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!
Welcome back! Hope you had an enjoyable holiday with your loved ones and got some well-deserved rest and relaxation. Markets got off to a choppy start to the new year after a rough finish to 2014, with the Dow finishing barely in the green after an early 100+ point pop that quickly fizzled out, while both the Nasdaq and S&P 500 closed red on the first trading day of 2015. Amidst the volatility gold managed to stage a modest rally on Friday, but still under the $1,200 level, with miners GDX and juniors GDXJ ending strongly up on the week. Natural gas continued to crumble with an EIA draw of -26bcf, well below expectations of -38bcf despite colder weather forecasts. Futures closed below $3 for the second time on Friday despite a strong morning rally that held above $3 most of the morning but was abruptly cut in half with a massive plunge back below by 14:25ET. The triple-leveraged UGAZ and DGAZ ETFs have been trending the past few weeks on StockTwits, with UGAZ losing more than 75% of its value in just over a month! Conversely, DGAZ has more than doubled over the same period.
Russian markets have been closed this week since Dec. 30th and reopen on Monday, but with another holiday on Jan. 7th. This has not stopped traders from making bets on the RSX Russia ETF as well as its triple leveraged cousins RUSL and RUSS, which have seen a wild ride tracking the volatile movements in crude oil and the ruble, both of which have resumed their downtrend.
The first full trading week of 2015 should set a more decisive tone for the short term, with some key economic releases including jobs data Wednesday through Friday, as well as the FOMC minutes on Wednesday. ISM non-manufacturing numbers are also due Tuesday morning (full calendar here). Some notable earnings this week include Micron Technology, WD-40, SUPERVALU, Bed Bath and Beyond, Constellation Brands and Apollo Education. As usual Alcoa kicks off the main reporting season the week after on Jan. 12th, with major financials Goldman Sachs, Bank of America, Citigroup, JP Morgan and Wells Fargo reporting the same week.
That’s it for now- trade well and stay disciplined, and wishing you all a great start to 2015!
After a breathtaking month-long run in AAPL which has seen it gain over $23 ($161 pre-split!) since the October 15 low of $95.18, the stock is now poised to take out the $120 level, having already hit a high of $119.75 this morning and surpassing the $700 BILLION level in market cap, the first time any company has ever reached that size. Sentiment on StockTwits has reached euphoric levels, with some users commenting “$125 by end of this week possible!”, “I’m buying a Lambo if this hits $125!”, and “Looks so cheap now on its way to $150!”. Of course, a flurry of well-timed upgrades by analysts has helped as well. Before you get caught up and chase the feel-good rally, note that the RSI is now at a blistering 87 (an RSI over 70 is considered overbought territory), and the charts show the prices peeking over the upper Bollinger Band, with stochastics also flashing overbought levels. This rally may also be spurred by anticipation of strong Black Friday sales after Thanksgiving this week, as well as Cyber Monday, but after that there may well be a consolidation or pullback. Of course, there’s always the beginning of December and the ‘Santa Claus’ rally to take into consideration, but the markets have continued to power to new all-time highs, helped also by China’s central bank cutting interest rates for the first time in two years, as well as ECB’s Mario Draghi commenting on more government bond-buying.
In commodities, oil is hitting lows again today, ahead of the OPEC meeting on November 27 (Thanksgiving- coincidence?). Gold has been holding a tight range just around the $1,200 level, and the next major news event the market seems to be anticipating is the Swiss referendum on Sunday, which may provide some impetus for the next move. Natural gas has also been extremely volatile, spiking over 5% last Wednesday after reports of more cold weather, with a net draw of 17bcf shown on Thursday’s EIA inventory report, but plunged back down on Friday and yesterday after new moderating weather reports came in and the futures contracts rolled down to January. This has spurred heated debate in traders of UGAZ and DGAZ alike, both of which have seen tremendous daily swings of 12%+, and it looks like it won’t be settled anytime soon.
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!