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.
March 19 2021 Option Professor Opinions & Observations
Welcome Back!…..We have told you in the last year that the S&P 2200 was turning up & start with Tech & Growth,,,,we then told you the S&P 2800 was a key long term moving average and once ABOVE it (with the Fed’s help) we were out of the woods…..we then told you Gold & Silver’s higher prices were parabolic and would not last…we then told you that VALUE & CYCLICALS & DIVIDEND PAYING stocks would gain favor as the yield curve would surely steepen and big money would be more comfortable buying into those stocks rather than the high valuation……recently we said that the highs around S&P 3960 could find resistance and a correction could occur. In the last 2 months we saw the S&P have declines from 3870 to 3690 and 3955 to 3720 and now 3983 to 3885…all very playable….BUT the prior 2 declines were followed by rallies of S&P 3690 to 3955 and 3720 to 3983 also very playable. NOW WHO WINS THIS TUG of WAR? We understand some cycle guys believe the market TOPPED out this last week and will DECLINE in a zig zag pattern until later this year….that is clearly a CONTRARIAN VIEW. The China numbers have been spectacular (retail sales +33%/manufacturing +35%/exports thru the roof) yet FXI & KWEB have DECLINED in the month of March so stranger things have happened. This may also be saying that they are screaming buys but China does seem to want no bubbles and have taken steps in that direction (BABA’s ANT deal squashed and reduce media holdings). The BULL CASE for stocks really comes down to 70% of our economic growth which is CONSUMER SPENDING. Households are on fire with cash (refinancing 2020 $2.6 Trillion inflation adjusted)), wealth effect, back to work, low interest debt service, millennials in the game, patient Fed (easy), vaccines, improved weather, pent up demand no interest in Bonds, VIX trying to sustain UNDER 20, and of course an obscene amount of stimulus now and coming.
We are seeing EVIDENCE of their willingness to SPENS with air travel already spiking and CREDIT CARD ACTIVITY HIGHER on a year over year basis and less at grocery stores and more at restaurants (my buddy in Phoenix says restaurants packed). We also see baby boomer credit card activity is up huge in March. We must respect the old phrase “just when you think you know the keys to the markets they change the locks”…..but it seems reasonable to expect the GDP and EARNINGS to spike and it starts in a couple of weeks with the BANKS who should deliver great numbers. Some say the economy is back to the strength of 2018 and now has 2X or 3X the GROWTH RATE and INTEREST RATES are HALF the level back then so it is SCARY how much of a DEMAND shock we could see. We did see drops in energy stocks as inventories rose and IF we get a END OF MONTH BID in the Bond market coming from mutual fund REBALANCING ….we could see the banks start to give back some like we saw this week. Ray Dalio who is a renowned hedge fund manager believes the monetization of the debt by the Fed is indicative of END OF DEBT CYCLE behavior that may show its ugly head by the end of the year. Here’s the deal…the whole world owns Bonds and they are LOSING money as GDP spike -Inflation-Potential Weaker Dollar may GROW in months ahead…..should they want to SELL and the Fed/Treasury must SELL…who is the incremental BUYER…..the FED. The Dow Transports (FDX UPS UNP) and the Russell 2K so far have been & remained strong which is good so if S&P & QQQ SMH ARKK hold their monthly lows AND we get a bid EOM on Bonds…if we see strength-go with it Remember…China saw some buy the RUMOR sell the FACT so be HUMBLE! SUBSCRIBERS will get our FOCUS LIST on a DIVERSIFIED approach that we feel is essential in this market . We will SHARE our ideas for VALUE-CYCLICALS-DIVIDENDS-TECH/SEMIS INTERNATIONAL-DOLLAR HEDGE. SUBSCRIBE TODAY!
Prior to last week we explained that Fed EX FDX was going to announce EARNINGS and they would be monster so anything between 255 and 265 was a steal…well last week we were rewarded with a great report and a $20 pop in the stock. We are following 2 new issues RBLX & CPNG for possible turns…speaking of turns..we are expecting the lows for March in SMH & QQQ & ARK funds to hold and proceed to rally if we see bid show up in Bonds with EOM rebalancing…if not..Sayonara….where is the puck going?…we think after any dips energy & banks plus value & dividend payers still the place to be….by May they talk of infrastructure deal maybe (URI-Materials-Vale-NUE-FCX ect)….SUBSCRIBERS receive our specific ideas. After that the sports related (DKNG MSGS ect) and autos related (DAN-F-GPC) are on the radar plus more. The ETF MOON is on the radar now vs ARK and really the big story in the next 2 weeks is whether there will be a selloff in tech & semis & innovation as rebalancing occurs or if we hold March’s lows and get a recovery run as the 10 yr pauses at 1.70-1.80? SUBSCRIBE TODAY!…..and get our FOCUS LIST & More!
