Author Archives: Jim Kenney
Author Archives: Jim Kenney
July 9th 2020 Option Professor Opinions & Observation
Good Day Everybody!…..ZOOM! The horses were running out of the barn this week as we saw all time highs in FANG and other stocks as well…..forget about valuations & fundamentals….you’ve got a momentum trade and pity the man who has stood in front of it…..Don’t fight the Fed & Don’t fight the tape…2 things we’ve told you here for since March…in fact the high beta portfolio (MGK VCR VGT SMH IBB) brought to your attention had been one of the best places to be….Would you like to know other ETF’s that have been on our Radar List….here you go…ARKQ (autonomous tech/robotics)…SNSR (Internet of Things-5G)…….SKYY CLDR WCLD (cloud computing)…ARKK (AI)…. CIBR (cyber security) ARKG (Genomic Revolution)….DLR (digital realty)….KWEB (China Internet) and a whole lot more…..HOWEVER C’mon…..you got to be getting some feeling of froth ( TSLA up 10%+ Friday on 23 million shares & NFLX up 8+% on 21 million shares). Many shares are 50% or more above their 200 day Moving averages (NVDA-AMZN ) others are 30%+ (AAPL-MSFT) the mere definition of extended. Also: we have noticed a number of things to CAUTION us…namely real estate DELINQUENCIES are soaring….renters are MISSING PAYMENTS and are being DISCOUNTED (Nordstrom says they’ll pay Half rent)…..EVICTIONS are rising (est. 28 million)….JOBLESS numbers are HUGE & many small businesses are letting people go after PPP…..we also see the VIX is ABOVE 25 and there is a DIVERGENCE on RSI suggesting EXHAUSTION while the PUT/CALL RATIO screams overdone and CREDIT SPREADS have been WIDENING. …….NEXT WEEK WE GET EARNINGS…..DAL announces and we’ve seen a 72% DROP in airline travel YOY….the banks 9WFC JPM C BAC WFC GS USB MS) have been sold off going into the numbers so they could catch a bid (up on Friday)…..but Q2 EARNINGS is supposed to be a dud (-50%) and for the year (-25%). NEXT YEAR is supposed to be a banner REBOUND year for small-mid-large cap earnings but the FACT that Value, transports, Russell all lag terribly this advance is cause for concern. The math stinks…last year SP earned about 1.60 X 20 P/E =3200….EXACTLY the area that has been trouble lately. If we drop 25% to 1.20 X 20 P/E – 2400. ……..ADMITTEDLY …This is The WALL of WORRY that will Persist but may not Impede…….we could get surprises in EARNINGS due to OPERATIONAL LEVERAGE (less employees/ less real estate) and the massive switch to work at home and digital living. Also; with the 10 yr Treasury going back into the 1/2% neighborhood the likes of KO NKE SBUX PG WMT trade at high multiples so who the heck knows the normal P/E…..another result of the FED OBSCURING real values. Seasonality; some say, is for the first 2 weeks of July to work & then fade by month’s end as Q# has been known to be the worst performer of the four ……..so the best summation we’ve heard for stock investors..Get on the Plane But Make Sure Your Seat is Close to an Exit!
Questions for us or tell a friend…email us @ [email protected]
There are sector ETF’s BEYOND just tech/mega cap growth & biotech that have cleared their 1-2-3 yr moving averages and have participated in this advance the most such as IPAY VCR VHT VOT VBK KWEB VOO VOX VWILX and a number of others. The catch up trades in energy, banks, restaurants, travel & leisure, real estate continue to labor on in fits and starts. We told you a while ago that the OPERATIONAL LEVERAGE would be the surprise that would return companies back to peak earnings much faster than conventional wisdom. We are and may continue to see a stock market that goes up while the economy & most peoples lives are troubled. We explained months ago to readers that the stocks move BEFORE Earnings & Earnings move BEFORE GDP. The jobs lost were primarily low paying jobs so the Govt programs were able to plug in a relatively modest income hit to the nation’s economy. Technology is great but it has killed a lot of businesses such as conventions….who’s going to want to travel/pay for a booth/hire people when ZOOM will rig up the meeting for pennies on the dollar. Also; with the ease of food delivery….will restaurants bounce back and when? The markets love the subscription model so PTON and WMT and others get a boost from that revenue. On the tech front…forgotten soldiers like CSCO & INTC may start catching a bid. Cloud computing remains front and center because it eliminates employees and improves efficiency..both winners. Some sspeculative isssues on our radar are CRSP WKHS & HEPA for various reasons. Also; Attorney General Bill Barr ws being interviewed about China/Huawei and seemed to think the technology in companies like NOK & ERIC may be worthwhile to compete so we are monitoring those companies in advance of 5G plus this move to digital real estate seems interesting as the New CEO of CLNY wass explaining the new direction that company is trying to take with towers and big data storage figuring prominently. This week is a biggie and by the end of the week we may know whether the SP 3250 area has been surpassed or have we begun our Summer Swoon…..
Want to Know More…email [email protected]
The Fed Balance Sheet has actually shrunk in the last 4 weeks and we believe it is under 7 Trillion…but for how long as the job numbers that have excited everyone may stall out as the easy lifting may be done.Credit spreads have been widening…defaults will be rising and revenues still are hard to come by for many distressed firms…many loan sharks (private equity) lay in the shadows willing to loan at high rates or buy assets on the cheap in industries that are not bouncing back. Leveraged Loans & High Yield & even preferred have not recovered ABOVE their 1-2-3 yr MA/s so mas problemas ahead. Mortgages & all the rest on Powell’s Christmas List (IG intermediate & LT plus short term Corps). Powell & Mnuchin are dancing so close to that line in the Fed Act 1913 because the Fed is LENDER of last resort not the grant giver of last resort and are making loans they know won’t be repaid and they are not supposed to lose money when they lend. Short term stuff VUSFX VCSH still look ok while VWLUX (tax free) has done well but what shape are these states really in when the dust settles???
Have fixed income questions? email [email protected]
US Dollar/ International Markets
The US Dollar is on the ledge…ass we told you many have said we are in a SECULAR BEAR market on the Dollar BUT we were not on the wagon despite the fact that the 50 day is now UNDER the 200 day MA (death cross) BUT hold your horses… the 1-2-3 yr MA’s are NOT inverted and the the 3 yr MA is about 95.50!!…So while we RESPECT the fact that we could break DOWN we remember when the S&P was at 2200 & the 1-2-3 yr MA’s never inverted and once back above the 2800 area we were in a BULL market again…so we have precedent to still believe…but we’re getting closer. China’s market went nuts this week with KWEB right in the thick of it with BABA TCEHY JD.COM ect…..BUT be aware that retail investors are plowing in & valuations are absurd in some cases so Caveat Emptor…..the rest of the world is either on the verge of breaking out or will turne DOWN at the RESISTANCE here…VPL VSUS VGK are three of many on our radar.
Have questions? email us at [email protected]
We are suspicious of prices in the 40’s near term unless our calculation of DEMAND is woefully inadequate…could be as AIRBNB CEO was saying most people are DRIVING to their holidays which make sense. Stockpiles have been bouncing around and Friday both prices & oil stocks turned up…oil stocks have faded off their bounce so let’see if they have legs next week. Longer term; we believe in the recovery and the Supply pinch (Frack/Rigs OPEC)…so into the 50’s + next year is still on our dance card as we speak.
Gold Silver Copper
Gold “broke out” above 1800 (went to 1830) but faded by the end of the week. We have positions we have had for years but have been hesitant to add up here because bullishness, coin premiums, distance away from longer term moving averages, RSI divergence still tells us to be careful. NOW if we sustain ABOVE 1800 then our tune could change but why goof up a great position by ADDING at the wrong time….not on our watch. SILVER is more interesting on many fronts including the MA’s are in the 16’s per ounce and we’re trading 18-19 plus the Gold Silver Ratio iss in the 100 area and the industrial use for Silver could be happening and finally if we clear 20-22 it could rip as the last time Gold was at 1900 Silver was 40-50!!Copper has been a friend to us ass we told you it was going to make a move to 2.50 (it did) then clear 2.80 (it has) and our buddies FCX & SCCO have been matriculating (Hank Stram) up the chart at a nice steady pace.
What’s on our Metals Stock List? email [email protected]
Soybeans & Sugar
After a very good run the resistance has been problematic for both markets. Sugar has to clear 12.50-13.00 (it hasn’t) and Soybeans need to clear 9.50- 10.00 to open up the higher seats otherwise they both stay in te bleachers. Stay tuned…more weather and crop progress ahead so you never know.
REMEMBER..There is a substantial risk of loss in short term trading and option trading and it is not right for everyone. Consult your brokerage firm, broker, advisor to determine your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital Only.
July 2, 2020 Option Professor Opinions & Observations
Hi Everybody…..Big fade on the close BUT We told you last week that if we HELD SUPPORT S&P 2950 area; the market could get on the bicycle. It did. Short Week but a good week as the stats from Q2 were very impressive such as Dow best results since 1987 & the S&P 500 best in 22 yrs.. Of course; most stats sound good until you put them in context (coming out of collapses 1929-1987 2201-2008) the rebounds % is impressive. Today’ unemployment report of plus almost 5 mill jobs sound great but many more are out of work. End of July the extra 600 buck goes out the window possibly and some say over 50% of restaurants on yelp are out of business. HERE”S THE DEAL….earnings and bank losses are coming out BUT if we can settle this market down a little (TRANSLATION get the VIX into the 20-25 area buy end of summer); we could really get a run as big money on the sideline has been SCARED of VIX north of 30..something we’ve told you about for a long time. So the under invested and sideline cash and year end book squaring could help us win. Yeah…we do have an election..the Fed moves markets…Washington talks.
Want to learn what sectors we like? …email [email protected]
We established a HIGH POINT in June of SP 3250 area…now let’s see if July can take it out…if not you have a monthly high surrounded by lower highs and that could set up an August opportunity..keep some powder dry in case. For those who contacted us early this week..the big call was Amgen about breaking 245 and wow did we get a run. Fed Exp popped big and those of you who caught swing trading using moving averages & RSI caught that one BEFORE the blast off. We have our favorites on our Radar List for sectors ect for the second half of the year…..others like GOOG GS Palo Alto RTX (Industrials), CHEGG and the usual suspects 5G, Cyber security & Cloud. Too much to cover so we encourage you to email us at the address below.
