Jeff Bishop’s Total Alpha Strategy | Jump On The Week

A strong November jobs report surprised the market on Friday and sent stocks surging higher. The surprise report showed payrolls adding 266,000 jobs in November, dropping the unemployment rate to its historic low of 3.5%. The Dow gained 300 points on the number, and Apple hit an all-time high ($270.71).

The stage is now set for the upcoming Federal Reserve meeting which is scheduled for the 12th.  While they are not expected to touch the key interest rate level—their comments are sure to drive the market in one direction or another.

Now, that doesn’t mean I’ve been sitting around and waiting for this Fed event.

No…No…No

In fact, it’s been business as usual for the TA portfolio:

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That said, there is plenty to go over in this issue of The Jump—  I cover the economic calendar, corporate events, IPOs. As well as, my thoughts on the trade deal,  current positions, and trades I’m looking to get into.

The Looming Trade Deadline

While there’s no shortage of rumors surrounding trade talks, we have yet to hear anything concrete. So far it’s one political posture after another. Yet, that all stops dead on December 15th.

Without a deal, the administration is set to raise tariffs on Chinese imports right in the middle of the Christmas season. To add insult to injury, these will directly target many of the consumer gifts purchased. While it will take a while for the pricing to roll through, it smacks of bad taste to come across as Ebenezer Scrooge.

Agricultural purchases appear to be the biggest hangup at the moment. China refuses to be tied to a specific purchase amount, something the Trump administration is dead set on. There could be other underlying problems, but it remains largely unknown.

What we do know is the closer we get to the deadline, the more rumor will be treated as fact. That means every tweet could drive the market haywire in seconds.

Impeachment Showdown

The U.S. House of Representatives plans to draw up and vote on articles of impeachment before the holiday recess. Complaints on process and procedure are largely being ignored. The narrative has become extremely partisan, with neither side backing down.

However, the Senate appears rather serious about the entire matter. Neither side wishes things to devolve into the circus that’s hung over the House. Republicans and Democrats largely agree they want a civil trial, regardless of their personal feelings.

Still, the pressure and presence of the showdown could push the president into rash decisions. That could make a budget deal difficult. But neither the administration nor congress wants a shutdown this time. If anything, they will pass a continuing resolution to fund the government at current levels.

Don’t Forget British Politics

December 12th also marks a special day for the UK to go back to the polls to see if they can break a deadlock in parliament. Polls currently show little change, which makes continuing in action all the more likely.

World’s Largest IPO

And don’t forget about the world’s largest IPO that you can’t invest in. Aramco set its public offering on December 11th. With an estimated value of $1.7 trillion. That also comes on the back of news OPEC and some non-members working to hammer out an agreement to keep oil production in check in a bid to raise prices.

On watch…

Call spreads

NFLX, AMZN, TEAM, FB, CVNA, AMD, PTON

Put spreads

TWTR, WYNN, FANG, EXAS, TPX, BIIB, COST, NKE, TSLA, ULTA, ZS, CMG, SMG, IWM, GOGO, AMZN, HUBS

Want even more trade ideas?

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Next Week’s Calendar

Monday, December 9th 

  • Major earnings: MDB (Mongo Database), TOL (Toll Brothers), SFIX (Stich Fix)

Tuesday, December 10th 

  • 4:30 PM EST – API Weekly Inventory Data
  • Major Earnings: AZO (Autozone), HDS (Home Depot Supply), PLAY (Dave & Busters), GME (Gamestop)

Wednesday, December 11th 

  • 7:00 AM EST – MBA Mortgage Applications
  • 8:30 AM EST – Consumer Price Index – Looking at any signs of inflation
  • 10:30 AM EST – Weekly DOE Inventory Data
  • 2:00 PM EST – Fed Decision – It’s not what they do, but what they say
  • Major earnings: AEO (American Eagle), PLCE (Children’s Place), UNFI (United Natural Foods), VRA (Vera Bradley), TLRD (Tailored Brands)

Thursday, December 12th 

  • 8:30 AM EST – Weekly jobless claims and continuing claims
  • 8:30 AM EST – Producer Price Index
  • 10:30 AM EST – Weekly EIA Natural Gas Inventories
  • Major earnings: CIEN (Ciena Corp), ADBE (Adobe), AVGO (Broadcom), COST (Costco), ORCL (Oracle)

