Global Market Comments
May 14, 2019
Fiat Lux
Featured Trade:
(FIVE STOCKS TO BUY AT THE BOTTOM),
(AAPL), (AMZN), (SQ), (ROKU), (MSFT)
With the Dow Average down 1,400 points in six trading days, you are being given a second bite of the apple before the yearend tech-led rally begins.
So, it is with great satisfaction that I am rewriting Arthur Henry’s Mad Hedge Technology Letter’s list of recommendations.
By the way, if you want to subscribe to Arthur’s groundbreaking, cutting edge service, please click here.
It’s the best read on technology investing in the entire market.
You don’t want to catch a falling knife but at the same time, you want to diligently prepare yourself to buy the best discounts of the year.
The China trade war has triggered a tsunami wave of selling, tearing apart the tech sector with vicious profit-taking few trading days.
No doubt that asset managers are frantically locking in profits for the rest of the year and protecting ebullient performance from a first quarter to remember.
This week shouldn’t deter investors from picking up bargains that were non-existent since December because the bulk of the highest quality tech names churned higher with lurching momentum.
Here are the names of five of the best stocks to slip into your portfolio in no particular order once the madness subsides.
Apple
Steve Job’s creation weathering the gale-fore storm quite well. Apple has been on a tear reconfirming its smooth pivot to a software service-tilted tech company. The timing is perfect as China has enhanced its smartphone technology by leaps and bounds.
Even though China cannot produce the top-notch quality phones that Apple can, they have caught up to the point local Chinese are reasonably content with its functionality.
That hasn’t stopped Apple from vigorously growing revenue in greater China 20% YOY during a feverishly testy political climate that has its supply chain in Beijing’s crosshairs.
The pivot is picking up steam and Apple’s revenue will morph into a software company with software and services eventually contributing 25% to total revenue.
They aren’t just an iPhone company anymore. Apple has led the charge with stock buybacks and will gobble up a total of $150 billion in shares by the end of 2019. Get into this stock while you can as entry points are few and far between.
Amazon (AMZN)
This is the best company in America hands down and commands 5% of total American retail sales or 49% of American e-commerce sales.
It became the second company to eclipse a market capitalization of over $1 trillion. Its Amazon Web Services (AWS) cloud business pioneered the cloud industry and had an almost 10-year head start to craft it into its cash cow. Amazon has branched off into many other businesses since then oozing innovation and is a one-stop wrecking ball.
The newest direction is the smart home where they seek to place every single smart product around the Amazon Echo, the smart speaker sitting nicely inside your house. A smart door bell was the first step along with recently investing in a pre-fab house start-up aimed at building smart homes.
Microsoft (MSFT)
The optics in 2018 look utterly different from when Bill Gates was roaming around the corridors in the Redmond, Washington headquarter and that is a good thing in 2018.
Current CEO Satya Nadella has turned this former legacy company into the 2nd largest cloud competitor to Amazon and then some.
Microsoft Azure is rapidly catching up to Amazon in the cloud space because of the Amazon-effect working in reverse. Companies don’t want to store proprietary data in Amazon’s server farm when they could possibly destroy them down the road. Microsoft is mainly a software company and gained the trust of many big companies especially retailers.
Microsoft is also on the vanguard of the gaming industry taking advantage of the young generation’s fear of outside activity. Xbox-related revenue is up 36% YOY, and its gaming division is a $10.3 billion per year business.
Microsoft Azure grew 87% YOY last quarter. The previous quarter saw Azure rocket by 98%. Shares are cheaper than Amazon and almost as potent.
Square (SQ)
CEO Jack Dorsey is doing everything right at this fin-tech company blazing a trail right to the doorsteps of the traditional banks.
The various businesses they have on offer makes me think of Amazon’s portfolio because of the supreme diversity. The Cash App is a peer-to-peer money transfer program that cohabits with a bitcoin investing function on the same smartphone app.
Square has targeted the smaller businesses first and is a godsend for these entrepreneurs who lack immense capital to create a financial and payment infrastructure. Not only do they provide the physical payment systems for restaurant chains, they also offer payroll services and other small loans.
The pipeline of innovation is strong with upper management mentioning they are considering stock trading products and other bank-like products. Wall Street bigwigs must be shaking in their boots.
The recently departed CFO Sarah Friar triggered a 10% collapse in share price on top of the market meltdown. The weakness will certainly be temporary, especially if they keep doubling their revenue every two years like they have been doing.
