Equity Happy; Treasury Crappy (TLT,DIA,FCX,UUP,IYT)

Equity Happy; Treasury Crappy (TLT,DIA,FCX,UUP,IYT) We’ve been talking in more emphatic terms about the bond market lately, though not because we have anything new to say on the matter. The message has been consistent for several years – that a grand selloff in Treasuries would funnel tremendous flows of cash into the equity market, precisely at the moment that U.S. stocks were perceived as the greatest possible investment holding of the last three centuries. In other words, there’s a bullish equity bubble in the making that will eventually tear the buttocks from Ginger May Gorilla, while sending the bond market lower for potentially many years to come. So CRASS! Our latest rantings, however, come at a time when the yield on the three year Treasury has come up even-steven with the yield on the S&P 500 (see below), an inflection point that could have a significant impact on the direction of both asset classes. Here’s the way it looks graphically – The last time the two met, the vectors were reversed, with a breakdown in Treasury yields creating an advantage for equities (red rectangle). That took place, of course, while the stock market was melting down, and nary a lad…

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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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Two Cent Technology Trade (XLK,GLD,FCX)

Two Cent Technology Trade (XLK,GLD,FCX)   It’s looking increasingly like the toppling market we saw just a month ago is now regarded by investors as ancient history.   Yes, there was a retreat – of sorts – over the last week, but it was selective.  And what emerges is that the leaders of this market – the big cap NASDAQ numbers – are stronger than ever.  Stocks like Amazon, Netflix, Google, Microsoft, Apple and Facebook are either at their all-time highs or pushing strongly thereto.   It’s a phenomenal show of strength on the part of some of the most obscenely valued securities on the planet, and an equally remarkable show of faith on the part of those investors who are ready to jump the bid at these levels.   Shocking, but maybe we shouldn’t be so surprised.   A Moving Target   At this stage, we can say that the momentum for equities is upward.  What will be in ten days or two weeks is anyone’s guess.  A look at just a few of the aforementioned companies’ charts shows that whatever danger the market perceived a month ago has clearly subsided.   Take a peek – These are six…

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Top o’ the Year to Ya! (DIA,FCX)

Top o’ the Year to Ya! (DIA,FCX)   It’s always easier to look back after the fact and act the sage, point out how obvious all the signs were, how the charts all pointed to that particular Wednesday being the top, and that particular earnings report triggering the selling, and the weak kneed trader at that hedge fund, already embroiled in a drug takedown that implicated the Gandhi crime family, whose sticky finger opened the selling when his Xanax wore off and he was without pills for better than an hour.   Sure.  It was easy as pie. But the truth, of course, is much more mundane.  Very few see the day or the sign or the true cause of any market’s rollover.   Though everyone tries to guess at it…   So they’ve been doing since the first day we walked into the business, wide-eyed and expectant, warning us, on the one hand, that the whole thing was about to explode and send up a dust cloud that would cover the earth for a century.  And they had the books to prove it.  We read them all.   On the other hand, were the Panglosses of the business, falling…

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When the Bystander Wins (FXI,GWW,FCX,BUD)

When the Bystander Wins (FXI,GWW,FCX,BUD)   A brief word to our friends and fellow citizens caught in the belly of the whale down in Houston – stay brave, dear brothers, and be good to each other.  You’re a tough bunch, and you’ll pull through.  We’re thinking and praying for you.   And speaking of a hard rain falling, how about Pretty Boy Nukey, North Korea’s dictator du jour, who looks to be begging for a whooping?   Now, even we understand the need to flex some muscle once in a while, and to assert one’s independence, but this looks a little exaggerated.  Sending missiles over the Japanese mainland is either a rookie mistake, or an outright request for a confrontation.   In any event, we’ll have more to say on the matter in a moment – including a trade founded on the chubby one’s latest adventures – but first a little business.   Two for the Record Books   We’ve got three trades to address today, two of which brought worthy profits.   We’ll kick off with our July 20th initiative, from a letter called Breaking Bulletin Bids Buyers Beware!, in which we recommended you buy the GWW December 15th…

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Metals. Now. (FCX,UUP,UNG)

Metals. Now. (FCX,UUP,UNG)   We’re going to take a broad survey of the commodities today because recent action in the ‘stuff’ class is looking bullish, and we believe we’ve identified a clever way to trade it.   But first to the background.   We start with the dollar.   As of this writing, the buck sits at its weakest level in a year and is threatening to plunge Alice-like into the nether realms if it loses but a rabbit’s hair more value.   In percentage terms, a mere 2% decline from current levels would put the dollar necrophiliacs into a rapturous frenzy of selling.   And to where she drops, nobody knows.   Have a look – This is the U.S. Dollar Index for the last three years, and as you can see, support sits but a whisker below current levels.   It goes without saying that a tumble of the sort we alluded to above would send the price of commodities blasting through space in search of an equilibrium moment.  The g-spot earthquake of buying that would ensue would simply be too much for the market to keep clothed.   The panties would fly and the ensuing screams would wake…