Second Half Focus?…email [email protected]
This going to be short and sweet this week. Will Rogers used to say “I’m more concerned about the RETURN OF MY MONEY more than the RETURN OF MY MONEY….Hey that sounds like Powell’s Policy cause that’s what you get. . The Fed has bought so much paper in the 1-3 year maturities that the prices are high. IG and Junk either don’t give much yield or do not pay you enough for loaning money to dodgy companies EXCEPTION is b or BB paper with firms that have GOOD FREE CASH FLOW. Looking for yield?…some say look to bank preferred’s with juicy yields & equities that pay great dividend with GOOD PAYOUT RATIOS. In fact; that may be a theme as yield thirsty investors plow into DIV_PAYERS We got NEGATIVE YIELDS after you back out inflation….How long do you think investors will go for thatNo Brainer for Us.
Got questions on our Fixed Income Radar List? [email protected]
US Dollar/International Markets
The Dollar did a minor fade but not nearly enough to support the SECULAR BEAR market enthusiasts of which we are NOT one nor break the 95-95 SUPPORT wherein we would be more attentive to all this bear talk. The Japanese Yen-Aus$ Can$ all failed to get above their Moving Averages BUT the one we told you TURNED BULLISH @ 111 is the EURO. It has pulled back off the highs but a CLOSE ABOVE 115 could get their currency to spike. That brings us to the Main THEME….It may be TIME TO DIVERSIFY portfolios with exposure to EUROPEAN STOCKS & BONDS! You have every right to ask WHY?? Well; the SHORT ANSWER is the ECB put DOUBLE the expected STIMULUS & the Germans who FINALLY put out a HEFT STIMULUS to boot! The Euro is trending UP and the VALUATIONS are very compelling so keep an eye on it as the weeks unfold ass a diversification and follow the money.
Stockpiles came out light but we are still suspicious of oil in the 40’s near term. The Virus has people jammed up so demand could be dodgy and the energy shares are holding on for dear life after a 20% pullback (VDC) but was OK Thurs before July 4th…but a lot of beaches are closed ect..so??? Longer term we have said since March…If the RESTART continues Oil in the 50’s next year looks probable as supplies L shaped & Demand V shaped.
Gold Silver Copper
Call us crazy (you wouldn’t be the first) but we think there is a LOT of risk to Gold if doesn’t get its butt above and stay above 1800-1900 spot prices. It got ABOVE this week but was pushed back down. Of course we think LONG TERM the Gold is a long BUT with 1-2-3 yr MOVING AVERAGES still in the 1500’s 1400’s & 1300″s ….and with William Devane is now again a household name (Gold Ads)….everyone thinks its up up up….we say wait for sustained breakout to add & keep powder dry if the stampede that has gone in then becomes movie theatre where someone screams FIRE! Silver moves more with stocks…hold 16 bucks get above $19-21…you may say A Star is BORN! Copper has been on the move as it tries to get above 3 bucks….our buddies at FCX went from 10.75-12 before settling at 11.50..buckle up more to come
What’s on our metals Radar List? simple email [email protected]
Yee of such little faith…..we began to feel that we were WAITING FOR GODOT in Soybeans…but the planting reports seem to light a fire as prices went from 8.55 to over 9 bucks…..we thought the summer planting season and weather ect. could play a role….let’s see..we’ve been bulls since 8 bucks. Sugar was another slippery one but it followed suit with beans going from 11.40 to 12.25 this week BUT both markets have MORE WOOD TO CHOP as resistance levels loom above..until we see sustained weakness…up is the bet
REMEMBER There is a substantial risk of loss in short term trading and option trading and it is not right for everyone. Consult your brokerage firm, broker and advisor to determine your own suitability. Past performance is not necessarily indicative of future results Use Risk Capital Only.
June 27, 2020 Option Professor Opinions & Observations
Bingo!!….For those of you who keep in contact with us during the week; we were able to ALERT you to a Short Term SELL SIGNAL on TUESDAY when HEDGING TACTICS (Cutbacks/Covered Calls/Collars/Married Puts ans also Replacement Trades) made a lot of sense. We noticed the VIX hit 29 and was turning back into the 30’s (bearish). We monitored the NEW HIGHS in FANG names and others. We saw the the NEW HIGHS on FB…AAPL….AMZN NFLX-GOOG were ALL accompanied with RSI READINGS that was LAGGING the new high. WHAT DOES THAT MEAN?….Well… to us it suggests that much of the VOLUME may be SHORT COVERING & EXHAUSTION…..which at LOFTY LEVELS tends to run out & the market is left to FALL UNDER ITS OWN WEIGHT…..once the algos smell weakness on EITHER SIDE of the market….they PRESS THE WEAK SIDE with the understanding that the WEAK SIDE CANNOT HANDLE THE VOLUME. Also; REVERSION TO THE MEAN has really been the story since the March lows when we hit SP 2174 and the LT MOVING AVERAGES were up near the area of SP 3000 (almost 50% UNDER). Yeah we went up to 3250 (failed to fill gap at 330 & recently failed to fill gap at 3200). We told you in RECENT UPDATES that we must be CAUTIOUS with this rally because the DOW TRANSPORTS & RUSSELL failed to get above the 1-2-3 yr MA’s and now are moving SUBSTANTIALLY below those levels. Q-2 report cards (earnings-revenues-profit margins-losses-guidance ect) will be coming out in July. Also; in July ass benefits RUN OUT…Mnuchin wants more money for PPP & extending BENEFITS thru year end (Trump_Mnuchin-Powell will plow UNLIMITED $$$ into the system to OBSCURE losses of Income & Debt Defaults-Inflate Assets before the election). To do so….scaring America & Congress (stocks drop??) is the BEST WAY to get their way. RIGHT NOW…we are TESTING our SUPPORT zone @ 2950-3000 and if we can HOLD tho levels & get the VIX back UNDER 30….we could BE BACK ON the bicycle. Should the VIX break ABOVE 40 and we BREAK support and the BAD NEWS exacerbates…..then look for our other SUPPORT ZONE 2750-2800 area and CALL the PLUNGE PROTECTION TEAM. For those uninitiated; the Plunge Protection Team (colloquial name) was created by Reagan on March 18 1988 after the Crash of 1987 by Executive Order 12631. It is headed by the Treasury Secretary (Mnuchin), also The Federal Reserve Chairman (Powell), along with heads of the SEC & CFTC. Their mission is to advise the President during times of economic & stock market turbulence. Some skeptics/critics feel it goes beyond into actively intervening and colluding with banks & institutions obscuring real values. It is said they met at Christmas 2018 after stocks plunged 25% in Q4 2018. We would bet they’ve met plenty in Q1 of 2020. Not exactly transparent; and the minutes of their meetings are not released which leads some to believe they go beyond analyzing & advising. Our free market system is supposed to be an open one and not influenced by mysterious forces or obscurity. Many believe that the gains in the second half of the year may come from the EPICENTER STOCKS but not from the weaker but rather the SURVIVORS who will have LESS COMPETITION potentially. If Correct…in the airlines maybe we look toward LUV & ALK…in hotels MAR HLT…in energy CVX XOM in restaurants SBUX CMG MCD YUM DRI…in travel BKNG EXPE…in gaming MGM LVS CHDN…. in housing ITB LEN PHM TOL DHI..rent a car CAR ect. NEXT WEEK…we will get more info on jobs, virus #’s & closures, any such additional rebalancing (was estimated up to $76 Bill by pensions & others Norways’ Norse bank) The consumer has been buying up a storm on durable goods, restaurants and retail sales (Cars-houses-furniture-restaurants). Some furloughed workers in hospitality & other businesses are being terminated and the helicopter money needs reloading. The Fed has gotten away with jawboning that they are buyers..our guess..real money spent soon. Our stimulus % to GDP is 15% vs Japan 42% but remember Japan’s stock market peaked in 1989 and still trades about 40% below the peak today. GOOD NEWS….T.I.N.A is alive and well and so is that $4.7 Trillion in money market plus a vaccine is on the way. Is the stock market train returning to reload?? Sitting in Cash/Dry Powder??..Let’s hope so……
Do you want to know more??…email [email protected]
They hit the BIG FIVE this week and if there’s more to come then more will come. We have told you that basis the MOVING AVERAGES many sectors and stocks had either gotten way ABOVE the MA’s or had rallied to just BELOW their averages and turned down. We spoke of STOP & GO restart story which seems this week was staring to happen. History tells us that a NEGATIVE result for stocks in the FIRST HALF of the year is sometimes followed by the 2nd half having ho hum results. If the spikes in the Virus leads to substantial deaths….then we may see just that HOWEVER if the bad data is transitory then the FISCAL & Financial stimulus could cause EARNINGS & VALUATION surprises which the administration’s objective. The Cloud (CLDR FSLY WCLD XSW SKYY CLOU FTEC) as well as Cyber security (HACK CRWD FEYE FTNT PANW) as well as Virus breakouts (PTON ZM0 still seem to be popular and obviously despite the pullback…analysts still love MSFT AMZN & AAPL. HOWEVER; the bloom came off the rose in FB & GOOG as advertisers are leaving (at least temporarily) which may be problematic for search/social media that depend on their revenues. Nike had a big miss but also had digital did well & store will be reopening. China is hurting them & SBUX…..Tariffs talk & acrimony not helping the situation. Albertson’s deal came to market and was a real thud despite KR is doing great. Investors may seek refuge in COST DG CLX CSCO BBY……while SHOP SPOT have been very strong…the RSI’s are in the blue zone so pricing out covered calls & collars seems appropriate. Others on our radar are BABA TECHY CHEGG & the international markets in Asia & Europe.
Want to discuss our Radar List? ..email us at option [email protected]
Well the Fed have been jawboning they have all this money to support High Yield & IG, Fallen Angels ect ect…this could be the week when they need to spend some money as HYG has been rolling under some moving averages and the RSI is under 50. Our base case is that TLT topped at 180 and dropped to a 150 handle and now is trading in a range between those two points. International bonds (BNDX) seem to be holding up well as Munis. Mortgages and other instruments on the Fed’s Christmas List. Some are suggesting pricing out convertible bonds and others are suggesting preferred in the banks so they are further up the capital ladder and avoid getting their “feet wet” as stock prices tanked on the banks this week as eliminating buybacks and capping dividends was not welcome news coming out of the multi-lettered (V-U-W shaped recoveries) outlined in the Fed Stress Tests last week. CLO’s are working at 8 to 10X leverage which sounds dangerous…but now days who’s not super leveraged using borrowed money (sometimes a La Cosa Nostra rates) trying to avoid insolvency and bridge themselves to the land of milk and honey awaiting on the other side of this crisis…hope they’re right or otherwise…TIMBER!! Our view remains..don’t stretch for yield..stay short to intermediate term.
