Author Archives: Jim Kenney
Author Archives: Jim Kenney
November 27 2020 Option Professor Opinions & Observations
Happy Thanksgiving Everybody!…This Week is an abbreviated weekly update and a real cut to the chase edition in a variety of markets. Seems like the transfer of administrations is happening despite the loud kicking and screaming….it seems the vaccine news is hitting full stride.. economic data of PMI (58) and retail sales (big recovery) are all good stuff and need to be to meet expectations of 30% jumps in earnings. Covid cases and resulting hospitalizations are up and if the market is hit by a shock due to holiday travel & gatherings…..with VIX in the low 20’s and RSI at nosebleed levels.. a pause of some degree is not off the table. We have been in the value sector big time for a number of months and the payoff in November in backs energy industrials ect has been remarkable. The SP monthly highs on the futures are still intact @ about 3670 so adding aggressively without that could be problematic and ruin nice positions already on the books. Should the S&P move under 3600 and then 3540-3510….a pause is in the works. We realize seasonally this is a bullish time & cash abounds..so don’t be a hero. Want to ask about options as a hedge tactic? [email protected]
As you know November has most stocks zooming to the upside. There are possible deals and IPO’s hitting before yearend…on our watch list in the merger world is DBX FANG WLH XPO ALXN DPZ RNG DBX SFM AAN AUY VIAC among many others. In the lithium area we are focused on LIAF &ALB. Many of the sectors that have had big runs this month (which we told you about long ago like VDE -Energy, VFH KRE-Banks & Regionals, VAW-Materials, VIS-Industrials, VNQ-Real Estate…and all the Value plays like MGV VOOV VONV VOE VBR and many more could be ripe for some give back if the focus reverts back to Covid cases-Unemployment (778K Claims)-Stimulus fights-unknown vaccine availability—-complacency & euphoria-VIX near 20 could mean reversion before this consensus opinion-EOY Rally. We are many stocks-ETF’s we like-interested? [email protected]
Spreads are tight in both Investment Grade and High Yield (400 BP) and TLT remains above 154-155…..should we break that then high yields could come calling…maybe 1.25-1.5% on the 10yr. If not…a market correction in stocks could rally prices further. Gong out on the risk spectrum has paid off nicely in recent months including VWOB with a 4+% distribution rate-Emerging Market….PFF yields over 5%+ in preferreds….VWEAX approaching 5% or so in the High Yield sector and FFRHX in the Floating Rate High Income genre. Otherwise…short term corporates…limited & intermediate duration munis. We are following various fixed income-email [email protected]
US Dollar/International Stock Markets
Lots to talk about here as the Dollar is on the ledge and international stocks are running with some slow pokes showing come from behind potential. Our choice on Emerging Markets has been VWO & VWIGX which have both been great to us and those who have been reading our updates…..but also Japan VPL and VEU VXUS but now we are looking toward the Down & Out in Beverly Hills crowd…namely Eastern Europe & Latin America…there you can find Russsia RBL-ERUS..Poland EPOL Turkey TUR & ESR diversified while in Latin America Mexico is the dog with the least amount of fleas (best comparable performance) EWW but one might look toward Brazil & Brazil small caps EWZ EWZS…Columbis GXG…Diversified ILF to see what discounted values make sense…with these you swim with the sharks…so try to follow moving averages and keep them on short leash-caveat emptor. The US Dollar is into our base of 90-92 and the coyotes are out in force on this wounded bird…the next few weeks may either see a resurgence in $$$ combined with a stock market correction or the floor drop out-stay tuned. Have questions on the Dollar-Global [email protected]
Crude Oil-Natural Gas
We brought to your attention months ago that the oil prices would not be going back into the 20’s and Chevron CVX ect were a steal with big yields and discounted prices. Lately we have really been rewarded for that smart prophecy. We believe the recovery next year could see Crude prices go to 45-60 and prices of energy shares continue their reversion to the mean. In the short run OPEC has talks this weekend and storage is bulging with Covid cases jumping so be aware the trends look good lately but pull backs are part of the game…..also some firms are borrowing money to pay the dividends.. Natural Gass went in the tak lasst week and this week treaded water…our baby LNG has given a 20+% pop this month may dip to 55…but that’s OK… Want our Focus list of ETF’s-Shares?? [email protected]
Gold Silver Copper BitCoin
We warned you about a reversion to the mean for Gold back into the 1700’s and Silver into the 18-22 buy zone and those who trimmed or replaced positions or collared their positions are happy they did…GDX GDXJ SIL SILJ and many more are getting a lot more interesting to us….but no need to be the first guy into the pool…Copper has divorced itself from the precious metals…we told you recently that the Copper-Gold Ratio was exploding in Copper’s favor so LONG Copper Short Gold was genius in the last few months. Bitcoin looks like it had a blow off top this week as GBTC hit 24 only to close in the 18’s down almost 10% Friday…..maybe too far too fast but long term a bull…How can You Protect Gains? [email protected]
Soybeans Sugar Coffee Cocoa
Lots happening here and has been for awhile if you read us and updates regularly….Beans popped to the upper band we told you about month ago (10-12) this week as demand has been great & China’s been a monster…we told you Sugar was a buy at 12.30 when the 50-200 day MA’s crossed and we rallied toward resistance of 16 only to fail….fear not.. if we break 16 for a good cause…the future looks very bright…..we told you earlier this year that coffee was a steal sub 100 and we ran to 137…then we recently told you support is 100-110 and if validated the next move is north…this week we hit about 125…and we told you Hershey’s orders caused a squeeze in Cocoa which cause the biggest jump in many years…this week it lost steam….Do you have questions on these?…email [email protected]
Happy Holidays Everybody & God Bless!
REMEMBER There is a substantial risk in short term trading and option trading and it is not right for everyone. Consult your brokerage firm and broker/advisor to determine your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital Only.
November 20 2020 Option Professor Opinions & Observations
Greetings!…..We warned you last week about the sell if that would occur if we failed to take out the SP 3670 highs. Hey…according to a Bank of America survey many managers are at a 20 year high in bullishness….credit card activity, restaurant & hotel bookings are rolling over (mobility fade) ..el virus is spiking in cases, hospitalizations & deaths…..food lines in Texas look a a major free in bumper to bumper rush hour….all the vaccine news was greeted by ho hum & cities are either closing earlier or threatening worse.. Mnuchin is taking money back from the Fed….stimulus talks are a joke while Trump claims squatters rights….10+Million getting relief & claims jumped this week…so we have more a few headwinds to overcome. We told you in AUGUST that Sept Oct Nov were going to see spikes in volatility and so far each month has given a great discount buying opportunity & we suspect that may happen again….HOWEVER IF they can get the VIX under 20 to draw the sideline cash/cover shorts… then all bets are off….T.I.N.A is not dead but resting until we get more clarity virus & stimulus…air got thin. We can explain hedging tactics and asset allocation models so feel free to email [email protected] with anything you want to discuss. Yes 2021 is supposed to be a great year..how much is discounted?…how great??
