Update 68: Consumer Stocks Stall/Stock Market Rollover This Week?

Consumer Stocks Stall/Stock Market Rollover This Week? 
November 9 2019  OPINION & OBSERVATIONS
THIS WEEK/NEXT WEEK
The big 3 Stock Market Indices all hit all time highs this week (S&P-Nas-Dow) with the Transports & Russell still lagging behind albeit moving higher as well. In fact; the proverbial train left the station in the Transports at the start of Oct as railroads like UNP has gone from 150 to 180 in 6 weeks. My point is that we have come screaming up in the last 6 weeks in a lot of markets discounting as Jaimie Dimon said a “pretty rosy” outcome of many of the challenges on the horizon. Money managers are sitting on all their gains and with year end bonuses at risk should we sell off I would think hedging or locking in gains at the first smell of smoke may be in the cards. Our base case has been that hedging the S&P stocks into 2950-3100 made sense and we are at the upper limits of that zone. While Transports & Russell have improved and VIX is under 14-15; my instincts tell me that it may be like when the DXY was breaking a bit above the top of our range (99) and then sold off sharply. If not 3300-3600 S&P is possible spike.  Next week-retail sales  plus earnings from Cisco, CBS, Walmart, Nvidia, AMAT, Tencent-JD.com, plus inflation #’s (CPI_PPI), Fed guys.
STOCK MARKET
Prices stretching short term tech indicators (RSI), valuations (yields have risen), and lower volumes this week. The consumer is 2/3 of economic growth and basis debt, visa activity, employment numbers; they certainly have been carrying the load left behind but the failures of cap ex and business investment. Of course with a who knows what’s next trade policy being made up as we go it is understandable that CEO’s would be hesitant to make too many moves without a better understanding of what’s on the horizon. Some say CBS, VIAB, CSCO, JWN, M are ones to monitor this week while caution to ROST & TJX if trade deal struck anytime soon. Bottom line is there are reports that one of the great investors of all time (Warren Buffett) is sitting on a Record Amount of Cash ( estimate 122 Bill)and that one his measures of valuation of overall stock price is the ratio between Wilshire 5000 Index and GDP which suggests that valuations are at levels not seen since the internet bubble of 2000 and without a new theme to fuel the elevated valuations. Unending QE  and new tricks could come on stream to sustain things but the buy back money and tax cuts interest rate cuts and now trade deals with questionable ability to enforce may not be enough. So with Buffett info and valuations favoring caution should we consider locking in or hedge/protect gains?…contact us at [email protected] to hear more.
BOND MARKET
As we said the 135 level on TLT was  and is key as yields accelerated higher this week toward 2% on the Treasury. Europe is dumping RECORD amounts of debt on the market ( up 13%+ over last year and EXCEEDED the RECORD 1.27 trillion issued in 2017. Next week one firm is offering 28 billion in corporates and spreads between corporates & treasuries are very tight meaning you are not getting paid a lot to take on the additional risk. Rates in Europe are a joke & the leveraged loan market is showing cracks while the re-fi market could heat up as well with mortgage rates dropping. REITS & Utilities have sold off because of the rise in yields…IF YOU FEEL…that the move 135 TLT & 2% yield on the 10 yrs is about over…then those 2 defensive sectors could offer a discounted value at this time. Our view is that it would make sense if it were accompanied by a sell off in stocks by late this week.
US DOLLAR
Well the yields rising sharply this week on US Treasuries certainly sent the dollar bears running back into their caves this week. Our base case remains that the range of ballpark 99-95 which coincides with the 52 week range continues but news that China is starting to embrace block chain technology and Bitcoin and exchanges to provide liquidity should cause one to pause about the future of the US Dollar as the standard for international settlements. The ECB head made a compelling argument in Jackson Hole about digital currency so the future of the almighty dollar with a 24 trillion dollar national debt may no longer be certain.
CRUDE OIL
As we said this ARAMCO IPO is a big deal but a wild one as valuations range from 1,2 trillion to 2.2 trillion..a wide disparity. But we felt a bounce in oil stocks could happen and it did ass XOM, RDS.A, BP among others got a lift. Big dividend payers but if we can’t start closing above 60-65 crude then the dead cat bounce may be just that. Base case still range 60-50 until proven otherwise.
GOLD-SILVER
As stated the base case remains breakout was 1350 and short term blow off to 1520-1580 zone which coincided with resistance from former lows of 2012. Expected a retracement & consolidation toward 1450-1475 worst case 1350-1400 which we are getting. This week we took out last month’s lows…..remember the general philosophy of trading a longer term uptrend is to buy the dips. We have broken the 50 day moving average and are pointing toward the 200 day but it remains intact. The fundamentals of the admin wanting a lower dollar for trade and the FED wanting higher inflation we believe keeps the bull story alive. Ditto Silver.
SOYBEANS
Well it looks like President Trump wants to sign the China Deal while riding a tractor in blue jeans in a Iowa grain field:):):)..whether that comes to pass is probably not as important as China BUYING like the President said they would. Base case remains that the yearly lows around 8 could be a low for awhile if we can clear the price resistance at 9-950 & 10 on a closing basis. So far only 9.
Contact us at [email protected] with any explanations/opinions  you need.
REMEMBER There is a substantial risk of loss in options & short term trading and it is not suitable for everyone. Please consult your broker and brokerage firm about your suitability. Past performance is not necessarily indicative of future results. 


