Stock Market- It’s Merrily We Go Along – Until We Don’t-Are You Ready? Read On!!
December 23 2021 Option Professor Observations & Opinions
If someone told you that in the next 90 days if you touch this electric switch you would feel a painful shock and if they said that within 120 days they felt 100% certain you will get that painful shock…would you keep playing with that switch without caution? If you’ve kept up with the shows & ALERTS; you know we said the correction on SPX should stop around the 24 month SMA on the 5 yr graph around 4500-4530 area which it did and we have had a great rally to close out the week close to SPX all time highs. Some money managers are suggesting going to CASH with 10% to 30% and up to a high of 70% of their stock portfolios in the next 30-90 days!! Some said they may even sell some into this week’s rally! The 2 school of thoughts are as follows #1 the stock market will rip to the upside in January as we get Q4 earnings (expected up 21%), massive liquidity from pensions and new year investors, a break in Omicron, and a big steepening in the yield curve amongst other bullish factors converging……#2 reasoning is that the Fed is withdrawing monetary stimulus & Joe Manchin is reducing fiscal stimulus (only 9% of the bill was infrastructure) while growth will back off the breakneck speed and the consumer has spent down their savings and stimulus money (savings levels back to at or below 2019 levels). Margin pressure and valuation pressures may unfold (SPX earnings 2.30 X 18 = 4100). We have an Election Year and the first half tends to be rocky (flat to slightly negative) followed by a big 2nd jump up. We may be early in the re-opening trade which may be more 2nd half of 2022 when travel opens up more but the structural shortage in energy with the supply demand dynamics of health care combined with the flight to large cap growth/tech (weather proof) seems to be the call for first half 2022. The VIX has been great for us this year as when we enter the 25-35 range it’s indicated a great buy for SPX and in the 14-17 range a reasonable trim signal. Volatility in December has been historic and the swings on the VIX has been unsettling BUT we did go home with a 17 handle so we may see some selling in the week ahead and if we do it could create a buy prior to the New Year……after that we will monitor to see if trimming to create some dry powder for late Q1 or Q2 opportunities make sense..2022=being nimble. Technical Everyone’s pushing out on the risk curve to generate income and gains…..since when does that mentality end well??
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It was a rising tide lifts all boats this week but caution that a reality check comes in when least expected. In 2022; expectations for cyclicals, financials, industrials, and materials ect may be tied to seeing the yield curve steepen and yields rise on the 10yr…no happening now and not in the direction the TLT is trending. So health care energy and FANG plus MSFT may see a lot of action. We have a FOCUS LIST on where we think positioning will be best served.
Yields rose a bit this week but nothing to write home about as foreigners can’t get enough of our debt with the double whammy of Dollar appreciations and much better yields than their homeland. Preferreds and short term loans along with high yields rebounded nicely. Yields are stuck. We can help with ideas for INCOME so go to optionprofessor.com
US Dollar/ International Markets
We told you the Dollar would be firm from 88-90 DXY and it has done exactly as expected but lately there has been some cracks in the armor around 97 DXY. If we hold 95-93; we continue to appreciate BUT if we break 90 a strong run OUT of the Dollar may commence. INTERNATIONAL markets may be the big story in 2022 for a number of reasons including CHINA will be EASING & stimulating because they saved their ammo for now as opposed to the Fed who now is boxed into a corner unless we tank the stock market/inflation rolls dead both long shots as of todays numbers. So look for China to revert back to the mean and if we have a synchronized global recovery it could be boom time for Europe & Pacific Rim. Get our focus list by going to optionprofessor.com and submit questions!
Crude Oil Natural Gas
The oil correction has come and gone and OPEC meets Jan 4 and they’re not too keen on backwardation while the Nat Gas is trying to relaunch going into what looks to be a cold winter….Get our ideas now….optionprofesor.com
Gold Silver Copper Bitcoin Crypto
We told everyone that trading and sustaining ABOVE 1850 & 25 bucks needed to turn the Gold & Silver ships…getting closer while the structural shortage in Copper continues GET OUR IDEAS…..we always maintain to wait for 30%-50% drops in Bitcoin & Ethereum before adding and we just saved those who listen the headache of buying at the highs so LEARN where we think values are compelling go to optionprofessor.com and take advantage of our knowledge
Soybeans Sugar Coffee
Critical time for all 3 as Soybeans had the correction into the 12 neighborhood where we thought it was a buy and now it’s popped while Sugar & Coffee had huge run ups (we spoke of these a year ago) and are trying to maintain values.
Remember All investing involves risk and 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 s NOT advice.