Daily Commentary: October 01, 2025

Auto Post1Option Commentary

The Government Is Shut Down

Posted by Pete Stolcers on October 01
www.oneoption.com

Politicians can’t reach an agreement, but they will.

PRE-OPEN MARKET COMMENTS TUESDAY – A government shut down was likely and the S&P 500 was 10 points from an all-time high yesterday. These stand offs have been resolved in the past and this is not going to spook buyers. Trump is going to take advantage of the situation and test his executive powers. He wants to layoff workers and this will give him just cause. The can will get kicked down the road and they will pass a continuing resolution in the next few days that keeps the doors open for another seven weeks.

Politicians won’t miss an opportunity to stand up on their soapbox and point fingers at the other side. The market is down this morning and if the shut down lingers for more than a few days, the selling pressure will build.

The more concerning development came this morning when ADP reported 32K job losses in the private sector during the month of September. Job growth of 52K was expected. JOLTs was a little better than expected yesterday and tomorrow we will get the Challenger Gray & Christmas report (planned layoffs survey) along with initial jobless claims which came in low last week. Traders will be watching for any tells for Friday’s jobs report (52K expected).

ISM manufacturing will be released after the open today (49 expected). Europe’s manufacturing PMI came in slightly better than expected (49.8), but it is still in contraction territory.

Job losses will make it harder for people to pay bills. Student loan repayment has resumed after a 4 year reprieve and that won’t help. This week we learned that two large subprime auto lenders filed for bankruptcy and we need to watch credit conditions carefully.

What does all of this mean? I don’t like the fundamental backdrop, but the technicals tell me to stay long. We always follow the technicals, but that doesn’t mean we have to be aggressive.

On a swing trading basis I am selling OTM puts on stocks that I want to own at lower levels. I am holding half of the strike price in reserve and I am prepared to take assignment. If the market drops, I expect these stocks to hold up well and in most cases they would have to fall more than 10% in a few weeks to be ITM. If the market decline gains traction, I will short futures intraday. Some of that will hedge the put positions and some of it will be to make money shorting the move. This is easier than reeling in a bunch of put positions and having to navigate those bid/ask spreads. I don’t want to be in and out of those positions.

From a day trading perspective, the natural temptation will be for buyers to try and fill the gap. The overnight news is weak enough to justify more selling. I believe an early bounce will set up a good short, we just don’t want to see stacked green candles. That would be a sign of aggressive buying. I also don’t want to chase a gap and go down. The market has been strong and chasing that move would be very risky. The best scenario for day trading today could be to short an early wimpy bounce. If the market can’t get any downward momentum going today, I will start looking at the long side after two hours of trading.

Support is $661.80 and resistance is the close from yesterday.

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