Early Edition-1st Was Banks & Energy Now REITS-FOMO? Read On

February 12 2021 Option Professor Opinions & Observations

Greetings!….Well we have Valentines Day & Presidents Day long weekend upon us so we have plans as we hope you do…..so here’s our Early Edition. Again our view has been that the 3900-4000 S&P area and more importantly by EOM some forces may change the rampant FOMO (fear of missing out) that has permeated the stock market and others. We told our readers that banks and energy were a steal many months ago as we said the yield curve would steepen (it did) helping the banks profitability & buybacks and oversized loss provisions was extra fuel to the fire…..we said back in March that -37 on Crude was a joke and that rig count & fracking drops would affect supplies (Shell says production peaked) as well as return of demand so we said stocks like CVX XOM PSX VLO SLB OXY ect. would fly (they did). NOW we are turning toward the REIT market where yield hungry investors. pension plans who have to meet targets may find juicy yields in REITS enticing backed by real estate in various forms…stocks such as WSR UBA EQR SPG and others have turned up in the last month and have a long way to go before making new highs-our opinion-defensive-good yields- MA’s Up FOMO can be a dangerous thing so in the next 2 weeks 2 scenarios make sense due to the Jan Effect ending and strong momentum…..we either stay in our prescribed range and turn down in March OR we blow thru SP4000 and take a shot at 4070-4150….BUT when something is overbought basis its Moving Averages…it doesn’t become less so when it goes even higher…so stay with the trend…..dust off your hedging techniques (covered calls married puts/trim/replacement calls/call spreads–if they play Blood Sweat & Tears..What Goes Up Must Come Down (cannabis-Gamestop) You’re Ready

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Stock Market

Stocks continue making new highs with many things going on as usual. Elon Musk took a $$$$$Billion and a Half and dumped it into BitCoin which we believe does 2 things…one is it fast tracked legitimization of BitCoin and also makes TSLA a proxy for BitCoin ownership possibly creating a new wave of buyers who can dismiss their automotive numbers and the fact that about everyone is getting into what was their EV market (very clever)….about 8% of balance sheet but when we see 20-30-50% swings…we’ll see how that goes Palantir got a deal with IBM and the chips shortage has sent SMH NVDA AMD flying high but not so great news for the auto who’ve estimated losses of $61 B due to inability to deliver. Lots of record highs and 52 week highs DIS DE GOOG LEN (housing prices up 14.(%) COF PYPL Fortinet Service Now also United Rentals (infrastructure) gaming DKNG CHUD PENN BETZ and many others BUT MGM gives you a double whammy when they open Vegas. Large pension plans are allocating into stocks which is bullish BUT a lot is known and being discounted and SOMEONE is selling into the FOMO craze.

Bond Market

We told readers months ago that yields would be rising this year (March blowoff at 180) and as long as we stay UNDER TLT 155…higher yield make sense to a point BUT beware the inflation numbers stink and IF stocks sell off in March (2 weeks away) then a heavily shorted market like the Bonds is vulnerable to a fast and furious re-pricing…we have liked short-limted duration corporates & Munis plus ETF’s with duration on munis less than 6 years….preferred high yield secured loans EM debt could be part of the mix Do you want to learn our focus [email protected] & subscribe

Us Dollar/International Markets

Same story with US Dollar…the whole world is short and DXT refuses to break 88-90 so far which means Euro-BP Aus Can J-Yen are all stumbling around….is it possible the rise in our yields puts back in play the yield advantage story?….we’ll see…The Japanese, China, Korean markets have benefited by our consumer spending during the pandemic big time as their exports have exploded and manufacturing in China also zooming (FXI UP) in Latin America we see EWW Mexico and EWZ Brazil have stalled…if the take out Jan lows..it could accelerate to the downside. We have a number of ways to play this on our focus list…subscribe at option [email protected]

Crude Oil/Natural Gas

We said to readers 9 months+ ago that energy and stocks thereof were a steal and as they said in Wall Street…the illusion is now real….China’s big. could we pull back…absolutely but we feel the upside is still there after corrections.. Natural Gas has been bouncing up but some of the our stocks have stalled near double tops after 50% pops from the lows…so caution here seems ok

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Gold Silver Copper Platinum BitCoin

Regular readers know we have been NOT bullish for the metals to take off (actually said it would not happen)…we’re using Gold 1950-2000 and Silver 28-30 prices as CEILINGS until proven otherwise…inflation number stink BitCoin competition (GBTC) and the parabolic move that is still working off excesses are the main culprits…China buying binge on commodities has sent copper & platinum to their highest prices in many years (something we told readers months ago) but the risk that buying comes in wave and Chinese personal incomes/spending have NOT recovered so caveat emptor BitCoin is getting institutional interest (Bank of NY Mellon servicing) so fast tracking is on BUT we see an Illiquid market as having risk of 30-50% pullbacks at any point (just had one weeks back 45k to 30K) and we see a double potential by year end..so it’s wild…risk capital dollar cost averaging Want to know our focus list on metals & BitCoin? email us & subscibe

Soybeans Sugar Coffee

China’s buying has sent soy & grains jamming but this week was correction time something we told readers because of how far it was from MA’s….still a bull market but was more interesting to us when we brought it to your attention at Soy 8-10 then at 14……Sugar’s another one that’s tough to trust…problems in India & elsewhere had prices rocking to well over 16 (we got bullish at 12.25) and this week back under 16 it went…looking for entry on drop….Coffee was great for us before (100-137) BUT unable to break 140 BUT still above support 100-110 so still chopping wood

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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 and broker to determine your suitability Past performance not necessarily indicative of future growth Use Risk Capital Only

Jim Kenney
 

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