Stocks Rip-VIX Warns-Earnings Coming-WOW-Must Read!

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April 10. 2021 Option Professor Opinions & Observations

The Option Professor is a Graduate of Boston College and has Decades of Investment Experience. He has instructed Thousands of Investors Worldwide on the Uses-Risks of Investing

Welcome Everybody….First Off…. We would like to extend a Thank You to all the NEW & Existing Subscribers to the Option Professor Newsletter….the idea is to ADD VALUE each week! Last week ended with a bang as there seemed to be a rush to get in BEFORE earnings start coming out next Wed.. We start out with JPM WFC & Goldman followed by Black Rock Citi USB & B of A and we close the week with State Street & Bank of NY Mellon. These guys should be making tons of money from trading, steepening yield curve and finance (IPO’s thru the roof), On top of that; they set aside a ton of money for loan losses that haven’t materialized and Fed say they can buy back stocks June 30. On top of that; OPERATING LEVERAGE should be evident as you can see their branches are empty and Samsung gave an example recently (Revenues +17% Earnings up 44%). Institutions have been cautious on stocks (fear of strains & higher Taxes) but the stock stampede we spoke to you about 200 S&P points ago could become a reality more than we saw already. ISM numbers were a blowout on durable goods but what happens if the service sector kicks in? Inflation is zooming as PPI was up 1% (double forecast) annualizing out at 4.2% (most since 2011). Here’s the rub….some say we will get a push as the euphoria of the reopen hits then die down (think of horses coming out of the barn–runs wild then calms down) …. others say inflation will be sticky due to supply chain bottlenecks and Clarida of the Fed says that if it persists thru yearend it must be dealt with at that time. Now we get the idea the Fed is going to become reactionary and outcome based. We are involved in an experiment with monetary & fiscal policy….it’s like the USA has a credit card with no limit and they never have to pay the balance…if offered that card…would you ask.. What’s the Catch? So we enjoy the ride in our value, cyclicals, banks, consumer discretionary and big name tech BUT we are aware that the VIX is OVER 25% higher in the July contracts than the front month which suggests that the bet is volatility (a correction/pause to refresh) is coming. We all know about valuation by most metrics is hot and put/call ratios & AD Line/ investor sentiment is elevated. Credit Spreads (difference between High Yield & Treasuries) have broke UNDER 300 basis points and the history of that is a buy signal for bonds but not good for stocks (2007-2018). Elon Musk asked Cathie Wood about valuations (like asking Jack Niklaus if he likes golf:). She indicated that the GDP is outdated (is much greater than reported) and inflation is much lower than reported based in part from productivity gains. Side line cash…institutions playing catch up…passive investors (people who buy at intervals regardless)…global….lots of $$$ to chase it BUT we have been around long enough to know 2 things-DON’T Fight the Fed or the Tape & The TREES Don’t Grow to the Sky…so we ride the wave and look for formations that would indicate exhaustion…to SUBSCRIBERS..we provide opinions on Diversified Positioning which is really the way to attack this market….be aware of your hedging strategies so that you know how to protect your portfolio against declines. Some say we top at S&P 4130-4200 others say S&P 4350-4450….the further you get above LT MA’s (95% above)..is not LESS overbought.. So Stay Humble-Should you Lose Your Humility–Watch Out! We see it in people and in traders.

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Stock Market

We told SUBSCRIBERS about Tech a year ago, Value 6+ months ago, Banks Energy Industrials Cyclicals many months ago and now we are getting an acceleration phase. We will be sharing our opinions of what and where we think the best values are in the next 6-9 months now. This week we has many stocks on our immediate radar including CMG SBUX URI DHI QSR VIS VFH VCR VOOG VUG LEVI ESGV GDX SILJ CANE DBA VWO VGK BABA KRE LTCN OSTK & a lot more! Also in the new Best Buy (BBY) is starting a subscription business and the stock liked it…Teens are in love with NKE & Eagle Outfitters while Jeans had a big run (LEVI GPS). The big banks (JPM BAC C GS WFC ect) are up 17% to 34% this year and regionals (KRE) not too shabby. Boeing (BA) had to pulls the MAX again but most say next week resolved and GM had to cut truck production due to chip shortage…with all the saber rattling between China & Taiwan we could lose TSM which make the $20 Billion Arizona deal on INTC all the more important. Florida sue the USA to get cruise ships moving (CCL RCL) makes Condo Commandos happy:):). Big News! Coinbase comes to market April 14 at a valuation equal to Goldman Sachs (GS). We share with our SUBSCRIBERS our Portfolio ROADMAP & FOCUS LIST & ASK US Questions. To Join Us.. Go To optionprofessor.com/subscribe for $49 per month $297 per yr. Good Value!

