We got off to a slow start this week with a near holiday like market on Monday, as many enjoyed Columbus Day away from trading. Wednesday’s Beige Book did not bring much excitement. Usually looked at as a forecast for any future decisions from the Fed, it basically gave a hint that we shouldn’t look for any action in October.
As I mentioned a week ago, the equity markets seem to be enjoying if not embracing, the idea that near zero interest rates are here for quite a bit longer. The market seems to be returning to the patterns it exhibited prior to “Fedwatch” ahead of the September meeting. With no rate hike in sight for a while, I expect the flow of money to continue into the equity markets.
I’m not fully confident that the S&P 500 is ready for a huge surge up, but I think we are going to see a slow climb up in the coming weeks. In a bullish play I like buying a November E-Mini S&P 500 2010-2035 call spread at 10 points ($500.00) or better. Risk is defined to the cost of entry plus fees and commissions. I am setting an initial target exit of 20 points. Maximum value of the spread at expiration on 11/20/15 is 25 points with both strikes in the money. If the market fails to rally, I would look to get out for a 5 point loss.
For those interested Walsh Trading is holding our weekly grain webinar Thursday October 14th, at 3:00 pm central time hosted by our Senior Grain analyst Tim Hannagan. Tim has been ranked #1 by Reuters and Bloomberg in 2011 and 2012 for his most accurate end of year price predictions for soybeans and corn. Registration is free and 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.
