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XLE

Oil Prices Will Determine Where The Stock Market Goes From HereWhile the stock market continues to march higher, economic fundamentals continue to deteriorate. Forward-looking in nature, the stock market tends to discount (ignore) what is happening now in anticipation of what is to come over the next 6-9 months. Although top-down stimulus from central banks and governments have propped up financial markets, economic data points across the globe are signaling a prolonged downturn. For the first time in modern history (BP started keeping recording in 1861), WTI oil prices traded into negative territory reaching $-36.20 per barrel. In essence, storage facilities were giving away oil because they had no more room to store it. Oil markets have been telling us what is truly going on. But are investors listening? Two weeks ago, OPEC+ decided to cut oil production by approximately 9.7 million barrels per day starting in May. Since that time, energy prices have been extremely volatile, falling further. Why did oil prices continue to fall despite the cut in supply? Lack of demand. Despite the fact that OPEC+ vowed to cut global supply by 10%, the gap between supply and demand has grown. Since the coronavirus accelerated, global demand for oil has fallen by 30%, leaving a 20% (20 million barrels per day) gap after accounting for OPEC+ cuts that start next month. The lack of demand has been widespread. According to Rystad Energy AS and the Trafigura Group, energy demand is expected to fall by 28-35 million barrels per day. U.S. oil demand has fallen 30% to 14.4 million barrels a day, the lowest level going back to 1990. In its short-term outlook, the EIA forecasts the hit to oil demand will be 16.7 million barrels a day. According to country officials, India’s crude demand (third-biggest consumer) has collapsed by ~70% as the country endures the largest national lockdown. Canadian oil producers expect the gap between supply and demand to reach more than 1.1 million barrels a day in the second quarter. In Spain, oil product demand fell by 23% in March. With gasoline and road diesel falling by 35.5% and 26.5% respectively. In Italy, which together with Spain imposed some of Europe’s harshest restrictions on movement, retail fuel sales have plunged 85%. The relationship between the S&P 500 and oil prices has strengthened over the last six weeks. The correlation (relationship) stood at .07 (statistically insignificant) in the middle of February, that figure now stands at .86 (statistically significant). Assuming there are no sizable policy stimulus that distorts prices further, I expect oil prices to dictate where the stock prices go from here. Oil price increases driven by short-term reductions in supply will not be enough. Globally, oil makes up 34% of our energy usage. Only an increase in demand will signal a genuine economic recovery. At some point, the stock market and economic fundamentals will need to be reconciled. -Appo Agbamu, CFA This material is for informational purposes only. Under no circumstances should any information or materials presented be used or construed as an offer to sell, or a solicitation of an offer to buy, any securities, financial instruments, investments, or other services. Any investment made is at your sole discretion. There are many factors that you must consider when making an investment decision, including, but not limited to, product features, risks, whether or not an investment meets your investment objectives, risk tolerance, and other personalized factors. Investing in securities involves risks, and there is always the potential of losing your entire investment.
AMEX:XLEShort
by AhrvoStockApp
XLE - Energy sector SPDR S/R levelsHello traders, Description of the analysis: Everyone sees an opportunity in the oil market. Personally, I would not invest in this commodity. There is a surplus of oil, there is no place to store it and no one wants it. It can't stop mining. But investing in the entire XLE energy sector could be interesting. Here are the main S/R zones where the price could react. Everyone makes their own point of view. About me: Hi, my name is Jacob Kovarik and I´m trading on stock exchange since 2008. I started with a capital of 3000 USD. My first strategy was based on OTM options. (American stock index and their ETF ). I´ve learnt on my path that professional trading is based on two main fundaments which have to complement each other, to make a bussiness attitude profitable. I´ve tried a lot of techniques and many manners how to analyze the market. From basic technical analysis to fundamental analysis of single title. My analytics gradually changed into professional attitude. I work with logical advantages of stock exchange (return of value back to average, volume , expected volatility , advantage of high stop-loss, the breakdown of time in options, statistics and cosistent thorough control of risk). At the moment, my main target is ITM on SPM index. Biggest part of my current bussiness activity comes from e mini futures (NQ, ES). I´m trader of positions. I´m from Czech republic and I take care of a private fund (4 000 000 USD). During my career I´ve earned a lot of valuable experience, such as functionality of strategies and what is more important, control of emotions. Professional trading is, in my opinion, certain kind of mental training and if we are able to control our emotions, accomplishment will show up. I will share with you my analysis and trades on my profile. I wish to all of you successul trades. Jacob
AMEX:XLELong
by Jacob_Kovarik
Follow on OIL Gas Index with near term target In the last few weeks the OIL and Gas Index has risen even though crude dropped again despite the agreement of major producers to soon start cutting production by 10%. The gain Friday is encouraging that the rise has further to go. If this is just part of a upward correction a likely target is given. If it quickly starts down again to complete a downward correction the stops I am using are shown on the daily chart. Personally I thing is part of a basing for a major longer term rise given the degree of drop since 2007. (see link for longer term chart). This is just my opinion. Process your way. Feedback always appreciated. Take care. Have a great weekend.
