Author Archives: OptionProfessor
Author Archives: OptionProfessor
OPTION PROFESSOR WEEKLY MARKET UPDATE OPINIONS & OBSERVATIONS
THIS WEEK & NEXT WEEK –
Well we had lots going on this week as The Fed cut by the widely advertised 1/4 point and had
to pony up Billions to rescue the overnight markets via repurchase agreements as liquidity dried up..a bit scary 10% Fed Funds rate.
While confirming they are not on a pre-set schedule…some said that they do not see Fed Funds under 1 5/8% thru 2022. BOE was steady & BOJ says they’re ready to add stimulus. QE lite may be in play which means Europe-Asia-USA all juicing their economies.
Next week..lots of Fed guys speaking while GDP and durable good plus home sales and personal income is on the docket.
With Oct dead ahead..the Big Question?.was FedEx earnings a precursor of what to come-Complacency + Earnings Misses=Ouch!
The streaming wars have gotten very ugly from some…ROKU off 25 bucks on 65+ million shares/40% off 176 the Sep ’18 highs.
NFLX also not a happy camper off 15 bucks on 23+ million shares/30% off 386 highs. Blame AAPL, T, DIS for entering the game.
Stocks with high dividends such as T, PFE, BMY,BP, RDS.A have improved while insider buying @ KMI & OXY looks interesting.
Watch CRK & WPX. Last month’s low must hold if this turn can be trusted. Some believe Uber & Lyft are more interesting now.
My base case remains 2950-3100 is a sell zone and with the Transports & Russell fading and saber rattling..No changes here.
BOND MARKET…OK we got a Fed cut but nowhere near the the 150 basis points the 10 yr Treasury has fallen since last year.
QE lite is back on the table but so is cracks in the liquidity of the system. The spike we saw last week in yields definitely gave a chunk back this week but I still believe 1.4% we saw on the 10 yr felt a little panicky and the entire planet is looking for more cuts.
What they are not looking for worldwide stimulus to lead to growth and inflation in areas like Europe-Asia-USA….but if they win I believe people holding 16 Trillion in negative yields and Trillions more in low yielding debt will hit the exits–a major liquidity challenge. Trump wants the Dollar down and Growth like a “rocket”.Fed wants Inflation up (already is)…careful what you wish for.
DOLLAR….same story different week…range bound 99 to 95 (DXY=98.42)……when & if it breaks…may expect a Vol spike of size.
Brexit-Trade Talks and Lagarde taking over ECB are major things to keep an eye on in upcoming months.
CRUDE OIL..well we got a spike gap up on the strikes on the Saudi oilfields and subsequent fade…if we fill the gap and hold 54….
we could be talking a Q4 turn..ARAMCO wants to go public and probably not into a collapsing price on a obsolete natural resource.
GOLD-SILVER-COPPER…..my base case remains that 1520-1580 is a sell zone for Gold and unless we break 1600 the odds could still favor further pullback/consolidations as we remain elevated from the 200 day moving average. Despite the rush to Silver…the belief is it will follow suit. Again bring the dollar down and bring rates down and get inflation up is music to the metals ears. If you believe the pullcak is over in GDX, GDXJ,SLV ect….maybe hedge or keep it on a short leash using this months lows as a line in the sand. Copper may be the story no one is talking about. Stocks like FCX & SCCO have been turning a bit and some say China is loading up on the metal. Combine that with possible infrastructure stimulus plays and maybe there is a future here. Other commodities that may show promise in Q4 and beyond may be Soybeans/Bean Oil (China Deal), Sugar (alt fuel) and Coffee.
As usual…lots going on and the exciting Q3 earnings and Q4 year end (Santa Claus Rally?) jockeying staring us right in the face.
So…if you have any questions for us….concerns in the markets……simply email us @ [email protected]
REMEMBER. There is a substantial risk of loss in option and speculative trading and it s not right for everyone. Consult your clearing firm and broker to discuss suitability. Past performance is not necessarily indicative of future results. Use risk capital.
OPTION PROFESSOR WEEKLY MARKET UPDATE OPINION & OBSERVATIONS Sept 13 2019
THIS WEEK & NEXT…The ECB met and decided to go with 20 Billion a month for open ended period of time.
We saw a continuation of something I brought to light which is the rotation to Transports & Small Caps and high yielding stocks .
We also saw yields scream to the upside as I also said that long duration with low yields is a risky combo and those holding
those instruments got whacked pretty good this week. Next week look for decisions out of the Fed, BOJ, BOE and Brazil.
