A wise Owl free idea post for inverse leveraged index plays (SHORTS)

 A WISE OWL Freebie

Leveraged LONGs on the concept of SHORT funds on the indexes (cost is reduced, and leverage increased), we are knocking on the door, most afford to hedge if needed with covered calls, most also have longer-dated calls as well

Wise Owl freebie Here is a brief example of what I generate each night

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Hello, my friends...                           01-05-2021     1950hrs

We begin this year in pretty much the same condition as we did during the last several weeks of 2020. In my view, it is way too late to be buying, except perhaps for defensive purposes. Although the market has managed to continue making new highs, the action has been very choppy and on ½ the volume when compared to the subsequent selling. Please remember that though I see limited upside potential it does not automatically mean the market is ready to go plunge off a cliff. As I have discussed in past weekend and market reports, tops take time to develop (more of a rounding pattern), especially significant ones (made on weak volume), and even after the final closing highs have been seen, it is sometimes many weeks or months before a bear market gets underway and becomes fully developed. Since the NYSE went on my fully bearish longer-term indicators the Dow has gained 2.0%. The SPX-500 has gained 2.4%. These new highs have so far been contained within the 5% range rolling top technical that I consider being significant. I think caution is warranted, but I cannot say with a high level of conviction as yet that the market is currently on the brink of a significant decline. In my view, the upside potential over the intermediate to long term is limited. The $64,000 question yet to be answered is whether an intermediate-term correction of 10- 20% will restore the technical health of the market or whether the avoidance of a health-restoring correction will lead to a major bear market.

Stocks did have a bit of an afternoon trading bot lift [light volume]. The Dow actually went negative before turning back up. While the proponents of BitCoin are trying to claim creditability and indestructibleness, I think that was more of a short squeeze [like we have seen in TSLA of late] than anything else. The financial news cheerleading media presumes that the strength in crude oil was based on the surprise cut by Saudi Arabia of a billion barrels a day in production. But many traders feel that crude oil may also be up on the idea that a new President may be tested with new Mid East tensions. Whatever the reason energy stocks led the rally defiantly, and I think to some degree that put a bid on the Short-crude-trade. At any rate, the bulls were very-grateful take it, after yesterday's slightly whipsawing performance. The key will be, can the crude bulls hold onto the gains tomorrow. That will be an important test.

Oil prices soared today on the heels of Saudi's self-sacrificial slashing of 1-million b/d output. They said this action was pre-emptive which, does not seem like a positive catalyst just how worried are they about their economy? How much did they want to suck up to Russia with a Biden administration coming into the mix? 

“We do that with the purpose of supporting our economy, the economies of our colleagues in OPEC+ countries, to support the industry,” Prince Abdulaziz told reporters. The Saudi pledge (if we can believe their crap) makes for a tighter crude market than traders had been anticipating and their action sent crude surging to a new 10-month high with WTI back above $50.00 until the API report was released.

API" the report showed the following

·         Crude -1,663mm (-1.2mm was expected)

·         Cushing +1.003mm

·         Gasoline a gain of 5.473mm  (+1.4mm was expected)

·         Distillates a gain of 7.136mm (+2.2mm was expected)

Analysts expected a 4^th weekly crude draw to end the year and they were spot on but the product builds were very significant... and not very bullish...

As most of you saw in my intraday comments and subsequent updates yesterday the action was intriguing to say the least. Many of the indices opened up into new record highs in many cases. The buying apparently may have come from offshore as global markets and futures were better, but once the apparent foreign money was deployed there seemed to be no follow-through. What may also have happened (that I should have thought of ahead of time) was that while it was the first day of a new month and a new year which might brought possible new money, what showed up instead may have been people who wanted to defer profit taking (delaying capital-gains tax) into this fiscal year and less they waited and began selling as soon as the opening rally stopped. I believe even people who feared that there is a possibility that capital gains could be raised assume it would not be retroactive to the beginning of the year but rather it would take place effective on the date it was passed (in 2021). Soon into the late day that selling found itself selling into a vacuum (lack of depth and buyers) and prices began to escalate on the downside and then the technicals deteriorated further and sell-bots took-over. The markets began to look like we were about to experience a major one-day key-reversal and that may have frightened traders and that exacerbated the selling into the early afternoon hours. We saw that the selling abated somewhat as the European markets closed (this is when my sell signals indicated a reversal as such, I covered our trading SHORTS and reversed into LONGS on the indexes and futures). It was hard to do so as the deterioration was heavy enough that by mid-day, we were looking at possibly having the worst first day of trading since 1932. Pavilion dip buyers and bargain hunting began to show up which trimmed the losses.