NYSE:XOILong
by goodguy
THE WEEK AHEAD: USO/XLE/XOP, EWW, XLUEXCHANGE-TRADED FUNDS ORDERED BY IMPLIED VOLATILITY RANK: USO 67/167 EWW 57/73 XLE 57/87 XLU 57/53 GLD 51/32 EWZ 50/85 XOP 49/105 SMH 47/58 GDXJ 44/86 XLF 41/53 FXI 32/39 GDX 31/66 TLT 30/25 BROAD MARKET EXCHANGE-TRADED FUNDS ORDERED BY IMPLIED VOLATILITY RANK: IWM 59/60 EEM 46/49 SPY 47/58 QQQ 46/44 EFA 39/45 FUTURES ORDERED BY IMPLIED VOLATILITY RANK: /NG 72/67 /CL 67/157 /GC 51/31 /ZS 51/19 /ES 47/56 /SI 41/51 /ZW 40/32 /ZC 29/27 VIX/VIX DERIVATIVES VIX finished the week at 46.80 with the entire /VX term structure in backwardation. MUSINGS: Shown here is an EWW short put in the May cycle paying 1.00. Camped out at the 23 delta strike, it has a break even of 22.00 and has a 4.54% return on capital in a cash secured environment. Alternatively, the May 15th 22/29 short strangle is paying 1.54 at the mid. * * * Long /CL at $20/barrel via out-the-money short puts or short put verticals may turn out to be the "trade of the year" after (in my case) being taken to the wood shed playing it non-directionally/rangebound between 52 and 63. Only time will tell; it's come up substantially off its lows already with it remaining to be seen whether OPEC+ can get its shit together and quit with the self-harm. * * * In the IRA, it looks to be touch and go for acquiring stuff on my shopping list. (See Posts, below). I've stuck my lines in the water; the best I can hope for is to get some bites at April opex. If I don't get assigned, I'll re-up with a rung to replace any expiring worthless if the market stays down here. Simultaneously, I'm looking to exit my TLT position, which has a cost basis of below $110/share, thinking that the capital can be better deployed elsewhere, but don't want to do that if I don't pick any other dividend-generating underlyings to replace it. Looked at from that perspective, my "personal" yield on the TLT position in light of my particular cost basis is 2.98/$110 or about 2.71%, which isn't horrible.
