January can be a tough month for traders. It is the start of the New Year, but it comes with a bit of a holiday hangover. It is easy to get sidetracked by all of the tasks and planning for the year ahead. Before you know it the month is nearly over. If you are going to be active trading the markets be sure to give it the attention it deserves. If you give your trading less than full effort and attention be careful. There is no such thing as half a loss.
Thursday’s Jobless Claims came in close to unchanged (+1000) from last week, and better than the consensus expectation (330,000) at 326,000 for the week of January 18. This is a bit of a sign of economic improvement in contrast with the jobs date that we received for December 2013. Continuing Claims went the other direction, rising 34,000 to put Continuing Claims over 3 million for the second week in a row. A bit of a serve and volley at play between good new and not so good news.
You can debate the validity of jobs data all you want, but the fact is they are an accepted form of measuring economic growth. While the equity markets enjoyed a fantastic run to the upside last year, most observers did not conclude that the U.S. economy is back on track. Many Americans are not working, and many more are in “underemployed” positions. Until those numbers change, this economy will still be in “comeback” mode.
Recent data has not derailed the bull run in the equities too much. It still appears that many players view it as the best place for return on investment. I think it can continue its upward move, but can get knocked down a few times on the way up.
E-MINI PUT SPREAD
I like trying to take advantage of a near term retracement using a put spread. I like buying the February E-Mini S&P 500 1825-1815 put spread at 3.5 points ($175.00) or better. Out maximum risk is limited to the cost of entry plus fees and commissions. Maximum gain is the difference between the two strikes (10) minus the cost of entry. The February options expire on 2/21/14. If The S&P 500 is trading below 1815 at expiration, we would get full value for the spread. If you are able to trade multiple contracts, I would set an earlier target at 7 points, and try to scale out up to 10 points on the remaining contracts. If the market doesn’t move in the direction we are looking for, I would exit the trade for a two point loss.
For those interested please join us for our weekly grain webinar series hosted by Walsh Trading’s Senior Grain Analyst Tim Hannagan. Our next webinar will be Friday January 24th at 3pm. Tim has been rated the number one grain analyst per Bloomberg and Reuters for the years 2011 and 2012 for his most accurate price predictions for both corn and beans. Admission to webinar is free and recordings can be sent to you if you cannot make it live.
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.
