Trading gives investors the opportunity to voice their opinions. If you think a market is going to move higher, you are a bull. If you are short the market a looking for a continued move down, you are a bear. Whichever you are, always remember to protect yourself. Just because you have an opinion doesn’t mean it’s right.
THURSDAY’S NEWS
Jobless claims provided a mixed bag of goodies Thursday morning. Initial claims were down 5,000 to a lower than expected (315k-370K) 305,000. Thursday’s number also gave a clearer picture than the previous two weeks, which had counting issues as California and Nevada overhauled their computer systems. Many expected high revisions for the previous two weeks, however last week’s number was only revised 1,000 higher to 310,000.
Now that we are past the counting issues from the prior two weeks, we can get a better look at the data. The four-week moving average is down 7,000, the fourth consecutive week with a decline. The 308,000 average is a new low for the “recovery” and down 20,000 from the August level. We are not adding a lot of jobs, but we may have stopped the bleeding.
This latest data isn’t exactly going to cause Fed Chair Bernanke to round up the troops and call for an emergency meeting. The taper talk has quieted down after last week’s news from the Fed. The Chairman did leave the door open for a policy change based on continued data. This week’s Jobless claims aren’t enough to warrant a policy change. The Fed will keep the printing press running.
TAKING PROFITS
The renewed debt ceiling talk has me taking a closer view of the market. Right now I think the risk is to the downside. As the government shutdown chatter picks up, I think it will make investors start to think about taking profits.
PUT SPREAD
Right now I like buying the Nov E-Mini S&P 500 1620-1570 put spread at six points ($300.00) or better. Maximum risk is defined to the cost of entry plus fees & commissions. I’d like to stay in the trade and look for first exit near 15-17 points. If this market continues to push higher, I would look to get out at a loss of about 3-4 points. We have some time on this one, November options expire on 11/15/13.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
