Author Archives: MPTrader

Generational Opportunity for Upturn in Yield

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We have been long the ProShares UltraShort 20+ Year Treasury (TBT) — the inverse, double-levered, longer-term T-bond ETF — in our MPTrader Model Portolio, expecting a downturn in T-bond prices in conjunction with a generational opportunity to capture the upturn in yield and interest rates after a 35-year bear market.

Yes, “the turn” has become a marathon, certainly not a sprint. However, increasingly my big-picture technical chart set-up argues strongly that yield will inexorably grind higher towards significant bullish catalysts that will propel both yield and the TBT higher in the months ahead.

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Financials & XLF May Have Further to Run

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Financials on Monday responded positively, as expected, to the prospect of tax reform legislation, with names like Bank of America Corporation (BAC), Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) all gapping up on the open, following by higher closes of between 2 and 3.5 percent.

The Financial Select Sector SPDR ETF (XLF) surged 1.5% to close at 28.00, after gaining nearly 5% last week.

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Eye on IWM Versus SPY:  Is Bull Market Losing Steam?

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On November 6, we noted in our Mid-Day Markets update that a comparison of the SPY and IWM showed a deterioration in the Russell 2000 small-cap ETF relative to the big-cap SPY. We said that as long as IWM was trading below its 20 DMA at 149.11, we would view it as vulnerable to downside continuation off of its Oct 9 all-time high at 150.58.

We were watching and continue to watch this SPY-IWM relationship closely, as, historically, in the later stages of a bull market, a divergence is very likely.  In other words, as a bull market loses steam, small companies lose upside momentum relative to the “go to” mega-capitalized companies. (more…)

XME Miners/Metals ETF Pushing Towards Significant Breakout

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The SPDR S&P Metals and Mining ETF (XME) could be on the verge of a surprising, very powerful upside breakout after completing a 6-month corrective accumulation period.

After Trump was elected last November, the XME climbed from just under 25 to a February 2017 high at 35.21, or a whopping 41%, in anticipation of the enactment of the Trump agenda, concurrent with lower taxes, stronger economic growth, and upward pressure on inflation.

Thereafter, however, in reaction to the Administration’s failure to pass health care legislation, coupled with a myriad of disappointments and political fumbles, prospects for “The Trump Trade” faded miserably.

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Braving the Wild Nat Gas Ride

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To anyone friendly to natural gas for the past five months, holding a long position certainly has been a challenge, and has been more akin to riding a bull on the PBR circuit.

Just to illustrate the bumpy ride, take a look at the 4-hour chart of the nat gas futures (NG) showing the price swings across a multi-month range carved out between 2.90 and 2.82 on the low side of the range, juxtaposed against resistance atop the range at 3.15 to 3.23. Within that range, over several months, there has been no significant change in the perceived  fundamentals that indicate there is just too much natural gas around to lift prices consistently above 3.15 for any length of time, yet there is also an apparent perception that under 2.90, nat gas prices are relatively cheap.

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TBT Advance Gains Momentum

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As we noted in our article last week, we have had strong reasons technically as well as from a macro perspective to be bullish on the ProShares UltraShort 20+ Year Treasury (TBT) since its low just under 33 on September 7.

And the TBT has continued to rise since then.  It gapped up Wednesday to $35.50 from Tuesday evening’s close at $34.46.

The upward thrust occurred just in advance of the unveiling of the President’s Tax Reform Plan (Wednesday at 3 PM ET), so we have to couch its bullish action under that umbrella.  But with lower taxes for most individuals and businesses and a one-time business foreign repatriation tax-break being reasons to anticipate an increase in spending, infrastructure, and investment, higher interest rates likely will be a bi-product of such a policy mix — if tax reform becomes law. (more…)