Have Bond Market questions??…email us at [email protected]
US Dollar/International Markets
As we have said in prior UPDATES…we are NOT on board the Dollar SECULAR BEAR train as of yet as our base case is that 95-96 is the base and so far we have traded UP off that region and this week was no different as the index went home with a 97 handle (close 97.49). If we break above 98 resistance could be dead ahead at 99 where we broke down from that area (quadruple former lows)..50-200 day MA’s are 98.64 & 98.37..bullish above. The Japanese Yen is slipping as well as the Can$ & Aus$ while te best looking one basis the MA’s remains the EURO ass the ECB & Germany stimulus packages have got the bulls running in places outside of Pamplona. Stock Markets in Japan, South Korea, Emerging Markets, Europe started to roll over last week so let’s see if they accelerate to the downside or hold water. On a relative basis; they seem better valued than USA but we’ll see.
Have questions??..send them along ..email [email protected]
Our base case was that we’d see in the 40’s this year (Rigs closed/Frackers done/OPEC Cuts-Russia cut this week)) which creates a L shaped supply & a V shaped demand picture…so far so good. Next year; with an economic recovery (vaccine) we could exacerbate the move and see in the 50’s. In the short run; unless we are off on demand, the market looks mature here. So covered call- collars- replacement trades worthy of a look and sticking with SURVIVORS like XOM & CVX ect seems the most prudent way to go right now.
Gold Silver Copper
We are getting the point where Gold ect are either on the verge of breaking out as Gresham’s Law finally materializes or we could be looking at one of the great SHORTING opportunities in a long time. Every trade has two sides so let’s CONSIDER BOTH SIDES. The BULLS have got the MOVING AVERAGES on their side as most are rising & inverted to the UPSIDE. Certainly the amount of money supply growth worldwide is staggering and if spot Gold can breach 1800 & 1900 then we would be in uncharted territory. Also money flow into Gold ETF’s, coins, stocks is at record levels. Finally; The RSI numbers are favorable and in areas preceding up moves. The BEARS can look to the 90 Day TRADING RANGE of $1800 to $1700 area as distribution…..they can acknowledge the money supply spike if the Bulls will admit MONEY VELOCITY has tanked (no inflation) and Gold shares are severely discounted to the last time spot was in the neighborhood. The bullishness is unanimous and coins are being HOARDED pushing premiums up dramatically (froth). LONG TERM MOVING AVERAGES are under prices by SUBSTANTIAL AMOUNTS (1600’s/1500’s 1400’s 1300’s) which historically is resolved with a PULLBACK…. BOTTOM LINE…..the Fed is OBSCURING VALUES so maybe Gold just goes on….but we would like a little more confirmation before ADDING as the unanimity of bulls beckons a hedge. We thought the move above 16-16.50 got the BULLS in the control position and still believe a move past 19-21 is possible spike…Keep Your Eye on the Ball. Copper has not changed much and suggests that a recovery is still the bet. Staying above 2.50 is good…getting above 2.80 and 3.oo would be better.
Both markets lost altitude this week as more bullish news was not forthcoming. Apparently name calling & assignment of blame is not the best way to do business in Asia….so unless we can hold 8-8.60 Soybeans plus get over 9-10 and on Sugar hold 10 and surpass 13….the future may be bleak.
REMEMBER There is a substantial risk of loss in short term trading and option trading and it is not right for everyone. Consult your brokerage firm, broker, advisor to determine your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital Only.
June 19, 2020 Option Professor Opinions & Observations
Well…Do you like old Westerns like High Noon? You could be on the verge of seeing the Stock Market version soon. In the last TEN DAYS we SHARED with you two (2) very valuable observations. #1 This is where we were approaching SP 3250 and our support zones and said that our SUPPORT ZONES were down at 2975 (ball park 61.8% retracement 3400-2175 & former tops of 2017 2018) and 2790-2800 (the 50% retracement/all clear signal). The idea of looking toward hedging (covered calls-collars-married puts) looked reasonable to us. #2 We SHARED with you that SUPPORT ZONE so that one could look to BUY against those levels and we certainly got a ROBUST 180 point RALLY after hitting the 2975 neighborhood. Great Call….. WHAT ABOUT NOW? We have the valuation camp (Lee Cooperman & Warren Buffett ect) having a difficult time reconciling the prices with earnings & growth estimates while the more Quant camp (Mike Wilson-Kolanovic-Tom Lee) having been very bullish in the last 3 months based on things like rebalancing/selling capitulation/the belief that the restart would be sooner/consumer resilient-robust/earnings surprises derived from less employees -real estate. THESE ARE YOUR TWO GUNFIGHTERS. You know which one we have been betting on if you’ve read our UPDATES. Starting in March we told you of our high beta portfolio of VGT MGK SMH VCR and they have gone thru the roof. We also told you of income ETFs like VCSH HYG PFF & funds like VWEAX VUSFX VWLUX and more. We also told you of epicenter stocks like CAR MAR STWD CCL GM JBLU QSR BA HAL & more that had huge rebounds PLUS Oil having a L shaped supply & V shaped demand with prices going toward 40 bucks per barrel…..Great Calls. OK>>>BUT WHAT NOW?…With rates at almost ZERO in money market..11 Programs by the FED….restarts going….1-2-3 YR MA’s are at 3009-2903-2813 RISING c& INVERTED TO THE UPSIDE Plus $1.5 Trillion infrastructure package, UNDER investment by active managers & value guys & an Administration clearly focused ONLY on November to hell with LONG TERM consequences…the bulls have a good story BUT we need to CLOSE the gap @ 3200+ which OPENS THE DOOR to closing the GAP @ 3300 & NEW HIGHS in JULY as some have forecast. The BEARISH CALL is a WINNER IF we see SP take out 2950 & 3018 (50 day & 200 day MA”S which are INVERTED TO THE DOWNSIDE. As we told you LAST WEEK…Our BIG CONCERN is the DOW TRANSPORTS & RUSSELL 2000 FAILED to get above their LT MA’s (DJTA 10,000+ RUT 1540+) which suggests this is a FUGAZI RALLY not based on Earnings GDP & Jobs but OBSCURING. This would set up our NEXT HIGH NOON @ 2790-2800 neighborhood. RIGHT NOW WAIT …we should be ready to HIT the GAS or PULL the RIP CHORD SOON.
Our UPDATES are FREE so Tell a Friend to Get Theirs …Simply email [email protected]
FRIDAY saw remix- quadruple expiration (stock-index-S&P futures-options) NEWS that Apple was closing some stores temporarily put coffee in the booze bowl Friday as Thursday’s 1.5+ Million jobs lost didn’t disturb traders.Many of the epicenter stocks that had big rallies but are UNDER their 1-2-3 yr MA’s have lost their steam…Florida’s virus spike not welcome. The ones that have been best for us are the stocks & sectors who have not only rebounded but have gotten ABOVE their 1-2-3 yr MA’s and have just run & run& run. We have a focus list if you’re interested shoot us an email. The BIGGEST Cash flow recipients YTD have been LQD VOO VTI GLD & QQQ not a bad portfolio as well. The IPO ETF which works with Initial Public Offerings has gone from ball park 20 to 42 in that last few months as stocks like ZM & BYD PTON TDOC DOCU & others have made an IPO banner year. Many believe competition w/ INTERFACE will actually have MANY Winners. TECH (MSFT New Highs) SEMIS (NVDA) Biotech (IBB XBI) as well as CRWD (cyber security & CRM move up. Also; AMAT LAM PYPL MU TME BABA Up. Longer term ITB could hit the double whammy of cheap $$ & new demand. While JP Morgan report credit card activity jumped 4.7% (fueled by Govt $$) the BIG RISK for banks is the June 25 result of their STRESS TEST because they added a COVID twist that centers around BUYBACKS & DIVIDENDS and if they must cut or eliminate either or both..their landscape could change; if not then the selloff could be a huge BUY opportunity ass the FED probably doesn’t have a vested interest in spearheading a mass exodus out of shares. SP LEVELS of support we see as 3080-3050-3018-2950…end of Q2 squaring?? TERRIBLY SAD NOTE: A young man ended his life who apparently was trading at ROBIN HOOD (13 million customers/average age 31 yrs old). They NOW are making changes to enhance SUITABILITY & EDUCATION…Too Bad.
Any questions..shoot us an email ……[email protected]
The Fed announced that on June 16 they would buy bonds and they did just that…of course a good bit of front running seemed to go on and HYG sold off by the end of the week and FAILED @ its 1-2-3 YR MOVING AVERAGES which come in at 85-86 (the highs)….INVERTED TO THE DOWNSIDE will it tank like DJTA RUT…stock sell off coming?? Stay Tuned! As we told you TLT had a blow off top at 180 & subsequent tank to the 150 handle. Our belief is a WIDE trading range could establish now 180-150 as things settle down. International Fixed Income is starting to stabilize a bit VWOB BNDX so there may be opportunity there. Munis are stable with expectation of Fed help BUT Junk/Leveraged Loans hardly out of the wood. IG quality pays not much so yield hungry still linger in HY. What should KEEP YOU UP at night in the debt market is that some believe the 10yr Treasury should be SP dividend yield plus GDP or 2%+2% = 4% yield…it’s about .70% so if these people ever become 1/2 right…TIMBER.. Our focus list has been our friend
Want to know more..email [email protected]
US Dollar/International Markets
As we told you in PRIOR UPDATES; we are NOT on the SECULAR BEAR market for the Dollar & in fact told you that 95 was the BASE. THIS WEEK we put a 97 handle back on it (close 97.66) and while still substantially LOWER than 2 months ago…the Yen-BP-Aus$-Can$ have all FAILED to turn their MA’s around and this week the rally in the EURO went the way of the Buffalo. Time will tell if sustainable foreign currency rallies will materialize Stocks are another matter..it’s time to keep a close eye on Germany Brazil Japan China Australia & Canada as they are attempting to get ABOVE their 1-2-3 yr MA”s…if they FAIL at these levels…back in the soup they go. Mexico & India have more substantial ground to go so you can put on your rally cap
Want to know more…email [email protected]
The Saudis export to USA fell to a 35 Year low and prices have been stable between 35-40…BUT our target was about $40 upper band …we expected a V Shaped Demand & L Shaped Supplies (Rig counts tank/OPEC cuts/Fracking done) which is EXACTLY what has occurred. NOW the oil stocks that had huge JUMPS as we expected and told you about MONTHS ago have faded so we see a lot of DEMAND returning and IF we underestimated that we could BLOW OUT to the Upside BUT most all oil companies are way under their 1-2-3 yr MA’s….something to consider..REPLACEMENT TRADES…a strategy where you reduce stock exposure and replace it with limited risk Calls.
