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The Oil Exploration & Production Companies Continue To Decline Too

August 7, 2019 Published by

When oil dip to a low of sub $30 in 2016 and came back from the dead, I assumed all the derivative play would follow, kind of like the tide rises all boats. 

It was only when I started analyzing the relative strength of the SPDR sectors against the SPY, that I notice the energy sector didn’t follow oil and has been on this steady decline. 

This means Wall Street is saying the valuation of energy companies today at $50 barrel oil is lower than the valuation of energy companies years ago at $30 barrel oil.  This is a really big deal if one can connect the dots.  One theme is cheap credit / junk bonds funding the expansion of the shale companies, who are having a hard time paying their debt back…this one theme has enormous consequence to the state economies of Texas, the Dakotas, etc.  However, that’s another post for a different time.

Last month, I spoke about VanEck Vectors® Oil Services ETF (OIH®) which seeks to track the overall performance of U.S.-listed companies involved in oil services to the upstream oil sector, which include oil equipment, oil services, or oil drilling and how the chart suggest OIH is headed lower over time.

The Oil Service Companies Continue To Decline

OIH ONE MONTH AGO

OIH NOW

I have another ETF that I think is worth shorting is the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).  XOP seeks to provide investment results corresponding to the total return performance of an index derived from the oil and gas exploration and production segment of a U.S. total market composite index.  Top holdings include: HollyFrontier Corp, Phillips 66, Marathon Petroleum Corp, Hess Corp, Valero Energy Corp and Marathon Oil Corp.

XOP looks very similar to OIH, with one exception.  XOP breached the monthly demand and is now at all-time lows.

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.

I’m Following The Smart Money, Are You???

August 7, 2019 Published by

The book, The Millionaire Next Door, published 1996 and having sold more than 3 million books in essence is about living below your means and being financially responsible in order to allow your cash to work for you vs. you working for cash.

If you don’t have one of these type of neighbors to mimic, just follow what the Smart Money on Wall Street is doing.

TIGER 21

Wealthy investors are trimming their stock positions, amid anxiety around a trade war and instability in Washington.

Members of TIGER 21, an investment club for high-net-worth individuals, reduced their stock allocation to 21% from 22% during the second quarter, according to the group’s quarterly report.

TIGER 21, a group of about 700 people with at least $10 million to invest, stands for The Investment Group for Enhanced Results in the 21st Century.

“They are concerned about the fact that the markets were priced to perfection; they thought they reached real highs,” said Michael Sonnenfeldt, founder of TIGER 21.

Source

Warren Buffett

Warren is the greatest investors of our lifetime.  Many don’t know he made the bulk of his money selling insurance.  Yes, he owns GEICO and many other insurance companies, but I’m talking about insurance in the form of options, where he collects premium with the right to buy the asset at a later day.  For example, during the Great Recession, Buffett loaned Goldman Sachs $5 billion.   Not only did Goldman agreed to pay a 10% dividend on preferred shares to Buffett, which cost Goldman about $500 million a year, but when Buffett finally cashed in, in total, Buffett made about $1.75 billion in cash and about $1.35 billion in stock, roughly a 62% return on a five-year investment.

With stocks at record highs, Berkshire Hathaway Inc. sold $1 billion more worth of stocks than it bought last quarter, its biggest net selling since the end of 2017. The result was that the company’s cash hoard — a major focus for investors in recent years — surged to a record $122 billion.

Source

Jeff Bezos

Between July 29th and Aug. 2nd the CEO of Amazon sold 1.5 million shares, while the stock sold off 6% during that same time frame.  But Jeff is by no means hurting, he’s still the richest man in the world.  Speaking of Amazon, the stock, well it’s sitting between daily supply and demand zones. 

Some folks on Wall Street have a $2500 target.  What I see is long term momentum decreasing.  It most certainly can break out, but it most certainly can break down too. Only time will tell, but in the meantime, I’m following the Smart Money.

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.

Unusual Options Activity In Boeing

August 6, 2019 Published by

They say the measure of a man’s character is not determined by how he handles his wins, but how he handles his failures.  And so I give a lot of credit to the CEO of Boeing, CEO Dennis Muilenburg.  He dealing with the aftermath of not one, but two fatal Boeing plane crashes that happen within a span of six months.

In March, an Ethiopian Airlines crashed killing 149 passengers and eight crew members on board shortly after takeoff. The incident was the second deadly crash of the new Boeing planes in less than five months. A Lion Air Boeing 737 MAX 8 plunged into the Java Sea shortly after taking off from Jakarta in October, killing all 189 people on board.

The culprit, Maneuvering Characteristics Augmentation System (MCAS), suspected of reacting to errant sensor data, the solution, a software update. Today, all 737MAX 8 planes around the world remain grounded.