Update 67: OptionProfessor Market Update

November 2, 2019 OPINIONS & OBSERVATIONS
LAST WEEK/THIS WEEK
Big Up-move last week as the jobs report was much stronger than expected and corporate earnings from the larger big name companies went well. Still; we have not made new highs in the Transports & Russell & the volume in many cases is unconvincing.As note; the VIX did get under 14-15 in the last couple of weeks which I said was a positive but now the we ware reaching the upper levels of our base case it is important that the 12 handle it now reads is also an area where previous declines have commenced. As stated; not a great idea to stand in front of momentum but we are getting technically extended, shorts have been blown out, sentiment is running hot (I hear Apple is “bulletproof & the sky’s the limit” from commentators), China Phase none is somewhat discounted, Fed’s on pause, call premiums are getting juicy so being on guard to this rally taking a break seems reasonable. This Week we have as usual a lot to chew on MONDAY PMI’s for China & Europe TUES/FRIDAY Trade Balance for USA & CHINA WED German Factory orders and Fed speakers throughout the week. Until & if we see corporate earning & employment changes (due to company margins squeezed) money flows into Bonds & Stocks but in the horizon one would have to admit there is a possibility of both seeing changes. Base case remains S&P 2950-3100 as a Sell Zone until & if we see more confirming data
STOCK MARKET
As stated above; the momentum is strong to the upside and the VIX at present levels is bullish. A break of 2970 S&P would startchanging the short term conversation and it may be reasonable to wait for a weekly high price to be surrounded by lower weekly highs to get some point to trade against in case a parabolic stampede of sideline money and speculators descend on the market.Learn about uses and risks of hedging tactics to protect gains or reduce cash risk before yyou may want to implement them.
BOND MARKET
Big Question?  Has the bond market discounted any possibility that growth & inflation may be much higher next year than currently anticipated?? If Not and we see the 10 yr Treasury get past 2% yield the field may have to change course creating an order imbalance that could be notable. Right now the mantra is slow growth & no inflation…well last year at this time wasn’t the mantra the Fed is hiking and will hike throughout 2019….had that one work out?..The entire planet rushed into bonds not out as yields dropped over 50% in a short period of time so we must a least hear the other side of the story not matter the conviction.Leveraged Loans looking a bit dodgy while junk bonds stable so far…lot of Eurpean issues rushing to the market …why??
CRUDE OIL
Base case remains prices are stuck in a range of 50-60…now 56+…stocks like RDS.A 7 BP have had good jumps and XOM looked good last week…with ARAMCO coming we don’t want to get too bearish on crude here but careful if we fail at 60 or take out 53-54
US DOLLAR
Base case remains the same that the DXY is range bound ballpark 99-95 and there was a good selling opportunity about a month ago near the high of the range. Now we are about 97 smack in the middle…50 dayy M/A is 98.35/200 day 97.45 so be careful.If the admin wants a weak dollar for trade comp then I would watch the downside using previous weekly highs as a barometer
GOLD-SILVER
As stated; the markets in metals got way overbought tech wise and has been going thru a correction…is the correction over??Maybe but I would use the October lows as a line in the sand and if broken look to reenter at more advantageous prices.Hey..the Fed wants inflation…the Admin wants a weaker dollar..isn’t that what the metals like to hear??
SOYBEANS
Been keeping an eye on this all year…have said the move toward 8 was a trade able low and resistance was 9-950-10 areas.China’s supposed to be a big buyer while I notice farmer bankruptcies have spiked. Moving averages (50 & 200 day) at 901-891which hopefully will hold and moves above 950-10 could get the ball rolling in a grander fashion
REMEMBER
There is substantial risk of loss in options & short term trading and it is not suitable for everyone. Consult your broker and brokerage firm to discuss your suitability. Past Performance not necessarily indicative of future results.

Update 66: Stocks Near All-Time Highs–Where’s The Volume?