Got Questions…email [email protected]
Gold Silver Copper
Gold & Silver have been STALLED for 2 BASIC REASONS. #1 In the case of GOLD…the 1-2-3 YR MA”s are 1569-1420-1380 all RISING & INVERTED TO THE UPSIDE…which means to us we are in a BULL MARKET with a lot of potential runway BUT we are OVERBOUGHT. #2 THe MONEY SUPPLY has EXPLODED (good for Gold) BUT MONEY VELOCITY has tanked (bad for Gold)…it’s difficult to have INFLATION with that relationship…you need VELOCITY to RISE. So do we believe in holding LT exposure ABSOLUTELY.. are we CONCERNED this & by the popularity by retail coin buyers & ETF Money flows ….yes….GOLD SHARES GDX GDXJ ect) are holding supports and are still way UNDER their HIGHS from the last run at $1900…not sure if OK or telling us something….if we BLOW OUT 1800-1900 & GDX ABOVE May’s HIGHS…then the train is on it’s own schedule….but until then….wait a bit. Silver got ABOVE $16- $1650 and looks like it’s ready to ROAR as LT MA’s are at 17-16-16.23..a little sloppy by OK…the BIG KAHUNA is 19-21..above that level and you wanna be there. Copper has done pretty much ass we suggested for months which is move toward resistance @ 2.50 and after breaking thru try to make a run at 2.80…LT MA’s are at 2.55-2.66-2.80 so INVERTED to the DOWNSIDE albeit crossing over the first two…if we turn down from here…no good…getting ABOVE and sustaining +2.80 needed.
Soybeans & Sugar
Both Markets have turned up off their lows and have maintained their gains pretty well HOWEVER…more heavy lifting ahead….need to get those pro China buying stories going again…maybe crop interruption via weather to get above 10 buck soybeans to get acceleration…..LT MA’s 8.80-9.15 areas. Sugar prices popped out of the 9-10 area and some tell us commercials have been leaning bullish…the turn formation off 9 looks good to us but again LT MA’s loom ABOVE at between 12.20 and 12.70…by late summer we may either get volatility enough to resolve these markets one way or another.
REMEMBER… There is a substantial risk of loss in short term trading and option trading and it is not right for everyone. Consult your brokerage firm, broker, advisor to determine your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital Only.
June 13, 2020 Option Professor Opinions & Observations
OUR BIGGEST LONG TERM CONCERN is that the Dow Jones TRANSPORTS (DJTA) FAILED at 10,096 which is where their 1-2-3 YR MA”s remain INVERTED to the DOWNSIDE (9800=10,147-10,161) and fell OVER 1,000 points & the RUSSELL 2000 FAILED at 1540 which is where it’s 1-2-3 YR MA’s are INVERTED to the DOWNSIDE (14810-1522-1524) and fell OVER 200 points. These 2 Indexes NEVER made a new high since 2018 & told us to BEWARE of 2020 S&P move to 3400 in Feb. as the Stock Market has NOT seen a sustainable RUN without these 2 indexes participating in the last 20 years! We still subscribe to Recovery & are LT Bullish…CAVEAT EMPTOR! LAST WEEK…..we were riding high and prices were zooming thru the roof… THIS WEEK…we got one of the biggest DROPS in history……What’s going on? We told you last week that BULLISHNESS was getting frothy (our support was 2975 & 2790) and SELLING CALLS & executing COLLARS could be a good idea to HEDGE your portfolio….EXACTLY the right strategy to employ. Campbell Harvey from Duke correctly predicted that the yield curve inverted in June 2019 & that 2020 we would we see a RECESSION that would be BRIEF (1 yr) and VIOLENT which started in Feb and should end in Q1 2021. He also cited risks/concerns that seem important NOW focusing on VALUATION-PROFITABILITY- CASH FLOW-DISCOUNT RISK UNCERTAINTY. You have not heard a PEEP out of Buffett (no buybacks/one time dividend payout/all that cash pile) in our opinion because the Russell 5000 divided by GDP at this point justifies very little value & the FED has OBSCURED real prices so well that even the Oracle of Omaha can’t figure out what stocks are worth. This week Powell & the 2nd Wave fears on the Virus put the risks back in PERSPECTIVE. A DIVERSIFIED portfolio served us well this week as large cap growth & tech did well (AAPL AMZN MSFT NFLX UP on the week) & BONDS did well offsetting weakness in other areas. Powell tapered the enthusiasm from the Jobs Report (revisions coming?) and said no hikes/low rates until employment returns which he knows is not going to happen. Business debt surged to 16.8 trillion surpassing household debt. Major retailers missed May rent payments (40%) & now renege & renegotiate. Simon Prop trying to get out of Taubman buy. GOOD NEWS is forbearance usage DROPS & Car sales were up & bookings on cruises & airlines are Up but keep in PERSPECTIVE still 82% Lower YOY. Most common age in USA is 29 yrs old which means the DEMOGRAPHICS in the next 10 yrs is solid. Houses & Cars will be bought and families created-very good underpinning. BOTTOM LINE…we told you were were way away from shore (3250 vs 2975-2790)…spec was high (Hertz)….Hedging made sense (Sell Calls/Collars) BUT so far the STRESS TEST of level one (2975) held & our WORST CASE is 2790 with a GOOD CHANCE of a TRADING RANGE to develop albeit WIDE with the VIX back in elevated territory (54% jump Thurs). The range for S&P in April (2975-2450) in May (3065-2760) & June so far (3231-2982)..we suspect the 2760 low will hold so we would continue with higher lows & higher highs…many of the epicenter stocks gave back a lot but still are above recent breakout points (banks/hotels/travel/airlines ) Stay Tuned Stay Safe
Questions on Covered Calls-Collars Hedging-Cash Put Selling-Spreads?? Shoot Us an email at [email protected]
The big question now is “Will Mega Cap Growth/Tech/Semis Hold Us Up”? Many feel if they give way then a more substantial drop is in the cards. As usual; it is a market of stocks not a stock market and that proved out in spades last week as stocks like PYPL MSFT AAPL AMZN NFLX NVDA XLK than the oils/banks/epicenter stocks. ATT (T) may be selling Warner games and could fetch $4 billion which would help them get ready for 5G or reduce debt. Gaming stocks loss their luster (WYNN LVS MGM DKNG PENN CHDN) but they could be buys on a pullback as slow or no openings expected to change over time (Singapore/Vegas/Macau/Sports). Best Buy (BBY) is opening 800 stores which is a relief to many while Ross & Tj Max (ROST TJX) should have a field day buying merchandise from retailers drowning in inventories & needing cash flow. Cloud computing, Cyber Security & semi-conductors in vogue. Concerns remain around state restrictions on restart procedures & the shape of consumer demand.
Want to learn more about what sectors/stocks are on our radar list?? send questions to [email protected]
Lower for longer is the message from the Fed as no hike until full employment mandate hit sounds like a pipe dream. Spreads are tight and expected tighter and our warning about duration risk a couple of months ago was EXACTLY appropriate as yields rose off the panic lows of March. NOW it appears investors have overreacted to the rebound with way too much optimism and the TLT going from 180 top to the 50 handle of last week may see a TRADING RANGE develop between the 2 points (180-150). The Fed changed the rules on Main street lending with lowering minimums to $250K & increasing Maximum to $300 Million while extending repayments to 5 years & no principal for 2 years. These things may end up being written off as grants who’s kidding who? Looks like that $500 billion in the muni facility will get some action soon as NYC needs $30 billion for MTA & Port Authority can’t be far behind…Hawaii is a total mess..needs $$$. Getting into High Yield & Leveraged Loans is welcome news to the investors (HYG_FFRHX)…thee still languish BELOW their 1-2-3 YR MA’s suggesting they are FAR from out of the woods…so Powell keep that check book out. Short to Intermediate duration seems to remain the sweet spot for debt.
Questions on what’s on our radar list email [email protected]
This week value & international got whacked after having a decent run. One reason was the shift from a 95 handle mid week on the Dollar Index to the 97 handle it finished the week. Like children running home to Mommy…when it hits the fan (Thurs)…the y still come home to the buck. LAT WEEK …We told you we were NOT in the secular bear market camp on the Dollar as we were above 95 support & many currencies had FAILED to get above their 50-200 day MA’s. So far; this patience has paid off. Germany hass a huge stimulus deal as their banks need help & the ECB issued DOUBLE the expected stimulus. IF we are to have an economic REBOUND of growth Europe & EM should do very well BUT VGK & EEM still struggling to get above their 1-2-3 YR MA”S so like their currencies-need more price proof. Aussie$ & Canadian $$ need more up & hope oil & Gold remain hot.
Well the cops showed up in the oil sector this week (Increased Stockpiles) and took 10%-25% off the recent high prices. We told you last week that our short term Upper band for prices (25-40) had been reached and you could dust off your hedging tactics (Trailing stops/Sell Calls/Collars/Married puts) which would have been handy this week. Longer term…while we admit the demand concerns & stockpile build are concerns…we remain steady that L shaped supplies ( Venezuela output at 1945 level) & V shaped demand (albeit prices have moved up at the pump) portends higher levels in 2021 (40-55). A thieves market but done with $15. For Buffett’s sake we hope so.
