Update 70: OPINION & OBSERVATIONS
November 29 2019
OPINION & OBSERVATIONS
THIS WEEK/NEXT WEEK
As I expected this week; most markets were remaining in their trading range while me & my sons explored Oahu & Maui:):)
Noticeable exception were the major indices which continued up a slow moving path to yet more new highs and even the
the low moving RUT made a 52 week high but remains well below it all time high of about 1750 set in summer 2018. While the top of our sell zone @ 3100 has been taken out by about 50 point and as we said last week it could extend to a Fibonacci number around 3200. With the VIX hitting under 11.50 this week, valuations high, Dec 15th tariffs potential; it seems rather obvious it could be a reasonable time to look at writing calls (in/out/or at the money), Collars or donating a bit of profit to put insurance.
Stocks that got hit this week were connected to the Opioid liability potential (McKeon-Teva) or the failure of a China buying spree that is supposed to come out of Phase One. It appears that money that has made it way to the farmer had been directed toward paying down debt (lot of bankruptcies) and rainy day reserves but not to new equipment ergo Deere got whacked. Banking stocks and biotechs have fared well lately helping push that Russell to new high ground however most stock indices did turn lower Friday while the Tranports (DJTA) moved away from 11K and the VIX jumped 7%……so as we said until the S&P stops making new highs on a daily and or weekly basis….traders lack a actualized price to trade against or defend from the sell side.
NEXT WEEK….we have manufacturing data both here and abroad, trade balance, LaGarde speaks & Friday Jobs – closer to Dec 15.
Stock Market
What can you do with a market that keep pitting out new all time highs on a Daily/Weekly/Monthly basis? Well of course there are countless thing one can do including but not limited to…enjoy the appreciation of your assets/ look at asset allocation and consider re-balancing, consider hedging or protecting ones gains/value, or hope that earnings will increase/rate stay low or drop/a trade deal open up revenue streams (40% of many companies revenue come from overseas)/the US Dollar decline helping multi-nationals/the inflation number remain subdued/Unemployment remains low & cap ex-business investment/PMI’s move up. While that seems like a lot to ask for we sometimes feel that is exactly what the market is now pricing in for 2020…too rosy??
Bond Market
The issuance of debt both here and Europe/Asia continues to explode…will it pop if retails slows (Dollar Tree/Kohls/Macy) or the Auto business or if any general slowing cause a reexamination of the covenants & collateral on this debt and an event cause the proverbial shot heard around the world. What I see i a greed for yield as the FED has essentially gone QE again and if the markets or the economy burps they are ready with the printing presses…since the admin ha a history in real estate; asset bubbles and dirt cheap rates with leverage exploding on the consumer side is music to their ears…..WOW….possible aftermath could get very wild.
If we take out 1.40% on 10 yr Treasuries who knows how low you go…above 2.25% then a ton of bulls will have explaining to do.
US Dollar
To get to the point..base case remain 99-95 trading range on DXY it’ rebounded for a 98 handle…listen to LaGarde and watch Germany’s number this week….maybe the case will improve if he instigate stimulus, PMI’s recover & Johnson can get on with it (Brexit)…..one would think that late cycle deficits that could choke a race horse would be favorable to the other guy’ currency.
Crude Oil
Things could get interesting soon a OPEC i meeting and Saudi i the one with excess capacity & an ARAMCO deal coming to the ever shrinking oil market but oil have have rolled over and oil price had a lousy week..range 60-50 remain..stay patient
Gold/Silver
OK we aid the market broke out @ 1350 and got way overdone @ 1580 o the idea wa if you till believe there i plenty of runway ahead we focused on 3 re-entry point 1450-1400-1350…..well we hit the first one and many of the mining fund held their 200 day moving averages…..are we out of the wood yet….early to tell….but goal of a weaker dollar & more inflation/debt feeds the story also a guess that a digital alternative may favor metals.
Soybean
Backsliding in the last month a the waiting game is stopping the bull from pressing bets as we tried to take out 950 and now we are trading under the 50 day & 200 day moving averages. Of course; news could change things on a dime before Dec 15 tariffs .Deere’s gloomy ..farmers are more concerned with debt reduction & rainy day fund than come line bets on new farm equipment
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REMEMBER
There is a substantial risk of loss in option and short term trading and it i not suitable for everyone. Consult your broker and brokerage firm to discuss your own suitability. Past performance is not necessarily indicative of future results.
