Washington Was Quiet until Friday
It appeared after the circus in Washington two weeks ago that this past week would probably be quiet. The markets have been quiet. There have been no terrorism attacks or threats. Assad has not started his final campaign and there was Hurricane Florence, but that was baked in the market. So it was a quiet news week. Then out of the blue on Friday The Wall Street Journal, published a news story about a letter from Dianne Feinstein (D. Cal) that she had sent to the FBI requesting an investigation into a potential “serious sexual abuse issue” about Judge Kavanaugh that had come to light.
Turns out the issue that she wants investigated took place 40 years ago at a teenager’s birthday party! An undisclosed women has come forward to say that the Judge put his hand around her mouth while instructing a friend to “turn up the music”. The friend was interviewed and doesn’t recall the incident. It has been reported that Senator Feinstein has had the letter in her possession for several months but has chosen this time to request a “full investigation by the FBI before the confirmation process continues.”
Chairman Chuck Grassley (R. Iowa) said he was aware of the issue, but the vote will go on as scheduled on September 20th. The White house, of course, was livid about what they called the Dems. “Dirty Tricks” to try and withhold the confirmation until after the mid-term election. They said that they had letters from 63 women that had worked with Judge Kavanaugh over the past 25 years and they all agreed that he had never been sexually abusive to them. They also pointed out that the FBI had vetted the Judge many times over the past twenty-five years and found no problems. The White House forgot to point out that the Republicans did the same thing during the last year of the Obama administration to avoid having a liberal on the court!
Finally, after the markets closed it was revealed that Paul Manafort had agreed to cooperate with the Mueller investigation. The liberal media immediately proclaimed that this was the smoking gun that they needed to prove that Mr. Trump’s campaign had helped rig the election with the Russians turning the vote in his favor. The president had no comment on the admission by Mr. Manafort, other than to say that the issue was a 12-year-old tax case that had nothing to do with the current administration. It would seem on this one that Mr. Trump has the edge as there doesn’t seem to be any logical connection between a 12-year-old tax case and Russia tampering with the 2016 election.
We shall see how these issues play out in the next couple of weeks, but one thing is for sure, Washington is just like the markets. You never know what they are going to do. They don’t announce their intentions, so you always have to be on alert to take advantage of any situation when it shows up.
Ask Mr. Seifert
I am constantly asked questions about trading and how important execution is to insure success. Each week, we will answer those questions with a short paragraph on a variety of trading subjects.
Question: My broker says to buy debit spreads, as they have less risk than a credit spread. Is he right?
Answer: Your broker is referring to the fact that the debit spread will always have less premium risk than the credit spread, but that doesn’t mean that it has less risk. In fact it has more risk than a credit spread at the same strike price. Here is why. For the debit spread to be profitable, it must overcome the premium you paid for it plus it must move in the price direction that you predicted when you bought it. Even if you are correct in predicting price movement it may not move enough to overcome the debit. On the other hand, a credit spread can win three ways. The price moves in the direction you predicted, the price doesn’t move at all, or the price moves against you but not as much as the credit you sold. For my money, I would rather have three ways to win and take the larger premium risk. In my mind you can’t beat a credit spread for reliable yield.
The Wise Guy Report: The View From The Electronic Floor
Each week I talk about how the Wise Guys (floor traders) find the soft spots in the market and take advantage of price dislocation in three major commodity markets: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). On the equity side, I cover MSS which is the Mister Seifert Sez Composite Index. This is a proprietary index that I created which measures the dollar flow of the four major indexes (S&P 500, Nasdaq 100, Russell 2000 and the Dow Jones Industrials) on an unweighted basis. Let’s look at how Crude Oil has been performing.
Crude Oil (Possible Top)
Crude Oil can’t seem to get a handle on where it wants to go. It has been stuck in a huge congestion area for the past five months between $63 on the downside and $71 on the upside. This past week it tried to break out to the upside but failed once again at the $71 level. With more production from fracking, the U.S. is now the number one producer of Crude Oil in the world. That might lead you to believe that with the problems in the emerging markets of the Globe that the demand for crude would be going down as the supply continues to grow, but so far that is not happening. The major producers have been able to keep production at high levels and at the same time to find buyers for their product. Something is going to give in the near future. My bet is that it is going to be price. The slightest hint that there is weakness in the U.S. economy will bring crude downhill in a hurry. At this double top I believe that you can’t be a buyer, but you can be a seller with a stop above the previous high.
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Each Monday morning by 11:00 EST, the plays for the upcoming week plus updated model portfolios for each strategy are posted on the site. The prices in the reports are Monday morning’s opening prices. In addition, I have a webinar on Thursday afternoon where I discuss various option strategies, what is happening on the floor and answer any questions that you may have. Don’t worry if you miss the show. They are archived on the site. Sound Good? Good! You can subscribe to one or more of the subscriptions for only $19.95 each per month on a month to month basis with no contract or strings attached. If you subscribe to three, it is only $49.95 per month while you can subscribe to all six for only $79.95 per month, a 33% discount. I think you will agree that this is a super offer so give it a try. Click on www.optionomicsgroup.com to access the Optionomics Group web site and get started today doing what the pros do –
“Don’t Buy Them – Sell Them”.
Mr. Seifert