AMEX:EWW
by NaughtyPines
2
THE WEEK AHEAD: CCL, XLU, XLE, SMH, TQQQ, /CLEARNINGS: CCL (67/284) (What?! 284% 30-day) announces earnings this coming week. Unless you've been under a rock the past several weeks, you'll know how hard it's been hammered with COVID-19 and can easily anticipate further hammering, both with earnings, forward guidance, and the potential reduction of its 2.00 annual dividend (12.86% yield as of Friday close). They have yet to announce a dividend cut, but cruise lines are also not part of the $2 trillion bailout package, so there is probably more pain ahead in the short to medium term, and a potential suspension or reduction the dividend payment will only add fuel to the fire. For those looking to bet on an eventual recovery, however, the May 17th 10 short put is paying 2.30 at the mid price as of Friday close with a resulting cost basis of 7.70 if assigned, a 53% discount over where the stock is currently trading. EXCHANGE-TRADED FUNDS ORDERED BY RANK XLU (67/57) XLE (67/99) SMH (67/72) USO (67/161) EWW (59/86) EWZ (59/95) GDXJ (59/1O2) GLD (58/35) XOP (49/115) SLV (48/63) FXI (44/49) GDX (41/78) TLT (34/28) BROAD MARKET EXCHANGE-TRADED FUNDS ORDERED BY RANK TQQQ (80/175) DIA (78/76) IWM (76/72) SPY (71/65) QQQ (71/55) EEM (73/61) EFA (53/50) FUTURES ORDERED BY RANK /NQ (74/72) /ES (71/66) /CL (58/34) /GC (58/34) /SI (48/60) /ZS (45/23) /ZW (36/36) /ZC (22/34) VIX/VIX DERIVATIVES VIX finished the week at 65.54 with the /VX futures term structure in backwardation. MUSINGS On Margin: Truth be told, I'm not doing a ton here besides either (a) waiting for assignment; or (b) making adjustments where doing so doesn't subject me to "call side whip" such that my put side headaches become call-side ones. And although the high volatility environment is great for premium selling, it does have one minor, pesky side effect that I may have mentioned before -- options liquidity hasn't been all that great, even in what are usually the most liquid underlyings. Additionally, I generally like to be managing the smallest number of crap piles at once as possible, and this closely correlated sell-off has resulted in a few that I'd like to clean up before potentially inheriting more. To a certain extent, one has to be fine with that; it is, after all, the challenging trades that make your life interesting. The IRA: As usual, the IRA's a patience game. Having stuck short puts out there in things on my shopping list (HYG, XLU, IYR, and EFA), the only thing to do here is wait until expiry, at which point I'll be assigned shares or the short puts will expire worthless. On the other end of the stick, I'm looking to dump pieces of my low-yielding TLT at or near all-time-highs and substantially up from my cost basis in those shares at or below 110, which is the last time I acquired shares. Unfortunately, I have been less than religious about keeping tracking of my cost basis of shares in the IRA, since the basic setup was that these were intended to generally be "never exit" or "never get called away" plays. However, I think U.S. treasuries have had a fairly good run, and there are probably better places to stick that capital. The /CL Chart: I've thrown up a monthly USOIL chart here to show how current prices in oil could be a multi-month, if not multi-year opportunity here to take a bullish assumption position in either /CL directly, USO, or one of the beaten-down oil exchange-traded fund sector exchange-traded funds (XOP, OIH, or XLE). With /CL implied/rank at 67/165, I've done some of that already with /CL out-of-the-money short puts, (See Posts Below), but this can also be done in USO more incrementally, since it's a much smaller instrument and has the added advantage of having .03 wide markets here. Alternatively, there is also the USO Zebra/Call Ratio Spread, about which I'll post separately ... .
