Morning Call Express: Big & Small Steps
In today’s Morning Call Express, Scott Redler reviews the action in the Dow Jones Industrial Average ETF (DIA) as well as the Industrials (XLI), Russell 2000 (IWM), and others. Scott also looks at bonds and provides a roadmap for how to navigate the markets as we head into the final stretch of 2016
Continue Reading -->Bears Scream After the Donald Trump Bump
The ISE Sentiment Index is one of my favorite sentiment measures. It is a call-put ratio (as opposed to a put-call ratio) that uses opening long customer options transactions to judge sentiment. It excludes trades like short puts (which are bullish positions) and trades from market makers and firms, which to me makes it more useful than straight put-call ratios. As of yesterday’s close, the ISE’s 10 day moving average was just 67. That is an all-time low, and it’s likely to go even lower tomorrow. As of 10:30 a.m. ET, the ISE was at just 44. If it closes at 44, the 10-day moving average will be down to 66. Over time, the ISE has fallen as equity options have increased in popularity as a hedging instrument, even for credit investors looking for protection in illiquid assets like high-yield bonds. But still, this is a pretty depressed reading. It’s lower than readings seen at the August 24, 2015 mini-crash. And prior to this 10-day stretch, the ISE averaged 87 this year. And the 10-day moving average bottomed at 76 during the February mess. In my experience, when you have technically stretched markets and bearish sentiment, we tend to see a stalemate. That said, other sentiment indicators I follow like the CNN Fear/Greed Index and AAII Sentiment paint a slightly different picture. But after the 2-day Trump bump, it’s safe to say fear is setting in again. Check out this chart of the S&P 500 against the ISE Sentiment Index: As you can see, when the ISE gets to these depressed levels, the market tends to bounce. However, we’re in uncharted waters from a political standpoint, and it still feels like we’re in an “anything goes” environment.
Continue Reading -->The Morning Hammer: The Trump Bump Continues!
The State of the Markets, Straight from Scott Redler Download Scott’s FREE presentation now by clicking this link: https://t3campaigns.clickfunnels.com/optin10692005 Yesterday, markets staged a big rally following an overnight session that was so bad that SPX futures went limit down. Traders were disappointed with Donald Trump’s historic victory over Hillary Clinton, The Trump Bump continues this morning, with SPX and NDX futures well into positive territory, and the Euro Stoxx 50 up 1.1%. One big story in the news today is that following the Brexit and Donald Trump’s US Presidential election victory, we could see even more major political upheavals. Now many folks think that Marine Le Pen, leader of France’s far-right National Front party, could become President of that nation next year. And Italy has a major reform referendum vote coming up on December 4 aimed at limiting the powers of regional governments in order to streamline legislation. But that could get rejected since Italian PM Renzi supported Hillary Clinton, which does not fit with the growing wave of global populism. All across the globel, the establishment is becoming less established. Maybe THAT is the big trading/investing theme we need to focus on. We could even look at Germany. PM Merkel has been considering running for a 4th term. Polls have indicated that about half of Germans oppose that. If she does run, I suspect she would get destroyed. The tide is just too strong. Anyway… The VIX is still falling and is under 14 this morning. So all those put buyers that were scrambling to buy election protection are getting decimated once again. The ISE Sentiment Index was just 68 yesterday even with the rally, pushing the 10 day moving average down to 67.4. That implies very, very negative sentiment. The 10 day moving average of the CBOE equity put call is 0.735, which is slightly above the YTD average. So we have a lot of hedges that probably need to be unwound, and that could propel the S&P 500 to record highs. Good luck out there!
Continue Reading -->The Morning Hammer: Trump Wins, Trump Wins
Want to Join the Exciting, Lucrative World of Prop Trading? Join Amber Capra for our next special information session: https://t3campaigns.clickfunnels.com/optin10627329 May you live in interesting times… -English expression of what may be a Chinese curse I’ve been saying that we couldn’t count out Donald Trump until the final vote was tallied, and lo and behold, he pulled it off. If you’re interested in learning why Trump won, I recommend watching this video — there is a good case to be made that Trump’s persuasion skills put him over the top. But let’s focus on the market. First things first… what’s going on with the Mexican Peso? Well, it’s down -9% — making a far bigger move than it did on the Brexit. The iShares Mexico ETF (EWW) is down -11%. The Euro Stoxx 50 is down -1.9%. The yen is up 1.7% vs. USD. The Nikkei is down -5.4%. SPX futures are down -2.1% with NDX futures off -2.4%. Meanwhile, biotech is flying! IBB is up a quick $15. Clinton has been critical of drug company pricing practices, and Trump’s victory means the pressure is off. It was pricing in a $10 move, so that’s a pretty spectacular rally. The VIX is up 7.3%. Gold is up 2.4%. You get the point… The big question now is whether this is a repeat of the Brexit action, meaning a massive volatility spike that looks like blip on the radar in a few months. I suspect we’re going to see a very interesting open. A lot of individual investors may look to dump quickly, and odds are we’re going to see a huge put option demand. I’d watch the ISE Sentiment Index. The first reading will be out at 10:10 a.m. ET. The 10 day moving average was at 72 (72 calls for every 100 puts), which is actually lower than what we saw at the February lows. I suspect we’ll get a sub-30 open, good enough to push the 10 dma under 70, which means serious, serious bearishness. Good luck out there.
