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March 27 2021 Option Professor Opinions & Observations
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OK…On Friday we saw a stampede into stocks in late afternoon trading taking the Dow Jones Transports to NEW HIGHS while the S&P & Dow tested their highs and the Nasdaq still off the pace. End of quarter rebalancing we told you about weeks ago is happening and VALUE-CYCLICALS- BANKS & ENERGY continue to be the new momentum trade…as we told you for many months–beneficiaries of better valuations-steepening yield curve-reopening-earnings. GOOD NEWS- GDP in Q4 was 4.3%+ and Jobless Claims tanked (we told you for months Jobs Reports will normalize). The VIX broke and sustained a sub 20 number!…..Banks can buyback stock & pay dividends June 30…M&A activity expected to jump…money supply up OVER 4X in last 20 yrs (accelerated last year) means lots of $$$ around….Personal Income/Household Savings rose at a Record pace last year…$3 Trillion Stimulus/$2 Trillion Households/Fiscal Stimulus NOT SO GREAT NEWS…Some Cycle guys still calling for a PEAK in March-Mid April leading to buy point in EOM May or June (we have seen tradeable sell offs from this neighborhood)….the A/D line is lagging…Household spending was down in Feb (bad weather?)….Prices Paid Index Jumped…this much LIQUIDITY…this much pent up DEMAND and the Fed still saying no hikes for 3 YEARS may lead to INFLATION & HIGHER RATES and some say Higher Rates is like GRAVITY to stocks (zero rates=no gravity)….we have BORROWED from the FUTURE-payback-higher rates-lower dollar. So who’s making out from all this….we have told you about the ROTATION for MONTHS and the chart of Value vs Growth suggests the turn is in full force and has a long way to go….foreign countries are exporting to us at record levels which means they are making $$$$….and supply chain shortages and demand pressures look good for resources SUBSCRIBE to our Newsletter and LEARN what is on Our FOCUS LIST NOW for $49 Monthly or $297 Yearly….peanuts.
Well we have demographics (millennials)–a steepening Yield Curve–positioning 9sideline money)–and risk reward (VIX under 20) all pointing to a favorable market so stay the course for now BUT be sure you know how your hedging strategiescollars-married puts-trimming-replacement trades using calls & spreads ect.) so that if we see a stall or correction you at least you have an opportunity to protect gains should decide gritting your teeth causes dental damage:):). We saw housing get a bid this week with stocks like LEN MHK SHW PHM and Williams Sonoma rising. Some are looking to dividend payers (we told readers about this MONTHS ago VYM) an now T-6.9%, KO 3%, IBM 4.8% USB 3% and VZ 4.3% are same than have garnered attention. Materials Energy Industrials and Consumer Discretionary (Staples now too) still attract bids…..while high valuations have hit the skids buy may be worth a peek off their highs Snowflake -50%., TDOC -29%, ZM -46%, ROKU -35%, SHOP & SPOT -20-34%, AAPL -17% AMZN -14% to name a few. My son got an I-12 which definitely has a bigger screen and 3 cameras so maybe a huge rush later this year?? The NFT craze is brewing and some say Ethereum (ETCG) may be a way to play it. Two vice sectors may continue as the states are looking for revenue….online gambling has been a monster (DKNG PENN Flutter ect) and the pot stocks (MJ)..one is pulling back the has done so…but now the states get apiece of the action…strange bedfellows but not surprising $$$$. Other stocks of note.. Unusual option activity V BA & AMAT plus price action in BX WBA FSLR BP STZ JPM XLE RRR WSC ORCL and many more as we keep subscribers abreast of not only ETF’s in sectors on our focus list but a lot more! SUBSCRIBE TODAY!..Only $49 per Month/$297 per Year…
The yields backed off the 1.75 area on the 10yr and 2.52 for the 30 yr after a drop in Bond prices that was the worst start to a year in this Century! We are NORMALIZING interest rates to reflect GROWTH & INFLATION expectations and since we still have negative real yields that process has a lot more to go over time. If you are an investor in LONG DURATION you are getting whacked (your coupon is dwarfed by the price decline of the bond) BUT it also must mean you have not listened to our WARNING since last March 2020 was a blow off top and the end of the declining rates cycle that started back with VOLKER….we have said stay in short duration and sprinkle some high yield and preferred stocks to sweeten the pot….this has been a good place to be…..Junk debt issuance at a record..overseas market are rushing to the issue window….Treasury issuance will explode as transfer payments and deficits must be paid for…this rally we see in debt may last awhile (positioning was VERY short like the positioning on the US Dollar and both have seen a corrective rally…but the fundamentals do like bode well for either market unless GROWTH outpaces INFLATION
US Dollar & International Markets
As we have told you the US Dollar (DXY) got oversold at the 88-90 areas (14% drop from 104) and positioning was ultra short so we believed the higher yields would return our yield advantage and cause a corrective rally which it has done closing Friday at 92.72. Now we trade ABOVE the 50 day MA and the 200 day MA (91.06-92.11) so that’s positive but the averages are still INVERTED to the downside so the sustainability of the rally will tell the tale. The Fed printing (money supply from 5 Trill to 20+Tril in 20 yrs) dwarfs foreign countries and some have positive real yields which means that at some point the house of cards playing with fire could burn…..unless growth is so strong that revenue spikes….we’ll be watching…..foreign countries are flooding us with goods (if they can get thru the Suez Canal:):)….which bodes well for their earnings (they have lower valuations)….some say we reopen July 4th…Europe Labor Day..Emerging Markets EOY….all bodes well for Asia Europe & Emerging Markets….we share our FOCUS LIST with subscribers so…….
