Option Professor-Stock Market-Everyone is Betting Up-What Could Go Wrong? Read It!
November 14th 2021 Option Professor Opinions & Observations
Let’s start this week by talking to TRADERS-This week we got an early in the week hit followed by a get back up on the bike rally by Friday’s close. We told readers that three (3 ) numbers on SPX were worth a look. First we said SPX had Fibonacci projections at 4660 (38.2)& 4724 (61.8) and there was a 12 SMA on our 1yr charts at 4630. All 3 numbers were valuable to use in the short term. In the last 2 weeks; once SPX broke 4665 on the UPSIDE; we accelerated to the highs near 4720 and failed at the 4724 area. When we broke the same area earlier this week on the DOWNSIDE; we accelerated to the LOWS around our 4630 level and closed ABOVE 4660 on Friday. For the BULLS; you want to see SPX 4724 taken out to get the GREEN LIGHT on that year end rally and stay ABOVE SPX 4660-4630 (VIX contracted substantially Friday). For the BEARS; you’re close but you’ll get no cigar unless we take out SPX 4630-4600 which would open up a significant AIR POCKET that could put a SPX 4500-4400 handle on the market and pollute the punchbowl.
The story goes that the consumer has tons of money and will spend it (retail sales this week) and the stores will have enough items to sell them (business (retail) inventories this week). Q3 GDP is supposed to be a hiccup and Q4 will blow away estimates as holiday shoppers go wild with pent up demand. This will translate into huge Q4 earnings and propel the market to new highs EOY and thru the Pamplona Bull Run known as the January Effect where new money comes in. Beautiful story….looks like it will happen as money in the bank or bonds pays nothing and comes with risk on principal. Our concern is that the entire planet is looking for this to occur and so the boat is a bit one sided although we did read where flows are mixed. If in December the Fed says they are accelerating the taper due to heat about inflation and the consumer takes a pass on high prices in stores restaurants and travel; the Grinch who stole the bull run could appear. As we look into 2022; if we see bottlenecks abate (boats will unload at some point) and pent up is followed by demand destruction via higher prices/cost of living…..and we have to compare numbers to this years blowouts…caveat emptor. Of course; we don’t fight the tape and we don’t fight the Fed BUT we are WAY ABOVE LT MA’s & VERY HIGH RSI’s.
We notice that the Growth versus Value ratio has made new highs which we can see in tech and semis plus small caps. With yields still very low the banks have stalled out and the energy trade as well. The materials and industrials sectors have fared much better. Consumer discretionary/retail has seen some frontrunning ahead of the holiday rush. Homebuilders are coming on strong a high rents may push demand and low rates make for cheap payments.
Contact us at [email protected] and get our ideas where we think positioning for 2022 makes sense.
We have stuck to our guns that until 1.75% on 10 yr Treasuries is taken out; we have seen the lows on TLT & EDV. The Fed make influence the short end but the long end has a lot to do with future inflationary expectations. With the technology boom toward efficiency and cost reduction plus changes in supply demand dynamics; deflation makes sense. We have a debt bubble hidden by Fed intervention and the demand from thirst for yield…will it pop in 2022? Contact us at [email protected] to get our views on the best ways to create a diversified INCOME stream
US Dollar International Markets
Our yield advantage continues to support the Dollar (DXY 95+) as well as our economic upsurge BUT we maintain the 94-96 area could be a ceiling as this area was the LOWS pre-Covid and now may be resistance. We have maintained that China may have turned in OCTOBER as we approach the Feb 2022 Olympics and much of their dirty laundry has been aired and regulatory pressures may subside. Our TRADE DEFICIT is at RECORD and our consumer has $$$ and wants to spend so doesn’t that potentially bode well for overseas markets which in some cases are DISCOUNTED to ours by historical amounts? Contact us at [email protected] and gain insight as to positioning for 2022
Crude Oil Natural Gas
The supply demand dynamic still is very tight for oil as OPEC+ says no more coming and oil companies are taking huge free cash flows and sending money back to investors (dividends) paying down debt and buying back stocks but not investing on more supplies. Prices have backed off in oil but unless we start seeing a 70’s handle another rally may be in the offing. Biden is trying to break the fever….jury still out on that one. Natural Gas has gone into the fade mode as well a Russia says they will deliver but the dictator in Belarus is talking sabotage….we’re testing longer term MA’s. Contact us at [email protected] to get our ideas on participating in the energy markets.
Gold Silver Copper BitCoin Ethereum
As we told readers (EARLY OCTOBER); it appears Gold Silver Platinum & China stocks have turned to the UPSIDE an so far so good. We wanted closes ABOVE Gold 1800-1850 and Silver at 25 which we got THIS WEEK. We may pull back to the breakout points BUT if this is not suckers rally we should see acceleration into the EOY an Q1 2022. We spoke of a BOTTOM back in July in crypto and a potential move to 100K by year end BUT we are not interested on buying crypto on strength as corrections always come and if you buy them it’s a more comfortable way to gain entry. You can simply Contact us at [email protected] and we can share our ideas on how to participate in these markets
Soybeans Sugar Coffee
Folks we are going thru food shortages (Wheat Coffee ect.) as we speak. We told readers LAST YEAR that these markets were breaking out on the UPSIDE and they sure did. We have seen corrections in some but most have remained firm…weather-bottlenecks ect. are factors. Too much money chasing too few goods…sounds familiar?
Remember All investing involves risk an it is not right for everyone. Consult your brokerage firm/broker to determine your own suitability and risk tolerance. Past performance is not indicative of future results. Information and opinions are for informational purposes only It is NOT advice.