May 28 2021 Option Professor Opinions & Observations
Greetings & Happy Memorial Day Weekend to Everyone!
The Option Professor is a Graduate of Boston College with Decades of Investing Experience. He has Educated Thousands of Investors on the Uses & Risks of Investing.
We have has a little bit of a pattern in the last 3 months of the S&P 500 starting up as we start the month and at some point have a pullback and finishing the month strong……except this month we did not make NEW HIGHS for the month as the HIGH of S&P 4238 was intact as we went home at 4204. The CBOE volatility index hit 15.90 toady but closed at 16.76 which was over 5% jump accelerating rapidly on the last hour of trading. It is known that household and 401k net worth is high and pent up demand is strong which is viewed as tailwinds BUT we must realize that household spending slowed last month considerably and durable goods orders declined 1.3% while core inflation hit the highest levels since 1992 (long time ago). Ahead we may see a Fed, Money Supply & Stimulus tapering and a slowing of inflation & GDP due to higher costs and the obvious pull forward of demand in housing (prices +20%), used cars (+10%) ect.. Earnings expectations are at about 190 this year X 22 P/E = 4180 and next year 209 x 22 =4598. If we see a very possible valuation compression; those numbers change dramatically. Earnings should be good this year with bottle neck costs absorbed by a desperate to have fun consumers. Next year the novelty of being overcharged for gas, food, air fare, hotels, dining, housing, and many other things could wear off. WHY BE CONCERNED WITH MARKETS NEAR ALL TIME HIGHS?……Our MAIN CONCERN is TECHNICAL and it is the distance between the CURRENT S&P 500 4200 Level and our 1yr 2 yr 3yr on our 20 year charts which come in at 3647 1yr, 3321 2yr & 3140 3yr. Historically; when a high point is reached and we are way above the LT MA’s…it doesn’t take too long to revert back toward the mean. Since this month we were at one point about 1,000 points ABOVE the 3 yr MA….we would be foolish not to prepare for a turn IF price evidence supports it. Rampant participation (millions of new investor accounts) and rampant speculation (valuations-spacs-meme stocks-junk bond issuance-Cape Ratio record levels ect) doesn’t happen at market bottoms. There is some data suggesting that when yields PEAK (Treasuries 10 yr 1.75% & 30yr 2.55% in March) within 2 -4 months later stocks peak. BOTTOM LINE…We have no interest fighting the tape nor fighting the Fed…..if in June make NEW HIGHS then the Odds of a melt up toward 4400-4600 in the 2nd half Increase. HOWEVER…should we take out 4160 and VIX takes out 30….knowing how Collars, Trimming, Asset Allocation Models (Stocks vs Bonds) works may Help Reduce Risk.
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So many stocks so little time….whether it be the autos (F GM TSLA) or Transports (DJTA) Financials (Banks) Leisure (PEJ) Pot stocks (CRON) Gaming (DKNG) BA or the meme’s GME Express Skillz AMC BB or earnings darlings CRM & NVDA..there was something for everyone this week:):)….In our letter SUBSCRIBERS got our opinion on NVDA and potential price action BEFORE the July split and the June 3 confirmation…and this week NVDA moved as we wished. Lots of chatter on AMC (1000 theatres reopen/some competitors bankrupt 25% mkt share jump)…lots o chatter on TLRY BB & NOK too. More Russian hacks could make for interesting price action on FEYE, Palo, Zscaler & Crowdstrike (earnings next week along with ZM RH CGC CPB LULU STNE. There are so many sectors and moving parts to cover here that it would be impossible to do it justice….we have strong feeling to share with subscribers about ASSET ALLOCATION models as we go thru the rest of the year…..take the time to go our WEBSITE and start getting our insights optionprofessor.com/subscribe and for $49 bucks monthly or @297 annual (works out to only $24.75 per month) we will SHARE with you our opinions-observations on Stocks, Dividends, Gold, Oil Europe & Emerging Markets!
The Fed used record repo numbers as the amount of cash earning nothing balloons. The junk bond market explode to busiest May ever yet we saw OUTFLOWS from junk bond funds. IG issuance very heavy and continual from financial companies. Shorting volatility has been the way to go since the spike in March and may continue to be the thing to do until we get to Jackson Hole in August when volatility could pick up into year end. We said for 2 months that the top in yields is in until we see different as obviously the inflation & economic numbers were baked into prices during the worst Quarter for duration/bonds in many many years. We explain our position on FIXED INCOME and DIVIDENDS each week in the newsletter & where to get yield SUBSCRIBE optionprofessor.com/subscribe & Get Our Focus List!
US Dollar/International Markets
The Dollar (DXY) closed at 90.05 Friday and while it tried to rally off the 89 area it slid by EOW. We told readers that the break UNDER 91.75 marked the end of the rebound rally & now we need a rally ABOVE 91.25-91.50 to get back on the horse otherwise the trend remains down. China is pegging the Yuan at 6.385. International Markets have been on SUBSCRIBERS radar for some time as Europe had done great and Emerging Market currencies are at record levels. Each week we explain how to gain exposure to Asia, Europe Emerging Markets Pacific Markets and Latin America. The reopening story has many layers and we are explaining what we see NOW.. Go to optionprofessor.com/subscribe!
Crude Oil/Natural Gas
OPEC meets this week and we have Euro PPI & USA+Euro PMI’s plus claims & a jobs report also this week. No wonder why we stalled in prices. Our position has been for the last year is to be bullish Energy as they say 6% of US Vehicle sales will be electric by 2025…we say that leaves 94% still looking for fossil fuels! Anything over 50-55 sets up some great free cash flow for these companies and demand for cars & jets is not headed south. We have explicit ways of getting on this train and share them with SUBSCRIBERS. We told readers that natural gas turned up at 2.50 (now 3.01) and LNG at 70 (now 84.90)..another good week for that one. LEARN MORE go to optionprofessor.com/subscribe!
Gold Silver Platinum Copper Crypto
We told readers of the TURN of Gold Silver and Platinum back in March and we continue to like what we see. Copper prices pulled back but demand supply dynamics still very favorable. The POTENTIAL OPPORTUNITY on BitCoin (GBTC) and Ethereum (ETHE) lies in some technical points on Fibonacci reading at GBTC 28 or 22 areas (200 day about 30) and ETHE staying above 20-23 (200 day is about 15)..we favor Ethereum as it has a programmable block chain that some have tried to compare it to Amazon Web Services (AWS) which is a lofty comparison and certainly generates debate. Go to optionprofessor.com/subscribe LEARN about Gold Silver Copper Crypto Technically & Fundamentally.
Soybeans Sugar Coffee
We have spoke of these three to reader since Beans were 8 bucks Sugar at 10-12 and Coffee was under 100!! WOW have times an prices changed…China demand, weather, crop reports, shortages and much more. There are ETF’s investors use to gain exposure….go to optionprofessor.com/subscribe….learn what they are and the uses & risks today!
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. Opinions & Observations provided for information purposes only.