Update 110: Stock Market-Wait!! Buying ReLoad Coming-Read More
September 11 2020 Option Professor Opinions & Observations
Welcome Back!..We told you in prior updates recently that Sept-Oct Nov could be a time of sizeable re-valuation and a reversion to the mean (50-200 day moving averages) and that is EXACTLY what is happening. Will there be more to go? Well here is our view…..there are 2 ways the market is much more interesting to us. #1 is we go down and values are much much more compelling or #2…they start taking out the monthly highs indicating we’re back on track….otherwise making a decision in a trading range is foolish… and that is exactly what we are in right now…a trading range. Th election is coming up and who knows what story will be bought…the story of “The Greatest Economy in History of the World”….which included a 40% tax cut used for buy backs….news jobs that were lost & didn’t pay much….the America First baloney where we had a $63 Billion dollar deficit with China & an $11 Billion Dollar deficit with Mexico and in 2018 & 2019 the combined trade deficit with china was $764 Billion. No complaints that money hasn’t been EASY from the FED…1/2% T-Bills & 44% of GDP injected by some “creative” moves by Mnuchin & Powell to “comply” with The Fed Act 1913 forbidding the buying of exactly what is being bought by the “facilities”. On the other side you’ve got an alternative to whatever the heck has been going on….Trump’s scorecard has been the stock market so one would assume all measures short of outlawing selling will be done to get a rally pre-election. On the other side…who cares…the Fed calls the shots and if Powell sticks with Buy American Stocks…we should rally after the election. Stats like 52% of young adults live with their parents bodes well for housing. The 5G stampede is coming and NVDA (big data/gaming) Broadcom Qualcom are not bad fishing lakes in the next 2 months….Bill Ackman’s Pershing Sq’s portfoio seem confident in the future (Lowe’s QSR CMG Agilent ADP HHC MDLZ ZTS Freddie & Fannie ect). Nasdaq had it’s worst week since March and the quickest 10% drop (3 days)..they are revaluating things and if you’ve read our updates…it is what you expected…we discussed tactics for protection (Covered call collars married puts replacement trades ect)… ..those all made a lot of sense to many….fearful when others are greedy….
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Stock Market
Let’s cut to the chase…big cap growth tech semis covid beneficiaries all have to come back to earth and they are….epicenter & value stocks with its 14-16 P/E’s need to hear one word VACCINE and they will get the jolt they need to take out June Highs and at least go back to yearly highs or beyond…that is a lot of upside and compared to hoping some of the high flyers take out their recent highs…we would bet the former. We’ve said all along that the split trade (TSLA & AAPL) would turn into massive sells once they hit the market EXACTLY what happened….they should have been HEDGED…..now TSLA has gone into the 50 Day M-Average zone (300’s) a much better price than 502!…but it is AAPL that we find the most intriguing as the reality is their growth in top & bottom line in the last 2 yrs has been OK…but the future could be dynamic as 75-80 million I-phones have been ordered and the MARGINS on these could be huge plus Laptops Ipads & wearables which leads us to believe that 80-100 is a steal (a gap in the 90’s/200 day is 83+). There are many stocks we believe should be on an investors shopping list ans some can replace income too as they have dividends of 2.75%-3.75% so if you want to know just email us….plan now execute later is the idea.
Bond Market
Not much here to report as the Fed does it’s thing keeping savers in the dark and encouraging yield starved pensioners to take more risk (value stocks). TLT the proxy for the 20yr Treasury is stuck in a tight range after yields popped a bit..a break above 170 could mean get ready for even lower yields and a break under 160 could signal that someone figured out that a lower dollar inflation and deficit spending is not a good deal for 1% until 2040:):) Junk bonds (HYG) are testing lower prices and one would have to think if the Fed didn’t have a “Facility” to buy them they would be in the toilet. In Preferreds (PFF)…they’re hanging in their with a good distribution and many are linked to banks…so if you believe….Munis have been coming down a bit as job & service cuts have to occur unless while the Fed & Mnuchin are printing money they can find some for the states (the spent plenty on the airlines who are still firing people)….bailout is obvious. The emerging market debt we told you about (VWOB) has done well since March and if the Dollar resumes its downtrend later this year-a positive.
US Dollar/International Markets
Our position has been the US Dollar hit a short term low 90-92 zone and is in a muli-leg rally…closing Friday at 93.27 which means we are looking for the Euro to fade off the 120 rally area (closed 118 area)….IF the Euro breaks the highs then 125 becomes the next target if not 115-116 is ahead…the Yen & the Can$ are comfortably UNDER their M/A’s..& Aus $ stable 72-73 for now Looking at stock markets around the world most are stable but could see some selling Germany Brazil India with Japan (Buffett ?) & Korea showing some boat legs. Same story with ETF’s like VEU VGK VXUS VPL VT & more
Crude Oil Natural Gas
We told you in previous updates we thought a move down in crude oil could be in the cards and we saw a drop from 44-36 area in tha last couple of weeks…the glut of oil trade (contango has front month way lower than the back months) plus the nice guys Saudis cut prices …30-35 should be as low as she goes and sets up nicely for strong demand in 2021…that’s our view so keep an eye out for those high yielding oil/energy stocks. We were bullish on Natural Gas UNDER 2.00 and the breakout above and loved the move to 2.75 but warned that the market was over bought and a break of 2.43 could see prices crack EXACTLY what occurred this week (close 2.25). Our stock we follow LNG has 50-200 day averages at 51-49 and we closed at 49…so if we take out 49 the odds increase for at least a move to 45…hedge?
Gold Silver Copper Platinum
Short Term…we’ve said it looks like the “precious” metals have topped at 2100 Gold 30 Silver and the stocks ass well GDX at 46 and Sil at 53 but with the intervention Fed around the Dollar which has gained steam could reverse and then the metals get the green light….In Fact…when the Dollar turned DOWN from March 102 area and lost 10% is when stocks & metals roared. Now the turn in the Dollar (albeit modest) led to declines of both. Copper is another story as it has mainatined abov 3.00 and by doing so has made our favorite copper stock we told you about all year FCX make new highs this week….both are getting a bit overbough-keep it on a short leash
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Soybeans Sugar Coffee
Let’s see how these exciting Three Amigos did this week….we have been bullish Soybeans since the $8 area and have said that if start closing above 9.50 we could start accelerating to the upside and a close above 10 could set up BIG potentials gains opening up the 10-12 area….well Friday we closed near the highs of 9.98 so get your seat belts on because if we breakout for cause the momentum is building BUT if unable to break thru profit taking and speculative shorts & hedging could be problematic. Sugar has been untrustworthy in some regards as the breakout above 13 should have been a green light for a sustained advance but instead it went back into 11-12 support zone (close 11.93) bothe the 50 day & 200 day MA’ss come in at about 12.30 area so IF we get above there and hold/closes..we’ll like it. Coffee has been great to us ever since we first liked it under 100 nad on the pullback to 110 BUT as we ssaid the market move toward 139 was stretched and a pullback was expected and occurred (MA’s at 114/112) so at least a level of 125 or an acceleration thru 135 work as short term key points,
REMEMBER There is a substantial risk of loss in short term trading and option trading and it is not right for everyone. Consult your brokerage firm/broker/advisor to determine your own suitability. Past performance is not necessarily indicative of future results Use Risk Capital Only.
