Semis, Weekly Wrap 10/29-11/4 /2017

Macro and Markets

Another week, another set of records in the major indexes. Wall Street got its preferred Fed Chair nominee in J. Powell, the status quo candidate. Economic numbers were mostly mildly positive or unremarkable. Earnings from Apple and FaceBook were solid but a repeat of last Thursday/Friday was not in the cards. So the market grinds higher, relentlessly. The S&P still has a good chance of hitting my year-end goal of 2700, less than 5% away.

The leak on Friday that Broadcom ($AVGO) was making a go at Qualcomm ($QCOM) kicked the semis into a higher gear — I didn’t know that was even possible. It was the eighth weekly advance of the ^SOX index which looks to be challenging the all time high of 1347.94 on Mar 10, 2000. I’ve been in the 3x ETF $SOXL since mid September. Qualcomm was the poster child of the dot com era and famously split 2:1 then 4:1 in one year. More recently it has been embroiled in a bitter legal battle with Apple in addition to having trouble closing the $NXPI deal. Both Broadcom and Qualcomm stocks reacted positively to the news.

Gold

I closed out $DUST earlier in the week and re-entered $JDST on Friday. Medium term outlook is unchanged from two weeks ago.

Portfolio

There were a flurry of trading activities this week. I was short $63.5 puts in Activision Blizzard ($ATVI) expiring Friday; they closed 30 cents in the money. Since I was planning on acquiring more it didn’t even occur to me to close out the puts that had been rolled twice already. I’ll be happy to be assigned. Last week, I highlighted the extreme ratio of the energy sector ETF ($XLE) to crude. Both $XLE and crude had a strong week. Refiners continue to do well but Exxon ($XOM) and Chevron ($CVX) started rolling over which finally convinced me to sell. I added to Eli Lily ($LLY) and BYD ($BYDDF) to bring them closer to the average weight among my individual stocks. Elsewhere, losses were taken in Kimberly Clark ($KMB) and Philip Morris ($PM). That brought the number of stocks to 27 and left a hole in the Consumer Staples sector. I didn’t find any good candidates at current prices so will continue to monitor this space.

Both pharma and biotech had been weak for several weeks. I tried to catch a falling knife in the biotech ETF ($XBI options) and left bits of finger on the floor. Nonetheless, bull markets are forgiving with poor timing, biotech looks to finally have turned the corner this week. On the other hand, the NDX remains strong which allowed me to continue moving up the strike of the short QQQ puts and add to calls. Across all speculative option positions, the leverage ratio declined to 34X due to increased option market values.

Good Reads

Edit: 11/6/2017 Qualcomm splits

None of the above is investment advice, the standard disclaimer applies.