Option Professor- We Told You the TOP of the rally is S&P 4600-4675-So Far We’re RIGHT ON!
August 12, 2023
OPINIONS & OBSERVATIONS
We said the market would sell off from S&P 4600-4675 zone (the high was 4631) and we have had a very nice drop of as much as 170 S&P points which means HEDGING above 4600 was a great idea at this point
We are seeing some RSI divergences so if we hold 4460, it is possible to see a rally but until price proven otherwise, respect the top at 4600-4675 and remember the 200 day moving averages are still WAY under current prices so the REVERSION risk that has begun still has an air pocket underneath current prices.
They got AAPL & MSFT to break their trendlines and if they get Meta & Google plus AMZN to give it up, a correction of size could be in the cards in the next 10 weeks. Be fearful when people are greedy and the AI panic smacked of greed. The Fed is done mantra could bite investors in the butt as 4.7% core (they had gas dropping 20+%-where are they filling up?) means that a Fed Funds ABOVE 5% is a very sticky reality.
We know the 10 yr Treasury COULD REVERT to the longer term moving averages at 3.5% to 2.5% BUT we see that only if accompanied with a big hit to inflation and the jobs market. Oil went from 65-84=no dice The Fed rate hikes kill the banks, commercial real estate and the Federal Cost of Debt Service BUT is not a big hit on the 70%+ part of the economy known as services and consumer spending. Probably won’t last
The Goldman Sachs Commodity Index turned UP in April like we told you from 528 (after dropping from 850!). The Energy sector is about 505, Metals & Grains dominate the other half. We saw Energy share rally AFTER we told you of this AND MOS DE CF have also been on a run (agriculture). Are the metals next?
We noticed 2 other developments that no one seems to have seen BUT are HUGE in our view on prices.
#1 The M2 Money Supply Growth versus Inflation TURNED UP in April (Could we see a REVERSION in M2) #2 WE told you we’ve seen a TURN in the Growth versus Value Ratio & it’s Value that’s outperforming.
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Option Professor-You Are Invited to LEARN How to Trade ZERO DTE-Weekly Options & TIMING!!
August 5 2023
OPINIONS & OBSERVATIONS
We Invite YOU to hear OUR approach to ZERO DTE & Weekly Options. Email [email protected]
OK Let’s start by stating the FACT that ZERO DTE and Weekly Options are RISKY & HIGHLY SPECULATIVE.
CONSULT YOUR BROKERAGE FIRM to determine Your Own RISK TOLERANCE & SUITABILITY. We are sharing our views and opinions on trading. We are not recommending this type trading. It is NOT advice.
As in any trading, there are USES & RISKs to Zero DTE and Weekly options. From the BUY side, we like the LIMITED RISK & LEVERAGE aspects and the potential for high returns. We also know Options Can EXPIRE worthless creating 100% LOSS. For speculative capital and suitable investors, this creates opportunities.
The KEY is TIMING. Here is where we believe our methods add value. EXAMPLE On Friday AMZN GAPPED up OVER 10% from about $129 to 143.63 on great EARNINGS news (about a $10 GAP!). We turned to OUR 1 day graph with OUR indicators. Why? Simple. When a market gaps up or down, there is a potential the market makers are setting prices EXCESSIVELY to take in the ORDER IMBALANCE feeling that when the orders are filled the market will REVERSE to the MEAN. This is when OPPORTUNITY may be knocking to FADE the price action. We look to the ZERO DTE options and OUR Indicators to see how to play it.
On OUR 1-day chart, AMZN hit $143 with an RSI 82. It dipped and made 2 runs toward the highs BUT RSI was fading 75 and 70. AMZN was LOSING MOMENTUM and was at risk of REVERTING to the MEAN. The Aug 4 expiring 143 PUTS traded for .58 or 58 bucks. We took our shot on the buy side. Later in the day, AMZN DECLINED UNDER our Moving Averages which were INVERTED to the DOWNSIDE at $142.80 which CONFIRMED the direction for us AND gave us price points to cut and run. At $140, $143 P =$300 Should a trader speculated on 10 contracts at $58 per = $580, the trader’s speculation grew to $3000.
