October 12, 2019
OPINIONS & OBSERVATIONS
OPTION PROFESSOR WEEKLY MARKET UPDATE
THIS WEEK & NEXT WEEK……Well we got a China Trade deal Friday but at the end of the day was it real or just rehashed
items agreed to months ago. Sharp turn from the USA position coincident to a pretty lousy political news week. China got the
increase in tariffs suspended and they got the grains & pork they desperately need due to swine flu/almost half their supplies cut.
Supposedly IP & currency agreements (Renminbi) & access for our financial firms are included by reality is nothing is in writing and no enforcement procedures are in place that I have read. Behind the hype; it may mean less damage to business but no greater certainty so cap ex & manufacturing may remain dodgy. China is still labeled a currency manipulator & Huawaei is still on the black list. China needed food and they got it while Trump needed everybody’s 401k to spike to offset the impeachment & Rudy talk.
Next Week…the rubber starts hitting the road (earnings) when the Banks report, retil sales come out & China GDP is announced.
As I saw the markets zoom later in the week; I told a buddy remember somebody is SELLING a lot of stock into all this buy volume
and by next week we will have a better idea if this was reactionary short covering in oversold indices (Transports & Russell) plus momentum players (AAPL) that will fade out or if we can sustain these prices above 3000 S&P 500. My base case has been for a long time that S&P 2950 to 3100 is a sell zone and so far that has not been bad. While I recognize this big rally this week; I do not see new highs in the RUT & DJTA nor a sustained VIX under 14 and until I do I remain unfazed by current events.
Big move up in yields this week though overall trends remain for lower rates. Crack in the leveraged loans market and some high yield exists but the duration boys got whacked this week. Greece now issues negative yielding bonds..has the world gone mad?
Remember the explosion of all this crazy debt would be frightful if we saw a pick up in economic growth and inflation and a weaker dollar which are the current objectives of central banks and the administration. Fed supposed to cut at month’s end then pause.
Big vol Pound Sterling this week but the base case has been trading range area 99-95..saw a peek thru the top now submerged.
A bit of a pop at week’s end but base case remains until sustained moves above 60 under 50 we are trapped but it does seem that the bulls have more enthusiasm lately…..RDS>A & KMI hanging in there
GOLD & SILVER
Base case remains..big breakout above 1350 gave us quick 200+ dollar rally into resistance zone (our sell zone has been 1520-1580)
Dips to 1475-1450-1400-1375 should be all she wrote if bull run is for real.
This is the one I’ve been pulling your coat about since the big sell off earlier this year…..Trump wants farmers votes/China’s got to eat/resistance at 9…950…10 dollars a bushel and we took out level one…if the China deal is a fraud then back down we may go.
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