The Builders: Trump, China and the Depot (HD,XLP,XLY,XOM,USO)

When the FBI demanded access to Apple’s encryption technology to unlock the iPhones of the San Bernardino terrorists, we were disturbed.  As far as we were concerned, Apple’s refusal to empower an already intrusive surveillance state was commendable. But others saw it differently.   Donald Trump, for one.   Trump went on the offensive, saying we ought to use ‘common sense’ and give the government what they need to fight the bad guys, to know if there were accomplices, etc. And that would be a great thing – to catch the bad guys. All of them. And lock them up.   But there was something unsavory about Trump’s appeal and his further suggestion that we boycott Apple products until they comply with the government’s dictate. To our minds, there’s something resolutely hollow about a government’s claim that privacy must be sacrificed for the sake of criminal justice.   In our experience, there’s always a larger, unaddressed problem that necessitates the need to pursue this type of ‘justice’. Somewhere, there’s a faulty policy, a bad practice, poorly conceived laws or just plain wrongheadedness that sets us up for intrusions of this sort, that allow, for instance, the state to listen to…

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Taking a Stab at Oil (XOM,USO,HD)

We’re in the middle of a bounce.   We don’t know how long or how high it will carry, so until we see genuine technical signs of a continued bull, we have to be guarded.   That said, we bulls still have a few key indicators on our side.   The first is sentiment, which is dreadful. No one is happy, the world looks increasingly dangerous, protest candidates are surging, and the last thing on the minds of Main Street investors is shoveling more of their savings into equities.   Fair enough. We track AAII sentiment numbers precisely for moments like these. We’re now in the pit of sentiment hell. It can’t get any worse.   And that’s a plus from a contrarian standpoint. Simply put, it means nearly everyone who wants to sell has already done so and is expecting calamity. And that’s precisely the point at which the smart money buys. But what if it’s just a temporary bounce that fizzles?   Then so be it. We’ll see what happens to sentiment as the indexes do advance. If they remain painfully pessimistic, we’ll remain chuckle-dee-do.   Another Plus   Consider also, the market has done little to nothing…

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Follow the Leader (HYG, FB)

We’ve got a hoard of trades to run down today, as last Friday’s options expiry ushered in a bevy of new results.  We start with our HYG trade from October. Sharpen your pencils and take out a fresh sheet of paper, ‘cause here we go… On the 27th of October we wrote a letter called Launch the Dirigibles! in which we urged you to consider buying a beaten-down junk bond sector. Specifically, we wrote – We say junk got smacked because an overly sensitive, Prozac-popping news-addicted investment community can’t see the big picture sufficiently to wait out these minor storms. Nor will they be sufficiently wise to get back in early enough to capitalize on a tremendous buying opportunity. Our recommendation is to buy the junk sector using CALLs on HYG and at the same time sell some premium to offset the cost. HYG is the iShares iBoxx High Yield Corporate Bond ETF and it trades on New York. When we recommended the trade, HYG had just bounced off its bottom. Have a look at the chart – Since then, there’s been little excitement in junkland. Our recommendation was to purchase the HYG March 94 CALLs for $0.55 and sell…

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Bellybuttons and Zeroes (FXI ,XOM, XLE)

Before we start this week’s rant, let’s take a minute to close out a successful trade. It’s actually two successful trades that are one and the same. The first was opened on the 8th of December in a letter called Chinese Market Riddle – Solved! The second was launched just three weeks later in China Breakout Imminent. They both involved option sales on the iShares China Large-Cap ETF (NYSE:FXI) and the lowdown follows – There wasn’t a great deal of difference between the two trades – neither in our reason for initiating them nor in the technical setup surrounding them. But what’s happened since then indicates to us that we should pocket the great big ball of cash that they’re offering before anything happens. Before we get to the details of the trade, however take a look at the technical structure of the stock. We like the looks of FXI’s RSI and MACD indicators, both of which surfaced above their waterlines roughly two months ago. We like the steady climb of the moving averages, too (fully unfurled and trending higher), which speak to ongoing strength in the stock, as well. What concerns us, though, is the stock’s return to the…

