Jim Kenney
Author Archives: Jim Kenney
Jim Kenney
Option Professor-Stocks-Panic to Joy-Tech Earnings Out-Time to Fade-Trade-Read On!
July 24 2021 Option Professor Opinions & Observations
Good Day Everyone!….What a week we just had….on Monday the fears of the Variant causing a growth scare got the S&P to tank (pretty much to its 50 day moving average) and then by Friday soar as short covering and sideline cash took us to a new high on major indexes. The combination of Snap & Twitter coming in with great results and guidance by companies at 20 year highs flushed out the naysayers but in reality took us a little bit above from where we were the a week ago. As we said BEFORE the month began…July will be choppy & potentially brutal…well if you checked your P&L on Monday..it looked kinda brutal. There are conflicting views on what lies ahead…the whole planet is bullish which is concerning (positioning)….and we are well over 1000 points above our LT3yr MA @ 3227….Over 7,000 Dow points @ 27,707….and OVER 5,000 Nasdaq points at 9,825….so overbought is an understatement. Countering that argument is Liquidity & Yields on Treasuries PLUS Earnings on the S&P that according to Ed Hyman at Evercore has estimated 220 for Q2…estimated 230 for Q3 and 240 for Q4…at 19X1 P/E could mean 4180 now then 4370 & 4560. Inflation is not going anywhere….rents are up 9.2% for the first 6 months and expect 6% for the year…they’re a huge part of CPI & PCE…wages are climbing everywhere…even fat cats at Black Rock are getting an 85 pop….and housing has gone thru the roof not yet accounted for in the numbers. Companies are passing costs along and if Chipotle raises prices…do you think they’re going to take them down soon??…companies know the consumer got $$ and they’ll get it! Breadth in the market is narrowing as about 50% of the jump in the Nasdaq 100 this year has come from 8 stocks (MSFT GOOG AMD NVDA AMZN FB MRNA PYPL). NEXT WEEK we get earning from the big tech guys and some buying late this week was front running those number which should be monster as Snap & Twitter set the stage. ALSO the Fed speaks on Wed and other data will come out including income & spending expected strong. B of A says global PMI’s peaked in May and the Jobs report showed Claims JUMPED…but some say id you focus on the clouds you miss blue skies. Three big RISKS remain Variants + Inflation + China geo-political…..the Fed meets in Jax Hole Aug 27 plus Sept 22 plus Nov3 and ends in Dec15th…BUT….if you expect the Fed to lead you are a fool…like the police…they come in after the fact…by the time they change policy…..the mess is already upon us….so behind the curve they happily remain. Despite the rally Friday the VIX closed ABOVE where it opened…so if that gets back above 18-20…maybe some rain falls Remember we are monitoring the theory that Stocks Top 2-4 months after yields top so March+4=July…1 week to go? We have explained how to get Income Growth International & Speculative exposure to SUBSCRIBERS-Get Our Insights!
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Stock Market
Next week it will be about earnings on tech and then what?? There are a lot of sectors that still are struggling a bit although Tech Consumer Discretionary Health Cate and Communications are not amongst them. The reflation trade including metals & energy are discounted so we keep an eye on them for a turn. The value trade has had the bloom taken off the rose with the disintegration of yields and the yield curve. PFE & BioNtech got good news with 200 million more doses. AXP got a record number of new accounts (household wealth & travel) and revenue spiked too. It looks like nothing will stop the bull run except something unexpected so we enjoy the ride and look for signs of surprises.
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Bond Market
The trillion dollar Treasury market is not supposed to gyrate in price like it did lately. Are yields dropping due to worldwide liquidity coming our way> Are yields dropping because some in the know sees a big drop in stocks coming (like in the 2 months prior to the March 2020 collapse)? Are they dropping because the road ahead will get slow?? Whatever the reason 10 yr at 1.75% in March has been solidified. Corporate debt is a joke….Carnival CCL just sold 7 yr notes at 4% replacing 7yr notes issued last year at 11.5%…..yes defaults look like low risk now…but the LEVERAGE on corporate balance sheets is enormous and when was the last time excessive leverage ended well? Senior Loans are now interesting to some and Munis look great as states are collecting big time on higher incomes. Preferreds and EM Sovereign debt has bounced nicely….so income investors are hitting on all cylinders….who’s right stocks or bonds??
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US Dollar/International Markets
The Dollar (DXY) has done as we forecast.. held the lows and rallied messing up the shorts and positioning just like bonds (another forecast that proved correct). The 50-200 day MA’s come in at 91.36/90.90 inverted to the upside so the trend is up albeit slightly extended. Inflation has hit emerging markets like Brazil & Russia pretty hard and as a consequence their interest rates are jumping. Europe Asia-Pacific & EM (Latin America Yes China No) are hanging in there but their vaccination rates and reopening are going badly (Japan). The big story here is China who cancelled orders for Corn..and is nationalizing the education firms possibly sending them in the tank PLUS FXI KWEB BABA BIDU and anything else answering to Xi. Sure they are discounted but where is this regime going?…After 2022 Olympics??
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Crude Oil/Natural Gas
Crude prices snapped back but what about the energy shares?….Last time we saw this lagging divergence between the commodity and its stocks was in Gold last year when we hit about $2100 Gold and the stocks lagged. Result was the stocks were right and Gold tanked to $1675…Again??….If not these stocks are a huge bargain as Baker & SLB think Shale will be slow to return keeping supplies tight as firms return capital )Vitol $2.9 Billion) rather than invest. We will keep subscribers up to date on our thoughts. We told everyone that Natural Gas was a buy at 2.50 (now at 4.04) and LNG was a go at 70 (now 83.89)….why not stay informed by subscribing and gain from our decades of experience??
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Gold Silver Platinum Copper Crypto
We told you last week that we want these metals to trade and hold ABOVE the 1 yr MA on our long term charts. So far that has not happened so we are sidelined after catching a great move from the March lows where we got bullish. As we said copper was consolidating but still had great supply demand fundamentals (the new oil). This we we popped to the upside and we are trading above the 50/200 day MA’s inverted to the upside. We told you the 61.8% corrections in both GBTC & ETHE from their lows to their highs may be OVER and we will see if prices can build on their gains from this week. The meeting with Wood-Musk-Dorsey (3 Musketeers) seems optimistic so let’s see if China’s damper on mining and the relocating to Canada & USA fixes the energy usage complaints and like Willie says “on the road again”
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Soybeans Sugar Coffee
Well the big play here is Coffee as a frost in Brazil sent price soaring (didn’t hurt SBUX either=higher prices). Soybeans & Sugar have been stable after a bit of a drop…overall ags-oil-metals have been ok…..should you diversify….too late??
We share ideas about diversified funds…ETF’s on specific markets….want to educate yourself..optionprofessor.com now
REMEMBER There is a risk of loss in all investing and it is not right for everyone. Consult your brokerage firm/broker/advisor to determine your own suitability. Past performance is not indicative of future results. Information and opinions provided for informational purposes only. It is NOT advice.
Option Professor-Our Call For July Is On-Will Earnings Turn the Tide? Must Read!
