Daily Commentary: June 11, 2020

Jeremy Engelbrecht1Option Commentary

Big Market Drop Was Expected – 4 New Options Trades For Today [Video Recorded Last Night]

Posted by Pete Stolcers on June 11

For the last week I’ve been telling traders to reduce risk and to go to cash. The warning signs were apparent and this morning the S&P 500 is down 75 points before the open. I’ve also warned you that this is a low probability trading environment. Bullish speculators are about to get flushed out. A spike in new Coronavirus cases has sparked profit-taking. Key support is at SPY $300 and $295.

In my comments I mentioned that Texas has more virus patients hospitalized now than it did during the peak a few weeks ago. This has also happened in other areas of the country and it will prolong the reopening.

The fact of the matter is that bullish sentiment has not been this high in decades. Stocks are overextended and we were due for a pullback. As I’ve been mentioning, the first wave of selling could be sparked by anything. Once the momentum kicks in, sell programs are triggered and bullish speculators hit the exits at the same time. This downward movement feeds on itself. Option implied volatilities were contracting and premium sellers were taking more risk. That is why our bullish put spread exposure is minimal. I believe that this move will be temporary and that we will find support at the major moving averages.

The economic news has been good and the Fed said that they are not going to raise interest rates through 2022. This safety net will keep a strong market bid. Asset Managers have missed much of this rally and we know that because the volume was light on the way up. Many will be looking to buy this dip and I believe it will be fairly shallow and brief. We are setting up for an excellent trading opportunity once support is established.

Regardless of the new virus spread, I don’t see states going back into a shutdown. The economic destruction was devastating and we are just starting to get back on track. This latest development will impede the economic recovery and it will impact consumer spending.

Swing traders are almost 100% in cash. We have two out of the money options spreads that will expire tomorrow and another one that will expire next week. In last night’s Weekly Swing Trading Video I published 4 new bullish put spreads. We needed a big market pullback to get filled on any of those trades and we are canceling the orders this morning. I’m going to evaluate the price action and I will inform members when it’s time to enter the trades. This video is released to the public on Saturdays, but I decided to release it this morning because the trades are so timely.


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