Energy & Commodities
We are currently standing before one of the most unique and frightening periods in history. Never have there been so many extremes in so many different areas. In the last 100 years everything seems to have developed so much faster, including population, technology, inflation, debt, money printing, budget deficits, stock, bond and property prices, crypto currencies etc.
All of these areas are now in an exponential growth phase. The final stage of exponential growth is explosive and looks like a spike that goes straight up. A spike for a major sample like global population or the Dow never finishes with just a sideways move. Once a spike move has finished, it always results in a spike move down.
It seems that everything in the world is developing much faster today like computers and mobile phones or robots. The world assumes that this exponential growth in so many areas will continue or even accelerate further. But sadly, that is unlikely to be the case.
EXPONENTIAL MOVES ARE TERMINAL
There is a more scientific illustration how these exponential moves occur and also how they end. (Ed Note: Great article & charts!)
….also from Egon Von Greyerz:
I have a longer term Pro-USD bias…perhaps because I’ve made money the past few years being short currencies against the USD…but right now I’m unsure what to do so I’ll stay out of the currency markets. Victor outlines opportunities in Gold, Crude Oil and the Stock Market
LIVE FROM THE TRADING DESK – NOV 18TH TRADING NOTES
Choppy price action in currencies: The September 8 Key Turn Date launched the US Dollar on a 2 month rally against most other currencies…the US Dollar Index rose 4.5%…but the past 2 weeks the price action was choppy with Euro, Yen and Gold all higher against the USD while AUD and NZD fell and CAD went sideways. My core short term trading idea since the Sept Key Turn Date has been to be long USD but for the last 2 weeks I’ve been on the sidelines…unsure what to do.
Some analysts make the argument, and they may be right, that the recent 2 month USD rally was only a correction in the downtrend that started in January when the US Dollar Index was at 14 year highs. Interest rate premiums clearly favor the USD (at the 2 year point of the yield curve the USA is premium Germany by 242bps., premium Japan by 192bps.) but those premiums have not deterred a good rally in Euro and Yen the past 2 weeks. The ECB says the Euro area needs continuing monetary stimulus while the Fed says they will be “taking back” previous stimulus and raising rates…while the BOJ remains “peddle to the metal”…but still the USD looks wobbly.
Perhaps the USD is weighed down by “political uncertainty” in Washington relative to the “political certainty” (don’t laugh!) of the Euro zone.
Other analysts make the argument, and they may be right, that the recent 2 week decline in the USD is but a brief correction in the early stages of a developing USD rally.
I’m aware that I have a longer term Pro-USD bias…perhaps because I’ve made money the past few years being short currencies against the USD…but right now I’m unsure what to do so I’ll stay out of the currency markets.
Gold: I bought gold this morning. A small position, and I’ll be gone if it falls back below yesterday’s close, but today’s price action looks good. I’ve noticed that YTD trading volume in the gold futures market is already higher than any previous year…and there’s still 6 weeks to go in 2017. That seems counter-intuitive given the sideways price action we’ve seen in gold while open interest remains well below last year’s levels. It’s as though gold has been “churning” below the surface…just waiting for a breakout one way or the other.
WTI: I’ve been out of the crude market for the past 2 months or so…waiting for an opportunity to get short. I’ve missed a great opportunity to trade the market from the long side because I’ve got a bearish bias…likely due to the fact that I’ve made money the past few years being short crude! Anyway, I waited and waited while the market rallied…apparently embracing the story that the cut back agreements by OPEC and some non-OPEC countries were not only “doing the job” but would be extended at the OPEC Nov 30 meeting. The “political uncertainty” in Saudi Arabia seemed to provide the “cherry on top” of hugely bullish sentiment and WTI rose to $58. I decided that this was “As good as it gets,” for WTI and got short. Prices fell $2 but then turned around and began to rally. I covered and went flat.
The stock market: last week and again this week the stock market looked “jittery” at different times but the major indices continued to rally back from the dips. I’ve been thinking that the market was “cruising for a bruising”…waiting for a chance to trade it from the short side. But to no avail, and, in what may be the kiss of death for the bull market, I bought the S+P! This is a pure price-action trade and not a vote of confidence…if the market doesn’t make new highs in a hurry I’ll be gone!
The $450 million da Vinci painting: Drew pointed out that this was a fantastic example of “not wanting to be in cash.” And maybe that’s the simple answer as to why the stock market keeps going up. People just don’t want to hold cash…not only that, but they’re willing to go deeper into debt to buy stuff. The central bankers must be smiling!
PI Financial Corp. is a Member of the Canadian Investor Protection Fund. The risk of loss in trading commodity interests can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade or the authorize someone else to trade for you, you should be aware of the following. If you purchase a commodity option you may sustain a total loss of the premium and of all transaction costs. If you purchase or sell a commodity futures contract or sell a commodity option or engage in off-exchange foreign currency trading you may sustain a total loss of the initial margin funds or security deposit and any additional fund that you deposit with your broker to establish or maintain your position. You may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice, in order to maintain your position. If you do not provide the requested funds within the prescribe time, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult to impossible to liquidate a position. This is intended for distribution in those jurisdictions where PI Financial Corp. is registered as an advisor or a dealer in securities and/or futures and options. Any distribution or dissemination of this in any other jurisdiction is strictly prohibited. Past performance is not necessarily indicative of future results.