July 17 2021 Option Professor Opinions & Observations
Good Day Everyone!……….We told readers over 2 weeks ago that July was going to be choppy & possibly brutal and that is EXACTLY the month we are having so far. We also told readers that NVDA may replicate the price action of AAPL last year BEFORE it ran up citing a pre-split advance of UP about 60% followed by a post-split decline of about 60% of the advance…which so far is EXACTLY how NVDA has traded. We also told you that there is data that suggests that when Treasury yields peak (March 1.75%)…the stock market peaks 2-4 months after which would be now in July….we will monitor that one closely. We like using LT moving averages as one of our go to tools to determine trend direction and of course since last year it has been effective to smooth out the bumps HOWEVER if there is a trading range market their effectiveness is removed. The whole world knows earnings will be good versus last year as we were in lock down in Q2 2020…..but the music may be changing due to a number of factors such as inflation (can companies pass thru costs). This may have been addressed by retail sales surprising jump and the CEO of Macy’s saying he welcomes higher apparel prices. Another factor is consumer sentiment which is tanking as only 30% think home buying conditions are attractive (no loan demand) but counting on consumers to spend is always a good bet (leisure) and BofA says almost 70% of stimulus checks have been spent (big data). When we keep hearing 3 dates when comparing inflation they seem to be 2000, 2008 and 1981…..the problem we have is all those years would be they were either followed by a crash or a big spike in interest rates and tangible assets. Some say the return of workers this fall, supplies replenished and the technological efficiency enhancements (big factor) will kill all that but we’re not so sure. Some very sharp people are concerned that by year end the piper will get paid as Bonds are ridiculously OVERVALUED and the best thing you can say about stocks is that they are a little less so. All investors can see from their account values (P&L) that we are slowing down or correcting….our LT moving averages are still inverted to the upside so LT still bullish BUT if we do not take out the July highs in AUGUST…and inflation is still in the news…collars, married puts and trimming may be savior. VARIANT RISK is looming as morons with a microphone (many) make money by scaring citizens on vaccines. We will update SUBSCRIBERS as to what sectors we like….which ones to avoid…& if a major correction is on.
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Stock Market
Next week we get more earnings from the likes of IBM KO NFLX JNJ TWTR AAL AXP so we get a taste of a wide variety of businesses. The banks gave us a sell the fact reaction and we wonder if these companies will do the same although the banks were hurt by an oversized run into the reports…not such a risk for some of these. Our short term indicators on S&P show MA’s and RSI in negative territory and Russell-Transports look terrible. Hope is not a strategy so we best see a turn in prices off these earnings and since short term we may be bit oversold so it is possible. The future is clouded by the VARIANT RISK plus inflation which either hits the bottom line if it is not passed thru to the consumer or at some point is systemic in the economy…neither outcomes sounds attractive. The Fed is accommodative but some of them sound like if by Jax Hole they still see high numbers….emergency accommodation will leave the building. Let’s see if we get our boat legs back this week as we see if the monthly lows (S&P 4250) can hold and price reconstruct. We educate subscribers on where to go for growth and dividend income..check it out optionprofessor.com/subscribe
Bond Market
Most traders cannot believe that with inflation running this hot and earnings robust yields are declining…but they are. We told subscribers that we were way oversold in Q1 and positioning for higher rates was a joke. The taper tantrum happened then and until we take out 1.75% 10yr Treasuries/2.55% 30 yr that has been the way to bet. Why are rates so low??…our guess is the flood of liquidity in the system (huge % of all dollars in circulation printed in the last year) and of course the firm dollar and yield advantage over Europe & Asia. You could get a high yield out of China but good luck with that after the 2022 Olympics when their polite demeanor could change dramatically (go ask Hong Kong). It’s all working for us INCOME seekers now from Munis to High Yield Corporates to Senior Loans to EM Sovereign Debt.
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US Dollar/International Markets
The trend on the Dollar is Up and has been since after the correction ended with a break above 90…now support is 91 but RSI’s are above 50 and do you want the Euro or Yen until they figure out their Delta Variant Risks/Inoculations?? On the International markets…..we are back on the defensive in Asia-Pacific (Japan Korea-Australia) and Europe so Caveat Emptor there and Cathie Wood’s reportedly dumping China exposure as Wall St is coming around to the concept many already knew which is a new Cold War with China. If this VARIANT leads to shutdowns; all bets are off for more upside progress and there are plenty of people to leave the theatre BUT with rates so low you may see TINA (there is no alternative) com to the rescue on sell offs…right now upside momentum has left the building. Our Latin American friend in Mexico and Brazil may do well as they are natural resource rich in an inflationary environment.
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Crude Oil/Natural Gas
The oil market is in a tug of war….the oil prices have been generally of (this week they lost altitude) but the oil stocks have been slipping big time. Some say that will close in the months ahead but we are questioning that as the slippage in shares is getting serious. When the 1 month-6month-1 year MA’s and RSI’s are flashing breakdown and have so for months and a VARIANT risk looks real…..you are left with the last rung to hold on the subway….the LT MA’s & RSI. For the bulls they are still intact so our call is we could be coming into an outstanding buying opportunity here as the averages are being tested and the RSI’s are nearing that 50 level….also the LT MA’s are inverted to the upside…so it’s seatbelt time dust off the buy the dip in a bull market theory….we’re going on sale….but not a bear market in our view. Natural Gas is a horse of a different color at this time as our bull call at 2.50 remains (now3.67) and LNG call at 70 (83+)
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Gold Silver Platinum Copper & Crypto
The precious metals tried to get started but by the end of the week they were losing their legs. Some say inflation will rage and paper fiat currency printing is at insane levels while others like Cathie Wood say workers return, bottlenecks will fade and technology will cause DEFLATION….who knows??…so we follow the tape which like oil suggests long term trend are bullish and we need to surpass and maintain prices above the 1 yr MA on our long term graph to get these horses running (Gold +1830-Silver+25.70-Platinum +1060)…Copper has lost altitude since it topped at 4.80 (LT MA at 3.80) but it is the new oil they say with massive infrastructure and China demand in front of us, China has been trying to DEFLATE everything in their path including their stock valuations and commodities (with obvious results). The only thing we say about BitCoin & Ethereum is the press stinks now (China & mining plus energy usage etc) and so do prices BUT let’s look at our old buddy Fibonacci to get some perspective….GBTC started its run from 5 bucks and ran to almost 60 (a 55 dollar move) so 61.8% of 55 is about 34 AND 58 has been the high so 58 minus 34 is 24 which has also been the low of the down move so let’s see if our buddy from the Middle Ages may be telling us we are near the lows:)
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Soybeans Sugar Coffee
All three were our favorites last year BEFORE they had huge moves to the upside…..now all 3 have hit short term peaks and are consolidating. We have ways of playing these markets as part of a basket or individual ETF’s-EDUCATE– LEARN
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REMEMBER There is a risk of loss in all investing and it is not right for everyone. Consult your brokerage firm/broker advisor to determine your own suitability. Past performance is not indicative of future results. Opinions and information are provided for informational purposes only. It is NOT advice
Option Professor-Stocks-Was it a Head Fake or Change in Direction? Must Read!
