RF's Financial News

RF's Financial News

Sunday, October 11, 2020

This Week in Barrons: Oct 11th, 2020

 This Week in Barrons: 10-11-2020:   



Only ONE bird gets the worm…

 

   Entrepreneurs aren’t waiting for the economy to come back to start their businesses.  And these builders of post-COVID businesses won’t be dependent upon real estate.  Instead, they are building around a tech-stack that is devoid of a storefront.  For example, if you’re launching a restaurant in 2020 you’re going to need a mobile ordering, pickup and delivery system from Slice, Toast, or DoorDash yes?  If you’re launching a clothing store you’re going to need a presence on BigCommerce, Shopify, Etsy and/or Poshmark?  If you’re opening a rental business you’ll need a point-of-sale system from Square and a website from Wix?  And finally you will need operational help (most likely) from either Brightwheel and/or  ServiceTitan.  Every single new corporate formation has replaced the ‘Where are you located’ question with: “What technology stack are you using to help you grow?”  This trend will accelerate over the next 12 mos.

   These days (per FW) the big VC ‘wins’ are coming from being (a) ‘early’ to the party,  and/or (b) being the ‘most committed’ institutional investor.  VCs are looking back over their ‘wins’ and are finding that their home runs came when NO other firms validated their investment decision.  It’s being called: negative social proof.  A typical scenario that’s circulating about is the first time Brian Armstrong (founder of Coinbase) came to a Y-Combinator event involving 15 other presenting companies, Coinbase, and a slew of VCs.  After 4 hours, only 1 VC wanted to invest in Coinbase, and the dialogue between the evening’s moderator and the potential investing VC went something like this:

-       Moderator:          “So which companies did you like best?”

-       VC #20:     “I like Coinbase. I think Brian Armstrong is on to something big.”

-       Moderator: “You are the first and only VC to say that.”

-       VC #20:     “I think that it’s going to be huge.  Please make sure we get the call when Coinbase wants to raise.”

 

   VCs win and win big when there’s negative social proof – aka when NOBODY else likes the idea but them.  In their words: “In a COVID world, you bet big or go home.  Only ONE bird gets the worm, and NOBODY gets a participation trophy.”

 

 

The Market: State of the Recovery…




   The U.S. may have to retake the Recovery 101 course, because we only added 661k jobs in September.  This was a lot lower than expected.  Do you remember when the unemployment rate was:

-       3.5% - back in February, 2020?

-       14.7% - back in April – after the COVID lockdowns, and we lost 22m jobs?

-       11.1% - back in June – as businesses reopened, and we added 7.3m jobs? 

-       8.4% - back in August – as we added 3.2m new jobs.  But many people gave up looking for work and became part of the long-term unemployed in the U.S.

 

   Those 661k new jobs in Sept. mean that our recovery is slowing down.  Factually: (a) the unemployment rate fell to 7.9% due to 1.1m people leaving the work force, (b) 865k of those 1.1m were women, (c) we’re still 12.6m jobs DOWN from our peak, and (d) bottom line, even with a vaccine – additional economic medicine will be necessary.  The $2.2T stimulus in March was largely responsible for driving the recovery, but those benefits have expired.  With 9 companies in the final phase of testing, the race for a COVID-19 vaccine is hot, but the CDC says vaccines won't be widely available until the summer of 2021.  With the pace of recovery slowing, and no stimulus bill in sight – we could be headed for an extremely rocky next 90 days.

 

 

InfoBits:

  


 

-       Bristol Myers Squibb is buying MyoKardia…   for about $13B to bolster its heart disease portfolio.

 

-       Ialy’s Nexi will acquire fintech rival SIA   for about $5.4B – creating a European giant in the payments sector.

 

-       Crowdcube and Seedrs (crowd-equity fundraising platforms)…  have agreed on a merger – creating one of the largest private equity marketplaces.

 

-       Apple has stopped selling…    Bose, Logitech, and Sonos audio products – in order to boost its own.

 

-       Coke discontinued its Zico coconut water brand…   as it has 275+ other under-performing "Zombie brands" over the years.

 

-       Faraday Future…   is planning to go public through a SPAC deal.

 

-       $67B is the size of our trade deficit…   the highest in 14 years – ballooning from $37B in February.

 

-       Boeing slashes its 10-year forecast for new aircraft demand…   by 11%.