Gold Silver Copper
Gold cash prices had their best week since April but GDX still consolidating above the 28-31 support zone. INFLATION is not a concern at the Fed or elsewhere for good reason. MONEY SUPPLY numbers have gone thru the roof in record amounts BUT MONEY VELOCITY has tanked the other way as banks have taken in assets thus curtailing velocity. For Inflation to get going you need to REVERSE this dynamic which will happen in 2021 & 2022 which is when your dreams of FIELDS of GOLD (Sting) have a better probability of happening. IF we take out 1800…a run to 2000 could happen and beyond in years to come. Still run the risk of a big pullback to LT MA’s in cash & stocks. Silver remains above 16-17 which we view ass constructive…it seems to react well when stocks react well (industrial)….UNDER $15…bye bye Silver. Copper is still a believer in the economic turnaround as we told you the last 2 months with increasing ranges (May 2.47/2.28 & June 2.70/2.42) with the 3 yr MA ahead at 2.80. All 3 MA’s remain INVERTED (2.55/2.66/2.80) so still a bit from all clear and if global restart stumbles..back in the soup she goes. The ones on our radar FCX & SCCO are hanging in there pretty good so far.
Soybeans Sugar Ect
Ass we told you…we believe these two markets have been turning up but both need additional strength & sustained price action to confirm. NOW prices UNDER $8 dollar Beans & $9 on Sugar seem unlikely as so there you go…lines in the sand…now we need supplies & demand to feed us bullish information so we can go from a walk to a jog to a sprint…price resistance remains above…if the lows hold/news improves..by year end maybe we go.
REMEMBER ……There is a substantial risk of loss in short term trading and option trading and it is not right for everyone. Consult your brokerage firm, broker, advisor to determine your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital Only
June 6, 2020 Option Professor Opinions & Observations
WOW….the only way to describe this week in stock price across the board. If you are a regular reader you know that after the capitulation selling in March (advance decline line & volume SCREAMING panic low); we have been all over this REBOUND rally. Not only have we told you possible levels of concern (2640/2790/3000…now 3250-3350) but EXPLAINED WHY & HOW it was happening so you wouldn’t get caught BEARISH or OUT like so many who looked at where the PUCK WAS and not where the PUCK WAS GOING! Let’s give newcomers a quick review of base case…..we got a self induced lock down of our economy at a time when stocks were EXHAUSTED by about ALL measures (SP 3400)…..which caused a PANIC unwind of 3 years of buying…..this allowed Trump/Mnuchin/Powell to put their PLAN into action….which was to EXPLODE Fiscal Deficits/National Debt/Money Supply & the Federal Reserve Balance Sheet & to make Money Market Rates ZERO! Not terribly sophisticated..ANYONE can run up DEBT & the FED CONTROLS short term rates……so now then you have investors SHORT or OUT with NO RETURN on cash…..PANIC….ACTION…you give 1200 bucks out to people & more for kids PLUS you jack UNEMPLOYMENT benefits REPLACING LOST INCOME (Personal Income JUMPED in May 11% with 40 Mill+ jobless) & you create PROGRAMS set up by MNUCHIN so POWELL can LEND money and comply with the FEDERAL RESERVE ACT of 1913 which speaks of purchasing TREASURIES…….NOW we have programs for every day (month??) of the week (Municipal Liquidity Facility/Primary Secondary Market Corporate Credit Facility/Temporary Asset Backed Securities Loan Facility ECT)……which allows them to by everything from Mortgages IG to Junk Bonds…EXAMPLES of Fed HOLDINGS are ANGL HYG HYLB IGIB IGSB JNK LQD SHYG SLQD SPIB SPSB USHYY USIG VCIT VCSH….a long way from TREASURIES huh?…..RESULT is Investors first plow into high beta names we told you about months ago like MGK VGT SMH VCR and now have plowed into EPICENTER stocks (cyclicals/hotels/airlines/travel/restaurants ect) PLUS small-mid caps and dividend paying stocks & staples-Value. Heck even HERTZ whose stock was at 40 CENTS rallied Friday to almost $4 DOLLARS closing @ $2.57 and they just DECLARED BANKRUPTCY!! We told you the REASONS we rallied #1 RESTART much quicker than expected #2 Consumer quicker to spend #3 STIMULUS (LEVERAGING) is beyond imagination & of course the BULLS BEST FRIEND…T.I.N.A….the FED has created a THERE IS NO ALTERNATIVE situation for investors who want or need to make money….that’s OUR View. HOW MANY PEOPLE DO YOU KNOW UNDERSTAND WHAT’S GOING ON? They understand their ACCOUNTS are UP…for Team Trump-Mission Done!
To let others know how to receive our weekly updates or to ask any questions….to register & ask questions email [email protected]
What a Ride!! We got the BEST 50 day rally ever/65% of S&P made new 3 month highs & 97% of S&P trade above their 50 day M/A. SURPRISED? You shouldn’t be as history shows us the trajectory or symmetry of the decline can be matched by the recovery (Remember RECORD 15 day DECLINE in March). In March & April the train was leaving the station for the high beta stocks on our radar MGK VGT SMH VCR and accelerate they certainly did (AMZN FB MSFT AAPL GOOG NVDA AMD ect) and they continue to perform well as short interest at CME & under investment by active managers saw a real panic after the employment report shocked the bears. The VIX is comfortably under 30 which we told you was key for this nascent rally. HOWEVER some of these stocks are stretched a bit (trading 20% to 40% ABOVE 200 day M/A’s) which could mean selling Out of The Money Calls to Hedge or Collars would be worth a look (email us if you need explanations). So what areas could be the next in ROTATION….how about the boring Value/Staples/Small cap/Midcap/Industrials/Materials/ Overseas/Gaming and epicenter stocks (banks/travel/restaurants/dept stores ect) ? On our Radar List beyond our higher beta names includes VIOG MGV VTV VONV VOE VOOV VIS VAW VDC VFH VEU VEA VGK VPL VIGI VXUS VYM in addition to many individual names. OUR EXPECTATIONS remain a potential of filling that gap up near 3300-3350 BUT reality is we have rallied almost 50% off the lows and the FEB LOWS were right around FRIDAY’s Highs plus exuberance could be assigned to Friday’s mood. RISKS NOW include #1 VIRUS SPIKE (or BULLISH if no NEW cases by June 15th), #2 CHINA & Trump (he now has his boat legs back w/ market rise), #3 REVISIONS likely in the Unemployment Report (2.5 mill up & 13.3% rate??) as the Bureau of Labor Statistics only had a participation percentage in the survey of households and businesses in the 60’s & numbers they’ve NEVER dealt with so experts paid millions are probably not that far off (8.3 mill down/19+%). #4 VALUATIONS…if you use the Buffet Russell 500- divide by GDP you would need ice & tilt your head back as you would have a NOSE-BLEED:):) BUT our “Three Amigos” Trump Mnuchin Powell still call the shots through keeping short term rates down & giving money away to anybody who asks (PPP extend 24 months & Unemployment likely extended too)…..so if someone wanted to trim or sell fat out of the money calls/collars…no fight here…our 2 big support zones are 2990 & 2790 and with this weeks run up we’re getting further from shore BUT investors have been SELLING BONDS & adding stocks…if this goes from a skip to gallop then we could get the juice for the S&P could to join the Nasdaq by making new highs sooner rather than later.
Questions?? email [email protected]
AS WE WARNED YOU….DURATION may be risky with all this printing & exuberance as we said “Do you want to lend ANYONE money for 30 YEARS at anywhere near 1%??….This week apparently no one else did either as TLT which WE SAID had a blow off (possible generational) BLOWOFF at 180 on March 9 and now trades with a 150 handle. The Fed doesn’t have as much influence on the long end and actually WANTS a steepening yield curve so banks (VFH) can make money & it looks like forward growth expectations are positive. This can be positive to a point for stocks as money flows their way. Forget about old standards…the FED is loaning in manners UNHEARD & UNPRECEDENTED Amounts & Directions and they approved PRIVATE Equity in Retirement Plans (Eugene Keogh rolls over in his grave) Will Powell & the Fed pour Cold Water on this Rally this week….. Election Year….Nah! Team Trump knows they got what they wanted out of this CRISIS…..Our Radar List includes VCSH VCIT VUSFX VMBS VWEAX PFF
Thoughts to Share?? Tell a Friend email us [email protected]
US Dollar/International Markets
We told you in prior UPDATES that the Dollar Index was in a RANGE of 101 & 99…and which ever way it BREAKS may indicate the next trend…well LAST WEEK the DXY broke under 99 & had a LOUSY week…this week was NO BETTER & in fact we closed with a 96 handle (96.95). Some say the Dollar has begun a SECULAR bear market which would be POSITIVE for EARNINGS but at this point we do NOT share that opinion. Gone are our yield & growth advantages plus our deficits & balance sheets are a mess. Our LT 1-2=3 yr MA’s come in at 98/97/95.50 areas so they’re not inverted buy 2 have been BREACHED…..Did we learn anything from STOCKS where we told readers that S&P getting back above 2800 (3yr MA) may result in a 2016/2018 scenario of BULL MARKET as BREACH is not turn down. So before we say SECULAR…let’s see if we can get under 95 and how long it stays there BEFORE we stick a fork in the US Dollar. The Us Dollar is pointing down & It COULD happen as Euro & Yen are closest to getting above MA’s with British Pound/Can$/Aus$ to follow…all need a bit more but this could EXPLAIN the better performance of EEM & FEZ & VWO…more??
What we told readers was that we would get an L Shaped supply curve (rigs closed/Frackers shuttered/OPEC Cuts) & a V Shaped Demand that could send oil prices back up to 25-40 area this year (fill in March gap) and possibly 40-55 in 2021. This is EXACTLY what is transpiring. HOWEVER we have now 4X the price in Crude (10 bucks to 40 bucks) on lower volume so we would suggest keeping close tabs on your oil stocks (XOM CVX COP XOP XLR VDE ect)) and if you feel they are running out of gas (no pun intended) you could dust off defensive tactics like trailing stops, trimming (if you double on a stock & sell 1/2 you have a free look at the remainder), out of the money covered calls, collars ect….BUT some do say longer term…a lot more runway.
