The New Bull Market

[over9k]

Finally, completely unrelated to today:

There's been a lot of talk about "dumbbell spreads" lately, i.e being heavy microcaps and heavy megacaps, and having nothing in anything in between.

Here's a quick comparo of the fang index & Renaissance International IPO ETF against just the sp500:

As we can see, both are outperforming the broader market significantly, so the data's actually supporting the rhetoric.

 

[Dark1975]

Got to love the volitality in the market, easy flip in morning trade tomorrow , bought in the xao bank shares in today's selloff for pay day tomorrow , I expect more volitality at the close of this week, rinse repeat monday

 

[Smurf1976]

TBH I can't see trump losing this time at all.

I don't intend my comment as a political one, just an observation that in terms of wider things outside the market which could trigger something, it's on the list of possibilities.

 

[over9k]

Got to love the volitality in the market, easy flip in morning trade tomorrow , bought in the xao bank shares in today's selloff for pay day tomorrow , I expect more volitality at the close of this week, rinse repeat monday

Yeah, anyone that bought near close yesterday has done very nicely. I didn't have the stones to (I was thinking today would open in the red yet again) so I put orders in for today's open in the expectation that we'd open red and then slowly climb today. Instead, we opened high and have continued to increase so I missed the ~1.5% that the nasdaq opened at. Still, we're at 3% for the day and running so I'm still doing ok.

I'm expecting something similar tomorrow - it's friday that has me jittery. I might trim a few positions at tomorrow's close.

 

[ducati916]

All's well that ends well.

jog on
duc

 

[ducati916]

Just for comparison:

The QQQ v SPY. The QQQ was deeper, but right on support.

The same below:

So should be no major issues to close out the week.

We might get a small pullback as the various indices hit now resistance points, but nothing major. When I say pullback, what I mean is that the rise higher will just pause.

jog on
duc

 

[ducati916]

Some interesting dynamics in the market as evidenced by news and commentary.

Now we never know who actually makes up the cohort of these studies, but they are (almost invariably) wrong. They respond to prices in a positive feedback loop. Prices are high...sentiment is high. News stories, by and large, follow this pattern.

It does not matter who wins the election. The results for the market are essentially the same over time. What we will get is a pick-up in volatility.

Mr flippe-floppe-flye.

That was significant intervention into the junk bond market. Which means that those credits are still alive and waiting for the next crisis.

While the big Tech. trade may still have some legs...always hard to time a mania, its days may be numbered. The 2 most unloved sectors: Energy and Financials.

Just the MMs messing with your mind.

jog on
duc

 

[over9k]

I can't see energy demand increasing until we're well into next year on account of, you know, winter. And then there's the saudi's and their ongoing price/trade war.

In fact I can only see things being bloody choppy from here on out. For anyone else reading, if you think that big tech's had its day etc etc and want to bank on it, it's ridiculously easy to bet against the market with inverse ETF's. There's even leveraged ones. You'll see that ETFDB has a ton of them listed

 

[over9k]

One thing I forgot to post yesterday was the comparison to the SMA:

Interestingly, the hit of support has coincided with a return (back) to the 50 day SMA. Question is whether we now see a divergence back to the previous track above it, or a matched trajectory from here on out.

I.e this:

Or this:

Considering the lack of stimulus, seasonality of going into winter, and the almighty reality check the past few days has given the market, my money is on the latter.

 

[ducati916]

As we reach the end of a shortened week:

Pretty much a technical correction. The market may remain a bit blah into the close, simply because it's a Friday. However, if not into the close, next week we'll be moving higher again, but this time more broadly and with better balance across the sectors.

While the indices are slightly lower, individual sectors are green. Mega-caps in Tech are still weighing the indices lower (as they boosted them higher).

jog on
duc

 

[over9k]

Yeah big selloff in the latter half of the day. The morning was actually pretty green for a bit.

Not surprising in the slightest.

 

[ducati916]

So market closed in the green.

Rebalancing across the sectors, which will make for a far more sustainable move higher going forward.

Oil news:

Friday, September 11th, 2020

Oil prices edged up just a bit during midday trading on Friday, with Brent climbing back above $40 per barrel. Sentiment remains more pessimistic than in previous weeks.

OPEC+ in a bind as demand softens. Low prices are hitting OPEC+ members, just as they began ramping up production. Should OPEC stay on course with the cuts, hoping that demand recovery picks up next year, enduring low-for-longer oil prices that crush OPEC budgets? Should they cut deeper?

