Option Professor-Stocks-You Don’t Get Hit By the Train You See Coming- That’s the Key! Read More
December 3 2022 Option Professor Opinions & Observations
This week we got a huge move up after Powell’s talk and a sober dip when the jobs report was stronger. Of course; on Tuesday’s QUICK ALERT and to customers we spoke with we told them that SPX 4100 was an area to fade and SPX 4006 was an area an area to support as the methods showed this very clearly.
We believe in REVERSION TO THE MEAN which many times is the “train most investors don’t see coming” For Instance; in January, we had SPX at 4800+ and our LT averages were at 3700….who’s looking for a big Drop….we were. In June & October, SPX was 3500-3600 and the LT averages were way above the market.. who was looking for looking for a big Rally…we were. In Sept-Oct, with the Dollar Index at 115 and 10 year Treasury Notes at 4.35% and the LT averages were way UNDER the market….who was looking for a Dollar drop and Yields to drop….we were. In June when Crude Oil hit 120+ and October when Gold hit about $1600 and LT averages on Oil was way under the market and LT averages were way above the market in Gold…we looked for Reversion. These are the trains that have hit investors who are not looking.
RIGHT NOW We have seen a lot of markets already had their reversion to the mean and we will now see if they can turn into extended sustainable trends. The economy is strong as the consumer is pulling out all the stops to keep spending. This includes but is not limited to HARDSHIP WITHDRAWALS to their 401k’s (Record) and use of Credit Cards (Record). They are leveraging themselves. In the Jobs Report; Monthly WAGES are rising on an annualized basis 7%+, on a 3 months basis 6% and on an annual basis 5% which way faster than needed to bring inflation down. Owners Equivalent Rent-Food-Gas= Persistent Elevated Inflation. The PCE this week was elevated & unless the CPI is concocted by Martians-it should be elevated.
TWO TRAINS for 2023 we don’t see coming. The consumer doesn’t run out of money and EARNINGS don’t fade and maybe jump along with a Fed who switches to 2% is a long term minimum rate not an average rate. The terminal rate stops Under 5%. The SPX stays above 3800 and takes a shot at 4400-4600. The SPX 3491 in October is the LOW; the 20yr-40yr cycles bottomed and the soft landing is achieved. Jobs keep getting created and the consumer-economy (GDP) continues to surprise on the UPSIDE-Glory days.
The second trains is that the yield curve inverting again predicts recession accurately. We see the LABOR MARKET via Unemployment rise .5% which historically led to big ACCELERATION in the jobless rate. We see credit hard to come by (banks are stingy now except on high interest credit cards). We see real estate listings go from discounted prices to a flood of listings (Kauai listings are up almost 50% already!). We call this the AVALANCHE and our thoughts may go from things don’t happen so fast to shock at how fast things can happen. Global real estate gets repriced & a recession hits Europe, USA and Asia & EM at once
Time for Us to Talk. Contact Us at 702-873-8038 or Email contact info to [email protected] We go over HEDGING Downside Risk & Upside Surprises. We can REVIEW Your Markets-Share Our Ideas. The Option Professor-Graduate of Boston College-Trained-The Option Institute-35+ yrs. of Info to Share
Give it A Try! You Should Have Done it Already!
Talk Soon,
The Option Professor
Remember All investing involves risk of loss and it is not right for everyone. CONSULT YOUR BROKERAGE FIRM to determine your own risk tolerance and suitability. Past performance is not indicative of future results. Information and opinions are provided for informational purposes only. It is NOT advice.