Friday, December 13th 

  • 8:30 AM EST – Import & Export prices for November
  • 8:30 AM EST – November Retail Sales – Good look at how we did to start the shopping season
  • 1:00 PM EST – Baker Hughes Weekly Rig Count

Major IPOs This Week

  • Bill.com Holdings (BILL) 8.8M shares expected to price between $16-$18
  • OncConnect Financial (OCFT) 36M shares expected to price between $12-$14
  • Sprout Social (SPT) 8.823M shares expected to price between $16-$18
  • XP Inc. (XP) 72.5M shares expected to price between $22-$25

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This Gold Loophole Could Help You Save on Taxes

By Grant Wasylik, analyst, Palm Beach Daily

Most people don’t know this… But there’s a way to turn losses on your gold holdings into immediate tax savings – without losing possession of your precious metals.

It involves a loophole under Section 1091 of the IRS code. It’s known as the “wash-sale rule.”

A wash sale is when an investor sells a security at a loss to claim a tax write-off… only to repurchase the same (or nearly identical) security within 30 days of the sale.

Now, the IRS prohibits such sales. However, its rules don’t cover “precious metals.”

This means they’re not subject to a holding period for tax-swap sales.

So if you’re sitting on losses on gold bars, numismatic coins, or silver, you’ll want to take advantage of this loophole before the end of the year. And I’ll show you how.

But first…


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“Wash” Your Gold or Silver

I wanted to find out why conducting a wash sale now would be good for precious metals owners. So I spoke to some of the top precious metals dealers in the country.

Rich Checkan is president and chief operating officer of Asset Strategies International. It’s one of the most reputable precious metals dealers in the country.

Here’s what he told me:

Now is a particularly good time to consider this strategy. Gold is about midway between its 10-year high and low. And over the last decade, silver is nearly 10 times closer to its low.

Why is that important? It’s simple. The lower the price when you execute a tax swap, the bigger the tax advantage, and the smaller the cost to capture it.

And if you act quickly, you should be able to put this to work this tax year.


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Here’s an example of how it works…

Let’s say you bought an MS-64 $20 Saint-Gaudens gold coin for $2,200 per ounce in 2010. Today, those coins are worth about $1,581.

Under the wash-sale loophole, you could sell your coins at the current market price… and then immediately repurchase them for the same price.

In this hypothetical transaction, you’d realize a taxable loss of $691 per coin – which will lower your 2019 tax bill. But you’d still be able to keep your coins.

Now, there’s a transaction fee on the sale (1–4% on numismatics and 1–2% on bullion), and the shipping costs. So you’ll want to make sure these costs are less than what you’ll write off in taxes.

Plus, if you don’t use up all your losses this year, you can roll them forward into future tax years. And if you don’t have an offsetting gain, you can still take up to a $3,000 loss in the current year.


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How to Execute a Tax Swap

Remember, this information is for general tax purposes only. We strongly encourage you to consult your accountant or tax adviser before making a tax swap.

If you do, here are the steps you should take:

  • Talk to your tax adviser: Tell them what you’re contemplating. Could you use some losses to offset gains on a one-for-one basis? There’s a chance your CPA may not even know this avenue exists.
  • Contact a gold dealer: We recommend Asset Strategies International or David Hall Rare Coins. Both can help you decide if a precious metals tax swap makes sense. Remember to do your due diligence. (Note: PBRG doesn’t receive any compensation for recommending these dealers.)
  • Know your situation: Before you reach out, you’ll need to know the types of precious metals you own, the quantity, the price you paid, your tax bracket, etc.

And if you’re ready to make the swap after talking to your tax consultant and a dealer, here’s a preview of what comes next…

You’ll have to physically mail your coins to a dealer. Dealers can “fix” the price. This means they can immediately arrange a buy-and-sell order on the same day.

If coin values spike in transit, you can have the dealer mail them back to you. No harm, no foul.

This tax loophole allows you to benefit from falling precious metals’ prices (in the past or in the future). And you’ll still be able to keep the exact same metals you started with… just with a new cost basis.

Be sure to act before the end of the year if you want to use any losses for 2019.


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Jeff Bishop’s Total Alpha Program | Navigating the Tariff Trade

Make no mistake about it, there has been a lot of talk about tariffs this year—learning more about them will only make you a better trader. After all, it never hurts to understand the headlines driving the market.

Why?

Because trading off the wrong headline can cost you money.

For example, stocks came off all-time highs last week but fizzled after it appeared that we wouldn’t be close to reaching a trade deal with China.

