MACRO BACKDROP:
Hope all of my dedicated readers had an awesome Christmas. Now it’s onto the New Year. Nearby contracts in the index futures are the subject here. It looks like the stocks have regained some footing today. The dollar saw some relief as buying spurred in it today as well. I believe that the so called “Santa Claus rally” was a real bust. That was just noise from the whiny press, as I alluded to before. The market instead appeared to have embraced the path of least resistance and just continued to sell the stocks, just on weaker volume earlier this week, in my opinion. Energy prices saw a slight bump up as well, though still quite weak in my opinion, given oil is sitting just above $46, with OPEC fundamentals back in full view. With the traders counting down the last few trading days left in 2018, it seems that the speculative take on what’s in store for next year and the year after are driving the day to day swings (again, my opinion). Holiday retail sector stocks may have contributed to today’s rally, but I find the technical activity a little more compelling.
STRATEGY: In my view, we have reached some pretty oversold levels in Russell, S&P and NASDAQ futures, in my view. My indicators are pointing towards a possible retracement from the recent lows, in the next couple sessions. Options, as I mentioned before, are not a bad tool to use, in my opinion. Volatility has been sparked, so again, buying premium can be helpful. If we happen to turn lower in the indices in the first couple of weeks of January, I have some good potential stop levels in mind to play off of more historical lows. If you’d like for me to design a trade to fit your risk tolerance, let’s talk.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
For questions, comments or deeper conversation regarding these insights or to talk more specific trade ideas, please reach me via email: bsears@walshtrading.com or my direct line: (312) 957-8079.