Gold Again

Emerging Markets and Gold

I expended on the prior post showing real rates and gold, along with a discussion of EEM, as two current ideas. Both are at important levels and their short-term performance will give an important signal for the broader markets. The Bull and Bear Case for Two Important Assets

Short Every Rip

The stock market has been grinding lower and keeps taking out important support areas. If you look at the 1 minute chart or similarly short timeframe, you can see multiple hits on the ES at 3700 and 3680. There is resistance at these levels as well. Which way will the market go?

This trendline is incredibly important for whatever reason.

There is heavy call buying after previous high put buying, pushing prices way up.

The long-bonds continue cratering.

USDJPY has been hitting new highs day after day, but the Korean won paused. A resumption of highs would be bad news for bulls because the Chinese yuan will follow.

Gold made a new low this morning. It is going to plummet along with most other assets given how bonds and the U.S. dollar is behaving. It seems like everything is being suspended to prevent options from paying off at this month's opex.

The counter explanation is stocks are leading what will be a rally in all assets, including a reversal in the U.S. dollar, but the fly in the ointment remains stubbornly strong crude oil.

I posted a list of stocks last night. These are stocks that fell on high volume yesterday. There are a lot of symbols I've posted in previous months, going back to late last year. Many of these charts are already way down, yet also only now completeing topping patterns that point to far larger losses ahead. Point being, there are more targets than capital at this point. It's a shooting gallery for bears out there. If the indexes resume their move to new lows, there will be massive losses in the less liquid sectors of the market.

GLD Gap Filled

Better Off Red

ZB is heading for the measured move target of 121. TLT is in free fall. I do not know if 121 will hold or not. I'm agnostic here. As I've said before, I think ZB can bounce as stocks crater and it can bounce with a bull rally. If it is falling, then stock are probably going lower. ZB is at a new 52-week low. Don't over think it.

Gold, copper and oil are all below important horizontals that mark topping patterns. All three have collapse analogs. The Federal Reserve is doing what they did when commodities collapsed over the past decade. The charts are rolling over into h-like patterns. I have a simple two-part thesis. One, I think these charts are going lower. Two, if these charts go lower, they complete setups that forecast plunging prices. If they go lower, they go way lower. So I buy OTM puts. Since gold has lower expected volatility, I went with that one. I have November $150 strike puts on GLD.

Stocks say hold your horses. I can't ignore the counter-signal from the market because it can be a predictor. For now that's all it is, a prediction. Everything else says stocks are experiencing an internal technical move that will lose steam. Stock will recouple with commodities and bonds, and sink.

You know what didn't rally? Energy. I closed weekly puts I opened yesterday. I may or may not open them again. I am still holding some OTM COP puts for November. I also closed my USO puts that expire Friday yesterday. I may or may not reopen that position because as I posted yesterday, I think it's time for XLE to underperform USO. If oil goes higher, that is probably bad news for stocks and bonds.

I can see outlines of a dollar top in the euro, maybe even the Korean won, but not in the Japanese yen. Not the Chinese yuan. Currency crisis only needs one player. I view this as a high stakes situation because DXY is advising some caution that will be warranted if USDJPY tops out. The flipside is China could be forced into letting the yuan drop and last time that happened, stocks went almost straight down 10 percent in much better macro conditions. I'm playing the possibility of this with OTM puts on EEM for November. There's no support if emerging markets break lower and China is their lodestone.

Finally, BTC. It ain't screaming sell everything yet, but it also ain't rallying.

These aren't my only trades listed above, only ones relevant to these charts. My first thought will be to add more BigTech, energy and consumer staples shorts if the market turns lower. I did jump into some Apple November puts yesterday. Earnings season makes single-stock options trades pricier, but I might put some on in special cases or post-earnings.

All My Positions

I have short positions of varying size on all of these. In terms of number of options, XLP is by far the largest position. By dollar size, CME, APPL, MCD, SHW are relatively large. If I group together all my energy positions XLE, COP and USO, that would be larger than everything, but some of these are weekly puts that I may take off early next week if crude doesn't dip quickly. XLP puts are cheaper though, and thus I anticipate they could be my largest position at the conclusion.

Update: I forgot to list BITI calls, a short position on BTC.

Put Buying Spree

I have massive OTM puts on all of these. Plan on adding to XLE and XLI. I didn't buy puts on FXI, but included it because it is important for emerging markets. It looks like the same setup as in October 2008. I still have cash left and am looking to add more on one final pop in the market.