The CEO thinks by the fourth quarter Boeing will have a software fix and the 737MAX 8 planes will be in service again.  There’s only one issue, while actually two.  Boeing is running out of time in maintaining investor confidence and they are running out of 737MAX8 storage room.  To maintain investor confidence, Boeing decided to cut the production rate from 52 to 42 737MAX8s.  But one solution created another problem.  As planes are being built, there is no place to store them.

And now Boeing has been forced to resort to some creative storage places, like the employee parking lot.

Although the CEO remains confident, the Smart Money begs to differ. Yesterday I noticed some bearish unusual option activity where the Smart Money bought almost 7500 of the October put options with a strike price at $275. 

This means the Smart Money thinks Boeing has more downside.

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.

Volatility…..It’s BBBAACCCKKKK

August 6, 2019 Published by

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.

Source

Just in the past week, we have seen Fed Powell cut US interest rates in attempt to keep the party going, President Trump issue more tariffs on Chinese goods, 900 DOW stock plunge and what appears to be the start of a currency war.

Experts say there could be lots more bad news to come for stocks this month beyond Monday’s big selloff. That’s because August is typically the year’s weakest month for U.S. equities.

Stock Trader’s Almanac Editor Jeffrey Hirsh blames the month’s historically weak performance woes on summer vacations that take investors’ eyes off of the market. “Everyone is in the Hamptons, out playing golf or in the backyard with the kids,” he said. “So, you get a vacuum of lower volumes, and the path of least resistance is down.”

LPL Financial found that while the S&P 500 hasn’t fallen every August, in the years that it’s done so since 1990, losses have averaged 4.6% — the worst showing for any month during that period.

Source

So any one long the Equity Markets or who have family members with IRAs and/or 401ks, buy some protection and hedge your hard earn dollars.  One way to hedge your portfolio is to buy VIX call options if you think volatility in the Markets are going to increase over the next 3-6 months.

And the newest alternative at our disposal as a hedge, is to buy BITCOIN.

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.

Currency Analysis Report 8-5-19…The Thailand Baht Is Doing Very Well

August 5, 2019 Published by

The foreign exchange market is where currencies are traded. When investors trade foreign exchange (forex or FX for short) they’re buying and selling currencies over the foreign exchange market.

The forex market is the largest and most traded financial market in the world. The forex market has grown to a daily trade volume of over $5 trillion a day which is over 200 times bigger than the New York Stock Exchange.

I try to stick to the major currencies and the minor currencies. The majors are the currencies of the major global economies – the US, Japan, UK, Euro Zone, Canada, Australia, Switzerland and New Zealand and stay away from the exotic currencies because they are a lot less liquid and prone to “slippage” and it also means they have wider spreads than the majors and the crosses.  However, I at least pay attention to them…at least from a distance.

The Thailand currency is call the Baht.  And as strong as the US dollar has been against all the major currencies this year, I was shock to read that the Baht has been outperforming the US dollar this year (+5%) and year over year (+8).

But this isn’t necessary good for the Thailand as their exports have become more expensive and so will ultimately hurt their economy.  This is why Trump has been fighting with China for the last 1.5 years.  Our trade balance with China is so lopsided as a result of China continuing to depreciate their currency whenever it suits their best interests.

Anyway, back to the Baht, is there any hope for the country of Thailand in regards to a cheaper Baht, lets go to the charts to find out?

Monthly Chart (Curve Time Frame) – monthly supply is at 35.750 and monthly demand is at 29.000.

Weekly Chart (Trend Time Frame) – the trend is down.

Daily Chart (Entry Time Frame) – the chart suggests to short price on a pull back to the daily supply at 31.350 with a target just above the top the of the monthly zone.

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.

A Huge Win For Ripple

August 5, 2019 Published by

Ripple keeps scoring good points both in the media and in the fan-base with XRP, a leading cryptocurrency in the fintech payments industry.

Whether Ripple is a decentralized or centralized blockchain, who cares as long as they are adding value.  Regardless, Ripple and the token, XRP will also have a fanbase that supports their mission.  And it’s not just their fanbase that is supporting the token.

Back in January of 2018, Ripple partnered with MoneyGram, one of the world’s largest money transfer companies to pilot XRP in their payment flows.  In July, Ripple made some noise by acquiring a stake in MoneyGram.

Well, it appears the pilot went very well because MoneyGram is going all in and recently announced that they are adopting Ripple’s xRapid payment, using XRP as the to fund transfers.

However, the announcement was nothing special as it didn’t move the needle in terms of XRP’s price and price has been sitting between daily supply and demand for quite some time.

Since mid-July, price has been coiling up and is about to break out.  A break out to the downside should bring in the buyers around $0.25 and a break out to the upside will be met with sellers at $0.40.

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.

Intermarket Relative Strength Analysis Report For The Week Starting 8/5/19

August 5, 2019 Published by

Instead of looking at financial markets or asset classes on an individual basis, intermarket analysis looks at several strongly correlated markets or asset classes, such as stocks, bonds and commodities. This type of analysis expands on simply looking at each individual market or asset in isolation by also looking at other markets or assets that have a strong relationship to the market or asset being considered.

