© Copyright 2023 eOption, a division of Regal Securities, Inc., Member FINRA
| Important Disclosures
950 Milwaukee Ave., Ste. 102 | Glenview, IL 60025
The information on this web site is for discussion and information purposes only. All accounts accepted at the discretion of eOption which accepts customer orders only on an unsolicited basis, and does not make any recommendations regarding any security or securities product with the possible exception of orders executed by our full service bond desk. Nothing contained herein should be considered as an offer to buy or sell any security or securities product. Online trading has inherent risks due to loss of online services or delays from system performance, risk parameters, market conditions, and erroneous or unavailable market data.
FINRA BrokerCheck reports for Regal Securities and its investment professionals are available at www.finra.org/brokercheck.
Options Disclosure: Options involve risk and are not suitable for all investors. Prior to trading options, you must be approved for options trading and read the Characteristics and Risks of Standardized Options. A copy may also be requested via email at firstname.lastname@example.org or via mail to eOption, 950 Milwaukee Ave., Ste. 102, Glenview, IL 60025. Online trading has inherent risks due to loss of online services or delays from system performance, risk parameters, market conditions, and erroneous or unavailable market data.
eOption Commissions: Broker-assisted orders are an additional $15. Option strategies involve multiple purchases; therefore your transaction costs may be significant for option strategy trades. A commission rate of $2.00 for equities and $3.99 + $.10/contract for options, per execution, applies to orders entered and filled by eOption's Auto Trade Desk and does not apply to customers who enter their trades directly into the eOption platform and are not utilizing the Auto Trade desk.
Broker Comparison: The competitor rates from published websites were verified on 12/22/2022 and are believed to be accurate, but not guaranteed. Commissions are subject to change without notice. At some firms, commissions may not reflect broker-assisted fees, orders over 1,000 shares, penny stock trades, OTCBB, pink sheet stocks or foreign stock orders. Firms may offer reduced commissions if additional criteria are met.
Blog & Commentary: eOption is neither affiliated with, sponsored by, nor endorses commentary and the opinions expressed are solely their own. Content is provided for educational and informational purposes only and eOption cannot attest to its accuracy or completeness. No information provided has been endorsed by eOption.com and does not constitute a recommendation by eOption to buy or sell a particular investment. You are solely responsible for your own investment decisions, and eOption makes no investment recommendations and does not provide financial, tax or legal advice.
Market Warning Sign – Watch This “Canary In the Coalmine”
PRE-OPEN MARKET COMMENTS TUESDAY – The S&P 500 tested support at the 50-day MA yesterday and it closed above that level. This morning the futures are poised to bounce. The tests of this support level have resulted in rallies the last 6 months and those dips have not lasted more than a couple of days. Earnings season should attract buyers and this pullback is a buy for day traders.
US Treasuries have been moving higher even though inflation numbers are extremely “hot”. The Fed has raised its inflation projections by 1% and we would typically see bonds decline. In the last two weeks I have questioned this “disconnect” and I suspect that the bond rally could be a flight to safety.
The Delta variant is spreading quickly and countries/states are imposing new restrictions. Booster shots might be required and it is uncertain how effective the vaccines are over time.
China’s market decline is a red flag. Their recovery is sluggish and the PBOC has eased. It has been the global growth engine for the last 20 years and this weakness is a potential “canary in the coalmine”.
Stocks are priced for perfection and surprise favors the downside. Any “fly in the ointment” can spark profit-taking like we saw the last two days. I have mentioned that there an options volatility skew to the upside. Calls are more expensive than puts and that is a sign that Asset Managers are unhedged. Bullish sentiment is extreme and big market drops happen when no one expects them.
We sold our half position of SPY at a tiny loss yesterday. I will not enter longer term swing trades until I see a sustained market decline lasts for more than a week. I view this as a low probability trading environment and once the mega cap tech giants report earnings in 10 days I believe we could see profit taking.
Day traders should be cautious early in the day. Opening gaps higher make it difficult to identify relative strength and a gap reversal is possible. I believe that the selling the last two days will spark an early morning probe for support. Once it is confirmed the market should rally the rest of the day. The 50-day MA has attracted buyers the last 6 months and I will be looking for trades on the long side today. If by chance the market makes a new low of the day after two hours of trading, favor the short side.
In one sentence I mention that big drops happen when no one expects them. In another sentence I say that these dips to the 50-day MA have been a buying opportunity. I am not contradicting myself. I can make a case for a market move in either direction. That is what makes this a low probability trading environment and that is why I suggest that swing traders with a 3-4 week trade duration stay sidelined.
Support is at SPY $422 and the 50-day MA. Resistance is at $426.50 and $431.
Content is provided by OneOption, LLC, which has no affiliation with Regal Securities, Inc. (“Regal”) This commentary is provided for information purposes only, and is not a recommendation, offer or solicitation by Regal to buy or sell securities or to adopt any investment strategy. Regal has not participated in the creation of the OneOption content and does not directly or indirectly endorse the content. Any reliance on this material is at the sole discretion of the reader.