 

-       McDonald's brings back baked goods…  so it’s a donut-shaped recovery.

 

-       Wells Fargo cut 700 jobs in commercial banking…   and plans to reduce its workforce by tens of thousands in the near future. 

 

-       Levi's saves itself with ecommerce…   and now wants your old jeans for "Re-commerce."   It wants to continue selling your old pair of hip-huggers.

 

-       Eli Lilly asked the FDA for emergency use approval…   of its COVID-19 antibody treatment, saying it could supply 1M doses this year.

 

-       DoorDash is making your food delivery as important as the food…   by creating free meal credits across 4,000 different restaurants and grocery. 

 

-       This year’s World Peace Prize goes to…  the World Food Program for acting as a driving force in efforts to prevent the use of hunger as a weapon.

 

-       IBM is doing more financial engineering…    as it announced that it will make its Managed Infrastructure Services unit – a separate public company.

 

-       Advanced Micro Devices is maybe buying Xilinx…  for $30B.

 

-       GoPuff, a convenience food delivery service…  has raised $380m in new funding with a post-money valuation of $3.9B.

 

-       Forest Road Acquisition Corp is a new SPAC…   comprised of 3 former Walt Disney Co. execs, Shaquille O’Neal, and one of Martin Luther King Jr.’s sons.  They will raise $250m to take video streaming platforms public.

 

-       Morgan Stanley is buying Eaton Vance for $7B…   days after completing its takeover of E*Trade Financial.

 

-       The number of Manhattan apartments available for rent has tripled.  The average rent fell by 11% to $3,036.

 

-       The majority of Americans believe…   the worst of COVID has yet to come.

 

-       'The West Wing' is reuniting:  This headline is very confusing if you didn’t know that “The West Wing’ was a TV show.

 

-       First Mark Capital…   became the 1st VC to raise a SPAC.

 

-       Jeffrey Katzenberg is looking for a buyer for Quibi:   So far, WarnerMedia, Facebook, and Apple have all said: ‘Nope, No Dice, and Quibi Who?’

 

 

Crypto-Bytes:



 

-       The Ethereum 2.0 experience…    is the first time the cryptocurrency industry will see a blockchain of its size and value – attempt to transition all users and assets to an entirely new decentralized network while keeping all operations on the old network active and running.

 

-       Ripple’s Chairman Chris Larsen will remove Ripple from the U.S….   if our country’s hostile stance toward cryptocurrency companies doesn’t soon change.

 

-       To get the best education on blockchain…   you need to attend: MIT, Cornell, University of California – Berkeley, Stanford, or Harvard.

 

-       Square purchased 4,709 Bitcoin…    a $50m investment representing 1% of the firm’s total assets.

 

-       Bitcoin options go crazy …   as $48m worth of options were bought – the highest daily volume since July 28th.

 

 

Last Week:




   Monday:  The futures are up sharply and I assume it is because Trump is not dying.  That’s one uncertainty the market can put behind it.  But we are moving right into earnings season along with the most contested election in U.S. history.  I believe that the dips will be bought with FED money, and we’ll try and stay above the 50-day moving averages – trending sideways and up.  Oil's up 6%, and the dollar’s down = good for stocks this week.  I’m liking the movement in the chip sector this week – right off the bat.  

 

   Tuesday:  Today’s all about COVID news flow and who else is infected.  We are green and Powell is speaking, so maybe he'll energize them with words of more free money and we'll see the market run.  Volatility is the name of this game and we've got it in spades.  Boom!  In just moments we went from being up 100 to down 300.  Word hit that Trump has instructed the Republicans not to negotiate the stimulus package until after the election.  Is this a way to put pressure on the two sides to get something done?  It could be, but the drop was dramatic and fast.  Now we just sit and see if this is the end of the rally, or a one day knee jerk.

 

   Wednesday:  The futures rebounded on Trump suggesting that Congress should send $1,200 per person, and help the airlines.  We're in a period of great uncertainty and wicked volatility.  We’ve regained all we lost yesterday, but I’m not going to buy anything today.  We're up huge, and too many things have moved too far.  With a full boatload of Fed heads out today, and Powell saying they are "committed" to using their full range of tools to keep the economy going – the market is having a prime day.  Interestingly, the FAANMG stocks are up, but not as much as they should be.

