Options Trading

The uncertainty in the world’s economy is still present. However, in recent times, gold prices went down mostly due to a strengthening USD. It seems that news about trade wars has died down even though these are still not resolved and are lurking in the background.

Forecasting Checklist

• General news
  • Political Plays?
    • On-going US-China trade war
    • Brexit plus parliamentary shutdown?
  • Level of uncertainty?
    • High, considering the trade tensions, Iran tensions, and Brexit tensions. ^
• Check status of economies 
  • It is hard to tell the state of economies right now. It is pretty much a mess. There are still rumours of a recession and general ‘fear’ in the market. ^
• Check other charts for movement
  • Other charts are very erratic and hard to predict
• Technical analysis
  • TTM_LRC ranges
    • The prices are in the midrange now in the long term trend.
    • The short term trend is downwards, but the longterm trend is upwards
  • IV percentile currently is still high at 86%

The Forecast

• I am 80% confident that the price of GLD gold will not fall below $135 on 16/11/2019.

As per two weeks ago, the uncertainty in the world’s economy is still present. In fact, there seem to be reports here and there of the negative outlook for the global economy. Although gold did drop in the past two weeks, I still think it will at least hold prices at this level while the outlook for the global economy is uncertain.

Forecasting Checklist

• General news
  • Political Plays?
    • On-going US-China trade war
    • Trump vs The FED.
    • China currency devaluation
    • Brexit plus parliamentary shutdown?
  • Level of uncertainty?
    • High, considering the trade tensions, Iran tensions, and Brexit tensions. ^
• Check status of economies 
  • It is hard to tell the state of economies right now. It is pretty much a mess. There are rumours of a recession and general ‘fear’ in the market. ^
• Check other charts for movement
  • Other charts are very erratic and hard to predict
• Technical analysis
  • TTM_LRC ranges
    • The prices are in the midrange now.

The Forecast

• I am 80% confident that the price of GLD gold will not fall below $137 on 19/10/2019.

In a change of tact, I am trading gold (in the form of GLD SPDR ETF). In recent months, with all the unpredictable political tensions going on, oil and the general stock market has become too erratic to trade. However, as unpredictability grows, the predictability of gold grows. In the same recent months, the price of gold has steadily been going up. This trend went completely under my nose until now. The reason for this trend is because when the market feels insecure traders will turn to ‘historically store of value’ assets, i.e. gold & silver. I believe the current erractic situation will continue for the foreseeable future. Even if things take a turn for the ‘better’, it would take time to normalise. In the meantime, gold’s trend should continue upwards.

I have chosen to trade GLD SPDR ETFs instead of directly trading gold futures as the open interest in the former is higher. There is also no leverage in the former, which I see as a benefit as I’d rather earn less than risk losing more in a leveraged position.

Forecasting Checklist

• General news
  • Political Plays?
    • On-going US-China trade war
    • Trump vs The FED
    • Brexit
  • Level of uncertainty?
    • High, considering the trade tensions, Iran tensions, and Brexit tensions. ^
• Check status of economies 
  • It is hard to tell the state of economies right now. It is pretty much a mess. There are rumours of a recession and general ‘fear’ in the market. ^
• Check other charts for movement
  • Other charts are very erratic and hard to predict
• Technical analysis
  • TTM_LRC ranges
  • • The prices are already on the upper bands of the probability ranges. This would indicate a technical downward pressure. v

The Forecast

• I am 77% confident that the price of GLD gold will not fall below $140 on 19/10/2019.

It seems that Oil prices will be moving out of its recent sideways momentum to the upside. The Trump tweet that temporarily forced prices down on Monday seemed to be a good chance to open a position. With the trade war seeming to have an ending, oil prices should be bullish in the short term.

Forecasting Checklist

• Oil industry news
  • Political Plays?
    • Trump Tweet on Monday forced prices much lower, but this seems only a temporary thing. v
    • OPEC ignored the aforementioned tweet and will continue to cut supply. ^
  • Level of uncertainty?
    • US-China Trade war seemingly close to resolution. ^
  • Upcoming events/meetings?
    • OPEC  – 18 April 2019 & maybe one in March
    • May – USA to redecide on Iran sanction waivers
• Check status of economies
  • Oil demand?
    • There is hope that oil demand will pick up. ^
• Check other charts for movement
  • Gold
    • general uptrend
• Technical analysis
  • TTM_LRC ranges
    • long term downtrend, but short term uptrend

The Forecast

It seems likely there is a short term uptrend in prices

• I am 86% confident that the price of WTI oil will not be below $49 on 17/04/2019.

It seems like the markets, in general, are undecided. There are as many reports for the price to go up as there are for it to go down. All this uncertainty even makes me feel uneasy. Overall, I believe there are more reasons for oil to go down, mainly due to the USA-China trade war and global market slowdown. But, it is unknown how long the market can tank these forces. There haven’t been any significant news to push things either way, but one cannot predict the news. For example, there might be some miraculous force that ends the trade war.