Gold Silver Copper
We have been CLEAR about our concerns about GOLD being OVERBOUGHT basis its 1-2-3 yr moving averages & the failure of cash prices to exceed 1800 & the retail rush to buy coins 150 bucks over spot…..those CONCERNS this month came home to roost as we now have a 1600 handle on spot & GDX has trimmed better than 15% off its highs. NOW…we have the 1 yr MA at 1560 area and GDX tested the breakout point & 50 day MA around 31 area so this week the 50/200 day averages around 28-31 important to hold & let’s see if this weaker Dollar/Debt explosion/Consumer Rebound puts legs under our wobbly fighter. Silver is exciting to us because it’s trading with a 17 handle and its 1-2-3 yr averages come in around 16-17 bucks…not bad….PLUS if we can clear & stay above 19-21 it has the potential to look like Bo Jackson when he turned the corner in Monday Night Football (YouTube it:)…lots of open space and if we’re V Shaped on the economy..well that could be a tailwind…maybe that Gold Silver Ratio will finally tighten. Copper; as we have said has been approaching the 2.50 level & this week it blew it out…will it last??…we’ll see this week but the momentum is ok but getting above 2.60 could be a tough hurdle. FCX & SCCO had a good week.
We told you to keep an eye on Soybeans and with China buying Monday & Tuesday we got a pretty good spike to the upside. Still resistance looms above at 880/900/950/10 so while constructive we need more stronger price evidence upward to get us thru & into higher levels above. Sugar prices have been on our radar and this week they got moving….some say that food supplies could get tighter IF Demand come in way stronger than supply chains are prepared to deliver…..only time will tell….follow the numbers.
REMEMBER There is a substantial risk of loss in short term trading and option trading and it is not right for everyone. Please Consult your brokerage firm, broker, advisor to determine your own suitability. Past performance is not necessarily indicative of future results.
Use Risk Capital Only.
May 29, 2020 Option Professor Opinions & Observations
Welcome Back Everybody!…Well we broke thru 3000 this week and tested the breakout point Friday & closed higher..not bad. Many investors (not our readers) are confused at WHY??….Is it because Unemployment is low? Is it because consumer spending is robust? Is it because Earnings are great & guidance great? How about GDP & LEI? AGAIN..as we said #1 Restart was way quicker than expected #2 Consumer bounce back believed more robust #3 Monetary Stimulus was fast & beyond imagination. HOWEVER..the biggest reason is what we brought to your attention 2 months ago! THE BIG REASON is when the FED manipulates the short term interest rates to ZERO; investors MUST invest even if they have no great reason nor understanding of the VALUE of what they’re buying. Do you remember the movie “An Officer & A Gentleman”..if not..stream it. Anyhow one scene has Lou Gossett hosing down Richard Gere & making him do drills so he will quit the Navy. At one point; Gossett screams at Gere…Why Don’t You Just Quit…to which Gere screams at Gossett “Beacuse I Have Nowhere Else to Go”..that’s Stocks. This week we saw more than 2 million more souls file for Unemployment as the Good News was that about 4 million didn’t renew (of course there will be some going back to work as we re-open..we contend many will not be). Personal Income jumped this week by 10.5% because the CARES Program cared so much they ended up paying people more than going back to work. Consumer spending was not so lucky as it dropped 13.5% (maybe the FED can actually spend money for consumers and Amazon deliver the goods??) Demand destruction has been palpable but as we said the Income hit has been made up by CARES/Unemployment. Spain just passed Basic Income for all…since we’ve followed Europe & Japan into fiat heaven..maybe that’ll be our answer to income inequality. China & Trump are at it again…the rhetoric is inflammatory & China will return serve this week. China did not kidnap companies or “rip us off” because Walmart & Nike & Apple and many many more voluntarily moved the supply chains over there to get CHEAP labor and make BIG Profits…now we are supposed to take our tax dollars to lure these same companies back through incentives & tax breaks? The BIG RISK to our view that the SPX could fill the gap around 3300 and stay above the 1 yr 2 yr 3 yr MA’s (2996-2887 & 2794) is IF Trump turns the Covid 19 crisis into a domestic & International political football which freezes up the consumer & IF talk becomes action resulting in a breakdown of supply chains & international commerce. China’s time horizon is decades & Trump’s time horizon is November. The Fed’s still in there; but so is short term investor exuberance…learn how to hedge….if we dip…watch the M/A’s.
Do you have questions for us? simply us email [email protected]
This week we saw some give back in some retail names like TJX, ROST, KSS M & JWN while the big guys COST WMT AMZN plus TGT (8 bucks away from all time highs) had constructive moves. Other rebounders like Oil, Banks, Hotels, Restaurants also seemed to lose some gas this week. Our high beta group MGK VGT SMH VCR seemed to regain popularity by the end of the week as the Russell & Transports-Value lost some luster. Defense was on display as Utilities (VPU) saw money directed their way as investors feel the bills will be paid & the yields are juicy. Some believe there is value in the Russell 2000 (VTWG) and also in infrastructure globally (AMY CCI ECT) as since the printing presses are running wild ..why not throw in some jobs. We’ve got a lot on our radar…let us know if you’d like to hear more This week..watch BABA & be careful if we close under SP 2995 or 2880.
Need to ask a question? Email us @ [email protected]
The Fed’s buying various areas of the markets & some believe the Junk market (HYG VWEAX) is worth a look as well as Intermediate term (VCIT) and the bid reamins on Munis (VWLUX) as bridge financing to states & cities ect seems probable. Short term debt (VUSFX VFSUX) still holds some allure but the RISK seems to be at the longer/extended terms as while there was no inflation after 2008….this stimulus is GLOBAL & 35-45% of GDP & the Dollar had a LOUSY week. So if you want to lend for 30 yrs @ 1+%-Feel Free!
Lots to Learn……send us an email @ option [email protected]
US Dollar BITCOIN
As we just said…the Dollar sold over this week…started at about 100 and had a 97 handle at one point only to close at 98.29. The Japanese Yen still traded ABOVE its 50 day MA (107.81 vs 107.78)& UNDER its 200 day M/A’s (108.34) so the jury is still out on that one…but it’s close. HOWEVER The Euro is another story as it had a great week as it closed @ 1.11 which is ABOVE both the 50 day & 200 day M/A’s but they remained inverted down so In Sum…we need a bit more price proof to reassure us that a turn is here. The commodity currencies (CA$ AU$) have maintained their advance so far while Bitcoin hovers around plus/minus 10,000 closing at 9470..stay tuned.
Those of you keeping track know that we said months ago that oil supplies would be L shaped (low rig counts-closed Frackers-OPEC cuts) and Demand may be V shaped due cheap prices and summer demand. This would lead us to 25-40 bucks a barrel this year and possibly 40-55 next year which so far has played out to script. OXY cut its dividend 7 the stock was taken to the wood shed and led the oil indexes to fade as well…they’ve all had a big run so a pause to refresh & a pullback seems in order..not quite the bargains.
Gold Silver Copper
While Gold is still overbought basis long term M/A’s…Gold got back on the bicycle this week and is starting top look like it wants to blow out 1800 and accelerate…this week is big….if it turns down then our thought of Summer doldrums could still play out….if not maybe add some more (GDX GDXJ ect). Silver is potentially a superstar if we ever clear 19-21 & if industrial use kicks in (SIL SILJ PAAS). Copper is banging away at that 2.50 price line & could accelerate again if China’s demand kicks in better. These are hard assets in a world of exploding money supplies–go figure
We saw the play Waiting for Godot and now we’re watching the show Waiting for Soybeans as we remain in the 880-820 range for another week. Sugar price are very interesting to us as we are holding the 9-10 levels & if we clear 1130-1150 an acceleration to the upside would not surprise us.
REMEMBER: There is a substantial risk of loss in short term trading and options trading and it is not suitable for everyone. Consult your brokerage firm, your broker, advisor to determine your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital Only.
May 22, 2020 Option Professor Opinion and Observations
Good Day Everybody…we are at a major junction and the big question remains…Do we BREAK ABOVE S&P 3000 or we get TURNED AWAY? If you have read our views on the market you know that are base case has been that the market was earlier this year OVERVALUED (3400 SP) and once it broke 3250/3000 that the market could accelerate to the downside due to illiquid investments (ETF’s) being sold en masse. The collapse was followed by our view that a REBOUND rally REVERTING up either 38.2% (2840) 50% (2790) or 61.8%/200 day M/A (2975-3000) was a good probability. NOW we are here knocking on Level 3 again this week. Why?…because investors are grasping that #1 the Virus fears/REOPENING is happening faster than thought #2 the CONSUMER may come back faster than thought #3 the STIMULUS has been faster & larger than anyone thought. We showed you a higher beta portfolio on our rader MGK VGT SMH VCR which have all snapped back big time. We also explained the beaten down sectors at the epicenter also may play a huge game of catch up which they have. WHY?? …because investors are feeling that if companies don’t hire back & work remotely (half of their expenses will be CUT BIG TIME & Earnings will roar. This all makes perfect sense as long as the S&P STAYS ABOVE the 50% retracement level/3 yr M/A 2790. Three Key 1-2-3 yr M/A’s come in at 2988, 2884 & 2791 all RISING and we CLOSED @ 2955 with a BIG GAP around 2925-2850. The BIG risk to taking out S&P 3000 in the SHORT TERM is the prices have DISCOUNTED much of these views. For EXAMPLE; Rent a Cars Restaurants & Hotels (CAR-MAR_QSR) are up 100% off lows, Materials & Industrials Casinos (VAW VIS LVS) have rallied 30% to 50%, even Airlines (DAL LUV) are up better than 30% PLUS some LEADERS are getting EXTENDED from their 200 day M/A’s like AAPL-MSFT-FB-AMZN about 20% & Semis/Virus stocks like NVDA-ZM-PTON- TDOC 50% to 70%. IN SUM; our opinion is if we hold 2790 we will EVENTUALLY get thru 3000 and a lot more to come as TINA wins again…BUT Trump is saber rattling with China …if that ends up BREAKING BADLY…..be PREPARED for the GAP under us.
Questions….Ask the Option Professor … @ [email protected]
We have shared with you sectors on our radar..the high beta..MGK VGT SMH VCR and also recently the catch up sectors like VIOG (small cap growth)..VOOV (S&P Value)..VOE (Mid Cap) VBR (Small Caps) to name a few on our radar. Gaming stocks like DKNG CHDN PENN have had good runs as has most of the market…so is it time to price out HEDGES like Collars -Covered Calls & Married Puts on situations you thinks may run out of steam or to just protect some gains. Stocks turn before earnings & earnings turn before GDP so we will see if in the short run if stocks have turned enough. We have many sectors & strategies on our radar from Precision Medicine, Robotics, Big Data, Internet of Things (IoT) to Income, Growth & Speculation
The blow off top in TLT 180 continues to hold as DURATION may become a risk that rears its ugly head. With the FED supporting everything from commercial paper to ETF’s on fallen angels we see bids of PFF & HYG which have juicy yields and also IG & short term like VCLT VCIT VFSUX VMBS nad even Munis are improved VWLUX. The reason duration could be problematic is if SUPPLY CHAINS cannot keep up with RESTART demand then prices could pop. We see big cutbacks in oil supply so if DEMAND spikes expect to pay more at the pump..things feel settled…for how long?? Should you have fixed income inquiries….