The S&P lost some ground this week ass did most indices…the question is a small pullback or something more serious?/…As you know we have been big value players as the P/E ratios and dividends are attractive plus even more the cyclicality which may surface with a re-opening next year. BABA seems to have hit a short term low around 250 and ass we go into the holidays keep an eye on EA ATVI SONY SNE NVDA as gaming seems to be on a run. TSLA has gone nuts ass it will be included into the S&P on DEC 21st so watch out for the stampede BEFORE to turn into ADIOS after it goes in (remember the run up into the split on AAPL?). Investors are confused by the vaccine news and the timetable of implementation….so first they bid up banks industrials airlines epicenter (hotels ect) only to switch to Covid Plays later in the week (ZM-PTON-TDOC) and more….Buffett’s disclosures as of Sept 30 shows trimming AAPL…reduced stakes in Liberty Media, M&T Bank, Barrick, WFC PNC JPM..left COST & added GM BAC KR PFE BMY MRK ABBV TMUS …looks like he likes pharma and not so many banks plus a 5G play….will the schizophrenia go on thru year end or was value just a pull back after a big VALUE run and resume? We saw unusual activity in options in SQ & Snap so keep an eye out….we’ve got lots of stocks & ETF’s on our radar list…email us @ optionprofessor.com
Let’s see ….we got a Fed/Treasury fight regarding closing down some facilities by year end (trying to set up trouble if we need the funds before transition?)…..yet TLT as we told you would rally out of 154 and had a GREAT week….if stocks sell off & data continues to erode…look for more upside. Around the horn…..preferreds PFF were range bound and yield over 5%….high yield was also flat and yields around 5%….but munis as we said are the place to be so far MUB has had a great 2 weeks & people love tax free income….floating rate high income FFRHX has been bid up in the month of NOV….our parking sport in short term IG corporates & limited duration tax free have served their purpose..finally Emerging Market debt VWOB has also been bid up in Nov and yields over 4%…..the Fed is a real backstop but duration has risk…ask us more @ [email protected]
US Dollar/International Markets
The Dollar has faded but not broken down in the last week or so holding the 90-92 neighborhood we identified as support a while ago…will it fall on its own weight…maybe BUT LISTEN TO THIS….our yield advantage has now returned ass yields have risen and Japan & Europe are a mess (particularly Europe) and while many believe the Fed adding reserves will kill the Dollar the TRUTH is Fed has added to GROWTH and not inflation and that in turn STRENGTHENS the Dollar..not to mention positioning is ALL SHORT US $$’s. Past cycles bear this fact out. NOW on international stock markets Japan’s market we told you about months ago has turned down a bit -very dependent on our consumer who is stalled….we bought BABA this week and will do so all the way down to 200 if we are so lucky…big gap at 290 to be filled…..EEM has stalled after a heck of a run and Europe VGK is rising based on hopes that the virus will turn valuation & Lagarde’s help Dec 10th. As we told you Mexico EWW Brazil EWZ & India INDA are stable to higher. Got questions on how to play the [email protected]
Crude Oil Natural Gas
Storage is back to the rim like earlier this year ass the virus killing demand short term & Aramaco is selling bonds to pay the dividend…XOM’s doing the same thing…some people call these type companies zombie companies…we have been bullish on this sector & have been paid during the big advance but now we could stall/pull back but still believe in the longer term demand return storis so every pullback may be a buying opportunity. CVX the best in breed have had a big run so keep some powder dry…longer term 45-60..Natural Gas that we were bullish on at 2.00 ran to over 3.50…but warned you it’ss volatile bent back to 2.78 this week & LNG is aobe M/A’s @ 54…do you want to know how we play oil? [email protected]
Gold Silver Copper BitCoin (GBTC)
There are a few things we find interesting about Gold….some which we told you about already….first off our view after the parabolic move this year to $2100 was a trading range of 2100-1800 would develop and it has…now that range has closed to 2000-1800 where we sit today….In Q3 Central banks were net SELLERS of Gold and fund flows show investors are LEAVING the ETF’s. With economic numbers rolling over…inflation fears are following suit. Some say we will see the Dollar rise and Growth return but not inflation as yield have also risen. Mining shares have faded 20+% off their highs so we better be getting to the buy point soon as we are now testing the 200 day M/A’s in many stocks GDX GDXJ SIL SILJ ect. We should know soon as Gold is still up for the year and Silver twice as much. We told you $30-$22 would be the range for Silver and we got there…now make that $26-$22 and whichevr way it breaks could see acceleration…some (like us) would love to see a hard selloff to $1750 Gold/$20 Silver as ideal entry #’s. Copper is the All-American metals as it hit 2 yr highs this week…a train we’ve beenon since 2.50…..FCX our favorite we’ve been on since single digits is now at OVER $21 any pullbacks would be buys as longer term closes at above $20 sustained opens up the door to 30 & beyond…unless black swans BitCoin has gone wild and is press ing the all time high 20,000 and our vehicle GBTC has been a pleasure….the year after halving tends to be good. Aquestion on these inflation/dollar [email protected]
Soybeans Coffee Sugar Cocoa
BIG WEEK for all four of these…new highs in Soybeans pushing toward $12 which we told you about in the $8 dollar neighborhood….we told you Coffee was in the support zone in 100-110..this week hit 125 area…..and Hershey’s caught traders on the wrong side of their interest which led to the biggest rally in Cocoa in decades. How do we follow these? [email protected]
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
November 13th 2020 Option Professor Opinion & Observations
Welcome Back!…..This week we saw the market continue to go where we told you we are already positioned..Value-Dividends-Industrials-Materials-Banks-Energy- Epicenter (hotels-travel- leisure) A VERY GOOD WEEK indeed So what do we see NOW??…Well we told you Sept-Oct Nov would see BIG TIME volatility and we did (VIX 40-22 range)….we aid we would get a BIG 2 WEEK BOUNCE in the first 2 weeks of Nov..we just did…the RISK of another TURNDOWN in prices is most probable between NOW & the end of the year. Monday looked and felt like a BLOW OFF top (SP 3670/RSI 85+) and we have a ton of EARNINGS coming this week (retailers) which could either support the market or REPEAT the price action we told you to PREPARE for when Tech Earnings came out (BUY THE RUMOR SELL THE FACT). Some example of that recently was Bezos SELLING $3 Billion in AMZN going into the election & the PFE CEO selling EXACTLY when they had good news Pfizer announced within earshot of 42 (now 38). The Virus is taking off big time…stimulus is no where to be found….JPM credit card data shows spending is slowing….restaurant sales which had recaptured 70% of pre Covid Sept-Oct also slipping NYC shuts down at 10PM can’t help. Also the VIX has a TRIPLE bottom around 22 so if that takes off next week then look out. Should we break UNDER 3550-3520 SP next week then the bloom may be coming off the rose. HOWEVER…..there are 2 sides to every flap jack and there are 2 FACTORS that could pull us up BIG TIME…the VIX sub 20 and stable and the US DOLLAR breaking 90-92…….should this happen the sideline money and bond market money should come poring in and shock the market. We should have a pretty good idea by next Friday and we will report be all over it as usual….OUR VIEW-if SP 3670 holds–selloff is coming.
Next week we have earnings that will give a glimpse at the consumer starting with Palo Alto WMT Kohls HD TGT TJX L Brands NVDA ROST BJ & foot locker to name a few. DIS & CSCO came out with good stuff this week…no surprise to our readers as we told you about the value of CSCO and the future of DIS. We had great moves in CVX PSX VDE in energy and BA ULTA LI (10x volume)DE EA AXP JPM CMG PLTR GRWG SONO to name a few. The vaccine stocks PFE JNJ PFE NUAX MRNA (3X normal activity) all are getting volatility…but it was airlines hotels cruises rent a cars that also were the big dogs this week. AS WE TOLD YOU…higher yield affects the Valuations & tech have a tougher time….throw in tax rate changes and there you go. Banks love the yield curve (C JPM MS BAC WFC USB PFC KRE) that is steepening…Going into the holidays look to AMZN WMT TGT ROST TJX ULTA DG for some upside as well as BBY NKE and others. Last but not least keep an eye on V Visa as they believe only a 6% market penetration on tap & pay will explode and increase credit card usage which of course ups profits.
email us at [email protected] to learn about our focus list
Our readers knowwe told you that a historic bottom in yields happened in March and the yield curve will and has steepened….we also told you to play TLT from the long side to get a bounce and stop under the 154 lows..this week that paid off handsomely. Munis are catching a bid as states are in better shape than thought and after tax yields are attractive. We told you bout EMERGING MKT debt and we saw VWOB rally nicely while yielding OVER 4%…..preferred PFF have done well yielding OVER 5% and HYG has done well too. Anotherarea for yields are banks energy and utilities all caught good bids this week…Muni funds VWLUX MAYHX NHMRX have been viewed as potentially beneficial vehicles. CPI was flat but PPI was up .3% or annualized 3.6% so we could get higher prices or compressed margins.
We follow fixed income…want to learn more email us at [email protected]
US Dollar/International Markets
We told you of the dollar decline from DXY 103 to 92 area and now we had a dead cat bounce but it could fall under itss own weight ($284 Billion MONTHLY DEFICIT/last year $3+ Trl Deficit/pre Covid $1 Tril annual deficit. You see Donny was good at cutting taxes (revenues) but he’s lousy at creating revenues which we said was EXACTLY what he has done in his business throughout the years ergo bankruptcies…..probably not the guy to tell we print money and you can borrow & spend to infinity. He’s gone but his tab stays with us and his structural no taxes/high spending platform keeps bond holders (inflation/bad currency) up at night. You want international…we told you for a while Japan & Emerging markets are the way to go. Europe is cheap but their unemployment picture is whacked. Brazil sounds bad but the etf is ok so far…the whole world oid jumping from India to Mexico INDA EWW and the rest of the Pacific Rim..throw a dart.
