Wrap It Up and Ship Her Away! (IYT,AAPL,DIA,XLP,DBC)

Wrap It Up and Ship Her Away! (IYT,AAPL,DIA,XLP,DBC) We’re going to open today with an indicator that gets far too much attention, but that still has much to offer if taken in proper perspective. It’s the VIX Index, the Chicago Board’s measure of implied volatility in S&P 500 options, sometimes called the market’s ‘fear gauge’. Those with a simplistic view of the VIX claim that when it’s low – watch out! – the market is about to take a spill. These folk see the complacency behind low volatility in options as an inevitable contrarian sign that the market is about to explode. And there’s truth to the notion that low volatility is eventually replaced by high volatility. The opposite is also true. Periods of high volatility lead directly to periods of low volatility. On a long term chart, it looks like this – But it’s also clear from the chart that volatility can remain excessively low for extended periods of time, rendering the “VIX at historic lows!” crowd all but irrelevant. A New Take We were been pioneers in the formulation and application of a related indicator that we termed ‘volatility compression’. It’s a marker that has served us well…

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Broad Themes and Extremes (FCX,UUP,AAPL)

Broad Themes and Extremes (FCX,UUP,AAPL) We’re going to revisit some of the themes we’ve been pressing over the past six months, particularly as they relate to the commodities, as it’s there we see the week’s best opportunity to write a trade. But before we do, a little background. The current move higher in the dollar is not over. We’ll get more upward pressure over the intermediate term as a function of a number of inputs, and we’ll discuss a few of those below. But take it as near a certainty as you’ll find in the financial world these days, that barring a cataclysmic event in Washington or Wall Street, the buck’s bounce is a buy. And what does that mean for commodities? Well, in a world where financial rules and inter-market relationships still applied, we’d tell you that a move higher in the dollar would be negative for commodities. But today we don’t think so. And here’s why. Commodities got a pant-whacking over the past eight years – one that puts AG Schneiderman to shame. Across the board (almost), the entire asset class was trounced. And now, selectively, we’re seeing a return of funds to the ‘thingy’ sector. Energy in…

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I’m Having An Attack! (AAPL,SPY,USO,FXI)

I’m Having An Attack! (AAPL,SPY,USO,FXI) Isn’t it always the case…? The news is horrible. The threats are palpable. The rhetoric and bombast are as hot as ever. Suspicion and anger are ubiquitous; finger-pointing; mud-slinging; muck-raking; belly-aching… For gawd’s sake, my meniscus has been twice herniated, my pylor valve is stuck, and I just burned the honey-garlic spaniel! The kids are gonna kill me… The Decibel Level Climbs When the news is not reporting the Mueller/Trump duel, it’s all about rising oil, with 1) Iran and the potential loss of three and a half million barrels of daily oil supply, or 2) Yemen trying to take out Saudi oil infrastructure, or 3) Israel gearing up for a takedown of Iran in Syria and Lebanon, or 4) Venezuela, whose oil production is veering toward zero, as funds to pay for the extraction of that country’s vast reserves go squandered or missing or who knows where. And now Warren! This week it was reported that Señor Buffett had his first losing quarter since 2009, reporting over a billion bucks lost for Q1. The damage is everywhere. And here’s what’s worse. From Wall Street we’re seeing growing concerns that the breadth of the market…

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We Are Investment Artists! (AAPL,GLD,TSLA)

We Are Investment Artists! (AAPL,GLD,TSLA) We at Normandy prefer the use of options because of the (mostly) limited liability involved in their use, as well as the wide variety of strategies and structures they afford the interested trader to employ. Nearly any price projection you might make has at least one corresponding options strategy available to profit from. In short, options are, in our view, the premiere weapon for the prudent investor in this age of increasing financial and geopolitical uncertainty. We mention this now, because we’ve clearly entered a period in which excesses in valuation and government intervention have made predicting market moves a far less quantitative operation – less scientific, if you will – and turned it more into ‘artisanry’. The new keys to investment and speculative success reside in a number of less widely-used indicators, basic technical analysis and in-depth sentiment study, all of which we at Normandy excel in. Give us an example, McAbby! A look at traders’ positioning in VIX futures is instructive in this regard. Below is a chart of traders’ speculative posture in VIX futures over the last three years. It makes clear the overwhelming shift in sentiment that occurred literally ‘overnight’ in…

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That’s Some Horse! (DIA,AAPL,UUP,IYT)

That’s Some Horse! (DIA,AAPL,UUP,IYT)   There are stats and there are stats.  And, of course, when the market is in the middle of a panic breakdown, all the facts fit to print are lugged out of the analyst valise in order to convince you of what’s to come. And here at Normandy, we’re really no different.  Regardless of how little we trust the mainstream, fundamental approach to investing in this era of absolute government intervention, we have to rely on something.  Coin-flipping went out at least a century ago in the stock buying game.   As we’ve stated repeatedly, the contest is now being played on the sentiment front – in large part – while flows of funds, sector rotation and some basic technical analysis still offer clues to market direction.   The larger picture will continue to be dominated by the size and degree of intervention by the Fed and Treasury, and while we’re always watching those two do-gooders like a chickenhawk, much of what they do is simply not transparent and the rest grinds its way through the system very slowly.   So it’s to the stats we’re forced to return for our commentary.   And we start…