Ask the Option Professor @ [email protected]
Didn’t Elvis have lyrics that said “I’m caught in a trap & I Can’t get out”..well ditto for the US Dollar which is caught between 101 & 99 for 2 months. went home @ 99.79. The Japanese Yen & the Euro still trade under their death crosses so for now …we stick with the buck. On the international scene..they lowered the boom on China stocks as BABA JD TCEHY got sashimied as Trump apparently looking to make China a big part of re-election efforts. We feel this is risky as bringing the supply chains home to workers unfamiliar with the jobs & maybe lacking the desire for the task. To be honest…it looks like you’re getting a chance to get on board…Emerging Markets & Europe look exhausted. Need more info…got questions
Ask the Option Professor @ [email protected]
If you followed the updates…we have been spot on in oil….we felt the flood fight between Russia & Saudi would not end well and it certainly didn’t ….followed our view that we would have cutbacks (Rig counts/Shale shutdowns/Opec) which would lead to a L shaped supply picture followed by a V shaped DEMAND with the RESTART. We told you of stocks on our radar COP XOM CVX HAL WPX VLO SLB HES CVR & many more. Our targets for this year was 25-40 which we already saw & potential for 40-55 in 2021 Should you have any questions…simply shoot us an email
Our position on Gold remains constructive as it has been since it broke out at 1350 BUT it is OVERBOUGHT basis its LT M/A’s and the rampant popularity & failure to get above 1800 & the gold stocks still LAGGING give us pause in the SHORT TERM that we could have a SUMMER VACATION for the bulls if it doesn’t get going….LEARN HEDGING…Silver has become a horse of a different color since it broke above 16-16.50 maybe due to the RESTART which has lifted many laggards. Maybe pullback to that region would be good…do not want to see a 15 handle now. Copper got whacked by the China skirmish this week so let’s see find a bid ass well a FCX SCCO.
Ask Option Professor @ option [email protected]
Not much to report here as prices are locked in the 860-820 window awaiting some signs on how the planting growing harvest seasons will play out as well as competitors situations like Argentina & Brazil..both countries are a bit of a mess right now…LT Sugar prices may be turning if 9-10 holds.
REMEMBER.. There sis a substantial risk of loss in short term trading and option trading and it is not right for everyone. Consult your brokerage firm, broker, advisor to determine your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital Only.
May 16, 2020 Option Professor OPINION & OBSERVATIONS
Hey everyone…another exciting week for stocks as we saw S&P go thru the 2800 level (every Tom Dick & Harry had their stops there) and drop to the 2766 area only to close back above 2850. THE BIG QUESTION???…Did we peak @ S&P 2975 area below our LEVEL 3 resistance area (1yr & 200 day M/A plus 61.8% of 3393-2174 decline)? We say NOT CONFIRMED YET….Why? Simply because the 3 yr moving average @ S&P 2790 has not seen a close UNDER that level & all 3 moving averages (1yr 2yr 3yr) have not crossed to the downside & essentially are still pointing UP. So the EVIDENCE we see still suggests that this is looking like 2016/2018 where the market resumed its UPTREND within months rather than the years it took in 2001-2008.
HOWEVER…We recognize comments from Tepper-Druckenmiller & Buffet about VALUATIONS & PREDICTABILITY…we recognize the risks are that company earnings could lag as about 50% of workers earning less than $40k are jobless..almost 40 million total…we see retail sales dropped 16+%..the most on record…about 50% of all companies can give NO forward guidance & many companies are suspending dividends & forget about buybacks…landlords (many small guys) are getting stiffed on rent/mortgages which trickles down to revenues for the states (NJ said state revenues DOWN 60%). Governments & People & Corporations are taking on HUGE debt to BRIDGE themselves…always a risky proposition. IF IF IF we squash the VIRUS fear & Companies have a VIGOROUS RETURN to EARNINGS due to LOWER levels of COSTS due to less employees & real estate….& we clear SP 3000…BE Bullish…Be Very Bullish. The next few months are key for PRICE & TIME….SP 2800-2500 will turn these KEY MOVING AVERAGES down & set the stage for a drawn out recovery (Powell’s Fears)……S&P 2750-3000 will support the Big Year End Rally theory of 3200-3400 & new highs next year & SHOCK many who will be left wondering how we can have HUGE Unemployment & Rising Stocks.
Anything confusing?..email us at [email protected]
NEXT WEEK is a big week for earnings on retailers such as TJX WMT TGT and many more plus NVDA & DE. This week saw big moves down & up in FAANG stocks spec names like DKNG (on our radar also CHDN & PENN). Trump & Co. think it’s a good time to escalate tensions with China as they mess around with Huawei & talk about bringing our supply chains “home.” China responded against QCOM & Trump launched new restrictions on China investments in USA start ups & Telecom Infrastructure. Foxconn’s profits plunged almost 90% due to Covid-19 which may be bad news for AAPL. SMH sold off pretty good on the news & we’re watching this fluid situation as if Mega Cap Tech & Semis head for the hills..maybe we should too. VIRUS stocks (ZM PTON DOCU IBB) had decent moves this week …but these EXTENDED Sectors may be candidates for collars ect to PROTECT your Equity against Declines while allowing for more Upside. Also: some are considering out of the moneyy cash put writing on stocks they like at lowe levels and hedging upside using the premiums to buy call spreads. Too much to cover here…Questions—email us at [email protected] We follow sectors & ETF’s in our work…some of the ones in various stages of uptrends are VOO MGK VGT SMH VHT VCR VONE VOX VTI VDC VIG…while others have had rebounds of varying degrees but have NOT regained their longer term moving averages.. VPU VNX VAW VYM VDE VIS VFH Plus Value & Small Caps…some believe without Banks & Industrials participating..it is tough to sustain a bull run….many in the laggard sectors are trading below book value but in this environment….tough to figure value..use Cape Ratios?
Do you have any questions?..ask us at option [email protected]
Run for Cover!!…there’s an AVALANCHE of debt issuance hitting the markets ($1 Trillion Corporates & $3 Trillion Govt). The FED started buying ETF’s this week and of course Boeing getting $25 Billion sold in their condition some say was confirmation that the lows are in. Powell & Fauci have something in common…they have to deliver reality with the dose of hope. Powell said this week that the recovery may take a long time as it will be of little solace to the majority of Americans if the FED/Administration are Successful at REINFLATING asset prices at the Expense of the Unemployed. WARNING…Duration may have significant risk to it as INFLATION would be a killer to low yielding long term Bonds….if they bring SUPPLY CHAINS back..does the costs of Tech rise?….is FOOD Inflation here to stay & with all the cuts in oil cap expenditures/rig closures spell HIGHER fuel costs? C’mon we’re going after a $4 Trillion dollar fiscal deficit & & a $10 Trillion Fed Balance Sheet & Paul Tudor Jones is HEDGING with BitCoin….this game of market crash—Rates @ Zero—-TINA—force Grandma into risk is crazy. Trump wants NEGATIVE INTEREST RATES ass a “present” to the people…who’s he kidding…he wants the public to get in on the Govt scheme of unlimited borrowing with little interest (cost of service actually down) to boost real estate & financial assets/spending. Remember Atlantic City-Big Debt/Lagging Revenue=Busted! Thankfully; Powell wants no part of negative rates (yet) as he sees that once you get into that hole….you can’t get out…Europe & Japan are drowning. Our radar VUSFX VFSUX VMBS VCIT VCLT PFF..watching high yield HYG VWEAX….Follow the Fed but carefully.
Send us your comments at [email protected]
Seems like the Dollar has turned into the Hong Kong Dollar (used to be fixed at 7.7 to 1) as we remain in and around the 100 number for weeks. The $$$$ range is tightening between 101 & 99 approx…..we closed at 100.36. The Japanese Yen & Euro have failed to surpass their 50 & 200 day moving averages so for now the path of least resistance for Yen & Euro are lower while a solid move thru 101 could ignite a dollar rally. The Aus $ & Can $ have held their 20% bounces as oil & Gold have improved…maybe more if commodities rally Internationally; On our radar BABA JD TCEHY BIDU but Emerging Markets & Europe still look dead in the water.
Well as we’ve said…capital exp cuts/oil & gas rig counts (record lows) plus Fracking Operations going from 1158 to 92..throw in Saudi/OPEC cuts and our base case of L shaped supplies with V shaped demand makes 25 to 40 range by year end & 40 to 55 range for 2021 look better by the day. CVX XOM WPX COP SLB OXY (debt?) VLO MPC ect all on the radar.
Gold Silver Copper
Well we added exposure to the Gold stocks this week as it appears to be breaking out to the upside on GDX GDXJ SIL SILJ plus spot Silver breaking ABOVE 16-16.50. Having said that; these are add ons and the risks remain that the Gold is OVERBOUGHT over its long term moving averages & bullishness (coins $135+ over spot) is concerning…so we don’t fight the tape..but a break even stop on the extra positions is kind of our thinking. A strong dollar & CPI readings that are declining not normally Gold’s cup o tea Copper backed off the 2.40 area which caused SCCO & FCX to fade..CHINA??
Still no real action to report as window is tightening between 860 & 820 & now we must see if the planting-growing-harvest seasons will deliver news and or if China’s bid ever shows up…until then we monitor prices in the thought that under the right circumstances volatility will create risk & opportunity….we also have Sugar prices on our radar..for now..no legs yet.
REMEMBER There is a substantial risk in short term trading & option trading and it is not right for everyone. Consult your brokerage firm, broker, advisor to determine your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital.
May 9, 2020 Option Professor Opinions & Observations
Ok…Who’s Confused??…Put your hands down & I’ll share with you our opinions & observations on what the heck is going on out there. We’ve told you about some reasons in past updates & will discuss potential tactics that we are considering right now. It comes down to OPERATIONAL LEVERAGE & RETURNING TO PEAK EARNINGS. Let’s start with the Unemployment Report which was the worst on record. Up to 34 Million that we know of out of work….we got PPD/SBA Rescue Programs with money going out people who don’t need it & people that are Deceased plus companies like Shake Shak (they gave it back others won’t). Two guys Ken Langone & Bernie Marcus were on TV saying it’s a travesty that they get Social Security checks when they made so much money off the system with (Home Depot) & the money could be directed elsewhere. A Continuing Chaotic Disaster.
