13,000 Thursday – Nasdaq in Critical Territory

13,146.  

That's the 50-day moving average on the Nasdaq that we need to cross back over by tomorrow or it's likely the Nasdaq continues to correct back to the 200-day moving average at 11,721, which would be 10% down from where it is now.  Since we know the Nasdaq is ridiculously over-valued, the 10% down scenario is a lot more likely than the resume the rally scenario.

Sure we just got $1.9Tn to play with but we knew we were getting that since November, when the Nasdaq was at 11,000.  $1.9Tn is 10% of our GDP and 11,000 + 10% is 12,100, not 13,146, which is 10% too high.

Everything is Awesome again – just like it was in 2007 and do you know what else is just like 2007?  Refinancing!  That's right, American Homeowners cashed out $152.7Bn of home equity last year, up 42% from 2019 and the highest level of withdrawals since 2007, although 2005, 6 and 7 were actually $262Bn, $320Bn and $240Bn respectively – so we're not there yet.  Still, as we now know in retrospect – people using their home equity as a piggy bank does not tend to end well, does it?

We're still on a stimulus high, of course and the Dow is at an all-time high at 32,300 but it's more like 32,400 in the Futures along with S&P 3,925 and Russell 2,305 and we'll be betting against them into the weekend so don't miss tomorrow's Short-Term Portfolio Review.  Considering the all-time highs, the STP is holdiing up remarkably well (see yesterday's Live Trading Webinar for my notes) but that's because our key shorts were TSLA and QQQ, which worked out very well for us and we even cashed out our Tesla shorts this week – another reason we need to adjust the STP.  

Oil prices are up 80% since October and OPEC just increased their demand forecast by 200,000 barrels a day, which is nothing – and that's for the 2nd half of the year, so no reason to get excited in March.  In its report, the cartel noted that the crude stocks of the Organization for Economic Cooperation and Development’s rich nations dropped in January to 46 million barrels above the 2015-2019 average, with all three major global regions winnowing down the supply glut they built up during the worst of the pandemic.

Meanwhile, OPEC’s report showed that Saudi Arabia last month cut 930,000 barrels of the million barrels a day that it had promised to unilaterally hold back from the market, according to secondary sources cited by OPEC.  That said, the organization still sees few fresh signs that U.S. production—which before the pandemic had challenged the cartel’s status as the world’s swing oil producer—will rebound to near its pre-coronavirus levels.  OPEC left its forecast for a 160,000 barrel-per-day increase in U.S. supply for 2021 unchanged, explaining that non-OPEC “upstream capital spending in 2021 is expected to remain well below 2019 levels, mainly due to the significantly lower projected investment in U.S. shale.”

We think they are very wrong about that last part as all this free money sloshing around combined with the "use it or lose it" situation people who own oil fields find themselves in as we wind down our use of fossil fuels is a lot of incentive for US producers to pump all they can.  The US still imports 3Mb/d of oil and that means US producers still have a shipping advatnage over 3M competing barrels so of course they will work to fill that gap.  

In our Short-Term Portfolio, we have the following position on the Oil Ultra-Short ETF (SCO), which is still good for a new entry:

Notice we sold two sets of short calls as we didn't expect to get to $8 very quickly and it's only 50 days until April expriation on our net $2,125 spread that can pay us back up to $15,000 if oil is below $60 in January for a very nice $12,875 (605%) return on cash.  If all goes well, we can sell another set of calls and end up with a free spread.  Aren't options fun?  

For today, $65 is a very nice shorting line on Oil (/CL) Futures – with very tight stops above.

Be careful out there.