 

Traders feared that today initially could be a rumor mongers delight and that it would be all about the Georgia election and King-Trump antics. While it is unlikely that we will have any results for days after. The key overall concern here is about whether the Democrats will sweep and control the Senate. I do not at this juncture expect that but if they did sweep with a Vise Presidential tie breaker vote majority would give them a chance to ram through all kinds of tax programs etc. By having the simple majority, they will be allowed to name each committee chair.

We saw today that December ISM manufacturing index rose to 60.7 from 57.5, and that was above the estimate of 56.8. This is the highest reading since August 2018. New orders rose to 67.9 from 65.1, while backlogs grew to 59.1 from 56.9. Supplier deliveries, implying delays in deliveries because of supply constraints, rose to 67.6 from 61.7. Inventories, both at the manufacturer and customer levels, were up slightly and still remain lean. Employment got back above 50 at 51.5 from 48.4. Export orders ebbed a touch to 57.5 from 57.8. Finally, and a big theme of mine this year as you know, prices paid jumped 12.2 points to 77.6, the highest level since May 2018. The ISM said, “The manufacturing economy continued its recovery in December. Survey Committee members reported that their companies and supplies continue to operate in reconfigured factories, but absenteeism, short term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that are limiting manufacturing growth potential. However, panel sentiment remains optimistic.”

We saw in 2020 the goods side of the economy the beneficiary of the collapse in spending on services and it is likely why manufacturing so outperformed. The need for inventory replenishment also gave the sector a boost in the latter half of 2020. This strength should continue this year until the service sector starts to come back and consumers shift their spending again. At the same time, supply constraints will continue, inflation pressures will only grow, and we will see in the back half of 2020 how this shakes out when factory floors are mostly immunized.

 

Some new ideas:

Ø  Developed     01-05-2021  “SHORT”  Bloated financial stock (looking for a double top failure) “GS”   Ranks a B+ Swing-Trade, I am  looking to take (400/ 100 for the portfolio)   “GS”  (LIMIT ORDER at $287.85 to step in)  “GS ” is a SHORT I prefer a push into overhead resistance at  $297.00+/-  and or > than < $279.85   target $250.05  then $237.05  its optionable              

Ø  Next earnings release: 01/19 before market, confirmed. EPS consensus: $6.41 (they reported $9.68 last quarter)  Revenue consensus: 9.66 billion  (they reported 10.700 billion last quarter)

Ø  Developed      01-05-2021  “SHORT” solar index    “TAN”   Ranks a B+ Swing-Trade, I am  looking to take (800/ 200 for the portfolio)   “TAN”  (LIMIT ORDER at $111.85 to step in)  “TAN ” is a SHORT I prefer a push into overhead resistance at  $119.00+/-  and or > than < $109.85   target $87.05  then $70.05  its optionable       

Ø  Developed      01-05-2021    “RLAY”    Ranks a B+ Swing-Trade,  “Biotechnology stock”    I am  looking to take (1000 for me / 500 for the portfolio)   (LIMIT ORDER at $27.50 to step in)  “RLAY ” is a LONG I prefer a technical solid retracement to $26.40+/-  and or a drop below and support established at $31.00    target $39.05  then $45.05  its NOT optionable          12% Short interest

Ø  Developed      01-05-2021    “GBIO”    Ranks a B+ Swing-Trade, I am  looking to take (1000 for me / 500 for the portfolio)   (LIMIT ORDER at $17.50 to step in)  “PLTR ” is a LONG I prefer a technical solid retracement to $16.40+/-  and or a drop below and support established at $20.00    target $27.05  then $34.05  its optionable          on 01/04/2021: Generation Bio reports two non-viral gene therapy milestone achievements; Data confirm delivery of closed-ended DNA to the liver via novel, cell-targeted lipid nanoparticles    ALSO  Generation Bio files for 7.5 mln share common stock offering 

Ø  Developed      01-05-2021    “PLTR”    gaining government contracts   Ranks a B+ Swing-Trade, I am  looking to take (1000 for me / 400 for the portfolio)   (LIMIT ORDER at $13.00 to step in)  “PLTR ” is a LONG I prefer a technical solid retracement to $12.40+/-  and or a drop below and support established at $16.00    target $22.05  then $29.05  its optionable     Palantir Technologies Inc. builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations. It offers Palantir Gotham, a software platform for government operatives in the defense and intelligence sectors, which enables users to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants, as well as facilitates the handoff between analysts and operational users, helping operators plan and execute real-world responses to threats that have been identified within the platform.

