MACRO BACKDROP:
Welcome back readers. Today is the first day following the results of yesterday’s midterm elections. Democratic majority control has returned to the House of Representatives. Republicans have retained the Senate. Okay, now that’s out of the way. Many analysts had called for this outcome. As of just shy of 8am CST on 11/7, the equities futures markets seem to be pointing to bullish opens in the underlying markets. In my view, the outcome of the midterms may cause some slight unrest and have the effect of a short term volatility in either direction depending on the whim of the market. But, I believe that speculation on the checking nature of the new House may give rise to the kind of gridlock which can spur inspiration for investor dollars to be reinvigorated into growth sectors like tech, healthcare and materials. Activity from the Fed, in my view, will continue to be a major spectator event for companies and investors. Political beliefs aside, I think we can expect stocks to benefit from, perhaps, potentially more thorough and collaborative fiscal and public policy. History & economics show that consumers are, ultimately, the big winners where competition exists…and now I believe we have a case of great competition in policy formation in Congress. Now, onto the trading environment.
INDICES:
The US 10 Year sits around 3.20% this morning after 8am CST. At the same time, Dec. S&P futures are up about 17 points, Dec. Dow is up about 139 points, Nasdaq futures up just shy of 60 points, and Dec. Russell is up just about 2.5 points. Near term, I’m still bullish on these contracts. But I like having downside protection, especially if you’re a “401K millionaire” looking for some hedge opportunities. Why? My contention is that trade with China, interest rates & the Fed and recent energy weakness can complicate macroeconomic outlook & sentiment following this election.. So having some spread opportunities with a long vol bias going into Dec. expiration is called for, in my opinion. Allow me to help you quantify some risk and set some targets.
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.