You may take a great vacation this summer but the market does not. Be sure you are protected and managing your risk properly so you can enjoy your fun in the sun.
Wednesday’s GDP number came in as a surprise to most market observers. Real GDP fell to -2.9%, consensus range was projected at -2.4% to -1.0%. This was the worst economic performance in nearly five years and far off the Bureau of Economic Analysis’ earlier 1.0% projection. Healthcare spending appeared to be the biggest factor in the drop, going from adding 1.01% to subtracting 0.16%. Also having an impact of the contraction was…get ready….wait for it… the weather.
The weather appears to be the dog ate my homework excuse for any bad economic data this year. As we move forward in the year, we shouldn’t have more data affected by the weather. A rainy wet spring may have made it hard to play baseball in the Midwest, but it shouldn’t have too much effect on retail sales.
If you were in an Econ 101 class and given the latest GDP number and asked to predict how the market responded, I’m guessing most would predict a sell off. That makes sense to me. In actuality we would be wrong. Some investors took the number as old news and not reflective of more recent data. Others view the healthcare number as one sector pulling the whole group down. On top of those views, traders are relying on what they heard last week; the Fed will be accommodating to the markets until further notice.
Summer Markets
As we approach July, the start of the summer for many, I am taking a casual relaxed view of the market. The fact that we saw a rally after Wednesday’s data may be an indicator that this market does have some strength in it. I think the bias is still to the upside, but we could get knocked back a bit along the way. Right now the S&P 500 seems to like hanging around the 1950 area, but looking to make a move either way.
E-Mini Strangle
I am looking to take advantage of a move in either direction buying the July E-Mini S&P 500 1910-1990 strangle at 9 points ($450.00) or better. I think the market may see another significant move before we set into the dog days of August, when the markets often trade in tight ranges. Risk is limited to the cost of entry plus fees and commissions. I am setting an early target of 20 points. The options expire on July 18th, so we have just over 20 days to be in this trade.
Grain Webinar
For those interested Walsh Trading is holding our weekly grain webinar today Thursday June26 at 3pm 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.