Obviously the first three are potentially market moving event. I expect an undeserving 1/4 point cut from the Fed and talk about how things are pretty good (which they are) and data dependent looking forward. The Gold & Silver and Bonds all corrected.
STOCK MARKET….I’ll say it again the S&P 2950-3100 range is a sell zone as AAPL, AMZN, Transports & Russell unable to make new highs….as I said we could and did make a run at 3027 all time highs but so far turned down. Sure we could take it out and go toward the upper end of my range but with The Fed meeting and October looming (what if trade talks stall again)…I may not be willing to roll that dice right now. Still in the advance mode but a break under 2940 would confirm potential of steeper decline.
ATT (T) got a major investor involved with lots of ideas and with the current dividend north of 5 % is worth monitoring closely.
BOND MARKET..As I said low yield and duration can be hazardous to your health and this week certainly was (TLT). No calls here for a Bond market collapse but if Europe gets a stimulus package out of Germany…16 trillion in negative yielding debt sound scary.
Looking at ultra short term and short term corporate ETF’s…some short term GNMA’s and maybe some emerging market debt.
US DOLLAR…Fed decision this week could have an effect as well as Oct trade summit but as I have said it is ina range 99-95 and at 97-98 is still safely in that range…at some point traders may look at the leverage in our companies & govt. debt and re-evaluate.
GOLD & SILVER….As I said Gold broke out and ran to 1520-1580 area which I deemed short term sell zone…we have seen GDX & others pull baclk as I expected…without a breakout above 1600 spot…we may shake out more of the Johnny Come Lately crowd.
Support 1500/1450/1400/1360 areas
CRUDE OIL…..Some rebound and falling in crude..as I said range bound but you have to wonder if we get a strong Q4 as the Saudis prepare to take ARAMCO public….watch those high yielding energy stocks,
SOYBEANS….As I told you the lows earlier this year have held and 850 area has been good support…this week talk of China buying
and a potential interim deal send beans flying to the upside…you would think Trump has got to get a bid for those farmers.
ANY QUESTIONS…simply email us @ [email protected]
REMEMBER..Past performance is not necessarily indicative of future results. Ther is substantial risk in options and trading and it is not right for everyone. Consult your clearing firm and broker to discuss your suitability.
OPTION PROFESSOR WEEKLY MARKET UPDATE SEPTEMBER 6, 2019
OPINIONS & OBSERVATIONS
THIS WEEK/NEXT WEEK Powell spoke and says no recession in view. China spoke and said meeting first week of October. The planet expects 1/4 point cut com Sept 18 and expects some easing out of ECB this week. China doing more stimulus as well….and as for Japan…well they always seem to be easing:):). RECORD IG Debt issuance (150 Billion & Apple doesn’t even need the $$) this week and none expected to be used to actually invest in their businesses. NEGATIVE yielding debt hits 16 trillion after being at 5.7 trillion just last year. Inflation Numbers & Retail Sales Numbers come out this week for China & USA. Berkshire issued RECORD Japanese Bond Sale. France issued RECORD bond sale to boot. Leverage is very high in corporate bonds an duration is being pushed to the limit. WHAT IF….all this stimulus worldwide/trade deal reignites Europe/Asia/USA/Brazil and investors see stocks turn and inflation numbers jump…..they say get me out of these negative yields and low yielding bonds…..who’s going to buy them??
STOCK MARKET….as I’ve said I never liked the new high made without the DJTA & RUT & major stocks confirming. My sell zone is and remains 2950-3100 until it is exceeded and confirmed the aforementioned indices. This week all the stops got run out of town at 2950 and move above 3030 would clean out the rest….when these stops must buy @ panic prices …who’s selling??
BOND MARKET..well the stampede into treasuries that has taken yields down from 3.25% thru 1.50% on the 10 yr. ran out of steam this week….watch the low yields made (1.44%?)….if they get blown out then the move toward decimal pt yields may begin. I told a bond bull…if yields backup to 2%=worried…if up to 2.5% = scared….if up to 3%+= petrified especially long duration. Corporates have investors stretching duration & credit quality=2 big risks if the music changes. Why such a big rush for corporations to sell low yields and long duration is rates are really going a lot lower…are they stupid or are we???
US DOLLAR…in addition to a bit of a turn in treasuries turning down so we also saw the Dollar turn down. Now they must follow thru to have any significant meaning. I gave you my range 99-95 and still well within that range around 98.
GOLD & SILVER..as I’ve said I am a bull on Gold since it broke 1350 but the run to 1520-1580 was a sell zone…so far that is been the deal as GDX & GDXJ have both seen almost 10% corrections ditto SLV. From here…pullbacks to 1450-1400-1375 would be great and a move above 1600 would suggest that the train is back on track. Fed want inflation to come back & deficits are roaring.