This is one EXAMPLE and NOT all trades will be profitable. We believe OUR Indicators help with TIMING.
We use WEEKLY OPTIONS to speculate on price swings for a number of days using longer term charts.
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REMEMBER All investing involves risk of loss and it is not right for everyone. CONSULT YOUR BROKERAGE FIRM to determine your own suitability and risk tolerance. Past performance is not indicative of future results. Information and opinions are provided for informational purposes only It is NOT advice
Stocks-Dead Ahead- QQQ REBALANCE-Fed HIKE-M2 RISING-Bank Loss Reserves UP-RU Set? Read!
OPINIONS & OBSERVATIONS
July 15 2023
BIG WEEK for stocks and news with bank EARNINGS coming in above estimates BUT lousy PRICE ACTION. CPI came in light (take off June 2022 #’s get a lift) BUT CORE is still 4.8% which means Fed Funds is only slightly ABOVE Core! We believe Fed Funds MUST get well ABOVE Core & stay there as it did with Volker. YIELDS did come off but they were OVERBOUGHT after the ADP shock (500K new jobs) and since they handle actual payrolls, they may be more reliable. WAGES are RISING & 3.6% jobs rate won’t kill inflation. Energy prices are RISING-OPEC cutting so forget about lower gasoline inflation. HOUSING is back on fire so OER should be supported as BUILDERS enjoy no inventories on existing homes for sale AND they play games with prices by providing better mortgage rates & just LOAD the difference into the asking prices. People are just interested in the immediate payment just like when they lease a car-It’s VERY DIFFERENT!
BANK Earnings were mostly beat so why the lousy price action? Simple. They are EXPLODING their LOAN LOSS RESERVES ahead of commercial OFFICE building losses (San Fran ect) AND CREDIT CARD losses that are coming off RECORD ($1 Trillion+) in Credit Card DEBT. Add in student loans need to be paid again a decline in residual money from Covid and AFTER Summer could get very interesting. Should we get GROWTH in the economy (popular belief) & WAGES-JOBS numbers stay good- maybe all’s well ends well
About 9 months ago, the S&P 500 was 3500 ( Now OVER 1,000 Points HIGHER), Nasdaq was 10,500 (Now OVER 50% HIGHER), IWM-Small Caps were 162 (Now 19% HIGHER). The POSITIONING of Investors has SWITCHED from UNDERINVESTED to large allocations (like Jan 2022). We are NOT the SAME as Oct 2022!
REBALANCING is coming to Nasdaq 100 as the SEC Diversification Rule limits the aggregate weighting of the largest stocks with 5%+ to 50%. We got a taste of what may be in SHORT TERM store with NVDA. Since JULY 1st, NVDA has JUMPED from $4210-$420 to OVER $480! In a matter of HOURS, we saw NVDA DROP about $50 bucks on Friday! On AUGUST 23rd, NVDA announces their EARNINGS & the FORECASTS EXPECTATIONS are thru the ROOF! This stock is the MOST OVERBOUGHT it has been from LT MA’s EVER.
OUR RSI DIVERGENCE signal FLAGGED a SELL on NVDA on Friday AND OUR Moving Average confirmed a SELL at $476-Not Bad! You should TEXT US at 725-254-6423 and set up a time to let us EXPLAIN it to you
Finally, WE TOLD EVERYONE WHO WOULD LISTEN that M2 money supply growth BOTTOMED in April at -4.84%, in May it was -3.99% and June was -3.01%. Is it on it’s was to ZERO or POSITIVE M2 GROWTH?
Well. The US Dollar has gone in the TANK (UNDER 100 DXY), Gold got a bid, Oil’s moving up, ASSETS UP! Is the Fed getting ready to PRINT? Do they see a LIQUIDITY Crisis ahead (Bank Reserve Requirements ect)
Many times the Market moves in a Direction to HURT the most people (this current rally KILLED the Shorts and Sideline Money-both were HUGE in Q4 2022!) NOW, who SEES a TECH Sell-off & VIX Spike!
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REMEMBER All investing involves risk of loss and it is not right for everyone. CONSULT YOUR BROKERAGE FIRM to determine your own risk tolerance and suitability. Past performance is not indicative of future results. OPINIONS & INFORMATION is provided for informational purposes only. It is NOT advice.