TVC:USOIL
by NaughtyPines
THE WEEK AHEAD: A PREMIUM RICH MARKETOPTIONS LIQUID EARNINGS ANNOUNCEMENTS: MU (77/112) NKE (74/103) EXCHANGE-TRADED FUNDS ORDERED BY IMPLIED VOLATILITY RANK: EWZ (91/132) USO (89/210) XLU (84/76) GDXJ (82/141) XLE (77/109) EWW (76/105) SMH (73/105) TLT (71/47) XOP (63/154) SLV (73/79) GLD (63/37) FXI (61/63) GDX (57/106) BROAD MARKET ORDERED BY IMPLIED VOLATILITY RANK: IWM (76/71) EEM (74/73) SPY (73/66) QQQ (73/60) EFA (54/53) VIX/VIX DERIVATIVES VIX: 66.04 /VX APRIL: 62.00 /VX MAY: 56.95 /VX JUNE: 49.95 MUSINGS: On Margin: As you can see by the chart showing the top five or so exchange-traded funds having the highest implied volatility ranks, this is largely a closely correlated sell-off. Because of this, I'm somewhat hesitant to pile into a bunch of nondirectional stuff simultaneously, if at all. If we get relief from the selling, these very same instruments could whip back to the call side in closely correlated fashion, leaving me with a bunch of tested call side; whereas now I'm just put side tested (and how). Naturally, this means I have to put up with being far more directional than I would ordinarily be, but these things happen and being patient and mechanical with how you manage current positions will be more productive in the long-term than going bonkers here and bailing out of everything in panic. Unfortunately, this likely means that I will be taking on far more shares of stock than I ordinarily like to hold on margin and then reducing cost basis over time via covered call. I'm always prepared for that, but being in stock on margin isn't buying power efficient, although you always have to plan somewhat for that possibility and go with the flow if taking on shares is really the best way to work yourself out of the trade. In The IRA: As pure luck would have it, leaving my SPY position monied throughout this nonsense (as well as erecting some additional call diagonals at market highs as delta cutters) has served me well. This wasn't particularly prescient or a stroke of genius; I was just doing what I felt I had to do to protect the largest element of my retirement portfolio at a point at which it made the most sense to do that and nothing else. Anyone else who did that and got lucky isn't a guru. No one saw this crap coming, and if they're saying they're a genius, well, I say you're free to call bullshit. Is this an opportunity to pick up things on your shopping list? Maybe. I've taken this opportunity to ladder some out-of-the-money short puts out in a few things that I've had on that list for ages -- XLU, IYR, EFA, and HYG; all dividend generators which have been just far too pricey to deploy the frustratingly large bit of dry powder I've had sitting on the sidelines for ages as the market inexplicably ground up to more and more ridiculous valuations. Will I get in at the best possible prices? The jury's out. I will be getting in far lower than at the market highs we saw just a few weeks ago (assuming price stays below the rungs of my ladders) and won't let anyone talk me out of the proposition that lower is always better in your retirement account even if I don't hit the lows perfectly. The basic strategy here, after all, isn't largely about share price; it's about assembling a portfolio that will pay out dividends regardless of growth and in which you can reduce cost basis over time via short call. It's three-legged: dividends, short call premium, and (if it happens) growth. If the grand arc of time has taught us anything, it's that growth may be an "average given" over the entire life of the market, but may not be over shorter time frames.
AMEX:EWZ
by NaughtyPines
5
THE WEEK AHEAD: ADBE, ORCL EARNINGS; GDX/GDXJ, USO/XOP/XLE, EWZEARNINGS: ADBE (89/65) and ORCL (77/60) both announce earnings on Thursday after market close and have the metrics I look for in earnings-related volatility contraction plays (>70% rank; >50% 30-day implied). Pictured here: a short strangle paying 11.65 at the mid price camped out around the 16 delta. Its defined risk counterpart: the 265/275/395/405 ten-wide iron condor pays 2.46. Off hours markets are showing wide, so look to price setups out during the regular session. The delta neutral ORCL April 17th 40/55 short strangle pays 1.45. EXCHANGE-TRADED FUNDS WITH EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE PAYS >10% OF THE STOCK PRICE: GDX (99/51), April USO (97/66), April GDXJ (96/58), April XLE (97/75), April EWZ (92/52), April XOP (92/51), April TLT (91/41), May EWW (91/48), April XLU (90/43), June SMH (84/56), April FXI (65/33), June BROAD MARKET WITH EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE PAYS >10% OF THE STOCK PRICE: EFA (87/37), June QQQ (83/43), April IWM (82/46), May SPY (78/41), May EEM (70/37), June FUTURES: /CL (97/65) /GC (84/25) /SI (70/30) /NG (65/48) /ZS (30/19) /ZC (21/22) /ZW (13/27) VIX/VIX DERIVATIVES: VIX finished the week at 41.94, so it has been a rough ride for shorters who were in plays before this volatility expansion (points to self). The basic watch word is "patience"; volatility will abate at some point in time ... .
NASDAQ:ADBE
by NaughtyPines