So when the sell-off hit Monday, I stepped in to buy the market for a quick trade.

This was the view of my Total Alpha account midweek

But before I get ahead of myself, and explain how you can profit off the tariff news. It’s important that we go over the basics first, understand what tariffs are on what their impact on the global economy is.

Tariff 101

Chances are you haven’t heard the term tariff thrown around this much since you studied American History in high school.

Remember the Boston Tea Party? A little tariff imposed on America was one of the few triggers that started the American Revolution…3 pennies per pound.

Well, brace your yourself. It’s the end of the decade and the future in front of us seems to hold new tariffs as well as a war of the trading variety.

A tariff is a government tax on imported goods. The result is the price of foreign goods gets higher.

The usual reasoning behind tariffs is that countries use them to either limit imported goods or to even out the pricing between foreign and domestic products. Sometimes both.

Why Is Tariffs News Now?

The U.S President made plans to hike tariffs billions of dollars’ worth of China’s imports, steel imports from Japan, Eastern Europe, and several other countries, as well as threatened tariffs on German autos. He delivered these under the authority granted to him under the heading of national security risks. This even extended to American dairy.

Chinese imports undercut two major industries in the U.S. The result is the U.S. margins are getting driven down constantly and the U.S. market is flooded with China’s goods. There’s also been an ongoing issue with intellectual property theft that’s been a headache for decades.

The belief behind the tariffs is two-fold. First, it evens the playing field for subsidized industries in other countries, including Chinese businesses. Second, it provides leverage for the administration to demand controls on intellectual property theft.

Deep In Bed With China

Last year the U.S. imported $540 billion worth of goods from China. A majority of what we imported were cellphones, computers, and what’s on your body and feet. In return, China imported only $120 billion of U.S. goods. Putting a spotlight on how far from a 2-way street we are. And this has been happening for years!

To top it off, China OWNS 28% of the U.S. debt it owes to foreign countries, making it one of the largest foreign investors in U.S. treasuries.

But wait, there’s more! As of this spring, China owned $1.1 trillion of the U.S. debt.

The Tariff Effect

So, what do these tariffs mean for us, billions of dollars on Chinese goods?

Initially, it raised prices on most consumer goods. I expect retail prices to climb, causing sales to drop. Low wage growth makes exacerbates this dilemma.

But American companies can’t keep up with the low prices of Chinese products. Labor costs make China more competitive for resource-intensive goods. They are forced to choose between lower margins or finding cost offsets.

Yet we may not be able to handle the demand. U.S. steel production has declined over the last 50+ years. That reduced overall production capacity. It’s not a simple matter to turn on production that offsets the imports.

Brace Yourself

For years and a couple of presidents, Americans were told more jobs are coming. But with higher tariffs looming, many companies would rather cut costs at home than pass that cost on to the consumer. This means fewer jobs which adds fuel to speculation of a possible recession.

In the meantime, everyone is waiting to see if December tariffs get signed. There is a very real chance they won’t be, at least this year, mainly due to the impending election year on our heels. These tariffs could hurt our president’s reelection odds if things take a turn for the worst.

There is no deadline set for the trade deal, just that it will be completed when the president is good and ready.

China isn’t the only country in the cross-hairs of tariffs of the future. Brazil and Argentina are potential targets. Just this month our president tweeted “Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries.

How to Navigate

Steel companies leveraged to U.S. production benefit from protectionist measures. Make sure you understand which ones manufacture in the U.S. versus outside. Those with greater global exposure are more unpredictable.

Chinese American Depository Receipt (ADR) trade directly with the hopes of a deal. Companies like Alibaba and JD.com move higher on lower tariffs. Lower tariffs increase U.S. consumption of Chinese goods. This leads to higher GDP outputs, which in turn drives growth in these Chinese companies.

It remains unclear if the U.S. economy will sustain long-term damage from the tariffs. So far, it’s shown solid growth in the face of global stagnation. For now, I focus only on news that states a deal is or is not done, and nothing in between.

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The TradeSmith Deadly Decade Live Event

Keith Kaplan, president of TradeSmith is hosting an event on Wednesday, Dec. 11 at 8 p.m. Eastern — the TradeSmith Deadly Decade event.

At this live online event, you’ll meet “Trader X,” the mastermind TradeSmith has been working with in secret for the past two years.

You’ll also find out about the “investing super project” TradeSmith has been working on since January 2018…

As we lift the curtain on this huge new project and the identity of “Trader X” at the same time.