ExxonMobil puts Guyana FPSO on hold. ExxonMobil (NYSE: XOM) suspended work on a third floating production, storage and offloading vessel in Guyana. The company awaits approval from the government of Guyana for its Payara project.

U.S. CFTC: Climate change presents dangers to financial system. A report from the U.S. Commodity Futures Trading Commission concluded that climate change poses risks to the stability of financial markets. “A world wracked by frequent and devastating shocks from climate change cannot sustain the fundamental conditions supporting our financial system,” the report said. While not new, the conclusion carries weight coming from the top commodities regulator.

Trump to ban offshore drilling in Florida, Georgia and South Carolina. The Trump administration said it would block offshore oil drilling in Florida, Georgia and South Carolina. While the Atlantic seaboard remained a speculative and arguably uncompetitive region for drillers, the Eastern Gulf of Mexico has long been prized (and off limits) to the industry. Up until now, the administration has supported opening up that section for drilling, but with the key battleground state of Florida up for grabs, Trump reversed course.

Uber commits to 100 percent EVs by 2040. Uber (NYSE: UBER) committed to making its fleet 100 percent electric by 2040, and it also said it would spend $800 million on transitioning drivers to EVs through 2025. Lyft (NASDAQ: LYFT) previously said it would meet the target by 2035, although without financial support for drivers.

Investors sue over potential Anadarko fraud. A searing Bloomberg report details the alleged fraud committed by top management at Anadarko Petroleum. A former engineer alleges the company defrauded investors by overstating the size of an offshore oil field. Former CEO Al Walker walked away with $100 million when the company was sold.

Enbridge to resume Line 5. Enbridge (NYSE: ENB) will restart the eastern segment of the Line 5 pipeline in Michigan.

Enterprise cancels Permian pipeline. Enterprise Products Partners (NYSE: EPD) scrapped the proposed Midland-to-Echo 4 oil pipeline project, a 450,000-bpd pipeline that would carry Permian oil to the Gulf Coast. The decline of production and the weak market led to the decision.

Floating storage on the rise again. Oil is filling up in vessels at sea again as the contango deepens. “The market is soft and bearish and floating storage is returning again,” a market source told Reuters.

Oil market turns pessimistic again. The EIA reported a surprise jump in crude stocks and weaker gasoline demand, adding to bearish sentiment. Covid-19 cases are rising in Europe and India, and India’s oil demand is expected to contract this year for the first time in over four decades. “It will take three years for global oil demand to recover from Covid to its new normal, assuming we have a vaccine or a cure,” analysts at Bank of America wrote in a report this week.

BP spends $1.1 billion on offshore wind. BP (NYSE: BP) purchased a 50 percent stake U.S. offshore wind assets from Equinor (NYSE: EQNR) for $1.1 billion.

Elliot hopes to derail Chevron takeover of Noble. Hedge fund Elliott Management Corp., which holds a large stake in Noble Energy (NYSE: NBL) is pushing the company to abandon its plans to sell itself to Chevron (NYSE: CVX), arguing that the proposed deal undervalues Noble.

UBS advises clients to pick sustainable investments. Swiss Bank UBS Group said that it is telling its clients to invest in sustainable investments, the first major financial institution to do so. The bank handles $2.6 trillion in assets.

Options market says Exxon’s dividend in danger. The options market is increasingly skeptical of ExxonMobil’s (NYSE: XOM) ability to maintain its dividend. “Right now, the options market is forecasting an implied dividend range of somewhere between about 30 and 50 cents over the next dividend period, declining to somewhere between 20 and 30 cents this time next year. That would be a significant cut from the 87 cents [Exxon is] currently paying,” Michael Khouw, chief investment officer at Optimize Advisors, said Tuesday on CNBC’s “Fast Money.”

Lawsuits against Big Oil. New lawsuits for climate change damages against the oil majors were filed this week by several governments, including Charleston, South Carolina, the city of Hoboken, New Jersey, and the state of Delaware.

Copper demand to surge on clean transition. The global need for copper could increase by an estimated 350% by 2050, with current reserves depleting sometime between 2035 and 2045, according to a new report. Copper prices continue to rise, topping $6,800 per ton this week.

