Category: INO.com Contributors

Gold: What A Long And Not So Strange Trip

Posted on by Gary Tanashian

The Gold Miner correction was well earned, but it was not a bubble.

Even today there is some pablum out there talking about how if inflation is good for gold it is especially good for gold miners. I will simply repeat once again that if gold usually does not benefit fundamentally by cyclical inflation (i.e. inflation promoted for and currently working toward economic goals) the gold miners never do, unless they rise against their preferred fundamentals as they did during two separate phases in the last bull market, which were justly resolved with crashes.

Here are a couple charts we used in NFTRH 648 in a segment written to set the record straight. We have also used these charts – especially the first one – since the caution flags went up last summer, visually by the first chart and anecdotally by the usual suspects aggressively pumping the unwitting masses. Buffett buys a gold stock!… okay, well so much for that. Sentiment became off the charts over-bullish and now, as we prepare for the final act of the correction, it’s the opposite. That’s perfect.

HUI had far exceeded the Gold/SPX ratio and so it was very vulnerable from a macro fundamental perspective. Why on earth would players want to focus on miners digging a rock out of the ground that was starting to fail in a price ratio to the stock market? They wouldn’t, and since last summer they didn’t.

Gold

But from a sector fundamental perspective the Gold/Oil ratio (Oil/Energy is a primary driver of mining costs) and HUI show that the 2020 rally was nothing like the two bubbles of yesteryear, when not only did HUI hit danger signals (!) noted above by a macro fundamental indicator, it also made two separate bubbles vs. this sector fundamental. This time? Nope, no bubble here. Continue reading "Gold: What A Long And Not So Strange Trip" →

U.S. Petroleum Inventory Rise 4.8 Million Barrels

Posted on by Robert Boslego

According to the Energy Information Administration, U.S. petroleum inventories (excluding SPR) rose by 4.8 million barrels last week to 1.292 billion, and SPR stocks were unchanged. Total stocks stand 2 mmb below the rising, rolling 5-year average and 31.4 mmb higher than a year ago. Comparing total inventories to the pre-glut average (end-2014), stocks are 233 mmb above that average.

Total US Petroleum Stocks

Crude Production

Production averaged 11.0 mmbd last week, up 100,000 b/d from the prior week. It averaged 10.700 mmbd over the past 4 weeks, off 18.0 % v. a year ago. In the year-to-date, crude production averaged 10.736 mmbd, off 17.5 % v. last year, about 2.3 mmb/d lower Continue reading "U.S. Petroleum Inventory Rise 4.8 Million Barrels" →

Capturing Over 100% Premium - Diagonal Spreads

Posted on by The INO.com Team

Capturing over 100% of the option's premium income and closing trades prior to expiration is the ideal scenario for options trades. The manner in how one constructs this options trade is the key to these attributes. A diagonal spread leverages a minimal amount of capital, defines risk, and maximizes return on investment while enabling traders to capture greater than 100% of the option premium while accelerating the trade's closure before expiration. Diagonal spreads are ideal when engaging in options trading for many reasons, namely its risk mitigation properties. This type of trade is excellent to layer into a long-term successful overall options strategy which includes risk-defining trades, staggering expiration dates, trading across a wide array of uncorrelated tickers, maximizing the number of trades, appropriate position allocation, and always being an option seller to continuously bring premium income into the portfolio.

Using a combination of diagonal call spreads, diagonal put spreads, call spreads, put spreads, and iron condors over the past 11 months, a total of 248 options trades were placed and closed. During this timeframe, 243 trades were winning trades for a 98% option win rate with an average income per trade of $168, an average return on investment (ROI) per trade of 7.9%, and overall premium capture of 85%. An options-based portfolio can offer the optimal balance between risk and reward while providing a margin of downside and upside protection with high probability win rates. Risk management is essential when engaging in options trading to drive portfolio performance, and diagonal spreads are a key component to this overall strategy (Figures 1, 2, and 3).

Diagonal Spreads

Figure 1 – Comprehensive options-based performance metrics
Continue reading "Capturing Over 100% Premium - Diagonal Spreads" →

Futures: All Eyes On This Week's Crop Report

Posted on by Mike Seery

Cotton

Cotton futures in the May contract settled last Friday in New York at 84.68 while ending the week on a positive note up 145 points, breaking a 7-day losing streak currently at 79.89, down nearly 500 points for the week as prices hit a 3 month low.

I have been recommending a bullish position from the 79.00 level, and if you took that trade, continue to place the stop loss below the September 29 low of 66.28 as an exit strategy. This is a high-risk trade as the volatility remains incredibly high as that situation is not going to change anytime soon, especially as we enter the summer season.

Cotton prices are trading below their 20 and 100-day moving average as this recommendation was a counter-trend trade. I believe prices have become too cheap as we topped out on February 25 at 95.68, dropping about 1,800 points in a matter of weeks from today's low. The commodity markets have run into trouble over the last several weeks because U.S. treasuries have hit a 1 year high in yields, pushing the U.S dollar higher, which are two bearish fundamental factors.

I remain bullish across the board. I believe this is just a retracement in a giant secular bullish trend that should continue due to massive quantitative easing from the U.S. government. Traders are keeping a close eye on next week's crop report, which will show the number of acres planted in the United States as that will certainly dictate short-term price action.

TREND: MIXED - LOWER
CHART STRUCTURE: POOR
VOLATILITY: HIGHOW

Coffee

Coffee futures in the May contract is ending the week on a positive note, up 225 points or 1.78% at 128.85 after settling last Friday in New York at 129.00, basically unchanged for the week bouncing off major support around the 125 level as I think prices look very cheap. Continue reading "Futures: All Eyes On This Week's Crop Report" →

How To Stop Being Scared

Posted on by Chris Vermeulen

The markets really scared a lot of people in the last month. We’ve received lots of emails and comments from people wondering what’s happening in the markets and why the deeper downtrend didn’t prompt new trade triggers. Well, the quick answer is “this downtrend did prompt new BAN strategy trade triggers and this pullback is still quite mild compared to historical examples.” Allow me to explain my thinking.

The recent FOMC meeting, as well as the expiration of the futures contracts, usually prompts some broad market concerns. Many professional traders refuse to trade over the 7+ days near an FOMC meeting – the volatility levels are usually much higher, and this can throw some trading strategies into chaos. Our BAN Trader Pro strategy handles volatility quite well most of the time.

Recently, the BAN Trader Pro strategy initiated new trade triggers of subscribers and myself. Our members are engaged in the best-performing assets for the potential upside price rally that may take place over the next couple of months. Our strategies target opportunities based on proven quantitative technology – not emotions and use proven position management to maximize gains while reducing drawdowns.

Transportation Index Daily Chart Is Bullish

This leading index shows early strength in the market with an upside target of $14,668. That is a 3.5%-4.5% upside move ahead of us.

Recently, we’ve seen some substantial support in the Transportation Index that aligns with our BAN Trader Pro strategy. The rally in the Transportation Index, which usually leads the US economy by at least 2 to 4 months, suggests the markets are actively seeking out a support level/momentum base for another rally phase. Continue reading "How To Stop Being Scared" →