24 December 2018 MONDAY Trade Commentary

The FOMC raising rates 1/4% in December:  Supposedly, this is a sign they feel the economy is growing with a stable progress.  With another huge drop in the stock markets at the end of last week, the short-term sentiment does not seem to agree with the FED’s views.  As they normally do, the FED issues comments after their meetings.  This time, they hinted that two more rate hikes in all of 2019 could be all that might be necessary.  Obviously, this “hint” is subject to change, not a fact, and so has little meaning – even though it could have tempered the stock markets reaction to this month’s rate hike, it clearly did not.  This week is one of the lightest of the year in trading in all markets.  One has to wonder, if it wasn’t a holiday week – would the sell off had been such a strong reaction as it was.

This present situation:  Although reports from from Japan and Europe are not weak, the media continues to trumpet the possibilities of an impending implosion in the world economy.  Much of the daily operation of the United States Government has been shut down by the very partisan dispute in legislation for funding for a ‘border wall.’  The new budget approval is the ‘hostage’ for now.  The United States members of Congress have vacated home for the holidays – and the media rhetoric has turned up to an even higher frenzy to fill the blank on-air time with daily regurgitations of the same things over and over.  Tariff disputes persist, a Government shutdown, and another New Years holiday week – and it all adds up to a near perfect storm for nothing to happen over the next 10 days or so.

Crude Oil:  I am short the APR19 $70-strike CALL.   There is an expression often used in a falling market:  “No buyers have stepped up to try and catch a falling knife.”  That is pretty much the story of crude oil futures at this moment.  I still feel that on the low side over the next few months, it is unlikely crude prices might drop another 30% and get down as low as $30 a barrel – but there is no doubt the current sentiment of traders is weak on oil and the prospects are dim for any higher oil prices in the immediate future.

Gold:  Most of the factors that influence gold prices have been vacillating heavily.  So long as the current uncertainty of stocks, tariffs, world economy, $US Dollar strength, and interest rates fail to point in any definitive direction –  gold is likely to continue in its present ranges.

I currently hold a FEB19 Gold position: I am short the 1100 PUT and short the 1500 CALL.  These options expire in only 35 days and I have a nice unrealized profit with these trades.  They both have “last trade” values of 0.20 ($20) and the total unrealized gain of the pair is about $90. I will be watching to probably close these out soon at either 0.10 or 0.20 on each one.  I don’t want to give this unrealized profit up – and I’m ready to move on as 2019 begins and shop for more gold options to sell.

I also hold the APR19 1600 CALL short at 0.60 and it is -$30 at 0.90; it has 92 days until expiration.  I continue to hold this position for now.

That is all for today.  I look forward to kicking off the New Year 2019 with many new trades ahead.  All the best to you and yours.

Thank you – Don

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