 

   Thursday:  Across the wire comes: “Trump says that it looks like there’s a really good chance to reach a deal on COVID aid – talks have re-opened.”  But Trump wants a healthy market heading into the election and every good news item will be rewarded like this.  Today we should see a lot of up and down action.  The chip sector has come alive.  Coca-Cola (KO) is making a nice chart set-up, and with earnings on the 22nd – it has a chance to run higher.  I'd take KO > 50.40.  Another chart that has my eye is COP, and I’d nibble > 35.20.

 

 

Marijuana… The beverages are coming … the beverages are coming:

 



-       Cannabis advocates say that the cannabis industry will support 300,000 workers by the end of 2020 even as some businesses are forced to shut down. 

 

-       Recreational marijuana legalization is once again on the ballot in Arizona.  Sales and production numbers show an elevated level of demand with increasing medical marijuana patient counts in AZ in July and August.

 

-       Beverages are the legal cannabis industry’s fastest-growing segment.  It’s split down the middle whether consumers prefer THC or alcohol.  

 

-       Ontario-based Canopy Growth is set to introduce cannabis-infused drinks in California and Illinois, and expand into other states in the following months.  The companies will focus on session ability – emphasizing THC dosages: “That will more closely liken itself to current beverage alcohol serving sizes.  Canopy Growth owns a 74% market share in Canada, and sees THC-infused beverages as a game-changer in U.S. cannabis.  We believe that beverages and other Rec 2.0 products will attract new consumers to the market and further drive conversion from the illicit market.”

 

-       A democratic sweep in November will bring with it the passage of the STATES Act in the first year of the new administration.  This would force the legislature to address: capital markets access, section 280E's removal, and social equity.  New adult sales from NM and VT in January will boost the marijuana rec. legal market.  I expect marijuana legalization to pass in AZ and NJ in November, with NY, PA, CT and RI to follow closely suit. 

 

-       The STATES Act is the simplest and least contentious way for Congress to legalize cannabis.  It is mirrored after the 10th Amendment to the U.S. Constitution which defers to the states all powers not given to the federal government.  Ultimately, cannabis would remain illegal unless a state took action to legalize, and states would be free to legalize for medical use, recreational use or both.  Given states would regulate cannabis sales with no federal government involvement, there would be no interstate commerce for cannabis (unless states were to enter compacts with each other to permit cannabis to move between them).  Because of its broader political appeal, the STATES Act is a more likely path for legislation than the MORE Act that would remove cannabis from the list of controlled substances entirely.

 

 

Next Week: Be on your game – because Volatility is alive ‘n well…




Markets - What Me Worry?  The S&P continues to grind to the upside, but the ranges on a day-to-day basis are phenomenally large.  Part of that is because everybody’s talking about a stimulus deal.  My advice in that regard is: (a) to buy the stimulus rumor, and (b) to sell the stimulus deal.  The market is big, bad and binary.  It’s overbought, setting itself up for perfection, and can move at least one standard deviation higher or lower on a single tweet.  

 

These large, daily ranges have NOT abated.  In July and August we had a large ‘gamma squeeze’ driven largely by the retail trader and Softbank.  During that time, the daily ranges were tight, small, and manageable.  Once we crossed over into September, the game completely changed.  Lately, the most recent volatility to the upside, is almost as great as it was earlier to the downside.  That is not a healthy trading environment, and in fact this week we broke-through the expected move (in the S&P) to the upside.  Be aware of this market inefficiency, and continue to remain focused on managing your risk – assuming that at any time this bounce could fade.  

 

It’s a Shell Game as to who’s leading versus following.  When examining the IWM (small caps), in 5 of the last 6 weeks the IWM has breached its expected move.  That signals a small cap marketplace in chaos.  I question whether it’s tremendous upside move – can proliferate outward to the rest of the markets?  This is currently a COVID news-driven environment.  Manage your own risk appropriately.  

-       [ASIDE:  A couple of us have been having some fun buying CTIC (a $3 stock) and wrapping it in either a $1, $2 or $3 weekly covered call.  This is netting us between 5 and 8% / week = rinse ‘n repeat.  It’s a safer way to live ‘n fight another day.]

 

“Fish where the fish are biting.”  Lately, the small caps (IWM) have been outperforming the other indices by a wide margin.  Even though the NASDAQ (QQQ) brought us to this dance, the small caps have (at least temporarily) stolen the show.  FYI, energy continues to lag this market, without any hope of reversing that trend. 