INternational questions…email [email protected]
Crude Oil Natural Gas
Rig counts jumped at Baker Hughes for the last 8 weeks and OPEC is worried about Covid demand fears. Having said that XLE & others had their BEST WEEK EVER.,..we been all over the CVX COP PSX VLO VDE SUN high yielding stocks for a LONG TIME..we believe in the sector..a bit ahead of its skis maybe but long term..we’re sticking to our bull outlook into 2021. Natural Gas still above 3..we got bullish at 2 and LNG ahs got legs now needs to sustain the advance and build on it to keep us interested.
Ideas on how to play energy?…email us at [email protected]
Gold Silver Copper BitCoin
Nothing to report here as our views on Gold & Silver remain range bound with additional DOWNSIDE risk….HOWEVER close ABOVE $2000 Gold and [email protected]^ Silver would turn us into much friskier bulls…GDX GDXJ SIL SILJ ect all need new fuel…get the Dollar to break 90 and now we’re talking upmoves. Copper to Gold Ratio is Above its 200 day average(copper outperforming Gold)..so jump on the FCX train if you like but it’s a train we’ve been on since it at HALF the current price…we’ve been riding BITCOIN thru GBTC and BitWise and VERY happy with our results…again it’s like a early tech stock (Total $300 Billion Market) so lots growth big players (PYPL letting millions of merchants use it)….and the year after halving has been good.
Got questions…email [email protected]
Soybeans Sugar Cofee
Checking in on the 3 Amigos…soybeans pulled back and has trouble at 12 bucks but may have further China demand and help from South America with supply demand dynamic…Sugar was brought to you at the breakout point of 12.30 but until we clear 16 the land of milk & honey os beyond our reach…..Coffee was our baby earlier this year at 100 then ran to 137…bye bye at 100-110 we say take a shot….closed at 112 and traded to 113..not bad
REMEMBER There is a substantial risk of loss in short term trading and option trding and it is not right for everyone. Consult your brokerage firm/broker to determine your own suitability. Past performance is not necessarily indicative of future results Use Risk Capital Only
November 5 2020 Option Professor Opinions & Observations
Hello Everybody….We feel during 2020 a very volatile period in the markets. ….we have DELIVERED VALUE ADDED information to our readers….so this week we’re going to provide to you what we have been saying since March and what our views are right now on Stocks Bonds US Dollar/International Markets Crude oil-Nat Gas Gold-Silver Copper and a few other markets. This week we have seen the REFLATION trade come and go…we have seen the blue wave come and go big stimulus-higher capital gain taxes come and go. As of this writing; the expecting is a blue White House and a split Congress with a Red Senate & Blue House. OUR POSITION that we told you last week was EXACTLY a SNAP rally this week due to Tech having been sold off & the VIX at 40 going back into the high 20’s and BEARISH positions (retail investors on the sideline/pros hedged)…..the VOLUME tells you a REVERSAL of those positions has occurred. Exceptional Uncertainty remains (stimulus-virus-policies-huge unemployment) and who knows if there is much more volume in the short run. The BIG IF is IF the highs on SPX DJTA QQQ NYA are NOT EXCEEDED and the Narrative Changes…..could we see BETTER PRICES in Late Nov thru mid Dec BEFORE a Santa Claus & Jan Effect Rally?? Sometimes a stampede In OR Out of stocks is just that and things tend to settle down. BULL CASE ….US Dollar dropped helping Stocks Gold Euro BUT it did not take out the 90-92 area and the Yen tanked while the Euro is still UNDER 120 with a second lockdown/recession talk & a Dec 10 ECB meeting. The Fed must keep rates low (T.I.N.A is back in vogue) BUT remember the last time GDP numbers were great (Q3) was AFTER the CARES money was spread all over town (who knows WHEN or HOW much will be distributed). So yeah…we are in a bull market….but totally out of the woods yet?? Value (banks-industrials-materials-epicenter) still struggling to break out- bounce. Valuations don’t get cheaper when prices go thru the moon. The FED says loan demand from small business (main street) stinks & they need FISCAL to chime in (with contested election-split Congress when’s that coming?). Somebody is fading (selling) into this buying stampede and we believe in the next few weeks we will see who is the smart money We don’t want to fight the tape but we are at the HIGH END of the Trading Range so waiting to see how the dust settles sounds reasonable—a return to a HIGHER VIX. NOW let’s get into the review of our opinions since March…toot our horn:):):
You can learn what ETF’s we use to diversify @ optionprofessor.com
We told our readers that MANY INDICATORS told us the SP3400 area was a top in Feb (AD Line/RSI divergences ect) and said a move toward 3000 was on the table so look into hedging (collars/puts/covered trims replacement trades)…..the break of 3000 and VIX above 30 put meltdown on the table (always does) and the collapse was upon us. Where would we stop? WE measured the move from the 2008 crash low at SP 666 to the Feb highs at SP 3393 and got 2727 points multiplied by 38.2 = 1042 points and by 50%= 1364 points or the pullback low range could between SP 2351 and 2029. It ended up being 2174 smack in the middle of our estimates. Once we heard the Fed was back in the game…..we immediately turned to tech& large cap growth & Consumer discretionary (VCR MGK VGT) which began their upward trend that remains today…follow our moving averages and the trends remain. We have rotated some of that into VALUE (MGV VYM VIS VAW VOOV VOE VBR) to capture low valuations/high dividends and the eventual hopeful cyclical-reopening coming in 2021 with therapeutics & a vaccine. We also cited epicenter stocks in travel/leisure gaming pot stocks bitcoin ect as LT deals.
Want to know our positioning opinions now?..optionprofessor.com
After we aw the INCREASE in yields in late 2018 and the 25% DROP in stocks we felt the days of higher yields was OVER…basis TLT which we use as a proxy for Treasuries the bottom was 110 areas. The economy could not endure higher rates and we RALLIED thru 2019 until late 2019 when we pulled back from TLT 150 area to 135 area and yields rose again (adding to our sell on S&P false rally in Q1). With the stock market collapse fueled by the Covid lockdown…we saw prices soar to TLT 180 are yields collapse to historic LOWS. It is our view that the COMMON THEME in 1981-82 when YIELDS ROSE to RECORD highs & this years RECORD LOWS is that the narrative was the yields would NEVER DROP back then and the yields will NEVER RISE which is the narrative today. We believe as WRONG as popular opinion was then about yields not dropping is about as WRONG as the opinion is today of yields not rising. The Fed wants inflation and the government wants growth and MONEY VELOCITY & LOAN DEMAND is best helped with a STEEPENING YIELD CURVE which has already begun.
We follow fixed income—corp/tax frees/international-optionprofessor.com
US Dollar/International Markets
We had the US Dollar pegged in a basic 14 point window (104-88) for the last 3 years…..when it slipped under 102-100 we got a sell signal and an acceleration into 90-92 where it bottomed in August (got us bullish Stocks Gold-Silver Euro from Q2 this year)…..but in August the turn in the Dollar and parabolic moves in the aforementioned got us committed to a consolidation/decline for those markets and a rebound rally in the Dollar EXACTLY what we have seen. If the short term SAFETY TRADE is to be Bonds & US Dollar then the other markets may be range bound a bit longer. International Markets such as EM (big up move)Japan China Europe have bright futures if the Dollar resumes it’s down move by taking out 92-90.
We have plays for the Dollar/International Markets-optionprofessor.com
Crude Oil Natural Gas
We saw the break UNDER 65 in 2019 as the signal the party was OVER in Oil and the move UNDER 45 the short term killer blow. Now we have seen fracking and other rigs unprofitable and big consolidation in the industry. The wide trading range of 45-25 now exists but we are NOT abandoning this sector as we believe it is getting sold out and the survivors will endure. Next year we anticipate DEMAND returning against smaller supplies and that bodes well for 40-55 crude longer term and the likes of VLE VDE longer term with juicy yields in the interim….so unloved so much potential. Nat Gas supplies are wild ergo so are the prices longer term like LNG above 52
Energy questions optionprofessor.com
Gold Silver Copper Bitcoin
Here’s your inflation hedges and quite a year they have had. Let’s start with Gold…we saw the breakout ABOVE $1400 as the green light and a grossly OVERBOUGHT $2100 (far over Moving Averages) so we then suggested hedging/trimming on GDX GDXJ ect….we thought the trading range would be wide 2100-1800 which so far is EXACTLY what happened….same with Silver…a break ABOVE 19-21 was the green light grossly OVERBOUGHT at $30 so our opinion has been a wide 30-22 trading range EXACTLY what has occurred & same with PAAS SIL SILJ ect……Copper is a different story (FCX huge winner for us) in that tighter supplies (Covid) and housing/China Demand blew out the resistance at 2.50 and sent prices toward 3.25…..still 25% ABOVE the 200 day and if we don’t get infrastructure and the housing craze subsides-correction possible. Bitcoin is played thru GBTC and it has done well–we go digital–big names in SQ PYPL more to follow including an entire generation who are digital. We are going in this direction..no doubt.
