Semiconductor Sector; A Market & Economic Leader

The signals have persisted since the May lows in the Semiconductor sector and in the broad markets. Nominal Semiconductor (esp. Semi Equipment) stocks and the sector’s market leadership have remained intact into our window for a projected cycle bottom, which was the 2nd half of 2019.

This post shines a favorable light on the Semiconductor sector while at the same time acknowledging that may have little to do with the broad market’s fortunes as Q3’s reporting begins next month. In other words, while we have been projecting new highs for the S&P 500 on the very short-term, there are fundamental and technical reasons to believe the stock market could be significantly disturbed in Q4. But the Semi sector is an economic early bird. Let’s remember that.

Reference first…

Nearly $50 Billion in Fabs to Start Construction in 2020

By the end of the year, 15 new fab projects with a total investment of US$38 billion will have started construction and 18 more fab projects will kick off construction in 2020. Of the 18, 10 fab projects with a total investment value of more than US$35 billion carry a high probability. The other eight, with a total investment value of more than US$14 billion, are weighted with a low probability of materializing.

See also… Continue reading "Semiconductor Sector; A Market & Economic Leader"

China Cancels Visit Causing Markets To Fall

Hello traders everywhere. Stocks fell to their lows of the day when news that Chinese trade officials canceled a visit to U.S. farms in Montana. Deputy trade negotiators from the U.S. and China resumed face-to-face talks for the first time in almost two months. The deputy-level trade talks are expected to help lay the groundwork for high-level negotiations early next month. This briefly lifted investor sentiment around trade talks.

Washington and Beijing have imposed tariffs on billions of dollars' worth of one another's goods since the start of 2018, battering financial markets and souring business and consumer sentiment.

The Dow traded 130 points lower, while the S&P 500 slipped 0.5% and the Nasdaq dropped 1%. For the week the major indexes will post their first weekly loss in over three weeks. The S&P 500 will lose -.30%, the DOW has the most significant losses with a loss of -.66%, and the NASDAQ brings up the rear with a weekly loss of -.49%. The Dow came into Friday's session 1.1% removed from its all-time high while the S&P 500 was 0.7% below its record mark from late July. The Nasdaq remained 1.9% away from its record.

Key Levels To Watch Next Week:

Continue reading "China Cancels Visit Causing Markets To Fall"

Your Option Contract Was Assigned - Now What?

Options trading can serve as a powerful means to generate consistent income and mitigate portfolio risk while producing high probability win rates. Options trading allows one to profit without predicting which way the stock will move. Options aren’t about whether or not the stock will move up or down; it’s about the probability of the stock not moving up or down more than a specified amount. Options allow your portfolio to generate smooth and consistent income month after month without predicting which way the stock market will move. Options are a bet on where stocks won’t go, not where they will go. Running an option-based portfolio offers a superior risk profile relative to a stock-based portfolio while providing a statistical edge to optimize favorable trade outcomes. Options are a long-term game that requires discipline, patience, time, maximizing the number of trade occurrences and continuing to trade through all market conditions.

Put simply; an options-based approach provides a margin of safety with a decreased risk profile while providing high-probability win rates. Despite this favorable trading backdrop, occasionally options can be assigned and move against you despite managing the risk profile. How do you manage these unrealized losses and navigate these assignments to mitigate downside risk and ultimately sell your assignment at a net gain? This is the scary side of options that is rarely talked about, here I’ll demonstrate the actions I take to manage these assignments.


Even though options trading provides a statistical advantage and generates high probability win rates, being assigned shares inevitably occurs. Briefly, when selling a put option, you agree to buy shares at an agreed-upon price (strike price) by an agreed-upon date (expiration) in exchange for premium income.

You collect premium income to compensate you for agreeing to buy shares at the agreed price by the agreed-upon date. As the contract lifecycle unfolds and the stock does not break below the strike price, profits can be realized early by buying-to-close or letting the contract expire to capture the entire premium. When the stock breaks down and trades below the agreed-upon price at expiration of the contract, the stock will be assigned. Continue reading "Your Option Contract Was Assigned - Now What?"

As Expected The Fed Cuts Rates

Hello traders everywhere. As expected the Fed cuts rates by 25 basis points to a range of 1.75 - 2.00%. This cut is the second cut that Fed has implemented in 10 years, the first rate cut came back in July when the Fed cut the rate by 25 basis points to a range of 2.0% - 2.25%.

The market was clearly disappointed by the 25 point cut as it was expecting or hoping for a 50 point cut. The S&P 500, DOW and NASDAQ have all headed lower on the day with the NASDAQ leading the way losing -1.0%.

Though the U.S. economy continues growing at a "moderate" rate and the labor market "remains strong," the Fed said in its policy statement that it was cutting rates "in light of the implications of global developments for the economic outlook as well as muted inflation pressures."

With continued growth and strong hiring "the most likely outcomes," the Fed nevertheless cited "uncertainties" about the outlook and pledged to "act as appropriate" to sustain the expansion.

New projections showed policymakers at the median expected rates to stay within the new range through 2020. However, in a sign of ongoing divisions within the Fed, seven of 17 policymakers projected one more quarter-point rate cut in 2019. Continue reading "As Expected The Fed Cuts Rates"

It's Time To Go long

While President Trump’s tweet calling the members of the Federal Reserve “boneheads” for failing to cut interest rates as low as Trump wants them grabbed the financial headlines, his suggestion that the government “refinance” its enormous $22.5 trillion debt got less attention. At the most, it was dismissed as undoable.

It’s hard to believe that the smartest people on Wall Street and at the U.S. Treasury can’t come up with some kind of scheme that would take advantage of today’s – and probably tomorrow’s – historically low bond yields and save taxpayers some money. This job would fall to Treasury Secretary Steve Mnuchin – himself a former Goldman Sachs investment banker – and not the Fed.

On Thursday, Mnuchin told CNBC that Treasury is “very seriously considering” issuing a 50-year bond next year. “We think there is some demand for it. There are some technology issues we need to make sure we have in place; there are market issues. But we would do this in a way that if there is demand, it’s something that we would meet.”

If Walt Disney and several European countries can sell 100-year bonds, certainly the United States of America can.

The initial reaction to Trump’s suggestion about refinancing Treasury debt was met with derision and skepticism. Continue reading "It's Time To Go long"