 

The Bonds were sold hard this week.  This is bullish for the financials = XLF.  Right now the bonds (/ZB) are around $174.  If the bonds get down to the $170 level, this marketplace will feel very differently about the bonds and the corresponding rise in interest rates that it will bring.   

 

The Dollar was also sold hard this past week.  I think the Dollar is being used as a flight to quality, so if the S&Ps selloff – we could see the Dollar rip higher.  The Dollar could rip higher because there’s nowhere else to go?  The Euro and the ECB are doing the same type of stimulus as we are.  Right now the Dollar ($DXY) is at $93.  A move down to $90 is completely fine, and would only be interesting if it crossed below $88. 

 

The Metals (gold and silver) move inversely to the Dollar.  If you’re short the dollar, you’re often long gold and silver, and to that end – last week was good to you.  

 

A VIX volatility spread trade:  The floor lately for the VIX has been around $26, and we closed at $25 on Friday.  It’s becoming advantageous to sell a downside put spread in order to finance an upside call spread.  For example: in the December monthlies, you can buy the $45 / $65 call spread for $1.10, and sell the corresponding $22 / $17 put spread for $1.35 to finance the trade.  

 

The SPX Expected Move:  Last week we broke through the $90 expected move on the SPX to the upside by over $30.  This coming week the experts are predicting that the SPX will move less = $72.  We had 3 days this past week where we moved over $70 in a day.  I’m scratching my head over this one, but it tells me NOT to sell options premium in the market.  This is a market that not even the experts are ‘handi-capping’ well.  This market is: big, bad and binary.  

 

 

Tips:    

 



   Despite COVID, the election tensions, despite the riots and the marches – we put in a big week.  Our President would love nothing more than market all-time highs.  Powell appears to be fine with the idea of printing forever, and Mnuchin’s obviously on board – so ‘up’ is the word right now.  But we are entering earnings season, and the word is that because of COVID closing so many businesses in Q2, this quarter should look great.  And yeah – most earnings estimates have been cut to the bone, so it should be fairly easy for most companies to beat their estimates – there is that.  One company that I’ll be watching and doesn’t release earnings for a couple weeks is ETSY.  If the market remains positive, it looks like ETSY has more room to run.

 

HODL’s:  (Hold On for Dear Life) / (All %’s = YTD)

-       Yamaha Gold (AUY = $6.17 / in @ $4.60 = up 34%),

-       Canopy Growth Corp (CGC = $18.07 / in @ $22.17 = down 19%), 

-       CTI BioPharma (CTIC = $3.19 / in @ $1),

o   Selling more Oct. $3 covered calls for 20 cents

-       EXK Gold (EXK = $3.62 / in @ $1.53 = up 137%), 

o   Looking into selling Oct. $4 covered calls

-       GBTC Bitcoin (GBTC = $11.77 / in @ $9.41 = up 25%), 

-       Hecla Mining (HL = $5.53 / in @ $2.36 = up 134%),

-       KL Gold (KL = $51.17 / in @ 26.85 = up 90%), 

-       MUX Mining (MUX = $1.17 / in @ $1.14 = up 3%), 

-       New Gold (NGD = $2.09 / in @ $0.82 = up 155%),

o   Looking into selling Oct. $2 covered calls

-       Pan American Silver (PAAS = $34.18 / in @ $13.07 = up 162%),

o   Looking into selling Oct. covered calls

-       Hyliion (HYLN = $29.73 / in @ $0.32 = 9,191%).

 

   Crypto:

-       Bitcoin (BTC = $11,350),

-       Ethereum (ETH = $375),

-       Bitcoin Cash (BCH = $240)

 

Thoughts:

 

   Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.

 

Please be safe out there!

 

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Until next week – be safe.


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Sunday, October 4, 2020

This Week in Barrons: Oct. 4th, 2020

 This Week in Barrons: 10-4-2020:   


 

20th Anniversary of: ‘Remember the Titans’…

 

   One of my favorite athletic movies of all times, has a ton of subtle messages:

 

   “Now that’s a dumb idea.”  Is it a dumb idea to: (a) sell shoes on the internet just because they come in 100’s of sizes, (b) expect people to find a date or a spouse online, and/or (c) build an encyclopedia that anyone can edit?  Are electric cars, vegan hamburgers, milk made from oats, and free online college courses dumb ideas?  Don’t you find it ironic that the most breakthrough of ideas are dumb, obvious, and unoriginal?

