MidWeek Commentary

HI Market View Commentary 10-05-2020

HI Market View Commentary 10-05-2020

https://go.ycharts.com/weekly-pulse?utm_campaign=Pulse&utm_medium=email&_hsmi=96679707&_hsenc=p2ANqtz-9bY9U1A-Yj1urteYXyfc-Z6rlL572QMjy9JEY9Go2g8KHuuzjk60c8cj4f0YzsT1WrLYEZ_RBZ_oDKZh1FatRzbdnez5qXGK6tZTzq5Wz-mXucZHs&utm_content=96679707&utm_source=hs_email

Market Recap
WEEK OF SEP. 28 THROUGH OCT. 2, 2020
The S&P 500 index rose 1.5% last week, the benchmark’s first weekly advance since August, as the real estate sector, financials and utilities led a broad climb. The S&P 500 ended the week at 3,348.44, up from last Friday’s close of 3,298.46. Wednesday, the index closed out the month of September with a 3.9% drop but was still up 8.5% for the third quarter. October and Q4 appeared to start on a positive note Thursday, with the S&P 500 gaining 0.5% in that day’s session. However, President Donald Trump and First Lady Melania Trump announced early Friday that they tested positive for COVID-19. The development added a new level of uncertainty for the market at a time when investors were already uneasy about how the rest of the pandemic, as well as the presidential election, will play out. The S&P 500 fell 1.0% in Friday’s session, wiping out Thursday’s gain. The real estate sector had the largest increase of the week, up 5.1%, followed by gains of 3.4% and 3.5% in utilities and financials, respectively. Just one sector was in the red for the week: energy, which shed 2.9%. Prologis (PLD) was among the week’s gainers in real estate as Goldman Sachs reinstated its investment rating on the stock at buy with a price target of $126. The shares rose 6.7%. In the utilities sector, shares of Duke Energy (DUK) climbed 11% this week amid a report the company may still be open to further talks after rejecting a recent takeover approach from NextEra Energy (NEE). In financials, Charles Schwab (SCHW) shares rose 7.8% this week as filings said the company expects to close its proposed acquisition of TD Ameritrade on Oct. 6. On the downside, the energy sector’s drop came as crude oil futures also fell this week. The decliners included Chevron (CVX), down 0.9%, and Exxon Mobil (XOM), down 4.8%. Next week, the market will get readings on service-sector business activity Monday, the trade deficit Tuesday, consumer credit Wednesday and wholesales inventories Friday. Minutes from the latest Federal Open Market Committee meeting will also be released Wednesday. Provided by MT Newswires.

“Mark Twain said that there are three kinds of lies—“lies, damned lies, and statistics.”

A fun statistic – Bezo’s himself is worth enough where he could buy Viacom, Ferrari, The NFL, Top THREE European Sports teams and have $7B left over for fun.

On 08/28/2020 I entered into a Tesla (TSLA) Bull Put Credit Spread on Robinhood.com. Only (2) contracts were filled for a credit of $280 to me, expiring on 09/04/2020 with collateral of $1000 held from my account.

$1.40 credit on a $5 spread

On 8/31/2020, TSLA split 5 for 1 and I then had (10) $410/$409 contracts.

You now have $0.28 credit for $1 of risk  

On 09/01/2020, TSLA traded up to $502 and the Spread I purchased went down to $0.00.

I tried 11 times to sell the spread from 09/01/202 – 09/04/2020, but was never filled.

What was the mistake? FIRST I would have $0.02 debit HAVE to make it worthwhile for the market maker

THEN IF I wasn’t getting filled close the short put leg.  WHY?  That is your obligation

On 09/04/2020, expiration day, TSLA traded between $372 & $428 and closed at $418.32.

MY Robinhood account reflected pending expiration transactions for the 2 legs of the Spread trade.

$8.32 ITM and I thought I won the trade.

On Credit Spreads, After market hours, a clearing house can send in short orders to your broker and have them filled. 

What happened to your position:

On September 4, 2020, TSLA closed during regular market hours at $418.32. At this time the options you held were out-of -the-money. Later that day during post-market hours the price of TSLA moved, which may have made part or all of the short side of your options position to be in-the-money. 

