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Options

Volatility 411


CBOETV - Dan Deming, KKM Financial, talks about the VIX dropping under 10, activity in July calls and next week's earnings.

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.


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Futures

Gold in a tricky spot right now?




Steve Sosnick, Chief Options Strategist at Interactive Brokers, believes gold is in a tricky spot right now.

The analysis in this video is provided 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 investments. 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.


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Fixed Income

Can Bonds Rally To New All-Time Highs?


Since the Fed increased rates in December, the bond market has been rallying.

Many have told me that the Fed controls all markets. Many have told me that you cannot fight the Fed. Many have told me that the Fed controls the bond market.

My question is if anyone has told the bond market this?

The Fed has now increased rates 3 times since December of 2016. So, if the Fed truly controls the bond market, and if the Fed truly controls the direction of interest rates in general, doesn't that mean that overall rates should be rising?

Well, the bond market does not think so. Since December of 2016, the bond market has been rallying, as can be seen in the attached chart below of TLT. Yet, the Fed has raised interest rates 3 times during this rally.

Yes, I know the Fed does not set long term rates. But, can we reasonably accept such a divergence between interest rates and Fed action? Or, is it that the Fed really does not control the market to the extent so many believe?

Personally, I do not believe in the omnipotence of the Fed, and I think that the 2020's will likely open many people's eyes to this fact. The reason I say this is because I foresee a major stock market correction which can wipe out 50% of the stock market value in the mid to late 2020's, yet I also believe we will see a continued rise in interest rates, despite the Fed's likely attempt to lower rates to fight the deflationary trend I expect. So, yes, my expectation is for a rising yield deflation years from now. And, that is the environment where many will eventually recognize the lack of control the Fed has on the general markets. Unfortunately, many will not recognize the Fed's lack of omnipotence until it is too late.

I view the 128.40 region as resistance in the TLT. As long as the TLT maintains below that resistance level, I believe there is a strong set up to see lower lows in the TLT. However, if the market is able to move strongly through that resistance region, it does open the door to testing the all-time highs in the TLT. For now, my expectation is that the 128.40 region will keep this rally in check.

However, if 128.40 should be strongly broken, then we will likely rally back towards the 137 region. But, again, that is not my expectation at this point in time.

See chart illustrating the wave counts on the TLT.

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.


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Futures

Oil can't get out of its own way


Steve Sosnick, Chief Options Strategist at Interactive Brokers, discusses the possible long-term and short-term futures of oil.

The analysis in this video is provided 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 investments. 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.


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Stocks

The Hammerstone Report - Mid-Morning Look


Stocks are trading in a narrow range to end the week, with energy stocks getting a little bounce as oil prices edge higher (still on track for 5th week of losses), banks mixed after Fed stress test results last night (though all banks passed), and biotech/healthcare stocks are taking a breather on the day, pulling back after week long gains. As of the close Thursday, the NASDAQ was on course to rise 1.4% for the week, ending a two-week run of losses, while the S&P 500 and Dow industrials are on track for weekly rises of 0.1% each, even after oil’s entry into a bear market weighed on those benchmarks. Though the DJIA has given back now for three straight sessions after setting a record high on Tuesday the 20th. The dollar is falling vs. most currencies, oil prices rebounding ahead of rig data later this afternoon, and gold extends gains for a third day off 5-week lows earlier in week. Note today is likely to be one of the busiest of the year for U.S. equity traders as the annual Russell reshuffle takes effect.

 

Treasuries, Currencies and Commodities

·      In currency markets, the dollar is lower across the board; euro back near highs vs. us dollar - 1.1193 (up 0.35%), despite better housing data in the U.S. this morning, while the dollar little changed vs. yen

·      Precious metals higher as gold prices look to make it a third straight day of gains; the dollar is broadly lower helping support prices this morning; gold tops $1,255 an ounce

·      Energy futures edging higher, with WTI crude around $43 per barre, but both Brent and WTI crude are on track for their 5th weekly decline after slipping into bear market this week; next catalyst the Baker Hughes weekly U.S. rig count data due at 1:00 PM ET (note the U.S. oil rig count has risen for 22 straight weeks)

·      Treasury markets little changed for a third day, as the benchmark 10-year yield head held around the 2.15% most of the week while the long-bond 30-yr yield remains near 2017 lows of 2.72%

 

Economic Data

·      New home sales for May rose 2.9% to 610K annual rate, above consensus for 590K; previous three months’ new home sales data revised up 34K; said median new home price rose 16.8% YoY to $345,800 while 18% of new homes sold in May cost more than $500,000, up from 14% last month; months’ supply at 5.3 in May compared to 5.3 in April

·      The "flash" reading of manufacturing purchasing manager’s (PMI) index fell to a nine-month low in June. The IHS Markit manufacturing index fell to a reading of 52.1 in June from 52.7 in May. The flash services PMI slowed to a 3-month low of 53 from 53.6 in May. The flash readings are based on 85% to 90% of responses.

 

Sector Movers Today

·      Financials/banks mixed after the DFAST results were out last night post close. All 34 banks passed the stress test while markets await the Fed releases Comprehensive Capital Analysis and Review (CCAR) results on June 28, 4:30pm. MS and STT skated closer to the required minimums than expected according to a few analyst, reason for underperformance

·      REITs; Bank America with a few rating changes as it upgraded PLD to buy and downgraded DRE in the industrial REIT sector; in mall REITs, SKT downgraded at Bank America to underperform, while BTIG defended group (reit buys on SPG, MAC, GGP); BTIG also defended Strip Center shares which are down an average of 7% since last Friday’s announcement of AMZN/WFM (reiterates buys on KIM, KRG and ROIC); Jefferies out with a Franchise Note looking at the impact of e-commerce warehouse demand on the Industrial REITs saying E-com retailers need 3x as much warehouse space as traditional retailers and we believe E-com growth will add 50bps/year of growth to warehouse demand – says prefers REXR and STAG

·      Deutsche Bank with a few changes in the metals and mining sector as it upgraded steel producer X and AKS to buy and raised aluminum producer CENX to hold from sell saying LME aluminum and U.S. Hot-Rolled Coil (HRC) prices fell 4% and 9%, respectively, through 2Q17…but says underlying U.S. economic activity appears positive (apparent steel demand up 4% YTD), with rising imports again being the main overhang…says supportive trade policy actions such as Section 232, could be a catalyst to change investor perception

Syndicate

·      Evolent Health (EVH) 4.5M share Spot Secondary priced at $25.90

·      Granite Point Mortgage (GPMT) 10M share IPO priced at $19.50

 

The content of this post was created by the Hammerstone Group. The Hammerstone Institutional Forum, a chat-based platform for traders, provides subscribers with up-to-the-minute breaking news headlines and instant analysis that drive the market. For more information please visit www.thehammerstone.com. For more information on the stocks mentioned in the Hammerstone Recap, please contact Brian Ducey at brian@thehammerstone.com.

This article is from the Hammerstone Group and is being posted with the Hammerstone Group's permission. The views expressed in this article are solely those of the author and/or the Hammerstone Group 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.


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