MYLI & TWER turned out to be some nice morning catches off their momo breakout & earnings releases. With it being June and all, staying in for the whole session wasn’t on many’s trade plan which isn’t a terrible thing since booking profits is what its all about. FES & INFI remain for the time being, but each has a very short leash and will be bumped off if either of the two fail their respective volume flow and price stability.
Options traders are due for two days of an absolute roller coaster of a bull ride with more news than you can fit on a sheet and the unique event, the Brexit Vote, one week away from tomorrow.
Stocks
HEROQ 1.22
For the 2nd time in less than a year, Hercules Offshore is headed for chapter 11 bankruptcy, but this time its for good. The Houston-based operator of drilling rigs and liftboats emerged from bankruptcy protection just six months ago when it called upon bondholders to swap $1.2 billion in debt for control of the company. This time, the plan is to shut down business and sell all the assets to cover the payments to lenders with any remaining assets, if any, to be placed into a wind-down vehicle and remain operational until sales are finalized.
Before getting sucked into the message board pumpers that made the AROPQ financials look better than they really were over the past weekend, know that HEROQ’s balance sheet looks amazing:
As of March 31, 2016
Assets: $1,062,807
Liabilities: $521,379
As of May 2, 2016
Shares Outstanding: 19,988,898
Looks good, but the bondholders swapped out $1.2B for control so they own that excess and still won’t see gains on their swap. So the plan is to trade the trade and, like very other Nasadaq delister, watch the level 2 closely for the drop, scale in in case the bottom wasn’t caught, and look for there to be enough momentum for it to be a worthwhile trade. Without seeing the live action Level 2, I’d expect to see below 0.73 and volume in excess of 5 million for the alarm to trigger.
Options
Strap on your seatbelt, make sure your trays are in the upright position, and be sure to take your dramamine because this ride will not be a smooth one. The chart and money flow is pointing right towards SPY 210 once again and Europe has opened up with that in mind, opening up on the S&P Futures for the first time in almost one week. But before the bell even rings today, there is a long list of economic news that can/will make an impact on the market:
4:30 UK Unemployment Rate (5.1%)
5:00 EUR Trade Balance (28.6B )
8:30 US Core PPI (MoM) (0.1%)
8:30 CAD Manufacturing Sales (MoM) (0.7%)
8:30 US PPI (MoM) (0.3%)
8:30 US NY Empire State Manufacturing Index (-3.00)
9:15 US Industrial Production (MoM) (-0.1%)
Quite a bit of news for a day, but there’s more to come before breakfast digests and the hunger for lunch begins:
10:30 US Crude Oil Inventories (-3.226M )
10:30 US Cushing Crude Oil Inventories (-1.363M )
Oil has fallen from the $50+ level back down below $48. This was a massive catalyst for the markets revival from the Feb 11 lows and is still an impact event, just not as much as it used to be and not with what’s due to come a few hours later:
14:00 US Fed Interest Rate Decision (0.50%)
14:00 US FOMC Statement
14:00 US FOMC Economic Projections
14:30 US Fed Chair Yellen Speaks
Yesterday’s pre-fed 3pm rally off the double bottom was the trigger to join all the longs who were loading SPY 209 & 210 CALLS ahead of today. We’re gearing up for not just a rally off the morning news, and a rally off of oil inventories, but for a rally into the fed announcement and another after the Janet speech. While we hope that Justin Timberlake doesn’t attend and rip off a piece of Janet’s clothing during the speech, but we are looking like we’re headed for a move to 2085: 20 points above the Tuesday close.
The Bigger Picture
A bounce to 2085 will take SPY to around 210 and will be forming the right shoulder after this dip formed the head to the neckline we looked for. This formation into the Brexit week should form a head this week which ends as the the third Friday of June: Quadruple Witching (see the definition here). March Quadruple Witching was an amazing array of volume ahead of Q1 earnings with 10 baggers all over the place that day.
Before any celebrating about any rally we see today can let the smell of profit leave the room, we have this lined up for Thursday – ALL BEFORE THE MARKETS OPEN:
Today
23:00 JPY Interest Rate Decision (-0.10%)
23:00 JPY BoJ Monetary Policy Statement
Thursday
2:30 JPY BoJ Press Conference
4:00 EUR ECB Economic Bulletin
4:30 UK Retail Sales (MoM) (0.3%)
4:30 UK Retail Sales (YoY) (4.0%)
4:30 UK Core Retail Sales (MoM) (0.3%)
4:30 UK Core Retail Sales (YoY) (3.9%)
5:00 EUR CPI (YoY) (-0.1%)
5:00 EUR Core CPI (YoY) (0.7%)
5:00 EUR CPI (MoM) (0.3%)
6:00 EUR Eurogroup Meetings
7:00 UK Interest Rate Decision (0.50%)
7:00 UK BoE QE Total (375B)
7:00 UK BoE MPC vote cut/hike
8:30 US Core CPI (MoM) (0.2%)
8:30 US CPI (MoM) (0.3%)
8:30 US Current Account (-124.7B)
8:30 US Philadelphia Fed Manufacturing Index (-1.8)
8:30 US Initial Jobless Claims (264K)
8:30 US Core CPI (YoY) (2.2%)
8:30 US Philly Fed Employment
With Japan’s Finance Minister, Haruhiko Kuroda, known to throw big monkey wrenches into the markets with their a) need to implement a VAT rate hike and b) intention on further cutting interest rates, then the UK and ECB data ahead of the US Jobless claims and Inflation numbers – holding any rally from today overnight would be INSANE.
My plan is to be in cash heading into Thursday with a slight chance of getting into some VXX CALLS or SPY PUTS depending on how well this expected rally inflates today.
WFM
Grabbed some WFM 32 PUTS for Jun 17 and Jun 23 after the reports came out mid day about how Whole Foods Market has until the end of June to remedy “serious violations” discovered by federal regulators during a February inspection of a Massachusetts plant that supplies ready-to-eat products across the Northeast. The news hit and the reaction was taken immediately to get into some PUTS.
After going to check it out, the FDA issued the letter June 8 about how they failed to manufacture, package and store food in ways that reduced the potential for contamination and microorganism growth. The move to the LOD 32.40 after hours is slightly encouraging these trades work out.
FB
Looking like those 115 CALLS bought Monday during the publicized short attack could pay off nicely prior to Friday.
CMG
Began tracking CMG yesterday after a few members like Chris and Ali were bullish about a recovery. Having dropped for 6 days straight, investors rallied Chipolte Mexican Grill back from its lowest point in nearly 3 years, metaphorically throwing burritos at Deutsche Bank analyst Brett Levy who said customers won’t be coming back after all those foodborne-illness outbreaks that sickened customers. NO SOUP FOR YOU BRETT – CMG was in #BeastMode Tuesday: 384 – 394.
