Posted by Pete Stolcers on September 7
Posted 9:30 AM ET – Donald Trump has not been good for market volatility. Traders looked forward to wild moves when he was elected. The market is resting just below the all-time high during a seasonally weak period.
Yesterday Trump struck a deal with Democrats to extend the debt ceiling by three months. He wanted to address this immediately so that he could tackle tax reform. The “deal” also included funding for Harvey and Irma.
As a citizen, I’m happy to see both sides work together. The fringes of both parties could be left out in the cold and perhaps this will build some goodwill.
From a trading standpoint, this strips away a great opportunity. I wanted to see a drawn out debt ceiling battle that went down to the wire. Nervous investors would reduce risk and spark a sell-off. This decline would set up an excellent buying opportunity in the next few weeks and now the threat of a government shutdown has been removed.
The debt ceiling will have to be extended in three months so the issue won’t go away completely.
Higher interest rates would typically spook investors, but the market seems comfortable with the next rate hike. Richard Fisher has resigned as a Fed official and he has been a perennial hawk. The market liked the news.
North Korea continues its missile testing, but the market won’t be shaken until military action is taken.
Hurricane Harvey and hurricane Irma will cause massive destruction, but the cleanup/reconstruction will create jobs.
I was looking for a nice seasonal decline to the 100-day moving average. A drawnout debt ceiling battle would make investors wonder if any deal can be struck. Higher interest rates, missile tests, debt ceiling debates and natural disasters would have sparked profit-taking.
My bias has shifted overnight. If the market breaks out I will participate in the rally. Buy calls if the SPY closes above $248 and use that as a stop.
Day traders should also focus on the long side.
The market has been holding its breath for tax reform. This move by Trump was market friendly.
OneOption conducts extensive option trading research and it provides specific options trading entry and exit instructions. Select from a spectrum of options trading strategies and find a service that is just right for you. Hedge funds, professional traders and active investors count on OneOption for solid research.