Roku (ROKU)
Benefitting from the broad-based migration from cable tv to online streaming and cord-cutting, Roku is perfectly placed to delectably harvest the spoils.
This uber-growth company offers an over-the-top (OTT) streaming platform along with the necessary hardware and picks up revenue by selling digital ads.
Founder and CEO Anthony Woods owns 21 million shares of his brainchild and insistently notes that he has no interest in selling his company to a Netflix or Apple.
Roku’s active accounts mushroomed 46% to 22 million in the second quarter. Viewers are reaffirming the obsession with on-demand online streaming content with hours streamed on the platform increasing 58% to 5.5 billion.
The Roku platform can be bought for just $30 and is easy to set-up. Roku enjoys the lead in the over-the-top (OTT) streaming device industry controlling 37% of the market share leading Amazon’s Fire Stick at 28%.
The runway is long as (OTT) boxes nestle cozily in only 40% of American homes with broadband, up from a paltry 6% in 2010.
They are consistently absent from the backbiting and jawboning the FANGs consistently find themselves in partly because they do not create original content and they are not an off-shoot from a larger parent tech firm.
This growth stock experiences the same type of volatility as Square.
Be patient and wait for 5-7% drops to pick up some shares.
Global Market Comments
May 13, 2019
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, OR A GAME OF CHICKEN),
(SPY), (TLT), (UBER), (BA), (SOYB)
In summarizing the global financial system today, I recall the classic fifties James Dean movie, Rebel Without a Cause. Two cars are racing towards a cliff and the chicken has to bail out first. But the chicken gets his jacket sleeve stuck on a door knob, and his car dives over the cliff and crashes and burns.
Thus, here we are entranced by the world’s two largest economies in a race towards a cliff, but this time, it’s an economic one. Will rational minds prevail, or will our leaders miscalculate and plunge the world into a Great Depression? In other words, will the crashing car land on us?
That’s what happened during the 1930s when after the 1929 stock market crash lead to tit for tat tariffs that eliminated economic growth for a decade. It was only after the massive defense spending of WWII that the slump ended. This time the script is playing out exactly the same way.
Certainly, the stock market believes in the rosier scenario. The Dow average only fell 1,278 points last week. In a real “NO DEAL” case, it would have given up the full 4,500 points it gained since December.
A prolonged trade war until the next election would take us well into a recession and back to down the 18,000 that prevailed before the last presidential election.
For the short term, the S&P 500 (SPY) is clearly gunning for the 200-day moving average at $275. That would take us down 6.78% from the recent high. I have been using soybean prices (SOYB) as an indicator of China trade negotiation success. It hit a seven-year low this morning.
It's all about trade talks all the time now and nobody has the slightest idea of what is coming next. So, I’ll sit back and wait until the Volatility Index (VIX) hits $30, or the (SPY) drops to $275 before entertaining another trade alert. Until then, I’ll maintain my 100% cash position.
I reach all these conclusions after two days of solid sleep, recovering from four days of bacchanalia at the SALT conference in Las Vegas. I'll write more about this when the market stops crashing long enough for me to write it up.
Long term followers of this letter are laughing because they recall that two years ago I predicted that the next bear market would start precisely on May 10 at 4:00 PM EST. That estimate was arrived at by an intricate calculation of the timing of a coming yield curve inversion and recession.
The S&P 500 (SPY) hit an all-time high of $295 on May 2 at 4:00 PM EST, seven trading days early. Who knew that it would be a Tweet that did it?
Uber went public last week, likely at an $82 billion valuation which sucked $10 billion out of the market. Not helping was a stock market crash and an Uber driver’s strike that spread from the US to London. After car operating expenses are taken out, drivers only net a paltry $5 an hour.
The Fed warned about high stock prices, and business borrowing is at an all-time high just two days before the market dumped. Maybe we should listen to our central bank?
US Job Openings soared in March, by a stunning 346,000 to 7.5 million. This is what tops look like.
Bonds exploded to the upside on stock market panic, as the world stampedes to “RISK OFF.” There’s a great (TLT) short sale setting up here, but not quite yet.
The US trade deficit hit a five-year low in March, down 16.2% to $20.7 billion. This is due to a big 23.7% jump in US exports to China, thanks to China’s massive economic stimulus program, not ours. But at what cost?