Natural gas prices on the rise as supply stagnates. Contracts for natural gas delivery at Algonquin city-gates, Transco Zone 6 New York and Tennessee Zone 6 for December, January and February have moved up to $6.63/MMBtu, $6.03/MMBtu, and $6.61/MMBtu, respectively. Natural gas supply hit a relative peak (temporarily perhaps) late last year, falling as drillers cutback amid low pricing. Lower supply is tightening up the market heading into winter.

Colorado drillers sink on new setback proposal. The Colorado Oil and Gas Conservation Commission voiced support for 2,000-foot setbacks, significantly larger than current rules. The commission won’t vote until October, but the share prices of Colorado-focused drillers sank on the news.

Appalachian drillers “red ink” in Q2. An analysis of nine Appalachian-focused shale gas drillers found that the group collectively posted $134 million in negative free cash flow for the second quarter.

Seeds of commodity “super cycle” being planted. While it could be years before prices shoot up again, the deep cuts in investment in new oil capacity could sow the seeds of the next boom. India, China and other fast-growing nations could shorten the downtime before the next boom begins.

Hurricane Energy slashes reserves. UK-based Hurricane Energy (LON: HUR) slashed its reserves in the West of Shetland area. Its Lancaster field now holds an estimated 58 million barrels, down from 486 million barrels. The company’s stock price plunged by more than 50 percent.

jog on
duc

 

[frugal.rock]

My takeaway.

Rebalancing across the sectors, which will make for a far more sustainable move higher going forward.

Thanks for your time @ducati916
Was thinking the other day I would be lost without you and @bigdog who I also thank, in more ways than one.

 

[ducati916]

The Options frenzy:

The Tech. rally has had little to do with the fundamentals of these businesses. It has had little to nothing to do with COVID issues transitioning the fundamentals. It has had everything to do with unbridled speculation. It is good to know that some things remain the same.

So in keeping with the spirit, next week I'll be looking to sell some AMZN PUTS.

I'll make the decision next week. The IV isn't what was available in TSLA, but it is (should) be fine.

jog on
duc

 

[ducati916]

Oil:

Realistically, oil (dependance) will be with us for a while.

jog on
duc

 

[ducati916]

IPOs:

So picking the winner or some winners from Tech. is not as easy as you might think from Day 1.

The rest:

Not a sector that I invest in or particularly like. However the odds of success in this sector seem far better.

With Energy, beating the established companies is a tough ask.

I don't play the IPO game, simply I wait for the successful ones to be picked up by an ETF. But if you do, interesting numbers.

jog on
duc

 

[Smurf1976]

Realistically, oil (dependance) will be with us for a while.

I'll add to your comment that energy forms are interchangeable only in some contexts but not all.

Lots of ways to generate electricity. If it gets hot or moves then it's possible - anything that burns, nuclear, hydro, wind, sun etc all works. Oil held a 22% market share globally back in the early 1970's but in most countries today it's barely above zero and small enough to be a rounding error.

Lots of ways to produce large amounts of heat eg steam for a factory or heating in buildings. Anything that burns or could use electricity produced by whatever means. Oil still has some market there but it's drastically lower than it was at its peak in the 1970's.

Now try getting a plane off the ground and your options are far more limited. Oil won't be disappearing from that market anytime soon that's a given.

The few places which have a high % of non-fossil energy also have the distinct feature of having a high % of electricity as the form of energy at the point of use.

Here in Australia, only 19% of end use energy is in the form of electricity and it's in the 15% to 23% range for every state except Tasmania (39%) . So even if we take electricity generation to 100% non-fossil fuel (and it already is 98% non-oil generated in Australia), then that leaves the other 81% of energy consumption still supplied by fuel combustion which in practice is mostly oil and gas with a bit of coal and wood. It's much the same in most countries - they have huge use of non-electrical energy at the point of use.

There's a huge amount of detail often missed on that subject. To avoid hijacking the thread - if anyone wants to know the fine detail then perhaps discuss it in the energy thread. In short though - wind farms and solar mostly aren't replacing oil, they're replacing coal and to limited extent gas, that's the crux of the point here. The move away from oil won't b a quick one, indeed consumption was still trending up until the pandemic.

 

[ducati916]

Air travel, gradually picking up.

Relevant for: (a) oil price, (b) economies re-opening.

jog on
duc

 

[ducati916]

So breaking news....

Futures already trading up.

But they would have traded higher anyway, it's a Bull market. This just gives them an excuse to trade higher.

IPOs this week:

jog on
duc

 

[over9k]

This lot are all weak. If you really want to swing for the fences, FNGU is where it's at.