Friday brings a close to another trading week. Take some time to review your recent trading. Make a note of worked well for you and what didn’t.
Learn from your mistakes, but don’t carry them over the weekend with you. It is better to start next week fresh, than with a hangover from Friday.
MARKET RECAP
We saw the S&P 500 and other indices sell off a bit on Thursday after jobless claims spiked higher. New claims came in up 360,000, well above the 329,000-341,000 expected consensus range. The dip was brief, and the market trended near the record high 1659.75 set the previous day. The rest of the session remained range bound and closed -6.50 at 1648.00, ending four days of record closes.
WHAT THE DATA MEANS
That jobless claim number may be a sign that economic recovery is on hold, or possibly even reversing. CPI (consumer price index) fell for the second consecutive month, and below expectation (-0.4% vs. – 0.3%). That level is well below the Fed’s ‘trigger” of 2.5% for policy change. In other words, the Fed is free to continue on with its buying spree until further notice.
That may be viewed as a sign to keep buying into the latest bull run.
BULL CALL SPREAD
I’m looking for this run to the upside to continue for a while. Right now I like buying bull call spreads to try and participate in that move. I like buying the June E-Mini S&P 500 1690-1740 call spread for seven ($350.00) or better.
Risk is defined to the cost of entry plus fees and commissions. Maximum profit is $2500 minus the cost of entry, fees and commissions. I don’t expect the strikes to be in the money at expiration (6/21/13), but I am looking for the S&P 500 to continue its push to 1700 over the next month.
I’d look for early profit taking if the spread hits 15. Aggressive traders may want to stick around and try to scale out at higher levels. If the move is not going our way, I would try and cut my losses at 3.5 – 4 points.
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Contact Weyer here with any questions.
