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Options

Volatility 411



CBOETV - Joe Tigay, Equity Armor Investments, discusses trendlines vs. headlines.

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker, or at www.theocc.com. The information in this program is provided solely for general education and information purposes. No statement within the program should be construed as a recommendation to buy or sell a security or to provide investment advice. The opinions expressed in this program are solely the opinions of the participants, and do not necessarily reflect the opinions of CBOE or any of its subsidiaries or affiliates. You agree that under no circumstances will CBOE or its affiliates, or their respective directors, officers, trading permit holders, employees, and agents, be liable for any loss or damage caused by your reliance on information obtained from the program.

Copyright © 2016 Chicago Board Options Exchange, Incorporated.   All rights reserved.

This video is from CBOE and is being posted with CBOE’s permission. The views expressed in this article are solely those of the author and/or CBOE and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


13036




Technical Analysis

Several Positive Developments Unfolding...


THE “AVERAGE STOCK” IS FIRMING…
The Value Line Index hit a new high yesterday and small-caps are outperforming again.

INDUSTRIALS ARE REACCELERATING…
New highs hit 55% this week and the Capital Goods Group is breaking out.

JAPAN RALLY TAKING SHAPE…
Bullish response from Japanese stocks over recent days and the Yen weakened yesterday.
 

A FEW OTHER OBSERVATIONS…

GOLD STOCKS ROLLING OVER…
Negative price action from the Gold stocks over recent days is worth noting.
 

THE U.S. DOLLAR REMAINS UNDER PRESSURE…
The DXY is at YTD lows and is now unchanged for roughly 2 years, defying the consensus view.

 

JAPAN EQUITY RALLY STARTING TO UNFOLD

 

GOLD STOCKS ROLLING OVER

 

IN REALITY, U.S. DOLLAR PAIRS ARE ALL OVER THE PLACE

 

Strategas Research Partners' Institutional Investor-ranked Research Team works to identify the major themes with broad implications for global financial markets. Strategas covers the broad investment landscape, with published reports discussing Investment Strategy, Economics, Washington Policy, Quantitative and Fixed Income research. The team's thematic and macro-driven approach relies on empirical data as well as fundamental and technical research to provide readers with an integrated investment strategy for a variety of time horizons.

This article is from Strategas Research Partners and is being posted with Strategas Research Partners’ permission. The views expressed in this article are solely those of the author and/or Strategas Research Partners and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


13035




Macro

Investment Grade Credit - Lots Of New Questions


Implied option volatility for Microsoft’s (MSFT) earnings release is higher than Amazon (AMZN), Facebook (FB), Google (GOOGL) and Apple (AAPL), and provided the below table for your reference.

Now take a look at this old exhibit by JPMorgan that shows AAPL, MSFT, and GOOGL fixed income holdings are larger than most of the largest bond funds in the worlds.

We highlight this in the context of low equity volatility ahead of their earnings releases because one theme that never receives the attention it deserves is how tax repatriation could impact the investment-grade (IG) corporate bond market, both offshore and domestic.

For example, will Apple look to buy back it's Australian dollar denominated bonds?

What will be the new composition of the debt market?

Will there be sudden technical pressure on account of selling or rotation by entities that need to meet the tax liability?

What happens to equity leverage ratios?

Will there be a reduction in Treasury issuance because of new tax receipts?

The list could go on, but you have to expect that tax repatriation could lead to a meaningful adjustment in the credit markets at a time when equity volatility is at a historical extreme in the very names that are most exposed to this event, or the stocks that are responsible for the majority of gains in the S&P 500.

 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


13034




Macro

Europe's stresses demand creative thinking


Welcome to this Real Vision TV taster. Marcus Ashworth conducts a whirlwind tour of Europe, identifying the challenges ahead for the EU, notably in the Italian banking sector and a muddy compromise looming in Greece. Looking beyond the upcoming elections, Marcus isolates the real problem for Draghi and the need for a creative solution to continue QE, with Germany now more concerned with inflation and the weaker European nations unable to stand up on their own. Watch the full interview on Real Vision TV now.

 

Real Vision TV is the world's first video on demand platform for finance and investing. It features in-depth, short-form and long-form interviews, presentations and documentaries with the world’s best investors, independent analysts, economists, geo-political strategists and policy makers. It now has paying subscribers in over 100 countries around the world. Our customers include some of the world’s most famous money managers along with students, RIA's, investment professionals, financial service professionals and home investors.