Forecasting Checklist

• Oil industry news
  • Political Plays?
    • State of the Union address just happened. I could find anything consequential.
    • No major updates of the Venezuela sanctions affecting oil, but oil refiners should be looking for other sources. ^
  • Level of uncertainty?
    • Seems that this is pretty high. Described as the Oct ‘volatility nightmare’.
  • Upcoming events/meetings?
    • OPEC  – 18 April 2019 & maybe one in March
    • May – USA to redecide on Iran sanction waivers
• Check status of economies
  • Oil demand?
    • Unknown. This is dependent on the economy.
  • Oil supply?
    • “Crude inventories rose by 2.5 million barrels in the week ended Feb. 1 “
    • OPEC cut their supply of oil to the USA. ^
• Check other charts for movement
  • Gold
    • slight dip
• Technical analysis
  • TTM_LRC ranges
    • On a longer-term downtrend

The Forecast

Considering the situation, I am not confident enough to trade in oil. The premiums I would collect, aren’t attractive enough either. I would just hold on to my current positions.

For interest sake, the probability confidence level would be 85% that the price of WTI oil doesn’t go above $59  on 15/03/2019.

Nothing much has changed from last week. At first I was thinking of opening a non-directional trade (Iron Condor), but I don’t think the price of oil will be rising strongly anytime soon. Although there are forces pushing the price up, like Venezuela sanctions, OPEC cutting supply, the market’s uncertainty over a slowing global economy is stronger. There are also factors such as US shale drillers who do not seem to be slowing their oil production despite the lowered prices and US oil oversupply. Even if the oil price were to move up, it needs to clear all these barriers first, and I don’t think any spectacular news will help it do that anytime soon.

Forecasting Checklist

• Oil industry news
  • Political Plays?
    • It seems that the HuaWei Heiress arrest is a proxy war for the US-China trade war. v
    • US slaps sanctions on Venezuela. ^
    • US government shutdown has temporarily ended.
  • Level of uncertainty?
    • Seems that this is pretty high. The global economy and China in particular reported as slowing down, but the effects don’t seem to be showing on the stock market.
  • Upcoming events/meetings?
  • OPEC  – 18 April 2019
• Check status of economies
  • Oil demand?
    • Unknown. This is dependent on the economy.
  • Oil supply?
    • There seems to be an oversupply in US, as their pumps keep going
    • OPEC cut their supply. ^
• Check other charts for movement
  • USD
    • Slight downtrend
  • Gold
    • It’s jumping up
• Technical analysis
  • TTM_LRC ranges
    • On a longer-term downtrend

The Forecast

It is less likely for prices to bounce up to previous highs than for it to drop downwards or stay sideways.

• • I am 87% confident that the price of WTI oil will not be above $61 on 15/03/2019.

The market still seems pretty undecided. There is bad news about the global economy, and there doesn’t seem like there is any ‘silver lining’ that can save it. However, the market is still tanking, with the S&P making a strong upward comeback recently. At the current price of about $53, the prices are low enough for USA shale rigs to just survive. Though I believe there is more downward inertia in the market, for oil in particular.

Forecasting Checklist

• Oil industry news
  • Political Plays?
    • OPEC supply cuts, though unconfirmed, seem to be having an effect ^
    • US-China trade war has a hope of being resolved ^
  • Level of uncertainty?
    • Still pretty high as the market could go either way
  • Upcoming events/meetings?
    • OPEC  – 18 April 2019
• Check status of economies
  • China has confirmed slower growth
  • Global growth slowing down evidence
• Check other charts for movement
  • USD
    • On the lower end and looks like it’s going up, but unsure, it is on a medium-term downtrend.
  • Gold
    • Plateauing, but on a general uptrend
    • Gold does not seem to be moving together with oil
• Technical analysis
  • TTM_LRC ranges
  • • Long term downtrend
      • But the price is in the middle now
    • Short trend uptrend

The Forecast

Mainly based on the TTM_LRC ranges, it would seem that it is less likely for prices to bounce up to previous highs than for it to drop downward.

• I am 85% confident that the price of WTI oil will not be above $61 on 15/03/2019.

I am back to do forecasting after multiple holidays interrupted my pattern. As I do not trade while on holidays, there was no chance to trade with the holidays continually overlapping with trade periods.

I am looking to do even shorter analyses than before as I feel they take too long to write up and to execute trades.

With the market being rather undecided, it seems that the best play to make is the non-directional one. However, the swing moves might too large, and I have a feeling that it is more likely to move either sideways or downwards. No amount of supply cuts is going to push the market up to what it was in Oct – Nov anytime soon. Basically, there is more inertia downwards than up.

Forecasting Checklist

• Oil industry news
  • Political Plays?
    • OPEC is expected to cut oil supply this month
  • Level of uncertainty?
    • Oil torn between economic slowdown concerns, OPEC-led supply cuts. The OPEC cuts give support, but the bad economy signs push it down
  • Upcoming events/meetings?
    • OPEC says no need for early OPEC meeting
• Check status of economies
  • Oil demand?
    • Dependant on the global economy which has a weakening outlook.
• Check other charts for movement
  • USD
    • Weaker than last month
  • Gold
    • Trending up, as the economy looks bad

The Forecast

As I said, I would think the price of oil has no power to move up, even if there somehow were good news in the market.

• I am 85% confident that the price of WTI oil will not be above $58 on 16/02/2019.