Trump loves twitting he’s
responsible for the rally’s in the equity markets, but blames Fed Powell when the
equity markets tank.  And while the equity
markets are up almost 50% since his election, due to the trade war and economic
uncertainty, the equity markets have gone nowhere in almost two years.

Although the equity markets
are near all-time highs, in the past almost 24 months, we witness almost a 20%
correction, several 10% declines, two declines of 6% in 2019 and just this week,
as an example, a 1200 point decline, followed by a 500+ rally in the DOW

 The CBOE Volatility Index, VIX aka the stock market fear gauge, is a popular measure of the stock market’s expectation of volatility implied.

Devesh Shah, an applied
mathematician and hedge fund manager who formerly worked for Goldman Sachs, was
one of the creators of the CBOE Volatility Index

The VIX is quoted in
percentage points and is the expected annualized change in the S&P 500
index over the following 30 days, with a 68% probability. VIX values greater
than 30 represent investor fear or uncertainty, while values below 20 represent
complacent in the Markets.

The iPath S&P 500 VIX Short Term Futures ETN (VXX) is the largest and most liquid in the volatility ETF/ETN universe. The ETN sees average volume of more than 15 million shares per day, typically, but spikes to more than 70 million when the S&P 500 sees a significant decline and traders pile into VXX pushing it higher.

Yesterday I noticed unusual options activity in VXX. The Smart Money bought over 22,000 of the VXX November 15 call options with a strike price of $37.

I honestly think this is a hedge, against an existing equity portfolio, but I’m just speculating. The one thing I’m not speculating on is the Smart Money thinks the equity markets are going to potential drop pretty hard over the next 45 days. In addition, October has been the historically the most volatile month in the equity markets.

Source

However, in order for this trade to be profitable, the price must breach the weekly supply at $36 first. Will the Smart Money be right, stay tuned.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Three days ago, I introduced a new game called, US Stock Market Charades. In this game, there are no non-verbal (no talking) motion clues, just charts and I put a bunch of charts in order to give you clues so you could guess what direction the US Stock Market Equities were heading next.

Lets Play US Stock Market Charades

Lets Play US Stock Market Charades – Part 2

Lets Play US Stock Market Charades – Part 3

Alright, are you ready for some additional clues?

Clue 1

The ISM index is a good leading indicator of the economy and is useful in gauging turning points in the business cycle because the difference between new orders and inventories equates to future production or lack of future production.

The ISM is released monthly by the Institute for Supply Management, but based on surveys of 300 purchasing managers throughout the United States in 20 industries in the manufacturing area.

On Monday the numbers for September were released and came in at 47.8%, the lowest since June of 2009.  50% is the line in the sand, so any above 50% means expansion and anything below 50% means contraction.

Source

Clue 2

The ISM Non-Manufacturing Index is an index created by the Institute for Supply Management Non-Manufacturing, using information collected from surveys from over 400 non-manufacturing companies.  Essentially, it’s an index measuring the service sector.  The numbers for September were released on Weds.

Service-oriented companies that employ the vast majority of Americans registered the weakest growth in September in three years, adding to a cacaphony of reports showing a broad slowdown in the U.S. economy.

The Institute for Supply Management’s said its non-manufacturing index fell to 52.6% last month from 56.4% in August. Economists polled by Marketwatch had forecast a 55.3% reading.

Numbers over 50% indicates businesses are growing, but the index has fallen 8 points below its post 2008 recession peak of 60.8% achieved last fall.

Source

OK, you have 60 seconds to earn one point, where is the US Equity Markets headed???

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Forever 21 is an American fashion retailer that sells accessories, beauty products, home goods and clothing for women, men and children, but the retailer is better known for the “wears” for teens, tweens and young adults. 

Forever 21 was founded in 1984 and during the 2000s, went hard opening up bigger and bigger store in the mall.  When it was all said and done, Forever 21 now has about 550 out of 800 stores located in malls.    But you know what with only 16% of their total sales coming from the web and mall traffic continuing to dwindle, this week Forever 21 filed for bankruptcy protection, and announced that it was ceasing operations in 40 countries and closing most of its international and 178 of its US stores last week.

Simon Property Group (NYSE: SPG) is a global leader in the ownership of premier shopping, dining, entertainment and mixed-use destinations and an S&P 100 company (Simon Property Group, NYSE: SPG). Their properties span across North America, Europe and Asia provide community gathering places for millions of people every day and generate billions in annual sales. 

Because Simon Property Group’s CEO David Simon fears such events like Forever 21 filing for bankruptcy, they have decided to dabble online as well. They partnering with other companies, essentially its tenants, and will take a cut of sales with the tenants responsible for fulfilling orders.

Now honesty, Simon Property should of done something like this years ago…maybe they might have had a chance.  But when Forever 21 is your seventh largest tent in terms of rent, it puts Simon Property in a bad spot. 

The Census Bureau of the Department of Commerce announced today that the estimate of U.S. retail e-commerce sales for the second quarter of 2019, adjusted for seasonal variation, but not for price changes, was $146.2 billion, an increase of 4.2 percent (±0.9%) from the first quarter of 2019. Total retail sales for the second quarter of 2019 were estimated at $1,361.8 billion, an increase of 1.8 percent (±0.2%) from the first quarter of 2019. The second quarter 2019 e-commerce estimate increased 13.3 percent (±1.6%) from the second quarter of 2018 while total retail sales increased 3.2 percent (±0.5%) in the same period. E-commerce sales in the second quarter of 2019 accounted for 10.7 percent of total sales.

Source

The tide turned for Simon Property Group when price broke the long term up trendline from 2009 accompanied by negative divergence.

One of my favorite set-ups is to then wait for the pull back, in this case the short at the monthly supply at $185.

And price gave potential sellers another opportunity to short at the monthly supply at $166. Nothing changes for me, the target remains the monthly demand at $115. Based on the secular shift to online retail, I’m confident price will get there within the next 1-2 yrs.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.