Option Professor-Stocks- Choppy August Leads to Sept Boom or Bust? Must Read
Hello Everyone!
Well this week was another wild ride as we saw a couple of good overnight sell offs in SPX followed by big moves on the upside. How do you know when a market is choppy? One way is to see how many times short term moving averages have been violated and in August we have seen plenty. We closed the week very strong with a combination of short covering and bargain hunting. What will we see ahead? Good question…..here’s our view….the retail sales number stunk up the joint but the year over year numbers are strong with Mastercard reporting great use of credit cards. BOOM–Consumer is 2/3 of GDP so household balance sheets and sideline cash does bode well for the market. After Sept 15th; hopefully Delta will have peaked and rolled over, geo-political angst will subside, and Q3 earnings will come into focus and with GDP expected at 6% one would imagine the numbers will be supportive…..that’s the bull case. BUST–The bear case is that Delta doesn’t roll over, the 20th anniversary of Sept 11 is problematic, the consumer really is pulling back & ports closed-supply chains bottlenecks affect earnings. The 10 day/20 day moving averages on S&P we follow are at 4436 and 4420 and both were violated but the market closed above both on Friday. The Relative Strength we look at is still well above 50 which is positive. We had a July low at 4224 and now an August low of 4347 so that is our new line in the sand for sustained weakness. The ports and other factors have hurt the Dow Transports (topped in May) and the Russell had a big day on Friday and this week we will see if it was just a dead cat bounce. The energy market and some commodities have lost their steam and the Semis (SMH) still are well off recent highs and sometimes lead weakness in the overall market so being aware of hedging tactics should traders feel the need is still a reasonable idea. In 13F filings; it appeared technology, communications and financials were 3 favorites of the big boys.
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Stock Market
As we said; the earnings keep rolling in and being very supportive. We will see if we build on Friday’s strong close as we hear about tapering all week. Our view is we are a long way away from hikes and until 1.75% gets taken out all this talk of 2% is beer talk as we have averaged only about 2% since GFC. Yes interest rates are like gravity to stock price and so valuations have run amuck BUT with inflation rates where we are….P/E’s should be around 18 not the 23 so contraction (like AMZN) of P/E’s may be the dagger that kills or staggers the bull ultimately. Consensus is that after 9-15 we could get a big run into year end and they certainly have a lot of evidence that they may be correct but you always have to be careful when the boat gets a bit one sided….we share ideas in our detailed report
Bond Market
This week Jackson Hole as the Fed frolics in Wyoming (it’s a real getaway:)….no hike any time soon and maybe tapering but at 120 BILL a month…does it matter? All the ideas we have on creating income have done their jobs since the March tantrum which we believe was the tantrum everyone is still looking for today. Short need to cover and supply is light so if we ever get up to 1.50% or 1.75%…maybe a steal..ask Japan who had 1.75% in 2011 and Germany in 2014?? get our detailed report
US Dollar/ International Markets
We told everyone the DXY bottomed at 88-90 and we have been bullish ever since that time. The ECB is mile away from tightening and the Japanese are light years away. Do you want the Yuan? We said Europe was good 6 months ago and now we saw enough is enough on emerging markets…start nibbling before Feb 22 Olympics in Beijing and don’t forget India who has tremendous demographics looking ahead..get our detailed report
Crude Oil Natural Gas
We told you Crude broke when it got under 70-72 and this week it lost a lot of ground. The trend is down so it’s tough to catch a falling knife…if you do we would use short term lows and short term moving averages as cut outs. Natural Gas prices have rolled but may find some support at 3.75 area which were the lows this week. get our detailed report
Gold Silver Platinum Copper Crypto
We said traders stay away from metals until they get above their 1 year long term moving averages and so far that has been the way to go though next week could be an important one if strength comes in significantly. Copper rolls over as China slows down which is probably the reason for overall commodity weakness. We said GBTC & ETHE bottomed last month and we stick with our call…get our detailed report.
Soybeans Sugar Coffee
All 3 markets were suggested to readers last year at much much lower prices so our interest now is very low as they struggle to maintain their parabolic prices and in some cases appear to be rolling over…get our detailed report
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