The Beat Goes On In Washington
The first full week of 2019 came with a few surprises, but the rally off the bottom after AAPL said to expect some heartburn with their next quarterly earnings seems to have been a near term low for US equities. The markets rallied sharply after the bad news and it now seems the capitulation bottom is in. Since the markets never announce themselves, no knows for sure but all of the technical indicators seem to indicate that the sellers have lost their position as the strong hands. The markets have totally ignored the shenanigans in Washington, as that mess appears to have been was built into the market.
So, what is going to happen with the latest political stalemate that has seen the impasse over the wall reach a record 22 days?. Other than some federal workers feeling the pinch of no paycheck, the equity and interest rate markets are telling us that a prolonged stalemate was anticipated and that the continuation will have no effect on the U.S. financial markets. It amazes me that many of the talking heads on TV keep focusing on the money involved. The money has nothing to do with this head butting.
As I said in my column last week, the amount of money is like children arguing over marbles in a school yard. The truth of the matter is that we are talking about one dollar in a thousand-dollar bill. The Feds burn thru the disputed money in less than twelve hours. What you have here is simply a clash of philosophies.
After sixty years of both Democratic and Republican administrations kicking the Southern Border immigration issue down the road, Mr. Trump pledged to have the issue solved by building a wall on the U.S. – Mexican border, and have Mexico pay for it. To this date that pledge has not been met and Mexico is not going to put up one dime to have the wall built. The truth is that the Democrats want open borders that favor them to be reelected as the new immigrants become eligible to vote. The Republicans want the border sealed so that they can compete in the election market. The markets are predicting that a solution will come, and life will get back to normal. In Washington, the abnormal is the normal and that is where we are headed!
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions with a short paragraph which will cover the trading subject.
Question: Do horizontal spreads present unlimited risk?
Horizontal spreads can have unlimited risk if they are initiated with a short ratio. But vertical spreads would have the same risk if they were put on as a short ratio. It is the same with straddles and strangles and the writing of naked puts and calls. They all present unlimited risk if you do not buy an equal or greater number of long options. If you buy a horizontal spread with a debit, your risk is limited to the amount of the debit. If you put it on as a credit, your risk is limited to the credit minus the strikes involved. So remember. As long as the horizontal spread does not have naked options your risk is limited, and under certain circumstances your reward can be unlimited. The important point is that your risk is always limited.
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. This week let’s take a look at how the equities markets have performed since the start of 2019.
Equities – Possible Reversal (Bullish)
Market Edge’s (www.marketege.com) computer models turned negative at the end of September 2018 and although the market continued to rally for a couple of weeks, we advised against taking any new long positions. We thought it was much better to trade from what we perceived as a safe posture which was either to get short or simply stay out of the market. When a head and shoulders chart pattern was violated in mid-December for most of the major indexes, we felt that there would be more pain in the market. As it turned out, we were right. However, the start of 2019 has changed our opinion. The first three trading days of 2019 were extremely volatile, but it looks like the AAPL announcement that the iPhone cannot solve all the world’s problems and may be overpriced, appears to have triggered what is referred to as a capitulation bottom. Market Edge’s ‘Market Posture’ has reversed to the bullish side and it is projected to remain positive into early March 2019.
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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