This video is from Real Vision TV and is being posted with Real Vision TV’s permission. The views expressed in this video are solely those of the author and/or Real Vision TV  and IB is not endorsing or recommending any investment or trading discussed in the video. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


13033




Technical Analysis

I Still Think the Consolidation Takes More Time


First published on Saturday April 22 for members of ElliottWaveTrader.net 

With the GDX breaking below the 24 level this past week, it has strongly suggested that it is not yet ready for a parabolic run.   And, as I noted during the mid-week update, it even opens the door to another drop below the March lows before the parabolic run begins:

“. . . the issue I have with it is that the high was struck into an a=c target, which most often denotes a corrective rally.  It is for that reason that I wanted to see the .618 extension of that rally hold so that I can continue to view it as an impulsive structure.   But, Fibonacci Pinball suggests that once that .618 extension breaks resoundingly, the greater probabilities shift towards that rally being a corrective rally.  For this reason, I am viewing the yellow count now as a much stronger potential.”

“Moreover, I will note that if we can see a higher high made in the GDX in the coming week, then I can consider the pattern as a leading diagonal up for a wave (i) as modified on the daily chart.  Yes, I know this has gotten more complex than I had wanted, but I am trying to maintain an open mind to the potential I am seeing in the market.”

As of the weekend, my perspective on GDX remains the same.  

But, I even have an issue with the more immediately “bearish” yellow count on the chart.  You see, c-waves are 5 wave impulsive structures the great majority of the time.  However, the drop off the prior week’s high is not easily counted as a 5 wave structure, but looks more like an a-b-c structure down into a region wherein a=c.  So, while the rally counts well as an a=c structure, I also have no clear impulsive structure to the downside wherein I can confidently suggest that we are going to drop to the 20-21 region.  Ultimately, this leaves me in a position where I have to maintain a hedge on my long term portfolio until we are able to break out over the prior week’s high, due to the potential for us heading back down to the 20-21 region in a larger wave (2) pullback. 

As far as silver is concerned, I noted a possible pattern on Friday which would be an “evil” set up for the market, but I have no clear indications it is playing out just yet.  But, it is something I think you need to watch:

If I may be EVIL for a moment, I would LOVE to see a b-wave rally back up towards the highs in silver, to set up a c-wave drop for an ideal wave (ii).  In fact, this will likely scare most of the market as they brace themselves for a break-down of an H&S pattern, but which will just trigger a 3rd wave back up.  Again, I am getting wayyyyyyyy ahead of myself, but I would love to see it play out like this.

And, if you remember, I made a similar call on GDX back in the fall of last year, which set up the exact same type of whipsaw which led to the rally we experienced earlier this year in GDX.  But, this time, the rally, if it sets up in this fashion, would be much more powerful and would cause much more chasing.

As far as the micro pattern is concern, as long as silver remains over the 17.40/17.50 region, I can maintain the expectation of a b-wave rally.   However, should we see a break-down of that region, then I would have to adopt the yellow count on the attached silver daily chart, which would suggest we test the March lows again in a larger wave (ii) pullback.

With regard to the GLD, I still think we can see more downside consolidation before the wave (3) takes hold later this year.   As long as we remain below the 126 region in the GLD, I am going to be expecting more consolidation in the coming weeks, with the potential for a drop back towards the converting trend lines for a bigger wave (2).  However, once we see the market strongly take out the 126 region, I am going to assume we are in the heart of wave (3), with a minimum target in the 138 region.

In conclusion, as I have noted the last few weeks, I think this pullback can still take a bit more time before we are ready for the next big upside move in the complex.  And, as long as the GDX remains below the highs it made a little over a week ago, there is strong potential that we can test or even break just below the March lows before the next strong move higher is ready.

But, please do not mistake me for being bearish.  I still believe that we are going to see much higher levels in 2017, even if we see a deeper pullback into May.  So, do not lose sight of the forest while you are analyzing some leaves.
 

See charts illustrating the wave counts on the GDX, GLD & YI.  

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.

This article is from ElliottWaveTrader.net and is being posted with ElliottWaveTrader.net’s permission. The views expressed in this article are solely those of the author and/or ElliottWaveTrader.net and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


13032




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