July 9 2021 Option Professor Opinions & Observations
Greetings All!……OK…what the heck just happened this week??…with the NBA finals in full bloom & our love of the game of basketball…we use the head fake/change of direction analogy:)….we saw our short term (5 day & 1 month chart) moving averages (about SP 4280 & 1.25% 10 yr) penetrated as a variant/growth scare/yield drop got everybody dumping stocks and buying Treasuries on Thursday. We then got word the Fed is going to “support the recovery” until it is complete..which people took as until unemployment goes back to full levels. Traders took that as a dovish Fed until pigs fly because with technology, operating leverage ect…..those jobs are goin’ boys & they ain’t comin’ back…Bruce S. The question is “are the slowdown/lower yields traders” correct or “are the growth/higher inflation/higher rates guys correct”….as usual we follow the numbers but what if we are in for a choppy July (meaning if you buy strength or sell weakness you’re a loser as the market never follows thru? This week will be very big as we get bank earnings (already they’re talking trading revenues down 40% & yield curve flatter so bye bye profits)….CPI & PPI (inflation numbers)…and if they’re not lying…could they be low? Many sectors had a bounce (value-banks industrials-materials-energy ect) but they still are below highs & moving averages. Some say go all in on cyclicals, value mega tech and short bonds looking for higher rates as recent price history was a blip….liquidity abounds, long term trends are up, the Fed kissed the bulls ring and strong markets stay strong BUT the recovery is not linear (ask China-Japan ect) and at some point valuations will get compressed (ask China) so the all you can eat buffet remained open this week despite a rocky road…if we get 190 in earnings on the S&P…will we valuate it at 25X=4750 22X=4180 or normalize to 20X=3800 or norm 15X=2850!! No one is prepared for the latter and by the end of the year (less than 6 months)..we believe the answer will emerge. There was a huge spike in volume in VT & VTI (broad based domestic stock and world stock ETF’s) this week which has at times been a precursor to a follow thru…let’s see if earnings & liquidity keep us going and see if fear is the other guys problem…..having played hoops for decades…we’ve been on both sides of head fakes…we’ll see who looks foolish!
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Stock Market
Briefly; the stock market intermediate and long term charts and moving averages stayed in good shape this week but remain way overbought basis the moving averages which like Fibonacci number act like magnets (reversion to mean) over time. Broad based stock ETF’s, healthcare, communications, real estate, consumer discretionary & big tech have the best relative strength…with the value trade trying to get back on the horse (banks, industrials, materials, energy). We have a group of stocks that we feel could be very scalable which can lead to explosive growth…spend an little money…join us either month to month or go annual…and we share these stocks…plus our decades of insights we share. Go to optionprofessor.com/subscribe and start educating yourself and should you have questions…just email us today.
Bond Market
It got wild this week as we saw yields plummet only to spike by Friday. Next week we get inflation numbers. The tug of war between the range bound/buy duration crowd (10 yr 1.50% to ,50% and the it was just a blip and we go to 1.75%-2.25% by year end continues. All we know is the Income ideas we have shared with subscribers have been fine ranging from tax free, corporates, preferred, senior loans and high yield. We have specific opinions on where to look for dividends & other income. Go to optionprofessor.com/subscribe….spend a little and get information that can help.
U.S. Dollar/International Markets
Briefly; we have said the US Dollar has huge support at DXY 88-90..until taken out we remain bullish….our yields dropping may hurt the dollar and if it ever takes out the support…yields, stocks and metals will get very volatile as if it tanks on news…repricing of the aforementioned could be substantial. The foreign markets of Europe & Emerging Markets are the next games in town as vaccinations and the variants are keeping them at bay. Valuations and the reopening trade being ahead of them means opportunity Subscribe @ optionprofessor.com/subscribe & LEARN!
Crude Oil Natural Gas
The story here is OPEC and the market says who cares? We have deficits going and supplies may be slow since private equity has left the building there is no cap ex top speak of now. Who wants to invest in fossil fuels when the planet is baking itself to death in heat waves and governments are all in on EV’s? We recognize the possibility of a correction as oil stocks still lag but demand has the upper hand to supply so the longer term future should be there. Natural Gas supplies have tightened and energy demand with the summer is off the charts. We got bullish at 2.50 long ago and LNG was our play at 70 and it closed up 25% above that point. We shares our opinions on how we see the energy markets and we suggest you subscribe and take advantage of the information. Go to optionprofessor.com/subscribe
Gold Silver Platinum Copper Crypto
All the metals & inflation hedges-stores of value have been on the defensive but in the next 60 days we see a potential major tide change and we will keep subscriber in the know as to our views. We were bullish at the March lows on their Fibonacci pullbacks and unless they take out those levels we have our buy radar out looking for an entry. Inflation worldwide is on fire and central banks are buying…go to optionprofessor.com/subscribe..Don’t miss out!
Soybeans Sugar Coffee
Despite the pullbacks off the huge price runs we saw; there may still be air left in the balloon and depending on how the dollar plays out we could still be in a bullish super cycle that started last March 2020…you can play this with market specific ETF’s or a diversified ETF tracking the Bloomberg Commodity Index….investors missed this boat to DIVERSIFY! Go to optionprofessor.com/subscribe and EDUCATE YOURSELF about these opportunities.
Remember —There is a risk of loss in all investing and it is not right for everyone. Consult your brokerage firm/broker advisor to determine your own suitability. past performance is not indicative of future results. Information and opinions are for informational purpose only. It is not advice.
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Option Professor-Stocks-Are You Ready For A Choppy July? Trim Risk? Must Read!
Happy July 4th Everybody!…..What a difference a year makes as we celebrate Independence Day! We have been following this trend wit Value Stocks an more recently a return to the Tech-Innovator names that got crushed in Q1 only to rise from the ashes in Q2. Historically; the month of July has not been a stellar month and after the giant gains of Q1 & Q2; we anticipate volatility to pick up. Let’s see….short term charts have RSI’s in the 80’s…we’re OVER 1,000 pts above the S&P 500 LT 3yr moving average…the VIX has a 14 handle….IPO’s are at a record pace….junk bonds are turning into investment grade…and after this quarter earning comps get more difficult as input costs and wages may outpace revenue growth. The jobs report showed 850K improvement with more to follow….wages up 3.6% (huge)….and participation flat. Are we at peak inflation, growth and Fed accommodation? Maybe…but consumer spending is up 19% over 2019 according to B of A and what some call pent up demand (revenge spending for being bottled up for 12 months) is roaring. Corporations are full of cash to use for buybacks, dividends (return of capital) and what some see as a 25% Jump in various Capital Expenditures as they are free to take action after a year of restraints….that would only put them back on trend. Recovery is not a trained seal & generally is not linear…..not all news is rosy on inflation and trade (core PCE up the most since 2008 & trade deficit 2nd highest ever). The yield curve steepened & next week PMI’s In our NEWSLETTER: we will be covering replacement trades, trimming, collars, married puts ect. to protect portfolios and also what sectors or stocks look promising in the 2nd half (i.e AAPL V AMZN +2%-6% catch up/Energy stocks divergence with energy prices-catch up-PLUS tangible assets that lagged) SUBSCRIBE option professor.com/subscribe
Stock Market
Records records records…will it ever end….well July is the month that is 4 months after interest rates peaked in March so it’s as good a month as ever to see a pull back. With no price evidence to support that we wait to get such evidence but will not dispute it when it comes…..and at some point it always does. We have ridden the tech & value story as well as consumer discretionary health care and communication runs as well. We told reader when NVDA was 570 that if they had a AAPL type run up pre split….our Fib calculation had us going to 834 (it hit at 820 today!)…we also thought using a short term moving average on a 6 month chart to ride it was reasonable which also worked out. We see a lot of opportunity in the 2nd half of 2021 JOIN US at optionprofessor.com/subscribe and start getting our information.
Bond Market
Rates refuse to move higher meaningfully despite consumer spending, higher inflation, and huge deficits. We are awash in liquidity so there is plenty of money looking for a home. We have been steadfast that until we take out 1.75% 10 yr and 2.55% 30 yr (March highs) duration, high yield and munis made a lot of sense and our opinion remains. In fact; debt was on sale in Q1 and has not looked back since that sell off. Even emerging market debt that got whacked in Q1 has bounced back. We review INCOME ideas weekly Go to optionprofessor.com/subscribe and get informed.
