How Did This Happen?
On Friday Boeing gapped opened $23 dollars to the downside at $344 giving back much off the gain it had achieved over the past six weeks. It looked like the stock was coming off the bottom as it had rallied $80 since its August bottom of $315. However, the stock seems to a have no bottom with the problems of its 737 MAX. You can look at the 29% loss in two ways. It is either a great buying opportunity or it is time to get rid of the stock.
My gut feeling as a trader is that the stock is pretty close to the bottom as it appears that all of the bad news is now in the market. It is stuck in a large congestion pattern and I think when the 737 Max problem is solved it will be a great buying opportunity. Markets never announce themselves and when they are ready to make a big move it simply happens.
The problem on Friday, was that a 2016 memo was released from Mark Forkner and Patrick Gustavsson who were two of Boeings most highly technical advanced pilots. In the memo they both noted that the flight simulator handling could be “egregious”. They claimed that they reported this to management but did not directly interview the FAA. When they did interview government agencies, they did ‘not lie”.
How is it possible that such a highly advanced technical plane could have so many software problems? That may be the difficultly. There are so many sophisticated systems now aboard that the plane can fly itself until it gets into a problem and then the pilots don’t seem to have the ability to shut the system down and fly the old-fashioned way. My guess is that eventually the engineers at Boeing will solve the problem, the plane will become a success and the stock price will once again soar!
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week we will answer those questions with a short paragraph covering a variety of trading subjects.
Question: Someone told me I can write credit put spreads to hedge my portfolio. Is that right?
Answer: As the option markets have evolved over the past twenty-five years, the use of weekly options has gained acceptance. This allows many investors the chance to use weekly credit put spreads in combination with longer based serial puts to create a synthetic short position that has very little or no time decay. This wasn’t possible even five years ago, but it is now a strategy that I teach to students that want to learn advanced trading and protect their individual stocks or portfolio from downside risk.
The Wise Guy Report: The View From The Floor
Each week I talk about what I think the Wise Guys (floor traders) are up to with the Big Three commodity contracts: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). I also track the Market Edge (www.marketedge.com) ‘Market Posture’ which has a twenty-six year record of forecasting the intermediate-term direction of the stock market as measure by the DJIA with around 70% accuracy.
T-Notes
Same old Same old. The ten year is stuck in a trading range and doesn’t seem to move one way or the other. The Fed is considering lowering interest rates this week and that may be the catalyst that traders are looking for to break out of this trading range. The break ay be to the upside, but I will keep my short position until I am proven wrong.
Crude Oil
Crude is also mired in a congestion range. It gave me a buying opportunity earlier in the month and I decided to pass on it. I still believe we are near yearly lows and it is a buying opportunity around $50 level. I will remain on the sidelines until it gives me an opportunity to enter the market.
Gold
The large congestion area of the past two months continues. This past week had virtually no volatility as gold traded inn a $20 dollar range for the entire week. Usually you would expect this type of price movement in ten minutes. I will continue to hold my short position as I believe that the short side is the side the strong hands are in control of when the price finally moves.
| The Big Three Commodities Contracts
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The Market Edge Market Posture
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The Market Edge ‘Market Posture’, which has been Bullish since the week ending 10/13/2019 (DJIA 27219.52) remains Bullish at this time.
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