What are we focused on next? optionprofessor.com
We told you Soybeans were a deal in the $8 range as we expected China to come in big (Q3 buys +63%) so we today made 52 week highs at 11.12+… very happy with that and monitor it closely ass we thought 10-12 may be the first level after break above 10. We told you Sugar above the 12.30’s CONVERGING 50-200 M/A’s was a go and we have traded well in the 14’s but need 16+ to get into gravy land. Coffee was a great market for us EARLY as we saw sub 100 a steal and the move to 137 excessive…supplies are plentiful which has made rallies temporary lately but 95-105 area so far is support.
Lots to Learn email us to Learn More [email protected]
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 form/broker/advisor to determine your own suitability. Past performance is not necessarily indicative of future results . Use Risk Capital Only.
October 31 2020 Option Professor Opinions & Observations
Happy Halloween & A Scary Week It Was!!…..Well our readers are well aware of what this Sept Oct Nov time frame could bring because we told them in AUGUST to get prepared….HIGHS in SEPT SP 3580 & Nasdaq 12,400 followed by sharp drops…followed in OCT with FAILED rally at SP 3550 & Nasdaq 12,200 followed by this drop….we told you of ways to PROTECT your portfolios using among other things COLLARS (sell calls/buy puts)… plus MARRIED PUTS (rights to SELL) and REPLACEMENT TRADES (limited risk calls/call spreads). We now have no STIMULUS–Q4 GDP CUTS–SELLS on great earnings reports (we told you about BUY Rumor-SELL Fact) & Spiking COVID Cases (500k RECORD last week). We see the 60-40 portfolios aren’t helping as BONDS fell with STOCKS last week–double whammy. This may change if STOCKS go down further as the DOLLAR & BONDS may be a safety trade temporarily if investors DITCH Stocks & Gold in November-Dec. Lots of people on UNEMPLOYMENT & Claims numbers while improving are PERSISTENTLY high. More layoffs coming at Raytheon-Schwab ect & wages-benefits are sluggish. Households overall are said to be in good shape but renters and homeowners in the millions say in NOV they are uncertain about making their payments. The yield curve is steepening and tax rates on capital gains may rise…both NOT welcome news to HIGH valuation tech & Mega cap growth….and pulled forward demand is a risk into year end. AMZN said their shipping costs EXCEEDED revenue growth and less user growth was problematic to others. Without BUYBACKS some stocks like AAPL have a harder time as I-phone sales haven’t been great and China seems to be waiting (-29%) to see the value of I-12. With EARNINGS on SP at $1.60 a 20X valuation is 3250 (this weeks lows)…..should expectations SLIP or Valuations CONTRACT….this is how the other shoe drops. THIS WEEK the FED & Powell will talk & we have a JOBS Report.. maybe see a snap rally???? The BIGGER QUESTION is WHERE DO WE GO FROM HERE??….READERS know OUR OPINION and it remains the same since AUGUST…..the SEPT OCT NOV time frame (maybe a little into Dec on some markets) you see a LARGE DECLINE in STOCKS-GOLD ect to CORRECT the OVERBOUGHT conditions (LT Moving Averages-REVERSION). No Stimulus-Virus Spikes- Q4 Slower GDP & the Election will be blamed. Many talk of the SIDELINE money but we have spoke of the OVERCROWDED trades and VALUATIONS that are ABUNDANT. We don’t know if SP 3200 will hold thru the year end…we have our DOUBTS but we DON’T FIGHT THE TAPE nor THE FED (but their job of stabilizing DEBT markets is mature). Let’s face it most investors are in STOCKS & GOLD and are HOPEFUL but we feel you respecting the POTENTIAL of a DEEPER Q4 DECLINE closer to their 200 day moving averages makes sense which is where the BARGAINS may BEGIN for 2021 as STOCKS-GOLD-VALUE-OIL may APPRECIATE handsomely from STIMULUS-VACCINES/THERAPEUTICS-WEAKER DOLLAR-STEEPENING YIELD CURVE-INFLATION & T.I.N.A ect. & a much more pervasive re-opening of WORLDWIDE economies. We SHOULD see a SUBSTANTIAL RALLY but FROM WHAT LEVEL?? RIGHT NOW it looks like TWO THINGS we suggested HEDGES & DRY POWDER are still Working.
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It was a BUY the Rumor SELL the Fact for the most part last week which is EXACTLY what we suggested last week in the Update. Investors got real comfortable at HIGH ALTITUDES and forgot where the long term moving averages are in most markets (AMD didn’t f orget as they and others are using found money (their stock prices) to finance acquisitions (never happens at the lows). News abounds as the CDC gave an OK to cruise ships (CCL) which also helped some airlines. Fisker came out.. got a poo and then fade. Pinterest went from 50 to 70 then faded to 60 while the double TOP in biotech (IBB at 145) got more proof as we saw a fade and GILD lost steam. As we told you…higher yields is not helpful to the red hot housing market LEN ITB ect so they have seen a fade lately. Banks also seem to like the steepening yield curve as JPM/KRE popped but need more price proof. CAT turned around nicely but after it fills the gap around 160..will it have legs. YUM & GE are trying to turn while China stocks (BABA KWEB) pulled back & some wonder if Europe & the USA are seeing a second wave–China next? This week we’ll see if SBUX MCD CMG CRM ZM ($130 bucks off highs) ect. can regain footing. After such a big drop we could see a snap back rally as the VIX is near 40 suggesting almost 3% volatility…..we told you the VIX inability to get UNDER 20-25 for any length of time was a WARNING signal; as when we were at SP 3400 highs early this year.. the was VIX near 14-more normal. The next 2 weeks-SP 3400 & 3475 GAPS above…filled?? Our position is that not enough PRICE PROOF so premature for Table-Slamming
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Yields rose (Prices Fell) and Stocks Fell…not exactly what your friendly financial planner said would happen….as we told you MONTHS ago..we may have seen a historic turn in Yields in March-April as investors see the joke rate they earn and the risk of duration in a printing press world. Well we continued to see an exodus this week but we caution in the short term a further decline in stocks by year end could see a safety trade send money into bonds temporarily (yields back off)…..but sometime in 2021 we expect deficits/stimulus-reopening/supply demand imbalances/dollar weakness to be problematic for duration as the yield curve steepens further. TLT had a blow off top at 180 and fell to 155 area…a pop out of this neighborhood is not off the table. We favor Short Term IG corporate–LMT Munis for now. The risk of EM debt reared its ugly head but maybe a slight bounce coming.
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US Dollar-International Markets
European markets had a tough month across the board as their Leaders consider more strict curbs on activity to quell the spike-our leaders seem oblivious to our 500K spike last week (of course they have doctors with REMDESIVIR on speed dial & the poor souls in attendance use Nyquil). Lagarde says Dec 10 they will reassess ECB policy but admit the data is eroding. China’s % of global GDP is soaring as they march on despite USA rhetoric & ANT raises something like $2.5 Trillion and smash all records. Japan which is on our Radar List had factory production up the most since 1973….also the last time we dunked a basketball…in other words a long time & the labor market is showing signs of bottoming out….The US Dollar is still holdin the 90-92 level and if we see a further decline in stocks by year end a temporary rally as a safe have still on the table-bad for Gold & Euro. China is trying to get more transparent on the yuan while the Yen & Can $ still unable to break downtrends…Auusie $ still languishing but holding 68-70.
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Crude Oil Natural Gas
More trouble for oil this week as DEMAND abates with Virus spike & stockpiles increase-a double whammy short term. XOM is cutting jobs in an attempt to preserve the dividend (which keeps people holding on). We will maintain our view that $30 area will be aided next year by more increased DEMAND (re-opening/jet fuel) and going into the 40-55 area in 2021 could occur if no external forces hijack the market (OPEC-Virus). CVX KMI SLB COP XLE are decent places to look after lows established-nice yields too. Natural Gas spiked to 3.50 (we got bullish at breakout point of 2.00) but Caveat Emptor as this is a thin volatile beast and LNG still can’t return to 52 and FCG hasn’t broke above $7 despite the fireworks in the underlying???
