Monday
July 27, 2015
1-855-RWT-0008
Prepared by the good people at Random Walk, LLC. (and Scott)
Great Morning!
Closing Prices From Yesterday
Confused? Don’t know if you are protected in a crash?
Call the office for assistance!
Today’s Number(s)
Yesterday and Today
Yesterday
We saw the major averages open slightly weaker on Monday, with the E-minis down about -6 at the open. Despite the weaknesses stocks like UAL, QCOM, and AAPL that had shown a lot of weakness days prior were actually up on the day and looking strong relative to the market as a whole. As an example:
UAL was up $1.83 at the highs but closed down -$0.18.
AAPL was $0.58 but closed down -$0.66.
BABA was up $1.50 but closed down $0.86.
QCOM was up $0.82 but closed down $0.14.
As the day progressed the market got weaker and weaker. What has been disturbing about this recent selling is that there really is no real news causing the weakness.
Why is the Market Selling Off?
Is it profit taking by the weak hands?
One could make the argument that since China’s crash and Greece are now behind us there should have been a huge run higher. There was a run to new highs in the SPX and Nasdaq, but just barely. So without follow through people panicked.
Is it earnings and economic numbers?
This could be too. Yes there have been stocks like NFLX and AMZN that surprised so strongly that the stocks were up HUGE. Jeff Bezos (AMZN CEO) made an extra $5 bln in personal wealth on Friday alone.
But some stocks considered more attune to the real economy such as UTX, IBM, etc. have disappointed. But come on…..IBM? Really? They have not come up with a new idea since I was in short pants.
Meanwhile interest rates are going down again with the TLT as high as 121.39. This is a huge run up from $114.88 exactly 1 month ago.
TODAY
ONE
We should see a tremendous bounce this weak, or I am lost and this is the start of a 10% correction that we have been evading for over 1400 days (that is almost 4 years). Keep in mind the USD/EURO is doing nothing, oil is not doing anything. Greece is not doing a thing. The Ukraine is sort of quiet.
TWO
We will see higher rates this year according to Yellen. If she doesn’t want to lose credibility she will have to honor her words. The reason bonds have bounced (in my humble opinion) is nothing more than short covering.
EVERYONE knows that rates are going higher, so a lot of people are short the TLT. In POT Class we were short it much of the year but got out on June 26 when the TLT was at $115. Yes, we got out within $0.20 of the dead bottom, but that was more luck than skill. We were short but I didn’t want to stay short going into Greece and economic numbers.
But after a $0.30 increase in the TLT during several days of strong selling it doesn’t appear that there is a flight to safety (yet), and most of the weak shorts probably covered. This would suggest it might be safe to get short the TLT again.
OPTION TRADERS
Friday we saw the VIX climb slowly and reluctantly all day, inching towards 15%. On the close people came in and sold premium down as the VIX closed 1% off the highs, settling at 13.74%. There is certainly more room to the upside than downside here, but buying Volatility at 14% is dangerous in a bounce.
What is interesting is the Skew has been decimated where slightly OTM call spreads are cheap relative to how much the index is moving in a day.
POT is held each Wednesday night at 7:00pm eastern.
Contract the office at 1- 855 ā RWT ā 0008 for more details.
Too True To Be Funny
Wow, the deal lasted almost 2 weeks ā a historical record for the Iranians.
But Trump (whether you like him or not) is right when he stated the Iranians accused Obama of lying about the terms of the deal as it was later proven to be an accurate accusation.
He is also probably right when he stated Kerry is a nice guy but not someone you want negotiating a deal. Look…I am with my strengths, but you don’t send me in to negotiate a deal on foreign policy. Just because Kerry is good at winning elections (by getting people too stupid to vote) doesn’t mean he can trade options, negotiate deals, or ride a bike without falling. Kerry should stick with what he does best, which is marrying billionaires. That certainly would be enough for me!
Ā
Next step? Bomb them into the stone age?
Are you kidding? We can’t even come up with a plan for ISIS in a year.
Or should we give this number one state of terrorism $100 bln and hope that makes them love us? You give me $100 bln and I will love you, but I don’t think it works of fanatics.
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Attorney Stuff
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