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Washington Redeemed! (AAPL,EWP,CBOE,FB)

Washington Redeemed! (AAPL,EWP,CBOE,FB)   Never were fans of big government here at Normandy.  Don’t think it’s good for the overall health of the nation, nor for its better management or even for its longevity.   Never trusted it.  Always figured the goal was to put everyone on the payroll and then force feed them worthless currency.  Where else are the buzzturds gonna turn for a buck?!   Nope, always preferred the local brand of self-governance – really local! So the thought of someone – an outsider – coming to the big house ready to do battle with the forces-that-be was intriguing.  But whether Senor Trump actually fits that bill remains an open question.   We’ve heard about ‘draining the swamp’ and we see a contentiousness between the White House and the establishment leadership that has certainly never existed to this degree.  But whether this actually leads to the change that so many desire – a restrained government reach, and more power to local authorities – is too early to tell.   It would be nice if the extraordinary waste of our tax dollars were actually curtailed.  No more federal research money spent on “incontinence cups” and ‘flatulence valves” (no joke!),…

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The Crypto-Reformation (GFI,AU,AAPL,DIA,AOBC)

The Crypto-Reformation (GFI,AU,AAPL,DIA,AOBC)   The biggest story by far this year in the financial world is Bitcoin, and the hop-along crypto-currencies that have been developed in its wake.   Our own commentary on the phenomenon has been limited thus far, with fellow Normandy scribbler, Hugh L. O’Haynew, chiming in earlier this week with his feelings on the matter at somewhat greater length.   We don’t want to bedevil you today with too much more on the story except to say that there is real evidence that the Bitcoin religion is stealing adherents from the chapels of the precious metal god. Hugh mentioned this in his tirade earlier this week, but just yesterday we caught wind of a story that lends substantial weight to the matter.   Congressman Ron Paul, among the lone voices for ‘sound money’ in the legislature, published the findings of an ad hoc Twitter poll he took last week in which he posed the question –   A wealthy person wants to gift you $10,000. You get to choose in which form you’ll take the gift. But there’s a catch: You must keep the gift in the form that you choose, and you can’t touch it for…

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The Snowball Manifesto (XLE,AAPL,TSLA)

The Snowball Manifesto (XLE,AAPL,TSLA)   Here at Normandy we believe that the dichotomy purported to exist between the so-called ‘Globalists’ and those who consider themselves part of the “Liberty Movement’, is a false one.   Yes, there are those – from both the right and left of the political spectrum – who believe that economic and political power should be concentrated in the hands of a few elite superiors.  We call them ‘Globalists’.  And their motto is ‘Trust your leaders’.   Then there are those who believe that power should be decentralized to the greatest degree possible, even at the expense of many long-established, well-run Washington-based entities that serve the common weal and boast a proven record of success.  These are the ‘Liberty’ contingent, for whom the individual represents the greatest possible value, and the collective, except in rare instances, must take a back seat.   But we at Normandy reject the polarizing nature of the dichotomy, and the acrimony and ill-will it creates.   For we are neither Libertine nor Globalist.   No, rather, we consider ourselves proud Snowballists.  And we stand firmly and unrepentant on our icy foundations, ready to strike hard with freshly fallen, moist packing snow…

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Things We Like. And Things We Don’t (QQQ,AAPL,PIR,SPY,DIA,AOBC)

Things We Like.  And Things We Don’t (QQQ,AAPL,PIR,SPY,DIA,AOBC)   Ed. Note – the devastation in Florida and across the southwest warrants a word of hope and encouragement for all those who experienced the wrath of Irma … Hang tough, friends.  And be good to each other.   Our thoughts are with you.   There are currently a number of discordant trends in the market that are worthy of our scrutiny, and that we believe point to precisely where we’re positioned in this longest and most powerful of all bull markets.   We hope that a firm understanding of that position will also reveal to us an appropriate trade for the week, as unlikely as it may appear as we begin.   So…   We start with a look at the dollar, in the midst of one of its worst declines in recent history, a bearish move that began on New Year’s Day and has spiraled lower by 12.5% as of this writing.   Here’s the buck – It doesn’t look good.   The dollar’s struggle seems to grind on despite the threat of higher interest rates, despite the rally in both the stock and bond markets, and despite the jawboning of…

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Confusion, Lies, and the Trades They Inspire (CAT,AAPL,KSS,XLK,IYH)

Confusion, Lies, and the Trades They Inspire (CAT,AAPL,KSS,XLK,IYH)   A good number of the folk you meet on a daily basis are whacked.  But it’s important to know that there are actually several types of whackos out there, including two that are regularly confused with one another.  In truth, they suffer from distinctly different maladies.   On the one hand, you have the confused individual.  He’s raised in a milieu of half-truths, modern statist brainwashing and outright lunacy and simply doesn’t know any better.  He therefore spouts his nonsense with conviction because it’s all he knows, and it’s well-nigh impossible for him to get outside the box that was built for him. He suffers for his addle-headed tripe, to be sure, and others around him also likely suffer.  And so it goes.  On and on.   On the other hand, there’s the liar.  This blackguard has no sense of integrity and speaks his nonsense for largely political reasons – to advance his own standing in the group or vis-à-vis another individual – and there’s very little that moves him outside of his ‘advancement’ agenda.  There is no genuine charity or sacrifice in him (save for furthering the cause of his…

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