Later today we will be walking into what will be the start of the June quarter earnings report storm. As we mentioned yesterday in Tematica Investing, some 250 companies will be issuing their quarterly results later tonight after the market close, and more than 1,000 will do so over the course of next week. Reports received thus far continue to be mixed with few companies boosting revenue guidance to any meaningful degree, even those that are putting up better than expected bottom line results.

We chalk this up to the number of uncertainties in the geo-political and global economic landscape, which have led a growing number of central banks, like those in Turkey, Australia and Malaysia to once again cut interest rates. With nods from those in China and the Eurozone vowing to do whatever it takes, odds are there will be more rate cuts ahead. That means we are more than likely going to see the recent strength in the US dollar continue. As of last night’s close, the PowerShares DB US Dollar Bullish ETF (UUP) August 2016 $25 calls (UUP160819C00025000) on the Tematica Pro Select List hit 0.30, up 20 percent from our 0.25 buy-in price. We’ll continue to keep these calls on the Select List, and recommend subscribers that have yet to build their position do so before the calls hit 0.35. Given the upward move in the calls, we are boosting our protective stop to 0.20 from 0.15.

Correlation Between Inverse ETF Positions and
The Chicago Board Options Exchange Volatility Index (VIX)

As the market has continued to creep higher, we’ve noticed that along with our inverse ETF positions drooping further, the Chicago Board Options Exchange (CBOE) Volatility Index (VIX), which shows the market’s expectation of 30-day volatility, has continued to move lower. July, however, tends to be a time of year when we see weakness in the S&P 500. As all those earnings reports come in, Wall Street recomputes earnings expectations and then promptly heads to the beach as the velocity of those reports dies down.

One seasonal study from Moore Research Center shows the market historically turns “decisively bearish” in these last couple of of weeks of July, with little reprieve until the first few weeks of August have passed. We’d note the seasonally low trading volume during this time tends to exacerbate stock price swings, much like it does in late December. Per Moore Research, this pattern has repeated itself in 12 of the previous 15 years. Given the continued new highs and stretched valuation mixed with lingering uncertainties, we suspect we are likely to see that pattern hold yet again.

As such, we will continue to hold our inverse ETFs for the time being, and we will continue to evaluate a call position in the shares of Scarce Resource company Randgold Resources. (GOLD). Much like the VIX, gold prices have continued to move lower over the last few days and that has led to continued declines in GOLD call prices. We will continue to watch both gold prices and the VIX as we inch closer to Randgold’s June quarter earnings on August 4th, which should reflect the strong increase in gold prices during the quarter.

It’s “Batter-Up” Time for Our AT&T Positions

After the market close tonight, one of the dozens of companies reporting its quarterly earnings is our own AT&T (T). We hold T shares in the Tematica Investing Select List as well as the AT&T (T) September 2016 $44 calls (T160916C00044000) that closed last night at 0.38, down modestly from our 0.41 buy-in price last week. Over the last several quarters, AT&T has handily exceeded Wall Street expectations and given the unquenchable thirst for mobile data as well as benefits to be had with cross marketing DirecTV, we would be shocked to if that trend didn’t continue tomorrow night. Heading into the earnings call, we remain bullish on the T September 2016 $44 calls, but given what could be a volatile market we are tightening up our protective stop, moving it up to 0.30 from 0.25.

What we’re watching?

As we head into the second half of the year, there is no shortage of seasonal strength to be had that will enhance a number of our existing thematic tailwinds. Commentary from wireless chip company Qualcomm (QCOM) pointed to continued year over year growth in 3G and 4G devices in the low single digits, with a stronger 4G ramp in China. As we move deeper into earnings we’ll  examine opportunities for Qualcomm calls as well as other Connected Society beneficiaries like Skyworks Solutions (SWKS) and Qorvo (QRVO).

We also continue to see online and mobile shopping gaining consumer wallet share in the back half of 2016, which is not only good for Amazon (AMZN), but also United Parcel Service (UPS) shares. The same is true for Visa (V), MasterCard (MA), American Express (AXP), Paypal (PYPL) and Square (SQ), which fall into our Cashless Consumption investing theme. Even if one orders digitally, one still has to pay for the order and those products still need to get to the buyer or other intended recipient. It always pays to connect the investing dots!

That’s a small sampling of how we are looking at option set ups for the back half of the year. If the soon to be upon us seasonal pattern for the market holds, so much the better as our shopping list will be ready.