Overnight on Friday, September 4th, after market close, we were informed by the Options Clearing Corporation (OCC) that your short TSLA put position  did not expire worthless as expected based upon the price of TSLA at market close, but had been assigned. In addition, the OCC did not automatically exercise your long put position because it was out-of-the-money at market close, and the OCC determines whether to automatically exercise options contracts based upon the closing price.  By the time we received notification from the OCC  that your short put position was assigned, it was past the cut-off to submit an exercise request on your long put position. We are required to submit exercise requests by 5:30 PM ET.

At market open on Tuesday, September 8th, due to the short put assignment, your account was long shares of TSLA, and you didn’t have enough buying power in your account to support the purchase of these  shares. As a result, the position was closed.  

A note about expiration risk:

Holding a spread through expiration exposes you to market risk. Particularly when the underlying stock moves after the market closes. Spread trades consist of two option contracts that are completely independent of each other. When you sell an option contract you are obligated to fulfill that contract. Please note that a contract being assigned is not controlled by Robinhood. 

Please reply to this email with any outstanding questions. 

TSLA opened up at $356.00 and he was filled with a margin call at that price for 600 shares

He now owes 31K to Robinhood Brokerage

Where will our markets end this week?

Higher

DJIA – Bullish

SPX – Bullish

COMP – Bullish

Where Will the SPX end October 2020?

10-05-2020            -5.0%

09-28-2020            -5.0%

Earnings:   

Mon:           

Tues:            C, BLK, FAST, JNJ, JPM

Wed:            GS, USB, UNH, WFC, AA, UAL, BAC

Thur:           SCHW, MS, WBA, ISRG

Fri:              BK, SLB, VFC

Econ Reports:

Mon:           

Tues:            CPI , Core CPI,

Wed:            MBA, PPI, Core PPI, Fed Minutes

Thur:           Initial Claims, Continuing Claims,  Phil Fed, Empire Manufacturing, Import, Export

Fri:               Retail Sales, Retail ex-auto, Capacity Utilization, Industrial Production, Business Inventories, Michigan Sentiment, OPTIONS EXPIRATION MONTHLY

Int’l:

Mon –            

Tues –         

Wed –         

Thursday –     

Friday-         

Sunday –       

How am I looking to trade?

All positions are mostly protected and now looking for OTM covered calls to add for full collar positions.  Just trying to get to the elections and earnings. 

EARNINGS

AA               10/05

AAPL         10/29 est

BA               10/28 est

BAC            10/14 BMO

BIDU         11/05 est

LLY             10/27 BMO

DIS             11/05 est

F                   10/28 AMC

FB               10/28 est

JPM            10/13 BMO

KEY            10/21 BMO

UAA            11/02 est

V                  10/22 est

www.hurleyinvestments.com 

www.myhurleyinvestment.com = Blogsite

customerservice@hurleyinvestments.com = Email

Questions???

https://www.cnbc.com/2020/09/30/baidu-dueros-voice-assistant-smart-devices-unit-valued-at-2point9-billion.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

Baidu’s voice assistant and smart device business is valued at $2.9 billion after cash injection

Arjun Kharpal

KEY POINTS

  • Chinese internet giant Baidu has raised an undisclosed sum of money for its business division focused on voice assistants and smart devices. 
  • The new funding for Baidu’s “Smart Living Group” (SLG) values that business at 20 billion yuan or $2.9 billion.
  • The outside funding will give a cash injection to one of Baidu’s divisions that could be key to its long-term growth as it faces stiff competition in its core business. 

GUANGZHOU, China — Chinese internet giant Baidu has raised an undisclosed sum of money for its business division focused on voice assistants and smart devices. 

The new funding for Baidu’s “Smart Living Group” (SLG) values that business at 20 billion yuan or $2.9 billion. Citic Private Equity, Baidu Capital (Baidu’s investment arm) and IDG Capital participated in the funding round. 

Baidu runs a platform called DuerOS which it calls a conversational artificial intelligence system. DuerOS allows devices to use Baidu’s voice assistant so users can communicate with hardware by speaking to it. For example, Baidu has its own range of smart devices under a brand called Xiaodu which includes speakers and wireless earphones all equipped with its voice assistant. 

