Staying defensive and adding a new Thematic Leader call position
Key points inside this issue:
- We will continue to hold the ProShares Short S&P 500 Jan 2019 30.00 (SH190118C00030000) calls that closed last night at 0.65.
- We are issuing a Buy on and adding the Nokia (NOK) July 2019 7.00 (NOK190719C00007000) calls that closed last night at 0.27 to Select List with a 0.15 stop loss.
While the market is essentially flat over the last five trading days since our last edition of Tematica Options+, it has moved tenuously higher over the last few days. Even as the S&P 500 has inched higher this week, putting some downward pressure on our ProShares Short S&P 500 Jan 2019 30.00 (SH190118C00030000) calls over the last few days, that major market index finished well off its daily highs. What this tells us is as much as investors would like to see the market move higher, anxiety remains. As I shared in this week’s issue of Tematica Investing and as Lenore Hawkins, Tematica’s Chief Macro Strategist, shared on a recent episode of Cocktail investing there are a number of items fueling that investor anxiety.
Reports are suggesting some positive movement on the trade front between the US and China, including reduced auto tariffs on US cars in China and Chinese state-owned companies buying at least 500,000 tons of U.S. soybeans. Despite these developments, at the end of the day, the nuts and bolts of any trade deal will be what matter’s most in the eyes of the market, not a few gestures.
As we turn our gaze from across the Pacific to across the Atlantic, we’re seeing growing concerns across the eurozone. Those include escalating UK Brexit drama, France’s budget deficit, and recent downgrades for the Italian economy by both Moody’s and Fitch. On this side of the Atlantic, we are seeing investors re-assess earnings prospects for the S&P 500 in 2019, which have started to be trimmed back compared to just a few months ago amid more data pointing to a softening domestic economy.
While we the stock market is trying to find its footing, the reality is there are ample risks to be had that could pressure the market in the coming weeks. For that reason, we’ll continue to keep our SH calls in place.
- We will continue to hold the ProShares Short S&P 500 Jan 2019 30.00 (SH190118C00030000) calls that closed last night at 0.65.
Adding a call position on new Thematic Leader Nokia
I recently called up shares of mobile infrastructure and mobile technology IP licensing company Nokia (NOK) from the Select List to become our latest Thematic Leader, filling the Disruptive Innovator void left when we removed Universal Display (OLED) shares from that list. The rationale behind that upgrade for NOK shares can be read in full here, but the skinny version is Samsung is set to join a growing list of smartphone vendors that will begin shipping 5G smartphones in volume during 2019. Unlike Motorola and others, Samsung has committed to begin shipping its 5G smartphones during the first half of 2019.
That’s a firm line in the sand for not only that debut but for operators building out their 5G networks as well as a pick up in the RF semiconductor food chain, which will furnish the needed 5G capable chips to Samsung and others. I see this translating into a pick up for Nokia’s mobile infrastructure business in the coming quarters as well as one for its IP licensing business as smartphone vendors get their technology licensing ducks in a row before launching this new class of devices.
- We are issuing a Buy on and adding the Nokia (NOK) July 2019 7.00 (NOK190719C00007000) calls that closed last night at 0.27 to Select List with a 0.15 stop loss.