Continue Reading -->Morning Call Express: America Speaks
In today’s Morning Call Express, Scott Redler talks about the impact of Donald Trump being elected the next President of the United States of America. Scott talks about where the markets were at the lowest point, overnight, and where it is looking to open. He helps put things in perspective and provides a roadmap to navigate today’s open. Scott also discusses the reaction in biotech land and gold.
Continue Reading -->The Morning Hammer: Happy Election Day?
How to Thrive in the Future of Trading Want to go Quant without a PhD? Check out our latest live event here: https://t3campaigns.clickfunnels.com/optin10626572 I’d say Happy Election Day but there’s doesn’t seem to be much happiness out there today. So I added a question mark. If there’s one sign of the times… it’s the lack of signs. I’ve lived in Brooklyn, NY my whole life, and every election, I’ve seen tons of signs for Presidential candidates in front of people’s homes. This time around… nada. Anecdotes aren’t evidence, but I think this says something about the state of affairs. It seems like the market wants Hillary Clinton to win to avoid the Trump wild card. I guess folks will decide the ramifications of a Clinton Presidency after the fact. However, what’s most important is resolution. The market wants a clean Clinton victory without Trump disputing the results and extending the spectacle. That said, I wouldn’t count Donald out until the final vote is tallied. Reuters is saying it sees a 90% chance of Clinton winning. But Trump was never supposed to even be in this race. Yet here he is at the homestretch. The Brexit was not supposed to happen. Yet it did. Futures are down slightly this morning, which feels like run-of-the-mill profit-taking after yesterday’s big surge. One interesting story I caught yesterday was Reuters’ report of Wall Street banks prepping for Brexit-like turmoil tomorrow. That may reduce the chances of a massively negative reaction to a Trump win or a sell-the-news reaction to a Clinton victory. In recent years, investors have generally overhedged, in the process throwing away untold billions of dollars on put options. Look at the chart below of the ISE Sentiment Index since inception in 2002.: As you can see, it’s slowly drifted lower, which means that put option demand has grown relative to call option demand. We’ll soon see if the recent spate of put buying was just another big waste of investor cash. Good luck out there.
Continue Reading -->Morning Call Express: Election Day
In today’s Morning Call Express, Scott Redler talks about how today’s election may impact the markets both today and tomorrow. Scott reviews the technical picture over the last week to week and half and what it suggests for price moving forward. He also shows the support and resistance levels to be watching. How to Thrive in the Future of Trading Want to go Quant without a PhD? Check out our latest live event here: https://t3campaigns.clickfunnels.com/optin10626572
Continue Reading -->Morning Call Express: Pre-election SPX Re-test
In today’s Morning Call Express, Scott Redler discusses the news over the weekend, the day before election day, and what to be looking for as far as support and resistance levels. He also talks about some high beta tech names and gives you a plan for today.
Continue Reading -->Trader Mailbag: What’s the Deal with PHK?
Hi Mike, You have been in PHK for a long time. What is the reason for the heavy selling? -Tom Hi Tom, Thank you for the question. Indeed, I have been in the PIMCO High-Income Fund (PHK) for a long time and it has been clobbered, dropping from a peak of $10.15 in August to $8.55 today. PHK is a closed-end high-yield bond fund that uses leverage to juice its returns. Closed-end funds are significantly more volatile than plain-vanilla ETF’s and mutual funds. And PHK has been trading at a giant premium to net asset value (NAV). So with the high-yield market coming under pressure on the decline in oil prices and pre-election jitters, PHK has gotten slammed, with that premium to NAV closing hard. As I’ve discussed before, I only like buying volatile closed-end funds like PHK on extreme down days. Why? Because they get absolutely destroyed, creating attractive buying opportunities. As far as my long-term strategy with PHK goes, it’s a buy and hold position for me, and I just leave it alone with dividends reinvesting. That helps cushion me against the short-term volatility, which can be pretty extreme. I’d only consider another outright buy on a dip below $8.
Continue Reading -->Morning Call Express: The Pattern of a Potential Bull Trap
In today’s Morning Call Express, Jeff Cooper talks about the potential of a bull trap in the SPX and wonders if an Orange Swan event is on the table. He also talks about the key levels to be watching for clues to a significant correction. Jeff also talks about several cycles that he has been cautioning his reader about.
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