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Some Things Never Change!
t was a pretty typical week in both the markets and in politics. The equity markets closed Friday on new all time highs, but since the markets can never go down again that was to be expected. There was the sex scandal involving Jeffery Epstein, a buddy of Mr. Trump that led to the resignation of Labor Secretary Acosta because he played a role in having a reduced sentence for the convicted sex offender in 2008.
Another upset was that Iran stated that they are going forward with developing their nuclear program, and that they will no longer abide by the terms of the 2015 treaty. What a shocker that one was. The treaty was a farce and when Mr. Trump exposed it for what it was, Iran got upset and decided to continue to violate what they had signed but had no intention of ever following. I think that this one could end up ugly as Israel is not going to take this lying down. They have blasted Iran before, and they probably will again. Who knows where this leads if Iran will not back down.
And the biggest upset of the week was that Treasury Secretary Mnuchin warned congress that we are running out of money again and if the debt ceiling is not lifted we will no longer be able to pay our bills. He sent a letter to speaker of the house Pelosi warning her that congress needs to address this issue before they go on break or that by the time they come back we will have run out of money. Ms. Pelosi office said that it had contracted Mr. Trump and that they are locking horns over the new limit and the 2020 budget.
I can tell you how this one ends. Mr. Trump will refuse to raise the limit and adjust spending. The Dems will press to get the printing presses starting again. There will be the usual name calling, but in the end a smiling Mr. Trump and Ms. Pelosi will both meet at capitol hill and say that everything is good to go, They authorized another trillion dollar short fall and will continue to stay that course until we eventually bust out.
Finally, the Mueller testimony has been postponed to July 24th so the Dems have more time to line up ammo in certainly what will be the most covered news story of the summer. No matter what Mueller testifies to, the Dems will have to form more special committees to probe deeper into the investigation. They are not going to allow Mr. Trump one day of peace until they can impeach him in what could backfire if they are not careful .
So how was your week?
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions with a short paragraph which will cover the trading subject.
What is a collar and how does it protect my portfolio?
Answer; A collar can be used in many ways. It is used to avoid paying taxes in this period on a stock position that has a large profit in it. However, it can be used for any purpose where you want to keep the stock and have no market risk. The collar is put in place by selling a call above the current market price of the stock and buying a put below the price. As an example, you own 100 shares of TSLA that you bought last year at $150. The stock is now trading $300 but you don’t want to sell it. To put the collar in place, you would sell the $305 call and buy the $295 put. They both will have the same amount of premium so whatever you lose in the call you make in the put and vice versa. You have collared the stock and locked in its value at $300. When you want the stock to trade freely again you can either let the options expire if they are both out of the money or you can buy back the collar if one or the other is in the money. In either case you have protected your investment for the time involved with the option serial that you used.
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
It was another week of congestion as the market digested the news from around the world. It now looks like the rate cut will be .25 basis points. Truthfully it doesn’t seem that there is a reason for a cut as we have little room to the downside and the selloff on Friday reflected that. We are now at near term support. I took profits and I’m looking for a new entry point.
Crude Oil
After a week of upside action, crude closed on the top tick. Even with the problems in the strait of Hormoz and the Iranians claiming that one of their tankers was stolen as part of the economic sanctions, the market had a gradual rise for most of the week as British war ships moved in to protect their interest. I am still long Crude but if it violates near term support, I will take profit and look for a new opportunity.
Gold
Gold is now in a volatile congestion phase at the top of the current market. It traded down on Friday to near term support. This could be a volatile congestion area that will find a breakout in a large range. I am looking to see the breakout occur before I am going to initiate a new position.
| The Big Three Commodities Contracts
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The Market Edge ‘Market Posture’, which has been Bullish since the week ending 4/18/2019 (DJIA 26659.54) remains Bullish at this time.
| Market Timing Models | Current Reading | Prior Week | Connotation | ||||
| Cyclical Trend Index (CTI): | 2 | 2 | Positive | ||||
| Momentum Index: | 3 | 5 | Neutral | ||||
| Sentiment Index: | -2 | -2 | Negative | ||||
| Strength Index – DJIA (DIA): | 63.3 | 46.7 | Positive | ||||
| Strength Index – NASDAQ 100 (QQQ): | 80.4 | 64.7 | Positive | ||||
| Strength Index – S&P 100 (OEX): | 68.0 | 48.5 | Positive | ||||
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