OCTOBER 25, 2019 OPTION PROFESSOR WEEKLY MARKET UPDATE OPINION & OBSERVATIONS
THIS WEEK/NEXT WEEK
Big week for earnings this week as about 20% of S&P 500 stocks reported. Some had very good numbers (INTC) while some missed the mark (AMZN) (MMM) but on top of last week bank earnings the quarter has been not too shabby so far. Being someone who recognized the market is in a uptrend; I remain trouble by the lack of volume (SPDR about 40% below it’s 20 day moving average), the tightest trading range since 2017, and the failure (so far) for the Transports & Russell to make new highs among other things.. Encouraging signs include the VIX this week getting under 14 and closing with a 12 handle and  the fact railroads (UNP), airlines (UAL) and the delivery guys (FDX) (UPS) were firming up. Also; you have Brexit, FED cut & China trade as potential short term tailwinds. The lack of volume/DJTA-RUT under highs keeps the base case as 2950-3100 as a SELL zone. NEXT WEEK..we have Monday-China industrial profits, Tues USA pending home sales & consumer confidence, Wed. FED decision & USA GDP, China PMI, Thurs. BOJ decision-Lagarde takes over ECB-Brexit deadline Fri-Jobs Data/Clarida speaks-hold on to your hats!
STOCK MARKET
The market went up and touched on all time highs this week and the path of least resistance appears up. However; many companies have yet to report….FED cut expected….Jobs data expected weak…and the volume has been dodgy…plus lots of international news to be had so while it’s not wise to step in front of a moving car…..pockets of skinny volume suggests a possible binary outcome….volume comes pouring in and we blow out the highs with a potential for a 10% run or this rally lacks conviction and a roll over as earnings/jobs report/FED remarks next week get investors to run for cover..S&P 150+ above 200 day M/A.. Stay Tuned!
BOND MARKET
Is the worst over as far as economic numbers and growth and will trade deals & Brexit get done? If so the 1.4% 10 yr Treasury may be the low for the year as positioning is still very much leaning toward lower rates and surprises that instigate re-positioning  may cause order imbalances. Few expect the 10 yr to surpass a 2% handle so if that happens for cause the scoreboard could lite up European countries like Italy & Greece continue to issue shorter term paper at negative yields despite dodgy fiscal situations while Argentina is talking 20% haircuts that could look like 40% or extended duration to incomprehensible dates. Leveraged Loans are showing cracks  as one issuer this week had to pay 12.5% to get done….hunger for yield can be risky due to leverage and covenants Right now there seems to be a fear that if you sell a bond it may be difficult to get back in due to demand & the hunt for yield. When’s the lat time people were desperate for anything & got a good deal? Fed Wed/Data due..watch TLT & the 135 level for clues
US DOLLAR
Defined trading range on DXY about 99-95…tested the top end and rolled over…now 97.81 after hitting about 97. If we cut rates and LaGarde gets fiscal stimulus to catch on in Europe combined with a Brexit deal…lots of ifs…then the dollar could retrace further after the bounce is over..98.42 area is 50 day moving average and 96 area is the 200 day M/A…vol hits this week??
CRUDE OIL
Base case is sustained prices above 60 and below 50 needed to get a hold on longer term direction…..but as stated the oil stocks like RDS.A< BP, KMI have held their ground and ARAMCO the Saudi deal may need higher prices to sweeten up the demand.
GOLD SILVER
Base case remains that the breakout above 1350 led us up quickly to the 1520-1580 neighborhood which corresponded to lows since years ago. The technical overbought conditions are being worked off and the rally off last weeks lows refreshed prices. If the Oct lows can hold…it is possible Nov & Dec could see better levels as sometimes the end of the calendar year and the beginning of the new year has been a sweet spot for the metals.
SOYBEANS
Ass stated the Chinese have to eat so getting them to buy food is not a stretch…so as stated a trade able low off the mid year lows made sense…now’s the hard part..we got over resistance @ 9 but so far have failed to exceed 950 or 10..50/200 day M/A 870-880.
Any questions or should you want to talk…simply email [email protected]

REMEMBER…There is substantial risk of loss in options and short term trading and it is not right for everyone. Please consult your brokerage firm and broker – advisor to determine your suitability. Past performance is not necessarily indicative of future results. 

