TLT
THE WEEK AHEAD: HAND SIT ON PREMIUM SELLINGAlthough VIX finished the week above the low volatility environment zone (<15) at 16.48, not much is enticing here from a premium selling standpoint at first glance. Earnings announcements are now down to a trickle, with the next quarter's announcements coming into range in the May cycle, militating in favor of putting on earnings-related volatility contraction plays closer to announcement since implied will in all likelihood expand running into them.
ASHR (50/29), GDXJ (44/27), GDX (35/24), TLT (36/10), XLB (33/19) round out the top five exchange-traded funds sorted by rank; EWZ (12/38), XOP (26/32), OIH (27/32), ASHR (50/29), and USO (14/28) when sorted by 30-day implied, all below the >50/35 metrics I like to see out of these to put plays on, although I will continue to sell a bit of XOP premium here, since it's 30-day implied is nearly twice that of SPY's at the moment: the May 17th 30 short straddle's paying 2.99 (.75 at 25% max), nearly 10% of the Friday close share price of 30.06.
On the majors end of the stick: SPY (28/16), QQQ (23/20), DIA (22/17), and IWM (19/21) -- all at the low end of their 52-week volatility ranges.
TLT, Confirmed Breakout, Risk off in PlayOn Friday, the Treasury bonds had a decisive breakout and a convincing move away from the large HVN. The price is heading to $127 target. After that we may see some pullback and potentially a breakout from the mature balance.
The investors are looking for safe investments. Usually, if the bonds are moving up the equities do the opposite.
03/24/2019
A LOW in TLT (US Treasuries) looks inplace, target $131Although I am structurally bearish US treasuries, I am bullish for a cyclical pop up to $131 on TLT.
TLT US BONDS I'll be tryign to add some bonds to my portfolio but need to wait for better opportunity
UPDATE: The US is NOT turning Japanese, TLT tgt $11735% of US treasuries are held externally, the Fed does not have full control over the interest rates until those treasuries are held internally and the US is internally funded.
OPENING: TLT MARCH/JUNE 120 PUT CALENDAR... for a 1.56/contract debit.
Notes: TLT is in a really low implied volatility state (30-day at 9.5%) and at or near horizontal resistance in the 122-123 area. With a June hike being talked about in terms of timing of the next hike, I figured I'd put on a calendar to potentially benefit from that scenario, which would lead to a downturn in the underlying along with a volatility expansion, both of which would benefit this setup.
Not looking for much out of it: 20% max.
Copper / Gold ratio pointing to lower Treasury yieldsCopper / Gold ratio pointing to lower 10 year Treasury yields around 2.40%. US yields seem to high on many measures but improving CESI and too much safety bid lately can push yields even higher before the real downturn begins.
DG stock is highly correlated with bonds DG's relative performance vs SPY is highly correlated with TLT on a weekly basis. Recent breakdown in correlation gives a good trading opportunity
Either DG is mispriced vs SPY or TLT is very cheap
US10YR Yield likely on a Long Path SidewaysUS Yields are likely going to follow the same path as Japanese Yields have taken over the past few decades. In this update i discuss why I believe this to be, and I also break down the chart using Elliott Wave and Fibonacci analysis to try and how this will play out.
Rate of Change in Eurodollars Signalled 10-Year Yield RolloverSubscribers were able to front run the rollover in U.S. yields as the rate of change in the eurodollar complex signaled a higher probability move. This as knock-on effects to yield proxies like USDJPY, TLT, XLU, XLRE etc.
This exerpt is taken from "The Powell Put Pause" by The Macro Strategist:
"Since January 14, the SPX is up 3.84 percent higher; but due to TACVOL's dynamic design, the range has been expanding since given as it takes in data. TACVOL score is bullish, and the range top is currently 2,730.
The frustrating part is it conflicts the macro which should be supporting higher risk assets. Risk management is key.
The move in policy expectations were hinted in Monday's "Charts to Ponder," which subscribers receive at the beginning of the week.
The EDZ 2019 (eurodollar) has tightened after a massive pivot in November, which caused yields to collapse. However, the 7- and 20-day rate of change is beginning to drift higher.
The 7-day ROC is above to flip from negative to positive and could see an inflow into eurodollars. This would be net-negative for the U.S. dollar; 10-year yield would roll over."
Current near-term TACVOL range for SPX: 271.81/246.52; 1.42 score (bullish)
Next Week's Expected Move ($47) + Gravity Points + Economic DataNext week will be perhaps the most important week of the year. Given the number and size of companies reporting, I can't emphasize enough to keep your seatbelts on. Thursday is the biggest earnings day.
Important Economic Events that happened last week:
1. The Economic Forum in Davos was downright pessimistic. Maybe a little bit overdone, but still these are CEO's, hedge fund managers, ect. all gathering in one lump sum all coming out with one idea, and that was that 2019 has got a lot of pessimism to it.
2. The week began with the International Monetary Fund (IMF), and for those of you who don't know the IMF came out and downgraded 2019 Global Growth. This is the 2nd time they've came out and downgraded global growth.
3. The largest semiconductor company - INTC - came out with bad Earnings. Semiconductor's are a leading indicator of the Technology sector. And it shouldn't be anything new when I say that the Technology sector leads the broader stock market. It's really not just Intel. I can't really remember any other time in my career where so many CEO's are displaying so much uncertainty in their projections moving forward.
4. China is pumping serious liquidity into their system. They're out there with a firehose just spraying massive massive liquidity all over the place like there's no tomorrow. As a trader, this makes me nervous. When China is spraying liquidity like that, that means they're seeing major major headwinds.
Take it for what you will, this is all just my interpretation. All I know is that when you start hearing a week or two of discussions on the mainstream news about the market heading for new all time highs, it's probably time to put your seatbelt back on.
Goodluck out there next week gentlemen,
RH
Last Week's Post: Beautiful example of why I use this on a week-to-week basis.
Trouble Brewing In The Bond MarketWe are at an interesting point in time when both TLT and SPX seem ready to go down at the same time! My money is on no further rate hikes. What do you think? Insert informed opinion below.
Business Cycle vs G3 Govt Bond YieldsBusiness cycle points to lower long term government bond yields. US 10 year yields seem to be the most at risk.
LONG LT BONDS & Bond proxies
Business Cycle points to more downside in Steel and Rates Business cycle has turned down again as depicted by steel prices and long term treasury yields. Last time, it was Chinese money printing that kick started the cycle again. This time Chinese are still slow to inject meaningful liquidity to the system. Once they get going, it takes 9-12 months for the economy to feel the real impetus. Hence, business cycle is likely to put pressure on rates and risk assets at least until the end of 2019.
LONG TLT and SHORT Steel Companies