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Long Legged Copper Trade (FCX,OSX,DIA,C,FAZ)

Long Legged Copper Trade (FCX,OSX,DIA,C,FAZ) We’re going to give you a number of things to think about today, most notably the prospect of rising interest rates and the effect they’ll have on commodities.  We’re going to mix in a discussion of inflation, too, as that up-and-coming star will likely play an outsized role in just how these two items (rates and commodities) interact. Before we get to it, however, we have to review two open trades, both of which require your attention.   We’ll start with our September 1st initiative, from a letter called Oil Services About to Spill, in which we urged you to purchase the OSX March 135 PUT for $9.80 and sell the DIA March 176 PUT for $6.20 for a total debit of $3.60.   The DIA PUTs finished far out-of-the-money, and as you can see from the chart below, OSX is nowhere near the 135 mark, despite selling off dramatically over the last seven weeks. Unfortunately for us, selling what remains of the option’s time value would only net us a few cents, so we have to look for a different means of recovering our initial debit of $3.60.   And this is how we’re…

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Running Numbers (XLK,IYH,GS,FCX,FAS,C,TLT,HYG,AXP,V,RSX)

We’ve got so many trades come due, there’s little time for anything else!   Let’s get right to it.   First, we’ll take a look at a trade we launched over a year ago, on the 12th of November, 2015, in a letter called The Sachs of a McMorAno.   There, we urged you to dump the commodities and move hard and bullish on the financials, using two stock bigshots to play the trade, Freeport McMoRan (NYSE:FCX) and Goldman Sachs (NYSE:GS).   The trade recommended you purchase the January 2017 FCX 10 PUT for $3.00 and sell the GS January 2017 GS 150 PUT for $4.95.  Total credit on the trade was a fat $1.95.   And now?   Wow!   First of all, we closed out the FCX PUT on the 10th of December, 2015 for a dandy $4.12 and recommended you “leave your GS PUT to rot.”   And so it did.   On the third Friday of January, 2017, the GS PUT took the chloroform, expiring worthless, and giving us a very large $6.07 on absolutely no initial investment.  We’d like to thank the academy, the directorate, the foundation and the makers of Turtle Wax for all…

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The NASDAQ Gets a Wedgie (QQQ,FCX,TYL)

A quick look at the financial press indicates that the Fed has now moved unequivocally beyond the political.   Rather, it has become perfectly presidentially partisan.   And how’s that?   Consider: the U.S. central bank laid out clear, ongoing guidelines that indicated at precisely what hour it was prepared to raise interest rates.  That hour arrived with the latest Federal Open Market Committee meeting (an unbelievably ironic moniker for what these people actually do) yesterday, and what happened?   In a move that shocked only the naïve, the Yellen Gang decided that they would “wait for further evidence of continued progress toward [their] objectives”. Translation – the case for higher rates is already upon us, but 1) because there’s an election around the corner, and 2) because the market has been a bit shaky of late, and 3) because we have no intention of setting off a torrent of selling before the Democrats are reelected new president is elected, we decided, without cause, to hold off.   A bit harsh, you say?   We don’t think so.  If you consider that three Open Market Committee members dissented from the Janets’ decision to delay – the biggest dissenting bloc in three…

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Gold Gap Zeroes Out (GLD,GDXJ,FCX)

There will be some very interesting developments across the market over the next few days and weeks, and maybe the most important will involve the precious metals.   Why?   Well, to begin, the dollar has now traced a very bullish continuation pattern called an ‘ascending triangle’.  The pattern looks like this – An ascending triangle is always bullish.  It’s an indication that in the battle between bulls and bears, the latter are slowly running out of ammunition, and once their last shots are fired, buying power will overrun them and advance above resistance toward a new high for the move.   And…   The upshot of a pop in the dollar is that it’ll pressure all the commodities, including gold and silver.  Commodities are priced in dollars, so currency gains generally push prices lower.   At the same time, a dollar advance will make U.S. equities a more exciting prospect for foreign investors.  Not only will stocks setting new all-time highs, but with the dollar on the rise, those same investors will have a chance to pocket an additional gain against their local currency.   This is a chart of the Dow Industrials for the last six months –…

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