The US economy is still the largest in the world and the US dollar is still the most powerful currency in the world.  Over half of all foreign currency reserves in the world are in US dollars.  Thus, the asset classes relative strength will be compared to the US Dollar.

Bitcoin

30 Yr Bond

Copper

Euro Dollar

Gold

Oil

Soybeans

S&P 500

Based on the moving averages and the last daily closing price, relative to the moving averages,

the asset classes’ relative strength, relative to the US Dollar are the following:

Two Weeks Ago

Forex $1 MM Challenge (8/4/19) – Recent Japanese Yen Trades

August 5, 2019 Published by

Safe havens currencies retain or increase in value during risk off environments, meaning when economic turbulence is upon us. Three major safe haven currencies are the U.S. dollar, the Japanese Yen and the Swiss Franc.  In the past several months we have witnessed a divergence in the equity markets.  While all major equity markets around the world are doing down, the US market is the only one holding on for dear life. So in a risk off environment commodity type currencies decline in price as a result.

On July 1st I when short two different Japanese forex pairs.

Forex $1 MM Challenge – Trade #16 (7-1-19) Sold USD/JPY

Monthly Chart (Curve Time Frame) – monthly supply is at 121.00 and monthly demand is at 97.000.

Daily Chart (Entry Time Frame) – the chart suggests to go short at the daily supply at 108.60.

NOW – Price stopped me out before pushing lower this past week.

Forex $1 MM Challenge – Trade #17 (7-1-19) Sold CAD/JPY

Monthly Chart (Curve Time Frame) – monthly supply is at 0.05600 and monthly demand is at 0.04600.

Daily Chart (Entry Time Frame) – the chart suggests to short price at the daily supply at 78.000.

NOW – this trade is still in play at this time.

Both trade set-ups were a Reward to Risk of 5:1. So although I was stopped out on the USD/JPY, if the CAD/JPY ends up hitting my target, my account will go up 4%.

The game of trading is a probability game, which you most trades have less than a .500 batting avg (win/loss ratio). However, as long as your avg win is greater than your avg loss, your equity curve should be positive. Let me illustrate, if my avg. win is 3X my avg. loss, all I need is a minimum win % of 25% to be profitable. And if your avg. win was 20X your avg loss, you only have to be right 5% of the time. This is why I stopped sweating my losses years ago because my losses lead to my wins. Until next time.

My Journey Into Forex – Part 3 of 3 (The $1 MM Challenge) – Part 2

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.

Cryptocurrency Relative Strength Analysis Report For Week Starting 8/4/19

August 4, 2019 Published by

When you think about Cryptocurrencies, one name immediately comes to mind, Bitcoin.  Since the creation of Bitcoin, there has only ever been one cryptocurrency at the top of the market cap rankings…Bitcoin. 

When the price of Bitcoin rises, generally you can expect altcoin prices to rise with it. Likewise, when the Bitcoin price drops, altcoins also follow. And sometimes when Bitcoin is rising, the altcoins are declining due to cash moving from the altcoins to Bitcoin and vice versa.

Source Image

Bitcoin dominance is used to measure the percentage of the cryptocurrency market that can be attributed to Bitcoin. Thus, it’s very easy to determine the relative strength of Bitcoin at any point. Not the case for the altcoins…until now. I have taken the more popular altcoins and determined their relative strength, relative to Bitcoin using just moving average.

Binance

EOS

Ethereum

Litecoin

Neo

Steem

Tron

Zcash

Based on the moving averages and the last daily closing price, relative to the moving averages,

the altcoins relative strength, relative to Bitcoin are the following:

This image has an empty alt attribute; its file name is image-317.png

Two Weeks Ago

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.

US Interest Rates Analysis Report 8/4/19 – Rates Will Continue To Go Down

August 4, 2019 Published by

The Fed Powell cut interest rate this past week because the Markets demanded it, Trump has been blasting Fed Powell about lowering rates and to keep the party going.  But don’t expect your interest rate on your credit card or car note to go down. The interest rate cut was the federal funds rate that was cut, meaning the rate banks charge each other over short periods.

The last time I spoke about rates, specially the 10 yr bond rates was in May,

US Interest Rates Analysis Report 5/20/19 – Are Rates Eventually Going Higher???

On the monthly chart price breached the up trendline to the downside in December and currently sits in the monthly demand zone at 2.322%.  Interest rates might go up in the short term,

but my bias is that rates will go down longer term because of the macro picture.

In addition to the rate cut, the news of more tariffs on Chinese goods and continued weak US PMI manufacturing data this past week,

Source

the yield on the 10 yr bond is now below 2%. This is a really big deal, because we haven’t seen rates this low in years, a testament that the economy is slowing down and a recession is right around the corner (I’m targeting May of 2020, but by that time, the Markets might be down 20%-30%). So while Fed Powell is saying don’t expect more rate cuts, he won’t have a choice but to continue to cutting rates.

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.

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