PCLN hit a milestone today, although a bearish one, as it plunged through the $1,000 level for the first time since October 2013. January 1000 monthly put options expiring on the 17th (technically tomorrow) skyrocketed from a low of $0.55 to a high of $10.60 before closing at $8.70, representing a 625% return overnight! Many other momentum names have fallen through key levels this week, including AMZN, AAPL, BABA, GPRO, NFLX, and TSLA.
Even ‘Turnaround Tuesday’ could not save the broader indices as an initial rally was quickly sold off, with the S&P 500 down again today for the fifth straight day, closing 52 points lower since last Friday at 1,992. The 30-year yield has also been cratering all week as evidenced by fresh highs in TLT. And the VIX has been hovering above the 20 level for the 3rd day in a row.
There were a couple of monster moves in commodities, notably natural gas, which surged almost 10% yesterday after already being up 5% the previous day off year lows. After this morning’s EIA inventory report it continued to rally briefly before giving back some of the week’s gains. The other big gainer was gold, up over $30 this morning as it breached the $1,250 level, reaching a high of $1,267 before settling just below $1,260. The catalyst for this appeared to be the Swiss National Bank’s decision to unpeg the Swiss Franc from the Euro, causing the franc to jump 30% vs. the Euro and 25% vs. the USD before paring some gains. FXF would be the ETF vehicle to trade this if you are so inclined. And of course, what week would be complete without volatility in oil? WTI crude rallied briefly above $51 before settling sharply lower at $46 today. For the strong of stomach DWTI has been an excellent ‘buy the dip’ tool to ‘sell the rip’ off any spikes in the commodity at this point, hitting a low of $144.81 this morning before closing near the HOD of $174.55.
With monthly options expiration tomorrow expect another volatile day as Goldman Sachs caps off a week of financials reporting disappointing results with BAC, C, JPM and WFC having all taken a beating. As always, trade well and stay disciplined!
What appeared at first to be another rout in gold on Friday turned into a monster bounce rally, after prices hit a low of $1,146 before roaring all the way back up to $1,192, just shy of the psychologically important $1,200 level. This lit a fire under the still beaten-down and almost forgotten miners index, GDX, which clocked a massive +6% gain and closed above the recent $19 resistance level. The triple-leveraged NUGT ETF added 17.4% to close at $13.90. Could this be the start of a recovery after falling off the cliff last month upon the official announcement of the end of QE? The weakness in the US dollar also helped, as it took a breather after a strong rally, which also helped oil prices bounce.
This has been an impressive week for tech names, with AAPL hitting new all time highs of $114.19, just a hair’s breadth away from the pre-split $800 level. YHOO also powered to new highs, as did BABA, reaching exactly $120 before pulling back five bucks and change. Interestingly, BBRY also broke through $12 on Thursday, a level not seen since August 2013, as CEO John Chen announced new software and gave a tantalizing glimpse of his plans for potential new partnerships in China with Lenovo and Xiaomi, as well as confirming a deal with Samsung during their Investor Day event. Unfortunately any bets on a strong finish to the week proved, well, fruitless, as it gave back all of Thursday’s gains and more. Granted, the stock had already rallied the entire week so perhaps this was the pause that refreshes.
FOMC minutes are out this Wednesday at 2pm ET, as well as some jobs and housing numbers the rest of the week. Full US economic calendar can be found here.
US markets juggernauted on to new highs this week once the midterm elections were out of the way leaving the Republicans firmly in control of the Senate and Congress. After that there was no looking back as Mario Draghi offered little surprise on Thursday with the ECB interest rate decision unchanged, and the Friday jobs report showing continued improvement, with the jobless rate at a 6-year low, although companies were hiring fewer workers. Alibaba (BABA) continued to soar to record highs, closing in on the $115 level after a breathtaking two-week run leading into earnings. Hard to believe this was only trading in the $82s during the mid-October correction. I surmise this rally has been partly fueled by short speculation that the stock would drop back below its IPO price of $68. Once again the chatrooms and boards showed the desperation of some unfortunate put holders and short positions as every $0.10-0.20 pullback in the SPY was greeted with proclamations of collapse, ‘rug pulls’ and ‘bull traps’. Quite the opposite, as every dip was bought back fiercely as we closed near all-time highs in the last minutes of Friday’s session.
On the commodities front, gold and silver both hit new year lows, hitting $1,131 and $15.04 respectively, before bouncing back sharply 3% (+$34.80!) and 2.26% by the end of the day on Friday. This helped stem the hemorrhaging in the gold miners ETF GDX and its leveraged cousin NUGT, which had fallen off a cliff since the official announcement of the end of QE, but now enjoyed a massive dead cat bounce of 8% and 24% respectively. Crude oil also continued to slide before bouncing off $77.19, but what really got my attention was the huge squeeze in Natural gas – going parabolic from a low last week of $3.62 all the way to $4.49. I was tempted to nibble a little at the 3x leveraged Natgas ETF UGAZ, which jumped from $10.02 to a high of $18.75 on Friday, but alas, it had already surged past levels I was comfortable with in such a short span of time. I can’t help but think there’s a commodities desk blowing up somewhere.
Other notable comebacks were in the coals sector with beaten-down-left-for-dead tickers like ANR, BTU, WLT staging huge double digit rallies on an almost daily basis.
Thanks for stopping by, enjoy your week, trade well and stay disciplined!