But DuerOS is also an open platform, meaning other hardware makers can also install it on their devices. 

The outside funding will give a cash injection to one of Baidu’s divisions that could be key to its long-term growth as it faces stiff competition in its core business. Baidu is China’s biggest search engine and makes money from advertising.

China’s advertising market has been hit by the coronavirus pandemic. Pre-pandemic, digital ad spending in China was forecast to rise 13% in 2020, according to eMarketer. The research firm now estimates it will rise only 5%, to $75.33 billion.

https://art19.com/shows/bcd08fc3-8958-4c47-bf8e-524432adcd77/episodes/5e3ba422-ba47-4045-85ff-4a5d5ad964bb/embed Over the past couple of years, Baidu has faced rising competition in search as Chinese internet users continue to move away from web browsers to so-called “super apps” like Tencent’s WeChat. These sorts of apps lets users access services and search all within one platform. 

Baidu has its own super app called the Baidu App which continues to grow. Daily active users reached 204 million in June. 

But part of Baidu’s strategy has been to try to diversify its revenue stream, putting an emphasis on areas from artificial intelligence to driverless cars and healthcare. Its Smart Living Group is involved in that effort with voice assistants playing a key role. 

And analysts see potential here for monetization. 

“We believe Baidu remains on-track for double-digit revenue growth over the longer-term,” Mizhuo analysts said in a note earlier this month.

Mizhuo said they “feel comfortable with that goal” as the company has yet to monetize investments such as voice search “which makes up roughly 20% of the search volume and its mini-program platform.” 

Mini-programs refer to apps within the Baidu App. It means users don’t need to go to a separate app store to use certain services. 

Baidu said the investment into the Smart Living Group is expected to be completed in the fourth quarter of 2020. The Chinese company will hold “super voting rights” in the business group and is expected to continue to consolidate the financial results of SLG, as a majority shareholder.

Meanwhile, Baidu is in talks with investors to raise up to $2 billion over three years for a new biotech company, CNBC earlier this month reported. It will be a standalone entity that would focus on using artificial intelligence to create new drugs and make early-stage diagnoses of diseases. 

https://www.cnbc.com/2020/10/04/market-bull-reveals-a-coronavirus-surge-and-a-democratic-.html

Market bull reveals two risks keeping him up at night and why they may alter his forecast

Stephanie Landsman@STEPHLANDSMAN

Federated Hermes’ Phil Orlando’s bull case for stocks may be on shaky ground.

The firm’s chief equity market strategist reveals there are two market risks keeping him up at night.

His first concern surrounds the presidential election and whether Democrats will get control of both the White House and Congress.

“What might fiscal policy regime change look like, if at all, come next year?” Orlando told CNBC’s “Trading Nation” on Friday.

In a blue wave situation, Orlando believes Joe Biden’s tax policies would likely get passed and put pressure on corporations and individual Americans. 

He’s also worried about the trajectory of coronavirus infections and deaths.

“We’ve already seen two spikes: The one that peaked in the middle of April, [and] the one that peaked in the middle of July. A lot of us are bracing for a third spike now that colleges are back in session,” Orlando said. “But to some degree it may be mitigated if we can continue to make good vaccine progress.”

His base case calls for a “substantial amount” of volatility leading up to the election. Orlando is telling clients to buckle their seat belts because he sees the potential for another 10% correction.

“Certainly, President [Donald] Trump’s Covid diagnosis… has amplified that,” he said.

Orlando’s year-end S&P 500 price target is 3,500, a 4% gain from current levels. But it’s more than 2% away from the index’s all-time high.

If the U.S. can contain the pandemic and Republicans hold at least a slight majority in the Senate, Orlando expects the S&P 500 will hit record highs next year. His 2021 year-end forecast is 3,800.

He lists easy earnings comparisons in the winter quarter, an improving economy and an extremely accommodative Federal Reserve policy as key reasons why he’s not ready to abandon his bullish stance.

“There’s no question the Fed is all in,” Orlando said. “Chair [Jerome] Powell has told us that we’re going to keep the Fed Funds Rate anchored zero-bound through at least the end of calendar ’23. That could continue for another year or two after that.”

https://www.cnbc.com/2020/10/05/presidential-election-and-markets-key-levels-for-sp-500-and-stocks-.html

With one month until the presidential election, Piper Sandler analyst plots S&P 500′s key levels

Keris Lahiff@KERISALISON

Uncertainty in Washington is keeping Wall Street in check.

