Broad Themes and Extremes (FCX,UUP,AAPL)

Broad Themes and Extremes (FCX,UUP,AAPL) We’re going to revisit some of the themes we’ve been pressing over the past six months, particularly as they relate to the commodities, as it’s there we see the week’s best opportunity to write a trade. But before we do, a little background. The current move higher in the dollar is not over. We’ll get more upward pressure over the intermediate term as a function of a number of inputs, and we’ll discuss a few of those below. But take it as near a certainty as you’ll find in the financial world these days, that barring a cataclysmic event in Washington or Wall Street, the buck’s bounce is a buy. And what does that mean for commodities? Well, in a world where financial rules and inter-market relationships still applied, we’d tell you that a move higher in the dollar would be negative for commodities. But today we don’t think so. And here’s why. Commodities got a pant-whacking over the past eight years – one that puts AG Schneiderman to shame. Across the board (almost), the entire asset class was trounced. And now, selectively, we’re seeing a return of funds to the ‘thingy’ sector. Energy in…

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Out With the Old War, In With the New-USO,IYT

If it looked like happy days were here again after the Korean Peninsula appeared to be cooling, just take a look at the South China Sea and the Middle East.   In the former, tensions between Mainland China and Taiwan are flaring again, with the communists declaring in both word and deed that it’s only a matter of time before ‘reunification’ takes place.  War games and exercises on both sides dominated the news this week and last, as everyone positions himself for a show of strength and urges his opponent to take him seriously.   From there, hop over to the other side of the Eurasian land mass, where Israel has announced what many already knew to be the case – that Iran is doggedly working on its nuclear arms program in locations hidden from IAEA inspectors.  The Israelis claim to have a trove of evidence to prove the case, and it appears the major western powers are about to send inspectors into Iran with the Israeli documents to check if, indeed, a violation of the Vienna Accords took place.   If that’s the case, you can almost assuredly expect the U.S. to drop their support of the deal, recommit…

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Cobre, Por Favor (ECH,EWZ)

Cobre, Por Favor (ECH,EWZ) We’re turning our investment focus this week to a corner of the planet we only occasionally visit, but that we feel is becoming more and more worthy of our attention as the geo-political storm winds begin to batter the region, and financial opportunities present themselves in abundance. It’s Latin America, and the trade we intend to launch is a play on the extraordinary wealth and prosperity possessed by the region, on the one hand, and the growing desperation and poverty there, on the other. The latter, sadly, is largely the result of gross mismanagement, corruption and negligence. But first some background. The ails and travails of Venezuela have been documented in these letters for years. A nation that was once wealthy from its vast oil reserves, the country has since been plundered by doctrinaire socialists and power hungry apparatchiks to the point where nothing is left but a military that is loyal to the ruling clique (who until now have managed to pay them) and an increasingly impoverished citizenry that has nothing to lose by dying in the streets in an effort to improve their lot. Venezuela Not Alone But Latin America’s violence and corruption are…

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We Are Investment Artists! (AAPL,GLD,TSLA)

We Are Investment Artists! (AAPL,GLD,TSLA) We at Normandy prefer the use of options because of the (mostly) limited liability involved in their use, as well as the wide variety of strategies and structures they afford the interested trader to employ. Nearly any price projection you might make has at least one corresponding options strategy available to profit from. In short, options are, in our view, the premiere weapon for the prudent investor in this age of increasing financial and geopolitical uncertainty. We mention this now, because we’ve clearly entered a period in which excesses in valuation and government intervention have made predicting market moves a far less quantitative operation – less scientific, if you will – and turned it more into ‘artisanry’. The new keys to investment and speculative success reside in a number of less widely-used indicators, basic technical analysis and in-depth sentiment study, all of which we at Normandy excel in. Give us an example, McAbby! A look at traders’ positioning in VIX futures is instructive in this regard. Below is a chart of traders’ speculative posture in VIX futures over the last three years. It makes clear the overwhelming shift in sentiment that occurred literally ‘overnight’ in…

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Stoking the Commodities (DBC)

Stoking the Commodities (DBC) Last fall, we suggested that by year end America would either be engaged in military hostilities of some sort with North Korea or would come away embarrassed, chastened and looking every part the fool. It didn’t happen, of course, because a back channel for negotiations was eventually set up, and North Korea is now openly suggesting it would give up its nuclear program under the right conditions. Is it a victory for the bombastic ones in the administration, who threatened and cajoled and all the while turned up the temperature on North Korea? Time will tell. It’s hard to say at this point who was bluffing, who was buying time, and who’s truly ready to follow through. What’s important to us, however, is that amid all the blather of war and the tit for tat twitter spat, the market shot heavenward in unprecedented fashion. And then… Following that, it was the so-called “trade war” with China that captured everyone’s interest. Again, the threats ensued, followed by an incremental ping-pong imposition of tariffs and levies amid growing concern that the world economy would be devastated and a new shooting war might even begin. Yet here, too, it…

