Option Professor-Stocks-Semis Correction Canary?-No U.S. Oil?-Value vs Growth-VIX? Must Read!

August 13 2021 Option Professor Opinions & Observations

Greetings Everyone!…We are in the dog days of summer and many people are asleep at the wheel as the stock market trades in one of the tightest trading ranges in a long time and the VIX has meandered toward 15. Covid-Delta on the news sounds bad but top tier analysts insist that the IHME & Dr. Gottlieb say the Delta variant is peaking and about to roll over like in the UK & India. They say we will get a sigh of relief and the market will take off on the upside. The semiconductor index may be telling a different story as since last week we dropped from about 272 to 258. Top 10 holdings include NVDA TSM AMD QCOM AVGO MU ect…….and some say that a rollover in SMH if sustained could portend a decline in SPX….they call it a Correction Canary not unlike the old canary in the coal mine which was sent in to detect harmful gases BEFORE they hurt humans…..we’ll see. Also; the market has been trading in a really tight range with a contracting VIX and it seems a blow off to the upside may be in order with a collapse in the VIX or volatility may spike and a unforeseen correction commences. Some believe it may be quiet until Sept 15 when the focus will go to Q3 earnings….but with consumer confidence down 13.5%…worst in a decade…who knows? This week is retail heaven with earnings from TGT HD LOW KSS FL TJX M and others so we’ll see if the apparel explosion is subsiding. Inflation is off the rails…used cars..gas..housing…shipping costs…wages…CPI>>PPI>>>PCE. Oil prices have backed off a bit a we plea with OPEC (Saudis & Russia ect) to boost output which is ironic as USA oil production off 2 million barrels and now we must ask foreign producers to play nice while we tout our plans to go 50%+ electric by 2030. Would you give away your oil or stick it to them? The Growth vs Value Ratio may be rolling over IF the 10 yr Treasury did bottom last week at about 1.12% (Closed this week at 1.30%). The ratio hit about 1.33 last year (high number) and rolled over and we caught the big rally in value stocks while tech stumbled (Banks-materials-industrials-energy ect.)….then we went to 1.22 ratio and saw a roll over in value between April thru July as rates dropped and tech caught up. NOW we may be seeing a rally in value as we turn off 1.33 ratio and if we take out 1.22 (correction low) value could accelerate to the upside (value tends to pay dividends to yield hungry surrender investors. There is a resolution coming to the low VIX and the tight trading range. Will September bring a huge rally as Delta fades or will we start discounting consumer slowdown and economic contraction from these Goldilocks comparisons (Southwest & ABNB warns of slowdowns).

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Stock Market

Not much going on in late summer although some stocks are slipping..we need to see how NVDA & CSCO earnings go this week along with the aforementioned.

Jim Kenney

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