The Mad Hedge Fund Trader dumped its last position Monday morning and, as a result, was completely up 50 basis points on the week. You may have noticed that I have been stopping out of positions must faster than usual recently and now you know the reason why.
Global Trading Dispatch closed the week up 14.59% year to date and is down -1.13% so far in May. My trailing one-year retreated to +18.96%.
Mad Hedge Technology Letter gave back some ground with two new very short-term positions in Intuit (INTU) and Google (GOOG) which expire on Friday
Some 11 out of 13 Mad Hedge Technology Letter round trips have been profitable this year.
My nine and a half year profit rose slightly to +314.73%. With the markets in free fall, I am now 100% in cash with Global Trading Dispatch and 80% cash in the Mad Hedge Tech Letter. I’ll wait until the markets find their new range and then jump in on the long side.
The coming week will be pretty boring on the data front.
On Monday, May 13 at 11:00 AM, the April Survey of Consumer Sentiment is announced.
On Tuesday, May 14, 6:00 AM EST, the NFIB Small Business Index is out.
On Wednesday, May 15 at 8:30 AM, March Retail Sales are released
On Thursday, May 16 at 8:30 AM, Weekly Jobless Claims are published. March Housing Starts to come out at the same time.
On Friday, May 17 at 10:00 AM, March Consumer Sentiment is printed.
As for me, I will be flying back from Las Vegas over the weekend having attended the SALT conference and my own Mad Hedge Fund Trader strategy luncheon. The highlight of the week was listening to Woodstock veterans Credence Clearwater Revival. I’ll write more about it next week.
Good luck and good trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
You Can’t Do Enough Research
Global Market Comments
May 10, 2019
Fiat Lux
Featured Trade:
(A NOTE ON OPTIONS CALLED AWAY),
(TLT),
(TRADING THE NEXT KOREAN WAR),
Global Market Comments
May 9, 2019
Fiat Lux
Featured Trade:
(TRAINING VIDEO ON “HOW TO EXECUTE A VERTICAL BEAR PUT SPREAD”)
(A COW BASED ECONOMICS LESSON),
I am usually a pretty positive person. However, this bull market is a decade old and all good things must come to an end.
So I thought I would take the opportunity presented by these quiet markets to educate you on the method to my madness.
Markets don’t go up forever. Trees don’t grow to the sky. Sometimes they meander sideways after a long run-up. Sometimes they roll over and die.
So if you want to make money all the time, not only in rising markets, you need to be able to execute a Trade Alert that profits when a stock moves sideways, up small, or down big over a limited period of time.
A Vertical Bear Put Debit Spread tilts the risk/reward balance overwhelmingly in your favor. The only way you can lose money is if the underlying security goes UP a lot immediately.
Hint: Even in a bull market, stocks can move sideways or down for 4, 5, or even 6 months a year. So, a Vertical Bear Put Debit Spread is a valuable tool to have in your tool bag.
It also gives you a nice insurance policy to protect your other long positions in case we get hit with a black swan, suddenly move into a correction, or suffer another flash crash. Remember, in-the-money Vertical Bear Put Debit Spreads do best the fastest in falling markets.
Vertical Bear Put Debit Spreads aren’t always the best bet in a falling market. When you are in a true bear market, just buying long-dated puts outright and running them will make more money. But keep in mind that you are also taking a lot more risk.
You win more games in this business hitting lots of singles, like this one, than counting on a few home runs. That is the classic error of the beginning trader.
My training video on “How to Execute a Vertical Bear Put Spreads” takes you through the entire order process, including reading the initial Trade Alert, placing the order through your online platform, how to monitor it on your position sheet, and of course, how to take a profit.
To watch it, please click here.
Global Market Comments
May 8, 2019
Fiat Lux
SPECIAL GOLD ISSUE
Featured Trade:
(THE ULTRA BULL ARGUMENT FOR GOLD),
(GLD), (GDX), (ABX), (SLV), (PALL), (PPLT)
(TESTIMONIAL)
Global Market Comments
May 7, 2019
Fiat Lux
Featured Trade:
(HOW TO EXECUTE A VERTICAL BULL CALL SPREAD)
(AAPL)
(THE CODER BOOM)
Global Market Comments
May 6, 2019
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, OR HERE’S ANOTHER BOMBSHELL),
(DIS), (QQQ), (AAPL), (INTU), (GOOGL), (LYFT), (UBER), (FCX))