CRUDE OIL…another market that is caught in a range …tempting to get those high yielding oil shares but if we can’t break 58-60 you may be glad you didn’t do it…..after the Fed meeting and Q4 may be when we get our clear signal.
SOYBEANS….they continue to fade but I just wonder as we get closer to crop yields and a trade deal if there is not value around the 62% pullback back and the 8.50 area…I’m watching this very closely….murdered in May….no new lows since.
QUESTIONS–Markets-Sectors-Indices/COMMENTS/SHARE IDEAS….EMAIL US at [email protected]…..
REMEMBER..There is a substantial risk of loss in options and short term trading and it is not right for everyone. Ask your clearing firm, broker, advisor regarding your own suitability. Past performance it not necessarily indicative of future results. Use risk capital.
Option Professor’s Opinion & Observations Weekly Update August 30 2019
August is behind us and in Stocks most induces closed lower for the month. Is it an indication of more to come in the month ahead? This upcoming week we have tariffs on Sunday, Tues manufacturing data (PMI), Wed. regional Fed Presidents speak, Thurs ADP employment report and Friday the Big Kahuna..US Jobs data for August. This will be followed by ECB meeting Sept 12 and the really Big Kahuna..Fed Meets 9/18….so yes..I do believe volatility should increase as the bull bear debate has we’ve seen Stock violently up and down moves of 4% short term….suggesting when resolution is made the move should be big.
Stock Market…as I said the move above 3000 not to be trusted as Transports, Russell and major stocks failed to confirm highs. Resistance 2950-3000 S&P….break under 2825 could spell 2700 area quickly. If you would like to know what we are watching regarding among other things high dividend paying stocks and what upcoming dates the lock up periods end on 2019 new issues.let us know. Will earnings forecasts be downgraded??….Is it time to price out EOM October puts & credit call spreads??
Bond Market–Treasuries-Corporate-International…. big blow off to the lower yields and higher prices in the Treasuries in the month of August as momentum players pressed the side that has been working since Nov 2018. However; the numbers have not been horrendous and the 200 day average is way below the market (overbought). So I anticipate the Fed not to gas up this fire as i said last week (and Dudley reiterated)..the Fed is not in the business or underwriting trade wars & re-election schemes.Save AmmoAs we turn to corporates; i like short term investment grades (VUSFX & VFSUX) to keep duration relatively short term…in the high yield space…watch HYG…it has hung in there but if we have Stocks drop & a cut in earnings….break of 85 could spell trouble..if forced to participate (VWEAX) has a reasonable duration and diversification. Preferred (PFF) has been firm..is a turn coming?.Italian 10 yrs have seen yields plummet..no thanks..while emerging market debt (VWOB) have done well since Dec..for how long?
US Dollar….new 52 week highs on DXY this week so this yield collapse has not hurt the values (98.8). Our economy in the USA is stronger/yields differentials beneficial so no surprise here. I have said this all along 99-95 is the trading range and despite Trump’s moves and jawboning….our currency is king….although the UK Governor outlined the concept of a worldwide digital currency as he stated reliance on the US Dollar as the reserve currency standard method of payments has become too risky…Goldman guy.
Crude oil….it has declining tops since April’s [email protected] 65 or so….as I’ve said must break 60-65 and hold 50 to remain interesting but I must say those juicy yields on RDS.A, OXY, CVX ect. are very tempting. It seems we have a well supplied market immune from thegeopolitical skirmishes than previously would have sent prices flying…..like stocks..September could be the feast or famine month.
Gold Silver….as i said..I have been bullish on Gold and the breakout above 1350 was a go but fast and furious it went and now the resistance has held around 1520-1580 (formerly lows late 2012 early 2013) and the 200 day moving average is way under current prices….so absent a parabolic breakout thru 1600 (1700 next target)….I say let’s see if we can get aboard 1375-1450 area.Silver…pretty much ditto the Gold story and while the white metal is being touting as a cheap metal that will close the gap in the Silver Gold Ratio but I suspect that the industrial uses for silver and platinum have changed which may explain the differences.
SOYBEANS….well we continue to see no buys out of China and I’ve seen farmers and there reps crying on TV about how bad their businesses have gone….but until I see closes above 9 and 950-10….I’m not seeing any home run here.
Email us at optionprofessor @gmail.com with any questions or to set up a time to reviews questions you want to discuss.
REMEMBER past performance is not necessarily indicative of future results. There is a substantial risk of loss in options, short term trading and all investments. They are not right for everyone. Consult your clearing firm/broker-advisor to determine suitability.