 

   You’re not so smart.”  The older I get, the more I realize that the really smart people require everyone to be open about: how they work, how they make decisions, and their goals.  Smart people don’t change the story, be evasive, or lie.  Smart people have done the homework, know that history doesn’t repeat itself – but it rhymes, and are not interested in making a mistake that could have been avoided with more preparation.  Success is a natural offshoot of smart people doing the difficult work of creating, innovating, and implementing.

 

   I just wanted it to be perfect.”  There’s a cost of moving from good – to great – to perfect.  Why do you need a perfect wedding – when family and finances say otherwise?  Why do you plan for the perfect business – when the business model won’t support it?  Having a great marriage doesn’t require the perfect wedding.  Building a business that has an impact doesn’t require VC’s or an IPO.  The path to success runs through listening, planning, doing the homework, and tracking the correct results.  We plan because we can and should – not because we must.  Every entrepreneur constantly asks: “Who’s my customer?” and “What does customer success look like?”

 

 

The Market: A Trump vs Biden market…  

 


 

   A lot of people think that if Biden were to win this election, the market would soar higher, because our government would spend more money.  I’m not a subscriber to that theory just yet.  I tend to think that a Biden win, will send this market moving lower because of the tightening of regulations surrounding banks, the environment, etc.  But the real issue that nobody seems to be talking about is the tidal wave of long-term unemployment that’s coming.  The Labor Department said on Friday that 2.4m people had been out of work for 27 weeks or more (the threshold for long-term joblessness).   Another 5m are approaching that benchmark in the next two months.  The decline in the headline unemployment number to 7.9% masks a worrisome trend – especially surrounding women.  Many women were hit hard early in the pandemic as service-sector jobs evaporated and child-care responsibilities kept them at home.  These same women have (by now) stopped looking for jobs and have dropped out of the ‘countable’ workforce.  With a headline 8% unemployment rate masking a real double-digit unemployment rate, I believe our economy is at risk for the indefinite future.  I’m certainly not a buyer of this dip anytime soon, and may be a ‘deer in headlights’ until after the election.

 

 

InfoBits:




-       Donald and Melania Trump…    have tested positive for COVID-19.

 

-       “Hello, I’m home.”  Amazon's new $250 doorbell camera is really a drone that flies around your house recording you.

 

-       Rough week for Nikola   A hedgefund accused the e-truck maker of fraud via videofollowed by an SEC and a DOJ investigation, then the CEO resigned due to sexual misconduct, and then Tesla claimed Nikola stole its truck designs.

 

-       3,500 companies…   including Ford, Tesla, and Home Depot – are suing the Trump administration for those tariffs nobody's talking about anymore.

 

-       JPM has $1B less to worry about…   as it paid almost $1B in fines for market manipulation and making fake trades with precious metals and treasury futures between 2008 and 2016.

 

-       Energy sucks…   Energy is the worst-performing sector thus far in 2020 and is down 47% YTD. 

 

-       Molson Coors and Coca-Cola…   have teamed up to manufacture, market, and distribute Topo Chico Hard Seltzer in the U.S.

 

-       Amazon unveils new biometric tech…    called "Amazon One" that allows you to scan your palm in order to pay at its Amazon Go stores.

 

-       Disney is laying off 28,000…   U.S. employees as the pandemic continues to crush its parks and resorts business.

 

-       Walmart Canada tripled its order…    for Tesla’s upcoming Semi all-electric trucks.

 

-       Democrats’ COVID-19 relief bill…    contains the key cannabis banking provisions outlined in the SAFE Act.  It will get ‘shot down’ by Senate Reps. 

 

-       Palantir and Asana both went public via direct listing.   Palantir opened at $11 and closed at $9.51 – while Asana closed higher.

 

-       Job layoffs are hitting Goldman Sachs.    HBSC slashed jobs due to COVID  back in June.  Wells Fargo also said layoffs will soon affect its ranks.

 

-       Facebook will no longer allow…    any ads that seek to delegitimize the outcome of an election.

 

-       Throw in AirPods and a Starbucks latte...    and that Canada Goose purchase is complete.  Canada Goose popped 8% now that winter is coming and outdoor activities seem here to stay.

