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April 2 2021 Option Professor Opinions & Observations
Happy Holiday Everybody…..We blew thru SP 4000 this week as the jobs report showed 900K+ which is a surprise to no one who realizes that 10 million unemployed is centered around service jobs and they are going back to work…..however what may come as a surprise is the participation rate is flat and wages are actually down. Earnings start coming out and they should be quite good and Q2 comps will be the easiest on record so look for sticker shock. As SUBSCRIBERS know; we have been saying since the crash that OPERATING LEVERAGE who bring peak earnings back way quicker than consensus estimates which is EXACTLY what is and has been happening. The VIX we said would normalize this year and get away from that elevated 30 average from last year EXCATLY what is happening. Volume on Thursday was weak which either tells us short covering fueled a lot of the move thru SP 4K OR that huge volume this week may give us a short term blow off peak. We have stuck with VALUE BANKS ENERGY for 9 months BUT we told SUBSCRIBERS that if MARCH LOWS held on QQQ & SMH and the 10yr stabilized in the 1.80-1.50 range…we could SPIKE on both and we did that this week. We got a glimpse of Infrastructure last week but not much reaction from the beneficiaries (PAVE). Everyone’s looking for a Post War type reopening and no doubt it should be strong BUT how much is baked into prices? Leverage & Valuation is getting extreme by some measures (Archegos biggest margin call ever & Buffet’s Indicator (Stocks divided by GDP) is 184 and in 2000 it was 143! USA manufacturing going at a pace not seen since 1983 & buybacks could be huge in months ahead (splits too?) As we embark on Q2…we will letting SUBSCRIBER know some of the areas to FOCUS on NOW and use March lows as your line in the sand. Additions to the Value-DIVIDEND Paying, Tech, Semis portfolio….we are expecting the dollar to weaken at some point (deficits & negative real yields) which would give a lift to OVERSEAS markets (trade surplus-local currency appreciation-lower valuations) and Gold & Silver-Platinum shares. As a SUBSCRIBER; we will share our opinions on exactly how POSITIONING could help portfolios. This is a great TIME to LEARN about our FOCUS LIST for 2021 & OUR PORTFOLIO ROADMAP!
Stock Market The market were rockin’ & rollin’ last week as more fiscal-stimulus and frontrunning of the jobs report blew out all the shorts. The stampede we alluded to in last weeks report came to pass BUT some still say that technicals running hot and some seasonal & cyclical guesses could spell a correction by or before Mid April but there is no price evidence of that so far. We are really discounting a lot of growth and a perfect re-opening which has risks but to stand in front of this liquidity and pent up demand is stupid. Some stocks we have believed in are QCOM (smart phones) AMZN GOOG FB (ads + all subsidiaries)) MSFT (cloud) MRK PFE AMGN (pharma) LIT & all things to do with EV filling stations (500K plus consumer incentives vs 145K gas stations nationwide)….we also feel the future is bright for life sciences, Industrial revolution, automation AI-Robotics, 5G, and sustainable technology. One stock..Corning GLW may also be on the upswing with their partnership with AAPL on glass (gorilla) and glass for vaccines as they can handle the temps. Add to that the cloud (only in the 3rd or 4th inning) , cyber security and digital transformation ect.. We will be SHARING our FOCUS LIST ect. with our SUBSCIBERS.
BOND MARKET We will be watching credit spreads like a hawk from here a they may tip off many things like trouble ahead for stocks and trouble ahead for INFLATION. After the Spanish Flu we saw 20% inflation and the money supply is up 25%…Fed Balance sheet is parabolic and we may be on transfer payments longer than you think (less employees & robotics). Jamie Dimon said he wouldn’t touch 10 yr Treasuries with a 10 foot pole ( we stabilize & rally a bit but just basically temporary). Investment Grade Bonds had the most downgrades 3X last year while refinancing has hit the skids as mortgage rates have risen 7 weeks in a row! As we told SUBSCRIBERS since last March…the cycle of declining interest rates and no inflation has TURNED and the 2 big questions are how long can you have negative real yields with these kind of GDP numbers? and who will buy all our debt if bondholders are dumping losers while the Fed-Treasury (now will be partners) trying sell trillions to finance deficits (monetize debt?)? Many sharp investors want to be DIVERSIFIED in international equities (local currency), commodities, Gold-Crypto ect in case we were to see USD get whacked..Chinese Yuan +10%. How should you go about getting DIVIDENDS & INCOME in this New World Order? We inform our SUBSCRIBERS as to CHOICES.
