for a p/e of 15.5 and they have $500Bn in sales and $15bn in profits yet their market cap is just $216Bn – about half of Amazon! This is completely ridiculous so either WMT is way underpriced or AMZN is way over-priced and, with a 120 p/e – I like the AMZN short!
We like Target (TGT) better than WMT as it flirts with $55, which is a market cap of just $30Bn on $70bn in revenues and $2.7Bn in profits so TGT makes as much money as AMZN on half the sales and you can buy the company for less than 1/10th of AMZN's market cap or stock price. Target's p/e works out to about 11 – much better than WMT and AMZN isn't even showing up at this competition.
Amazon makes all it's money from their cloud services – retail loses money and if it wasn't for retail, then they wouldn't have all that cloud capacity to sell so chickens and eggs but the cloud space is crowded and will eventually be commoditized and, though it's been a widow-making, we're ready to take a stab at an Amazon short – so tune in next week for that as well!
We are aleady long on WMT and TGT in our Member Portfolios and we'll be looking to add AMZN and TSLA shorts next week. There's a G20 Finance meeting this weekend ahead of the big meeting in Hamburg on July 7th when Donald Trump gets to hang with the other World Leaders for the first time – I want to be there for that fun!
Meanwhile, we're done with our Futures shorts but we will short the Russell if we can (see rules above) and we're waiting on a few reports at 10 but, for the most part – it's a watch and wait day but next week we have some trading to do, for sure!
Have a great weekend,
– Phil