Bond Market

Our view was that Last March we saw a blow off top in price and blow off low in yields. There is a potential that the cycle of debt and declining interest rates had come to a close 40 yrs after Volker’s Extreme. The 2% 10 yr Treasury and 2.50% LT Treasury are important as if broken it would solidify our thesis with price evidence. The Fed an others believe inflation and spikes in GDP growth are transitory and we will revert back to trend in the years to come. If so; you could start adding a bit of duration or for aggressive traders Strips (zero coupon) Bonds as the current panic to be short Bonds smells like a unbalanced trade that could blow up. We see extended maturities (EDV) down big time in Q1 which may not persist or at least at that speed in the months ahead unless the Fed is wrong and inflation & GDP sticks and they have to cut back monthly buys and go to TWIST for yield curve controls (YCC). Credit Spreads under 300 has spelled a buy point but these times are unchartered so old comparisons may be lacking. The relationship between 5 & 10 year Treasuries suggests no inflation further out and as long as credit spreads are tight..the Fed may be right. Municipal Bonds are seeing huge inflows ahead of tax hikes and aid from the feds. We favor short term corporates with Munis Preferred High Yield Senior Loans REITS EM and Dividend paying stocks in value sectors as a way to go. SUBSCIBERS get our FOCUS LIST on ways to get INCOME in a diversified portfolio prudently. GO to optionprofessor.com/subscribe for $49 per month or $297 per year….info you need!

US Dollar/International Markets

We told you before that the move from 104 to 89 on the DXY was like the sell off we just saw in Bonds and the selloff we saw in Tech in March…..it just got too crowded. So with yields rising our advantage returns and up we went plus our vaccine progress & growth blows away other areas of the world (Japan lockdown Tokyo-Kyoto-Brazil hospitals full-Europe better but not great). As long as the DXY is in the 91-93 range we could see 94-96..under 91 spells trouble. China’s angling to crypto to attack the Dollar overtime while the ECB pulling back on purchases. Italy is the most indebted country in Europe and they got a line wrapped around the block for their 50 year bonds. USA debt is weak in investment grade but Junk is at records (Chuck E Cheese is bank in the game after bankruptcy). Twenty (20%) of stocks are zombies (revenues do not service debt) so the world is getting pretty wacky. Munger’s Daily Journal is buying BABA and our view is that our trade deficits will enrich Europe Asia and Emerging Markets later this year so that could be the bigger bang for your buck in Q3 Q4 ROTATION. LEARN about our PORTFOLIO ROADMAP & FOCUS LIST in these markets….Get On Board! Go To optionprofessor.com/subscribe and for ONLY $49 per month or $297 per year you’re in!

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Crude Oil Natural Gas

Pause to refresh here as we had a huge run in Q1 (best performing sector) and OPEC did hike production. SUBSCRIBERS benefitted from our view of bullishness in the last year and these pull backs are buying opportunities as rig counts lack of private equity and a demand pick up globally spells for better days down the road…the refiners and leveraged players are interesting and VDE OIH are two on are radar after the raining subsides. We share our ideas each edition. Natural Gas prices were flat but our favorite LNG popped off support at 70 this week..we’ll see. Go to optionprofessor.com/subscribe to get the Portfolio Roadmap & Focus List right away!

Gold Silver Platinum Copper BitCoin

We told you that $1675 was a buy point in Gold and Silver about the 424 area which was true HOWEVER we said the easy lifting would take us to the mid $1750’s and $25 neighborhood. Should we break the $1775 area and Silver $2650-27…we could see a significant move, Our base case these markets will do better in Q3 Q4 than now but we go with the flow. Platinum is our dark horse as it already shaved about $500 bucks off the discount to Gold and we expect the car industry resurgence in summer to help a lot. Copper has been mixed lately as increased supplies in China fight with demand expected at 10 tonnes. A breakdown should see support at 3.75 area and take off above 4.25 could light a fire…We share 2 stocks on our FOCUS LIST that have been rainmakers the last 12 months. You get our FOCUS LIST on metals stocks when.. BitCoin; as we told SUBSCRIBERS..is great the year after halving..average in on 30%-50% dips! Go to optionprofessor.com/subscribe for JUST $49 per month and $297 per yr–stay informed!

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Soybeans Sugar Coffee

Soybeans remained in a tight trading range as we await crop report news. Long time readers know we were all over prices last year at $8 to 10 and saw a great run toward 14.50 where it stalled after China filled their orders (Corn just hit a 8yr high). Now it gets tricky as IF farmers are hedging with crops they don’t have and we have a weather market and if China’s appetite remains robust…we could breakout to the upside…the risk is the LT MA’s are at 10-11 range and that mean any bear news could instigate a decline back to the mean.. we’ll see soon. The Sugar market corrected and held support in the 13-14 range and if we get above 16 again we could run. Coffee is similar to Sugar in that it needs to break resistance to give us a good run like it did for us last year (140) so we wait and watch and still believe we could see a run ahead. There are ways to play these with ETF’s and we share this information with our SUBSCRIBERS Go to optionprofessor.com/subscribe and get our FOCUS LIST….$49 per month or $297 per yr!

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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, your broker and or your financial advisor to determine your own suitability. Past performance is nor necessarily indicative of futures results. Information provided for Informational Purposes Only. Use Risk Capital Only