Wall Street Next Week: Financial astrology for the successful investor & trade

1. .@tafund

RED ALERTnext week to month end markets

We begin today [6/11] with initial stepped market positional shorts, sell bonds & buying puts & VIX.

We believe by 6/24 inflation worries will be even more obvious.

 

@tafund 6/14

Markers: TNX 1.44 VIX 15.55 DJ 34600 SP 4244 NAS 14031

Buy an extra pair of traders diapers!

Upcoming yellow orange & red market days:

KEY DATES: June 13-17, 22 24 25-28

 

Sell in June?  Sell in August?

Correction odds in June 71% by August 84%

Bear Market in June 50% August 65% 

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There is little REALITY to today's markets BUT in the next two weeks inflation watchers may stop believing the “temporary” fairytale story, a swan event &/or Robinhooders may learn trees don't' grow to the sky. We are not betting today’s pyramid games will continue- see above.

The trigger?

• Bitcoin collapses (30K support broken which it will sooner or later) would do it. 
• Another landmine would be TNX à 2 = 20% Nasdaq correction.
• In addition to “I” word inflation well above 2%, the dreaded “T” word- not the Trillion Dollar infrastructure package but TAXES!!!
• A change in perspective- comparing not to last month or last year, but a longer term horizon leaves little upside to analyst projections.
• FED warning of course shift (tapering, willing to act IF inflation is NOT temporary), or perhaps even suggesting they are discussing tapering vs. just losing credibility! 

I am unwilling to buy at today’s prices, especially SPX > 4000: Currently market upside remains limited near term. 

Outside of day trading and special situations, we plan to sell/short and look to buy if/when markets are 10%-20% lower.   

PIVOTS         2020 Close  10%-            Nov 3          

DJI 34600      30606          31581           27480          

SPX 4244       3756             3825             3369            

NAS 14031    12888          12789           11160            

 

ACT BEFORE MARKETS REVERSE

Inflation is now above 4% and I don’t believe it is just “temporary”.

Given market sky high valuations, we do not see sufficient FUNDEMENTALS (Fed accommodation, Vaccines & Stimulus Packages) to justify SP500 earnings.

Our recommendation continues to be maximum portfolio protection.  

 

TSLA, BTC, VIX, GME & TNX are our five market “canaries in the coal mine”:

When three or more canaries sing, be ready to Head for the Hills (&/or your nearest bar) .

TNX:              > 1.50-1.75

TSLA:            < 666-555

VIX:               >22-26

BTC:              < 42-30K

GME:*           <50-30

*Gamestop & stocks such as AMC [>10] or COIN [>225] are like Bitcoin, their trading has little or no relationship to reality. 

Short of a reality check that the emperor has NO clothes, newbies learning that all stocks do NOT go UP ALL the time can also time market tops (June &/or August).

 

TRADERS SHOULD DO QUICK DAY TRADES OR HAVE VERY DEEP POCKETS

• After hard rallies or market drops, it is smart to book profits.
• Current odds of a market leg down starting this coming week is better than 65% and we will continue to short rallies.

 

Commodity Trading:

Gold             Buy on dips Rinse and repeat Latest buy 1870

Silver            Buy on dips

Copper         Watch +/- 4.50

Oil                 Sell/Distribute > 70

KEY DATES:        June 13-17, 22 24 25-28

DJIA:                     Pivot 34500 S1 34000

SPX:                     4250 PIVOT/Resistance S1 4226

NASDAQ:             14000 PIVOT S1 13800

GOLD:                  1880 PIVOT  R1 1902 R2 1925

SILVER:                R1 28 R2 30 R3 33

OIL:                       70 PIVOT S1 66  R1 72

COPPER:              4.50 PIVOT0

US 10 Year:          1.50 PIVOT R1 1.75 

DXY:                      90 S1 88 R1 92

VIX:                       18 PIVOT R1 22 R2 26 S1 16

BTC:                      38K PIVOT S1 33K S2 30K S3 24K

 

2020 CLOSE:          DJIA 30606 SPX 3756 & NASDAQ 12888

2019 CLOSE:          DJIA 28508 SPX 3231 & NASDAQ 8823  

2018 CLOSE:          DJIA 23327 SPX 2506 & NASDAQ 6635

AFUND Fair Value  GOLD $1825

Reduce Risk and Focus on Capital Preservation:

THINK TRADITIONAL SWISS AND PRESERVE CAPITAL: HEDGE AND PROTECT AGAINST DOWNSIDE RISK.