President Donald Trump is in hospital after testing positive for Covid-19.

Some breakthrough in relief talks on Friday between House Speaker Nancy Pelosi and Secretary Treasury Steven Mnuchin sparked hope.

All this comes less than a month until the presidential election.  

Craig Johnson, chief market technician at Piper Sandler, does not see an ongoing negative impact for markets from Trump’s Covid diagnosis and treatment. However, he does see technical reasons for the S&P 500 to be stuck in sideways trading.

“First and foremost, I think we’ve got to look at that high back in September on the chart as really a marginal new high right now,” Johnson told CNBC’s “Trading Nation” on Friday. “And we need to be focusing on the fact that we did have an uptrend violation coming off of those April lows and all the way up to where we are right now and we’re just kind of stuck in a trading range.” 

He sees 3,386 to 3,400 as the upper end of that range with the lower end acting as support around the 50-day moving average at 3,364 and 200-day moving average at 3,112.

“For now we’re stuck in a range. And again, we need to be a little bit more careful than we have been previously. It was easy making money off the March lows, but now with these levels, you’ve got to be a little bit more careful,” Johnson said.

Danielle Shay, director of options at Simpler Trading, agrees that markets are rangebound until the election. She does still see opportunity within individual stocks, though.

“I have had a great time trading the Covid stocks,” she said in the same “trading Nation” interview. “These are the companies that haven’t just remained strong but they’ve benefited from the pandemic. What I’ve discovered this year, primarily, is that looking at individual sectors has not been working as well but looking for companies like PelotonChewyWalmartTeladocDocuSignZoomAmazon, there’s plenty of opportunities in trading these companies and buying and holding them because they’re doing so well throughout the pandemic.”

Video conferencing stock Zoom, for example, has been one of the top performers this year, rallying more than 600%. Amazon, one of the largest stocks on the S&P 500, is up 69%.

Disclosure: Shay regularly trades PTON, CHWY, WMT, TDOC, DOCU, ZM, and AMZN. 

https://finance.yahoo.com/news/treasuries-yields-pop-higher-chances-152841294.html

Treasuries Yields Pop Higher on Chances for Biden Win, Stimulus

Vivien Lou Chen

BloombergOctober 5, 2020

Treasuries Yields Pop Higher on Chances for Biden Win, Stimulus

(Bloomberg) — Long-end Treasury rates surged Monday amid optimism that U.S. President Donald Trumpmight soon leave hospital, while his coronavirus diagnosis supported the prospects both for fiscal stimulus and an easier election win by his Democratic election opponent Joe Biden.

The yield curve steepened as the 30-year rate advanced as much as 7 basis points to 1.56%, the highest level since Aug. 28, driving the widely watch 5- to 30-year spread to a peak of 124 basis points.

A clear and undisputed winner of the Nov. 3 vote had been one of the most underappreciated risks in financial markets prior to Trump’s diagnosis. Biden has extended his advantage in opinion polls in recent days, with the RealClearPolitics average putting him more than 8 percentage points ahead of the incumbent.

In addition to shifting the election landscape, Trump’s illness may also boost the chances of a nearer-term stimulus deal in Washington, which would have a buoyant affect on Treasury rates. Supply could also add pressure, with reopening sales for both 10- and 30-year debt set to take place this week. Data released by the Commodity Futures Trading Commission last week showed that speculators were already becoming more bearish across long-end Treasuries.

The 10-year yield rose by as much as 5 basis points to around 0.75%, a level that was cited by BMO strategists Ian Lyngen and Jon Hill in a Monday note as “the next line in the sand toward higher yields.”

“A breach of this key support has only occurred once since June and it presents an obvious hurdle toward a repricing that has any probability of being sustained,” they wrote. “Our biggest concern isn’t the absence of fundamental backing for moderately higher rates; rather it’s the extent to which risk assets can weather an attempt to move into an environment with 10-year yields between 80-100 bp.”

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©2020 Bloomberg L.P.

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