WHYTECLIFF FINANCIAL CORP.
By Bradley Parkes
Markets – Trades
Investment ideas for June 01, 2015
AVOIDS
Let us be blunt. Three words…Energy and mining.
The double bottom has not been made – one more spike down on oil and gold. AT LEAST, we are so close to 100% deflation views that we are getting close to inflation.
SHORT IDEAS
OIL (HOD.to)
GOLD (HGD.to)
EUR (EUO.N)
LONG IDEAS
USD (DLR.to)
German DAX (EWG.N)
Japanese Stocks (EWJ.N)
China (FXI.N)
BONUS
Long DOW - With AAPL a new component in the DOW and with capital flows to the US from (Africa, Asia, Europe...) the S&P500 and DJIA are likely going to peak at a level considered obscene...DJIA = 22,000. This trade is the break down of European socialism and will violate cheap/expensive market metrics as money flees to where it seems “safe”. It may not seem rational.
Trade Idea Reasoning
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Long USD
The rise in the USD is not over, and in need to check the charts but a hold of 92-93 (approximately) @ the lower Bollinger Band and let the weekly chart work of its RSI overbought status should be a good entry point. Major support is in the 93-95 range.
The DLR.TO ETF is a buy should the DXY bounce off the 95 level with a decline in RSI on a weekly
-a stop at 93 (or the equivalent level on the DLR etf) would be the proper risk move
-the weekly chart on DLR looks like a cup and handle pattern
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Long DAX
Money fleeing weak Europe leads to Germany as the DAX will eventually dividend out Marks if/when the worst happens (Grexit and Brexit). If the Euro stays weak and the DAX is rising then this trend is safe.
The trend is currently parabolic (mirror of the USD) and needs a rest and/or concurrent retracement with the USD.
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Long Japan
Japan is at the end of 25-30 years of “deflation” and the Japanese stock market and bonds have confounded and frustrated an entire generation of investors leaving few interested. I like the Dylan Grice trade from a few years ago, when he suggested a real cheap gamble would be to buy way out of the market long dated calls and wait for Japanese hyperinflation. People used to speak of Japan in reverence and now it is ignored and mocked....it will never recover is the mainstream view. Yet the Japanese central bank has told the world they will buy stocks. Don’t fight central banks, there are easier targets.
Like the USD and Germany this trade is parabolic at the moment, need a bounce of $12.05 on the EWJ and a quick recovery to $12.40 and this would suggest the return of the bull.
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Long China
I think China is a counter cyclical investment at this point in the cycle. The purge must be close to ending because the reserve requirements have been cut and interest rates set lower. Moving both these down forces money into the economy, if you were worried about corruption, you would not make this move, as free money moves to the corrupt first in China.
Lower commodity prices, especially oil, has made this trend more viable, yet surging imports could suggest hoarding and stockpiling and not expansion. Nobody knows what to believe out of China, but maybe the Chinese like looking weak. Sun Tzu was reckoned to say act strong when weak and behave weak when strong.
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Short Oil
I live in Calgary. My current profession is as a geologist. I hate typing this but to make the head and shoulders bottom I expect to lead us to $70-75 by year end we need another leg down to the low $50s. I do not think there is a trip to $20; I do not believe we are in a “new era” of oil. But I do not think we have washed out the smart. I have hubristically called the bottom when it traded to the low $40s. I still believe that, but the market enjoys shaking out the weak and punishing the early. I do believe this sets up as one of the best investments in decades. Let’s see what happens to all the “new era” claims when ISIS bombs a Saudi mosque in Riyadh or hits a pipeline. We will be back in the “old era” of violence and political instability in the Mid East.
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Short Gold
When I first wrote this I said if gold were to break back above $1205 I would rethink my view. I have changed the break above price to $1250. Gold is the metrosexual of trading instruments. It’s rugged, but very emotional. Those that promote gold have not been broken yet. It is manipulated in their mind so they will never be wrong. That sort of thinking makes me wish gold would drop to $200/oz and sit there until somebody commits suicide. Then back up the truck. I still think gold needs to test $1000 and have one more sharp painful leg down. Central banks, China and smart people all need to lose more money. Once $1000 is broken we would test the 1980s top. If that holds the new bull should start after some consolidation.
I think this is the easiest of the trades listed. THAT COMMENT HAS ME VERY WORRIED ABOUT BEING WRONG.
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Short EURO
The EUR has had a rally in it, but it’s eventually going to test the all time low. The DXY, JPN, DAX should all trade inversely to the EUR. I know this trade is obvious, but I bet you don’t have it on. It is so obvious nobody is interested in anymore. I do believe the EUR survives in some manner with Germany still in, but a repricing is needed, which actually helps an export heavy Germany.
BONUS
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LONG DOW
After typing that I had to go brush my teeth, but that is what makes this trade so amazing, it makes you want to vomit a little. PE & CAPE should exceed all other peaks because this is the death of Euro socialism + US QE; this is not like any other bull market. This one is hated, its vomit inducing. AAPL should push the DJIA to metrics higher than the S&P500.
Disclosures:
Investors should carefully consider the investment objectives, risks, charges and expenses of any investment. The above does not constitute investment advice or recommendations, just crazy ideas I have when I cannot sleep. There is no guarantee that any investment (or this investment) will achieve its objectives, goals, generate positive returns, or avoid losses. The information provided should probably be disregarded and potentially treated as a contrarian advice, with the expectations that I am 100% wrong on everything. Please consult someone with a higher level of intelligence than the author with respect to investing money.