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Update #65: October 18th 2019 OPINION & OBSERVATIONS

THIS WEEK & NEXT WEEK…Since the run up in APRIL…Our base case remains that the S&P 500 index in the 2950-3100 area is a a SELL Zone. As I said the “deal” we have with China so far is not much of a deal at all as nothing is in writing and China’s growth is still at 6% versus our 2% growth if we are lucky. They can wait this thing out and that’s what it appears they are doing. They say they’re not growing at as fast a pace as before..well of course not they are a more mature economy at about 11 trillion. Do you think Amazon was growing faster 5 or 10 years ago than now? The lagging Transports & Russell and VIX back above 14 non-confirming…so while tempted to adjust the base….I’ll wait for more proof & see how earnings play out with CAT & 3M this week. Next week..keep an eye on earnings plus Draghi’s swan song Thursday plus existing home sales Tues. & BOE’s Carney talk on Wed..
STOCK MARKET…Boeing is the big story this week as some messages from pilots that questioned the problematic planes surfaced abs wipe out much of the progress the stock had made. Let’s see how earning come out Oct 23.  There are gaps under the market that could get things rolling if industrial earnings spook people this week. The consumer is supposed to be holding us up yet retail sales declined for the first time since February. Since manufacturing and business investment has been weak; the importance of strong consumer numbers cannot be overstated. In recent quarters the spending had outpaced economic growth so a pullback is not too shocking. If the XRT breaks 40; that could be cause for concern as Macy (M), Gap (GPS), and L Brands (L) have been pummeled. While Macy’s trading @ about 80% of book value sounds cheap; stores like Costco,Target, Walmart, Ross ( who could be a sell if a Real China Deal is had) & HD seems to be chugging along so far.Finally 2 sectors that we have been monitoring closely are the Heath Care & Housing Sectors. Health care ETF’s like VHT have 50-200 day moving averages inverted to the upside and these companies still spit out earnings case in point United Health Care UNH but still need to maintain these levels and still remain a headline or 2 from panic potentially arising. We have brought to yoyr attention that about 70% of all 20 year olds still live with their parents which has helped starter home especially take off..stocks like  IYYR PHM, LEN, KBH have soared are trading WAY above their 200 day moving averages…so now like we said with Gold up at 1580……protecting some of these gains with collars, married puts or replacement calls may not be a bad call…if you need an explanation about these tactics…feel free to ask. Keep an eye on Europe ..a Brexit deal & a LaGarde could be a recipe for at least a bear market rally.
BOND MARKET Yields were firm this week with the 10 yr Treasury at about 1.75% and Treasuries in the 30 year around 2.25%. We are still high compared to yields worldwide and the FED is expected to cut 1/4 pt at the next meeting..with 3.5% employment & 3k S&P 500?? Draghi turns over the reins to La Garde on Thursday..she’s a politician and hopefully a good one as she tries to coordinate monetary policy throughout a EU with all different fiscal policies. Getting Germany to start fiscal stimulus should be job one. Where do rates go from here….look at TLT…if it breaks 135…odds are yields rise…above 145…watch for a 1.25% handle w/a crisis. Rates are crazy in Japan..Toyota sold 3 year notes at ZERO interest while Chater communicationss sold Junk @ 4.6%/they have 75 Billion or so in debt….our feeling is a debt bubble could lead to many things such as monetization & deflation to name two. GDP shrinkage to 1% could unleash a lot of BBB reevaluations and the CCC & BB & Leverage Loans could be vulnerable.
US DOLLAR
Watch Out!!…this week we got a taste of what happens when everyone wants to come out of a crowded trade (like long Bonds Long Utilities  and Long REITS)….the DXY is about 60% Euro and we saw both it and Pound Sterling take off as Boris may pull something out of his hat. The entire planet was long the Dollar..we told you the top of the trading range was 99 so selling against that neighborhood was the call…now watch for support at the bottom of the range 96-95-94…below that…you may hear Timber!!
CRUDE OIL
Same story sustain levels below 50 or above 60…then you have significant price information…now 53-54…no man’s land. Energy shares trying to hold on…if price breaks..they may follow.
GOLD SILVER
As we said our base case remains…breakout above 1350 went to SELL zone of 1520-1580 and ditto for Silver. As theyy work off their technically overbought conditions (200 day moving averages WAY under prices) look to 1475-1450-1400-1375 levels.
SOYBEANS
We have said our base case is the selloff earlier this year sset up a tradeable low ith resistance at 9-950-10..we have surpassed  the first level and approached the second.. China wants to eat and have some AG issues…between now & year end- huge Vol??.
Lots going on…do you have questions or want to talk…email [email protected]

REMEMBER..There is a substantial risk of loss in option and short term trading and it is not suitable for everyone. Ask your clearing firms and broker about your suitability. Past performance is not necessarily indicative of future results. 

Update #64: Stock Market- Hey We Got A Trade Deal—Or Did We???

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.

STOCK MARKET
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.

BOND MARKET
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.

US Dollar
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.

CRUDE OIL

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.

SOYBEANS

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.

You have many questions on the markets & how to protect your portfolio….share them with us at [email protected]

Remember..There is a substantial risk of loss in options and short term trading and it is not right for everyone. Consult your clearing firms and brokers to discuss suitability. Past performance is not necessarily indicative of future results.

