The S&P once again has bounced higher with fury from the Mid April lows down at 1803.25 to rally over 77 points to trade at the 1880.00 level. This impressive bounce coincides with the price action since February and what the stock indices experienced for much of 2013 where dips in the market became nothing more than buying opportunities. Better-than-expected earnings, positive reaction to economic data both home and abroad, and most importantly in my view a backbone of support from the Fed provided investors with reasons to buy the dips.
MAY SEASONALS
A few things to remember from a historical perspective and that is that the month of May has historically been one of the worst performing months for the stock indices on a year-by-year basis. Secondly, as we enter next week the Fed meets again for their scheduled two-day meeting followed by an announcement that should reveal more tapering to the central bank’s stimulus program by $10 billion a month that could reveal a more aggressive taper agenda as we enter summer. Thirdly, next Friday’s April non-farm payroll numbers which will be highly scrutinized will reveal revisions from prior month’s and possibly give us final employment data for the first quarter, but reveal in what most consider one of the most tell-tale jobs reports because past holiday hires and future summer hiring will most likely not show up in this report.
TRADE IDEA
It is my opinion that if the S&P can trade up to the yearly high at 1892.50 and possibly even 1900.0 that traders should possibly look at the following trade. For some downside protection and exposure in the indices, look at buying the June E mini S&P 1800 put and sell the June E Mini S&P 1700 put for a purchase price of 8 points or in cash value $400.00. The risk on the trade is the price paid for the spread plus all commissions and fees. This is a low risk trade in my view, where the maximum profit is $5,000.00 if both strikes finish in the money at the time of expiration. Option expiration is in mid June, so therefore the trade has plenty of time in my opinion for a sizable correction.
WEBINAR
For those interested in grains, Walsh Tracing’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 pm central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for next week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup.
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.
