It’s a short week with the Good Friday holiday, so I will try to be short and sweet with my words today. On Wednesday we heard from Fed Chair Yellen, and she repeated that any future interest changes would be based on employment numbers and inflation. The Fed also released the Beige Book on Wednesday, telling us that the economic activity increased and improved in most of the country as weather improved. The market seemed to like both of these bits of information, and the S&P 500 rallied and closed higher for the third consecutive day.
The market has enjoyed a nice recovery since last week’s two day washout. The S&P 500 futures are up over 2% from last Friday’s close, and in positive territory again from the start of year. This market looks like it wants to push higher again, but I still have concerned for more sell offs. I want to define my risk by using a bull call spread. I like buying the May E-Mini S&P 500 1875-1900 call spread at 9 points ($450.00) or better. Risk is limited to the cost of entry plus fees and commissions. My initial exit target is at the 20 point level. If this run looks like it is over before expiration on 5/16/14, I would look to exit for a 4 point loss.
Holiday weeks can give us jittery markets that can be tough to trade. Be sure to make sure you are limiting your exposure. I would like to extend an apology to anyone who read this column last week. I hinted that we were receiving clear signs of spring and it was time to put the snow shovels away for the season. Some of us in the Midwest received significant snowfall on Monday and may have needed those shovels. Of course, I would rather be wrong about the weather than my market views.
WEBINAR
For those interested Walsh Trading is holding our weekly grain webinar series this Thursday March 13th 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.