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Update #63: Stock Market–New Highs Ahead or Dead Cat Bounce?

OPTION PROFESSOR WEEKLY MARKET UPDATE OPINION & OBSERVATIONS
OCTOBER 4, 2019
THIS WEEK & NEXT WEEK
This week the market saw the VIX jump above 20 and the S&P 500 test the lower 2800 area and pop to 2950 after the unemployment rate dropped to 3.5% and prior months revisions saw more jobs added. Wages were not gang busters (maybe companies should slow down buy backs and pay their people?) but not terrible so it looks like everybody’s got a job and 2/3’s of economic growth (the consumer) is ready to roll. We’ll see. My base case has been and remains that the price range on the S&P 500 between 2950 and 3100 is a SELL zone. The 2 indices that were encouraging me to adjust my base case were the Russell (RUT) & the Transports (DJTA) but both fell out of bed in the last 2 weeks and even with the huge bargain hunter/short covering rally which was Friday…..they could barely manage a 1% gain. Next Week the consumer comes into play with announcements on consumer credit, consumer price index and consumer sentiment all on the docket. The FOMC minutes are Wednesday..fly on wall.
STOCK MARKET

Big snap back late Thurs & Friday however RUT & Transport still lagging badly. Sentiment gauges such as the VIX @17 still elevated and not in the bullish sweet spot under 14. Earnings will be flowing soon enough and we will see how revenues and profits are plus the all important guidance. Semis are back testing the highs as well as AAPL which his hoping their new gadgets and services will reignite the consumer and possibly benefit from an increased valuation on earnings. Speaking of valuations…it’s been hurting the IPO market. companies like NFLX & ROKU and even AMZN which uses to trade at 100+ P/E and now around 70 & testing 1700.  Airline shave been whacked big time and the Financials rebounded after losing some of their luster. Big head fake in the energy sector when oil price went back in the tank but strong dividend payers like RDS.A & KMI are hanging in there so far. Defensive names where investors had been hanging out REIT’s & Utilities also caught a bid Friday despite a risk on vibe. Gold shares got back on the bicycle a bit this week although my base case is that the metals in general are consolidating/pulling back to work off excess. Until the RUT & DJTA and the VIX can get and stay under 14…I still feel cautious about October….USA-China talks this week!!
BOND MARKET
Well can we all be right at the same time?? Yields have been dropping like a stone for the last year across the board. Does that mean the economy is booming? If it is not booming then what the heck are stock market indices doing trading within ear shot of all time highs? Good questions and the answers are forthcoming in the form of earnings, profits, guidance and inflation. I just read Fannie Freddie & FHA have balance sheets near 7 Trillion which is 30% ABOVE the highs of pre crash plus the income to payment ratio is over 50% in many cases. If we ever do see a legitimate slowdown $$Trillions of Junk, negative and low yielding plus now mortgages could have liquidity issues…also if worldwide stimulus packages and trade deals materialize & stick….GDP’s  could fly. Treasuries have been the place to be and 1.25% 10 year could be in play if we take out 1.4%…above 2% the tide is changing.
US DOLLAR As I’ve said my base case is the Dollar (DXY) is in ball park range of 99-95…last week we peaked out above the top area but I said let’s wait a week and see…this week the peek turned back but we must be on alert if a panic into the dollar occurs.
CRUDE OIL Last week I reiterated my base case in that unless we can sustain prices above 60 or under 50..the price of oil is stuck. I am quick to point out that the moving averages converging around 54-56 have been breached but the double low around 50 has survived. ARAMCO is preparing for a potential IPO so betting on a crash in Crude with no recent price evidence sustaining sub 50 is off.
GOLD & SILVER My base case here is that we broke out above 1350 and accelerated toward my SELL zone of 1520-1580. We continue to digest the move and saw pullback under 1500 Gold & 17 Silver which I believe could give more bargains ahead. A break above 1600-reassess.
SOYBEANS My base case was that the big sell off earlier this year created some very trade able lows and with the election and a China deal coming in the weeks or months ahead….the long side would be interesting on a break above 9-950-10..well the first level went.
You probably have a lot of questions on the markets & using options to protect values…email us at [email protected]

REMEMBER-There is substantial risk of loss in options and short term trading and it is not right for everyone. Consult your clearing firm, broker, advisor to determine suitability. Use risk capital. Past performance is not necessarily indicative of future results.

Update #62: Knock Knock–Who’s There??–Q3 Earnings Next Month!

