World Oil Supply And Price Outlook, March 2019

The Energy Information Administration released its Short-Term Energy Outlook for March, and it shows that OECD oil inventories likely bottomed last June at 2.806 billion barrels. It estimated a 21-million barrel decline for February to 2.837 billion, 9 million barrels lower than a year ago.

However, throughout 2019, OECD inventories are expected to rise rather quickly through November. At year-end, EIA projects stocks to be 2.918 billion barrels, 64 billion more than at the end of 2018.

For 2020, EIA projects that stocks will build another 82 billion barrels to end the year at 3.000 billion. That would push stocks into glut territory.

oecd oil inventories

Oil Price Implications

I updated my linear regression between OECD oil inventories and WTI crude oil prices for the period 2010 through 2018. As expected, there are periods where the price deviates greatly from the regression model. But overall, the model provides a reasonably high r-square result of 80 percent. Continue reading "World Oil Supply And Price Outlook, March 2019"

Weekly Futures Recap With Mike Seery

We've asked Michael Seery of SEERYFUTURES.COM to give our INO readers a weekly recap of the Futures market. He has been Senior Analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.

Michael frequently appears on multiple business networks including Bloomberg news, Fox Business, CNBC Worldwide, CNN Business, and Bloomberg TV. He is also a guest on First Business, which is a national and internationally syndicated business show.

Gold Futures

Gold futures in the April contract is currently trading at 1,304 after settling last Friday in New York at 1,299 up about $5 for the trading week bouncing off of major support. The precious metals continue in a longer-term bullish trend as I do think gold prices will break the February 20th high of 1,349 in the coming weeks ahead as there is strong demand. Gold is currently trading slightly below its 20-day moving average, but still above its 100-day as the trend is mixed to higher and the chart structure is starting to improve as the volatility remains low. The U.S dollar has put pressure on gold prices over the last month as that currency is right near a two year high. However, gold prices have held up relatively well and if you ever get some type of sell-off in the dollar that could propel prices higher. If you take a look at the daily chart, the trendline remains intact as palladium prices are right near an all-time high once again as that that is the leader to the upside. If you are bullish gold prices and you are long a futures contract, I would place the stop loss under major support at 1,280 as an exit strategy as that would be a three month low. I would see no reason to be long if that situation occurs.
TREND: MIXED - HIGHER
CHART STRUCTURE: SOLID
VOLATILITY: LOW

Continue reading "Weekly Futures Recap With Mike Seery"

Bear or Bull Market - Options Trading Provides Outperformance and 98% Win Rate

The broader market has whipsawed over the past five months. The S&P 500 posted one of its worst quarters and since the Great Depression with the index selling off 14% and erasing all of its gains from 2018. 2019 started on a high note for the S&P 500 with January posting a 7.9% gain, logging its best January in over 30 years. This was followed by continued strength in February, putting the index on its best footing since 1991 with a cumulative return of 11% year-to-date. In this article, I’ll be discussing how options trading can generate consistent premium income with a high-probability of success, regardless of the market backdrop. This is accomplished since options are a bet on where stocks won’t go, not where they will go. Following the options trading mechanics described in this article, my options-centric portfolio resulted in a total portfolio return of 4.2% against the S&P 500 return of -4.4% over the previous five months. This timeframe provided both bear and bull market conditions to demonstrate the effectiveness and resiliency of options trading while outperforming the broader index by a wide margin. This seesaw from a negative to a positive market backdrop provided unique opportunities to capitalize on options trading via capturing a higher percentage of premium income. In January and February, I was able to achieve a 98% options success rate by closing 46 out of 47 option contracts while leveraging cash-on-hand.

Options Crash Course

Options trading can be a fantastic avenue to mitigate risk, provide consistent income and hedge against market movements while maintaining cash-on-hand. Risk mitigation is particularly important given the market wide melt-down during Q4 of 2018 albeit the market has rebounded furiously thus far in 2019 through February. Maintaining liquidity via maintaining cash on hand to engage in covered put option selling is a great way to collect monthly income via premium selling. Heeding critical variables such as implied volatility, implied volatility percentile and probability, one can optimize option selling to yield a high probability win rate over the long term given enough trade occurrences. I demonstrated via empirical data how these critical elements translate from predictive high probability outcomes to reality. In the end, options are a bet on where the stock won’t go, not where it will go and collecting premium income throughout the process. These empirical data demonstrate that the probabilities play out given enough occurrences over time. Despite a small sample size (148 trades) in a period where the market seesawed from erasing all of its gains for 2018 to posting its best January/February since 1991, an 85% win rate was achieved while outperforming the broader market by a spread of 8 percentage points from October of 2018 through February of 2019 (S&P -4.4% vs. 4.2%).

Trading Mechanics

Continue reading "Bear or Bull Market - Options Trading Provides Outperformance and 98% Win Rate"

Bounce Back Week For The Market

Hello traders everywhere. After a tough week where we saw the market sell-off over -2% the market bounced back with some vigor. Both the S%P and NASDAQ are posting gains over +2% while the DOW was fighting to stay in positive territory after being weighed down by steep losses by Boeing in early trading, but Boeing is making a comeback as we enter afternoon trading.

In fact, the NASDAQ will post its best week of the year with a gain over +3.6% and that will also be the 11th positive week in the last 12 weeks. The S&P 500 will have a weekly gain of +2.7% and the DOW brings up the rear with a weekly positive gain hovering right around +1%.

weekly gain

The U.S. dollar hasn't faired as well losing -.8% as traders await news on a Brexit deal. After votes on Tuesday and Wednesday, the UK parliament is back in session today for a third (and hopefully final) vote this week. After rejecting UK PM Theresa May’s deal on Tuesday then rejecting then a no deal, “hard Brexit” on Wednesday, all signs point to UK parliament voting in favor of an extension to the negotiating window, currently set to expire on March 29. Continue reading "Bounce Back Week For The Market"

The Bank That Couldn't Shoot Straight

Other than President Donald J. Trump, Wells Fargo CEO Timothy Sloan has to be the most hated man in Washington, or at least he was this week.

On Monday, the New York Times published a story which said employees at the bank “remain under heavy pressure to squeeze extra money out of customers” despite “years [of] publicly apologizing for deceiving customers with fake bank accounts, unwarranted fees and unwanted products” and claims by top executives that they “have eliminated the aggressive sales targets that spurred bad behavior.” That was a reference to the 2016 scandal in which over a period of many years, thousands of bank employees opened millions of accounts without customers’ knowledge or consent.

But that proved to be only the beginning of the bank’s problems. Since then there has been a steady drip of one scandal after another, from forcing auto loan customers to buy insurance they didn’t need to allegedly overcharging military veterans for mortgage refinances.

Indeed, “each time a new scandal breaks, Wells Fargo promises to get to the bottom of it. It promises to make sure it doesn’t happen again, but then a few months later, we hear about another case of dishonest sales practices or gross mismanagement,” Rep. Patrick McHenry, R-N.C., told Sloan at a House Financial Services Committee hearing on Tuesday.

At the hearing, members of both parties lambasted Sloan and his bank. Continue reading "The Bank That Couldn't Shoot Straight"