We’re going to lead off today with a recap of our year-end predictions from Stock Market Superhero, our annual foray into the dark arts, in which we dipped our Ouija boards and crystal balls into our witchy Normandean tea leaves to offer you our best thinking on the last half of the year.
In this installment of Wall Street Elite we report on just how accurate those predictions were.
And we lead off with the Dow.
Our prediction for the grand-daddy of all indexes was…
On the Last Day of 2016, you can expect to see the Dow Jones Industrial Average to be cruising in the vicinity of 20,000, though we’re still not certain if that’ll be on its way up or down. From today’s levels that’s a gain of some nine percent.
And ladies and gentlemen, that’s precisely what happened. The Dow closed last Friday at 19,762, a mere 1.19% below our keenly calculated prediction, making us, if not Kings of the World and Masters of the Galaxy, at least worthy of your continued servitude.
The NASDAQ Composite, we suggested, would be trading at 5650.
As it turns out the COMP closed Friday at 5383. Not as good as the Dow, but not a catastrophe – 4.7% too low.
Precious Metals: A Mixed Bag
As to gold and silver, we were dead on with the former and a bit slack on the latter.
We wrote –
We call for GLD to close 2016 in the middle of the wedge. Call it $110. As for silver, look for a sideways slide here, as well. We see a range of anywhere from $17 to $21. Split the difference and call it $19 by New Year’s.
The truth fell out like this –
Gold closed at $109.61 and silver at $15.11. Call it A+ for the former and C for the latter.
In other words, we’re geniuses with a deep sociopathic bent.
A Crude Stab at Crude
You’ll remember that when it came to oil, we weren’t so confident. We wrote…
As for oil, it’s more difficult. A rising stock market should be accompanied by a strong price for crude – at least that’s the way it works most of the time. But we’re living in less than normal times, friends, so don’t count on it. The best we could assume is a retracement rally that runs out of steam in the $60 area before year’s end. Throw the knife and call it $55.
And what happened?
“Stick with me kid; I’ll make you a winner.”
We were off by just 2.3%.
We wrap it up with a very quick look at our predictions for the dollar and long bond, which went like this –
DXY will return to 100. TLT will close at 142.
As to the dollar, she closed at 102.38 while the long bond dumped to close at $119.13.
We give ourselves a B for the buck and a C for the credit market.
And that’s where it ends.
Cumulative GPA on the year: B+ in the prognostication department, A in the profit column, and, as always, A++ in your hearts.
With that behind us, we’ve got two trades to report on before we offer today’s initiative, so pay close attention as we wind our way through them.
The first was launched way back on April 26th in an article called Trading Basics. There, we urged you write a Tesla trade that didn’t work out, putting two board lots of the stock in our hands at the end of September. At that point, we wrote CALLs in order to recoup the loss.
The first round of CALLs expired successfully, reducing our cost base for the shares, and on the 29th of November, in a letter called Hey, Gold Bug, Welcome to the Inferno, we sold another pair to further write down the price of the trade.
Last Friday, we were vindicated.
The stock pulled above our strike price, the shares were called away, and we emerged with $10.10 net on the whole affair. A very happy ending to what was at times a hairy ride.
Lordy, bless us always!
Next on the docket is a trade that took a similar route, though the final result wasn’t nearly as glorious.
We opened back on August 8th, in a letter called Golden Roadblock Dead Ahead.
There, we wrote a GDX trade that didn’t pan out, putting one board lot of GDX in our hands and forcing us to sell premium to recover the loss.
And so we did. In a letter called Markets Go Boing, we recommended you sell two (2) GDX December 30th 21 CALLs for $1.23 each, and one GDX December 21 PUT for $1.24. Total credit on the affair was $3.70.
Then, last Friday, the trade came due. The two CALLs expired worthless and the PUT closed eight cents in-the-money (GDX closed Friday at 20.92).
We’re now owners of a second board lot of GDX which we are selling for an 8 cent loss, along with the first board lot acquired in late November (from our August 8th trade).
The final tally turns up the following –
Our loss on the initial shares is $3.56, but our gain from the latter is a hefty $3.62.
That gives us 6 cents on the whole shebang, and it beats a loss.
Take it to the bank.
This Week’s Trade
Our first trade of 2017 is a rather straightforward affair and is based on a similar theme to a number of initiatives we’ve launched over the last few weeks. We’re calling it the ‘overbought, looking for a cool-down’ trade, and this week it features visual computing giant Nvidia Corp. (NASDAQ:NVDA) whose shares have spiked wildly over the last three and a half months, putting on 100% in that time frame.
Much of the gain came after shorts were squeezed from positions in the post-election Trumpeting that saw all stocks soar higher.
Take a look –
NVDA can’t keep this up forever, and we say the jig is likely up. After an overbought RSI reading last week (in green) was followed by a crystal-clear, bearish engulfing pattern (in blue, below), we believe the time has come.- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]
We look for this to unfold in the coming days.
With kind regards,
Hugh L. O’Haynew