OPTION PROFESSOR WEEKLY MARKET UPDATE OPINION & OBSERVATIONS
September 28 2019

THIS WEEK & NEXT WEEK…The week started OK then went into the tank a bit as worldwide PMI’s, disappointment in
the results of MU and talk of closing down access to Chinese firm due in part to accounting conformity was troubling.
Two indices that were starting to encourage me to alter my base case turned down substantially namely Transports & Russell.
Next week starting Sunday night; we get China’s PMI & Japan’s industrial production…followed on Tuesday with USA manufacturing & construction data plus PMI’s for India, Brazil, and Russia. Thursday; we’ll get USA factory orders and the big
kahuna is Friday with the USA Jobs report & Fed Chairman Powell speaking. Obviously increased volatility is a risk here.
With trade wars escalating before the Oct 10th meeting; would you do a ton of capital expenditures & manufacturing??

STOCK MARKET..My base case remains that the 2950 to 3100 is a sell zone and the rollover in the Transports (DJTA) & the
Russell (RUT) plus the VIX looking uncomfortable at any reading under 14 creates confidence in the base case. With Q3 earnings coming up; one might ask if it makes any sense to consider collars and married put to protect values on stocks that have run up like COST, HD,DG, C, WFC, TGT ect. as we approach these reports. I read that about 60-70% of all people in their 20’s still live at home for a variety of reasons…..maybe the home builders (DHI, PHM,LEN) with entry level prices and low interest rates have been telling us those numbers may be changing with 3 1/2% unemployment & the natural feeling of wanting your own place. AMZN has lost some altitude in the last couple of months and is testing the 1700 area which may be a change in valuation as we’ve seen P/E slip.
The markets want a trade deal and with the political events of the last week…Mr.Trump could soften his position by Oct 10th as
some analyst are revising growth targets for 2020 to between 1% and 1.8% continuing the year over year declines.

BOND MARKET…My base case has been that the 10 yr Treasury got overdone when the yield dropped to about 1.4% and a snap back toward 2% was possible to correct the imbalance which we almost got to in the last 2 weeks. Now; we are back to rates fading lower and with PMI’s fading & the jobs report this Friday, volatility may be back in fashion. I have told you about the debt explosion in negative & low yielding & junk bonds. We have more evidence of that this week as Italy issued 10 yr debt at the lowest yield ever, Junk bonds issue 29 billion which was the busiest month in 2019 and High Grade issues saw 150 billion last week from 124 issuers up about 60% from last September. In addition; Treasury offerings are increasing substantially to boot. While granting some is being used to refinance old debt; it is concerning that some say growth may slow substantially next year which puts earning forecasts in play as well as leverage and covenants. Any redemption run on sovereign or corporate debt is troubling.

US DOLLAR…same story different week..range bound 99-95 ball park on DXY….peeking out above 99 this week..let’s see next week

CRUDE OIL….big run above 60 after the attack on Saudi oil fields..then dump back to wipe out those speculators….now into support 54-56 where a number of moving averages converge and then the double low support at 50 area…my take is that when it maintains values above 60 or under 50….then you will have more evidence to make a definitive answer on the direction of c-oil.

GOLD SILVER COPPER…my base case on Gold remains that we broke out above 1350 and had a quick run into a 1520-1580 sell zone (former lows of 2012 & 2013) and well above the longer term moving averages (potentially overbought). We have seen dip under 1500 but not to the 1450-1400-1375 areas. Silver seems to following suit while Copper needs to overtake resistance of 2.80 & 3.00 to show legs. Will the September lows hold for the metals…we could get volatile this week…above 1600..adjust base case.
Longer term…if the administration want the dollar down (it’s rising)..Fed want inflation up….deficits soaring….positive for metals?

SOYBEANS…still keeping on eye out for China buying and other fundamentals but technical resistance between 9 -95- 10 remains

Should you have any questions please email us @ [email protected]

REMEMBER There is a substantial risk of loss in options and short term trading and it is not right for everyone, Please consult your
broker/advisor and clearing firm to determine suitability. Use risk capital. Past performance is not necessarily indicative of future results.

Update #61: Stock Market-High Flyers Fading-So Where’s The Money Going Now?

OPTION PROFESSOR WEEKLY MARKET UPDATE OPINIONS & OBSERVATIONS

THIS WEEK & NEXT WEEK –

Well we had lots going on this week as The Fed cut by the widely advertised 1/4 point and had
to pony up Billions to rescue the overnight markets via repurchase agreements as liquidity dried up..a bit scary 10% Fed Funds rate.
While confirming they are not on a pre-set schedule…some said that they do not see Fed Funds under 1 5/8% thru 2022. BOE was steady & BOJ says they’re ready to add stimulus. QE lite may be in play which means Europe-Asia-USA all juicing their economies.
Next week..lots of Fed guys speaking while GDP and durable good plus home sales and personal income is on the docket.
With Oct dead ahead..the Big Question?.was FedEx earnings a precursor of what to come-Complacency + Earnings Misses=Ouch!