Again, this is going to be a critical 90 minutes. Below, you’ll get a taste of what’s in store.


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From a financial health standpoint, it could be the most important (and profitable) time investment of the year.

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Jeff Bishop’s Total Alpha Program | Midweek Market Update (12/5/2019)

Congratulations, you’ve almost made it through the trading week…and what a roller coaster ride it’s been! Let’s get you squared away with where things stand after some wild market action with the midweek market update.

The SPY managed to fill the gap today left open from Monday’s massive decline. That comes after a sharp reversal Tuesday that took most of the day to play out.

SPY hourly chart

Earlier this week, I said I expected the market to make its way to the hourly 200-period moving average…which is exactly where it stopped. And I will put my money where my mouth is.

Total Alpha Portfolio midday yesterday.

That’s why I look at the other markets, including Bonds, Gold, and the Dollar, for additional information.

Equity winners – Small caps, energy, utilities, and consumer staples

As I outlined at the beginning of this week, I expected small caps to outperform the broader market. The weekly close above the trading range that bound it all year told me it wants to move higher.

IWM weekly chart

We’re already seeing the IWM outperform the SPY by 0.15% in the last three days. That’s come at the expense of the QQQ, which underperformed by 0.32%.

The real high flyer comes from the least likely of places. Energy stocks (XLE) are down a paltry 0.36% compared to the SPY 1.02%. Much of that comes on the back of rallies in both natural gas and crude oil.

XLE hourly chart

Crude oil itself is up 5.17% this week. However, it finished down 4.75% last week when the SPY gained 0.75%…so it’s really just playing catchup and adding a bit to the top.

Natural gas looks more like an oversold bounce. The commodity fell a whopping 17.09% last week, creating a pop this week of 3.97%. It’s got a very long way to go before it shows any semblance of strength.

Utilities continue to perform well alongside bonds. The cheap yields in treasuries force safety investors to search for return, which often drives them into high dividend stocks.

XLU hourly chart

Those with a little more risk tolerance tend to stick with consumer staples. They may have smaller dividends, but offer more exposure to growth.

XLP hourly chart.

Safety Trade Outperformance

Bond ETFs also performed exceptionally well off the back of equity declines, up 1.2% for the week.

TLT hourly chart

This is a crucial hint. For the majority of the year, bonds and stocks traded together. We only saw them decouple and trade opposite one another this week (historically normal behavior).

Following a close second are the gold ETFs. GLD climbed 1.17% this week so far.

GLD hourly chart

Poor performers – The Dow, transports, and the dollar

The biggest loser this week so far has been the Dow Industrials (DIA). Though a small index, it’s down 1.58% on the week.

DIA hourly chart

The real loser this week has been transports. They’ve been just obliterated. The IYT ETF is down 2.88%, nearly double the Dow’s performance.

IYT hourly chart

This could be a harbinger of doom for any Dow theorists.

The real head-scratcher is the dollar. No matter when you looked, the dollar had been the strongest performing area week after week, month after month. So it’s a bit shocking to see it down 0.68% on the week.

UUP hourly chart

That may not seem like much to you. But it’s almost a third of the monthly range.

Go no-where – Healthcare 

Here’s an oddball for you. Healthcare stocks are flat on the week. It’s impressive given all the political drag this sector has.

XLV hourly chart.

Most volatile – The VIX

Last week, the VIX printed prices under $12. That’s extraordinarily cheap…and it indicated complacency among investors. It’s not a surprise that the VIX shot up nearly 41.77% at its peak this week, while still settling up 16.63%.

VIX hourly chart

My analysis – we’re heading lower before we head higher

Let’s look at the facts:

  • Equities haven’t seen a selloff since…well it’s been a while
  • Investors didn’t buy enough protection
  • Stocks rose on little volume
  • Now, the VIX shoots through the roof, and all the safety trades outperform
  • But the dollar is noticeably weaker

It’s pretty clear that we’re seeing money move into the safety trades after a monster run. However, even though the volume on the downside was much higher than the upside, it’s still pretty light.

Outside of a news event, we’ll likely float sideways to higher through the end of the week. From there, I expect we’ll see one last push lower before we get our Santa Clause Rally.

How I plan to profit these next two weeks

That’s for me to know and Total Alpha members to find out. There’s plenty of egg nog…so pull up a chair.

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Source: TotalAlphaTrading.com | Original Link