Dodged One-Now The Money Grab Is On
The U.S. dodged a bullet last week when Category 5 hurricane Dorian skirted the East Coast. Most of the major population centers did not receive a full blast and those that did were greeted with a storm that didn’t have the punch that was predicted for the South East. But our neighbors to the south, the Bahamas got flattened. The smaller outlying islands got absolutely smashed. It will take them years to recover if they every do. Paradise Island and the hotels that generate much of the income for the nation were spared. This event will be remembered for 100 years in the Bahamas.
In the meantime, business went on as usual on Wall Street and the fact that the Fed has lowered interest rates again to zero means that the big boys cannot possible lose money if they borrow as much and as fast as possible. And so, the big firms are taking advantage of this as long as they can. Apple, John Deere and Company and Walt Disney Co. sprinted to the banks as soon as they opened.
Apple launched a bond deal on Wednesday for the first time since 2017, selling $7 billion in debt thru Bank of America. All three companies issued thirty year debt with a yield under 3 % for the first time ever. Twenty more companies joined the carousel later in the week with more expected to follow this coming week. The reason is the same, slowing growth and rising issues on the trade war with China. This has been the theme in the market for the past six weeks while Congress has been on their traditional summer break.
I have been doing this for more than 43-years and I am going to let you in on a clue. There will always be recessions. Usually they begin with a selloff and fear entering the market. I don’t care if it is a yield curve inversion, a terrorist attack, a hurricane or some other man made or natural event, you can’t avoid the business cycle and this time will not be different. No matter how much president Trump tells the world that there will be no recession on his watch, he won’t be able to stop the cycle. Believe me, the Dems who have completely ignored the economy for three years will be the first to let us know!
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.
Question: What is the best way to initiate a credit spread?
Answer: Getting the spread on correctly is important. Novice traders blow themselves up trying to get the “edge” on the market makers. Forget about that strategy. It won’t work. You are not going to be able to out execute the market makers. There are a couple of choices that will work when getting the spread in place. First you can “leg” the spread on by buying the long side of the trade first and selling the short leg second. I use this strategy when I have a preference in market direction. I get my limited risk leg on first and then try to sell the credit side with more premium. Second, you can set your browser on the site you are using to find out where the spread is trading in the market. You should be able to get filled within a few cents either way once you know where the spread is trading in the live market. The third way, which is always wrong it is to leg the spread by selling the short option leg first. This is selling a naked option and will eventually cause a big loser. You are not going to beat the wise guys at their game. Eventually the impossible will happen and as soon as you sell the naked option, Houston will get fifty inches of rain, and you will take a possible risk of $280 and turn it into $3000. You will then email me and tell me that I don’t know what I am doing, and the risk is much greater than I claim it is. Remember bulls and bears make money in the market, pigs get slaughtered! Don’t be a pig. There is plenty of money to be made doing it the right way!
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
T-Notes sold off slightly as yield curve mania cooled down somewhat with the talking heads getting ready for the return of hate to Washington. Once again with rates this lows some AAA companies are taking advantage of all time record lows to borrow as much cash as they can. It might not look so good if long term rates follow Europe and Japan and go negative, but since it is impossible for them to lose money at this level, I would tend to agree with the borrowers.
Crude Oil
The market continues to churn in a wide in a wide congestion range for the past four months. It cannot take out near term lows as when price approaches that level it brings in buyers. On the other hand, when the longs try to become the strong hands the shorts put them in their place. I will continue to hold a long position as long as near term lows are not violated. A rally to highs would give me a perfect spot to collect profit and take a shot from the short side off the resistance.
Gold
Gold seems to have stalled out near current highs. It certainly isn’t interested in the trade wars and the inverted yield curve but could be looking for a political move in the U.S. to see where the next move will be. If it appears Mr. Trump is wearing out his welcome, we could see some price movement, most likely to the upside.
|
The Big Three Commodities Contracts
|
The Market Edge Market Posture
| Market Timing Models | Current Reading | Prior Week | Connotation | ||||
| Cyclical Trend Index (CTI): | -12 | -12 | Negative | ||||
| Momentum Index: | -3 | -4 | Neutral | ||||
| Sentiment Index: | 3 | 1 | Positive | ||||
| Strength Index – DJIA (DIA): | 10.0 | 1.0 | Negative | ||||
| Strength Index – NASDAQ 100 (QQQ): | 14.7 | 5.9 | Negative | ||||
| Strength Index – S&P 100 (OEX): | 18.6 | 8.2 | Negative | ||||
The Market Edge ‘Market Posture’, which has been Bearish since the week ending 08/02/2019 (DJIA 26485.01) remains Bearish at this time.
FREE Two-Week Trial Subscription
The option Trades and Strategies offered by the Optionomics Group are unique in that they all have limited risk while creating great leverage. Our basic Bullish – Bearish Credit Spread Trade lets you control 100 shares of a $200 stock, a $20,000 position for less than $500 or 40:1 leverage. Your maximum risk is always limited and our strategies produce winning trades in three out of four possible outcomes. Check out The Scoreboard on the home page to see our results.
Optionomics let you become the casino whereby you have a mathematical edge that enables you to grind out consistent returns. These strategies are designed to produce good returns over short to intermediate-term time frames in any type of market environment.
Optionomics offers a FREE Two-Week trial to its entire web site with no cost or strings attached. Each of the strategies are explained in a 5-7 page booklet which includes detailed explanations and sample recommendations. You can see how the strategies are performing every week by clicking on The Scoreboard tab on the Home page. During the trial, you can paper trade the various strategies and get a feel for the deal without risking a penny. Simply click on the appropriate tab on the Optionomics’ Home page to access the informative booklets and then sign up for the trail. As a special offer, you can download a FREE copy of my latest book, “Trading Options My Way”. I doubt that you have ever read anything like this.
The ‘Traders’ Subscription Includes The Following:
- The Bullish – Bearish Credit Spread Trade: A basic strategy to trading weekly credit spreads.
- The One Day Wonder Trade: A one day trade with great consistency and upside potential.
- The Blow Off Top – Bottom Trade: A lot of action and big moves too.
- The Earnings Season Trade: Potential big movers with little or no downside risk.
The ‘Investors’ Subscription Includes The Following:
- The 21st Century Covered Call Strategy: A modern day alternative to the old fashioned covered call strategy.
- The Low Cost Put-Call Hedge Strategy: Sleep at night knowing your portfolio is protected for little or no cost.
- The Billionaire Risk Reverse Strategy: Big time leverage – small time risk.
Each Monday morning by 11:00 EST, the recommendations for each strategy are posted on the Optionomics’ web site. In addition, the updated results from the previous week are posted on the Optionomics’ Scoreboard. I also have a webinar on Thursday afternoon where I discuss various option strategies, what is happening on the trading floors and answer any questions that you may have. Don’t worry if you miss the show. They are archived on the site. Sound Good? Good! You can subscribe to either the Traders or the Investor plans at an introductory special of only $39.95 each per month on a month to month basis with no contract or strings attached. That’s $10.00 off the regular subscription rate ($49.95). If you subscribe to both it is only $64.95 per month. I think you will agree that this is a super offer so give it a try. Go to www.optionomicsgroup.com and get started today doing what the pros do –
“Don’t Buy Them – Sell Them”.
Mr. Seifert