NEWS: Well the big news this week should really not surprise anyone & sets right in my base case. The S&P 500 may very well have seen a short term peak @ 3027 and it’s failure to take out 2950-3000 sets up a further downside move. The Fed in Jackson Hole essentially says that they will watch the data which shows decent consumers spending albeit on credit and that the trade war is killing manufacturing, capital expenditures and the farmers. Trump appears unhinged with his banter and Powell will not underwrite either overly aggressive trade/currency wars or short term re-election schemes. Save some ammo for a rainy day.
Stock Market- I never liked the rally to 3027 and said so. My reasons included the lack of new highs in some major stocks and more importantly the Transports (DJTA) and the Russell 200 (RUT). Today; on a percentage basis, both are far weaker than DJIA/SPX. Cut to the chase; the rollover has support at 2825 and 2700 area but with VIX @ 20 area plus the Presidential banter…who knows?
If you want to discuss how the uses and risks of protecting your portfolio…email us @ [email protected]
International…strong dollar and trade wars weigh on Europe & Asia & Emerging Markets….don’t catch a falling knife but also don’t put your head in the sand. If & When this thing settles down (maybe by mid Oct); valuations & prices & trends may be much more compelling. Cooler heads/humility must prevail on trade and today that seems far fetched….but we all know things can change.
Bond Market- Yields dropped sharply with an inversion and the 30 yr Treasury hitting record lows. The returns on long term duration (EDV) are many times the historical norm so one wonders if a pause to refresh is in the cards. I do know if economic number (GDP/Inflation) were to surprise on the upside in Q3-Q4; the risk on duration would be huge. Right Now..not the case.
High Yield- this is an area that is giving a clue that stocks are just having a correction. So far HYG has not broken & one would think that if it was game over; HYG & Leveraged Loans-International (VWOB) and the bunch would be in the toilet. So far; they are not.
US Dollar-good size drop today on DXY but still well within the parameters I have said which is 99-95 (97-98 area now). Hey, a strong economy & elevated comparable rates will get people hanging around your currency.
Crude Oil-still stuck between 50-60 (53-54 now). A break above 60-65-70 would certainly make the oil stocks interesting as their
P/E ratios and Dividend Yields are nothing to sneeze at. Right now….it’s a falling knife.
Gold Silver–OK I have been talking the bull story since the break above 1350 witha pullback call @ 1520 area which we saw.
Right Now..turmoil and budget deficits and stimulus talk globally sounds like printed money is getting out of control. A percentage held in GDX & GDXJ has been a good call and remains so but still be aware that we are way above the 200 day moving average.
Soybeans- China was supposed to be buying now they got tariffs on the beans…a real tank job. As I’ve said before break above 9-950-10 combined with new would get my attention….farmers not as made whole as previously advertised.
EMAIL [email protected] with comments/questions or requests for specific on what we are monitoring.
REMEMBER-Disclosure: There is a substantial risk of loss in options/futures and short term trading and they are not right for everyone. Consult your Advisor, Broker and Brokerage firm to discuss what is suitable for you. Past Performance is not necessarily indicative of future results.
Here are our VIEWS & OPINIONS
NEWS….The yield on all Treasuries & Stocks came down sharply this week in reaction to inversion of the yield curve. By week’s end yields rose and Stocks recovered a bit. Gold shares slide off their highs while the dollar was firm as was oil prices.
Stock Market- I saw a break under 2975-2950/VIX +17 as a sell signal but said that if 2800-2700 hold then a Q4 rally may still be in the cards. Quality high yielding stocks are of interest as it appears that the FED will cut at least a ¼ point in September Consumer data remains good which is 70% of growth. Also; tech, semis, financials and small caps & MAGA could see a turn if we hold and get a Q4 rally. Resistance now @ 2950-3000. In China watching BABA &FXI..FEZ –Europe.. US– SMH JPM MAGA
Bond Market- 10 year Treasuries broke 1.5% and the 30 year hit all time lows under 2%. My take is there is a panic to get in and that sometimes is not a good idea. Some long term bond etf’s are 30%+ above their 200 day moving averages and YTD returns are 4X normal. Consumer/employment good…prices /wages are rising a bit…earnings OK & comps will be getting easier in Q3 and beyond….are we underestimating European growth/possible ECB stimulus/China deal/GDP-inflation surprise??….if so China-US-Europe stock rise and rates back up. If you follow the herd long enough..you know what can happen.
US Dollar-as I’ve said all along…the trading range is 98-99 top range..94-96 bottom range…need a sustained break to call it.
