New Year in, Same as the Old (GDX,OSX,XBI,XLE,KOL,QQQ)


Executive Lounge, Options Trader Elite / Thursday, January 4th, 2018

New Year in, Same as the Old (GDX,OSX,XBI,XLE,KOL,QQQ)

 

We’re going to start off with a look back at our annual mid-year market predictions, found here for all those who hate to leave things salacious and unverified.

 

And how did we do?

 

Well, in the first place, we’re pleased to report that it has been another tremendous year of stock picking on the part of our team here at Normandy.  A glance at our track record page (on the website) shows a great deal of profit throughout the year.

 

That’s not to say there weren’t problems.  We had to roll out a number of troublesome trades to future dates, and that’s never comfortable.  But we remain confident in our calls, and look forward to a successful resolution to them all.

 

As to the predictions themselves, call it another McAbby Miracle.

We’ll start with the dollar.

 

Back in mid-summer, when we penned our prognostications, we said –

 

We’re going to bet conservative and say that Auld Lang Syne tring-a-lings a dollar index read of 93 on January 1, the precise level at which we’re currently situated.

 

And…

 

As of the last trading day of 2017 (December 29th), the dollar index stood at 92.12, a mere whisker (0.9%) lower than our estimate.

 

We call that a grand slam and give ourselves a well-deserved A+.

 

Now to the precious metals, both gold and silver, regarding which we waxed confident over the summer, claiming that the bullish picture for the two was coming clearer with each passing day.

 

We also commented on how unpredictable we expected the trade to be –

 

Our call on the two largest precious metals ETFs, GLD and SLV, are as follows – January will bring GLD to $135 and SLV to $17.75, gains of roughly 10% to 15%.  That said, we have to admit that these two items represent our least confident projections at this time.

 

And how did it turn out?

 

GLD ended the year at $123.65, 8% below our projection, while SLV ended at $15.99, 10% below our call.

 

Direction correct.  Magnitude weak.  And for that performance, we offer ourselves a meager B.

Stocks and Bonds

 

On the day we penned our learned tome, the Dow Industrials sat almost 3000 points lower, at 21,963.  Today, they stand at a lofty 24,719, but our prediction – as optimistic as we believed it to be – was not bullish enough.  We foresaw the DJIA at just 23,050.

 

Our mistake was to assume (along with everyone else) that the markets would correct at least once by some five percent or so before year’s end.

 

But it was not to be.  2017 proved to be the least volatile year in market history.

 

Again, direction correct.  Magnitude sub-par.  We call it B+.

 

As for the bond market, represented by the iShares 20+ Year Treasury ETF (NYSE:TLT), it turned in a more jagged performance, bouncing erratically for the full half-year in question before settling at 126.86 on the last day of the annum.

 

We had expected it to stay put at 121, but a war of words with North Korea, continued conflict in the Middle East and piano string tension in domestic politics kept the long bond buoyed slightly above our estimate.

 

So, on the long bond we get another B.

 

Slick Call, Bro!

 

Finally, regarding the price of crude oil, we wrote –

 

In a stunning development, we call for oil to rise to $64 after a few unanticipated, explosive events on the geopolitical front.

 

As it turns out, we were wrong on those explosive events actually occurring, but correct on the effect they would have on traders anticipating them.

 

Oil rose from $49.80 a barrel when we made our call to $60.10 at year’s end, making our prophecies for the viscous blackness downright prophetic.

 

PIC – “he’s an absolute genius” ‘and such a way with words!”– droll looking face, sayng…

 

For being so slick on oil, we grant ourselves a solid A–.

 

And that wraps up the retrospective portion of the show.  Likely, you’re keen to get on to the money-making bit.

First, we have several open trades to address.

 

The first was our trade from September 16th 2016, Oil Services About to Spill, a venture with OSX that we’ve had to roll out until last week, when we finally pulled clean.  You can check the rollout information here, here and here, but the final tally is a profit of $1.00.

 

And after better than a year, it feels nice.

 

Next up is our April 20th trade from a letter called Crude Drug Dealing, in which we urged you to sell the XBI January 19th 75 CALL for $3.45 and buy the XLE January 19th 69 CALL for the same price.  Zero premium was the result.

 

And today we’re urging you to sell the XLE 69 for $5.60.

 

We’ll wait and see what happens with XBI.

 

Third trade was from a letter entitled If People Won’t Die, Will Bulls…?, launched November 23rd.  There, we recommended buying the KOL July 20th 15 CALL for $1.15 and paying for it with the sale of three (3) KOL July 20th 13 PUTs for $0.45 each.  Total credit on the trade was $0.20.

 

And today, the CALLs sell for $1.65 and the PUTs for $0.30.  Buy back the former and sell the latter and you net $0.95 on nothing spent.  Adjusted for minimal commissions gives you a profit of 533% in just six weeks.

 

Phenomenal.

 

Finally, we have our December 7th initiative from a missive called I Hear Voices, wherein we suggested the purchase of the QQQ January 12th 159.50 CALL for $0.50 and the QQQ January 12th 147.50 PUT for $1.30.  Total debit on the trade was $1.80.

 

Today, the long CALL goes for $1.30, and we say take it.  We’ll see what happens next.

 

Today’s Trade

 

It’s a rather simple affair.

 

The gold miners have moved strongly of late and are ready for a rest.

 

Take a look –

With resistance at the long term moving average (yellow line) and support at the rising, clumped moving averages (in black), we’re betting that in one month’s time the miners will still reside in the range between $23 and $24.

 

And that’s why we’re offering the following –

- Content protected for Normandy Executive Lounge, Option Trader Elite, Executive Lounge members only]

Many happy returns!

 

Matt McAbby

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