June 1, 2017
It HAS to happen at some point? Where we get the attention-grabbing ALL IN rally in Stocks…where the HERDS of naysayers HAVE NO CHOICE but to go diving in?
One thing I’ve learned is you never know what the specific catalyst might be that ignites a major move in any given market…In fact, many times there is nothing you can point to that truly explains why a market suddenly just lifts off…or crashes…I DO know, however, that the markets are essentially the world’s biggest video game, played with real money, and that changes in values…in of ALL this stuff…are more a function of investors and traders getting in and out of ideas than anything else…That sometimes the mob is “chasing a runaway”, and sometimes everybody is “running for cover”…And that is precisely what I think we are about to see in Stocks…and the interest rate markets…that we’re about to have an absolute rocket in Stocks, and a collapse in Eurodollars.
I maintain that there are TRILLIONS of dollars handled by supposedly “professional” analysts and money managers who are STILL on the sidelines as the Dow, S&P 500 and NASDAQ all continue to make new highs…BUT you can bet that they are becoming more and more and MORE worried about this thing leaving them behind, and I firmly believe the day is fast approaching when all of those managers, in FEAR of looking FAR worse than they already do…in fear of losing their jobs really…are FORCED into finally throwing in the towel and becoming aggressive buyers…and buyers “at any cost.” And yes, I’ve said this over and over, but it IS the way the markets work, and that WE WILL SEE (ARE SEEING) A TRUE STOCK MARKET LIFT OFF AS THOSE TRILLIONS COME POURING BACK INTO EQUITIES.
And there is no telling how big the move might be…
To anyone who still thinks we are in a slow growth economy, I would suggest just opening your eyes to the fact that the roads, shopping centers, airports, vacation spots, construction sites, and anywhere else you want to name are JAM PACKED WITH PEOPLE AND ACTIVITY…And the next thing I would say is, in my opinion, THERE IS NO WAY THAT TODAY’S EURODOLLAR CONTRACTS ARE ANYWHERE EVEN CLOSE TO REFLECTING THE REALITY OF WHAT INTEREST RATES ACTUALLY WILL BE DOING FOR THE BALANCE OF 2017…AND BEYOND.
MY CONTINUED OPINION IS THAT RATES ARE GOING UP FASTER AND BIGGER THAN THE MARKETS ARE CURRENTLY ANTICIPATING. I CONTINUE TO RECOMMEND BUYING PUTS…YES, MORE OF THEM, WITH MORE TIME…OUT IN THE MARCH 2018 EURODOLLAR CONTRACT SHOWN BELOW…I BELIEVE THE PAINFULLY SIDEWAYS ACTION WE’VE SUFFERED THROUGH, AND THE RECENT RALLY, ARE OVER…AND THAT AS A RESULT OF THIS CONSOLIDATIVE PHASE, OPTION PRICES HAVE GOTTEN SO CHEAP THAT IT ABSOLUTELY MAKES SENSE TO NOW OWN SOME OF THE PUTS SHOWN BELOW…THIS TRADE HAS A LONG WAY TO GO.
And as I keep pointing out, It is mind-blowing that this contract is only reflecting ONE 1/4 % INCREASE IN THE NEXT 10 MONTHS…
And I truly believe this last rally should be sold here…with decent evidence the rally is over…and while it is still up here, some 30 points off its low…with the March puts having 10 MONTHS of time…and being offered at prices that I think are just nuts…
And yes, I keep pounding away on this because experience has taught me that:
If you are bearish a market, you DO sell into the rallies.
As a trader, you can’t let the disappointment of 5 months sideways deter you from acting when you should be acting.
Consolidations are often followed by very direct, one way moves.
As this trend towards higher rates is just getting started, put option values will probably never be cheaper than they right now.
I MAY BE DEAD WRONG BUT I STILL THINK THIS IS THE BIGGEST TRADE I HAVE EVER SEEN…AND THAT THE NEXT THING WE WILL SEE IS A NON-STOP MOVE (NO REAL CONSOLIDATIONS) TO MUCH, MUCH LOWER LEVELS.
Do something with these March puts…Keep everything else…Get some March’s…
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Eurodollars