Options Alert Pro's staff has experienced first hand how some financial news services simply provide a trade idea but never provide any commentary on why they made the suggested trade.  Options Alert PROTM doesn’t  think that instills much confidence – i.e. to tell someone here’s the recommended trade go do it! Therefore, this blog will provide information on why we have made the recommendations we have. 

Our Blog

Out-of-Focus

Recent Headlines

Our goal is to post that information as well as market moving news and what to be aware of in the markets.  Our first priority will be to get you the trade and then follow up with why we made the recommendation here within 24 hours.  Sometimes we are too busy and need the evening to catch up. We hope that you will find the information useful and one that distinguishes Options Alert PRO from other services.

TM

Volume Concerns - What Goes Up Eventually Comes Down

21 Aug 2016

If we look at the volume of the SPY ETF from July 15, 2015 to July 16, 2015 the daily average was 127,643,632.   Since July 15th of this year the average daily volume has dropped to 63,359,106.  That is a drop of just over 50%!  I consider that a caution flag.  I went back to look at the last period of time we saw this type of drop in volume it appears to have been in late November to early December of 2014.  After that the volume picked back up and the markets declined about 5%.  If we experience the same effect here, history does sometime repeat itself, then we should see the S&P move from 2,183 to 2,073 and the SPY dip to about 207.50.   We are watching this closely and preparing to buy puts on the SPY at the right time.

December 1999 Repeats Itself – Triple High!

11 Aug 2016

Yes, the last time this event occurred was December 1999, almost 17 years ago, where the DOW, S&P and NASDAQ all three achieved a new high.  U.S. equities have recently traded in a tight range, but have managed to hit record highs. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.7, down 2.4 percent. There’s always a bear somewhere and Matt Tuttle, CEO of Tuttle Tactical Management, said "what worries me is volatility is so low." "I think this is over-extended." He also said that, "even though everything is bullish, I think we're due for a correction."  U.S. oil settled 4.27 percent higher at $43.49 a barrel on comments from the Saudi oil minister about possible action to stabilize prices and as the International Energy Agency forecast crude markets would tighten in the second half of 2016, a day after falling nearly 2.5 percent amid an unexpected build in inventories.

Employment Situation Report – Market Maker or Breaker?

04 Aug 2016

It has been another exciting week on the market for Optik.  We just closed the HYG position today for a gain of 24%. As we look forward, the team is closely monitoring tomorrow's Employment Situation Report out at 0830.  Last month, nonfarm payrolls got back on track, surging 287,000 to eclipse May's 38,000 slump. Forecasters see growth in nonfarm payrolls easing back in July, to a consensus 185,000 in a result that would still be consistent with solid growth in the labor market. In other signs of strength, the unemployment rate is expected to dip 1 tenth to 4.8 percent with average hourly earnings picking up to 0.3 percent following June's very soft 0.1 percent gain.

 

Today the Bank of England cut interest rates with a global economy that is more uncertain than ever.  The latest rate cut following the Brexit is meant to bring stability to the Pound and draw money back into the UKs economy.  The Post-Brexit surge helped strengthen the US Dollar with investors seeking security.  Even though the Fed desires to raise interest rates, competition from global currencies will likely keep US Interest Rates low through the end of 2016. Earnings season is in full swing with many companies reporting their results for the 3rd Quarter.  Optik considers the best position in earnings to be no position.  Instead, we look for value in overreactions and irrational trading from these swing traders.

 

After hitting all time highs multiple times the SPY has moved back down into the low to mid $216 range.  With another better than expected report, we could very well see the SPY reach new heights again. As always, Optik is proud to help its clients navigate the uncertain waters in one of the most difficult markets investors have ever seen.

Markets Making History!

28 July 2016

Today was the 11th straight day the S&P 500 closed inside a 1% trading range, looking back for 40 years the first time this has ever happened! What does that mean? We are not sure! Everyone wants to know what happens to stocks following these ranges. It has been observed that tight ranges are generally followed by out-sized moves.  Each tight range and sun up appears to be followed by market drops.  In fact, following 7/31/2013, 1/10/2014, 9/11/2014 and 12/8/2014, the S&P 500 experienced 1-month drawdowns of -3.3%, -5.5%, -4.6% and -4.3% respectively.  But as we all know past performance is no guarantee of future performance. We continue to watch the market looking for a clear signals.  The most recent was our alert on GE.

What’s Ahead?

27 July 2016

The UK economy grew by 0.6% in the three months to the end of June, as economic growth accelerated in the run-up to the vote to leave the EU. The strongest growth was in April, followed by a sharp easing off in May and June. On a yearly basis the UK economy grew 2.2%. The pick-up was boosted by the biggest upturn in industrial output since 1999.  That is the great news because economists, including those at the Bank of England, had estimated second-quarter growth would be about 0.5%. The Fed today, in its typical mumbo jumbo speak, stated that the economy is good and we are planning to ease forward with rate hikes but we will not tell you when or provide definitive news or a timeline – it just all depends.  They must all be lawyers because that is a typical lawyer response – “it all depends.” We are anticipating a significant market dip between now and October and are watching the markets very closely.  In fact, Strategist Tom Lee, one of the biggest bulls state that he is concerned moving forward because in the last seven years the S&P 500 has fallen an average of 6 percent during the month of August.  Additionally, because the bond market has become a lot more volatile than equities, and whenever this happens, over 60% of the time, the stock market falls in the following month. So we are set up for a significant potential dip.

