Usually at this time of year I am talking about the lull and lack of activity in the markets. I often talk about (with a hint of jealousy) what seems like most of Europe going on holiday to as we approach the end of summer. With so many people on holiday or hitting the beaches, the markets usually go into slow motion in August.

Lots Of Action

This August is off to a bit of a different start. Geo-political concerns have seemed to grab everyone’s attention. Earlier in the week reports that Russia was prepping along the Ukraine border gave the equity markets a scare. The news may have also helped gold climb over $20.00 as traders looked for a “safe” play. Heavy rains in Germany and France have may lead to significant damage to the wheat crop, sending wheat futures to a four week high. The ECB left rates alone this morning, but ECB President Mario Draghi said that geo-political risks are increasing, and “may have the potential to affect economic conditions negatively.”

Heightened Uncertainty

The combination of all the news and events has a cloud of uncertainty hanging over the markets. The chess match of economic sanctions is also heating up, giving traders and investors another reason to be extra cautious. Uncertainty in the markets can make people nervous and afraid of what may happen next. I’m not saying investors are hitting the panic button, but they are checking to make sure it’s still in the same place.

Fear Is Driving Markets

Fear is stronger than optimism when it comes to the markets. The current atmosphere has me concerned about a strong move to the downside in the equity indices. I like buying the September E-Mini S&P 500 1875-1825 put spread at 9 points ($450.00) or better. This trade is long premium so risk is limited to the cost of entry plus fees and commissions.  If you are already long in this market you can look at this as a bit of an insurance play and ride it out until expiration. I am setting an initial exit target at 25 points. If the market holds steady or gets back to its upside trend, I would look to keep a loss to 5 points.

Be Prepared

I’ll be glad to see everything settle down and end peacefully. But my experience has taught me to prepare for the worst. If I’m going on a boat, I make sure I have a life jacket, if I’m headed to the beach I bring some sunscreen. If you are playing these markets don’t forget to protect yourself.

Webinar

For those interested Walsh Trading is holding our weekly grain webinar today Thursday August 7th at 3 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.

Read More

TraderPlanet Interview: Josh Brown aka “The Reformed Broker” Holding Wall Street Accountable