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Jobless claims down, Exxon Mobil (XOM) shares down on dropping oil prices and Aston Martin to place recall

Markets closed flat after a short trading session on Christmas Eve. There was an unexpected drop in unemployment claims last week. The Labor Department announced that people filing for unemployment benefits fell 9,000 to a seasonally adjusted 280,000. This is the lowest rate in seven-weeks for unemployment claims. Chris Rupkey, chief financial economist with MUFG Union Bank, said, “The labor market is tightening up. Any job losses are just normal frictional unemployment in a healthy growing economy.” There was also a large drop in the four-week moving average of 8,500 to 290,250. This is a more reliable gauge of unemployment claims as it takes out large weekly swings. Shares of Exxon Mobil (XOM) closed lower after oil prices dropped again. Crude oil prices dropped as much as $2 per barrel to levels around $55. There was also a surprise increase in U.S. inventories. The Energy Information Administration said that supplies were up by 7.3 million barrels last week to a record high during the month of December. Economist had projected a 2.3 million drop. Phil Flynn, an analyst at Price Futures Group, said, “It’s a Christmas flood of oil at a time when refiners and producers usually are letting inventories…

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Santa’s Good to the Elite (XOM)

We set a lot of trades here at Options Trader Elite. Roughly once a week – and sometimes more – we set a trade that’s the envy of the newsletter world, both in terms of its return and its sheer entertainment value. There, there, Rachel… take your Zoloft, my love. As it turns out, we very often set trades with December expiries. Not exactly sure why, but it just happens to work out that way. And so it was with last Friday’s options expiry, that we now have a bevy of initiatives that either closed down, or that we feel it’s now appropriate to take off the table. And so, without further delay, we ask Rudolf to run them down for you now. We start with a trade that was launched May 6th in a letter called Rising Rates Returning wherein we claimed the top was in for bonds, the whole market was about to turn lower and everyone should be out of fixed income product for a good long while. As it turns out, we were wrong. The top of the bond market is going to be a longer, more drawn out affair than we originally anticipated, and so…

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Short Term Profits on an Oil Bounce (XLY, SPY, XOM, USO)

We have an open trade that requires your attention. And depending on what kind of personality you have, it could go in two entirely different directions. It was a trade we opened in mid-August in a letter called The Outperformance Game. There, we spoke about the lack of excitement in the consumer discretionary sector; a corner of the market that generally fares well when consumers are confident and the economy is humming without worry. At that time it wasn’t the case, but we suspected the situation would change, and the discretionaries, as represented by the Select Sector SPDR Consumer Discretionary ETF (NYSE:XLY), would outperform the S&P 500. The trade consisted of a long XLY CALL purchased with funds garnered from a short SPY CALL ( the SPDR S&P 500 ETF). And what happened?   We bought the XLY December 69 CALLs for $1.33 and sold the SPY December 205 CALLs for $1.44, pocketing a credit of $0.11 per pair traded. And today the XLY’s are trading for $2.30, while the SPY’s are fetching $2.55. Take a look at XLY’s chart – The technicals show a tremendous run-up to new highs posted last Friday (in red), and a sharp decline on…

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Choose Life! (MO, XOM, FB)

It’s not a comfortable topic to discuss at the best of times, and certainly not in polite company. But it’s become topical of late and because it has relevance to the world of finance and markets in general we feel it’s worthy of a word here.  The subject is suicide. Yes, friends, suicide. And it’s no joke. There have been a rash of bankers and other high-ranking financial types (among others) who’ve taken their lives as of late and our feeling is this is anything but coincidence. Blame it on growing work demands in a world of tightrope performance pressures. Blame it an increasingly alienated citizenry, whose social time is now spent with virtual friends instead of the real, flesh and blood variety. Blame it on the material culture that we inhabit, that focuses exclusively on one’s cash hoard, social standing or notoriety at the expense of matters of the heart and spirit – and you have reasons aplenty to figure why people opt for the most desperate act of all. A New Financial Reality? January 25th – Tim Dickenson, communications director at Swiss Re AG. January 26th – William Broeksmit, 58, senior executive at Deutsche Bank AG. January 27th…

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