Crude Oil Natural Gas
OK…..the Suez Canal Drama has helped return the bid to Crude Oil prices (57 to 61) after a correction we told you was coming from 68 to 57 (50 day MA). We are still well above the 200 day MA so back and forth action may continue but we are very interested in OIH as a longer term vehicle and used the sell off to 180 area as an opportunity…if we’re going to 80 the future of that is bright….also the leverage players and refiners are on our radar always as lots of gas guzzlers still making us money. Natural Gas may be hitting support at 2.50 and our favorite LNG hit support at 70 like we said so let’s see if the correction is over in the days & weeks ahead…
Gold Silver Platinum Copper BitCoin Rare Metals
We have said for may months that the parabolic moves in Gold & Silver last year was going to need TIME & PRICE corrections to normalize and we continue with that process. Technically oversold at $1675 & $24.50 we felt we could rally and we did but as we said last week…the easy lifting is done …..on Gold we need to clear $1750-$1850-$1950 to make big money on the Upside with Silver needing ABOVE $28-$30 to get it’s mojo back on…this may take time so now a late summer or early fall cyclical low may be in the cards HOWEVER with an exploding money supply and GDP spike with Price Paid spike & the Fed on hold for 3 years….I wouldn’t stray too far. Platinum is our dark horse as it is way more rare than Gold…is trading at a huge discount to Gold (was larger) and has industrial application (catalytic converters) & possible shortages like many markets so $800 to $1000 is the base and ABOVE $1300 is rarified air. Copper has demand coming out its ears (10 million tonnes) and supply chain issues but lately we saw a 1-15% correction dues to overbought technical condition (35% above 200 day MA) at one point. Same thing with a couple of copper stocks that have been stellar for a year… now the correction maybe over…we share these ideas with subscribers on our FOCUS LIST….BitCoin (GBTC & ETCG) is the same story we’ve told for OVER a year…the year after halving is good (2021)….it is illiquid due to concentrated ownership…institutions are warming up (Fidelity Van Eck ect)…..Central Banks (China-Sweden) are moving forward & the Fed is using MIT for data….block chain has not been breached…so every time you see a 30% to 50% drop (we seen a few)…take your risk capital and take your shot….is there a risk that it could be outlawed like Gold was back in the day….will CB coins unseat its supremacy.. who knows?….it’s risky..so far profitable. Turning to Rare Earth mining and a stock symbol MP which just dropped 35%–for the faithful-it’s on sale
Soybeans Sugar Coffee
US Growers plan to seed the most acreage of Soybeans since 2014 as the higher prices brings out the John Deere’s. What we don’t know is how the weather will be during this planting and growing process PLUS how much hedging (sell short to deliver crops not yet harvested) is going on that could cause a perfect storm (no pun intended:) Prices have been hanging in the 13.50 to 14.50 area all year long (we told readers be bullish at 8-10 last year). We are way above LT MA”s so the RISK of a DROP exists but IF we hold this range and a weather market breaks out with China demand it could be a wild 2021…..Sugar and Coffee have seen corrections (maybe having to do with Trouble in Brazil) but corrections are all they are (in fact Coffee bounced nice off 125…they still are holding LT support (13 & 110) SUBSCRIBE TODAY! Get our insights into these markets and our FOCUS LIST of ETF’s for Only $49 per month or 297 yr…
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