Episode #58: OptionProfessor Market Update
Option Professor’s Opinion & Observations Weekly Update August 30 2019
August is behind us and in Stocks most induces closed lower for the month. Is it an indication of more to come in the month ahead? This upcoming week we have tariffs on Sunday, Tues manufacturing data (PMI), Wed. regional Fed Presidents speak, Thurs ADP employment report and Friday the Big Kahuna..US Jobs data for August. This will be followed by ECB meeting Sept 12 and the really Big Kahuna..Fed Meets 9/18….so yes..I do believe volatility should increase as the bull bear debate has we’ve seen Stock violently up and down moves of 4% short term….suggesting when resolution is made the move should be big.
Stock Market…as I said the move above 3000 not to be trusted as Transports, Russell and major stocks failed to confirm highs. Resistance 2950-3000 S&P….break under 2825 could spell 2700 area quickly. If you would like to know what we are watching regarding among other things high dividend paying stocks and what upcoming dates the lock up periods end on 2019 new issues.let us know. Will earnings forecasts be downgraded??….Is it time to price out EOM October puts & credit call spreads??
Bond Market–Treasuries-Corporate-International…. big blow off to the lower yields and higher prices in the Treasuries in the month of August as momentum players pressed the side that has been working since Nov 2018. However; the numbers have not been horrendous and the 200 day average is way below the market (overbought). So I anticipate the Fed not to gas up this fire as i said last week (and Dudley reiterated)..the Fed is not in the business or underwriting trade wars & re-election schemes.Save AmmoAs we turn to corporates; i like short term investment grades (VUSFX & VFSUX) to keep duration relatively short term…in the high yield space…watch HYG…it has hung in there but if we have Stocks drop & a cut in earnings….break of 85 could spell trouble..if forced to participate (VWEAX) has a reasonable duration and diversification. Preferred (PFF) has been firm..is a turn coming?.Italian 10 yrs have seen yields plummet..no thanks..while emerging market debt (VWOB) have done well since Dec..for how long?
US Dollar….new 52 week highs on DXY this week so this yield collapse has not hurt the values (98.8). Our economy in the USA is stronger/yields differentials beneficial so no surprise here. I have said this all along 99-95 is the trading range and despite Trump’s moves and jawboning….our currency is king….although the UK Governor outlined the concept of a worldwide digital currency as he stated reliance on the US Dollar as the reserve currency standard method of payments has become too risky…Goldman guy.
Crude oil….it has declining tops since April’s high@ 65 or so….as I’ve said must break 60-65 and hold 50 to remain interesting but I must say those juicy yields on RDS.A, OXY, CVX ect. are very tempting. It seems we have a well supplied market immune from thegeopolitical skirmishes than previously would have sent prices flying…..like stocks..September could be the feast or famine month.
Gold Silver….as i said..I have been bullish on Gold and the breakout above 1350 was a go but fast and furious it went and now the resistance has held around 1520-1580 (formerly lows late 2012 early 2013) and the 200 day moving average is way under current prices….so absent a parabolic breakout thru 1600 (1700 next target)….I say let’s see if we can get aboard 1375-1450 area.Silver…pretty much ditto the Gold story and while the white metal is being touting as a cheap metal that will close the gap in the Silver Gold Ratio but I suspect that the industrial uses for silver and platinum have changed which may explain the differences.
SOYBEANS….well we continue to see no buys out of China and I’ve seen farmers and there reps crying on TV about how bad their businesses have gone….but until I see closes above 9 and 950-10….I’m not seeing any home run here.
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