Update 67: OptionProfessor Market Update

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
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.
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??
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
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
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??
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
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