MACRO BACKDROP:
Welcome back and hope you all had a great New Year’s holiday. As we return from an exhausting period of merrymaking, that means getting back to business. As I alluded to in my previous article, the 2019 stock markets have appeared to make a run for it to the upside. Many factors could have caused this. Looking ahead, my view is to be mindful of the macro-driven stories in this volatile environment. Such as, Jerome Powell and the Fed’s stance on rate policy adjustment, the new congressional makeup with Democratic majority in the House, emerging markets and fund flows, etc. These days, stocks appear vulnerable to resistance, also as I previously mentioned. As of Jan 4th, a very strong December ’18 nonfarm payrolls number could have sparked a great surge in equities following yesterday’s selling. Trade deal progression appears favorable these days. In my opinion, the indices in general can continue the path forward to some previously tested highs. Still, it might be a choppy and messy way up in the near term.
STRATEGY:
Futures may reverse in a single day, so March options can be risk appropriate. Look for 1-2 week swings and pivot points. My indicators suggest that the indices have made about a 25-30% retracement off of the December lows. Implied volatility in options looks to have spiked, so further upside can occur. Near term, I recommend buying premium in the E-mini S&P, E-mini Russell, and Dow Industrials. To see how I would risk into these trades, confer with me directly.
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.