Episode #55: OptionProfessor Market Update
This is a text only update:
Stock Market…Stocks continue to have a volatile week and while it is remains possible the short term highs are in place; the current support in the 5% -10% correction territories remain intact.
Bond Market….yields continued to fall this week and high yield (HYG) gave way earlier in the week but recovered by week’s end
US Dollar….the dollar (DXY) has certainly come off its highs in recent weeks but was essentially stable at elevated levels.
Gold-Silver…..Gold & Silver soared earlier this week with talk of devaluations worldwide but faded off the highs by weeks end.
Crude Oil….earlier this week oil prices sold off flirting with the key $ 50 per barrel price support while ending the week with a rally regaining about half the lost ground.
Soybeans…strong week for the beansof about 40 cents off the lows by weeks end.
MY VIEWS & OBSERVATIONS
Stock Market….S&P 500 entered my red zone (2950-3100) wherein my belief lightening up/hedging made sense. I’ve said a break under 2950/VIX +17 could see an acceleration of prices to the downside which is exactly what we saw. The snap back rally should have resistance between the 2950 and 3000 area. The longer the trade war goes on…downward pressure on rates and rethinking corporate profits and valuation may continue…..2800 area (200 day M/A) and May lows (2700 area) could arrive if news doesn’t change….Volatility’s back! As I’ve said RUT & DJTA no making new highs and momentum fading is not bullish Up sectors this week REITS/Utilities, Health Care KO & MCD CHV while down moves in Tech & Financials CAT INTC PFE IBM 3M. Looking for yields & safety??
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Bond Market…..yield fell precipitously this week and snapped up abit by weeks end. The RSI is way up & TLT failed to exceed 144. Both those things make me believe that the highs in price and the low in yields (10-year @ 1.59%) maybe temporary turning points if not exceeded this coming week. Never can I recall when an administration & the markets bullied a Fed into policy…Stay Tuned!
US Dollar….I have said for many months the basic range for DXY is 98-99 nad 94-95 nad should that range break and hold we may be able to decide where we are going. Where’s your alternative? The Euro is dealing with negative yield, political unrest, Brexit among other things…while in Asia Japan amy be slowing & fighting with Korea. Our economic numbers ain’t bad and the yield advantage is great. Trump wants rates & the Dollar lower…one out of 2 is not bad!…Still Rangebound
Gold- Silver….big bull trend on it’s way but short term we have overstretched RSI and resistance between 1520-1580 where the market broke from year ago. So if you wanted to look at taking something off the table or hedging…that’s the neighborhood I would look at. However; the mantra of lower rates lower dollar higher inflation is all music to the metals ears so it could just go parabolic. Ther are many metals stocks and leasing of metals that I follow who have had very strong runs with potentially more runway if we can keep the metals running. Gold-Silver ratio has tightened somewhat to th high 80’s…some see more moves.
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Crude Oil…..pressure contines on prices albeit a reprieve at weeks end. Will it break 50 and accelerate to the downside or will it take out 60-65 and get on thye bicycle??..If it’s the latter…RDS.a, CVX, BP, and many other could be interesting on a yield and valuation basis.
Soybeans….came roaring back this week but still don’t trust it until we can sustain 9+ nad clear 9.50. If we get a China deal…maybe demand could strip supply and we could get a run…it’s been awhile since we could say soybeans an a big run
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Remember past performance is not necessarily indicative of future results. There is a substantial risk of loss in options and short term trading and it is not right for everyone. Talk to your clearing firm, broker and any advisor you may have to determine your suitability. Use risk capital.