Category: INO.com Contributors

Silver And Palladium Update: False Hope

Posted on by Aibek Burabayev

The price action in the silver futures has given a false hope to bulls this month.

The largest volume support (orange) has offered a solid support for the silver futures price lately. It is located between $17.4 and $18.2. The price has tested it three times already and failed to break it down.

Silver Futures Weekly

Source: TradingView

The RSI has built a Bullish Divergence during the second touchdown at the end of the summer. The reaction was an imminent reversal to the upside. It was promising price action for the bulls as the futures price soared from $17.4 up to $21.3 by the start of this month to book the gain of almost four bucks (22% growth).

Afterwards, the same indicator has failed to break above the 50 barrier in spite of a strong impulse and so did the price rally. It stopped more than half dollar below the moving average (purple).

The price dropped back to the largest volume support after above mentioned failure but bounced then. It has managed to score more than one dollar from the latest valley of $18. This puts the silver futures between the hammer ($21.9, moving average resistance) and the anvil ($18, volume support).

The chart structure of the recent rally looks corrective. This means that the weakness of the price should resume. The next support is located at the following volume area of $15.8.

There are no other significant levels to catch the “falling knife” of silver except the “Flash-Crash” valley in $11.6. The drop to the latter could build a larger corrective structure visible on a bigger map.

The invalidation of the bearish outlook would come with the breakup of the moving average above $21.9.

Last time, your most popular answer was that silver futures would stop at $16. The next bid was bullish. None of the bets have played out as yet. Continue reading "Silver And Palladium Update: False Hope" →

Best Performing ETF Group is Not What You Think

Posted on by Matt Thalman

With just two months to go in 2022, the best-performing group of Exchange Traded Funds year-to-date may not be what you would have expected it to be when we started the year.

After a strong bull market rally coming off the march 2020 Covid-19 dip, most investors would have assumed stocks, mainly big technology stocks, would again be the market leaders in 2022.

However, the market never ceases to surprise, and as hindsight is always in 20-20 vision, it feels like we all should have seen the signs that 2022 wasn't going to be a good year for stocks and another asset class was going to dominate.

What asset class are we speaking of? Bonds! Well, to be more specific, shorting Treasury Bonds.

Shorting longer-dated Treasury bonds has been, hands down, the best trade of 2022. Whether you use leveraged and-or inverse products or not, shorting Treasury Bills has produced great results in 2022.

For example, the ProShares UltraPro Short 20+ Year Treasury ETF (TTT) is up 176% year-to-date and more than 50% over the last three months. Direxion's version of the same ETF, the Direxion Daily 20+ Year Treasury Bear 3X Shares ETF (TMV), is also up 176% year-to-date. The ProShares UltraShort 20+ Year Treasury ETF (TBT), which is a 2X leveraged inverse fund, is up more than 100% year-to-date.

Even the funds that short the shorter term Treasury bills, the 7-10 year term bills, like the Direxion Daily 7-10 Year Treasury Bear 3X Share ETF (TYO) and the ProShares UltraShort 7-10 Year Treasury ETF (PST) are up 66% and 42% respectively.

If you had run a screener at the beginning of the year for non-leveraged and non-inverse funds because the risk involved with those products are not necessarily in your comfort zone, you still could have bought the Simplify Interest Rate Hedge ETF (PFIX). PFIX holds over-the-counter interest rate options and US Treasury Inflation-Protected Securities or TIPS, and still produced a return of around 100% year-to-date.

So you may be asking how and why shorting longer-dated Treasury bills produce solid results when interest rates, Treasury bills, and bond yields are climbing higher. Well, it is a little complicated on the surface but pretty simple once you understand how it all works. Continue reading "Best Performing ETF Group is Not What You Think" →

Two Growth Stocks to Buy on Dips

Posted on by Taylor Dart

It’s been a volatile year for the major market averages, and the S&P-500 (SPY) has now corrected over 27% from its highs, suggesting we’ve seen the majority of the downside short-term.

This is based on the average recessionary bear market coming in at 34% and the S&P-500 now satisfying 80% of the average decline’s magnitude.

One of the most beaten-up areas of the market has been growth stocks, and with elevated pessimism finally increasing the likelihood of a short-term market bottom, this is the ideal time to be hunting for new ideas.

Unfortunately, not all stocks are created equal. While many growth stocks might be oversold, those still posting net losses per share and carrying high debt levels are extremely risky in a rising-rate environment.

