You’re welcomeWe had plenty of time to execute our trade idea from yesterday morning’s PSW Report, where I said:
“Our play this morning in our Live Member Chat Room was to go LONG on the Nasdaq Futures (/NQ) at 5,775, expecting at least a weak bounce (and a $500 profit) to 5,600 and maybe a strong ($1,000) bounce to 5,625 because we’re still in a low-volume environment, so we’re not expecting any major selling just yet.“
As it turned out, we hit the jackpot with a $1,500 per contract gain and now re-testing the weak bounce line at 5,600 because, as we expected, the volume was nonsense (48M on SPY – less than half an average day) and gains quickly reversed on all the indexes after hours. European indexs are testing Friday’s lows this morning as Trump is speaking in Poland and scaring everyone ahead of the G20 meeting.
It’s not because of anything specifically he’s saying – just the general loss of confidence people get every time they are reminded this guy is the President of the United States.
I’m in Europe at the moment and generally they see Trump as a joke but they don’t think he’s dangerous – just ridiculous. If anything, he’s helping Europe to feel better about themselves and take charge of World affairs, no longer waiting for America to take the lead.
Meanwhile, while Donald Trump is breaking trade agreements, other countries are making them. This morning, the EU and Japan signed a major free trade alliance, shifting even more of the balance of Global Power away from the Unitied States as relationships we worked on for decades are being tweeted away on a daily basis. Among other things, the pact would eliminate duties on cars, agriculture and food imports, as well as other goods and products. This will put US producers at a tremendous disadvantage if Trump can’t check his ego and come to the table.
U.S. ambassador Nikki Haley told a U.N. Security Council meeting that North Korea’s actions are “quickly closing off the possibility of a diplomatic solution,” stating the country is prepared to use military force against Pyongyang. Defense stocks could rise again today as President Trump said he’s contemplating some “pretty severe things” to retaliate after the isolated regime launched an intercontinental ballistic missile.
I’m no great politician but I don’t really understand how threatening to attack an unstable dictator with nuclear weapons is going to stop him from using them when clearly it is the only viable defense he has against US forces. Those forces are likely to come up from South Korea, a country with 50M people and 1,313 people per square mile vs. 90 people per square mile in the US. That means a nuclear missile strike anywhere in that small, dense country would be devastating.
Keep that in mind when you are laughing about Trump’s tweets – this is the first President that has moved the “Doomsday Clock” closer to anhilation since Kennedy and Kruschev squared off over Cuba in the 60s. Since then, our World leaders have worked to reduce tensions, not to escalate them yet John Mecklin, editor of the Journal that keeps the Doomsday clock recently said:
“Now, about halfway through Trump’s first year in office, it is unfortunately obvious that this negative assessment was correct, if anything underestimating the president’s proclivity for intemperate and careless behavior with regard to matters that threaten the whole of humanity and the future of civilization. Traditionally, the Doomsday Clock is set once, at the beginning of the year, and the minute hand does not subsequently move for light or transient causes. This July 4, the Clock remains at two and a half minutes to midnight, because the Science and Security Board foresaw and factored into its calculations what has very unfortunately come to pass in the past six months.”
“That their early judgment has been proven correct is no source of satisfaction. In this case, the words ‘we told you so’ reflect a terrifying reality: Because of his carelessness, unwillingness to heed expert advice, refusal to acknowledge well-established science, and apparent lack of impulse control (among other concerning tendencies), the president of the United States is a threat to the future of civilization.”
So happy Fourth of July America, it’s only month 7 for Team Trump and we’re alreay on the brink of nuclear war. It doesn’t seem to bother the stock markets as we drift along near our all-time highs so let’s just enjoy the ride while it lasts – if it lasts….
Tesla, for example, had bad news on sales, a very harsh downgrade from Goldman Sachs and a negative report on their crash ratings which dropped them all the way from $385 last Monday to $308 this morning (20% on the button) but then Gene Munster does Elon a solid this morning and says “Tesla’s Model 3 Could Change the World Just Like the iPhone” and the stock jumps back up to $315 but, as we know from the 5% Rule™, a $77 drop should give us a $15 bounce to $333 just to qualify as weak and $348 is the strong bounce line so we’ll see how much Munster BS the suckers are ready to swallow once the markets actually open.
We are, of course, short on TSLA in our Short-Term Portfolio and have been since May, when I wrote the award-winning: “Tesla’s Earnings Miss – Emperor Musk has no Clothes!” They were at $320 at the time and now, finally, back to $320 and yes, we had to roll our original short play but now it’s working out very nicely, as is the GM play I predicted would outperform TSLA, which was:
- Sell 10 GM 2019 $32 puts for $4.25 ($4,250)
- Buy 25 GM 2019 $28 calls for $7.25 ($18,125)
- Sell 25 GM 2019 $35 calls for $3.60 ($9,000)
That trade went into our Options Opportunity Portfolio at net $4,875 and it’s already at $7,150, up $2,275 (46%) and well on the way to paying off the full $17,500 in 2019 if GM is good enough to stay over $35 (where it is now). I guess, at $7,150, it’s still good for a $10,350 (144%) gain from here so still good for a new trade and still a trade I like better than anything long on TSLA, which will NOT be worth more than GM ( $53Bn) or about $320 for the bloated EV maker.
It’s a good example of playing value over hype – the value play will end up making $12,625 (258%) on cash in lesss than two years with very little risk so why, Why, WHY people do you even consider messing around with these idiotic momentum plays? Why???
It’s a tricky market – let’s keep it simple and keep it hedged!