Gold Silver Copper Bitcoin
These are the hedges against INFLATION & a WEAKER DOLLAR (Copper of course has tight supplies & an Infrastructure-housing play). Well the Dollar stopped being weak since AUGUST which coincided EXACTLY with OUR CALL that Stocks would peak Gold peaked at $2100 & Silver peaked at $30 bucks in the SHORT TERM. Early this year & frankly for a while before we liked GDX GDXJ SIL SILJ & many more but the BLOW OFF short term move and the PANIC to buy had us lean to pullback & correction…not any price evidence yet to change our view…in fact a Gold Council this week said Q3 Gold stats showed DEMAND declining as high prices hurt jewelry sales BUT investor DEMAND was up & coin & bar DEMAND rose 49% (good salesman) BUT this hit us..Central Banks were NET SELLERS in the quarter…..we look for a better potential prices later this year for traders and an up move 2021 FCX has been our call for Copper but warned that short term overbought and 13-14 would be monitored for add ons (we entered in single digits) Bitcoin remains a long term potential-GBTC the vehicle we use if above 10.
Soybeans Sugar Coffee
We told you last week that our bull market in Soybeans (we got positive in the $8 area) could see a pullback as it would not be immune from an across the board hit in financial markets and indeed we shave 30 cents off last weeks highs-50-200 day MA’s are at about 10 & 9 so stay tuned…..Sugar prices (which we told you turned positive at 12.30) got hit this week for the first time in 5 weeks (nice run) but failed to get above 16–breakout point. Coffee we told you is one of the few commodities with a surplus (that is one of the reason commodities have a bright future potentially VCMDX)..still holding 100-15 but above 108-115 needed to get the flow more northenly.
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.
October 23 2020 Option Professor Inc. Opinions & Observations
Welcome Back Everybody!…..There is a lot going on ( prez-debates-earnings-stimulus talks- virus uptick) but in truth the SP has been in about a 100 point range for the last 2 weeks with the VIX trading between 25 & 30. Something seems to be brewing and we’re here to tell what we see. First off…Claims came out down from last week BUT we are still at historic levels on the unemployment rate and ongoing unemployed (some just ran out of time on their benefits). Cash holdings are 5X normal at 12% of GDP globally & 17% of GDP in the USA with savings rates near 20% in some places. The winds of change are blowing in the YIELDS market (something we told you about for months). This STEEPENING if the yield curve has a number of ramifications including helping FINANCIALS-CYCLICALS which have been on a tear BUT it could dampen the extended TECH & other high valuation stocks that could be REVALUED in the weeks & months to come. Also future TAX RATES for capital gains (highest since 1922) may affect tech and mega cap growth as we see COMPRESSION of valuations-profits-margins and causes a long awaited REVERSION to the mean as anyone who has looked at long term charts & longer term MOVING AVERAGES has to see they are extended. Yields rising could cool off the red hot HOMEBUILDERS as we see a 10% drop off the highs in ITB LEN PHM ect ( a very crowded trade). So OUR VIEW NOW is the market remains BULLISH however a risk in the next 2-8 weeks is that a correction could occur of 5-10%+ and may start this week if when earnings come out on FB MSFT AAPL AMZN & others this week and we see a buy the rumor sell the fact outcome (like NFLX-Fastly). WATCH OUT if the SP 3400-3350 breaks along with the RSI under 50 & a VIX north of 30-35 as signals that a correction is unfolding. LONGER TERM.. we see a very ROBUST Q1 for a number of reasons including STIMULUS (remember April- May stampede after last stimulus) plus the earnings comparisons will be easy and blow out earnings expectations (beat 2019) as we ride the WAVE of sideline money looking for YIELD & GROWTH at reasonable VALUATIONS. This means the areas of the market that have not captured or exceeded yearly high may do so. Financials-Industrials-Materials-Epicenter stocks ect may outperform other areas of the market as the economy re-opens…we get therapeutics & vaccines and hopefully the cases that do increase see far less fatalities. Place that people congregate (Disney-Six Flags-Wynn-LV Sands) could be significant beneficiaries. Stocks that had valuations bid up thru the roof due to work at home & social distancing could be the casualties. FINALLY…a word on BitCoin which made 52 week highs this week appears to be in the FIRST inning of a very long game (like a early tech stock investor) as we see PYPL is now involved and some spec they will come up with their own digital coin…we saw Square make a sizeable investment…we view Silvergate (SI) as a play also as they are the bankers for crypto firms….. we know the block chain has been a secure system….and we know the next generation is a digital generation….we know the printing of fiat currency is off the rails (Fed ECB BOJ)…we have used GBTC to participate…we are pleased we did……we have other ideas too.
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We have earnings all next week and the list of companies is impressive. We will hear on Tuesday from MRK PFE CAT AMD MSFT MMM ect; we then on Wed. hear from GE BA AMGN Pinterest… but THURS is the big kahuna with AAPL GOOG AMZN FB and ad spending will be a key for some and cloud & pandemic business (shopping is the new entertainment) will be front and center. Expectations for FB includes a almost 12% jump in sales but a 11% decline in earnings ..at AMZN 92B in sales…at AAPL 64 B in the quarter as services will be a key driver but a 6.6% decline in earnings and GOOG sales at 42B new growth 5.6% but EPS -10.5% but a rise in cloud business. This week we saw misses on INTC (data center revenues) AXP (travel) and news that WFC may sell they money mgt division for 3B…..GILD bounce off 60 as FDA gave them a green light…hospitals & health care caught a bid (tenet HCA UNH PFE MRK)…. SNAP did well -Gap- JWN-TJX ROST try to come off the canvas……Covered calls & collars has been our call for the high flyers. Pot stocks are worth a look (MJ ect) and malls (SKI) Outlet Malls and remember we said look at 40 area for DKNG…well they’re here & others.
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Let’s cut to the chase…we told you for months that yields bottomed after the crash….maybe as historic as when they topped with Volker in the early 80’s. .This week we saw the spreads widen considerably (steepening of the yield curve) and should we see a stock drop maybe yields could back down a bit otherwise the landscape ahead includes huge funding needs by Treasury & a Dollar of unknown value and inflation fears…..and a robust recovery in 2021….money velocity needs a bigger yield curve..we’ve said that will occur. As usual we take refuge in limited term munis & short term corporates and AVOID duration for now…something we told you for months and continue.
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US Dollar/International Markets
The US Dollar remains in the trading range it has essentially been in since August (92-94) which came after a 10+% decline from March highs at 103+. The stability after the decline has kept assets like Gold-Silver-S&P-Euro in a trading range as well as they consolidate their gains. We have heard some say where can you go for a Dollar replacement.. Europe is a museum.. Japan is a Seniors Center & China is a jail…we’re the one-eyed man in the valley of the blind….one of the many reasons digital currency has a future. The dollar could either accelerate to the downside (our deficits-Fed printing) or if we see stocks correct…a safe haven moving toward the 200 day MA above 96 which would blow out the shorts and probably send the Gold-Silver-Euro into the tank (all crowded trades). A always go with the flow/don’t fight Mo. We see improvement and potential in the stocks of China-Japan- Pacific-Emerging Markets as well as Europe as the 50-200 day moving averages are inverted (Golden Cross) and are pointing north.. ETF’s offer diversification. South America looks weak as Brazil is stalled & Argentina’s money is a joke.
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Crude Oil-Natural Gas
Crude has been flat lining from 42-36 since June as demand picked up and the rig count tanked..fracking went belly up and OPEC has behaved BUT now Libya has supply coming out and demand is slowing by some people’s measures…that could lead to softer prices but not lower than our support zone around 30…next year we see a recovering economy and jet fuel demand so the 40-55 range is our call. COP bought Concho for 9.7 B in stock deal creating a Permian presence and a shale giant. Natural Gas has ripped higher and trade above 3.00 which is 50% higher than when we got bullish at 2.00 BUT LNG still can’t get above 52 and stay there so we wonder why??
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Gold Silver Copper
Copper prices made a 52 week high and then some when it hit 3.21 this week…no surprise to our readers who were told to get bullish long ago (supplies are tightening) and our baby FCX continues to deliver the goods making new 52 week highs at 18.68 this week…a long way from our entry. Gold and Silver are either renewing their uptrends or could see selloff if the Dollar fails to break down and we see a REVERSION to the mean which basis the moving averages is well under current levels….if they start to break down next week and their RSI’s break 50..we would anticipate that we could wipe out some longs prior to a robust year in 2021…tread lightly.