However, for investors willing to dig through the rubble, two names stand out as extremely attractive, trading at significant discounts to fair value despite boasting strong earnings trends. In this update, we’ll look at two stocks that are solid buy-the-dip candidates:

Boot Barn (BOOT)

Boot Barn (BOOT) is a small-cap growth stock in the Retail/Apparel industry group that has enjoyed near triple-digit sales growth, increasing revenue from $180MM in fiscal Q1 2020 to $299MM in fiscal Q1 2023.

This has been accomplished by industry-leading same-store sales growth rates and continued unit growth (73 new stores opened), which is supported by the company’s continuously improving unit economics. For example, the company’s average sales per square foot have improved from a prior target of $170/square foot to over $400/square foot, increasing its payback period from three years to one year for new stores.

At the same time as sales have continued to increase at double-digit levels and it’s grown its store count to 330, the company has enjoyed growth in exclusive brand penetration, providing a significant boost to annual earnings per share.

This is because its private-label brands carry much higher margins, allowing BOOT to nearly quadruple annual EPS from FY2020 to FY2022 ($6.18 vs. $1.55). These are phenomenal growth rates, and with plans to grow its store count by over 12% this year, this growth story is still in its early innings.

Unfortunately, the stock has been crushed year-to-date (down 56%) due to the negative sentiment for the Retail Sector (XRT) and the company’s lukewarm comments in fiscal Q2 2023 guidance. Continue reading "Two Growth Stocks to Buy on Dips" →

Gold Update: The Breakdown

Posted on by Aibek Burabayev

It’s all about persisting inflation at the end of the day. All markets watch how the Fed tries to fight it as aftershocks of rate decisions are observed in bonds, stock market, foreign exchange, precious metals and even crypto.

US Inflation vs Fed Rate vs Real IR

Source: TradingView

The graph above visualizes that “fight of the night”. Indeed, we witness some progress of the Fed’s efforts in the falling U.S. inflation (red line) numbers from the peak of 9.1% in the summer down to the latest data of September at 8.2%, which was still above the expected 8.1%.

The 3% increase of the Fed rate (blue line) brought inflation down only by 0.9%. It is way too slow, as the inflation target of 2% is still way too far, hence the Fed could keep their aggressive tightening mode.

Surely, there is a time lag between the Fed action and the inflation reaction. However, the time is ticking away as inflation is like a fire - the earlier it's extinguished the better.

The real interest rate (black line, down pane) crossed over the August top above the -5.1%. The next resistance is at -3.7% (valley of 2011) and it is highly likely to be hit soon as it is only 1.2% away. The valley of 2017 in -2% is almost 3% away, which means a huge Fed rate hike or a big drop of inflation. We can’t rule it out anyway.

Where do you see the yearly U.S. inflation by the end of the year?

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Indeed, these interest rate projections above could make precious metals life tough. Let's check the gold futures chart below. Continue reading "Gold Update: The Breakdown" →

ETFs for a Strong Dollar

Posted on by Matt Thalman

Since the Federal Reserve started raising interest rates, we have seen a dramatic increase in the US dollar. The main reason is that the dollar is becoming a more attractive investment for investors at home and worldwide.

There are a lot of dynamics at play that investors need to consider when the dollar is rising. Such as, a rising dollar will hurt domestic companies that sell internationally because the exchange rate lowers their profits. However, companies that import raw materials will benefit from a strong dollar.

Due to the strong dollar, some emerging markets will suffer if they borrow in dollars. This happens because it becomes harder for borrowers to pay back their debt as the dollar strengthens. Furthermore, these same countries can get hit with a double whammy if they also import many US goods since those goods will now be more expensive.

Let us look at a few Exchange Traded Funds that you can buy that will help your portfolio weather this strong dollar storm.

I would like to mention the first two ETFs are also rather obvious picks. The Invesco DB US Dollar Index Bullish Fund (UUP) and the WisdomTree Bloomberg US Dollar Bullish Fund (USDU) both are long the US dollar against a basket of other global currencies.

In plain English, these funds increase when the dollar rises and decline when the dollar declines compared to other international currencies. There is no magic here and nothing fancy going on; if you think the dollar is going higher, buy one of these two funds and hold it for a while.

Another set of ETFs you could buy are dividend-paying ones. Something like SPDR Portfolio S&P 500 High Dividend ETF (SPYD), the WisdomTree US High Dividend Fund (DHS), or my favorite, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).

These will typically do well when the dollar rises for a few reasons, mainly because the stronger dollar will likely hit the earnings of companies with large exports. But, as companies, especially those in the Dividend Aristocrat group, are very reluctant to cut their dividends, the stock prices of these firms usually hold up better than the non-dividend paying stocks. Continue reading "ETFs for a Strong Dollar" →