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The one thing I was certain would happen over the past 12 months turned out to be the exact opposite.
Last November, the newly elected president was committed to stirring up the typical D.C. drama.
President-elect Donald Trump had a mission to “drain the swamp.”
He promised to be a president who went against the grain of how things were done.
I, along with many others, expected the one thing the markets would experience in his presidency would be wild market swings, also measured as volatility in the stock market.
After one year, we saw the exact opposite.
Volatility, as measured by the CBOE S&P 500 Volatility Index (VIX), is at all-time lows.
The stock market has experienced one of the longest runs in history without a 5% correction.
In short, there is a remarkably low amount of volatility in the markets.
And I hope you are taking advantage of that by riding the market rally with options. Let me explain …
Use Volatility to Your Advantage
Options aren’t something most people associate volatility with, but it is the first thing that comes to mind for me.
See, options are a leveraged bet on a stock moving in a certain direction. And many people use options to do just that — place bets.
But you can also strategize with options to use volatility to your advantage.
Let’s start by looking at a chart of the VIX.
If you are looking at this chart and wondering how it relates to the options market, think of it this way: When the VIX spikes higher, you are paying more for the options than you did the day, week or month before.
Volatility is factored into the options price because the price of an option is made up of three factors: intrinsic value, time value and implied volatility.
You don’t have to know what each means for now. I just wanted to note that volatility is an input that can determine the price of the option.
And since it helps determine a price of an option, it means we can take advantage of it.
Volatility Needs to Be on Your Radar
What you want to see in the options market is low volatility when you are buying options, and high volatility when you are selling options.
Buying options when volatility is low allows volatility to rise and work in your favor. If volatility increases after you buy the option, and the stock hasn’t moved much, you could be sitting on a nice gain even though the underlying stock was basically flat.
On the other hand, if you are buying options when volatility is high, and then volatility declines, you could lose money even if the stock went the direction you expected.
Again, these gains and losses in the options market can come simply from volatility movement, and not from price movement of the stock.
That’s why volatility needs to be on your radar if you are trading options.
With the current low-volatility market, buying options is something we all should be taking advantage of.
Regards,
Chad Shoop, CMT
Editor, Automatic Profits Alert
Whether the stock market is entering a multi-month parabolic phase or beginning a new multi-year secular bull market the trading strategy is the same. This video details that strategy.
….also: Really, Are We That Stupid?
Cannabis stocks have zig-zagged for months. It’s been a regular roller coaster! Now, the next breakout is here. Just how high could this next round of reefer madness take us?
Dude … pretty darned high!
Here’s a chart of the Horizons Medical Marijuana Life Sciences ETF (TSX: HMMJ) (OTC Grey: HMLSF). It’s a basket of 37 leading cannabis-related stocks operating in North America.
You can see that HMMJ is on a wild ride. After soaring into August, it slumped all that month. It didn’t make new highs until September. Then it was off to the races until October, until it went into consolidation. Again!
But now … well. Now, it’s time to shatter that ceiling.
The most recent thing to light a firecracker under cannabis stocks is the news that broke on Monday.
Alcohol goliath Constellation Brands is guzzling nearly 10% of Canada’s premier marijuana company, Canopy Growth. It only cost Constellation $190.9 million. Such a deal!
Constellation will provide support in areas such as consumer analytics, marketing and brand development.
In return, it gets a front row seat in seeing how a successful consumer cannabis brand develops. Canada has had legal medical marijuana for years.
Starting in July 2018, recreational marijuana use will be legal across the country. That’s only cannabis flowers (buds), though. A year later, the regulated sale of cannabis edibles will start.
The companies will also collaborate in developing cannabis-based beverages for adults.
When recreational cannabis is legalized in the U.S. – and you know that’s a matter of when, not if – Constellation will be able to import that knowledge across the border.
In other words, it’s a genius move.
And the U.S. isn’t waiting for the foot-draggers of federal legalization.
For the first six months of 2017, cannabis beverage sales in Colorado, Oregon and Washington, totaled $13 million. That’s up 26% from the comparable year-ago period.
Heck, that’s before Nevada got in on the act. And California legalizes in January.
As I said, it’s a genius move on Constellation’s part. And you have to wonder: What’s the NEXT U.S. company to buy its way into Canadian marijuana expertise?
Marijuana Millionaire subscribers are riding that wave. They owned Canopy Growth. Sold it, took profits. Then I recommended it again recently. And now, it’s up 44% in a little over a month.
Boom-shakalaka!
So, go back and look at that chart of the Horizons Medical Marijuana Life Sciences ETF. And ask yourself how high it can go.
How high indeed.
Do you want to sit on your hands? Or reach for the weed … and the big profits!?
Best wishes,
Sean
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