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T3’s Take 3: Mr. Market Is Still Telling the Most Boring Story on Earth
1) What a Boring Market Stocks are still in sleep mode, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite showing next-to-none movement. The Russell 2000 fell -0.5% to 1384.09, and in today’s low volatility environment, that actually counts as major movement. Traders are still debating just how hawkish the Fed is following its statement last week. That’s driving continued profit-taking in the US dollar, which helped gold catch a bid. Regional banks, which have been key in the post-election rally, are still dropping, while US Treasuries perked up again. 2) Wait and See? We’ve been falling asleep for the past month as day-to-day movement has gone to basically nothing. The word on the street is that traders are waiting on Thursday’s healthcare vote before putting their chips down. However, throughout the year, we’ve seen plenty of big events — Trump’s inauguration, then his first address, jobs numbers, the ECB, Fed statements, etc. — and none have driven real volatility for more than a few hours. So my big concern is that we’ll see some fireworks on the healthcare vote, and then head right back into this low-volatility snoozefest. 3) But There’s This… This morning, Bloomberg News reported that the CBOE SKEW Index rose for 5 straight days, the longest streak since June 2016. This indicates that traders are paying up for out-of-the-money options, which only pay off in the face of a huge market move. According to Bloomberg, the last time the SKEW Index was so high relative to the VIX, the VIX surged 65%. However, before throwing your money at VIX calls, consider that we’re dealing with a sample size of 1 — that’s far from reliable.
Continue Reading -->T3’s Take 3: This Bull Can’t Be Killed by Conventional Weapons
Want to Kick Your Options Trading Up a Notch? My buddy Doug Robertson is hosting a FREE options trading webinartomorrow where he’s teaching his secrets for generating major options profits in volatile markets. Click here for more information 1) This Market of Ours… The bull kept on charging ahead today, once again frustrating naysayers crying “what goes up must come down!” The S&P 500 rose 0.3% to 2163.79 today, which is not exactly a huge move. But markets looked very strong below the surface. The Russell 2000 was up 0.9%, showing pretty solid outperformance. The action in biotech was particularly impressive. Even with Biogen Idec(BIIB) down 2.7% on media outlets denying yesterday’s takeover rumors, theIBB ETF rose 1.1% to $297.92. That’s pretty surprising given that BIIB constitutes 8.7% of IBB. We also saw a major intraday rebound in crude oil prices on today’s E.I.A. inventory report, which in turn pushed up energy stocks. And on the flip side, traders took profits in safety assets like gold, silver, and utilities stocks. 2) Rumor Has It… Twitter Edition Twitter (TWTR) was once again the subject of takeover rumors, and traders are buying in even though we’ve seen this story play out all too many times. The alleged buyer is Steve Ballmer and Saudi Prince al-Waleed. Twitter call options traded at 3.2X normal volume and the stock rose 7.3% today. The recent wave of reminiscent of the nonstop rumored takeovers of BlackBerry (BBRY) back when we called it Research In Motion (RIMM). Frankly, I have a hard time believing any company’s going to pony up the $15 billion+ required to acquire Twitter, given its collapsing growth during a booming news and social media ad cycle. Plus, Twitter almost feels like it’s out of style. Ask any teens or college students what they’re hooked on, and you’ll hear Instagram and Snapchat way more than Twitter. And if you know anyone doing online marketing, ask where they’re putting their ad dollars. Many industry folks I know are throwing piles of money at Facebook (FB) because of its sophisticated targeting technology. Twitter… not so much. 3) Is Gold About to Correct? This morning, my colleague Jeff Cooper gave his views on why the Junior Gold Miners ETF (GDXJ) may be set to pull back: As the daily GDXJ below for 2016 shows, there have been 3 tests/undercuts of the 20 day line this year. Each has perpetuated a continuation in keeping with the idea of pullbacks to a rising 20 day as a Holy Grail Buy signal. When the 20 day m.a. was regained in early June, a new high followed. Ditto late July. 50 is a key level squaring out the low of the year. GDXJ broke out in the first week of February and this week is 180 degrees/days opposite early Feb. Yesterday, GDXJ gapped up setting an opening high and tailed off a tad, leaving a little Gilligan sell signal. Markets often play out in 3’s and GDXJ shows 3 tests which perpetuated 3 drives to new highs. So theoretically, a stab back below the prior swing high from July 13 at the key 50 level probably indicates a correction is on the table. P.S. T3’s Doug Robertson is hosting a free options trading webinar tomorrowafter the close. Click here for more information.
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