Ø  Developed      01-05-2021    “QURE”   Ranks a B+ Swing-Trade, I am  looking to take (1000 for me / 300 for the portfolio)   (LIMIT ORDER at $22.50 to step in)  “QURE ” is a LONG I prefer a technical solid retracement to $21.40+/-  and or a drop below and support established at $30.00    target $45.05  then $53.05  its optionable     QURE  Provided a clinical update on its hemophilia B gene therapy program; co's Phase III HOPE-B study has been placed on clinical hold by the FDA following the submission of a mid-December safety report relating to a possibly related serious adverse event associated with a preliminary diagnosis of hepatocellular carcinoma (HCC) in one trial patient who was treated with AMT-061 in October 2019 and who also had multiple risk factors associated with HCC. Co will conduct investigations into whether the gene therapy made any possible contributions to the development of HCC. At two-month lows.

Ø  Developed      01-05-2021    “ABNB”   Ranks a B+ Swing-Trade, I am  looking to take (1000 for me / 300 for the portfolio)   (LIMIT ORDER at $13.20 to step in)  “ABNB ” is a LONG I prefer a technical solid retracement to $102.40+/-  and or a drop below and support established at $120.00    target $145.05  then $166.05  its optionable     

Developed      01-05-2021    “DASH”   Ranks a B+ Swing-Trade, I am  looking to take (1000 for me / 300 for the portfolio)   (LIMIT ORDER at $13.20 to step in)  “DASH ” is a LONG I prefer a technical solid retracement to $90.40+/-  and or a drop below and support established at $109.00    target $125.05  then $146.05  its optionable     

Ø  Developed      01-05-2021    “WW”   Ranks a B+ VALUE & Swing-Trade, I am  looking to take (2000 for me / 600 for the portfolio)   (LIMIT ORDER at $13.20 to step in)  “WW ” is a LONG I prefer a technical solid retracement to $12.40+/-  and or a drop below and support established at $16.00    target $23.05  then $37.05  its optionable       

I restarted the Growth and Value Play portfolio as of 01/01/2021, we had record returns in 2020, should be impossible to repeat gains of over 1000%, the portfolio has been reset to $25,000, not including the carry overplays

I have placed bets that they could try to gap-up and romp the markets into this 1^st trading week of the New-Year!

WE are knocking on the entry door on a number of our SHORT inverse leverage funds, see notations, most are optionable as such we can buy longer-dated calls, a vertical call spread or a covered call situation...

Wealth inequality spreads like the Covid-19 virus

The economic collapse of 2020 due to the mishandling of the Covid-19 pandemic has undeniably widened the wealth gap; the rich have gotten richer and the poor and working-class significantly poorer, (economic fairness at its best).

Now, our country is more divided than ever... divided between those who have made huge wealth gains, and those who have lost almost everything, between those who must patiently wait for some food in food-lines after losing their ability to provide for themselves and their families, may have also lost the roof over their heads; while the elite and most wealthy (and those that did not lose their jobs) sit comfortably within their own homes waiting for the Covid-19 disaster to be over.

Soup lines abound that is the ominous picture of an increasingly unequal America. This societal collapse will be revealed for what it is (the debt enslavement of average Americans) just how unequal our economic system has evolved.

As massive euphoria breaks out on Wall Street sending stock prices to nose-bleed heights, Main Street remains in the economic cesspool, with roughly 8.6 million Americans joining the real ranks of the poor since June.

Productivity gains will surely be one-sided due to Covid-19 gains

 As we enter a new-year “2021”, the incessantly hyped vaccines bring hopes of reopening and a return to normal (like flipping a light switch) but the reality is that markets and the economy will not return to its pre-Covid-19 world anytime soon as they are constantly evolving. That evolution creates for us some decent money-making opportunities.

Here are a few of my thoughts on potential trends that I expect to affect the markets in 2021 and beyond; please remember that post-pandemic economies will look far different:

History tells us that every recession brings economic scarring. Given the scale of the Great Covid-19 Recession (GCR), this time will not be any different.

Proactive fiscal policy and FED policies have been a pillar of the recovery and we should expect structurally higher spending (free-flowing stimulus) going forward. There is a real possibility that significant higher deficit spending will likely result in higher interest rates, higher inflation, and sharper and shorter business cycles, all of which come with higher volatility and a broader role for active central planner intervention management. 

One powerful trend due to Covid-19 is the deployment of stay-at-home technology to disrupt existing business models. We have seen these secular trends continue with robust demand for investment in AI, automation, and industrial supportive software. The application of various new technologies in response to the Covid-19 pandemic has led to new ways of operating that made firms more efficient and able to some extent protect their margins. I suspect that these efficiency gains are just the tip of the iceberg as the continued dissemination of technology across industries boosts productivity for years to come; too bad the gains will not filter down to the working class.

