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So Long to 2016 - Hello 2017      

3 Dec 2016

As we enter the last month of 2016 we are not sorry to see it go.  It was a year of uncertainty and lots of volatility. We’ve experienced BREXIT, a presidential election, oil prices controlling the market, Yellen and the Feds threat of raising interest rates and a host of geopolitical issues that move the markets. We are disappointed that we did not have the stellar year that we experienced in 2014 and 2015 and we are EXTREMLY PLEASED to have beat hands down most other (if not all) other services with a current return of over 400% and with luck by the end of the year over 500%. We have worked hard to get listed with TD Ameritrade and Think or Swim and that is still an ongoing project.  We’ve also expanded staff and worked very hard on identifying and developing technical indicators to achieve the gains we experienced in 2014 and 2015 – we want to break 1,000% for our subscribers in 2017.  The big questions for December evolve around the following. Was the Trump Rally too fast too far and will that inhibit the Christmas Rally as it has been called. Second, everyone is in agreement that the Fed will raise interest rates this month. If they do is that already baked into the markets or will the markets react adversely?  If they don’t, will the markets pullback in disappointment?  We ask this – Was it a Trump Rally or was this latest rally due to the spike in oil after OPEC agreeing to cut production.  We think it was oil!  So as 2016 moves behind us we look forward to 2017.

Longest Winning Streak in 20 Years

28 Nov 2016

The Russell 2000 lost ground today snapping its longest winning streak in 20 years. It had index had rose for 15 consecutive trading sessions.  Indexes in both Europe and the U.S. were weighed down by falling bank stocks, which have been big winners since the election.  Many investors are anticipating a rate hike in December.  Markets may also be on edge awaiting the results of this weeks OPEC meeting to see if oil production is reduced.  Shares of oil and gas companies struggled Monday as prices swung ahead of this meeting of major oil producers in Vienna. The Organization of the Petroleum Exporting Countries agreed in September to trim production amid a global glut of supply, but left the details of who cuts how much to a meeting in Vienna on Wednesday.  “Speculation that OPEC would agree to production cuts spurred big increases last week, and we’ll get this kind of back and forth until we get clarity on what exactly the deal is likely to be,” said Ian Williams, strategist at brokerage Peel Hunt.

Oil Moving on Up – Pulls up Markets to Record Highs

21 Nov 2016

Renewed optimism for an OPEC deal to reduce output has push crude oil 4% higher in today's trading and has given a big boost to energy shares and the rest of the stock market. The WTIC Light Crude oil rose above its 50-day average for the first time in three weeks after recently finding support near its 200-day moving average. The three major indexes closed at record highs simultaneously for the first time since this past summer. The S&P 500 topped its all-time intraday high of 2,193.81, the Dow rose around 88 points, surpassing previous closing and intraday record of18,934.05 and the Russell 2000 and S&P Mid Cap 400 also hit new record highs. WHY?  Oil, did we say oil?  If OPEC does reach a deal we could see higher highs but if it does not we will probably see a pullback.

S&P Drops for 9 Days Straight – Volatility Jumps

05 Nov 2016

The markets are experiencing a significant sift since the FBI announced it was re-starting the investigation of Hillary Clinton’s email server and her usage.  The CBOE  Chicago Board Options Exchange Volatility Index, or VIX, has risen to 22.1 from 15.4 before the FBI news came. If we examine the historical years of a presidential election there is generally a downtrend followed by a solid move up for the remainder of the year. The VIX measures investor expectations of future S&P volatility. The correlation between the VIX and the S&P 500’s daily price swings over the past 30 trading days—what’s known as realized volatility—tends to be strong. The S&P 500 Index dropped for a ninth straight day, a gauge of equity volatility had the longest stretch of gains on record and Treasuries climbed the most since September ahead of next week’s vote. All the jitters sent the dollar down after a brief advance that followed data showing U.S. jobs rose at a steady pace in October, supporting a Federal Reserve hike next month. Oil sank as hopes faded that OPEC will be able to implement a deal to cut output.

Trump Leads in the Polls – VIX Spikes

1 Nov 2016

Trump is leading in a number of polls to include the Washington Post and that has the markets worried. The CBOE volatility index moved up significantly and that sent the markets down.  Gold was a winner and oil fluctuated.  We were stopped out of our SPY position at $1.84 a loss on that alert of 33%.  This seems to be a crazy week with three events working the market over.  Those three events are the uncertainty around the presidential election, the Fed releases minutes tomorrow at 2pm and will there be a rate hike and lastly the release this Friday of the jobs numbers at 0830am.  All these factors have the market in turmoil. Stay tuned as we are entering a historically good up period for the markets.