Stock Market-Fed-Rates to Kill Rally? Energy-Metals-China Turn? Bank Earnings? Read More!
July 8 2023 Option Professor Opinions & Observations
Hello Everyone! We got a Jobs Report Friday that initially was viewed as a turn down in the Labor Market BUT by the end of the day, traders realized the WAGES are UP, Hours Worked UP and 3.6% rate is still at 50 YEAR LOWS! The conclusion is the Fed has more to do and sans a “event”, the Rates will stay elevated.
The next realization by traders was that valuations on AAPL & MSFT as examples, had gone from the 20’s to the 30’s P/E’s since the beginning of 2023. Along with many others, this mean that this rally was FUELED by MULTIPLE EXPANSION. In a world of 5%+ Fed Funds rate, the VALUATION should be CONTRACTING toward 15 or 16 not 20 or 30! This week we start EARNINGS SEASON and companies better put up or shut up! This week, Friday, we start with BANK EARNINGS with JPM, C, First Republic and others the following week we get GS, BAC, and MS to name a few. We will see how the REIONALS are doing with many having to give away their profit center of Net Interest Income (translation the bank pays you NO INTEREST on your money and EARNS INTEREST for themselves). Not a bad scheme if you can get away with it; however many have to pay MARKET RATES to retain nervous depositors. No loan Growth?
The world may be CHANGING so keep your eyes open. Energy prices are benefiting from DEMAND VS SUPPLIES in that Saudi & Russia are cutting and inventories appear LOW. Energy futures are in a condition called backwardation which translated meaning they pay more for immediate delivery than deferred suggesting tight supplies. INFRASTRUCTURE may be a key word in the months ahead and if so FCX ect., INDUSTRIAL stocks and metals may go on a RUN. Gold & Silver have been SOLD off BUT if CPI runs LOW this week (expected to as last year’s HIGH numbers is removed), Yield ease, Dollar drops, they could run. China has been a busy bee with restrictions on 2 key metals, Gallium used for Radar Solar panels, TV/phone displays and compound chips. Also, Germanium used in Fiber optics, night vison goggles, and space exploration/satellites. CHINA also cam down with BIG fines on the tech giants BABA, TECHY, PDD, and BIDU and this was viewed as a sort of culmination as China big caps (FXI) SPIKED up on the news.
BUT, all these markets have SIGNIFICANT technical resistance ABOVE current price, this week promising.
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REMEMBER All investing involves risk of loss and it is not right for everyone. CONSULT YOUR BROKERAGE FIRM to determine your own suitability and risk tolerance. Past performance is not indicative of future results. Information and opinions are provided for informational purposes only. It is NOT advice.
Stocks-Q2 Ends with a Bang! More to Come? OR, Reality Bites-Earnings-Rates-Recession-Read It!
July 1 2023 Option Professor OPINIONS & OBSERVATIONS
Time for Bullish (and how could you not at almost 1000! S& P points ABOVE the lows of October 2022!) Of course, we know this is what HAS happened and the key is where is the puck going. The talk of all these short is amusing as I don’t think Musk has enough money to stay short this market:): JULY is a huge month in that expectations are for CPI to retreat due to last June’s 2022 month being dropped replace by a low number. PCE CORE is at 4.6% so we have cut 50% off the top rate of 9%. With equity prices up, housing higher, jobs plentiful, will the next 2.6% inflation drop be easy? They say the cure for higher prices IS higher prices (people refuse to purchase/change spending habits). Firsthand, we may have witnessed it at Home Depot where we have pictured up major appliances 33% OFF! This may hit the last inflation engines (first it was Covid demand, then supply chain issues, and finally price hikes).
We suggested TECH (Growth) OVER Value back in Q4 2022 and it still is the overweight despite concerns. Friday, we got tech like AAPL MSFT AMZN META NVDA continue to be fed BUT small & mid caps are adding to recent gains and expanding breadth. Global stocks sin Mexico climbed, cloud and cyber security, travel/gaming, ev’s autos, Gold Silver Copper, Health Care, Financials, & other sectors all gained.