We follow bullion & mining shares…go to optionprofesssor.com
Soybeans Sugar Coffee
We told you back in the $8 soybean area that getting BULLISH wass the way to go and breaks abobe 9.50 & 10 could set up a run toward 12…this week we made 52 week highs at 10.88 so we are getting there BUT we are near the highs of late 2018 so if all markets get hit going into the year end… Soybeans may not be immune….covered calls-collars-trimming considered. Sugar prices were told to you at 12.30 ass a BUY and now we are at the 14.50-15 zone (52 week high is 15.46)…getting above 16 seems is a key for acceleration again they are in an area of failure in 2018 & 2019. let’s see. Coffee supplies are apparently ample and so prices are having a hard time holding gains…we told you a bounce from 105 could be short lived and it was….IF we hold that 100-105 area and take out 108-112 on the upside then maybe the bull rides again….but lately this old Bull has lost its swagger
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.
October 16 2020 Option Professor Opinions & Observations
Good Day Everybody!….This was a pretty good week for stocks until the last hour of trading on Friday. As we said…the mid Sept highs at about SP 3430 was taken out and we could be setting up for a run toward the SP 3550-3600 area but news keeps coming out throwing water on the rally and we see a RSI DIVERGENCE in a number of the strongest sectors (Dow Transports) that could spell short term trouble. YES! we got great news on consumer spending with the retail sales numbers (we have told you about IBUY & XRT as easy ways to play it for months now). Consumers have gone Shopping which has replaced Entertainment…..are the closets getting full?? Aggregate Households are feeling good with wealth up debts down and savings up but shrinking with all this spending. The annual government deficit is at $3.1 trillion (our ENTIRE national debt was in the 3-4 Trillion range in the 90’s)….it’s a RECORD and only helped in costs by low rates. Also industrial production is negative and the trade deficit is jumping too. You’ve got many record or new highs in all the retailers many with very rich valuations and we still have half the lost jobs from earlier this year still lost (weekly jump in claims)……our suggestion is to remain vigilant as we approach the election…..some believe the upside for stocks is limited in the short term on the frothy part of the market and call options are enormous….does covered calls…collars…replacement trades using calls/spreads make sense…get the facts & decide…if we accelerate thru SP 3420 those odds increase….for now TINA & the Consumer are winning…next week we get EARNINGS from many companies such as BIIB KO COST HAL T VZ CSX TSLA AXP and many more with more to come…Fastly went from 135 to 85 in 2 days (almost 40% drop)…will we see more mutiny as data-prices-election collide? Stay Tuned!
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What’s in store next for the stock market? Are the lows in at SP 3200? In the next 10 weeks (year end) will we see a stampede into stocks? We believe in following the numbers so SP 3420-3363-3300 are keys for us and RSI staying above 50. We told you since July-Aug that Sept-Oct Nov could be VOLATILE months and so far we got our fair share….more to come? Well…chew on these numbers…the 1-2-3 year moving averages on SP are 3150-2998-2913 so could something occur to see a break toward those numbers? We’ve seen NEW highs on SP & Dow Transports with DIVERGENT RSI’s which can be short term problematic. P/E ratios (valuations) have exploded and 2020 targets of SP 3500-3600 have pretty much been reached. So prepare your plan if clouds surface and save some dry powder in the weeks ahead. We continue to believe the barbell approach will endure (tech-growth-value-materials-industrials-epicenter) and we may see a catch up trade soon. Many stocks & ETF’s on our Radar such as BEP BABA LULU MRNA SWKSS ITB FB UPS TSM QRVO AKAM and many more (oil could surprise in 2021).
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As we said…barring any surprises….we expect yields to rise as deficits-currency-et el will send yields up/priced down….something we told you for months and we see Treasury Bond futures sell off from 193 to 175 since March and TLT (20yr proxy for T-Bonds) fall from 180 to 160 similarly. Short term corporates and limited duration Munis have been our call with the exotics of floating rates-preferred-Junk and EM debt added for risk takers. The Fed may WANT longer term yields to rise to steepen the curve and get Banks & MONEY VELOCITY to get going as Japan & Europe get none with a flat curve. That’s our story and for now we’re sticking to it…..we’ll soon see
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US Dollar & International Markets
The Dollar was hanging in there this week not taking out 92 and trying to approach 94…we have told you that the move from 104 down to 90-92 area was OVER and a bounce would occur that would correspond to corrections and consolidations in the markets that ran up (Stocks-Gold-Silver-Euro ect.) So the next big leg up in metals-stocks-ect. and rates will probably need a break of the 90-92 Dollar rate otherwise a surprise move to 94-98 could spell a further correction of size in the aforementioned markets…..On the international front Europe’s got Covid spike problems and more and Asia and EM all are seeing a malaise presently…..again if the Dollars breaks–UP!
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Crude Oil/Natural Gas
Our view remains that the 30-35 area should be worst case for crude oil prices and so far 36 area has held (we are at 40). The rig counts …fracking business…and a cooperative OPEC spells supply controls and with all these cars sales going on…they’re going to drive somewhere and should jet fuel make a comeback we like the upside on oil & oil stocks in 2021 barring a surprise change in the current trends. We stay with best of breed like CVX COP KMI VLO EOG PSX SLB XOM BO RDS.A OKE to play this sector.
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Gold Silver Copper
As we told you when Gold & Silver topped out at $2100 and $30 bucks…we will see pullbacks toward their moving averages and consolidate their advances…this view continues so far this month. Do we anticipate a upside move between now and 2021??…..if we see the Dollar drop & long term rates rise (Inflation & Money Velocity could then jump)….we will add to core positions and ride the next wave which we told you was happening on the break ABOVE $1350 Gold & $19-21 Silver months ago. GDX GDXJ SIL SILJ are all on the radar plus many more….end of the calendar year & the beginning of the new year is Metals Time…..so don’t get caught sleeping at the wheel! Copper still maintaining the 3 buck level…infrastructure & housing…lots a copper used and needed and our buddy FCX (been bullish since single digits) still seems the place to be as long as above 12-14….we have others too
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Soybeans Sugar Coffee
We told you about Soybeans in the $8 area and we thought we could get a run with China buying…we cleared 10.00-10.50 but are stalled a bit now…we thought the recent move opened the door to hit 12 but just under 11 has been the max….prices got extended so a dip was in order….countries like Brazil with a lousy currency may step in and create a competitive pricing atmosphere…staying above 10-10.40 could keep us on track….election?? Regarding Sugar the call to get long when the 50 day 200 dayy MA’s converged at 12.30 was spot on ass we took off into the 14’s…now a bit extended but the trends remain up…if we clear 16 with cause….accelerate? Coffee continues to hold 105 support and if we print above 115-120 then things could get very exciting as they did when we said sub 100 was a steal.
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
October 9 2020 Option Professor Opinions & Observations
Good Evening…..This week was a very key week POTENTIALLY as we took out the SP 3363 resistance last week and the SP 3430 resistance this week and participation widened out considerably. Our original view that Sept Oct Nov time frame will lead to VOLATILITY has still played out and our view that a trading range of 3500-3100 is still in play but now we must consider that SP 3215 (61.8% retracement) could be the low and with stimulus and infrastructure either coming immediately or soon after…..that $4.3 Trillion of sideline cash (not counting private equity & corporate cash) is hard to step in front of as we know sellers will raise their offers to the moon if the market will bear it. Lots of dry powder & heavy Short Interest in the NDX. Covid is scary but the FOCUS may not be on CASES but SEVERITY (deaths) We are not totally out of the woods…..household income has been lost & drawing down savings only lasts so long….job cuts (as we told you would happen 6 months ago as corporations re-size for peak earnings) continue at the airlines, Disney, Warner Media, Banks and more. Housing, e-commerce infrastructure, Communications, Digital Lifestyle will remain the themes. However; a peak at bank earnings (loan defaults-Commercial Real Estate) plus retail sales and closing to what could be another Nightmare on Elm Street (A.K.A the Election) looms ahead…..so the barbell approach we’ve encouraged since March remains-Tech-Growth-Value-Utilities-Epicenter.
