Option Professor-Stocks Hit All-Time Highs Make Hay While the Sun Shines-Must Read
October 30 2021 Option Professor Inc. Opinions & Observations
Our insights into the market swings have been pretty sharp with a sell call at SPX 4500+ and the subsequent decline to SPX 4280 followed by a buy signal at SPX 4355-4400 which has now been followed by all time highs-not too shabby. So what do we think lies ahead?? Well we will go over things we see going on globally and see if you reach the same conclusions. Let’s get a couple of definitions out of the way- first is STAGNATION- means lack of activity, growth or development while the second is INFLATION- means a general increase in prices in an economy and consequential fall in the purchasing value of money. Got it. We just got GDP numbers for Q3 and they came in at 2% about 30% UNDER estimates and about 75% UNDER the prior Q2. We just got the PCE (Personal Consumption Expenditure Index) up 4.3% the HIGHEST reading since 1991 fueling concerns that price increases will last longer than expected. Whether you look at gas prices UP 100%, housing UP 20+% rents UP 11%+ and more, food stamps UP 25%, Social Security UP 5.9%, and there doesn’t seem to be a light at the end of the tunnel. China, Europe, and the Emerging Markets are getting hit too with China GDP at 4.9% (if you believe them) DOWN about 40% from the prior quarter and their PMI’s point to possible RECESSION. Germany cut its 2021 GDP to 2.6% DOWN 25% from prior forecasts. Supply shortages and rising inflation are the root cause. These guys plus Emerging Markets get whacked when food and energy rise or there are shortages and their consumer gets nailed. Supplies (bottlenecks) are improving with the ports around L.A. going to 24/7 shifts but on time shipments are at ONLY 34% which is almost 60% LOWER than pre Covid levels. According to trade associations; we are SHORT 75,000+ truck drivers as the pandemic reevaluation phenomenon has made less attractive and lower paying jobs difficult to fill. Cyclical theorists believe the 20 & 40 year Cycles will BOTTOM in 2022!
OK…that was very enlightening….now what can we do about it? Well…we are in a seasonally strong period (October SPX UP 6.9%) with Holiday Sales expected UP as much as 10.5% this year (last year was up 8.5% and pre Covid ranged between 1.8% and 3.5%). Could supply shortages revert us back toward the Mean? We also have the January Effect when money flows into the stock market historically. The RISK here is that you can’t sell products that are not on shelves and personal income and savings are slipping with higher cost of living causing a pinch. Even Apple’s Tim Cook said he expects things to get better “depending on the economy” in 2022…..their final product comes out of China but components come from all over the world. So-“Make Hay While the Sun Shines” BUT keep a close eye on your P&L!!!
RIGHT NOW we see a NARROWING of stock opportunities (check market breadth).are focused on stocks that can benefit from this scenario which in our view include Transports-Growth-Dividend Growth-Resources-Tech and others. We will share our VIEWS on where we see OPPORTUNITIES and HEDGED STOCK STRATEGIES as it will soon be 2022!!
Simply EMAIL US at [email protected] with your contact information to LEARN what we see coming!
This week we get a lot of data that will cause VOLATILITY. Watch how the relationship of consumer staples do versus consumer discretionary….could be a key to the winds of change. THIS WEEK we get ISM manufacturing and service numbers PLUS Labor Costs & Productivity AND Friday-the JOBS Report..WATCH–EMPLOYMENT PARTICIPATION RATE!
Email Us at [email protected] with questions
Globally Interest rates are rising and in some places a lot (Australia Brazil) and even Germany almost got out of negative territory! Central Banks have started issuing a lot of RHETORIC and sound a lot to us like that old song Prince’s big hit “This is What it Sounds Like When Doves Cry”. If inflation persist that song will get louder as they are all betting on “transitory inflation” and with the amount of printing and debt out there.. so they better be right!
Get our views on our views in TLT & FIXED INCOME…EMAIL US at [email protected] and ask your questions!
US Dollar International Markets
The US Dollar (DXY) is up against our resistance zone at 94-96 and now we see DECISION time dead ahead as our Long Term RSI is at about 50 and was ABOVE 50 during the run UP in the Dollar between 1996 and 2002 and more recently between 2014 and 2020. So if we get ABOVE & SUSTAIN this 94-96 level the surprise could be Dollar STRENGTH. Should we break UNDER the yearly lows SAYONARA! The USA is the best market on the planet as supply shortages and higher food and energy prices are hurting China Europe & Emerging Markets much worse than here.
EMAIL US at [email protected] and we will share our views in the Dollar-China-Pacific Rim-Europe & EM!
Crude Oil Natural Gas
These markets could get wild SOON depending how the winter unfolds and if OPEC will release more oil and Russia will deliver the gas they promised. Big oil companies are woefully inadequate delivering supplies and energy problems are definitely hurting global economies. We saw oil prices back off temporarily this week…they recovered…this week?
EMAIL US and we will share our views on oil and gas and ways we see opportunity [email protected]
Gold Silver Copper BitCoin
We have been patient in our views on Gold & Silver as while we feel there is potential that the lows are BUT the failure to maintain Gold ABOVE 1800-1850 and Silver ABOVE 25 has us feeling traders should sit on their wallets a bit longer as if those levels are exceeded and maintained…it should be game on. Copper mines are talking supply shortages again and that may spell good times UNLESS we take out 4 bucks and we enter a slowdown or heaven forbid RECESSION. Bitcoin & Ethereum (GBTC ETHE) jumped up and are now meandering (actually Ethereum is performing better as they have committed to clean energy in 2022). Will we see a end of the year STAMPEDE as many expect…we will soon see.
EMAIL US and we will share our views on these markets [email protected]
Soybeans Sugar Coffee
We told readers last year that Soybeans were a bargain at 8-10 and they ran about 15….former resistance was at 12 so when we pulled back toward 12 we thought it could bounce and it has….if w take out recent lows just UNDER 12 then all bets are off and there seems to be supply issues in Corn & Wheat & fertilizer issues in Europe-ammonia -13yr highs. Sugar and Coffee (softs) had huge run ups after we told reader about them last and recently have gone into ranges as they digest parabolic moves. If supply chains & weather are problematic for as far as the eye can see…more if not less.
Remember All investing involves risk and it is not right for everyone. Consult your brokerage firm/broker to determine your own suitability an risk tolerance. Past performance is not indicative of future results. Information and Opinions are for informational [purposes only. It is NOT advice.