Mid-July, we get CPI and the start of EARNINGS season (banks). REVISIONS have been to the upside BUT NKE & WBA are 2 examples that if you miss you will get punished. EARNINGS are expected to drop 6%+ but the Q1 EARNINGHS were supposed to drop and came in stronger than expected. Are China EXPORTS slowing telling us something? Economic slowdowns and inflation in Europe? China/Japan currencies hit?
The 2nd half will be FAR different than the 1st half of 2023 for reasons ranging from lag effects of Fed Policy, the AI boom will sober up, valuations are ridiculous, summer will end, and Q4 will pay the price.
Having said that, we don’t fight the tape DESPITE the fact that the tape is fighting the Fed. We said that 1 year Treasuries (real rates as well) MUST get ABOVE the CORE inflation rate and stay there for a lengthy period to bring inflation down AND we are not done with that mission. When we see price proof-we go!
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REMEMBER All investing involves a risk of loss and it is not right for everyone. CONSULT YOUR BROKERAGE FIRM to determine your own suitability and risk tolerance. Past performance is not indicative of future results. Information and opinions are provided for informational purposes only It is NOT advice
Option Professor-Stocks To Rally Before July 4th? Find Out What Our RSI Signals Say? Read More!
June 24 2023
OPINIONS & OBSERVATIONS
The stock market took the bloom off the rose this week as was to be expected with the RSI DIVERGENCE we saw at the highs of about 4500 S&P 500. For those of you who get our weekly update, this was no surprise to you. Rate hikes around the world, slow economies in Europe and China PLUS inflation that is elevated and sticky are the main themes out there. EARNINGS for Q2 start coming in a few weeks. The Q1 earnings ONLY down 3% vs 8% expected was a driver. The BIGGEST drivers of this rally in our view was the LIQUIDITY the Fed put in TWICE (Debt Ceiling & Regional Bank Crisis), POSITIONING (out or short), and LOW Volatility (VIX 12 handle breeds confidence for big money to return). What if things change?
The Fed is expected to REDUCE liquidity by returning to reduce the balance sheet and hiking fed funds. The Regional Banks are now facing HIGHER reserve requirements, bad commercial loans, and Net Interest Income out the window as they have to pay depositors to stay. Short interest is at the highest point since April 2022. The S&P 500 FELL from 4300 to 3640 from April to June last year. These shorts must have some counter position because I don’t know too many traders who would not have covered during a 400 point S&P 500 rally and still have any money left or a job:):):). The VIX is SURPRISING many people in that it is saying that NO RECESSION is in the future and downside risk is nil. If EARNINGS miss- It’s Sayonara:):)
RSI DIVERGENCE- Two weeks ago we flagged Estee Lauder (EL) and got a huge RALLY from the 170’s to 200+ in ONE WEEK. This week we flagged TSLA as a SELL up near 275 and that rolled over nicely.
TIME TO CONTACT US! We can EXPLAIN how this tool PLUS our moving averages can help you markedly.
This helps you with short term trading and short term option trading PLUS apply to longer term as well. Those of you who have received the information and 1 hour online session KNOW how this is helpful.
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Thanks, Look Forward to Helping You Take Advantage of this Opportunity,
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The Option Professor
REMEMBER All investing involves risk and it is not right for everyone. CONSULT YOUR BRKERAGE FIRM to determine your own risk tolerance and suitability. Past performance is not indicative of future results. Opinions and information is provided for informational purposes only. It is not advice.
Option Professor-Will Stocks Spike Up Continue? What Could Trip It Up? What’s Next? Read More
June 17 2023
Happy Father’s Day Everybody!
The stock market has broken thru all resistance and blown out the record short interest big time. Many traders have been fading this rally and have the wounds to show for it. Our last 2 potential resistance zones was S&P 500 4200 and the just over 4300, both went like a knife thru butter. Don’t fight the tape is a mantra but the markets may be challenging the other mantra of Don’t Fight The Fed! Powell skipped the hikes this meeting but said more to come. The markets scoffed at that and instead turned to the July 12 CPI report that has the potential of seeing an INFLATION DECLINE in the rate to UNDER 3%! How’s that? Simple, we will be removing a huge inflation number from last June so if we were to get a new reading like this month the CPI could be as low as 2.7% by some estimates! Of course, the CORE and PCE CORE are still in the 5%+ range and if gasoline prices go the other way (it’s started), all bets may be off.
