This is the free weekly update that is posted first to the OptionProfessor.com site each week. The Substack paid updates provide more specific detail.
July 23 2021 Option Professor Opinions & Observations
Good Day Everyone…..Another wild week with Tech Earnings on balance very impressive BUT from AMZN & PINS to GOOG-MSFT-AAPL-SBUX-JPM-UPS and others had a bit of a fade going into the weekend. Online retailers really got hit. AMZN lost OVER 10% in the last couple weeks which is a lot for a almost $2 Trillion dollar company. GDP was short and housing & the consumer sentiment seems to be leveling off and masks are gain part of the wardrobe. Inflation is running at the fastest pace since 1991 and the Fed appears light years from tightening. Small caps are underwhelming versus big caps and sectors like consumer disc-social media (FB)-communications-energy-leisure-re-open are off highs We have a theory we have been monitoring that goes like this….when Treasury yields peak within 2-4 months the stock market peaks. In March; we had the peak in Treasury 10yr yields at about 1.75%…..In May (2 months later) the Dow Jones Transports peaked (had fallen almost 2,000 points)….we are now finished with July (4 months) and we hit a high of about SPX 4430 this week. The easy lifting may have been done (comps to last years shut down/Fed accommodation -Fiscal Stimulus-pent up demand)….with the future more difficult. Another point….look at Treasury yields leading up to the March crash (Nov 2019 thru Feb 2020)….you will see they were headed lower during a strong economy from the same place we started our yield drop since March despite a steroid economy….why??.do stocks turn down in Aug-Oct? We always say that long term trends remain up and don’t fight the Fed nor the tape! However; masks are back in the conversation and this sell off in stocks after great earnings is concerning. CONCLUSION…Some respected analysts were looking for a stampede INTO stocks this week and next…..they may very well be correct BUT AUGUST may hold the keys to the castle….we have a GAP on SPX between about 4410 and 4420…..if we go toward that area and turn down to take out SPX 4350 and last months lows at 4225 area….the exits could get crowded….be aware of tactics like trimming, collars, married puts, covered calls and replacement trades just in case…AMZN investors wish they had.
Join Us at optionprofessor.com/subscribe to gain our insights and ask your questions…we share our experience.
Rates are low (like Buffett says they’re like gravity to stock prices and right now not much gravity). This week looks like a pull back and buying opportunity as long as we get good price action next week. The same song and dance in that valuations are high-prices are well above their mean risking reversion-and the Fed never met a dollar it wouldn’t print. The drop in AMZN was unsettling but that 3300 area has some long term averages at that level maybe a buy set up. Next week we get a slew more earnings but you figure they should be good…more sell the fact?? Everyone is bullish and positioning seems ultra long so be aware of your parameters and go some if you haven’t got any….as we saw with AMZN…a little late to look for hoses when a fire breaks out. The value trade (financials-industrials-materials-energy) is supposed to finish the year strong so keep an eye out while back to school (hopefully) will be on time. Most big brokerage firms and bulls think the VARIANT RISK is not a problem but I’d rather check the numbers to verify that view. Do we blow out the highs this week? Nowhere else for $$ to go….AMZN proves sometimes it goes back in the pocket:):
Go to optionprofessor.com/subscribe…find out what’s on our Portfolio Road Map?
Treasury yields just seem to be unable & unwilling to rise. We told everyone that March was the taper tantrum and until taken out buy all the Bonds you want…so far so good. We follow preferreds, senior loans, emerging market sovereign debt, high yield. munis, short term IG corporates and DIVIDEND payers…want income? we can help inform
go to optionprofessor.com/subscribe and learn how we tackle the income beast
US Dollar/International Markets
We told everyone the US Dollar (DXY) peaked last year near 103 and bottomed near 89….it has been range bound between about 89-93 most of this year….not too exciting. The yen is benefiting from our consumer but has vaccine problems and Europe is just now trying to reopen to salvage the August tourist business….we’ll see if the pull it off. Inflation is a worldwide issue so we will see how fiat currency does in the months ahead…we suspect the world will be looking for a non-sovereign store of wealth in the not too distant future. China has been the big story and as we told everyone it has not been worth the political risk. They seem to be targeting the super wealthy rich guys companies (one guy lost $15 B when his education company lost 98% of value). We are looking for some type of low in the next 30-90 days which is not coincidental as our feelings on all of this disruptive news is happening now so as we get closer to year end (only 4 months) & the Bejing Olympics Feb 2022….the house will be in order & they will greet their guests. Emerging markets like Mexico & Brazil are trying to improve and Europe & Asia banks can return to dividends. Long term trends are up across the board but if the variants take over…all bets are off…we share our insights on each week
Crude Oil Natural Gas
This area has many confused as the price of crude oil has been firm close to its 52 week high while the shares are way below…..will that change? There are some sharp traders who still believe we close out the year with a bang as a mean game of catch up may be in front of us as CHV just announced over a $4 Bill profit in Q2 with tons of money to return to shareholders….subscribers will learn our picks soon. Tight supplies, no cap ex spending should mean brighter days. Natural Gas got hit this week and may be due for a correction likewise LNG as we got bullish on these many months ago. Join us and take advantage on where and when we see opportunities soon.
optionprofessor.com/subscribe….our insights every week
Gold Silver Platinum Copper Crypto
We told everyone in March that those prices were your buy in and now we tell them that we are using out long term charts 12 SMA to give us a buy signal for Gold Silver & Platinum….so traders should NOT be in there just yet. Ditto the mining shares but we monitor closely as sometimes late summer/labor day is the turning point FCX in copper is well thought of but we see the industrial metals had a great week (CLF & X). We told everyone that we believe the lows ib Bitcoin & Ethereum may be in and if these gurus are half right the next 4 months could bet wild…Get our Newletter!
Soybeans Sugar Coffee
You heard of live by the sword and die by the sword?…well Coffee traders have a new one called Live by the Frost Die by the Frost as Coffee prices went up 45+ points ($17 Grand a contract) on Frost fears and just had it’d worst decline since 2008 when they abated…Ouch!…Playing parabolic markets tend to end badly. After drought comes rain as Beans topped in May & June and have been sliding since with some consolidation. We told readers to get bullish last year at 8 or 9 a bushel as China buying was evident. Sugar may also be due for a correction as it also has gone up huge since we told readers to get bullish at 12.50…..there is a one stop shop commodity fund that we respect…join us and learn!
Remember All investing involves risk 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 observations are for informational purpose only. It is NOT advice.