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Next week we get earning from the banks and others plus Delta and more stimulus jaw-boning. Looks like B of A is getting into the pay day loan business and we got lots of merger action this week as well…Morgan Stanley got into it with Eaton Vance (is Invesco or Janus next??) while AMD and Xlinx are looking at a $30 Billion dollar deal and some talk of a Exxon Chevron merger but that may be more of the beer talk variety. International Paper IP & WestRock may be ready to profit bigtime on the move to paper shipping materials and as you can see e-commerce delivery just took the Dow Transports to RECORD levels not seen since 2018. This may also confirm an up move for Dow theorists as this piece of the puzzle had been missing. Workhouse is in the finger pointing game as with Nikola about the veracity of some of their data. Our favorite betting stocks DKNG PENN CHDN all are getting hit (DKNG announced a secondary offering-never welcome news) and all should be buys again in the not too distant future but maybe the reduced sports schedules & their nosebleed valuations have caught up to them. Some of the symbols of the recovery stocks on out Radar are TJX DLTR GM UNP CSX JCI BWA ROST SCI IEX GWW WYNN BKNG
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Not much to report here as yields were pretty flat all week with an upward bias. Of note is the % jump in yields has been 50% since the lows and 20% in the recent past…big numbers. TLT which we use to assess long term rates (and where we see the greatest duration risk) closed at 160 and it has broke the 50 Day MA at 164 and intra day broke the 200 day MA at 159.50. So we feel if the markets take off and growth starts cooking…TLT could accelerate to the downside HOWEVER…..the 50 day iss still above the 200 day (164-159) so this could be a garden variety pullback after a huge up move and should we close ABOVE 165 with weaker stock action…forget the bear-get bullish. We favor short term Corporates & limited term Munis but if you want to spike your drink…look to floating rates, preferred, High yield & emerging market debt if you want to stretch part of your portfolio & risk profile.
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US Dollar/International Markets
Europe is in a stall phase as Italy & Spain desperately need help from the Recovery Fund and soon. One of the Europe ETF’s we watch (VGK) closed at 54.50 with the 50day/200 day MA’s at about 53-51 inverted to the UPSIDE so unless we take out 50 maybe the cheap valuations of their shares win out. The BIG OPPORTUNITY overseas could be JAPAN (EWJ) as the Nikkei is flat on the year while the USA is up and Korea (EWY) and Taiwan (EWT) have both made good advances and some believe EWJ will play catch up. Emerging Markets China South Pacific all have been picking up steam. The US Dollar lost steam from last week…we told you a bounce out of 90-92 could go to 94-96 but then a reversal would occur….with deficits stimulus trade deficits and record structural unemployment…can you blame them? So if we hold 92.50/93.00 area (61.8% pullback) maybe we have more upside but the avalanche of printing could spell trouble for the greenback although are the Euro & Yen great alternatives?….No….but Gold-Silver-BitCoin ect.???
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Crude Oil– Natural Gas
For those of you looking to renewables…a stock we have been keen on this year is BEP Brookfield Renewables which hit a low in March around 25 bucks and now trades 52. We have been telling you our view is that 30-35 is worst case for crude prices and we recently hit 36.50 and now trade above 40 again…we believe next year we will see a demand reversion while seeing RIG COUNTS lower than 2015 & fracking is a rough racket plus couple that with a well behaved Saudi supplier and for the patient the CVX SLB KMI & others may pay off…be careful of XOM who we read is borrowing money to pay the 9% yield…silly. Nat Gas is all over the place…LNG need to get back in the 50’s to renew our interest and a break under 45 could be a back breaker
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Gold Silver Copper
Well these 3 had a great week as the Dollar faded and happy days are here again blared out of traders radios. We’ve been bullish copper since 2.50 and FCX since 7 bucks so we’re not just arriving here. We needed to hold 14 on FCX.. we did.. and now more upside. Housing & Infrastructure music to us. Gold & Silver hit short term lows in late Sept and turned up this week as the dollar hit the fade mode. Still in trading ranges with resistance in Gold at 1950-2000 7 the at the highs of 2100. Silver is above the 24 level which is a good sign but resistance at 27-30 looms ahead…..our mining shares GDX GDXJ SIL SILJ all got a bang to the upside…DXY takes out 90-92….we soar.
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Soybeans Sugar Coffee
How did our three bulls do this week?…Soybeans which we told you about since the mid $8 area made NEW HIGHS at 10.80 area and closed at 10.65..if China needs to hit a buy quota—we said the upside could be 10-12 or more. Sugar prices looked great and we said the buy was when we crossed the 12.30 area (50 & 200 day MA’s converged)….this baby closed at 14.22. Finally Coffee which was a favorite early this year…got way overbought…corrected right into our support zone (105-110) pooped back to 112 area for a nice trade but jury still out if that’s all we’re seeing….under 105-get outta town?? After big runs in any markets…always be careful of a reversion to the mean.
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.
October 2 2020 Option Professor Opinions & Observations
Hello Everybody….What a Week!!….We had a national embarrassment (the “Debate”)….we had President Trump et el test positive for COVID (reminds me of what my brother Kevin used to say to me “What Did You Expect?)… and we had a jobs report that confirms what we’ve told you for a while…the economy is slowing and so is the rebound pace and the easy wood had been chopped. Comparisons to this pull forward demand we saw is going to be tough and a spike in cases worldwide will not help…..earnings may get people feeling better & so would a stimulus bill…one of the 2 may not happen. From NYC real estate to downgrades by Moody…the turn around has lost steam…add in durable goods report…personal income (spending savings)..manufacturing pull back on top of credit card activity..open table..bookings for hotels and you get the picture…..if we take out SP 3450 (around mid Sept Highs)…we’ll reassess our opinion that the market hit a SHORT term peak and the correction could take us back to the SP 3100-2900 zone…..if we take out the recent lows of 3200 in the next couple of weeks the odds of that scenario coming to pass will exponentially improve as well. So will a stimulus bill & better news on the Virus get us back on the horse… maybe but we’re betting the other way until & if the yield curve steepens.. .the Virus subsides…the stimulus arrives and VALUE take out recent highs. We told you the Sept Oct Nov time frame could be tough and despite the rally which faded Friday…not ready to join the crowded “Pamplona” trade.
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As you know…it is a market of stocks and not a stock market and that was true this week. Mega cap Tech gave up the goose (FB AAPL AMZN MSFT ECT.)…while ZM PTON TDOC did well ass Virus cases spiked BUT we suspect the old story (when the cops raid the brothel everybody goes downtown) will prevail. If we break the QQQ’s….looking for the one-eyed man in the valley of the blind may not be wise. Energy shares got whacked like we’re either going back to the horse and buggy or cruise with the Jetsons…hey guys…stick your head out the window on the freeway..lots of fossil fuel..so when we see Chevron CVX paying 7% plus dividend currently & Royal Dutch Shell RDS.A…we figure blood in the street (not ours) is a good thing. Unusual option activity in DDOG AAPL NVDA & XPEO while stocks like UPS DE BABA DKNG CYRX SONY DIS ROKU were definitely on a radar this week
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The story here is JUNK bond issuance which saw the biggest Sept EVER on record and the 3rd biggest month EVER on Record. Hey.. tight spreads lowest rates EVER and record issuance and if these companies misss on earningss the mosst LEVERAGE ever maybe…how do you think it’s going to end? THe yield on HYG is about 5% and the high in Jan was 88.53…it closed Friday at 83.83…already lost the yield…now it’s trading under the 50 day and could break the 200 day anytime and daily volume off 20% or so…if we are correct on stocks possibly taking a leg down and if we take out 80 HYG investors may be reminded why they call them JUNK Bonds. NYC munis downgraded by Moody’s…the beginning of a stampede with no stimulus?
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US Dollar International Markets
We told you a SHORT term low was in on the Dollar in early Sept and a rally toward 94-98 areas was expected…right on! We also told you the March DECLINE from 104 on DXY also fueled the stock gold silver rally since late March…we also told you the TURN in the Dollar in Sept Upward also sent sstocks gold silver on their REVERSION TO THE MEAN TRADE which it remains in the midst of completing. We told you the Euro was a buy at 110 and a sell at 120 and so far that’s true (closed 117). It may be short term as the FED looks to explode the balance sheet further…but DEFLATION in the Euro zone & Japan is scary as a FLAT YIELD curve does not work as our view is MONEY VELOCITY cannot occur without a steeper yield curve…we don’t have it now but we believe we will in 3-6 mos but Japan & Eurozone do not have a clue. We believe there is a RISK of an ACCELERATING RISK OFF in EM Europe Asia in the weeks ahead especially if COVID comes back strong & the stimulus fight is He on & of course the potential of Election Chaos…hey if the numbers flow the other way…we won’t fight the tape.