RIGHT NOW we are EXTENDED basis the moving averages but the Growth OVER Value continues so far. If the market is to EXPAND the rally, we suspect a catch up trade in Utilities, Staples, Dividend payers , Small caps and Mid caps where valuations are much more attractive to new money & EmergingMarkets/Europe IMPORTANT! We suspect that when we truly hit the HIGH POINT there will be DIVERGENCES to confirm it
TIME TO CONTACT US. Go to optionprofessor.com Submit contact info. Let’s Talk. The VIX is at 13.54!!!!!
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Exciting Times Ahead!
Talk Soon/All the Best
The Option Professor
REMEMBER All investing involve risk and it is not right for everyone. CONSULT YOUR BROKERAGE FIRM to determine your own suitability and risk tolerance. Past performance is not indicative of future results. Opinions and observations are provided for informational purposes only. It is NOT advice.
Option Professor-Stock Market-CPI/ Fed Skip? Has Growth vs Value Peaked? Gold? Oil? Read It.
June 10 2023
IMPORTANT! Register-ONLINE WEBINAR Monday. Including- Short Term Trading-RSI Divergence Signals
We are not hurting for news in the week ahead and there could be big surprises. The Bank of Canada and the Bank of Australia BOTH did surprise hikes so will the Fed follow suit? Yes, we have seen a lot of reports of a manufacturing recession in ISM #’s and a weakening of ISM services but CORE CPI is still ABOVE 5%. The surprise some are looking for is 2 WEAKER CPI prints ahead due to easy comparisons from last year.
ESTIMATES CPI nominal drop from 4.9% to 4.1% and CORE 5.5% to 5.2%. Surprise coming and Fed skip?
The consensus seems to be a skip in June and a hike in July. The Fed doesn’t meet after that one until late September so maybe a hike in July to 5.25% or about equal to CORE CPI would make sense. Events ahead include Q2 EARNINGS come out in July, the Treasury issuing tons of Treasury Bills to refill coffers, and whether the Saudi oil cut will send prices toward 80 or above. POSITIONING to some say that tons of money on the sideline will succumb to FOMO ABOVE S&P 4400 (of course we still need to get there).
OUR CONCERNS- The complacency out there is palpable (VIX 13 handle has round tripped to pre Covid). The frenzy of AI may have hit an inflection point as the frenzy about GM F TSLA in the electric car space. If the Fed has major concerns about the banks liquidity and want to divert attention, they may be happy with a big market rally. Of course. this may also prevent a reduction in consumer activity and inflation. No question we have had a great run since the lows of October and most moving averages are UNDER markets now. BUT we did see a TOP in the Growth to Value Index Ratio in May so maybe it is time for a tech sell off? We need to see QQQ outpace SPX by the end of June or we will make a call to SWITCH out. The Russell has jumped due to realignment, regional banks and the fact that their valuations are lower. Since the realignment is done in a few weeks and regional bank euphoria could be temporary, we may need prints ABOVE 190 and the month of July to declare victory. Also, XRT XLY XLI XLC XLK XTB still s go?
Finally, there is a POTENTIAL for a BIG turn in the Goldman Sachs Commodity Index ahead based on a number of factors including the fact that it dropped from almost 850 to almost 500 since last year! Also; we see a DIVERGENCE in RSI on our 1 and 5 year charts in May. Supply & Demand-two fickle customers. Half the index is energy related-then grain-metals so what is that potentially telling us? Time will tell:):)
Remember! FREE ONLINE WEBINAR Monday; if unable to attend call the office at 702-873-8038 for info.
Thanks
The Option Professor
REMEMBER All investing involves a risk of loss and it is not right for everyone. CONSULT YOUR BROKERAGE FIRM to determine your own suitability and risk tolerance. Past performance is not indicative of future results. Information and opinions are provided for informational purposes only. It is NOT advice.
Option Professor-Stock Market- With VIX 14 Handle? Time to Locate the Rip Chord? Read It.
