Weekend Market Commentary 1/9/2015 – $SPY, $TLT, $IYR, $EEM, $PCY, $GLD

Big Picture:

I really want to put on my jaded hat and get pissed off like the old man I aspire to become, but sometimes I foolishly hope I’m wrong.  Like most rational people (politicians excluded), I believe we have a pretty serious debt problem in the U.S. and I’m concerned about how things will play out in the next 10 years and beyond.  Specifically, I’m worried about both Federal debt and Student Loan debt.  Student loan debt is on track to become the next crisis.  Trust me, it will happen if things don’t change.

debtSeriously, what happens when a well educated generation of young people can’t find jobs to pay for the exponentially increasing amount of debt they took out specifically to find jobs?  That’s right, they get pissed.  Really pissed.  In fact, they get even more pissed when the soccer mom with a subprime minivan loan defaults on hers, but they can’t walk away from their student loans and, on top of that, Uncle Sam is the one holding out his hand for payment.  Do you know who sees all of this playing out?  Obama.

On Friday Obama mentioned that he’s planning to offer two free years of Community College subject to certain requirements.  From a government spending standpoint, that’s horrifying and from a policy standpoint is suggests that he knows there’s a problem.  The problem is debt and student loan debt in particular.  At the same time, young people are becoming more resourceful.  I read an article in the Economist earlier this week about Apps that make it possible for freelancers to find work (think Uber and Handy).  Will young people figure out a way to get out of the system of debt serfdom?  Who knows, but apps to promote freelancing give us a little bit of hope.

How does that all play out in the markets?  I’m not sure, but U.S. Equities stumbled this week while the Long Term Treasury ($TLT +2.95%) and Real Estate ($IYR +3.54%) were strong.  That being said, I think the bigger story is that Gold looks like it’s firming up and both Emerging Markets Equities ($EEM +1.29%) AND Debt ($PCY +0.86%) were higher on the week.  I’m watching for a breakout in $GLD above 119.  If we see that level, the Dollar may start to weaken.

On Thursday morning $SPX gapped higher at the open and raced higher during the day.  I sold a Jan 2015 Weekly Call spread above the market, took a little pain on Thursday, and enjoyed the sell off on Friday.  $SPX hasn’t closed the gap from Thursday morning, but the weakness on Friday suggests that it might happen sometime soon.  We’ll see.

The Weekly Stats:

ETF Rotation System Stats

ETF Rotation System Positions:

The Basic ETF Rotation System positions had a mixed week.  The Russell 2000 ($IWM) was down on the week and the Real Estate ($IYR) was up.  The strong performance in $IYR left the Basic system slightly positive on the week.  The Schwab Commission free system was in Real Estate and Global Real Estate ($SCHH & $RWO) and both were up on the week.

Click here to see a copy of the December 2014 Market Momentum Newsletter that covers the systems in more detail.

Schwab Commission Free ETF Rotation System Positions:

$SCHH ETF Rotation System
$RWO ETF Rotation System

Basic ETF Rotation System Positions:

$IYR ETF Rotation System
$IWM ETF Rotation System

Forex Breakout System:

The Forex trades are still running and look good.  There really isn’t much to say right now other than the Euro continues to fall.

$SPX Weekly Options Trade:

On Thursday morning I sold a $SPX weekly call vertical that was in line with the Weekly Options system.  Honestly, the trade was somewhat discretionary because I don’t take these trades every week.  That being said, I was watching $SPX bounce hard after yet another Fed announcement and just didn’t buy the move.  Since the Weekly Theta system said it was ok to be short, I got short.  I might get proven wrong on Monday morning, but for now the trade is okay.

Note that I tweeted this position before getting filled.  If you aren’t already, you should follow me on Twitter.  Click here and then Follow.

$SPX Weekly Vertical Trade


Trades This Week:

SPX – Sold to open Jan 15 2090/2095 call vertical for .50

ETF, Options, & Forex Inventory:

SPX – Short Jan 15 2090/2095 call vertical (sold for .50)

IYR – Long 32 Shares from 76.7699

IWM – Long 20 Shares from 120.67

SCHH – Long 41 Shares from 34.009 (previously 58 shares)

SCHH – Long 72 Shares from 38.73

RWO – Long 92 Shares from 48.49

EUR/USD – Short 5,000 notional units from 1.35028

USD/CHF – Long 6,000 notional units from .9037

USD/JPY – Long 2,000 notional units from 110.084

NZD/JPY – Long 2,000 notional units from 89.036

Looking ahead:

It will be interesting to see what happens to U.S. Equities this week after the move higher Thursday followed by the weakness on Friday.  I don’t get the sense that the S&P 500 wants to move higher right now, but I’ve definitely been wrong about that before.  On Monday I’ll be looking for a $RUT Iron Condor to sell.  Lastly, I had a post up on See It Market this week that talks about potential weakness in the Dollar.  Check it out here if you haven’t already.

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