New Record Highs Continue on the SPY

25 July 2016

Last week our primary trading instrument at Optik Options (the SPY) set new all time highs. After experiencing a slight dip earlier in the week, the SPY roared upward past its previous high of 217.01 up to a peak of 217.37. With current world events and market uncertainty, the SPY will continue to be one of the most liquid ETFs on the NYSE. This week Optik is monitoring many technical events and the FOMC meetings Tuesday and Wednesday. Given the recent bull market, there is more market uncertainty given the Fed's desire to raise rates. Optik is proud to help navigate it's clients through the uncertain waters and looks to continue building on its successes in 2016 markets grind higher.

Low Volume - Slight Pullback

21 July 2016

Markets have had a record streak of up days until today and we saw a little pullback.  Just yesterday we saw the seventh straight day of gains.  New stock market highs are being supported by low interest rates and the belief that the Fed will not hike rates this year.   Aggregate earnings so far in the second quarter have shown a 4.4% decline in profits year-over-year, marking a fourth straight quarter of weaker earnings, according to S&P Global Market Intelligence.  This streak up has been on low summer volume.  We expect a significant pull back to occur.  The International Monetary Fund (IMF) today made an “urgent” call for the world’s largest economies to roll out more growth-boosting policies. Further the IMF asked the Group of 20 largest economies to prepare contingency plans in case of a further downturn.

New Record High on the S&P

11 July 2016

We were able to return 29%+ on our most recent alert on the SPY! Congratualtions to all that participated. The S&P closed at above its previous all-time closing high at 2130.82 with this continued rally after the BREXIT happened.  Participants remained upbeat following a headline beat in Friday's Employment Situation Report for June and in Japan, Prime Minister Shinzo Abe's LDP won a supermajority, paving the way to an easier approval process of potential future stimulus measures. This event helped to push the markets higher as well. The Nasdaq Composite (+0.6%) finished ahead of the Dow Jones Industrial Average (+0.4%) and the S&P 500 (+0.3%). “The record today is a reasonable response to the fact that the world looks a little better than it did a week ago,” said Russ Koesterich, head of asset allocation for BlackRock’s Global Allocation Fund. “But the ability to move higher going forward is going to come down to a better economy and stronger earnings growth.”  Analysts and investors said maintaining these heights will require signs of improvement in earnings, with companies including BlackRock, J.P. Morgan and Wells Fargo scheduled to report this week.  “Ultralow rates are just driving the stock market,” said Bruce Bittles, chief investment strategist at Robert W. Baird. “I’ve been doing this for a long time and I’ve never been in an environment like this.” As of June 30, analysts expected corporate profits to fall 5.3% in the second quarter compared with the prior year, a fifth consecutive quarter of contraction, FactSet data show.

Rollercoaster - One Ticket Unlimited Rides

2 July 2016

As we predicted BREXIT happened and the markets collapsed for a couple days just to recover over the next few and now we are back to where we were before BREXIT! What a roller coaster ride.  There is no denying that the market experienced an amazing rally this past week.  The question is whether this rally will persist now that price is reaching strong overhead resistance once again. We are voting no.  We look to be locked in a trading range that appears to have no end insight.  We do not see any reason for a breakout in the market we think there is a higher likelihood of a breakdown between now and October.  Why would we take this position over a breakout? We have a global low growth economic outlook.  While earnings this past quarter were reasonable, many companies were pointing towards headwinds. The Fed keeps the market guessing – they are falling flat on their faces at unity and leadership in this market it is the worst led Fed in history!  Markets are also still trading with oil. If you watch oil then you can see the direction of the markets. As we stated in our last posting, we plan to start issuing more alerts with short-term gains of about 20%.

Banks are Doomed This Year – Volatility Continues

26 June 2016

BREXIT equates to no rate hikes by the Fed this year, which equates to banks being doomed for the remainder of the year. With no rate hike the banks, which were looking as thought they may be a favorable investment three or more months ago, now look to be sidelined and out of the game. Our prediction for months, if you look back at our old posting, has been continued volatility in a market that is locked in a trading range. We find this to be even more true now. With the Brits leaving the EU uncertainty abounds globally and volatility in the markets shall continue if not accelerate! There will be excellent opportunities along the way and we are planning to increase alerts, as technical indicators dictate, to take advantage of multiple moves on the SPY in a tighter trading range. Our plan is to produce eight or more alerts per month, each with a minimum gain of 20% for a total return of 160% plus per month.  In addition, we will continue to keep an eye out for special opportunities, as we always have, such as we did recently with EEM returning 66%. We will be publishing our Q2 results sometime in July.