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Crude Oil- Natural Gas
Crude Oil tanked this week ass the slowing economic numbers plus the Libya oil flood plus the Virus spike has the bulls on the run & bears controlling the tape…..BUT we believe 30 is worst case pending a collapse of the economy as next year a 40-50-60 print may be in the cards as DEMAND returns and that means oil refineries oils servicing ect may have value here. Natural Gas is a wild ride from 1.75 to 2.75 to 1.75 to 2.92 to close 2.44 OUCH
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Gold Silver Copper
The big story this week was the hit they put on Copper prices as we fell from like 3.07 to 2.83 (17% hit) only to close back at 2.98…..all things considered it hung in there and infrastructure and new home sales & China back in business can’t hurt..our baby FCX since 5 bucks has pulled back..stay above 13.50 & 14 and we say 2021 should be a banner year. The Gold and Silver were in trading ranges with Gold 2100-1900 and Silver 30-24 but those ranges were violated…long term still bull market but lotss of real estate between here and support…core positions hold …extra..WAIT!
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Soybeans Sugar Coffee
As you know we were bullish on Soybeans for months from the 8 to 9 range and felt a close above 10-10.50 could open the door to 10-12 as China demand and other factors could get us going…we went to 1.50 area turned down to sub 10 and closed at 10.20. Now a close ABOVE 10.50 could get our engines going or a close under 9.75 could stock a fork in the Bulls..WATCH The coffee market was one of our favorite this year and for good reason.. below 100 we saw a steal…rally toward 140 now hold the 105-110 area and a second sprint to the upside exists…let the cards come out….Sugar held the pullback support 9 to 10 area then the 11-12 area and busted well ABOVE key averages in the 12.30 neighborhood..we closed at 13.58 so far so good BUT it needs to surpasss 14 to really get trucking and there is a gap near the BREAKOUT POINT at 12.30..retest?? maybe but we are overall BULLISH!
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
September 25 2020 Option Professor Opinions & Observations
Greetings!…Well we told you a few weeks back that we had a BLOW OFF short term top and last week that DECELERATION was upon us and this week we saw strong selling followed by a week end rally. We told you credit card data. open table & hotel bookings were all rolling over and with no stimulus package the risk of those numbers softening is high. We saw durable goods orders roll over this week and while ISM & PMI numbers are hopeful Goldman Sachs CUT GDP estimates for Q4 in half! Let’s face it there is risk to the downside particularly if 3428 SP holds next week as the scary election (Trump may refuse to leave/rigged election/AG Barr at the ready) PLUS the panic to get RBG replaced but no panic on stimulus PLUS a COVID SPIKE in some states & EUROPE reminds us we are no out of the woods. Earnings will be forthcoming and as we told you in MARCH-APRIL…be prepared for surprises on the upside as less employees & real estate would help return to peak earnings. Hey..the long term trends are intact (we told you they were reestablished in APRIL when we got back above 2800 SP (3 yr MA) BUT REVERSION TO THE MEAN is occurring EXACTLY as we said & we EXPECT more to come. The 1-2-3yr MA’s on SP are at 3108-2963-2886 and we believe they are all FAIR GAME between now and year end but we targeted SEP-OCT NOV ass the time frame for this correction BACK toward the mean. This includes any and all OVERBOUGHT markets like we told you GOLD & SILVER would revert back down and it has big time….Again prices could get very choppy between now and the election & thereafter so IF we close up above 3428 we would be encouraged but maybe they would just be running the stops. Could there be an October surprise after rebalancing early next week? Sure…if it has anything to do with vaccines & stimulus (credible) then that would be different but we still have 13 Million on the dole and almost 900,0000 new claims last week….caution is the better part of valor.
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We got a big run in Covid stock beneficiaries late this week (PTON ZM TDOC ect) as the news of a Europe spike in Covid case got traders running with the idea of more cases coming our way and an extension of the status quo. The Nasdaq finished the week positive by we believe more wood to chop at lower levels absent a break in stimulus talk. Lots of stocks to follow-trade including JETS as more money for airlines on the way likely. The cruise lines (CCL ect) got upgraded as well as safe to sail expected soon. Uber caught a bid as we prepare for the Prop 22 vote & sports gaming in on the huge bull run (DKNG PENN WIMMY CHDN) as millennials maybe have found a pastime better than Robin Hood….online & anonymous…just like the want it. Stocks such as TECH PEP QCOM UPS XPO STC TGT Fire eye all were on the radar and vaccine stocks like NVAX & PFE & MRNA (who has certain technology that could unleash 23 more drugs) also got a look and GILD may be a worthwhile value around 62. Speaking of value…that trade hass been put off for now ass trends were broken and resistance held but we will keep an eye on that ball because quality firm & high dividends have value especially if we see the yield curve steepen. CSCO has a PE ratio that’s reasonable and when we return to in office activity then they will shine plus the generate 14 Billion in free cash flow and pay way above 3% dividend. WCLD & CLOU had good weeks as we ran back to tech at the end of the week. Disney Hong Kong opens this weekend so keep an eye on DIS
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The times they are a changin’ in the Bonds as we said markets are reverting to the mean and JUNK bonds have been been retreating for 2 weeks & had their worst week since April. At some point overleveraged (CCC debt was very popular) and the public’s appetite for crazy was going to correct. Defaults rates are at 8% and could go to 12% easy with a stalled economy and the unknown ways things may break (forbearance-stimulus-election). RECORD junk issuance this year and no beta protection in 60-40 portfolios which forces investors to take more risk-accept lower returns or redirect part of their risk % into more aggressive areas (Gold/Alternative Plays).IG short term is insulated ass the Fed is clear about supporting those but the rest (HY-Munis-Preferred Mortgages) may not have such assurrances though they have traded ass if they did. We said still with IG short term corporates and stay away from duration as if the Fed want to steepen the yield curve (help banks) and inflation up/Dollar down…risk & no return.
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US Dollar-International Markets
We told you that the Dollar hit a low in the 90-82 selloff zone and looked to rally EXACTLY what has occurred. We told you the Dollar TOPPED in March and fell 11% which sent Stocks & Gold-Silver & Euro soaring NOW we see the US Dollar hit the short term bottom in early Sept and since Stocks-Gold Silver Euro have been in the FADE MODE. We said if the Dollar breaks 93-94 and maybe goes further to 96-98 it could be a catalyst for a FURTHER FADE International market that benefit from a stronger Dollar and weak local currency (Turkey TUR Brazil EWZ & Mexico EWW) got a bounce but overall Europe’s PMI’s & Banks & Virus spike put them on the outs and Emerging Markets & Asia are fading as our economic numbers fade…the world is on defense as we said it would be in this time frame…if the numbers change-we change but for now FOMO has left the building…not the country.
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Crude Oil Natural Gas
After last week when we got a big jump to the upside..this week was a big nothing in price movement but we closed with a 40 handle. The BIG news was the machete they took to energy stocks in the last 2 weeks which wreaks of give up on the idea of a V shaped recovery and DEMAND returning soon. Best of breed is Chevron CVX with the best balance sheet to survive & thrive and a heck of a dividend north of 7% and so far secure. Keep an eye on this sector & the banks…very unloved very cheap. Natural Gas was a big winner when we spoke about it under 2.00 and a breakout up toward 2.75…we broke 2.50 and tanked toward 1.75 and this week on WED soared out of the blue to 2.75-2.90 area…our buddy LNG needs to break 52.
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Gold Silver Copper
Another REVERSION to the mean story ass when the Dollar turned that panic we saw to 2100 Gold & $30 Silver was OVER. We feel in the months ahead Gold in the 1800-1700-1600 areas and Silver $17-$20 range could be in the cards followed by a nice resumption of the powerful uptrends fueled by monetary base explosion and structural stimulus that will last for years. Copper has been a real soldier comparatively but did break 3.00 this week and our buddy FCX retreated as well (more reversion to the mean). Long term still up trending so don’t throw the baby out with the bath water.
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Soybeans Sugar Coffee
Blood Sweat & Tears sang “What goes up must come down” (were they traders?)…well that was the story on Soybeans as we shaved off about 50 cents off a great run which we told you about months ago. Resisstance was 10.00 & 9.50 on the way up…let’s see if it’s support on the pullback. China is supposed to buy 130 bill in 2nd half of this year to comply with phase one so maybe they’ll be back at the bar after backing off. SSugar; we told you was a go after it got above 12.30 an it had a good week while Coffee hasda a big pullback to former resisstance & breakout point 105-110 and turned up…it could be ready to re-caffeinate the bulls in the weeks ahead.
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.