01/21/2017 Weekend Update

[Cobra]

Smart money not extremely short yet so should still be some up rooms.


How I use the chart:

I don't care what's the logic behind the chart. I found it works in the following two cases:

1.) When market up huge, if I see smart money huge short, best if new record short, then I know a short-term pullback is due soon.
2.) When market down, if I see smart money suddenly rises sharply from very negative value, then I know the pullback was over.

So I only use this chart for the above 2 cases. Besides those 2 cases, it means nothing to me. i.e. the absolute value of this chart means nothing to me, I only care if it rises sharply or drops sharply.

[Cobra]

don't forget our weekly sentiment poll here: viewtopic.php?f=9&t=2333

[Cobra]

Summary of the week's stock picks:
viewtopic.php?f=10&t=2328&p=235832#p235832
All eliminated which has never happened before, interesting.

[Cobra]

No stock picks for the next week. The scan program found 285 candidates:
viewtopic.php?f=10&t=2335

[TraderJoe]

This is for the wise one's on the form;

Whats up with the 'SKEW'??? It's way, way up...

[Trades with cats]

Black Gold-

John Kemp an energy trader had this on twitter-
https://futures.io/attachments/225288
So the Hedge Funds (ok should be called managed accounts or CTAs) are buying the dip. You are supposed to bet against the herd but sometimes you will get run over by the stampede.
Price has been stopped at 53 something like 5 times now so until something happens it looks like we have a ceiling with 50 ish as a floor. Look at Fehro's charts for a better feel.

Seasonals usually show builds until mid- March time frame when the refiners switch over to summer blend and start stockpiling gasoline for the summer drive season. End of June mid-July they dial it back. Last year when we were at 30 this time of year two unplanned events caused a price breakout. The Canadian fires shutting down tar sands and the Niger Delta Avengers shutting down Nigeria. Lybia was still in chaos. Spec's had built a large short position. The panic that the change in supply caused was probably exploited by the big operators and before you knew it we were at 50. At $1,000 per point someone made a lot of money.

So what a difference a year makes. US has about 30 million barrels MORE oil in storage. World production is up. Libya and Iraq are ramping production. US Shale producers are reversing the US decline locking in record levels of future sales at profitable levels and putting significant numbers of drill rigs back to work. Exxonmobil, never known as a first or smart mover has just put a couple of billion into shale. So more production, more in storage, prices $20 higher and the largest spec long position in history. Clearly the four Econ classes I had did not prepare me for this reality unless you consider the OPEC promise. Afterall it worked for Sears for years until the Fed's made them stop. And I do mean the famous mark up mark down sale strategy. OPEC ran up record production later into the winter than they usually go while promising to make more or less their normal winter reductions and annual depletion numbers (Mexico) but call them a "production cut". In run the Hedges chasing last winter's profits.

Where could we go from here is an open question. The top could be the low 60's. OPEC says mid 50's is good. So possible some upside this spring. IF lybia and or Nigeria blow up again (this is negotiations with rebel groups, you pick the odds) it would support prices. If Venezuela goers to chaos and production stops that supports prices but they have loans from China so I think Sinopec and the Chinese Army would quickly send 'help', so possibly a spike then back towards equilibrium.

On the downside OPEC can not obscure actual production anymore because of all the tanker tracking services. They have a long documented history of constant quota cheating and US shale production is continuing to climb for the foreseeable future. Right now it is the sweet spot. But come late March when the refineries start cranking up they will have to show real cuts. The Davos promises of a second round to start during the fall decline in refining may give the longs hope but if the storage surplus keeps growing the longs should give up if we move toward contango. And when they do with the lopsided market positioning it could be yet another panic in crude, this time benefitting the refineries.

Long or short? Fundamentals and history of extreme positions favor shorts. Geopolitical events, if they happen, favor longs. Week by week the market is responding to the way 28 year old Ivy League history majors interpret the carefully crafted media campaign of seasoned OPEC oil ministers. So step up to the green velvet table and place your bets if you dare!

[BullBear52x]

It is what it is department:
Mid BB support with no conviction.

[Al_Dente]

Approximately 8% of the companies in the SPX (42 companies, through Wednesday) have already reported earnings results for the fourth quarter.
Which trump policy plans are these companies most citing in their Q4 conference calls?
Tax policy
Regulation
Trade policy
http://insight.factset.com/what-trump-p ... i=41080801

[TraderJoe]

From an article in Market Watch;
10 popular stocks at risk from Trump’s ‘America first’ inauguration speech

The new president’s protectionist policies could damage the earnings of highly regarded companies doing business overseas

“Protection will lead to great prosperity and strength,” the newly installed President Trump said. He also remarked: “We will follow two simple rules: Buy American and hire American.”

My thoughts immediately drifted to any potential impact on my investments and those of subscribers to The Arora Report. As Trump implements his America-first policy, there could be repercussions for U.S.-based companies that do business overseas. A trade war could lead to higher taxes and tariffs for American companies if other countries retaliate.

I have designed a search screen that looks for U.S. companies whose products and services could easily be substituted by rivals from abroad. After listening to Trump's speech, I quickly added a technical screen and an earnings “hit” screen of U.S. companies that could be damaged if other countries buy fewer of their products.

