Update 118: Stock Market-Our Accurate Forecast Review-Read More
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:):):
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Stock Market
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
Bond Market
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
Soybeans-Sugar-Coffee
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.
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