Long term rates hit about 2.54% and much more and TINA’s got a fight. After the run up we’ve seen and may see stocks may have discounted much of the good news and the consumer spending pop could ease…if that happens people like the Black Rock boys who indicated duration may be a less dirty word soon will arise. There’s so much debt and ongoing issuance only a fool would not think we’re near the breaking point unless growth is so sustainable that we can handle the LEVERAGE…but let us SHARE with you a LEVERAGE HISTORY LESSON…..1980’s LEVERAGED BUY OUTS (LBO) preceded the 1987 crash…LONG TERM CAPITAL & VALUATIONS preceded the DotCom crash…..no money down no doc REAL ESTATE LEVERAGE preceded the crash of 2008….and now we see LEVERAGE in the Fed Balance sheet & Corporate balance sheets & Consumer (credit card issuance & use) is HISTORIC….hard to time but look out for Cops…in fact we believe the Fed is like Cops…great people..we love them…but they come AFTER the trouble. SUBSCRIBE TODAY!..we show you where to get INCOME & explain details
US Dollar & International Markets
As we gave details to readers before the DXY has held 88-90 as our economy rebounds dramatically & vaccinations far outpace the world and our interest rates are back up to a real advantage so we push 92…..if we push 92-95 that changes the landscape Longer term the Fed is monetizing the debt down the road substantially potentially and could be the straw that breaks the Dollar’s back..we are on the look out and will adjust accordingly. International markets like Europe. EM and Asia Mexico/Brazil look very interesting but some still lack growth BUT we will use them for CUURENCY and VALUATION diversification which we believe will be needed by Q4. SUBSCRIBE TODAY!…Get our FOCUS LIST and details on where & is liked
Crude Oil Natural Gas
As we told you the energy sector was a bit frothy as were oil prices and refiners were racing to deliver so this week we saw inventories rise which has trimmed prices (XOP XLE ect) but a rebound late in the week occurred after the 10 buck sell off from the highs….LT we still believe in the supply demand dynamic to be positive but as in any bull market..buy the dips. Go size selloff in Natural Gas from 3.25 to 2.50 may be over and with it the dip we warned about in LNG…should hold the 70 neighborhood if any good SUBSCRIBE TODAY!…Get our Energy FOCUS LIST before the next move!
Gold Silver Copper Platinum BitCoin
We told you GOLD SILVER PLATINUM hit short term lows at $1675, $25 and $1100 and so far they have bounced very nicely BUT the easy work may be done as we need prices OVER $1850, $28-30 and $1300 to open the door to the real upsideor risk going back in the soup. Copper has DEMAND of 10 Mil Tonnes and supplies that may not be adequate as INFRASTRUCTRE is a sweet word for the copper bulls…we have 2 copper stocks we rode like Secretariat this last year…..BitCoin has money flow coming in and terrible LIQUIDITY to meet the demand…our mantra since last year is that 2021 is great and could hit 100K BUT use 30% to 50% dips to average in with risk capital…remember like TSLA they were first to the game..competition next SUBSCRIBE TODAY!..Learn what metals stocks are on our FOCUS LIST
Soybeans Sugar Coffee
The grains have benefitted from CHINA demand and this week was no different….prices seem elevated and a correction would seem natural but BEWARE…farmers and others may be sellers/hedgers up here against CROPS THEY DO NOT HAVE YET which means if we have WEATHER MARKET this year there could be a scramble for example if the shorts have more exposure than they can deliver..a spike can happen…Gamestop to an extreme example was fueled in part by 140% short interest. Sugar & Coffee are losing altitude but if you are a believer in a COMMODITY BULLISH SUPERCYCLE ….be happy to get the dip SUPPORT Sugar 12-13 Coffee 110-100 SUBSCRIBE TODAY!…Get our Focus List on ETF’s in these markets & MORE!
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