STOCK MARKET
The streaming wars have gotten very ugly from some…ROKU off 25 bucks on 65+ million shares/40% off 176 the Sep ’18 highs.
NFLX also not a happy camper off 15 bucks on 23+ million shares/30% off 386 highs. Blame AAPL, T, DIS for entering the game.
Stocks with high dividends such as T, PFE, BMY,BP, RDS.A have improved while insider buying @ KMI & OXY looks interesting.
Watch CRK & WPX. Last month’s low must hold if this turn can be trusted. Some believe Uber & Lyft are more interesting now.
My base case remains 2950-3100 is a sell zone and with the Transports & Russell fading and saber rattling..No changes here.

BOND MARKET…OK we got a Fed cut but nowhere near the the 150 basis points the 10 yr Treasury has fallen since last year.
QE lite is back on the table but so is cracks in the liquidity of the system. The spike we saw last week in yields definitely gave a chunk back this week but I still believe 1.4% we saw on the 10 yr felt a little panicky and the entire planet is looking for more cuts.
What they are not looking for worldwide stimulus to lead to growth and inflation in areas like Europe-Asia-USA….but if they win I believe people holding 16 Trillion in negative yields and Trillions more in low yielding debt will hit the exits–a major liquidity challenge. Trump wants the Dollar down and Growth like a “rocket”.Fed wants Inflation up (already is)…careful what you wish for.

DOLLAR….same story different week…range bound 99 to 95 (DXY=98.42)……when & if it breaks…may expect a Vol spike of size.
Brexit-Trade Talks and Lagarde taking over ECB are major things to keep an eye on in upcoming months.

CRUDE OIL..well we got a spike gap up on the strikes on the Saudi oilfields and subsequent fade…if we fill the gap and hold 54….
we could be talking a Q4 turn..ARAMCO wants to go public and probably not into a collapsing price on a obsolete natural resource.

GOLD-SILVER-COPPER…..my base case remains that 1520-1580 is a sell zone for Gold and unless we break 1600 the odds could still favor further pullback/consolidations as we remain elevated from the 200 day moving average. Despite the rush to Silver…the belief is it will follow suit. Again bring the dollar down and bring rates down and get inflation up is music to the metals ears. If you believe the pullcak is over in GDX, GDXJ,SLV ect….maybe hedge or keep it on a short leash using this months lows as a line in the sand. Copper may be the story no one is talking about. Stocks like FCX & SCCO have been turning a bit and some say China is loading up on the metal. Combine that with possible infrastructure stimulus plays and maybe there is a future here. Other commodities that may show promise in Q4 and beyond may be Soybeans/Bean Oil (China Deal), Sugar (alt fuel) and Coffee.

As usual…lots going on and the exciting Q3 earnings and Q4 year end (Santa Claus Rally?) jockeying staring us right in the face.
So…if you have any questions for us….concerns in the markets……simply email us @ [email protected]

REMEMBER. There is a substantial risk of loss in option and speculative trading and it s not right for everyone. Consult your clearing firm and broker to discuss suitability. Past performance is not necessarily indicative of future results. Use risk capital.

Update #60: Yields Up-Rotation to Transports & Small Caps-What’s Next?

OPTION PROFESSOR WEEKLY MARKET UPDATE OPINION & OBSERVATIONS Sept 13 2019

THIS WEEK & NEXT…The ECB met and decided to go with 20 Billion a month for open ended period of time.
We saw a continuation of something I brought to light which is the rotation to Transports & Small Caps and high yielding stocks .
We also saw yields scream to the upside as I also said that long duration with low yields is a risky combo and those holding
those instruments got whacked pretty good this week. Next week look for decisions out of the Fed, BOJ, BOE and Brazil.
Obviously the first three are potentially market moving event. I expect an undeserving 1/4 point cut from the Fed and talk about how things are pretty good (which they are) and data dependent looking forward. The Gold & Silver and Bonds all corrected.

STOCK MARKET….I’ll say it again the S&P 2950-3100 range is a sell zone as AAPL, AMZN, Transports & Russell unable to make new highs….as I said we could and did make a run at 3027 all time highs but so far turned down. Sure we could take it out and go toward the upper end of my range but with The Fed meeting and October looming (what if trade talks stall again)…I may not be willing to roll that dice right now. Still in the advance mode but a break under 2940 would confirm potential of steeper decline.
ATT (T) got a major investor involved with lots of ideas and with the current dividend north of 5 % is worth monitoring closely.