 

2. Here's my Ursine market outlook for the next 12-18 months

We continue to see a shift away from investments that benefited from the pandemic and lockdowns - such as technology, health care stocks and bonds - to investments that will benefit from a slow but continuing recovery - like resources, industrials, infrastructure, tourism stocks and financials.

Many analysts recommend adding investments that can benefit from higher inflation such energy, gold, TIPS, utilities, Art/Blue Chip collectibles and real estate.

 

Make a list of stocks to buy AFTER a 20% correction. u

SELL/STOP STOCKS you wouldn’t buy at current prices, buy September puts, write Covered Calls & reduce margin/raise cash levels.

If this is not upcoming in the next two weeks, then we will remain highly liquid and wait for the music to stop [August?] or Godot to arrive, whichever comes first.

Outside of Special Situations, short term we plan to only VERY selectively add stocks, largely in two of our favorite sectors - metals & mining and entertainment.

 

Favorite H2 2021 Sectors:

Entertainment, Mining & Technology [AFTER a 20% correction if Undervalued & Highly Scalable]

Currently we are also watching some Select Health Care (lower cost/better outcomes, Energy & Distressed Investing for Q3 2021.

Note: With Oil above $70 we are now reducing/covering Energy bets.

Stock selection is important. Whenever possible, we prefer to invest in stocks sporting strong cash flows, sound balance sheets & growing dividends.

Choose your favorite stocks and patiently bid for them.  

 

3. Given newbie gold and silver investors have scant knowledge of the industry and many are accustomed to Tech valuations, is there an upper limit to Gold or Silver pricing? Maybe not!

When Bitcoin meet reality, it is likely to usher in a rapid source of many new gold investors.

Conservative investors would accept $2200-2300, while more aggressive gold and silver bugs have gold targets of 2500-3000+; silver $35 to $50+.

Silver Fair Value $27.50 $25 support and $30 overhead resistance.

 

There are many good buys in the precious metal space depending on your time frame & risk/reward desires.

 

Gold: Fundamentally the global political and economic situation is very favorable for precious metals.

Precious metals remain favorite sections. Many generalist investors now have some interest in Metals and Mining.

Also, it is under allocated by most investment programs, this gives it even more potential room to run, especially as inflation fears resurface &/or if US dollar weakens!

Hence, we recommend a full and over weighted precious metals portfolio allocation.

However, we advise long term precious metal investors to also pay attention to stock selection.

Gold remains cheap geopolitical crisis insurance.

For investors who cannot or will not buy the $US currency as well as investors who wish to safely and cheaply hedge their US$ exposure,ONLY GOLD IS AS GOOD AS GOLD!

Once again, someinvestors are hedging record equity prices by buying gold.

Low real interest rates is positive for gold as well as low global bond yields makes gold an attractive alternative risk mitigation hedge.

We expect precious metal stocks to outperform physical gold & silver in 2021.

 

Gold FV $1825 = Commodity FV: 1668 + Currency FV: 1800+ Inflation Metal FV: 1800 + Crisis FV: 2040

INVESTORS: We will stay LONG in H2 2021 both as an investment and as a portfolio hedge despite short term seasonal summer trends.

 

4. June seasoned spectulator pick: None

Most are high risk/high reward market picks that we believe are potentially very rewarding and/or interesting to watch.

Many picks are best for speculative portfolio allocation and as such bought as a member of a group of 5 to 10 such stocks.

Remember NOT to ignore potential High Risk - meaning use speculative allocation i.e., “money you can afford to lose without altering your lifestyle.”

Always do due diligence before deciding to act. 

 

5. "Is inflation transitory or something more structural? Will the Fed lose control of it down the road and make a policy error and not have the ability to rein it in?"

Steven Oh, global head of credit and fixed income, PineBridge Investments

HW: What me worry?

 

"There are a lot of questions about inflation because you see it in everyday life, But we may have seen the peak, especially in terms of wage growth."

Bryan Koslow, principal, Clarus Group

HW: That latter comment may be true, but just imagine how high prices would be if there was any inflation according to the Fed!

 

“You kind of have this notion that worries about inflation from the investor base might have peaked.”

Ross Mayfield, investment strategist, Baird

HW: Say what?