Our precious Green-back / Dollar looks very oversold

Step back for a bit and reflect upon the 10-year interest rate and put yourselves in the shoes of foreign holders who now see both the disturbing trend in yields and the fall in the dollar since March it must be increasingly and very painfully (financially) obvious to foreign holders that holding onto dollars almost guarantees they will lose money. 

And the interest compensation on their bonds is very-very inadequate to recompense them for the risks of holding a deteriorating foreign currency (our dollar, one reason why I see it rallying back to $96.00-97.00 in the weeks and months ahead (especially if it double bottoms at $87.50-88.50) and given the acceleration of the FED’s massive wave of monetary inflation, the general loss of capital values for time deposits and fixed interest bonds has been significant. Furthermore, the increasingly immediate prospect of the latter, which is the story being told by the golden cross in the chart above, is likely to quicken the pace of foreign selling of bond holdings, driving yields higher, they would compensate foreign currency holders for future losses of purchasing power. But this is one of those times where a rise in yields worsens the situation for government finances and will require a huge reassessment in the market to even higher yields. In short, foreign sellers of dollars will begin to drive interest rate expectations higher in my opinion, taking over the led role from the FED.

The false safety of equity markets will soon be borne out as an insight into the thinking of central bankers with respect to financial assets...Since 2014 QE has been a dominant feature of monetary policy, and it has become increasingly the means of bolstering bank reserves held at the FED without the pass-through to real investing institutions. QE is an official policy for central bankers to inflate equity markets in order to create a so-called wealth effect. Presumably, the FED is confident that a manipulated equity market can continue to be openly manipulated through QE, dismissing the possibility any policy failure on their part.

The Fed will almost certainly lose control over financial markets as it is forced to hyperinflate the dollar. Foreigners could quickly dump the dollar, fixed interest holdings and equities, reducing their $28.7 trillion exposure to a level of liquidity that relates to more closely to their trading prospects. Stocks are being pumped up by the FED through massive QE (debt) to valuation extremes, a policy set to fail when interest rates are forced to rise. It will almost certainly lead to a nasty bear market.

Yellen vs. Bernanke

Yellen’s tenure as FED chairwoman was far worse than B-53 Bernanke’s. At least Bernanke’s money-printing insanity was misguided by his credentials as a lame so-called scholar of the Great Depression and the mistaken conclusion that the Wall Street meltdown of September 2008 was another prelude to such an occurrence. IMHO the Great Depression of the 1930’s was caused by way too much FED-nurtured foreign borrowing on Wall Street during the roaring 1920’s. They stimulated a massive and unsustainable boom in US exports, soaring domestic CapEx in order to expand production capacity and then a stock bubble which in turn fueled a massive consumer-spending boom in cars, appliances and other durable goods. Therefore, when the Wall Street bubble burst in October 1929, foreign borrowing literally dried up, US exports and CapEx crashed and spending on consumer durables fell off a cliff.

·        This was likely the main cause of the massive recession/depression in 1930 -1933, which took the GDP down from $95 billion to $58 billion in dollars of the day.

·        By contrast, the crash likely had nothing to do with Milton Friedman’s crashing M-1 (money supply), which was a consequence of unavoidable and necessary bad debt liquidation by the banking system.

·        Nor was it the result from any lack of credit availability to solvent borrowers, as demonstrated by market interest rates that remained ultralow (under 2%) throughout the recession/depression.

The depression of 1930–1933 was not owing to the tightfistedness of the FED, which actually expanded their balance sheet by 72% between August 1929 and early 1933. Consequently, Bernanke’s lame and reckless move of flooding the system with fiat credit during 2009 - 2013 was a significant mistake.

Now fast forward a few years when Yellen became Fed Chairwoman in February 2014, there was no plausible excuse at all for keeping B-52 Ben Bernanke’s extremely bloated FED balance sheet in place or continuing to keep interest rates at or near the zero bound. If there was ever a chance to normalize Bernanke’s significant mistaken depression-fighting policy, it was during the 48 months of Yellen’s tenure. Needless to say, Yellen’s FED did no such thing. After 50+ years of dedication, and devotion to the BS” Keynesian theory of full employment economics, Yellen kept real interest rates buried into the cesspool during the entirety of her term.