BOND MARKET..As I said low yield and duration can be hazardous to your health and this week certainly was (TLT). No calls here for a Bond market collapse but if Europe gets a stimulus package out of Germany…16 trillion in negative yielding debt sound scary.
Looking at ultra short term and short term corporate ETF’s…some short term GNMA’s and maybe some emerging market debt.

US DOLLAR…Fed decision this week could have an effect as well as Oct trade summit but as I have said it is ina range 99-95 and at 97-98 is still safely in that range…at some point traders may look at the leverage in our companies & govt. debt and re-evaluate.

GOLD & SILVER….As I said Gold broke out and ran to 1520-1580 area which I deemed short term sell zone…we have seen GDX & others pull baclk as I expected…without a breakout above 1600 spot…we may shake out more of the Johnny Come Lately crowd.
Support 1500/1450/1400/1360 areas

CRUDE OIL…..Some rebound and falling in crude..as I said range bound but you have to wonder if we get a strong Q4 as the Saudis prepare to take ARAMCO public….watch those high yielding energy stocks,

SOYBEANS….As I told you the lows earlier this year have held and 850 area has been good support…this week talk of China buying
and a potential interim deal send beans flying to the upside…you would think Trump has got to get a bid for those farmers.

ANY QUESTIONS…simply email us @ [email protected]

REMEMBER..Past performance is not necessarily indicative of future results. Ther is substantial risk in options and trading and it is not right for everyone. Consult your clearing firm and broker to discuss your suitability.

Update #59: Stocks to New Highs Then Fade?

OPTION PROFESSOR WEEKLY MARKET UPDATE SEPTEMBER 6, 2019 OPINIONS & OBSERVATIONS
THIS WEEK/NEXT WEEK Powell spoke and says no recession in view. China spoke and said meeting first week of October. The planet expects 1/4 point cut com Sept 18 and expects some easing out of ECB this week. China doing more stimulus as well….and as for Japan…well they always seem to be easing:):). RECORD IG Debt issuance (150 Billion & Apple doesn’t even need the $$) this week and none expected to be used to actually invest in their businesses. NEGATIVE yielding debt hits 16 trillion after being at 5.7 trillion just last year. Inflation Numbers & Retail Sales Numbers come out this week for China & USA. Berkshire issued RECORD Japanese Bond Sale. France issued RECORD bond sale to boot. Leverage is very high in corporate bonds an duration is being pushed to the limit. WHAT IF….all this stimulus worldwide/trade deal reignites Europe/Asia/USA/Brazil and investors see stocks turn and inflation  numbers jump…..they say get me out of these negative yields and low yielding bonds…..who’s going to buy them??
STOCK MARKET….as I’ve said I never liked the new high made without the DJTA & RUT & major stocks confirming. My sell zone is and remains 2950-3100 until it is exceeded and confirmed the aforementioned indices. This week all the stops got run out of town at 2950 and move above 3030 would clean out the rest….when these stops must buy @ panic prices …who’s selling??
BOND MARKET..well the stampede into treasuries that has taken yields down from 3.25% thru 1.50% on the 10 yr. ran out of steam this week….watch the low yields made (1.44%?)….if they get blown out then the move toward decimal pt yields may begin. I told a bond bull…if yields backup to 2%=worried…if up to 2.5% = scared….if up to 3%+= petrified especially long duration. Corporates have investors stretching duration & credit quality=2 big risks if the music changes. Why such a big rush for corporations to sell low yields and long duration is rates are really going a lot lower…are they stupid or are we???
US DOLLAR…in addition to a bit of a turn in treasuries turning down so we also saw the Dollar turn down. Now they must follow thru to have any significant meaning. I gave you my range 99-95 and still well within that range around 98.
GOLD & SILVER..as I’ve said I am a bull on Gold since it broke 1350 but the run to 1520-1580 was a sell zone…so far that is been the deal as GDX & GDXJ have both seen almost 10% corrections ditto SLV. From here…pullbacks to 1450-1400-1375 would be great and a move above 1600 would suggest that the train is back on track. Fed want inflation to come back & deficits are roaring.
CRUDE OIL…another market that is caught in a range …tempting to get those high yielding oil shares but if we can’t break 58-60 you may be glad you didn’t do it…..after the Fed meeting and Q4 may be when we get our clear signal.
SOYBEANS….they continue to fade but I just wonder as we get closer to crop yields and a trade deal if there is not value around the 62% pullback back and the 8.50 area…I’m watching this very closely….murdered in May….no new lows since.
QUESTIONS–Markets-Sectors-Indices/COMMENTS/SHARE IDEAS….EMAIL US at [email protected]…..


REMEMBER..There is a substantial risk of loss in options and short term trading and it is not right for everyone. Ask your clearing firm, broker, advisor regarding your own suitability. Past performance it not necessarily indicative of future results.  Use risk capital.

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