• This Week's Trade Ideas:
Bullish: No new bullish ideas at this even later stage of the relentless “slo-mo” rampage.  No low-risk ideas exist and all names from scans were up over 5% already ☹

Bullish Mentions: Only for those STARVING for action: MOS

NOTE:  HUN and AAPL, (bullish mentions from a few weeks back, for any still in those stocks) are both much closer to resistance targets of a kind than they are support levels when spotted.  In other words, both may need a breather if they manage to tack on a little more.

Bearish: Comcast Corp. > CMCSA > $36.03 Last.  SPECULATIVE: (See Below)

Bearish Mentions: (Only If we see selling again in our lifetimes – we’re not kidding!)

QCOM (Although earnings are imminent) There’s a lot of potential downside with a little more weakness.  In other words, if it falls a little, it could fall a lot.

• Market Overview:
Last week largely played out in accordance with our speculations. Things simply aren’t much different than last week other than us becoming more tired of stating the same things. The news has actually been legitimately good if we’re willing to ignore the “calculatory” shenanigans (which we are in the short run!)

• Below the Radar:
Describe it as you will: The rigging is working. The financial engineering is working. The inflation is working. The Great Global Ponzi Scheme is working. The CON is working. Describe it as you will but whatever it is, it’s working.

• Options Academy:
A very happy yet concerned client recently asked what is the best way to hedge three very profitable stocks after their earnings “beats”. AMZN, GOOG, AAPL. That got the wheels churning: If one person has that question, maybe others do as well? That’s certainly a possibility in the Market that Only Goes Up!

How much more Good News can be Baked in?

The Trade(s):

We strongly suggest attending tomorrow morning's Advantage Point Morning Call for full details with respect to these idea(s), last week’s and options education.

The Great Melt Up has never looked better!

Bullish Ideas:

No new bullish ideas at this even later stage of the relentless “slo-mo” rampage.  No low-risk ideas exist and all names from scans were up over 5% already ☹

Bullish Mentions:

Only for those STARVING for action:

MOS

NOTE:  HUN and AAPL, (bullish mentions from a few weeks back, for any still in those stocks) are both much closer to resistance targets of a kind than they are support levels when spotted.  In other words, both may need a breather if they manage to tack on a little more.

Bearish Ideas:

Comcast Corp. > CMCSA > $36.03 Last.  SPECULATIVE: (See Below;) Buy the Dec. 15th 37.5 Puts for $2.10 or less with a close or anticipated close below $35.85 in a down market (😐) with expectations for continued weakness in the indices.  This is a counter-trend idea (in terms of the market) that will have easier sailing if the indices were to back off a little from the highs but it is potentially close to a vulnerable area that, if breached, could see the stock fall to the $34.00 area.

Bearish Mentions:

(Only If we see selling again in our lifetimes – we’re not kidding!)

QCOM (Although earnings are imminent)

There’s a lot of potential downside with a little more weakness.  In other words, if it falls a little, it could fall a lot.

Outlook:

Here’s last week’s Outlook:

“Almost out of words at this point.  This day after day slo-mo melt up currently provides little in the way of easy bullish opportunities and it's yet to fail technically in any way.  This would be great for riding longer-term longs but makes for very trying times when seeking new long entries.  Big name earnings are looming and thus we're at a 50/50 juncture on what the gang may do next.”

This week all we can say is that the earnings were mostly used as rocket propellant to keep stock prices in orbit or push them further into orbit.  Otherwise, we’re speechless… only we can’t be!  The lack of any corrective action for eons combined with exceedingly high levels at which most stocks find themselves has left us with virtually NO low risk/respectable reward scenarios.  Something must give as this is not a state of being that persists for very long in our experience.

Technicals:

Will be discussed in-depth in the Advantage Point Morning Call webinar.

Fundamentals:

These trade idea(s) and mentions are technically-driven.

(Editor's note: This trade idea may be updated periodically, in keeping with market conditions. It is intended solely for educational purposes.)

Recap of Last Week:

This week’s recap is a snap.  There were no bullish ideas or mentions as conditions were too extended and thus threadbare.  Just about where we find ourselves this week only more so!

