Option Professor-Stocks-Was it a Head Fake or Change in Direction? Must Read!

July 9 2021 Option Professor Opinions & Observations

Greetings All!……OK…what the heck just happened this week??…with the NBA finals in full bloom & our love of the game of basketball…we use the head fake/change of direction analogy:)….we saw our short term (5 day & 1 month chart) moving averages (about SP 4280 & 1.25% 10 yr) penetrated as a variant/growth scare/yield drop got everybody dumping stocks and buying Treasuries on Thursday. We then got word the Fed is going to “support the recovery” until it is complete..which people took as until unemployment goes back to full levels. Traders took that as a dovish Fed until pigs fly because with technology, operating leverage ect…..those jobs are goin’ boys & they ain’t comin’ back…Bruce S. The question is “are the slowdown/lower yields traders” correct or “are the growth/higher inflation/higher rates guys correct”….as usual we follow the numbers but what if we are in for a choppy July (meaning if you buy strength or sell weakness you’re a loser as the market never follows thru? This week will be very big as we get bank earnings (already they’re talking trading revenues down 40% & yield curve flatter so bye bye profits)….CPI & PPI (inflation numbers)…and if they’re not lying…could they be low? Many sectors had a bounce (value-banks industrials-materials-energy ect) but they still are below highs & moving averages. Some say go all in on cyclicals, value mega tech and short bonds looking for higher rates as recent price history was a blip….liquidity abounds, long term trends are up, the Fed kissed the bulls ring and strong markets stay strong BUT the recovery is not linear (ask China-Japan ect) and at some point valuations will get compressed (ask China) so the all you can eat buffet remained open this week despite a rocky road…if we get 190 in earnings on the S&P…will we valuate it at 25X=4750 22X=4180 or normalize to 20X=3800 or norm 15X=2850!! No one is prepared for the latter and by the end of the year (less than 6 months)..we believe the answer will emerge. There was a huge spike in volume in VT & VTI (broad based domestic stock and world stock ETF’s) this week which has at times been a precursor to a follow thru…let’s see if earnings & liquidity keep us going and see if fear is the other guys problem…..having played hoops for decades…we’ve been on both sides of head fakes…we’ll see who looks foolish!

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Stock Market

Briefly; the stock market intermediate and long term charts and moving averages stayed in good shape this week but remain way overbought basis the moving averages which like Fibonacci number act like magnets (reversion to mean) over time. Broad based stock ETF’s, healthcare, communications, real estate, consumer discretionary & big tech have the best relative strength…with the value trade trying to get back on the horse (banks, industrials, materials, energy). We have a group of stocks that we feel could be very scalable which can lead to explosive growth…spend an little money…join us either month to month or go annual…and we share these stocks…plus our decades of insights we share. Go to optionprofessor.com/subscribe and start educating yourself and should you have questions…just email us today.

Bond Market

It got wild this week as we saw yields plummet only to spike by Friday. Next week we get inflation numbers. The tug of war between the range bound/buy duration crowd (10 yr 1.50% to ,50% and the it was just a blip and we go to 1.75%-2.25% by year end continues. All we know is the Income ideas we have shared with subscribers have been fine ranging from tax free, corporates, preferred, senior loans and high yield. We have specific opinions on where to look for dividends & other income. Go to optionprofessor.com/subscribe….spend a little and get information that can help.

U.S. Dollar/International Markets

Briefly; we have said the US Dollar has huge support at DXY 88-90..until taken out we remain bullish….our yields dropping may hurt the dollar and if it ever takes out the support…yields, stocks and metals will get very volatile as if it tanks on news…repricing of the aforementioned could be substantial. The foreign markets of Europe & Emerging Markets are the next games in town as vaccinations and the variants are keeping them at bay. Valuations and the reopening trade being ahead of them means opportunity Subscribe @ optionprofessor.com/subscribe & LEARN!

Crude Oil Natural Gas

The story here is OPEC and the market says who cares? We have deficits going and supplies may be slow since private equity has left the building there is no cap ex top speak of now. Who wants to invest in fossil fuels when the planet is baking itself to death in heat waves and governments are all in on EV’s? We recognize the possibility of a correction as oil stocks still lag but demand has the upper hand to supply so the longer term future should be there. Natural Gas supplies have tightened and energy demand with the summer is off the charts. We got bullish at 2.50 long ago and LNG was our play at 70 and it closed up 25% above that point. We shares our opinions on how we see the energy markets and we suggest you subscribe and take advantage of the information. Go to optionprofessor.com/subscribe

Gold Silver Platinum Copper Crypto

All the metals & inflation hedges-stores of value have been on the defensive but in the next 60 days we see a potential major tide change and we will keep subscriber in the know as to our views. We were bullish at the March lows on their Fibonacci pullbacks and unless they take out those levels we have our buy radar out looking for an entry. Inflation worldwide is on fire and central banks are buying…go to optionprofessor.com/subscribe..Don’t miss out!

Soybeans Sugar Coffee

Despite the pullbacks off the huge price runs we saw; there may still be air left in the balloon and depending on how the dollar plays out we could still be in a bullish super cycle that started last March 2020…you can play this with market specific ETF’s or a diversified ETF tracking the Bloomberg Commodity Index….investors missed this boat to DIVERSIFY! Go to optionprofessor.com/subscribe and EDUCATE YOURSELF about these opportunities.

Remember —There is a risk of loss in all investing and it is not right for everyone. Consult your brokerage firm/broker advisor to determine your own suitability. past performance is not indicative of future results. Information and opinions are for informational purpose only. It is not advice.

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Jim Kenney

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