Watch Out For This Event During the Day – It Could Be A Market Mover!
Posted by Pete Stolcers on November 12
Yesterday the market dipped early in the day and it gradually found its footing. The price action in the last week has been dull and we are in a light news cycle. Our bullish put spreads are trading for pennies and we will wait for a market dip to sell more.
President Trump will give a lunchtime address at the Economic Club of New York today. He may provide some clarity on US/China trade negotiations. Over the weekend he said that he would NOT reduce tariffs to the degree that China is requesting. Good news is priced in and I believe risk favors the downside. The self-imposed mid-September deadline for European auto tariffs might be extended and it could also be mentioned in the address.
Jerome Powell will testify before Congress tomorrow and we should not expect anything new. The Fed is happy with its current policy.
Thursday morning China will post retail sales and industrial production. These are the biggest economic releases this week. China’s economic data points have been stable and I’m not expecting any big surprises. “Singles Day” hit record levels, but it was a little below expectations.
Impeachment hearings and riots in Hong Kong are not having much of a market impact.
Earnings season is winding down and the results have been good. Guidance has also been positive. Stocks are trading at the upper end of their valuation range and the headwind is stiff.
Swing traders are long a half position of SPY. Set an intraday stop at $305 and set a target of $310. Buy back your bullish put spreads for pennies this week. These positions should be maxing out and we will be on the sidelines waiting for a market dip. It’s dangerous the start rolling bullish put spreads at this level. Option implied volatility is low and you won’t get much of a credit. You will be forced to sell options that are too close to the money and the risk/reward profile is not favorable. Once we do get a wave of selling, bullish speculators will be flushed out. Be patient and wait for the dip. It might only last for one day so be ready.
Day traders should look for strong stocks with heavy volume breakouts early in the day. Use Option Stalker Heavy Buying and Relative Strength 30 searches. 4Bar Breakout is another good Option Stalker search early in the day. Try to make your money in the first hour and go to the sidelines. Intraday price movement has been an extremely compressed. Be mindful of Trump’s lunchtime address. The slightest hint that US/China trade negotiations have stalled would spark selling. I believe the downside risk is greater than the upside reward heading into his speech.
Look for choppy trading with a slight upward bias and low-volume.
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