 

-       Amazon says 19,816…   of its essential workers have tested COVID positive.

 

-       The September jobs report showed…  that we added only 661,000 jobs while the unemployment rate fell to 7.9%. 

 

-       Tweet from Elon…   To be frank, in the early days I thought there was an over 90% chance that both SpaceX and Tesla would be worthless.  The press, aerospace, and automotive industry at the time (correctly) agreed with me.”

 

 

Crypto-Bytes:


 


 

-       Bitcoin (BTC) has been less volatile…    than TLSA in 2020, and has broken its record for longest streak trading above five figures. 

 

-       A Twitter blockchain…    is coming said Jack Dorsey this week, and he’s looking to hire at least five new people to make it happen.

 

-       “Get onboard or get out…”    was basically what Coinbase’s CEO Brian Armstrong said about his company’s new culture shift.  He offered those who want out – a generous separation package.

 

-       Overstock wins…    as the judge tossed-out a class action suit, saying Overstock had a "legitimate business purpose" for issuing its digital security during its “transition from being a traditional online retailer to a blockchain technology business.”

 

-       Nasdaq launch:   Blockchain services firm Diginex has become the first crypto exchange operator to list on the Nasdaq.

 

-       Election predictions:   Crypto-political gamblers (following the first presidential debate) are betting incumbent President Trump will lose in November.  Betting platforms like Augur and FTX aren’t as bullish on Biden, but agree that the odds are in his favor.

 

 

Last Week:




Monday:   I thought they might engineer a move back into the 50-day moving averages, and it appears like that is going to happen.  With the huge open we’ve pretty much pinned all three major indexes right up next to their 50-day moving averages.  Now it's simply a question of "can they hold it or not?"  That said, if they want to run us higher – look at our corrupt banking sector as they’re getting money flows lately.  I'd be okay nibbling on the XLF > $24.25.  I could see taking C > $43.90.  I have to guess there will be some profit taking on the close, so watch those 50-days?

 

Tuesday:  What a market-moving Monday.  The 50-day on the DOW is 27,546 – we closed at 27,584.  On the S&P it is 3,353, and we closed at 3,351.  On the NASDAQ it is 11,037 and we closed at 11,117.   I'm not buying anything here because the 50-days will begin to act as resistance.  Tonight’s debates have our markets on-edge.

 

Wednesday:  We couldn’t hold above the 50-days yesterday.  This just hit the wire:  “European Central Bank President Christine Lagarde said it’s worth examining a Federal Reserve style strategy that allows inflation to temporarily rise above the institution’s target.”  If Lagarde and Company are willing to push for higher inflation, that means more stimulus = more QE – and the markets love QE.  What to buy?  MSFT’s technicals look great with the MACD lines crossing, and the RSI going positive.  I could see myself taking MSFT > $212.57.  (Or maybe some Nov. $180 call options).  Then there’s APPS.  It's trying to break out of a line of resistance, and over $34.20 is good.

 

Thursday:   There is chatter that the stimulus talks are going better, and hope on the horizon for another check to the US people.  The initial jobless claims are out, and 837k people needed to apply for first time unemployment benefits last week.  That’s horrible, and Challenger just released the following:  U.S.-BASED EMPLOYERS ANNOUNCED 118,804 JOB CUTS IN SEPTEMBER, UP 186% YoY.”  The pulldown today is a result of a combo platter of: election jitters, stimulus worries, and those pesky moving averages.  I'd still be willing to take MSFT over $213 and APPS over $34.15.

 

Friday:  Can 2020 get any stranger?  From bioweapons to murder hornets, from riots and looting to an epic election – this year just won't stop.  President Trump has tested positive for COVID.  If Congress goes for another lockdown, I don't think the market can take it.  Layoffs are still roaring, and companies are learning how to work with less – NOT bring back the ones that are laid off.  I think if Trump is not symptomatic and he can still function – then the market will try and hold up.  If he gets really sick, and the market deciphers that he’s going to lose the election – then the market rolls over.  Today’s move: DOW up, NASDAQ down deeply – has FED money written all over it.