US Dollar & International Markets
The Dollar Index (DXY) turned up after failing to take out 89 in June and our moving averages are rising at 92-91 and 90.75 so while we could see a pull back we are not jumping on the Dollar fade bandwagon until we take out 90 on volume. Europe is having trouble with the Delta variant (a worldwide risk) and Asia-Pacific are behind the 8 ball on vaccinations making the Euro & Yen dodgy at this time. The commodity currencies (Aus$ & Can$) may get renewed life in the weeks ahead if the AUS gets back above 76-77 and the Can holds 79.50. It’s been USA all the way in the equity markets as a pause has hit European stocks, China stocks are back in the tank, and Emerging markets Asia Pacific have been nothing to write home about…we think changes are in the wind. SUBSCRIBE at optionprofessor.com/subscribe
Crude Oil Natural Gas
OPEC couldn’t get a consensus so it looks like tight supplies may be here to stay thru summer. Crude is at 75 and staying above 73 & 70 is a must for the trend to continue…..the big story here is price divergence between the oil prices and the share prices…we share our opinion on how that gets resolved with subscribers. Natural Gas has benifited from the heat wave but conservation pleas have been heard and enacted so while prices hit 3.80 (we got very bullish months ago at 2.50)…it could have been worse. Our favorite LNG still looks good (we got bullish at 70 & it closed 87+) To find out what we think about the energy markets go to optionprofessor.com/subscribe and get onboard!
Gold Silver Platinum Copper Crypto
These markets may very well be sleeping giants for the 2nd half of 2021 as INFLATION may persist and the Fed cannot meet the rise in inflation as the DEBT bubble would burst….jawboning works for awhile them morphs into the boy who cried wolf. The support levels are right under us at the March & June lows and like crypto if you don’t want to buy discounted prices then you may find yourself buying higher prices by year end. To wait for momentum is an option to consider so if we take out prior weekly/monthly highs; the view may be clearer at that time. Industrial metals still seem to have a bid as cap ex spending infrastructure and general construction seems to still be outpacing supplies. We get into specifics on all these markets in the newsletter…educate yourself…SUBSCRIBE optionprofessor.com/subscribe
Soybeans Sugar Coffee
All three markets got hit recently and have bounced back keeping the commodity super cycle bulls feeling better. Getting and staying above 13-14 Beans, getting and staying above 16 Sugar and Above 140-150 Coffee could keep the longer term moving averages from turning down so stay tuned as if the softs metals and oil have big 2nd halves one has to wonder what that does to fiat currencies and assets Stay Informed go to optionprofessor.com/subscribe!
Remember There is risk of loss in all investing and it is not right for everyone. Consult your brokerage firm/broker/advisor to determine your own suitability. Past performance is not indicative of future results. Opinions & information provided is for informational purposes ONLY and it is NOT Advice.
Option Professor-Stocks-The Gift is Gone-Is It Time for Summer Breeze? Must Read!
June 26 2021 Option Professor Opinions & Observations
Welcome Back!….The drop under S&P 500 4200 a week ago was a gift and that gift is gone. Last week BEFORE the Fed meeting and Quad Witching; we sent out an ALERT that Volatility may spike due to a change in Fed speak & the expiration of the huge volume of expiring options ect.. We got EXACTLY what we bargained for on that one. We used the S&P 4180 as important support (the market ran some stops under to 4166 only to get right back above it).. We said we expected the decline to be brief and getting back above S&P 4200 would be the first signal that we are back on the horse…..EXACTLY what we saw this week. Now we feel that any closes UNDER S&P 4160-4180 and maybe even SP 4200 would indicate something is wrong especially going into the July 4th holiday….highly unlikely but nothing is impossible. Investors plowed into retail this week especially the digital marketers (NKE jumped on a 41% jump YOY in digital sales). We sent out an ALERT on the bank stress tests and of course they passed and now the return of capital game begins! This will come in buybacks and dividend hikes. We spoke of NVDA having an AAPL type run up going into the 4-1 split in July and a 200+ dollar rally has ensued. We are now looking at VIAC as an interesting property that could attract buyers as it has a low valuation, a studio and could potentially fill a void of a number of firms….it had a Fibonacci type decline of about 61.8% off its highs and has been climbing ever since it caught our interest under 40…there is a huge gap between 85-90 when it broke from 100 in Q1….WARNING….while the S&P 500 has made a record high; other large indices have failed to do so and it has been a substantial time since their highs (examples of indexes and time since their highs include Russell 2000-11 weeks, Dow Jones Transports 6 weeks, S&P 400 Midcap 8 weeks, DJIA as well). ALSO; companies like FedEX (FDX) let us know labor costs and other challenges are affecting them and with EARNINGS around the corner one must wonder if there will be any SURPRISES derive from MARGINS pinched by these challenges. We believe that by end of summer when positioning is complete; the risks from the FED & Inflation elevate-BE-AWARE
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Stock Market
With the good news on banks and cyclicals stemming from an fade on inflation/higher rate fears; the value trade got off the canvas. The yield curve flattening has given way to a bit more steepening so the jury is still out as to the sustainability of a flatter curve. It time for a Summer of Fun as BKNG & CCl give you an idea that people are ready to move about. Energy, value, banks ,industrials and consumer discretionary al were the places to be this week and if analysts like Kolanovic at JPM are correct…that interest rates will glide a bit higher…these same sectors have potential. The ones that had run up lately MSFT AMZN GOOG gave up some ground after being bid up. We told readers BABA looked like it hit the lows around 205 as it wreaked of a FIB correction low and now we see 228 on Friday–accelerated. Lots of infrastructure plays got attention including Trex, Mantowac, HERC, AA SUM DE CAT CLF URI or one stop PAVE.
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Bond Market
In our portfolio roadmap we cover income producing investments such as short term corporate bonds, tax free munis, preferred, senior loans, emerging market sovereign debt and high yield among others. Our view has been that the taper tantrum happened in Q1 when Treasuries 10yr at 1.75% and 30yr at 2.55% were hit and prices dropped the most in decades. We saw TLT (proxy for 20 yr treasury) at 133 as grossly oversold and positioning extremely short. NOW we have seen a rally to TLT 146 area and now reversing as we may see a drift toward 2% on the 10 yr over the 2nd half of 2021as a strong economy, Fed removing emergency accommodation and inflation persisting as the culprits of change. Most areas have been stable except for emerging markets; they were blindsided on a stronger dollar than anticipated.
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US Dollar/International Markets
The Dollar Index (DXY) lost some steam this week after a great run up from the 88-90 area which shocked many but not us as we saw the Dollar oversold down there and the move ABOVE the 90.65/91 prices as a return to stability. Now we will see about durability as a move UNDER the aforementioned levels would put the DXY back into a tailspin that could take out the lows and cause stir in the metals markets going into Q3-4. The concerns on the commodity currencies remain (CAN$ & AUS$) with choppy commodity action and Europe is still a mess as countries target Portugal as a problem (also the Delta variant in UK which has a fair share of India ex pats). The Yen has been a joke. The big news in international markets in our view is the turnaround in China stocks (BABA KWEB FXI) which in turn has helped emerging markets….Europe is choppy but should be full steam by summer’s end. We are all over these markets.
