Another week, another opportunity to make some cash. This week we will start testing some more long-side trades once again, but remember this is a higher risk scenario for a few reasons. The first and most important is we are still in an uncertain market that is handcuffed by headlines. Bad news has recently been digested fairly alright, which is a good sign. However, we can’t become complacent and assume bad news will continue to be digested in an optimistic way. September is a bad month, historically speaking, and continued negative macro news is likely to weigh on us at some point. Another reason is we are nearing the top of the current trading range. This presents riskier upside potential due to the large downside fall to the bottom of the range that could take place at any moment. Stop losses will be crucial to protect against that as well as using smaller long positions in case of a gap-down that bypasses your stop loss. So, as discussed often these past few weeks, trade carefully with a tight leash and smaller positions than normal.
This week we have many eyes on the Fed. Also, Friday has a potentially large event in the Israeli-Palestinean border/state vote by the United Nations. Large Middle East issues have about a greater than 50% of creating short-term market issues from my perspective, which is typically to the downside. I don’t expect anything overly negative this week from it since it’s a Friday vote, but over the coming weeks it is a situation we should monitor, especially if the media decides to discuss it often. If you notice the media constantly talking about this vote, watch your positions closely, but this week should still be dominated by the Fed and European headlines. Next week, if at all, should have more focus on Israel.
The “Trade Of The Week” for this week will be out on Monday. I plan on having some more charts this time around. The markets are due for a pullback, so I’d like to see Monday’s action before we decide on buying more long-side swing trades. I’m slightly net short in the portfolio for the first time in a while now via going long ProShares UltraShort Russell2000 (TWM). Gastar Exploration (GST), a long-term trade of mine that I wrote about on SeekingAlpha, is consolidating nicely and looking for a potential move up soon. I’ll detail more of that tomorrow, but look for a breakout above $4.35.
Again, remember we are still in an uncertain market. A pullback in the markets should be expected, but we must stay vigiliant that we could break to the upside. This creates higher risk this week if we bet too early. I’d rather prepare for each path and be quick to deploy cash in the direction that is winning this week. See the economic calendar below for this week’s data and look for the trade of the week tomorrow so be sure to sign up for google email alerts which are sent around 4AM Central.
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Sep 19 | 10:00 | NAHB Housing Market Index | Sep | 15 | 15 | 15 | ||
| Sep 20 | 08:30 | Housing Starts | Aug | 575K | 592K | 604K | ||
| Sep 20 | 08:30 | Building Permits | Aug | 575K | 588K | 597K | ||
| Sep 21 | 07:00 | MBA Mortgage Index | 09/17 | NA | NA | +6.3% | ||
| Sep 21 | 10:00 | Existing Home Sales | Aug | 4.50M | 4.70M | 4.67M | ||
| Sep 21 | 10:30 | Crude Inventories | 09/17 | NA | NA | -6.7M | ||
| Sep 21 | 14:15 | FOMC Rate Decision | Sep | 0.25% | 0.25% | 0.25% | ||
| Sep 22 | 08:30 | Initial Claims | 09/17 | 412K | 417K | 428K | ||
| Sep 22 | 08:30 | Continuing Claims | 09/10 | 3710K | 3730K | 3726K | ||
| Sep 22 | 10:00 | FHFA Housing Price Index | Jul | NA | NA | 0.9% | ||
| Sep 22 | 10:00 | Leading Indicators | Aug | 0.0% | 0.1% | 0.5% |
As always, do your own homework to see if you agree. Good luck out there.
Mike
At the time of publication, Kudrna was long TWM and GST but positions may change at any time.