 

 

Marijuana:


 

   Trulieve expanded outward from its home state of Florida into Pennsylvania.  Trulieve, Surterra Wellness and Curaleaf basically own the marijuana side of Florida.  All have announced an edibles initiative which means a beverage initiative is not far behind.  Sales are up over 25% and patient volumes are increasing by over 35%.  But Trulieve also made two acquisitions in Pennsylvania.  They acquired both a cultivator and producer PurePenn and a dispensary operator Keystone Relief Centers – which does business as Solevo Wellness.  "We believe Pennsylvania is one of the most attractive cannabis markets in the United States and these acquisitions align with our focus on expanding within the northeast,”said Trulieve CEO Kim Rivers.  Trulieve paid $46m for PurePenn, and will pay $20m for Solevo – which owns and operates three dispensaries in the greater Pittsburgh area.  This week we also learned that Aurora is mounting a more premium push into edibles.  Miguel Martin (CEO of Aurora) believes that it will promote it’s innovation efforts and push its concentrates and edibles to the forefront.

   They’re voting on complete marijuana legalization in New Jersey on November 3rd.  If passed, New Jersey could easily see annual revenues approaching $2B in a couple of years, with consumers crossing the bridges from New York and Pennsylvania in order to buy marijuana in a recreational legal environment. 

 

 

Next Week: An October Surprise Damages Tech:




HL says: “There is this old saying in the markets that stocks are stories and bonds are math.  I love stories, so stocks have always been for me.”  If you love stories, 2020 has been for you – and so is the year of the SPAC.  That spike in the FED’s balance sheet that began in March 2020 to fight COVID has already created some of the craziest stock stories of all time.  One of the biggest stories of the year has been about SPAC’s. Here are the numbers: 2018 =  $9B of value created via SPAC, 2019 = $13B, and 2020 thus far = $44B created.  The $44B has already given us the NKLA story, the SPCE story, and even a SPAC ETF story = SPAK.  

 

- Presidential Covid:  Even though tech and the entire market place finished the week higher, on Friday the NASDAQ was down about 3% on the Presidential COVID news – while the small cap index (IWM) was higher by almost 1%.  Although COVID may have been the catalyst, the outcome was clearly a technology sale.  It’s bothersome that:

   a.)  With a huge 75-point trading range in the S&Ps on Friday – we still only did 2m contracts (low-ish volume).

   b.)  The President testing positive for COVID was a side-story.  In the past, tech rallied during any COVID scare – now it’s as if everyone is taking profits on what has been ‘bid-up’ as of late.  If that is the case, tech will be on the chopping block to see more sell-side activity in the days and weeks to come.   

   c.)  We had full-blown correlation breakdown.  There is no way to diversify within a market place where the top 5 stocks – control over 20% of the action.  Tech, gold, and oil were all punished to the downside – while the dollar gained.  The weird part is that NOBODY rushed into bonds and the small caps (IWM) moved significantly higher.

 

- Unexpected divergence:  Over the past 3 months, the NASDAQ (after once diverging to the upside) – has broken back down and the three main products: QQQ, SPY, and IWM are all getting very close to each other.  

   a.)  What is alarming is that the IWM (small caps) exploded to the upside all while the NASDAQ was moved lower.  If this movement continues to play out, it would mark the beginning of the end for the NASDAQ.  What I mean is, the QQQ’s would lose over 30% of their value – while the small caps would gain over 20%.

   b.)  The only time you see convergence like this – is under extreme market duress.  The IWM has outperformed the NASDAQ over the last month by a good 5%.  

 

IWM Bouncing … a lot:  When you apply the expected move matrix over the action in the small caps (IWM), you find that the IWM is virtually unpredictable.  The options market is doing a lousy job of telling us where and how large the movement in the IWM will be over the coming weeks and months. 

   a.)  The options market is not handicapping IWM risk effectively.  There is a back-spread opportunity building here.

   b.)   Even though the NASDAQ got hit hard on Friday, they still ended the week higher – and well within their ‘expected move’.  So again – tech may be coming around to telling us that their wild upside movements are done for the foreseeable future.  

   c.)   But before you sell tech, realize that even though we dropped 3% in tech on Friday - there was no bump higher in volatility on Friday.  So honestly, a 3% down day didn’t even make it on most investor’s radar – yet.