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Crude Oil Natural Gas
Crude Oil has been stellar as price exceeded 74 this week and many call for 80 and more. We feel that prices above 50-55 generate tremendous free cash flow for the oil companies and ergo could spell more upside but we have price levels that must be exceeded for us to dismiss the possibility of a correction from an overbought level. We are close but nee more strength this week otherwise a pause to refresh remains. We have been bullish on oil since -37 a barrel so we are trying avoid what we avoided in other markets that we got bullish on last year but thankfully refrained from joining the parabolic tops some have seen in recent months. Still demand is overwhelming supplies which is bullish. We told reader Natural Gas was turning at 2.50 (Now 3.53) and LNG at 70 (Now 87) so our compass has been fairly correct.
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Gold Silver Platinum Copper Crypto
The Gold & Silver Platinum markets all had big selloffs but as we follow GDX it may have ended last week as Gold stayed above 1700 Silver above 25 and Platinum above 1000 bucks. GDX peaked at 40 after running up from 30.64 or 9.36 cents X 61.8% = 5.78…we take 40-5.78 = 34.22 which was the low on Friday!! We will monitor this but if inflation persists…this ancient relic that has been a store of value for thousands of years may finish the year with a B_A_N_G! Copper prices (and our favorites FCX SCCO) have rebounded nicely as the reality is that demand dwarfs supplies and it is not easy to get the supplies humming again. Crypto (GBTC=BitCoin & ETHE Ethereum) are both still on the defensive HOWEVER our support zones (GBTC 22-28) still show merit. The tug of war between those who call it Rat Poison and true believers still exists but the road to the clouds go thru 32-38…so we look for more sustained strength for proof.
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Soybeans Sugar Coffee
Looking at the 50 day and 200 day moving averages on all 3 markets we see the markets trading ABOVE the averages on Sugar (17-15.50 areas) Coffee (150-128 areas) suggesting we are just seeing pull backs and a possible resumption of the uptrend while Soybeans (15.00 -13.08) are trading UNDER the averages and need a rally above to re-engage.
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REMEMBER There is a risk of loss in all investing and it is not right for everyone. Consult your brokerage firm/broker/advisor to determine your own suitability. Past performance is not indicative of future results, Opinions & Observations provided are for informational purposes only. It is NOT advice.
Option Professor-Stocks-What Happened? What to Expect Next? This is a Must Read!
June 18 2021 Option Professor Opinions & Observations
Welcome Back!…..Well we had quite the wild week but not unexpected to us as we issued an ALERT warning of a volatility spike before the Fed meeting and Quadruple Witching Friday. We saw this due to the likelihood the Fed would address the inflation numbers/dot lots and the options trading volume has exploded so of course when you hit quarterly expirations colliding….order imbalances that cause volatility is a no brainer. We have told subscribers that the S&P was OVER 1000 points ABOVE our long term moving averages and that was not sustainable plus valuations on banks-industrials-materials ect. were at nosebleed levels. We discussed ways of reducing risk like collars, trimming, married puts and replacement trades. So the yield curve flattened (bye banks), the dollar got strong (bye commods, industrials, materials) and data out of China weakened (bye industrial metals). The strong dollar (which could have a contrarian run in it) also took the legs out of Europe-Emerging Markets and Asia Pacific markets. This was no overnight story as these markets have either been deteriorating for weeks or stalling waiting for the igniter. When you subscribe at optionprofessor.com/subscribe we share with you our views gleaned from decades of experience.
So what’s next?…while saving specifics for subscribers we will share some broad strokes….Since Canadian borders not yet open and vaccinations in EM are way behind and Europe is still not fully open….we see a long runway still ahead for some before it’s game set match (probably caused by non transitory inflation like wages and housing). You already see durable goods getting whacked. Before this week; we said a rotation out of value into areas that either seem rather bulletproof (near monopolies-great free cash flows), those who offer great ROE’s, or are reopen-pipeline stocks look to be where the puck is going. Risks remain the variants, vaccinations, and if higher costs pinch profit margins with expected earnings for S&P at 200 this year & 215 in 2022. We look forward to cap ex spending, M&A activity, corporate cash and global re-openings to fuel the next upswing AFTER this drop runs its course. Too soon to say the yield curve collapse is here to stay but we see opportunities in different stocks than the popular ones 6-9 mos ago. We will be sharing our specifics and our ALERTS for turning points…..also we will review the RISKS of passive investing and the old 60-40 portfolios if BOTH stocks & bonds drop together–Go to optionprofessor.com/subscribe–Join Us Today!
Stock Market
Is there more to go on the downside…yeah probably….but if last Q1 Quad Witching is any indication…we keep an eye on this week late for a turn after the FED guys are all over the news (Congress) calming nerves and wash out the weak hands. Getting back ABOVE 4200 SP would be a start….. a deeper move toward 3800 not off the table but at this point seems unlikely….after Jax Hole late August?…that’s a horse of a different color and could be rip chord time. Stocks that have great free cash flow, can pass on higher costs, pay compounding dividends, great ROE’s and benefit from a low rate long term environment seem to be the ones that could fuel the next advance…..we will share exactly what we see. Go to optionprofessor.com/subscribe and add us into your research.
Bond Market
The yield curve flattened as short rates popped for the first time in a long time. Much of fixed income was stable such as short term investment grade corporates, high yield, preferred, senior loans for the most part while the jump in the dollar whacked emerging market debt (one of the big risks as some local currencies came off their high horse. We cover the INCOME markets so join us at optionprofessor.com/subscribe and get educated.
US Dollar/International Markets
We told readers AND subscribers that the Dollar Index was having trouble breaking 88-90 and since the whole world was negative on the Dollar the contrarian bet looked good…some same a 5-7% move on the Dollar to the upside could occur. We said back ABOVE 91+ could put it back on the horse and we closed at 92.31….don’t be too fast to dismiss the rally as Europe is starting to print and do you trust the Yuan or Yen?? Commodities tanked so Can$ & Aus$ are ?? Go to optionprofessor.com/subscribe and we’ll share our specific views.
Crude Oil Natural Gas
We warned readers about the fact that SLB HAL XLE were having problems staying up above moving averages and sustaining advances….this week they went into the soup. Like most markets that got hit: important to note they remain ABOVE their long term moving averages so we may be looking at a buy the dip deal. Rig counts are actually picking up (permian) and the stalled re-openings may hurt demand temporarily…but prices above 55 seem to generate great cash flow for the diversified/leveraged firms. We called the turn at 2.50 Natural Gas and we are still way above 3.00 and we called the turn in LNG at 70 and it ran all the way to 90! We saw a rollover a bit and we’ll update subscribers on our next ideas on energy which along with health care can be reliable in inflationary times. Go to the website & Subscribe!
Gold Silver Platinum Copper Crypto
We called the lows back in March on the Gold & Silver followed by a great run BUT we told everyone that price were hitting resistance at 1950 Gold area and 2850 Silver area…once Gold took out the 1 yr MA at 1850 ball park it sold off in a vacuum. We feel that the inflation #’s still will shock on the upside so as long as 1650 Gold & Silver 24 bucks hold..we will be looking for potential entry points for a significant rally going into the fall/winter. Copper was way overdone as we told you (we got bullish on FCX UNDER 10) so this drop is no shock as China puts the squash on it. Not ready to throw the baby out with the bathwater as EV’s, green deals & infrastructure await. Crypto like Gold & Silver are best bought AFTER they drop in price so we maintain that Bitcoin 22-28 (GBTC) is a buy and ETHE may be good but we see BitCoin as the foundation (some say way better than Gold as store of value) and ETHE as a great programmable block chain but if someone comes a long with a little better set up it could go the way of Yahoo when a company named Google came up with a little better search engine. Join us at optionprofessor.com/subscribe—LEARN!