June 3 2023
We got a lot of data to chew on this week from ISM numbers to the Jobs & Jolts Reports. Job OPENINGS rose to their HIGHEST level since January as we EXCEEDED above the 10 MILLION job openings at the end of April. In the Jobs Report, we expected LESS than 200k jobs and we got MORE than 300k jobs-a huge beat. Wages are up but not going thru the roof. Conclude- people are working, making money, spending. EARNINGS came in just 3% lower rather than the 8% drop expected in Q1 BUT we have seen changes in Q2 that will be reflected in JULY reports. We suspect that if you back out the delirium over AI and 7 stocks, you will find out many companies are seeing consumers pull back (COST DG for two).
Technically, we are watching 2 things very closely. We see the VIX made a 52 week LOW this week and has a 14 handle. We also are looking at a Fibonacci 61.8% retracement of the S&P 500 high at 4810 and low of 3491 coming in at just ABOVE 4300 (SPX). Inflation data (CPI) is one day before Fed meeting (skip?).
REVERSION to the mean happens all the time as markets ultimately correct. VIX/Fib retrace and the FOMO feeling of this week has us looking at PROTECTING portfolio valuations prior to CPI & Fed Meeting
Do you know the strategies used to HEDGE against Downside risk AND Upside Surprises? We should talk. Go to optionprofessor.com, Submit your information and we will REVIEW your markets and hedging ideas
Option Professor-Stocks-Time to Sell the Last Rate Hike? Switch From Growth to Value? Read It
April 22 2023 Option Professor Opinions & Observations
There is an old adage of sell the last Fed rate hike. We are also ending the powerful Presidential Cycle trade of buy on October of the President’s second year in office and sell in the 3rd year of the President term in office. This is something we have told you about and clearly this time it worked like a charm.
Why sell the last rate hike? The theory is the LAG effects are about to kick in and slow the economy down. The EARNINGS decline that follows can REPRICE stocks and if rates remain higher for longer it weighs on VALUATIONS. Here’s the TRUTH as of today. The lag effects have mostly been seen in manufacturing which is a product of supply chains normalizing and overordering during and post pandemic.
Services continues to be strong as the consumer is employed with higher wages, higher interest on savings (5X in one year!), and the baby boomers collecting social security just got a HUGE raise as well. This has translated to dining, traveling, gambling and all sorts of discretionary spending and is strong.
HERE’S the RUB!! Everyone who keeps talking about the Fed is done has a VESTED INTEREST in saying the Fed is done (they own stocks-bonds-real estate) and so they have said this for the last 3 Meetings. Fed officials are NOT going to say they are going to hike until Fed Funds is way ABOVE CPI and the REAL interest rate (10 yr Treasury LESS inflation) is also POSITIVE (right now 5% inflation-10 yr 3.57%=-1.43%) Owners Equivalent Rent has been sticky and NYC rents just hit a RECORD. The CORE was 5.6% and RISING The VIX saw16 handle this week (52 week LOWS) and S&P & QQQ Resistance HOVER above at 4210/330.
The point is there is a lot of come line betting here on INFLATION, FED PAUSE/CUTS, and RECESSION. Where’s the BEEF? Our OPINION; Crude Oil & Gold FAILING and rolling over ($84 & $2075) suggests slowdown. The 10 yr Treasury ABOVE 3.30% DODGED a bullet as a air pocket to 2.75%-3% lies underneath Should the 10 yr. Treasury & 2 yr Treasuries close ABOVE 4% & 5%; REPRICING ASSETS’s the story Q2/Q3. With the VIX making 52 week LOWS; NOBODY is positioned for HIGHER RATES & HIGHER DOLLAR. The BANKS announced EARNINGS this week and B of A’s Moynihan says CONSUMER has Room to BORROW
Let’s let the markets show us the way. Let’s RESPECT the other side of every trade we do. MEANING-have your EXIT strategy in place either via Trimming, Replacement Trades, Covered Calls/Married Puts/Collars. THIS WEEK we get BIG BOYS earnings MSFT GOOGL AMZN META & May 4 AAPL. What’s the GUIDANCE?
Time to CONTACT US! Go to optionprofessor.com. Submit Contact Information. We’ll EXPLAIN Our Help!
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The Option Professor
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