Trading is tough. Staring at a screen can be tough on the mind, putting you into a zombie like state. It can also be very rewarding, giving traders more than a few treats. It’s not a bad idea for traders to follow the same rules as kids on Halloween, have fun, be careful, and stay safe.
The markets are getting back to “normal” as the data flow from the federal government continues. Jobless Claims came out Thursday morning at 340,000, down 10,000 from the previous week. The news comes with a little bit of a dark cloud hanging over; the four week moving average (348,250) is about 40,000 higher than it was in mid-September prior to the government shutdown. The higher range may be a result of forced layoffs due to the shutdown. No matter what the cause, increased claims tend to frighten some investors.
Most traders and investors operate from a position of confidence. We are confident in a market direction (or at least we tell ourselves we are) and we trade based on our predictions. A very confident trader may put on multiple outright positions. Trading a smaller position or a risk limited, profit limited position may be a tell tale sign that we are not as confident in our market outlook. News like we received in this morning’s Jobless Claims may scare a less confident trader out of their position.
I do think it will take a little more than one mediocre jobs report to spook this market. The bulls seem to still be on a run, with the equity indices putting in new highs earlier this week. The threat of a taper is put off, at least for the time being. The Fed will continue to buy bonds like kids eat candy for at least a few more months if not more. Bulls remain confident, while bears wait for their opportunity to pounce.
E-MINI TRADE
I think the market is going to continue to trade higher, but with some sell offs along the way. I like buying the Dec E-Mini S&P 500 1775-1800 call spread at 9 points ($450.00) or better. Risk is defined to the cost of entry plus fees and commissions. I have a target exit of 20 points, and would look to exit with no more than a 5 point loss.
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.