Soybeans Sugar Coffee
We’ve been saying in our own way that we liked these markets late last year and early this year at way lower levels and said so in our updates. HOWEVER after their big advances where they got so overbought on weather and bottle necks; our experience told us that the risk reward (transitory factors) was out of whack and when you throw in your biggest buyer (China) is on a crusade to reduce prices..you get out…Now we reassess now that the prices came in a bunch. Time to Subscribe/Learn about uses & risks of ETF’s optionprofessor.com/subscribe
Remember There is a substantial risk of loss in short term and option trading and it is not right for everyone. Consult your brokerage firm/broker/advisor top determine your own suitability. Past performance is not indicative of futures results. Opinions provided for informational purposes only an is not advice, Use Risk Capital Only
Option Professor-Stocks-Has the Melt Up Started? If so..What’s Hot & What’s Not? Read More
June 11, 2021 Option Professor Opinions & Observations
Welcome Back!…..This week we had an inflation number that was huge but bonds shrugged it off with yields dropping and the S&P 500 made new highs. The Dow Transports (DJTA) and the Russell (RUT) both rebounded off their lows but no new high there as UPS threw water on the bulls. We had another hack (that we know of) and FEYE & CRM were two that benefited. We got a new drug approved by the FDA for Alzheimer (BIIB) which we told subscribers about last week and the stock zoomed to 468..got sobering support and settled at 396 (still a jump from last weeks close). Since many speculators felt the FDA had lowered their bar others went into play (SAVA ANVS). The advance decline line we spoke about that made new highs has been a good tip on prices lately. Household net worth jumped in Q1 so some who think we are in the midst of the next leg up see discretionary. energy, health care and a resurgence of tech/FAANG as the engines to take us to higher levels. Some are fading financials with we suppose thought of weak loan demand and low returns on free credit balances. Our thoughts are that could be temporary as by the end of Q3 and Q4 we could be running on all cylinders. What’s the risk? Inflation sticks and companies can’t pass thru costs (Burger King sez beef, pickles & Mayo are zooming…yikes!). This could pinch margins which in turn pinches earnings at a time where valuations demand earnings beats. This transitory inflation mantra may play til the Fed meets in Jax Hole in August but if these inflation numbers don’t abate (China just got a variant scare -Delta-and ports were affected)..expect taper talk on asset purchases (Corp bonds already with mortgages to follow)…and an extended S&P 500 may not like it much. Next week let’s see if we follow thru as closes under 4200-4180 could change sentiment from the huge bullishness. We share our opinions and observations in the newsletter so subscribe today and get our take on what’s ahead.
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Stock Market
Next week we get more news on EU inflation and German inflation…the world is inflating due to short supplies and high demand. With rates dropping many are turning to the beat up areas like ARKK and its inhabitants ROKU TSLA (bad China vibe but a new fast car) TDOC ZM SQ ect. Will they be right? We have seen a rebound but let’s see about follow thru next week as ARKK has gotten back to the surface (50-200 day MA’s at 115-116)…so it’s crunch time. Aple announced some enhancements to facetime to compete against ZM and engage customers for years to come. Some people who seek dividends are looking at VZ IBM AGNC PM while those looking at low valuations have seen ABBV BMY VTRS as interesting candidates. We share our opinions and observations on what seems promising in our updates
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Bond Market
Well the shorts were on the run this week as the Treasury 10 yr has a 1.40 handle despite inflationary numbers that beat estimates. The lows on TLT was about 133 and it looks safe for now. We suspect that big risk to bonds is later in the year when and if transitory inflation starts looking like recurring. Some say we are going to 1.25% on the 10 yr and 12 on the VIX…if so say hello to a possible stock rally going into the July 4th holiday and maybe slowdown in new data. Investment grade (IG) spreads are very tight and high yield lowest quality seem the most popular as some default sure things (travel & leisure) have returned 100 cents on the dollar. Negative real rates abound so the world is a bit mad. Fed exceeded $500 Bill in repos to stabilize the front end. We have opinions & observations we share for Income.
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US Dollar / International Markets
We have maintained our opinion that USA opens by July 4 Europe Labor Day & Emerging Markets by EOY. Much has to do with vaccinations a Japan & Korea are at 9%-20% inoculated and that will take time to rectify. We don’t know exactly what to make of China as their economic growth numbers are great but it trades at a discount…Why? One reason may have come out this week when we read they passed some kind of seize assets law and we heard one commentator say that only Wall St doesn’t realize we are in an economic Cold War…..in fact we heard in compared to the Hotel California as investors plow money into their bonds and stocks….with capital controls…the song goes…”you can come in anytime you want but you can never leave”…obviously humorous but what happens if Taiwan is in play?? Areas such as Asia Pacific Europe & Latin America have seen flows….we share with subscribers our opinions on choices
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Crude Oil Natural Gas
The good news in crude oil this week is that demand is expected to remain strong of some time and the prices broke 71 bucks a barrel on WTI…the not so good news is that rig counts in Canada jumped to a 2 yr high and you have to wonder when more rig count jumps and supply releases will occur..the 200 day MA is at 50 and the 50 day is at 61 and the whole planet is yellin’ about 80…could be ripe for a correction which may explain the stall in energy shares. We have been bullish since last March so we know how long this ride has been…longer term still bullish but caveat emptor near term. With the heat wave we see Natural Gas taking off ( we said it turned at 2.50 weeks ago) and LNG we said turned at 70 (now 88)…..these are some of the things we share with subscribers each week…so subscribe today.
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Gold Silver Platinum Copper Crypto
Gold and Silver are running into some short term resistance…..we told you of turs in March but the rally has run into challenges at Gold 1950 & Silver 28.50 areas. We still believe by later this year as real interest rates stay negative and maybe the Dollar weakens we could see substantial upside but for now a range may be developing. Copper corrected off its recent highs as problems in Chile & China squelching prices plus home builder stocks getting soft has not helped…if we hold 4.50 we could rally but LT MA’s are at 3.63 so reversion to the mean is a risk. We told you BitCoin (GBTC) & Ethereum (ETHE) may be near their lows (GBTC 28 or 22 & ETHE 20-23) so if you’re a believer take a bite. Learn exactly how we see the precious metals & crypto and the shares involved. Go to optionprofessor.com/subscribe
Soybeans Sugar Coffee
All three were brought to readers attention many months ago at much lower levels and we said we see a possible high point in the month of May. OJ got hit this week as the USDA forecasts were higher for crop expectations..could these see the same fate in the months ahead…China’s trying to dampen prices and ,maybe the weather’s turning? Brazil is a wild card but sometimes after tight supplies comes supplies…ETF’s available…learn more option professor/subscribe
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REMEMBER There is a substantial risk of loss in all investing and it is not right for everyone. Consult your brokerage firm/broker/advisor to determine your suitability. Past performance is not indicative of future results. We provide our opinions and observations for informational purposes only and is not advice. Use Risk Capital Only
Option Professor-S&P 500 @ Highs-Where’s the Transports? Russell 2000? Must Read.
June 4,2021 Option Professor Opinions & Observations
The Option Professor is a Graduate of Boston College and has Decades of Investment Experience. He has Educated Thousands of Investors Worldwide on the Uses & Risks of Investing.