During the sweet spot of the longest manipulated and FED intervened upon business cycle expansion in history; from month 55 to month 103 when the economy should have been left to expand on its own merits without massive “stimulus” from the central banking branch of the state, Yellen kept real money market rates pinned at historic lows. The justification for such economic insanity was the claim that the US economy was not at its full-employment level (pure “BS”) as measured by the very dubious U-3 unemployment rate and that the job of the central bank was to keep injecting “demand” into the economy until the system was briming over and at 100% of “potential GDP” was attained. Potential GDP and full-employment labor markets are purely “BS” lame Keynesian hogwash. In a economy in which domestic labor competes with China’s price for goods, India’s price for internet-based services and Mexico’s price for manufactured goods assembly, full employment cannot be measured by the headcount metrics of the BLS, nor can it be achieved by injecting massive amounts of credit into the bank accounts of Wall Street dealers who in turn use it to foster their accounts and stock market positions.

With total outstanding credit now standing near $81.8 trillion, or 384% of GDP, the FED’s liquidity injections never really leave the coffers of Wall Street. The result is increased speculation on Wall Street and accelerating massive inflation of financial asset and commodity prices. Money markets do not finance the working capital or fixed asset investments of business, nor do they fund consumer borrowing for homes, automobiles, and other durables. Instead, short-term money markets are where Wall Street dealers finance their inventory and where speculators fund their positions in the options markets or via margin and repo credit against stocks and bonds held outright by Wall-Street and the TBTF-bankers.

These real negative real interest rates were and are the mother’s milk of financial speculation and the resulting massive asset bubbles. Yellen’s stupid policies constituted an epic monetary mistake that has fueled bond and stock market bubbles that are basically off the charts!  Yellen (our new Treasury Secretary) sowed the wind of monetary excess, and now we are reaping the whirlwind of a gargantuan bubble that is a clear and present danger to the economic future because it will crash, and the resulting financial and economic damage will be biblical. Ironically, Yellen likely will be sitting in the captain’s chair when the most violent and destructive financial storm in history finally blows ashore.

US (FED and government) DEBT; Debt glorious debt as far as the eye can see

This market is running on the back of massive debt, once consumed then what manipulative game will the FED introduce

Master Asset inflator Powell (who kisses the asses of the elite and most wealthy): dares to warn about DEBT, so then he stealthy (through many back-doors and “BS” lending programs of the day” decides to give more crack-cocaine DEBT to enslave the crack-cocaine “DEBT junkies” many are zombie firms that are massively over-indebted and fiscally irresponsible run by braindead corporate idiots whose only goal is self-enrichment via cheaper free-flowing monies...they are still taking on debt wherein they will run up even larger debt (to buy-back-stock, as the FED has reduced borrowing to ~0.5%....they will not use the new debt to grow their business, as many of these firms are also laying off hundreds and thousands of employees) where is the logic in that...then again its perfect logic if your primary goal is to enslave the masses & working class, as the “taxpayers” become the back-stop for this reckless endeavor, basically the rich get richer the poor get poorer!  Government DEBT is almost at the unserviceable level right now!

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 The re-awakening of the potential “Blue Wave” Democrats winning in Georgia brought some serious risks today, and King-Trumps antics and exploits added to the risk...add in escalating Covid-19 pandemic-related lockdowns/restrictions (that are coming in worse than expected, and the so called vaccination roll-out has been botched by the King’s administration and Covid-19 hospitalizations are soaring used in some panic-mongering like we saw in 2018) and it basically sparked the worst start to a new year for the SPX-500 since 2001...The entire broad market was hit with a selling wave after the open after some giddy buying overnight. Interestingly the markets all moved together for most of the day...all sectors were lower led by Utilities and Energy stocks led...Just maybe the massive dip-buying Robinhood traders will be back tomorrow...time will tell! The VIX surged higher today...to 29.19 before pulling back into the close [26.97]...with the short end now inverted as expectations around tomorrow's Georgia Senate runoff vote (over 3-million mail in votes have already been cast) it has likely left traders with massive end-of-the-year profits looking to hedge uncertainty...by booking those gains into the New-Year (JMHO)....

I found it very interesting that treasury yields were wildly unchanged today...but real yields collapsed to record lows (suggesting support for higher precious metals maybe even crypto’s)...as breakevens surged (10Y above 2%)...Our precious greenback managed to crawl modestly higher today, bouncing off the old 2018 lows which were critical support...while the dollar ended flat, it was the Yuan that made headlines overnight, surging to It's best level against the dollar since June 2018...

Carl Icahn stated today that “In my day I’ve seen a lot of wild rallies with a lot of mispriced stocks, but there is one thing they all have in common. Eventually, they hit a wall and go into a major painful correction. Nobody can predict when it will happen, but when that does happen, look out below,” ominously adding that “another thing they have in common is it is always said, it’s different this time. But it never turns out to be the truth.”

 

 

 

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