November 27 2020 Option Professor Opinions & Observations
Happy Thanksgiving Everybody!…This Week is an abbreviated weekly update and a real cut to the chase edition in a variety of markets. Seems like the transfer of administrations is happening despite the loud kicking and screaming….it seems the vaccine news is hitting full stride.. economic data of PMI (58) and retail sales (big recovery) are all good stuff and need to be to meet expectations of 30% jumps in earnings. Covid cases and resulting hospitalizations are up and if the market is hit by a shock due to holiday travel & gatherings…..with VIX in the low 20’s and RSI at nosebleed levels.. a pause of some degree is not off the table. We have been in the value sector big time for a number of months and the payoff in November in backs energy industrials ect has been remarkable. The SP monthly highs on the futures are still intact @ about 3670 so adding aggressively without that could be problematic and ruin nice positions already on the books. Should the S&P move under 3600 and then 3540-3510….a pause is in the works. We realize seasonally this is a bullish time & cash abounds..so don’t be a hero. Want to ask about options as a hedge tactic? [email protected]
As you know November has most stocks zooming to the upside. There are possible deals and IPO’s hitting before yearend…on our watch list in the merger world is DBX FANG WLH XPO ALXN DPZ RNG DBX SFM AAN AUY VIAC among many others. In the lithium area we are focused on LIAF &ALB. Many of the sectors that have had big runs this month (which we told you about long ago like VDE -Energy, VFH KRE-Banks & Regionals, VAW-Materials, VIS-Industrials, VNQ-Real Estate…and all the Value plays like MGV VOOV VONV VOE VBR and many more could be ripe for some give back if the focus reverts back to Covid cases-Unemployment (778K Claims)-Stimulus fights-unknown vaccine availability—-complacency & euphoria-VIX near 20 could mean reversion before this consensus opinion-EOY Rally. We are many stocks-ETF’s we like-interested? [email protected]
Spreads are tight in both Investment Grade and High Yield (400 BP) and TLT remains above 154-155…..should we break that then high yields could come calling…maybe 1.25-1.5% on the 10yr. If not…a market correction in stocks could rally prices further. Gong out on the risk spectrum has paid off nicely in recent months including VWOB with a 4+% distribution rate-Emerging Market….PFF yields over 5%+ in preferreds….VWEAX approaching 5% or so in the High Yield sector and FFRHX in the Floating Rate High Income genre. Otherwise…short term corporates…limited & intermediate duration munis. We are following various fixed income-email [email protected]
US Dollar/International Stock Markets
Lots to talk about here as the Dollar is on the ledge and international stocks are running with some slow pokes showing come from behind potential. Our choice on Emerging Markets has been VWO & VWIGX which have both been great to us and those who have been reading our updates…..but also Japan VPL and VEU VXUS but now we are looking toward the Down & Out in Beverly Hills crowd…namely Eastern Europe & Latin America…there you can find Russsia RBL-ERUS..Poland EPOL Turkey TUR & ESR diversified while in Latin America Mexico is the dog with the least amount of fleas (best comparable performance) EWW but one might look toward Brazil & Brazil small caps EWZ EWZS…Columbis GXG…Diversified ILF to see what discounted values make sense…with these you swim with the sharks…so try to follow moving averages and keep them on short leash-caveat emptor. The US Dollar is into our base of 90-92 and the coyotes are out in force on this wounded bird…the next few weeks may either see a resurgence in $$$ combined with a stock market correction or the floor drop out-stay tuned. Have questions on the Dollar-Global [email protected]
Crude Oil-Natural Gas
We brought to your attention months ago that the oil prices would not be going back into the 20’s and Chevron CVX ect were a steal with big yields and discounted prices. Lately we have really been rewarded for that smart prophecy. We believe the recovery next year could see Crude prices go to 45-60 and prices of energy shares continue their reversion to the mean. In the short run OPEC has talks this weekend and storage is bulging with Covid cases jumping so be aware the trends look good lately but pull backs are part of the game…..also some firms are borrowing money to pay the dividends.. Natural Gass went in the tak lasst week and this week treaded water…our baby LNG has given a 20+% pop this month may dip to 55…but that’s OK… Want our Focus list of ETF’s-Shares?? [email protected]
Gold Silver Copper BitCoin
We warned you about a reversion to the mean for Gold back into the 1700’s and Silver into the 18-22 buy zone and those who trimmed or replaced positions or collared their positions are happy they did…GDX GDXJ SIL SILJ and many more are getting a lot more interesting to us….but no need to be the first guy into the pool…Copper has divorced itself from the precious metals…we told you recently that the Copper-Gold Ratio was exploding in Copper’s favor so LONG Copper Short Gold was genius in the last few months. Bitcoin looks like it had a blow off top this week as GBTC hit 24 only to close in the 18’s down almost 10% Friday…..maybe too far too fast but long term a bull…How can You Protect Gains? [email protected]
Soybeans Sugar Coffee Cocoa
Lots happening here and has been for awhile if you read us and updates regularly….Beans popped to the upper band we told you about month ago (10-12) this week as demand has been great & China’s been a monster…we told you Sugar was a buy at 12.30 when the 50-200 day MA’s crossed and we rallied toward resistance of 16 only to fail….fear not.. if we break 16 for a good cause…the future looks very bright…..we told you earlier this year that coffee was a steal sub 100 and we ran to 137…then we recently told you support is 100-110 and if validated the next move is north…this week we hit about 125…and we told you Hershey’s orders caused a squeeze in Cocoa which cause the biggest jump in many years…this week it lost steam….Do you have questions on these?…email [email protected]
Happy Holidays Everybody & God Bless!
REMEMBER There is a substantial risk in short term trading and option trading and it is not right for everyone. Consult your brokerage firm and broker/advisor to determine your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital Only.