June 11, 2021 Option Professor Opinions & Observations
Welcome Back!…..This week we had an inflation number that was huge but bonds shrugged it off with yields dropping and the S&P 500 made new highs. The Dow Transports (DJTA) and the Russell (RUT) both rebounded off their lows but no new high there as UPS threw water on the bulls. We had another hack (that we know of) and FEYE & CRM were two that benefited. We got a new drug approved by the FDA for Alzheimer (BIIB) which we told subscribers about last week and the stock zoomed to 468..got sobering support and settled at 396 (still a jump from last weeks close). Since many speculators felt the FDA had lowered their bar others went into play (SAVA ANVS). The advance decline line we spoke about that made new highs has been a good tip on prices lately. Household net worth jumped in Q1 so some who think we are in the midst of the next leg up see discretionary. energy, health care and a resurgence of tech/FAANG as the engines to take us to higher levels. Some are fading financials with we suppose thought of weak loan demand and low returns on free credit balances. Our thoughts are that could be temporary as by the end of Q3 and Q4 we could be running on all cylinders. What’s the risk? Inflation sticks and companies can’t pass thru costs (Burger King sez beef, pickles & Mayo are zooming…yikes!). This could pinch margins which in turn pinches earnings at a time where valuations demand earnings beats. This transitory inflation mantra may play til the Fed meets in Jax Hole in August but if these inflation numbers don’t abate (China just got a variant scare -Delta-and ports were affected)..expect taper talk on asset purchases (Corp bonds already with mortgages to follow)…and an extended S&P 500 may not like it much. Next week let’s see if we follow thru as closes under 4200-4180 could change sentiment from the huge bullishness. We share our opinions and observations in the newsletter so subscribe today and get our take on what’s ahead.
Next week we get more news on EU inflation and German inflation…the world is inflating due to short supplies and high demand. With rates dropping many are turning to the beat up areas like ARKK and its inhabitants ROKU TSLA (bad China vibe but a new fast car) TDOC ZM SQ ect. Will they be right? We have seen a rebound but let’s see about follow thru next week as ARKK has gotten back to the surface (50-200 day MA’s at 115-116)…so it’s crunch time. Aple announced some enhancements to facetime to compete against ZM and engage customers for years to come. Some people who seek dividends are looking at VZ IBM AGNC PM while those looking at low valuations have seen ABBV BMY VTRS as interesting candidates. We share our opinions and observations on what seems promising in our updates
Well the shorts were on the run this week as the Treasury 10 yr has a 1.40 handle despite inflationary numbers that beat estimates. The lows on TLT was about 133 and it looks safe for now. We suspect that big risk to bonds is later in the year when and if transitory inflation starts looking like recurring. Some say we are going to 1.25% on the 10 yr and 12 on the VIX…if so say hello to a possible stock rally going into the July 4th holiday and maybe slowdown in new data. Investment grade (IG) spreads are very tight and high yield lowest quality seem the most popular as some default sure things (travel & leisure) have returned 100 cents on the dollar. Negative real rates abound so the world is a bit mad. Fed exceeded $500 Bill in repos to stabilize the front end. We have opinions & observations we share for Income.
US Dollar / International Markets
We have maintained our opinion that USA opens by July 4 Europe Labor Day & Emerging Markets by EOY. Much has to do with vaccinations a Japan & Korea are at 9%-20% inoculated and that will take time to rectify. We don’t know exactly what to make of China as their economic growth numbers are great but it trades at a discount…Why? One reason may have come out this week when we read they passed some kind of seize assets law and we heard one commentator say that only Wall St doesn’t realize we are in an economic Cold War…..in fact we heard in compared to the Hotel California as investors plow money into their bonds and stocks….with capital controls…the song goes…”you can come in anytime you want but you can never leave”…obviously humorous but what happens if Taiwan is in play?? Areas such as Asia Pacific Europe & Latin America have seen flows….we share with subscribers our opinions on choices
Crude Oil Natural Gas
The good news in crude oil this week is that demand is expected to remain strong of some time and the prices broke 71 bucks a barrel on WTI…the not so good news is that rig counts in Canada jumped to a 2 yr high and you have to wonder when more rig count jumps and supply releases will occur..the 200 day MA is at 50 and the 50 day is at 61 and the whole planet is yellin’ about 80…could be ripe for a correction which may explain the stall in energy shares. We have been bullish since last March so we know how long this ride has been…longer term still bullish but caveat emptor near term. With the heat wave we see Natural Gas taking off ( we said it turned at 2.50 weeks ago) and LNG we said turned at 70 (now 88)…..these are some of the things we share with subscribers each week…so subscribe today.
Gold Silver Platinum Copper Crypto
Gold and Silver are running into some short term resistance…..we told you of turs in March but the rally has run into challenges at Gold 1950 & Silver 28.50 areas. We still believe by later this year as real interest rates stay negative and maybe the Dollar weakens we could see substantial upside but for now a range may be developing. Copper corrected off its recent highs as problems in Chile & China squelching prices plus home builder stocks getting soft has not helped…if we hold 4.50 we could rally but LT MA’s are at 3.63 so reversion to the mean is a risk. We told you BitCoin (GBTC) & Ethereum (ETHE) may be near their lows (GBTC 28 or 22 & ETHE 20-23) so if you’re a believer take a bite. Learn exactly how we see the precious metals & crypto and the shares involved. Go to optionprofessor.com/subscribe
Soybeans Sugar Coffee
All three were brought to readers attention many months ago at much lower levels and we said we see a possible high point in the month of May. OJ got hit this week as the USDA forecasts were higher for crop expectations..could these see the same fate in the months ahead…China’s trying to dampen prices and ,maybe the weather’s turning? Brazil is a wild card but sometimes after tight supplies comes supplies…ETF’s available…learn more option professor/subscribe
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