GOLD-SILVER- as I have said the breakout was 1350-1375 and the Silver 14-15….now we have come a long way fast so 1520-1580 is resistance which is former lows in the past and we are way above the 200 day moving averages. My take is the metals either go parabolic further or more likely sideways-pullback. GDX/GDXJ/SIL/SILJ (large & small cap miners) pulled back a bit. Everyone clamors about cheapness of Silver & Platinum due to historical rates to Gold—Have they lost some industrial uses?
Crude Oil—seems well supplied & impervious to geo political news..however if the Q4 contrarian view materializes and we clear 60-70…watch out…prices way down & sentiment stinks.
Soybeans..still keeping an eye out for that Chinese buying…so far like waiting for Godot..if it clears 9.50 & 10.50….let me know
EMAIL [email protected] with any questions for us.
REMEMBER..past performance is not necessarily indicative of future results. Options & trading involves substantial risk of loss and definitely not right for everyone. Consult with your broker/clearing firm/yourself to determine your suitability.
This is a text only update:
Stock Market…Stocks continue to have a volatile week and while it is remains possible the short term highs are in place; the current support in the 5% -10% correction territories remain intact.
Bond Market….yields continued to fall this week and high yield (HYG) gave way earlier in the week but recovered by week’s end
US Dollar….the dollar (DXY) has certainly come off its highs in recent weeks but was essentially stable at elevated levels.
Gold-Silver…..Gold & Silver soared earlier this week with talk of devaluations worldwide but faded off the highs by weeks end.
Crude Oil….earlier this week oil prices sold off flirting with the key $ 50 per barrel price support while ending the week with a rally regaining about half the lost ground.
Soybeans…strong week for the beansof about 40 cents off the lows by weeks end.
MY VIEWS & OBSERVATIONS
Stock Market….S&P 500 entered my red zone (2950-3100) wherein my belief lightening up/hedging made sense. I’ve said a break under 2950/VIX +17 could see an acceleration of prices to the downside which is exactly what we saw. The snap back rally should have resistance between the 2950 and 3000 area. The longer the trade war goes on…downward pressure on rates and rethinking corporate profits and valuation may continue…..2800 area (200 day M/A) and May lows (2700 area) could arrive if news doesn’t change….Volatility’s back! As I’ve said RUT & DJTA no making new highs and momentum fading is not bullish Up sectors this week REITS/Utilities, Health Care KO & MCD CHV while down moves in Tech & Financials CAT INTC PFE IBM 3M. Looking for yields & safety??
EMAIL [email protected] with any questions.
Bond Market…..yield fell precipitously this week and snapped up abit by weeks end. The RSI is way up & TLT failed to exceed 144. Both those things make me believe that the highs in price and the low in yields (10-year @ 1.59%) maybe temporary turning points if not exceeded this coming week. Never can I recall when an administration & the markets bullied a Fed into policy…Stay Tuned!
US Dollar….I have said for many months the basic range for DXY is 98-99 nad 94-95 nad should that range break and hold we may be able to decide where we are going. Where’s your alternative? The Euro is dealing with negative yield, political unrest, Brexit among other things…while in Asia Japan amy be slowing & fighting with Korea. Our economic numbers ain’t bad and the yield advantage is great. Trump wants rates & the Dollar lower…one out of 2 is not bad!…Still Rangebound
Gold- Silver….big bull trend on it’s way but short term we have overstretched RSI and resistance between 1520-1580 where the market broke from year ago. So if you wanted to look at taking something off the table or hedging…that’s the neighborhood I would look at. However; the mantra of lower rates lower dollar higher inflation is all music to the metals ears so it could just go parabolic. Ther are many metals stocks and leasing of metals that I follow who have had very strong runs with potentially more runway if we can keep the metals running. Gold-Silver ratio has tightened somewhat to th high 80’s…some see more moves.
EMAIL [email protected] with any questions
Crude Oil…..pressure contines on prices albeit a reprieve at weeks end. Will it break 50 and accelerate to the downside or will it take out 60-65 and get on thye bicycle??..If it’s the latter…RDS.a, CVX, BP, and many other could be interesting on a yield and valuation basis.
Soybeans….came roaring back this week but still don’t trust it until we can sustain 9+ nad clear 9.50. If we get a China deal…maybe demand could strip supply and we could get a run…it’s been awhile since we could say soybeans an a big run
EMAIL [email protected]
Remember past performance is not necessarily indicative of future results. There is a substantial risk of loss in options and short term trading and it is not right for everyone. Talk to your clearing firm, broker and any advisor you may have to determine your suitability. Use risk capital.