Let’s start with an annotated chart of Nvidia NVDA, -1.09% a popular stock these days. Please click here for the chart.

Read: How stocks perform in a new president’s first 100 days — in one chart

Nvidia’s stock, which surged 225% last year, is potentially imperiled as the chipmaker is heavily dependent on international revenue. The Santa Clara, Calif.-based company is known for graphics processing units (GPUs) for the gaming market as well as technology for self-driving cars and machine learning. As protectionism heats up, Nvidia’s products could be dropped in favor of those of local companies, damaging earnings of this expensive stock. (The price-to-earnings ratio is 54, almost three times that of the S&P 500 Index SPX, +0.34% )

My complex screening reveals that, besides Nvidia, the following nine popular stocks are most at risk from Trump’s protectionism: Apple AAPL, +0.18% Broadcom AVGO, +2.97% International Business Machines IBM, +2.24% 3M MMM, -0.11% Nike NKE, +0.51% Skyworks Solutions SWKS, +13.01% Wynn Resorts WYNN, -0.12% United Technologies UTX, +0.05% and Yum China Holdings YUMC, +0.19%

[TraderJoe]

Billionaire hedge fund manager George Soros on Thursday reiterated his belief that President-elect Donald Trump is "an imposter and con man and a would-be dictator."

Soros, 86, said at the World Economic Forum in Davos, Switzerland, that he is convinced the president-elect will fail.

"He stands for that other form of government, which is the opposite of an open society," said Soros, who is a Holocaust survivor and Hungarian immigrant. "It's really better described as a dictatorship or a mafia state."

Soros said Trump "would be a dictator if he could get away with it," but that US institutions are strong enough to prevent that scenario. He also said the ideas that guide Trump are "inherently self-contradictory" and that those contradictions are "embodied by his advisers."

Uncertainty, he said, is "at a peak" right now.

"It's impossible to predict exactly how Trump is going to act because he hasn't actually thought it through," Soros said. "He didn't expect to win. ... He was engaged in building his brand."

Asked how the business community should deal with Trump going forward, Soros said, "I will keep as far away from it as I can."

[Al_Dente]

...Whats up with the 'SKEW'??? It's way, way up...

High SKEW just indicates that the “pros” are loading up on portfolio insurance, as they “should” with the market so near its highs.
RISING SKEW = RACE TO BUY PUT PROTECTION AND SELL CALLS = HEDGING

OLD NOTES TO SELF: [from various sources]
$SKEW is essentially the relationship between the “implied volatility” of SPX out-of-the-money puts to comparable out-of-the-money calls.
Institutional/professional investors are the biggest traders in SPX options. The pros hedge their exposure to tail risk (risk of crash, black swan risk) by purchasing SPX puts with low strike prices (OTM puts). This shift in demand bids up the prices of these puts relative to their value under a normal distribution.
As the pros become more concerned about the potential for a market decline, 'crash protection' is in demand, and the SKEW rises, reflecting the higher relative premium they are willing to pay to hedge. They start rotating from 'normal' risk protection to 'extreme' risk protection.
Basically a 'low VIX/high SKEW' combination says that: "the market overall is complacent, but the pros perceive far more tail risk than usual.“

SKEW is a good way of estimating investor hedging appetite, since it varies independently from the level of implied volatility.
Why is skew is so high?
Option market sentiment:
1) Low demand from call buyers (bearish)
2) High supply of call sellers (bearish; pros are willing to forgo the upside potential in favor of downside protection)
3) High demand of put/protection buyers (bearish)

In June, as the market was correcting, the pros loaded up on portfolio insurance. By the time SKEW registered its highest (June 28-29 SKEW hit the highest on record, approximately 153.36), it marked a SPY bottom. At a certain point, most extremes become contrary indicators. With such extremely negative market sentiment, contrarians thought a SPY bottom was near, and sure enough, SPY hit rock bottom for that cycle.

WHAT IS SKEW:
http://www.cboe.com/micro/skew/documents/SKEWFAQ.pdf

[TraderJoe]

Well said. Thanks....

[Al_Dente]

Tech nervously awaits the rollout of trump’s plans. Here are five key areas:
http://thehill.com/policy/technology/31 ... nder-trump

Here is a workable watch list of “The Big Five” tech stocks (in order of market cap): AAPL, GOOG, MSFT, AMZN, FB, the biggest stocks in the QQQ (40% of the QQQ), and they together account for more than 11% of SPY [Art Hill says it is now 13% of SPY].
[with others added to the Big Five here]
https://stockcharts.com/freecharts/cand ... N,HACK|M|0

OLD NEWS 12/30/16 Bloomberg:
For the first time this year, technology companies at times held each of the top five spots of the world's most valuable public companies. The combined market value of Tech's Fab Five ...AAPL, GOOG, MSFT, AMZN, FB, was $2.4 trillion as of Dec. 27, or more than 11 percent of the S&P 500's value. That means tech superpowers are inching toward the 16 percent share of the S&P 500 they held at the peak of the tech bubble in March 2000.
https://www.bloomberg.com/gadfly/articl ... 123016_BIZ

[Trades with cats]

VIX is as one sided as oil now with record activity. Apparently the big boys are selling volatility as a good bet for making income. Clearly a Fed has my back trade. So it could end badly, again.