On the bear side, official idea PAYX never had a chance to trigger as we went into the “double secret” stage of euphoria.  Of course, we were propelled there by HUGE tech earnings/reactions and very positive economic numbers in the back half of the week.

Bearish mention LMT did take a tumble since then but HDS and SYY haven’t really done much since then.  It’s pretty tough to even be a bearish mention during bull manias!

Here’s how last week’s Market Overview began:

“We’re still where we were last week only at higher prices.  What does that mean?  Here’s what that means: More room is there if the bulls decide to keep pushing but it’s not that much more room and we’re long past the time where we should have seen a pullback.  We all know that it should happen much sooner than later, but we can’t fight against the market yet in the form of a counter-trend trade.  The SPYs and the NDX aren’t looking as strong as the DOW but that can be reversed in no-time, so we need to be patient.  Big names will be reporting this week and it’s hard to see how more “beats” won’t be announced and celebrated.   

The economic calendar could also help to pump up the euphoria.  From Wednesday onward, we’ll see a few notable numbers hit the tape.  GDP on Friday could become the figurative spiking of the ball after the touchdown if the bulls have yet another good week.  The earnings that we’ve seen indicate that the bulls have a good chance of pulling it off…”

Last week largely played out in accordance with our speculations above.  We were very tempted to simply do a reprint and to see if anyone would notice!  For sure, a little tweak here or there and we would likely have been able to slip it by!  Things simply aren’t much different other than us becoming more tired of stating the same things.  The news has actually been legitimately good if we’re willing to ignore the “calculatory” shenanigans (which we are in the short run!)  Earnings are even more wonderful we’re told.  Dr. Pangloss couldn’t have written this script any better.  If the market “sold off a little here and there” is the only piece that’s missing.  If it were to do that, many would feel much more comfortable and there’d be much less anxiety.  But ours is not to wonder why but rather just accept it.  The only thing we’re certain of at this point is that there’s less reward and more risk (assuming risk still exists).  That’s it.  There’s still room left and there’s no confirmed sell cycle as of yet.  We’re keeping it simple with only the SPYs this week since all key indices are in the same predicament:

Describe it as you will:

The rigging is working.

The financial engineering is working.

The inflation is working.

The Great Global Ponzi Scheme is working.

The CON is working.

Describe it as you will but whatever it is, it’s working.  The Asset Inflation Players Theater has been successful at least until this point.  Of that there can be no doubt.  The only thing that’s really mattered since the 2009 bottom has been asset inflation by any means necessary.  Behold what follows:

China and Euroland data launch rallies but when the data is weak in those regions US stocks rally nonetheless.  China’s important for Apple but when sales slow there, Apple’s stock hasn’t yet finished rallying.  No negative effects or reactions.  Only one thing matters.

Home values in the US are inflating at their fastest rate in 3 years.  They’re up over 6% Year over Year as per August’s data:

The “same thing” is happening all over again.  Last time around the gang at the FED created an unsustainable housing bubble as they inflated home values far faster than they inflated wages.  Ummm…

As can be seen in the graphics above, the money printers continue to push shelter further and further beyond the reach of many of the employed.  This is just another issue that will not matter until it matters at this point.

With their home values being jacked up as if to echo the housing mania from 10 or so years ago, many inflation beneficiary consumers are “feelin’ it”:

It’s all relative however… If you’re “wealthy” (an asset holder), then it’s likely that you love the FED’s “inflate everything” policies.  If you’re not holding assets, then you’re holding the BAG and the FED has crushed your spirits relative to those of your asset-holding countrymen:

Naturally, folks continue to realize that they have to get in on the great inflation scheme.  So…that’s exactly what they’re doing in a very big way as if prices no longer matter.  Things have really change in a decade’s time:

With all that in mind, we present our concluding piece that’s worth the short read.  We’ve been conveying this in our webinars and certainly within this newsletter but it’s nice to see it in print.  After all these years of asset inflation, it’s now VERY difficult to find ideas that are low risk/respectable reward.  In short, they’ve got it all jacked up all over again!

http://www.zerohedge.com/news/2017-10-31/there-are-no-cheap-stocks-anymore-literally

18 of 20 metrics are UP THERE!:

Interestingly and also a sign of the times, the stock inflation fest has favored the “big boys” just as the economy has only improved for the “better offs”:

So where does this leave the American worker?  How do the numbers work out if we place them into perspective?:

The “little guy” needs to work a lot harder to buy his slice of the inflation pie…

A very happy yet concerned client recently asked what is the best way to hedge three very profitable stocks after their earnings “beats”. AMZN, GOOG, AAPL.  That got the wheels churning: If one person has that question, maybe others do as well?  That’s certainly a possibility in the Market that Only Goes Up!