Greetings Everyone!…..We got the much anticipated jobs data today and for us it was as expected. We got a 559k number versus an expected 675k number…..but what did you expect with added unemployment benefits til September and people making money in real estate & the stock market. The wages kicked up (inflation) considerably and that could be sticky as once wages increase it’s hard to take it back. Participation rates stinks meaning people don’t want to go back to work (more job openings that unemployed). So what we should probably anticipate is slower number thru the summer and a kick in the fall as conventions re-open & unemployment enhancement runs out. This lead everyone to say the Fed’s runway to ease remains and yields dropped (10 yr Treasuries in the 1.50’s) and a short covering relief rally in tech & nosebleed valuations that were hit on rate hike fears. Did you notice Transports were down & small caps went nowhere? Did you notice that value banks & energy & materials & Industrials (the leaders) hardly budged on Friday. Did you notice that S&P pressed the highs but VIX ended at 16.42 ABOVE the 15.90’s area of last Friday. The Advance Decline line made a new high which had us bullish all week long. HOWEVER insider selling has been rampant & companies (AMC) are selling stock not doing buybacks. We are about 1000 pts ABOVE our 3 yr Moving Average and guys like Rieder of Black Rock are using words like “convexity” which could mean raise cash by replacing long stocks with call options (if we tank potentially lose less & have cash to buy). Just in time inventory was hit with a double whammy in that supplies collapsed during Covid & Demand has gone thru the roof…..this is transitory and correctable. We agree with some respected analysts who say we are at PEAK growth and we will slow with inflation (stagflation) as Q3 & Q4 unfold. The Fed knows the punch bowl is overflowing and potentially flooding the party (liquidate the corporate bond facility). Don’t forget they bought during the crash at pennies on the dollar and are now selling into a buying frenzy. The wind of change may be blowing as many things may have PEAKED in May (Commodities-Shortages Homebuilder Stocks-Transports-Russell 2000 ect.) So What Now?????….Next week is key as Thursday we get CPI which is expected @ +.4% year over year @ 3.4%….to steal a line from President Biden…”C’Mon Man”…how can we not blow that number out with the way prices are going nuts all around us??….so that could be the fly in the ointment…we know the bulls say….buy all you can…Jay & Janet have our back and they may be right….but we think keeping things on a short leash in the next 30-60 days may make a lot of sense…we will tell our SUBSCRIBERS what are view is on playing it.
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Stock Market
Let it ride has worked so far in stocks but the growth of those of you who hold a market index or 60-40 portfolio have seen your accounts appreciation slow to a crawl in the last 2 months. Friday we saw the meme stocks give it up (AMC GME BB BBY KOSS WKHS BCTX SKILZ EXPR and others). We saw the high valuations that tanked get a rebound rally as rates fears eased (DOCO ZM ect) and we saw the split frontrunning continue (NVDA). We saw a great opportunity to ride the wave Friday on Biogen (BIIB) which opened and ran in anticipation of Monday’s decision by the FDA on their Alzheimer drug which is hopeful to slow the progression of the disease. Some people like Founder run companies like SQ SHOP TSLA COIN ABNB CRWD ROKU PTON TWTR PLTR ZS NFLX RBLX FB RNG OKTA TWLO TWTR and many more. Some like companies that let you do everything on line you want or need like IBKR BKNG AMZN SHOP CHWY ETSY PTON ABNB CVNA RDFN ect…so if that’s your cup of tea…there are some examples. We reviewed some 13F filing from the large universe of filers (this is dated material so positions can change at any time so it may be unreliable). Having disclosed that; we found Michael Burry’s (Big Short movie)kind of interesting with a partial list of ARRC SXC IMKTA TAP HFC CXW GEO DNOW LUMN UBA and many others. Certainly not the more prevalent well known names of the others.
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Bond Market
The bond market loved the jobs report as shorts scrambled to cover (the pain trade is rates drop). The Fed is liquidating corporate bonds and talk of removing emergency easing is long overdue. We told readers time and time again that March price collapses in bond prices (record) probably was the taper tantrum and discounted much of what we are seeing. If we take out 1.75% 10 yr & 2.55% 30 yr….then the higher rate mob may have a point but if bottlenecks & supplies come back on line…it could be bye bye inflation and hello lower yields….shocking but could it explain Fed?
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US Dollar/International Markets
The DXY (US Dollar Index) popped above 90.50 only to finish the week with its tail between its legs (90.13)…we told readers the rebound rally ended on the break under 91.75 (key moving average)..we now need closes ABOVE 91.20 to get back the mojo. European currencies (Euro & Pound Sterling) are benefiting from economic and vaccination acceleration and the Emerging Market currencies hit record. The Loonie (gotta love the nickname of the Canadian Dollar) & the Aussie and even the Yen are gaining ground…would a stock market correction change the tune in the next 60 days? China is trying to suppress the Yuan, commodity prices & crypto and may succeed at all but to use it as a reserve currency seems like a stretch. China is trying to pump up population by approving a 50% increase (3 kids) in procreation but many doubt it will work. Chile let pension plans liquidate as much as they want (had 10% limit). We love Europe, the Pacific-Asia, and Emerging Markets as the reopening story is at varying stages and will accelerate,
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Crude Oil Natural Gas
Our views on energy have been spot on for OVER a year and we continue our beliefs that supplies are not in line with demand and the potential for companies that relish in oil above 50 (free cash flow) will endure. Which energy areas do we like (refiners-leveraged players, exploration & production (E&P)? SUBSCRIBERS have benefitted from our opinions. Natural Gas turned up at 2.50 (now 3.09) and LNG turned at 70 (now 87.35)…..some of the reasons investors SUBSCRIBE
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Gold Silver Platinum Copper Crypto (BitCoin-Ethereum)
Ok we called the turn in March in all 3 precious metals (Gold Silver Platinum) and we had a great 2 month run. We are monitoring the pullback (they rallied Friday) to see a new entry point as we suspect that a 1950-1800 Gold trading range may develop for awhile. Silver breaks above 30 and Gold above 1950-2000 and the land of milk and honey may be upon us and probably a product of sticky inflation the Fed standing still (just like post WWII in 1946 & 1947!) Copper could be in trouble if housing slows (lost 20K jobs in this report) and Chile is wacked out as pension plans are dumping and the government wants to spread the copper wealth around the population. We told you BitCoin (GBTC) hit its LOWS at 28 with a chance of 22 and Ethereum (ETHE) support would hold (20-23)…so far so good.
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Soybeans Sugar Coffee
Did the markets PEAK in May? This week they did launch a turnaround due to weather and shortages but the highs of last month remain intact. There are ETF’s we use to gain exposure to these and other agriculture markets. The huge opportunity in these markets in the last year in these areas have been astounding. Learn more & proceed with caution.
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 discuss your own suitability. Past performance is not necessarily indicative of future results. Use Risk Capital Only Opinions & Observations provided are for informational purposes
Option Professor-Stocks-Take the Money & Run-VIX Hits 15.90? Jump in June? Read On
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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Stock Market
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!
Bond 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.
Option Professor-Stocks-2nd Half Volatility Coming-R U Ready?? Read On
May 21 2021 Option Professor Inc Opinions & Observations
The Option Professor is a Graduate of Boston College and has Decades of Investment Experience. The Option Professor has Educated Thousands of Investors Worldwide on the Uses & Risks of Investing.
Greetings Everybody!
