Weekender for 1/15
1. Market Summary
Consumer Price Index Matches Expectations
- Consumer Price Index (CPI) matches expectations on the headlines, stocks bounce up and down then rally.
- CPI internals show continued surging services, rents, food — the things we need.
- S&P 500 bumps into the 200-day simple moving average (SMA) as PHLX Semiconductor Sector (SOX) continues up through the 200-day SMA, small-caps and mid-caps post the best moves.
- Still some good patterns in the “right” sectors that we are looking to add if the moves can continue.
Inflation just at 6.5% overall and 5.7% core. Surely we have hit pricing nirvana. Well, that is what you would think. Stocks rallied into the CPI, apparently on the notion prices would continue to fall. The CPI hit expectations on the headline numbers. Futures flipped from DJ30 +169 to DJ30 -129 in seconds. Looked as if some classic sell on the news action was unfolding. Stocks rebounded, surging to premarket highs. Then once again they flipped, selling through the first 20 minutes of trade, taking out the futures’ low. Again a surge back upside, a pause to the European close, then new sessions highs early afternoon.
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NOTE: The figures and information above are from the 1/12 report.
Watch the Investment House Videos For This Week Here!
NOTE: The videos are from the 1/11 report.
2. Targets Hit
Investment House Daily:
For the past several months, we’ve been into heavy metal. Literally. Not the musical kind but the more earthy kind, industrial or precious. Gold is breaking out over $1,900, as sovereign nations, particularly China, buy more. It is said by some that China is buying gold to give it a way to run around the sanctions that will be levied when China invades Taiwan. Others say the gold is to back a gold-backed yuan designed to usurp the U.S. dollar. I think those are both likely.
Even more, however, when the world’s economies face the problems emerging here in 2023, precious metals stocks are a very good way to make a lot more dollars that can be used to purchase more gold. As for the industrial stocks, well, they are just in shorter supply since the pandemic, and demand is still solid enough to drive those stocks higher as well.
Thus, we are in and will continue to be in these stocks. As they move higher, we will bank gain at logical levels, letting some of the position run, adding more when the time is right. As a result, we have taken gains and entered new positions. This week, we banked some gains in the following gold and industrial metals stocks:
McEwen Mining Inc. (NYSE: MUX) (gold, silver): 80% gain in the stock.
Companhia Siderurgica Nacional SA (NYSE: SID) (steel): 15.79% gain in the stock.
Vale SA (NYSE: VALE) (industrial metals): 76% gain in the options.
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Technical Trader Alert:
The consistent rallying stocks in this market appear to be all based in the “hard stocks” — the stocks of the companies making hard assets such as machinery, industrial goods, metals, minerals. Indeed, those groups are returning solid gains, such as these we banked this week:
Century Aluminum Co. (NASDAQ: CENX): 81% gain in the options.
Cleveland-Cliffs Inc. (NYSE: CLF): 100% gain in the options
Newmont Corporation (NYSE: NEM): 107% gain in the options.
Southern Copper Corp. (NYSE: SCCO): 140% gain in the options.
At the same time, when great setups in great stocks appear in other areas, it behooves us to take advantage of that positioning. Thus, when we saw retail perennial winner Crocs, Inc. (NASDAQ: CROX) form an excellent consolidation at the 20-day exponential moving average (EMA) just ahead of Christmas, we were ready to play the move.
CROX faded from a November rally, easing back to the 20-day EMA and consolidated there over a two-week span. We waited, and on Dec. 21, CROX broke higher with a gap and rally. We entered with February $100 call options that were asking for $10.90, with the stock trading just over $100.
With CROX, these plays can be bought and forgot about until the target is hit. That is what happened here. CROX marched steadily up the 10-day EMA, compiling session after session of small gains. Perhaps not anything that provides an adrenaline rush, at least not until the stock hits your target and you see what you can bank.
Indeed, this week, CROX picked up some speed, gapping higher on Wednesday and rallied into Thursday. Friday it finally showed a bit of cooling, so we issued the alert to sell a portion of the position with the call options bidding for $28.10 — a solid 157+% gain.
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Rapid Profits Alert:
This week, we continued adding more iron to our diet. Last week featured SID and MUX. This week, Vale SA (NYSE: VALE). Not the resort (no “i”), but the miner. VALE moved right up the 10-day EMA after we issued the buy alert for $16.69 on Dec. 21, as VALE broke higher.
The stock rallied through Christmas but faded modestly to start 2023. The bids immediately returned, however, and VALE bounced right back over the 10-day EMA, marching higher into this week. It touched our target on Jan. 9, and we issued the alert to sell with the stock bidding for $17.55 — a solid 5.15% gain added to the brokerage account.
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3. Covered Call Options Play
Antero Resources Corp. (NASDAQ: AR) — Antero Resources Corp. is currently trading at $29.95. The Feb. 17 $30 Calls (AR20230217C00030000) are trading at $2.14. That provides a return of about 8% if URBN is above $30 by the expiration.