Dow Slides Friday on FBI Email Probe

30 Oct 2016

This was the headline in many places – we think that everyone that reported the market dropped due to the FBI probe of Clinton’s emails is WRONG!  As everyone is aware as oil moves (for many months now) so goes the markets.  At about 11am Friday oil turned down and continued to selloff the rest of the day.  That selloff pulled the markets down. The news on Hillary was not until about 1:30pm and the markets had already started down.  On Friday, GDP, the broadest measure of U.S. output, was reported at 2.9% for the third quarter. It was the strongest quarterly reading in two years after three straight quarters of sub-2% growth.  Was it really that good? We think not! We surveyed businesses and we think that number is imaginary boosted by exports and especially soybean exports. That was the fastest pace in two years, up from a sluggish rate of 1.4% in the second quarter, and better than economists expected. A closer look at the trade boost to GDP shows that soybean exports were the big driver in a great GDP report. So we think the Obama economy is still hanging by a string. It is clear that GDP was boosted by a seasonal distortion to the numbers direclty relatd to soybeans — albeit a boost — that should not be overlooked.

GDP

27 Oct 2016

Our technical indicators at 3:45pm today indicated we should issue a buy alert for SPY calls. We did not issue the alert because the GDP will be reported tomorrow morning at 8:30am.  Depending on this report the markets could plunge or soar.  There will be much speculation and talk about does a good GDP number mean the Fed will raise rates.  What if the GDP number if bad?  Maybe the markets will advance on the speculation that free money (i.e. no interest rate hike) will continue.  As we’ve written in this blog previously the Fed is restricted as to how high they can take rates.  We believe that number is a maximum of 3.25% because above that we U.S. will be unable to pay the interest on the National Debt and we will be a bankrupt nation like Greece with no one to bail us out. Next week there are a number of economic indicators to include the jobs report next Friday, which can be a major market mover.  Yesterday we issued an alert that provided a return of over 22% in about 45 minutes.  We've also launched a new mobile friendly website located at www.thepowerofoptions.com.

Optik Beating Mutual Funds by 74%+

22 Oct 2016

The markets seem to be stuck in a sideways action part of this is from uncertainty surrounding the upcoming presidential election between Hillary and Trump.  Right now the polls show Hillary in the lead but we need to recall that the polls showed that Briton would not exit the Euro.  That poll was wrong and indeed this one might be as well.  So hold on!  Ongoing is the markets following oil as well as the continued banter over interest rates and will the Fed hike?  The central bank moves seem to be a bigger influence. The belief that the Federal Reserve will hike rates in December and not at its next meeting in November with the presidential election in just 16 days away.  The tension is near its highest of the year, with the market pricing in a roughly three-out-of-four chance that a hike will occur in the Fed’s final meeting of the year.  We like to look at historical market action and the Dow has closed below the 50 day moving average for the last 30 days, but hasn’t dipped below the 200-day moving average. It is the longest such stretch since in almost three decades. We just updated our returns for 2016 and while not anywhere near the returns we had anticipated we are up 85% overall beating hands down all mutual funds http://news.morningstar.com/fund-category-returns.  We are hopeful to exit the year with a return of at least 200% but of course there are no guarantees. 

Stocks Stuck in a Range – Is it a House of Cards?

09 Oct 2016

Markets seem to be holding up like a house of cards. Oil keeps moving the markets as well as does continued speculation on the Fed and Yellen’s rate hike plan or lack thereof.  If I were a speculator – I am not – I would predict a major selloff in January 2017.  Certainly, investors are not overwhelmingly in love with the markets with the latest AAII Sentiment Survey showing Bulls at just 24.0% and Bears at 37.1% (the respective norms are 38.4% and 30.4%).  The Federal Reserve is likely to remain highly accommodative for quite some time as the U.S. economy is showing moderate growth and the dust is far from settled over Brexit.  Did anyone see the news that Russia has its permanent air base in Syria. Now it’s looking at Cuba and Vietnam? (https://www.washingtonpost.com/news/worldviews/wp/2016/10/07/russia-has-its-permanent-airbase-in-syria-now-its-looking-at-cuba-and-vietnam/).  So the world political stage continues to whip saw the market and add volatility.  We continue to be steadfast in identifying the trend and running with it as we did this past week for a 45%+ return on two alerts.  But the P/E ratio on the S&P 500 is elevated signaling caution and perhaps that January slide.  The Feds current longer-run target of 2.9% for this benchmark is far below normal.  As we’ve previously stated t can’t go up higher than this because then the United States become like Greece – bankrupt because we could not pay the interest on the National Debt!  We think we have adapted to all these fluctuations and are now on course to deliver exceptional returns for the remainder of this year and beyond.  

Where Are We Going?

