November 14, 2016
The chart below presents a picture of what HAS been happening this year in stocks…and what is happening NOW…
Wall Street and all the Internet Nitwits (all well dressed and well spoken) loudly told you to, “Sell!”, because of China, “Sell!”, because of Brexit, and “Sell!”, because of election uncertainty and the possibility of a Trump victory.
HORRIBLE ADVICE IN EVERY CASE…but that IS their norm…My 11 years at Merrill Lynch (and ever since) have taught me that just because some Joe Blow gets told, “Joe, we want you to study up on _______ and be our official ________ analyst”, does NOT mean that Joe understands that particular market, or any market really, or MUCH more importantly, how to predict the DIRECTION of that market…What I have seen 1000’s of times are analysts who do know EVERYTHING about a market…EXCEPT which way it is going…where they know all the fundamentals, and ALL the buzzwords, and they always SOUND good…but in the final analysis, they are perpetually backwards…and never, EVER right about the big stuff…and NO QUESTION, they have been dead on true to form WRONG about stocks all year.
For real…this IS what we’ve seen in 2016…and those guys HAVE been saying, “No. No. No.” ALL YEAR. With every event of any consequence, they have been telling you to “SELL!”
And so now the Dow IS off and running…and these few headline snippets that follow, just from the past few days, are quite representative of their current thinking…that is, they are STILL hemming and hawing and NOT on board with what IS happening (and frankly, HAS been happening…in their faces…since March, 2009).
For sure, with the market making record highs, there must be a few of them who are tilting towards the buy side, but in general, you know they are NOT.
AS I HAVE WRITTEN ALL YEAR, I CONTINUE TO BELIEVE THE STOCK MARKET AND THE ECONOMY ARE IN ERUPTION MODE…AND THERE ARE ZERO REASONS FOR RATES TO REMAIN ANYWHERE EVEN CLOSE TO THEIR CURRENT LEVELS…
THE TREASURY BOND MARKET HAS NOW FALLEN MORE THAN 20 POINTS IN THE PAST 4 ˝ MONTHS AND I ABSOLUTELY LOOK FOR IT TO CONTINUE LOWER…MEANING LONG TERM RATES HAVE ALREADY RISEN BY MORE THAT 3/4 PERCENT…I CONTINUE TO RECOMMEND BEING SHORT BONDS.
AS FOR SHORT TERM RATES, AND MY RECOMMENDATION TO BUY PUTS ON EURODOLLARS?...ALL I CAN SAY IS, IN RECENT DAYS WE HAVE CLOSED INTO NEW FIVE MONTH LOWS AND I FERVENTLY BELIEVE A LARGE, FAST DOWNSIDE CRASH IS NOW GETTING STARTED…AND WITHOUT GOING INTO DETAIL, I WILL ALSO SAY THAT THE LATEST POLITICAL DEVELOPMENTS HAVE LED ME TO BECOME EVEN MORE BEARISH EURODOLLARS AND TREASURY BONDS THAN I HAVE BEEN FOR ALL OF 2017…IN OTHER WORDS, I NOW THINK INTEREST RATES (BOTH SHORT TERM AND LONG TERM) WILL END UP EVEN HIGHER THAN ANY OF THE LEVELS I WAS PREVIOUSLY EXPECTING.
I CONTINUE TO RECOMMEND, EVERY DAY, BUYING JUNE, 2017 EURODOLLAR PUTS.
I THINK THE TIMING IS PERFECT. I THINK THEY ARE DEFINITIVELY NOW ON THE MOVE. I MAY BE DEAD, DEAD WRONG BUT I THINK THERE IS NO WAY INTEREST RATES WON’T BE SUBSTANTIALLY HIGHER 8 MONTHS FROM NOW…MEANING EURODOLLARS WILL THEN BE SUBSTANTIALLY LOWER.
If you think I am making sense, and you have the RISK capital, I encourage you to pick up the phone and call me.
And let me get something straight…I don’t just draw lines on these charts to “inspire” anyone to buy my ideas. I have literally scoured a million charts as a trader, and the truth is, what I DO lay out as possibilities are based on mental pictures of what I have seen 1000’s of times in literally every market we trade…AND what I always draw are what I consider to be my minimum expectations…With this in mind, I will tell you (though I may be wrong), I honestly cannot imagine anything LESS than seeing this contract at 98.00 before next June.
And if you already are on this…with me hopefully:
While the recent new lows do not absolutely represent a bearish confirmation, new lows ARE the first thing we needed to see…and if you DO have an inclination to increase the size of your position, this IS where you do it…NOT for example, 2-3 weeks from now when the “rise in rates” is maybe beginning to be all over the headlines. It’s still relatively “quiet” now. Everybody is glued to watching every tick in stocks and bonds…but NOT in Eurodollars…So, to be clear, I DO think downside fireworks are imminent…and this is a great time to make a move…
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