US Dollar & International Markets
We have told SUBSCRIBERS that the US Dollar (DXY) was topping at over 100 and short term low UNDER 90…both forecasts have been correct. NOW we said a move above 92 could get us into 94-96 range an last we we breached 93. A move into that range would be a Fib 38.2 correction of the down move which is coincidental. At some point; our trade deficits, fiscal deficits and the point of diminishing return of the re-open mania will weigh on the Dollar and while the return of its yield advantage helps…others are already negotiating new means of exchange (Yaun Euro BitCoin). Best to wait for price evidence that this has started..to expensive to be a trailblazer. Internationally; we took advantage of the selloff in China’s market due to margin call selling from that rogue trader. Also Europe, Pacific & Emerging Markets look great from a trend and valuation basis…that is where we believe the puck is going….we’re skating. Find out what is on OUR FOCUS LIST to gain exposure and track progress. Become a Subscriber
Crude Oil Natural Gas
HOORAY!! The Suez Canal is open…truth is it had hardly any effect on the oil situation. What will have a bigger effect will be if OPEC behave itself supply wise and the surplus works off by summer and the demand kicks in…EUROPE is the key..if they can get COVID under control and are full force demand by Labor Day then 80 Crud could still be in the cards. We have SHARED with SUBSCRIBERS ideas on oil companies, refiners and MLP;s for the last year that have had substantial runs and paid us DIVIDENDS of which others would be envious. Right now e have found an equilibrium. Nat Gas is still holding the 2.50 level which is good and our LNG is holding 70. We have a lot to SHARE with our subscribers on our FOCUS LIST so Join Today!
Gold-Silver-Platinum Copper BitCoin
We have said for many months the trend for Gold & Silver stinks and outside of a bounce we played off $1675 Gold (to $1740)….we have said it may be late this year before we heat up. HOWEVER…our long term target for things like GDX SILJ Barrick have been hit in March so we have started sniffin’ around and will add above 1750-1850-1950 for the rest of the year providing MARCH LOWS hold …if not maybe 1500 Gold 20 Silver here we come…..last time inflation jumped way above the 10yr yield was back with Volker….very bullish if it occurs plus most bulls washed out with 300 buck drop. If no leverage..you’ve held on…later this year $$$? Platinum has been our darkhorse and you can play it with stocks or bars..they’re stealing lotsa catalytic converters out by us …maybe a sign of platinum demand when car production zooms this summer…Copper again has big demand coming and a couple of stocks we SHARED with subscribers went way up and may be over their recent pullbacks. Watch out for re erating companies holding BitCoin as it is a risk asset and could penalize their credit rating…the big issue for BitCoin will be if deflation shows up ( households save or reduce debt)…..maybe 100k?
Soybeans Sugar Coffee Soybeans have been trading pretty wild lately but remain in that 13.50-14.50 area (we got bullish last year at 8-10)…..we feel that there is a tug of war between demand from China and potential weather interrupting crop yields and the biggest acreage plantings since 2014. It should be a wild 90 days ahead. Sugar has been correcting from an unsustainable move above 16 but is still above the 200 day MA at 14.23 area so it may be a case of anything coming out of Brazil (soybeans & coffee too) is out of sorts between weather and Covid & their economy. Coffee is the same story as the 100-110 area hold so we still are optimistic but patiently await.
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