29 Sept 2016

There were a number of times over the past week we wanted to issue an alert but our indicators simply would not trigger.  Yesterday we had a spike in the markets brought about by OPEC stating they will cut oil production. Today the markets dropped because a congressman, drilling the CEO of Wells Fargo (WFC), announced they were going to investigate all the banks because of WFC’s illicit activities of issuing credit and debt cards to customers without the customer’s consent or knowledge.  I think I can hear a major class action forming!  It was almost like watching the Spanish Inquisition!  Does it make sense that because Wells Fargo violated a number of laws that Congress should now investigate all banks?  Wells Fargo's CEO, Stumpf, did seem to be out of touch with reality.  When he was quizzed about what his competitors do, his response was he did not know.  I can’t imagine any CEO, even one running a small business, not being aware of what the competition was doing. Crazy! Add on top of this all the talk and concern that Deutsche Bank (DB) may be close to failing without a major bailout by Germany, and DB has a ton of business around the world to include the US, the markets pushed down.  It is clear that the markets are having kneejerk reactions to every bit of news.  So the volatility continues.

Oil and Apple (AAPL) Push Markets Down Friday

24 Sept 2016

Markets tried to push higher Friday but oil and the drop in Apple (APPL), the top holding in the S&P 500, kept the markets lower.  Are proprietary software indicates that staring Monday and continuing until the 3rd of October the SPY ETF should move up and we are anticipating hitting our target price on the current alert that was issued late in the day Friday. Markets were overall up for the week, and we see the S&P 500  going up to retest the August high of 2,194. In addition, this past week we saw the NASDAQ 100 make a new all-time high. This past week we also exited an early SPY trade for a 50% return.  Markets continue to eye the Fed and Yellen who on Thursday failed yet again to raise rates.  On CNBC this week we saw Jeremy James Siegel, who is the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania, state the housing should continue to be safe from higher rates for the next 5 to 10 years.  We agree, until such a time that the United States reduces the National Debt it can’t afford any rate higher than 3% because it would be unable to pay the interest on the now outstanding $19,481,571,141,222 debt.  We are looking forward to closing out this year by adding substantial gains.

Oil and Fed Meeting – Volatility

18 Sept 2016

Oil dropped this week pushing the markets down. In addition, there is fear on the street of a rate hike announcement this coming Wednesday at 2 pm by the Fed and Yellen.  The greater effect of the two was clearly oil prices.  Apple (AAPL), which is the largest holding in the S&P 500 Index, was up 12% this week and helped to hold up the markets. Our prediction is that there will be no rate hike Wednesday and the market will surge upward.  Our late alert Friday we anticipate will do exceptionally well.

DOW Plunges Below 50-Day Moving Average

09 Sept 2016

This morning Federal Reserve Bank of Boston President Eric Rosengren  started the sell off by stating, “a reasonable case can be made” for increasing interest rates because the economy is too hot and holding rates level creates the risk of making labor markets too tight, forcing the Fed to raise interest rates sharply, which could result in another recession, he warned in remarks prepared for a morning speech in Quincy, Mass. What great news to send the markets!  It was very effective for the bears. Both the S&P 500 index SPX, -2.45%  and the Dow Jones Industrial Average DJIA, -2.13% plunged below their 50-day moving averages, precipitated by a rout in equities and government bonds on intensifying fears that the Federal Reserve could finally raise rates. Friday’s steep selloff suggests that the market has not baked-in a September rate. Looks like the markets will be volatile until the Federal Reserve convenes for its two-day policy meeting Sept. 20-21 and announces its decision on rates.

S&P Hits New Highs in August

3 Sept 2016

There was some volatility in August and the major averages ended near the unchanged mark, the S&P 500 did man­age to hit all-time closing highs on three separate occasions. Interestingly, those re­cords came with little fanfare, as overall daily volumes continue to lag the average by about 50%.  The American Association of Individual Investors (AAII) survey indicated that only 28.6% of respondents said they were Bullish on the prospects for stocks over the next six months, versus the 38.5% his­torical average, while 31.5% said they were Bearish. However, I have read that often the markets react 180% to the AAII surveys! The BofA Merrill Lynch Sell-Side Consensus Equity Sentiment Indicator, dropped to 49.6 on Aug. 31, the lowest level since 2013.  The talking heads continue to espouse the futures dangers of the Brexit, oil prices, global warming, global GDP depression, terrorists, and the polarizing presidential election cam­paign as possible market black swans. But we have to recall history and historically the markets have enjoyed average annualized returns of the 10% to 12%. As Warren Buffett’s has proclaimed, “Be greedy when others are fearful and fearful when others are greedy.”

 

Last Friday the Employment Report was lackluster sending the markets higher at the open on the basis that Janet Yellen & Co. will not do a rate hike in September. This was also viewed as a negative for the financial ETF XLF as well as bank stocks. We need to take note that the Fed’s long run target is now 3.0%, which is quite a bit below the historical Fed Funds rate average of 5.5%.  Why is it so low? Because the United States Government would go broke at a higher rate because we have allowed our National Debt to grow to such an outrageously high number, $19.5 TRILLON, that we could not afford any higher rate. We would be Greece on steroids!  We are excited for the last 4 months of the year and hope to end up over 500%.

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.


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