 

- Bounce and Fade is working:  The QQQ had decent sell-side activity over the past 4 weeks; therefore, you look for a wicked bounce like we’ve been getting – and then you fade (sell) it as well.  Products where this continues to work are: Lululemon (Buy the October $332.50 Put and Sell the October $330 Put), and Nvidia (NVDA).  Now, if IWM continues to be parabolic to the upside and moves over $160 – it too would be a candidate for a bounce and fade strategy as well.  That trade would be an In-Out Spread, and it is much easier to trade a ‘bearish’ In-Out Spread than a ‘bullish’ one because the premium costs are less.  In terms of the IWM, I would be buying the October $153.5 Put and selling the October $151.5 Put.  

 

- SPX Expected Move:  Last week’s expected move in the SPX was $87.75, and next week’s is $89.70.  We’re consistently hitting and bouncing off of the expected move.  So as inefficient as the small cap (IWM) market place has become – the S&Ps are extremely efficient and predictable.

   a.)   Next week’s expected move is only $2 higher than this past week.  This doesn’t leave me warm and fuzzy.  After all, we just moved in a $75 range on Friday alone. 

   b.)   The volatility that I’m seeing is not representative of the week that we’ve seen or the news items that is potentially in front of us.  For that reason, I am not selling option premium this coming week.  

   c.)   We will see if: the correlation breakdown continues, the convergence between QQQ and IWM continues, and whether volatility is going to pick its head up off the mat?  

 

 

Tips:    

 



Friday’s sell off has once again put the indexes back to 50-day moving averages range. Since September 8, they’ve been hovering around those 50’s, some days above it, some days below.  On Friday, the NASDAQ closed at 11,075 and it’s 50 is 11,077.  The DOW closed about 60 points above its 50 and the S&P closed about 12 points below its 50.   I think we’re in for another week of volatility.  Believe it or not, we’re on the cusp on another earnings season starting soon, and that’s on top of all the uncertainty we’ve already had.  I have been keeping my trades tight, taking profits quicker than usual, and trying not to get blindsided.  I think that they’re going to try and get us back over the 50’s and trading higher, but again I think it’s all about Trump and how well he deals with this COVID.  

 

HODL’s:  (Hold On for Dear Life) / (All %’s = YTD)

-       Yamaha Gold (AUY = $5.77 / in @ $4.60 = up 22%),

-       Canopy Growth Corp (CGC = $14.17 / in @ $22.17 = down 36%), 

-       CTI BioPharma (CTIC = $2.99 / in @ $1),

o   Selling more Oct. $3 covered calls for 20 cents

-       EXK Gold (EXK = $3.39 / in @ $1.53 = up 120%), 

o   Looking into selling Oct. $4 covered calls

-       GBTC Bitcoin (GBTC = $10.86 / in @ $9.41 = up 19%), 

-       Hecla Mining (HL = $5.08 / in @ $2.36 = up 114%),

-       KL Gold (KL = $48.54 / in @ 26.85 = up 81%), 

-       MUX Mining (MUX = $1.06 / in @ $1.14 = down 6%), 

-       New Gold (NGD = $1.74 / in @ $0.82 = up 112%),

o   Looking into selling Oct. $2 covered calls

-       Pan American Silver (PAAS = $33.09 / in @ $13.07 = up 144%),

o   Looking into selling Oct. covered calls

-       Hyliion (HYLN = $39.50 / in @ $0.32 = 12,243%).

 

   Crypto:

-       Bitcoin (BTC = $10,750),

-       Ethereum (ETH = $350),

-       Bitcoin Cash (BCH = $220)

 

Thoughts:   With the uptick in COVID cases in NYC and Europe, the lack of any progress in getting the government to shovel in more stimulus money, and the Trump-Biden debate underscoring the uncertainty of the election, GLD started acting like a safe-haven again.  It had dropped the equivalent of 2.1 standard deviations between Sep 18 and Sep 23, but has rallied back.  Has GLD pulled itself back from the brink in order to head higher, or is it going to slink back down?  That’s anybody’s guess, and it might just churn back and forth as bullish and bearish news comes out.  But at 23%, GLD’s implied volatility is at the higher edge of where it’s been through the spring and summer, and that’s making its options interesting short premium strategies.  If you think GLD will trade in a range for the next few weeks, you might consider a neutral strategy to take advantage.  The short iron condor that’s long the $165 put, short the $167 put, short the $191 call and long the $193 call in the Nov expiration is a neutral strategy that collects a credit 1/3 the width of its strikes, and has a 71% probability of making 50% of its max profit before expiration.

 

   Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.

 

Please be safe out there!

 

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