In today’s issue, we’ll update this week’s trading activity and update you on current positions. Earlier this week, we alerted you on two trades…
First, you should be filled exiting the final portion of your Teucrium Wheat Fund (WEAT) position for a 19.15% gain. Excellent!
This comes on top of gains taken on the first half of the position and represents a total profit of 13.2% on the entire WEAT trade.
Second, you should be filled on the recommendation to buy ProShares UltraShort S&P500 (SDS). Great!
This position is already showing a modest gain as stocks finally appear to be rolling over. And it’s a good place to be, given recent weakness in technology shares, weak technical backdrop and growing geopolitical uncertainty.
Additionally, prospects that the U.S. Fed will remove the quantitative easing punchbowl later this year offers another headwind for stocks that have been dependent on easy money for so many years. It’s no wonder volatility is on the rise.
We expect this to pay off for SDS, as well as your holdings of PowerShares Ultras Short Dow 30 ETF (DXD) and Direxion Emerging Market Bear 3x ETF (EDZ). Continue to hold.
Now for an update on some of your other holdings…
Let’s start off by addressing the recent slide in the U.S. dollar.
The late-June swoon in the dollar carried into July but is showing signs of stabilizing. That makes sense given the magnitude of the decline, severely oversold technical condition and somewhat unjustified strength in the Eurocurrency.
The European Central Bank and Bank of England took a surprisingly hawkish stance toward monetary policy in recent weeks, which lifted their currencies relative to the greenback.
But we think the slide in the U.S. dollar is overdone. In fact, there’s a good chance that this morning’s low will mark an intermediate term bottom.
That’s because of this morning’s stronger than expected jump in June payrolls, which included an upward revision over the last two months.
The upbeat jobs data bolsters the Fed’s case for tighter monetary policy, including normalizing their enormous balance sheet later this year, as well as another interest rate hike, which is dollar supportive.
While we see a tradeable rally in the U.S. dollar in the short-term, we’re running short of time on our September UUP call option position. So here’s the plan: We’re looking to exit these calls on the next rally – to minimize time decay of the option premium prior to expiration.
We may roll out to longer dated UUP call options, or recommend a new strategy to take advantage of dollar strength. We’ll let you know just as soon as the time is right so stay tuned.
Meanwhile, hawkish central bank jawboning prompted a rather dramatic jump in bond yields. This includes a jump in 10-Year German Bund yields to their highest level in 18 months.
This jump in yields is a negative headwind for our precious metal positions, including VanEck Vectors Junior Gold Miners (GDXJ), Direxion Daily Junior Gold Miners Index Bull 3x Shares (JUNG) and Velocity Shares 3x Long Silver (USLV). Plus, our two mining stocks Seabridge Gold (SA) and Sibanye Gold (SBGL) have been pressured as well.
We still expect a near-term bottom and upside reversal in both silver and mining shares between now and mid-July, just as our E-Wave cycle model has been forecasting. However, gold could remain under selling pressure a while longer. It’s possible the more bullish cycle trends for silver and junior miners are being overridden by the more bearish projection for gold, but it’s too soon to say for certain. We will let you know instantly if these forecasts change.
Also, we see new buying opportunities in oil and energy sector stocks just ahead, and will let you know when the timing is right to make your next move. In the meantime, we’re closely monitoring current positions, so continue to hold. And stay tuned for fresh updates and trade alerts coming your way soon.
Good investing,
Mike and David
