Stocks sank a smidge again on Monday, as it appears that the summer doldrums have come earlier than usual. Treasurys were stronger, the U.S. dollar was weaker and gold was higher. Telecom was the only sector to finish higher, while tech clanked -1.2%.
Among institutional investors, the focus was on the potential for an interest rate lift-off in September following the strong employment report published by the government Friday. There is a growing view that the better jobs number shows that the first-quarter weakness was transitory, the result of an extra-cold winter and the West Coast ports strike.
A Reuters poll shows that 14 of 16 Wall Street firms expect the Fed to start lifting rates in September, while 13 of 16 expect two rate hikes by the end of the year. The consensus is for the federal funds rate to be 0.625% at year-end.
As for Greece, I wish I had better news, but there has been no meaningful progress on a reform-for-funding deal. Greek Prime Minister Alexis Tsipras seems well-liked by eurozone leaders, but all sides continue to want what the other side can’t offer. As I have said many times, Greece cannot afford the loans it’s got, and the eurozone, the International Monetary Fund and private creditors should not have extended them.
At the end of the day, I still think it is the creditors who have more to lose than Greece and will cave. Their new willingness to push doomsday back a year is evidence of that.
As for the commodity markets, crude oil was lower on Monday, and natural gas was higher. In fact, nat gas prices appear to have bottomed, according to our metrics. To take advantage of that, my recommendation today is for United States Natural Gas Fund, LP (UNG) calls.
UNG jumped 4.6% on Monday in sync with the higher natural-gas prices, back to the highest level of last week — and it should keep advancing from here now, if this is indeed the bottoming process.
Buy the UNG June $13 calls (UNG 150619C00013000) at $0.50 limit, good till canceled, for target $0.80. Set a protective stop at $0.30, good after 11 a.m. ET only. This is the monthly option expiring on June 19. With expiration so near, consider purchasing half the number of contracts you’d normally purchase.
Jon Markman writes a daily trading newsletter, Trader’s Advantage, and CounterPoint Options, a service geared towards helping individual traders make steady, consistent profits with the VIX. Check out his Top Stock for 2015 here.
