Trading Opportunity- Next Week Now

Stocks and Bonds Correlation Inversion Next to Go Belly Up?

originally posted on OpportunisticTrader.com

On Friday, Mark Fisher stopped by for a brief  one-on-one with Michael Aronovitz. We pulled that interview out of the OppTrader report as as a ‘Best of ‘ piece based on subscriber views.

During the chat, Mark opined on stocks and bonds:’paper assets may be a good sale here in general‘. He got specific citing that he’s thinking about a ratio short combo of selling stocks and bonds and the reasons why.

Also discussed was energy with an emphasis on NG next week. In the past Mark has noted that expiring energy contracts frequently have a mini short covering rally. Friday he made particular note that while the worst may be over for Nat Gas shorts, he found it hard to believe ‘that anyone would want let their shorts go out uncovered’ and that last minute variables make it very risky to do so. He sees the Jan NG contract going out higher, or at least making a final spike before rolling off.

Finally, special note was made of what he called the impending “pizza wars”. We will leave that for the listener to decipher except to offer this: If a price war in a relatively recession resistant industry were to take place, that could catch a lot of longs flatfooted

We think this is a good, concise interview where answers were given and rationales for options explained if not in this interview, in previous ones Mark has given on these topics

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OppTrader Weekly Report:

Economic Headwinds push US stocks to their lowest weekly close since March 23 and daily since April 3rd.

 Weekly ES Chart

Daily ES Chart

Headwinds Remain:

  1. GLOBAL SLOWDOWN:  This past week China, EU, Japan all reported softer than expected data.
  2. FRUGAL FED : Powell likely to raise again this week making it 4 for 2018.
  3. TRADE PARALYSIS: China/US tensions drag on, handcuffing corporate and gov’t leaders’ ability to plan for 2019 and beyond.
  4. THE EUs FULL PLATE: between Brexit, The French tax revolt, and the on-again off-again Italian budget battle, EU leaders have a lot to juggle
  5. ENERGY DILEMMA: Crude Oil is -10.5% YTD and 33% off the October 3, 2018 highs of $77 a barrel even as OPEC details remain unresolved
  6. HOUSE POOR: US Housing market cooling show no signs of slowing

As we enter the second half of December have a look at MTD performance:

 Trading Desk Takeaways:

  • WTI could not hold a bid – any rally above $53 has been sold
  •  S&P 500 closed below 50 and 100 day moving averages.- technically all look horrible.
  • Sector Losers: small caps, tech, and transports took turns leading sell-offs
  • Precious metals trading well despite stronger US Dollar (Gold +1.3% Silver +2.9%) – buy Friday’s ugly action may spell the end of that. Watch the CNH
  • Financial ETF -12% YTD, 17% off September high – but worse than we expected
  • Technology ETF +2% YTD, 15% off October high- still up on year despite panic
  • Transportation ETF -10%, 18% off September high – in line with Tech sell-off
  • Home Builders ETF -24%, YTD, 30% off January high. – OppTrader regional survey says  residential inventory overhang is toxic, re-purposing commercial space a struggle

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