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Where The Markets Meet War (SPY,NOC)

bs’d Where The Markets Meet War (SPY,NOC) There are days to be thankful for, friends. And this is one of them. For all that we have (and don’t really deserve), we should bend over backward and thank our tormentors. For all that we want and still haven’t gotten (and really don’t deserve, either), hold on a bit. For in the end, there’s little doubt that the greatest of all Supreme Court Justices will bestow upon us our worldly dessert in the most precise and poignant manner. And may he do so doubly to our enemies! Revenge and the Making of Foes It’s hard to figure where the current round of trade wars will end. There are those who posit that we’re fast-tracking toward a military confrontation with the likes of Russia, China and Iran, and whoever else we might end up feuding with (Canada? Mexico?). And there are those, like the President and his cabinet, who claim that this is simply about protecting American business from an unfair playing field that we, in our unthinking ideological rush for an ill-defined ‘globalism’, created ourselves. It’s now simply a matter of healing those self-inflicted wounds and restoring thereby our former glory. In…

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The Balsa Wood Festival (TSLA,GFI,AU)

The Balsa Wood Festival (TSLA,GFI,AU) When I was a kid, it was all the rage to build balsa wood gliders and send them sailing down the 70 foot drop at Dead Man’s Hill in Eglinton Park. The things never lasted more than four or five trips; they were balsa wood, after all. But watching them soar was a thrill. And if the winds were just so, and the balance and design were good, those contraptions were for us an awe and a wonder on par with the ten plagues. The crash-ups were equally exquisite. Those golden moments of silence when my buddies and I waited for our aircraft to finally touch down were the most breathtaking of my entire childhood. The anticipation. The hope. The subsequent speedy and dangerous descent to ascertain the damage, and the knee-slapping, ground-roll guffaws that followed. Childhood Nirvana… Funny. Now, as an adult, I feel I’m reliving those days watching the NASDAQ. There have yet to be any wild crashes – at least not among the leaders – though some appear to be headed in that direction. Could be that shortly we’ll be grabbing our popcorn and melting a stick of butter. Glider Death Among…

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Turn Tide, Turn! (TLT,LVNTA,SPY)

Turn Tide, Turn! (TLT,LVNTA,SPY) We file these reports on a strict weekly deadline. No matter what happens, we’ve committed ourselves to arriving at your inbox on time, week in, week out, every Thursday by noon. And, of course, it’s tough nuts to us if we have to offer a trade in the midst of a major market selloff. Lord knows how tough it is to read markets while a storm of volatility is crashing down upon us, just like that which appears to be at our doorstep. We have a few options available when this happens, to be sure. We can refocus on a calmer quarter of the investment world and attempt a trade where no one is looking, so to speak, and, indeed, that has proven an effective strategy on several occasions. The commodities, as a group, have been surprisingly stable during this week’s five percent NASDAQ selloff, and could provide us with a safe harbor trade, if needed. Or we could hedge ourselves with a bet on just about anything that offered limited upside or loss potential. A short term spread in either direction would accomplish that. But we’re going to undertake something a little less conventional at…

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A Tale of Two Markets (QQQ,DIA,SPY)

A Tale of Two Markets (QQQ,DIA,SPY) Here’s some technical puzzlement to lead off the day… What’s to be made of the dichotomy between the Dow and S&P 500 on the one hand, both of whom have failed to better their former all-time highs from late January, and the NASDAQ, whose fashion-forward tech names have easily managed to best those levels over the last few days? Does it mean we’re headed for a retest of the February lows, as the charts of the Dow/S&P would suggest? Or are we rather headed higher, with any dip in the coming weeks or month just a chance to gather ye marbles, while ye may. The answer to that question may reside in the finer detail of the charts, and for that reason we’re now going to show you four indexes, and share a little of our thinking on each. We do so because immediate market direction is dependent upon a number of key resistance and support lines that we’re now about to show you. To start, here’s a look at the Dow Industrials for the last six months. What’s most prominent here is the unfolding pennant formation (in red), a continuation pattern that’s consistent…

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We’re All Numismatists Now (GLD,XPO,IYT)

We’re All Numismatists Now (GLD,XPO,IYT)   We’re going to lean against the wind a little this week and offer up something that gets little attention in the investment world, though, in our view, it deserves more.   There are many folks who, like us, like the market’s prospects in the near term.  There’s also a full throated minority that carry the bear case.  But both groups are in full agreement that bear markets begin where bulls end, and even saying so is too much a truism to garner any meaningful attention from either party.   But what if that were not the case?  What if markets did not turn over in the normal fashion after the last highs were hit?  What if, indeed, no bear market whatsoever ensued?  What if everything just stopped, and all the money that was formerly invested those markets just went ‘poof’?   Sound crazy?   We’re talking about a cataclysmic event, to be sure, one that would take down the system entirely, either temporarily or for good.  And we’re talking about it precisely because 1) no one else is, 2) there’s a remote chance it could happen, and 3) we want to be prepared for…

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