OPEC+ agrees to increase production. Oil moves. Adding more Saudi Arabia with MSCI. Reducing company risk in US oil patch. Bitcoin gets smashed and recovers (we hope). Intel loses a CEO - time to top up.
Market Jitters - Tariff Tantrum Big news for the weekend was OPEC announcing an increase in production
With 1 million barrels of oil expected to reach markets, Brent crude price dropped - no surprise there as Middle Eastern oil is supplied into that market. US crude prices rose which conforms the supply information from Permian Basin.
The signals from OPEC and the easing of fear about trade tensions did push US markets up on Friday.
Now there is a cautionary note coming from this rise in US market values. The share of household assets invested in equities is reaching highs, says doomsayer, Mark Hulbert. One day he will be right.
The next moves in reaction to tariffs came from China where they cut bank reserves by $100 billion. This flowed through immediately to a weaker Chinese currency. My most recent forex call option on USDCNH is looking solid with the price action running steeper than the price scenario I modelled.
This price action has brought the 2nd of my 3 trades in-the-money with a 6.52 strike.
World Cup The Russia Google search is all about football and tourists landing in hot water. No mention of the OPEC announcements which have important implications for Russia's economy.
Of course the Western media is playing up allegations about cover ups in Russian doping.
World Cup news is focused on the outcome in Group C where Australia are playing. No surprise there.
England and Senegal and Colombia and Japan excel. The greatest excitement comes when Panama scores its first ever World Cup goal in a 6-1 drubbing at the hands of my team, England.
Portfolio News
Sold
Chesapeake Energy Corp (CHK): US Oil Producer. Consistent with my strategy of reducing exposure to specific midstream oil producers, I sold a portion of my exposure to this oil producer in favour of the NYSE Pickens Oil Response ETF (BOON). Sale produced a 50% profit since May 2018 (6 weeks)
Bought
NYSE Pickens Oil Response ETF (BOON): US Oil Explorers/Producers. I added a small parcel to match the proceeds of the sale of Chesapeake Energy (CHK). Chesapeake is the largest holding in this ETF. See TIB234 for the discussion on BOON.
Intel Corporation (INTC): Semiconductors. Intel CEO Brian Krzanich resigned on Thursday after it was found that he violated a company policy regarding relationships with co-workers. The affair was apprently over before he took over as CEO. I was watching CNBC's Jim Cramer discussion on Intel when the news broke. He was very bullish on the prospects for the company and said that the markets had not absorbed the full breadth of what the business was doing to reduce its reliance on PC chips. Buying shares on the day of a CEO resignation is not always a smart move - especially putting an order on in pre-market trading.
Intel share price has pulled back more than 10% from its highs this last month. It has also under-performed the last few months against a backdrop of growing economies. The chart compares Intel (black bars) over the last 5 years to Van Eck Vectors Semiconductor ETF (SMH - orange line).
The divergence started in early 2016. The growth of NVidia (NVDA) will be a strong contributer to this divergence, The gap is now over 50 percentage points. Close half that gap and Intel will reach $59 for a 12 to 15% increase from current levels. The change of CEO will renew the focus. The risk in the trade is that they choose to jettison the changes that Brian Krzanich was driving.
Note: VanEck Vectors Semiconductor ETF (SMH) is a market capitalisation weighted ETF and Intel accounts for the largest holding at just under 10%
iShares MSCI Saudi Arabia ETF (KSA): Saudi Arabia Index. The formal announcement that Saudi Arabia will be added to the MSCI Emerging Markets index was made last week. This will drive an important amount of passive inflows to Saudi equities as fund managers that track the index have to add stocks. The OPEC meeting was expected to increase output at its weekend meeting. That will also flow through to Saudi income increasing which should also give Saudi equities a tick up.
Note: You may think I am being inconsistent as I wrote in TIB 241 that wanted to add Saudi Arabia originally because its returns are somewhat uncorrelated with other markets including oil markets. I am expecting an uptick because other investors are inconsistent.
I did also read an article at the weekend which pointed to an uptick in GDP following the removal of the ban on women driving. I can believe that as more people driving is more demand for fuel and motor vehicles and related services and more shopping - simple really. This will take time to flow through and it is a bonus to the investing idea only.
https://www.bbc.com/news/business-44578119
Shorts
Eurodollar 3 Month Interest Rate Futures (GEZ). Following a margin call in my IG markets account over the weekend driven by Bitcoin price collapse, I closed my remaining Eurodollar position for 1 basis point profit. I replaced that trade in Monday trade once the Bitcoin price made its reversal.
Income Trades
One bid hit in Friday trade.
Wells Fargo & Company (WFC): US Bank. Sold July 2018 strike 58 calls for 0.55% premium (1.6% to purchase price). Closing price $54.98 (higher than last month). Price needs to move another 5.5% to reach the sold strike (easier than last month). Should price pass the sold strike I book a 209% capital gain. Income to date amounts to 11.2% of purchase cost.
Cryptocurency
Bitcoin (BTCUSD): Price range for the weekend was $1012 (14.9% of the high) with a sharp move down on the back of news from India and Japan. So much for writing about confidence following the Bithumb hack last week. The price action took out the support level it had been holding above for the last 10 days and tested the February low. That level held.
The price action did trigger the liquidation level in my Bitmex account of the June futures long I was holding. Trade closed at $6029.5 for a $2962.50 per contract loss. The extent of the drop did surprise me as I felt I had enough leeway on the liquidation level. The sad part of the spread trade is I had already banked profits on the short side of the spread and was exposed. I had been planning to replace the short when price reached the top of the channel.
I also got the margin calls over the weekend in my IG Markets account. I sold a few positons and I added cash.
Ethereum (ETHUSD): Price range for the weekend was $124 (22.8% of the high). Price also broke below the support level and headed down to the middle of the channel. It is in "no mans land".
I sold one contract (5 ETH) to cover margin in the account. Loss was $44.03 per contract (7.7% loss). I do not normally do this but I wanted to reduce exposure - I remain exposed to 25 ETH in this account.
CryptoBots
Outsourced Bot No closed trades on this account (212 closed trades). Problem children list was unchanged though a lot uglier (>10% down) - (18 coins) - ETH, ZEC (-49%), DASH (-48%), BTS, LTC, ICX (-45%), ADA (-48%), PPT (-66%), DGD (-54%), GAS (-66%), SNT, STRAT (-56%), NEO (-62%), ETC, QTUM (-50%), BTG (-65%), XMR, OMG.
ICX, ADA, QTUM all joined the 40% down club. 4 coins traded to more than 60% down (PPT, GAS, NEO, BTG) with PPT the worst.
Profit Trailer Bot No closed trades. Dollar Cost Average (DCA) list was unchanged at 12 coins with 1 coin (OMG) trading flat and 11 worse. Five coins are trading worse than -50% down. Worst faller was CMT with 16 percentage points drop
New Trading Bot Positions dropped 18 points to -55.9% (was -47.6%).
All coins trade down hard with ETH the worst.
Currency Trades
Forex Robot closed 10 trades (0.54% profit) and is trading at a negative equity level of 2.27% (higher than prior day's 1.7%).
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. All other images are created using my various trading and charting platforms. They are all my own work
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex and crypto prices
Crypto Trading: get 6 months free trades with Bitmex for leveraged crypto trading. http://mymark.mx/Bitmex
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June 21-22, 2018