The 3 main reasons behind the rally (after $5Trill to $12 Trill Stimulus & Fed Socializing markets) are #1. Rebalancing as Stocks were Discounted to Bonds #2 Reversion Rally back toward the 200 day Moving Averages #3 Belief that Operating Leverage will return companies to peak earning faster than expected & TINA (there is no alternative) is irresistible allure to $5 Trillion in money markets and Global money that has been sitting in Death Valley (a.K.A Europe/Asia/Emerging Markets). When the market were in the midst of wholesale selling in stocks & buying of Treasuries in March..the FED stepped in and stabilized the Credit Markets first…Why?..because if you went to cash a check & the system was frozen or money markets broke the buck…real panic would have set in. So FUNDS in allocation models had to sell Bonds & Buy stocks to return to their percentages (e.g 60-40/80-20 ect). Selling volume was exhaustive so we snapped back 400 SP points quickly. After a 1200 point drop..we told you the moving averages were way above the market so with the FED involved…odds were great for a snap back to either 2640 (38.2%) 2790 (50%) or 2950-3020 (61.8%- 3yr M/A/200 Day M/A). We are at the TOP of those 3 levels & some sectors (examples include Tech-Healthcare-Consumer Discretionary-Communications) have already risen above. AS WE TOLD YOU-in 2001 & 2008-the 1-2-3 yr SP M/A’s inverted to the DOWNSIDE and it took years to turn them back UP….in 2016 & 2018; those averages were BREACHED but never CROSSED & in MONTHS we resumed UPTRENDS…I am sure the Admin-Treasury-Fed are well aware of this & explains the PANIC to print money in the Trillions & the FED either THREATENS to buy things & send money out in a very CHAOTIC fashion. Desperate to avoid ASSET PRICES languishing thru the election..they said what the heck..let’s BLOW OUT the fiscal DEFICIT & National DEBT and REINFLATE ASSETS (like what happened after the tax cut-buy back financing)…..Get that S&P back above the 3 yr M/A (2790) so investors can feel OK again….if it doesn’t work…we’re gone after the election..we’ll leave a pile of manure for the next guy…..if it works…reelected & maybe 4000 SP. Now let’s talk about #3 which is the IMPORTANT ENGINE of the scheme. It’s NOT PRETTY but if it WORKS…the rich will get richer. Here ya go….the return to PEAK EARNINGS (like after the 2008 Crash) can happen thru Operational Leverage…it’s SIMPLE….you have less REVENUES so how do you return to profitability??…..you CUT COSTS…..the WORK FROM HOME has exposed inefficiencies in business as to how TECHNOLOGY can replace people (cloud) & all this real estate expenditures can be consolidated (zoom) So: if you have less labor costs & real estate costs your lower revenues are profitable & if revenues jump over time…you do the MATH. Sound familiar??…Business did the same things with their supply chains when overseas cheap labor/no factories led everybody over to CHINA….no buildings no employees no RUST BELT ect….China didn’t KIDNAP our companies…they went there to MAKE MONEY at American worker expense. Look at BIG 5 TECH firms & see how many people in the USA they employ & how much USA real estate they use in relation to the $5-6 Trillion market cap…..a joke….FINALLY…the dirty little SECRET…..most of the unemployed either NEVER FINISHED high school or only finished high school. As such; 2 things have come out….they weren’t MAKING any money (only a 10% hit to Income) which the FED can make up with printing BUT worse yet if this scheme works out as it has in the past….these people are NOT all coming back to work. So you could see HIGH unemployment but a RISING stock market due to VIGOROUS EARNINGS RECOVERY based on cost cuts. FINALLY..the Fed has played this game BEFORE after 2008….get money market rates (cash) down to ZERO & FORCE PEOPLE to take risk if they have any hope of any return on capital & it TRANSFERS some of the BAILOUT to investors & PRIVATE EQUITY & OFF the FED who is so far off the ACT of 1913 it’s RIDICULOUS….TINA’s back with a vengeance. It is BULLISH the FED can LEVERAGE their balance sheet to INFINITY & the SCHEME to INFLATE ASSET prices is working so long as we STAY ABOVE the SP 2790 area. WHAT’S THE RISK? The RESTART is SLOW…..The VIRUS explodes….the DISPARITY in WEALTH spells trouble AFTER unemployment runs OUT….INFLATION pops…and if (when?) we see China & or Russia ACT UP
More Information ……….Email Us…[email protected]
We just went over why we continue to see higher prices…..sector ETF’s like MGK VHY VCR VHT SMH have all been mentioned here and all have been doing just fine surpassing their 200 day moving averages. NOW the question is will they hold water or simply see the PACE of advance moderate. If you’re BULLISH you hope for the ladder as investors by these areas REGARDLESS of valuation models. One of the RISKS is the cutting of BUSINESS & CAP EX spending that many firms are announcing and the pace of the restart….even Cloud/Cyber Security ect. need capital outlays. If you subscribe to a RETURN TO PEAK EARNINGS via cost cuts…then your OUT OF Favor sectors (virus epicenter) with low P/E’s and still OVERSOLD basis their 200 day moving averages could be worth a look as many are trading BELOW Book Value…Retail, Restaurants, Banks, Hotels, Travel-Leisure Oil. Mega-Tech, FANG, Health Care clearly has led ; but if this rally is to broaden and the effects will be muted due to FED/Fiscal stimulus, then the catch up trade could be ok. Some Banks & Mortgage Processors may have a bumpy road ahead but some have low P/E’s & are priced below book & can take some heat due to good cash positions. Regionals (KRE)…Large (C & BAC) & processors (ESNT, RDN MTG) are on our radar. For the REST OF THE MARKET…..Option prices have been ELEVATED for some time….which means pricing out COVERED CALLS for some downside protection & pricing out fully paid cash SELLING PUTS on stocks you like at lower prices is worthwhile strategies to investigate for suitable investors. Remember Buffet sold $6.5 Billion in April/$137B in Cash….and while still bullish Long Term on America…valuations & this experiment has a range of possibilities
Want to discuss views?? Email optionprofessor.com
ISSUANCE is the buzzword this week as $37B came to market & BA & other troubled companies continue to raise funds via the markets much to the DELIGHT of the FED. The line was drawn this week as UAL had to pull the $2+ Bill offering as investors apparently are not that DESPERATE for yield. Fed to buy some HYG next week we hear & we noticed many fund that were trading at a PREMIUM have sold off to flat as the FED said they would not buy over NAV. China exports to the USA up 2.2% while Imports -11% suggesting FRONT RUNNING Tariffs again & poor demand. Treasury offering $3 Trillion..over 10% of National Debt…off the charts. Some sayy CAVEAT EMPTOR to those buying DURATION as the Fed has little control past 10 yrs..we agree & focus on VUSFX VFSUX VMBS VCIT when hunting.
Need Clarification? Email optionprofessor.com
US Dollar/International Markets
Well…Dollar Index is around the 100 mark still (99.76) so again we say the the Japanese Yen & Euro are sitting just under their 50 & 200 day moving averages and the are inverted to the DOWNSIDE so that is the path of least resistance for the YEN while the Euro is hanging on for dear life at about 110. Hey we got yield advantages (albeit smaller) and the restart has instigated optimism….Canadian $$ & Aus$$ improving in tune with oil improving..may be a proxy for an oil trade?…slice it anyway you like…so far the Dollar is stable to strong and if 35 mill jobless is ok..What kills it?? AS far as International markets (Europe/Asia/Emerging)…..they all look dead and haven’t really done anything on a 1-3-5 yr basis so tread caefully.
In the last 2 weeks they have called off the dogs in oil…can you trust it up 20=% for the week 60+% for the month? Another expiration ahead and a break under 20 could spell relapse. Stocks on our radar brought to your attention XOM CVX VLO MPC HES COP PSX OXY WPX HAL ect & gas guys like LNG have has good runs so in the short term covered calls collars & married put could be worth a look if the legs go out, LONGER TERM….as we have said the SUPPLIES may be L shaped (shale/rig counts disappear/OPEC) with DEMAND returning V shaped (cheap gas-America travels) so we stick with 25-35+ year end & potential of 40-55 in 2021 we get cooking as hoped.
Got questions?? ..Email option [email protected]
Gold Silver Copper BITCOIN
The Gold prices were pretty sideways this week with Silver getting back to a 15 handle while Copper is pressing toward the 2.50 neighborhood. The BIG NEWS this week was the story of Paul Tudor Jones (one of our favorites & runs the JUST fund) who said he was going into Bitcoin as a HEDGE 7 viewd it as Gold in the 1970’s (early years/just off Gold Standard/beginning of leveraging USA exploding Money Supply). You obviously can buy BITCOIN futures (if you are suitable) but not for the faint of heart as the 52 week range has been about 14 Grand to 4 Grand now at 10 Grand…if you drove like that on the freeway…you’d get a DUI:):)…on our radar GBTC. Gold/GDX flirting with legitimate breakouts so we hold core positions from much LOWER levels..so far no add….2-3 yr M/A’s way under the market suggests overbought and would rather buy dips in a BULL market…Silver rebound & stocks up is nice but still fall Short of resistance while China back to business helped Copper prices & our buddies FCX & SCCO
Want to know more…email us optionprofessor.com
It’s getting warmer…and the prices are heating up as well as we went up almost 25 cents a bushel this week albeit we fell a bit on the close. Our gut (without much price evidence) was that $8 Beans could go 9-10+ this summer if China buying & supply/yield disruption would give us the juice needed to get the trifecta of spec/fund buying with farmers lifting hedges & squeeze on whatever shorts could be squeezed. the price areas of 8.60 to 8.80 the 9.0 to 9.50 could really tip the scales for the bulls…nice week…need more…coffee prices turned up a bit (SBUX opens??)..otherwise not much.
REMEMBER There is a substantial risk of loss in short term trading and option trading and it is not right for everyone. Consult your brokerage firm, broker, advisor to determine your own suitability. Past performance is not necessarily indicative of future results Use Risk Capital Only ,