And with that this week’s installment of Options Academy sprang into existence.

And away we go…

There are several variables that needed to be clarified with regards to this particular client so we went to work to extract the information…he replied with a spreadsheet of his positions…that cleared almost everything up except for his outlook on these stocks.  The forecast almost always becomes the driving factor to taking the next step.  So…, in a nutshell… this client wants to continue to ride these positions as long as they are going up, but wants to take some of the profits off of the table now.  He had bought several different expirations and strikes in each of these stocks.  Most positions were 6 months to 1 year out in time and either slightly-in-the-money or at-the-money at the time he opened the trades.

Without getting into details on each one, we wanted to mention some of the choices that every investor/trader has in a similar scenario.

Choice #1 : EXIT

Sell some of the contracts you have ( eg. sell half of position.)  This reduces your risk dramatically, but also reduces the remaining upside(reward).

Choice #2 : ROLL

Having an option that is 6 months out in time throws a curve ball into the normal routine for people.  Normally, people have to roll due to expiration approaching fast, but in this case, he had the choice to roll closer in time, within the same expiration, or further out in time. Rolling is not really a hedge but is more of a repositioning of your position.  The markets provide strikes centered around the current stock price, so as a stock moves up, the exchanges will always add strikes to accommodate the stock price.  So…in this case, all his stocks were either at or near all-time highs.  To get more specific, what were his choices if he wanted to “ROLL”?  Well… the idea of rolling is to take profits off the table and play with the house’s money (some of the gains that you have made without using your initial investment.)  The roll depends on your outlook.  If you believe that the stock, on which you hold calls, has a lot of room to run and you want more time to capitalize on it then you can roll out (in time) and up (higher) in strikes.  If you think the stock only has a shorter duration of time with a few days or weeks to go before it tops out, then maybe you roll closer in time but still at higher strikes.  The roll allows a lot of flexibility to reposition your options to keep maximizing your gain and while minimizing your risks.

Choice#3 : HEDGE

A true hedge is when you protect your current position.  For this gentleman, with his ITM calls, he could sell something against them higher in strike with a lower delta.  As with rolling, there are several choices.  These choices also depend on your account type… IRAs typically do not permit the holder to sell longer-dated options that expire beyond the current long option.  Thus, the furthest out in time you could sell would be the expiration you are long.  At any time, this gentleman can elect to sell options against his position.  He could sell the same total that he owns or just a few depending on his outlook.  He also has the flexibility to sell a variety of strikes to protect his gains.  What he sells becomes his hedge.  If he has a $100 call, and sells a call with $10 of premium against it, then he has only effectively hedged 10% of the position leaving the other 90% exposed.  This is fine if he believes that the stock price will continue to run higher and he wants to retain some upside.  At any time, if the stock starts to fall through his support level, he can then get more aggressive with his hedge and sell a further in-the-money option to protect his gains even further down should the stock price continue to fall.  Again, the hedge provides a ton of flexibility and you can use the decay factor on your side if you are selling OTM options, then you effectively have turned this into a buy-write type of position just to be “synthetically clear”.

Choice #4 : A COMBINATION

With options comes great flexibility.  There is no rule that states that he had to opt for just one of the choices listed above.  He and YOU can do a combination of them… taking some of the position off, while rolling the options up and selling something to collect premium against the options you own… it all depends on your outlook.

Many folks become locked into an “either/or” mentality and the best solution could be a little of a few things.  Something to think about.

We encourage you to learn well your adjustment options so you can put them to work in your everyday trade management.

Have a great week!

The Advantage Point Team