This week was a wild ride but as far as the Dow Nasdaq & S&P 500 is concerned a real yawner on a week over week basis. Last month (April) we ran up to S&P 4200 and saw the HIGHEST readings for 2021 on the RSI. We suggested exploring COVERED CALLS and other portfolio preservation tactics such as collars ect. In May here we made a slight new high but it coincided with a LOWER RSI reading and that my friends is called a DIVERSION. We are losing some of our momentum (e.g. we had 90% of S&P stocks ABOVE their 50 day MA which is down to 60% & Nasdaq is lower). We told you last week that the Treasury 10 yr yield at 1.75% & the 30yr at 2.54% from MARCH may be very KEY levels as data shows if they peaked the market may see a peak 2-4 months afterwards (May or July). We got inflation data CPI core annualizing at 11% & Service PMI today at 70 & Earnings zooming at retailers & housing prices up 16% & we can’t take out the MARCH HIGHS IN YIELDS? The talk is starting about cutting back Fed purchases (120 Billion per month) particularly in mortgages. Stimulus talks are just that talks. Enhance Unemployment is ending. Pent up demand is not never-ending demand. Earnings forecasts for S&P 2022 are 209. The key is will we MAINTAIN a 22 PE ratio or will we COMPRESS VALUATIONS next year. Here’s the math…209 X 22 PE = S&P 4598….209 X 20 = S&P 4100…OK….but what if the TREND of VALUATION COMPRESSION that has already claimed ZM TDOC DOCU PTON COIN SPOT ect were to hit the S&P 500 and we were to normalize/correct to 15 PE or 18 PE? We would then see a big VALUATION shift to 209 X 15 PE or 209 X 18 PE and the S&P could be priced at anywhere between 3135 and 3762….surprise!! In case you haven’t noticed you can take a look at stocks like BABA…the forward PE in Sept 2020 was 31 & now it’s 21. Many stocks in China have come down despite big growth and earnings numbers in part due to huge VALUATION CHANGES. So was S&P 4250 the high point or do we hit 4300-4500 before DISCOUNTING next years comps and post pent up demand and normalization of inflation (supply demand realigns) & GDP reverts to mean? As we said last week; we could get a bang to the upside going into the holiday weekend next week if we can close ABOVE S&P 4180 BUT the time is getting CLOSER to when ASSET ALLOCATION may preserve your portfolio so you could avoid the pitfalls many investors are now feeling with the ARK funds & BitCoin & BABA-first they lost their humility & then lost their money GO TO optionprofessor.com/subscribe and LEARN what OPPORTUNITIES we like & ASSET ALLOCATION ahead of us!
Stock Market
Big stories this week was ATT merger with Discovery which was not welcomed after an initial bang to the upside. Every Tom Dick & Harry sold the stock as the volume was thru the roof as they cut their dividend. Crowded field in streaming plus the TMUS/Sprint merger was a double whammy. Our LT MA’s suggest if we can stay ABOVE 29 and the break 33…this thing could work out as panic selling sometimes isn’t sharp selling. Watch out for VIAC to get courted and MGM is dating AMZN apparently. BitCoin the other big story but we said last week GBTC needed to close ABOVE 45-50 to get back ABOVE MA resistance which failed….BUT we started at 1o went to 58 so a 61.8% move down takes us to 28 which was the LOW and we rallied only to fall back by the end of the week….so let’s see if 22 or 28 is it as Cathie Wood says she sees capitulation & $500,000 down the road despite the PBOC saying forget payments & mining plus Musk now worried about environmental issues (TSLA sales drop 67% MOM…so let’s hope her glasses aren’t fogging up:) The auto were interesting as F was on fire with their EV F150 pick up and FSR teamed up with FOXCONN to build here. Volkswagen may be the deal as their EV biz is bright and their PE is low. OTLY popped on the IPO..we’ll see how sticky. NEXT WEEK earning calendar has retail (JWN BBY COST GAP DICK’S) plus TOL & HP CRM AZO….but the Big Kahuna is when NVDA announces as they are splitting 4-1 on July 20 (July 19 dissemination)….this stock is up 1250% since 5 yrs and double in the last year and amongst other things produce graphics processing units that create images for video games. BUT the stock has been caught in about a 100 dollar trading range for 9 months due in part to some say a high VALUATION. We have an opinion on what potentially we may see going into the split which needs approval on June 3.
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Bond Market
The Fed is starting to sound as if some tapering of purchases will be the first step at leaving the emergency funding phase we are in now. TLT above 133 still tells us that transitory is still the best bet on inflation and growth. Despite growth that leads to higher revenues & earnings; the MARCH highs in Treasury yields remain intact. The entire planet is screaming higher rates are coming and they may but we won’t buy their story until we take out the March lows which seemed to overshoot the recalibration of rates vs the economy as evidenced by the rally against strong econ data. The Fed’s got to get off the short end of the yield curve which has plenty of liquidity and keep powder dry for the long end. Each week..we SHARE our thought on where to get DIVIDEND INCOME plus Tax Free High Yield Preferred and Loans Go to optionprofessor.com/subscribe and get updated weekly on specifics about INCOME OPPORTUNITIES!
US Dollar-International Markets
Our view on the Dollar is that the rebound ended with the break UNDER 91.75 on DXY and a break ABOVE 120 & 135 on the Euro & BP. Our deficits and negative real yields are a double whammy. Now we need to see if we hold the 88-90 support on DXY or do we accelerate to the downside the the 2nd half of 2021. If Gold & Energy hold their water the Canadian $ & AUS $ should fend well while Japan’s consumer internally seems spotty. Fiat currency beta digital this week for sure. We like Europe and Emerging Markets but the latter is still way behind on vaccines and the former needs to get their act together for the summer vacationers. We believe they will an steps are moving to ease travel. Retail sales in the UK were up 9%..expect more of the same in the Eurozone. We SHARE ideas on how to participate China & EM still a work in progress but a bargain..go to optionprofessor.com/subscribe & LEARN what we see.
Crude Oil Natural Gas
Crude hit the skids this week but did rebound a bit by the end of the week. We still believe the future is bright for energy stocks but volatility is the name of the game. Some say 80 in the future months ahead so we stay focused. Our SUBSCRIBERS know we have been all over this for OVER a year. Iranian oil is a wild card but not enough to alter our longer term view. We told SUBSCRIBERS that LNF was turning at 70 (now 83) and Nat gas at 2.50 (now 2.90)..not bad! Go to optionprofessor.com/subscribe and LEARN how we think the E&P Refiners and Integrated names will fare
Gold Silver Platinum Copper Crypto
The original store of Value Gold had a great week and since we called the up move off $1675 it’s been rewarding. Silver ABOVE 27 and Gold $1775 suggests that after a possible consolidation a move up in Q3-4 should see acceleration. Negative real yields and inflation and money supply explosion should set the fire. Supplies of platinum couldbe tight when auto factories come on line in summer. We warned people that Copper near 5.00 was getting rich so we dipped. We have been on this since 2.50 Copper and 10 bucks FCX so we are careful up here in the friendly skies. Hosuing was spotty on starts and existing home sales plus the ITB has rolled over a bit. The BitCoin Ethereum trade got whacked but we said OUT of GBTC UNDER 50 and ETHE Under 35 was the place to be and we stick to that while it stabilizes. Go to optionprofessor.com/subscribe & LEARN where we see the OPPORTUNITIES in metals & Crypto looking forward!
Soybeans Sugar Coffee
All three bull markets all three overbought and consolidating while the squeeze is either resolved or continues. We told you the weather can change the crop report could throw water on things and the mills could increase production. BACKWARDATION is now a common language but may be temporary and that’s the rub on the bull call. It is a mess with these three from a supply demand perspective but like copper…we liked beans at 8 not 18 coffee at 100 not so much at 160 and Sugar at 12 not 18…we share ideas on ETF’s you can use to play and some have had really nice runs Go to optionprofessor.com/subscribe LEARN how we see OPPORTUNITIES in the markets unfolding ahead of us!
REMEMBER There is a substantial risk of loss in short term trading and option trading and it is nor 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 informational purposes only.