The U.S. dollar index futures market is getting its 15 minutes of fame. What was once a rarely spoken about futures contract is now garnering attention from CNBC and Fox Business news. The greenback has been relentlessly grinding lower in recent months but is beginning to show temporary signs of life.
If you follow currency trade, you have likely read about the carry trade that has allowed the U.S. currency valuation to drop beneath what the fundamental value might actually be. Carry traders are essentially borrowing dollars (selling them) to invest in currencies that provide higher yields. With the Fed keeping the overnight Fed Funds rate at nearly zero, that leaves the dollar at an interest rate disadvantage relative to most currencies and thus the seemingly never-ending demise of the greenback. However, if you recall the Japanese Yen was once the victim of a similar carry trade but when traders were forced to unwind the Yen was catapulted. We believe that eventually we will see the same price action in the dollar.
Unfortunately, traders have been sensitive to dollar movements simply because much of this rally has stemmed from the premise that a weaker dollar promotes earnings potential for firms doing business overseas. In addition, it keeps U.S. farming and factory workers moving as a result of a high demand for domestic products from overseas buyers. Remember, U.S. goods look cheap with the dollar in the dumps.
As the dollar recovers, stocks will initially struggle. For this reason, I feel as though the December S&P futures will be facing an uphill battle in the near-term. I cannot say that I am overly bearish in this market due to the seasonal strength that is typically seen going into year-end but it does seem that a patient strategy of selling on swift rallies could be the way to go. That said, since March the money trade has been being long so as a bear you should make it a rule to never chase the market lower. Let it come to you, or miss the trade....
The S&P has left some buy stops above 1103 and might eventually go for them but for now it seems like a move to 1070 is the in the works. Similarly, the NASDAQ might be headed for 1730 and the Russell 555.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
November 11 - We recommended that our clients sell the December S&P 1160 calls for $7 or better. Some were getting fills near $6.75 others opted to continue working the order at $7.
Russell Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.
NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
If you follow currency trade, you have likely read about the carry trade that has allowed the U.S. currency valuation to drop beneath what the fundamental value might actually be. Carry traders are essentially borrowing dollars (selling them) to invest in currencies that provide higher yields. With the Fed keeping the overnight Fed Funds rate at nearly zero, that leaves the dollar at an interest rate disadvantage relative to most currencies and thus the seemingly never-ending demise of the greenback. However, if you recall the Japanese Yen was once the victim of a similar carry trade but when traders were forced to unwind the Yen was catapulted. We believe that eventually we will see the same price action in the dollar.
Unfortunately, traders have been sensitive to dollar movements simply because much of this rally has stemmed from the premise that a weaker dollar promotes earnings potential for firms doing business overseas. In addition, it keeps U.S. farming and factory workers moving as a result of a high demand for domestic products from overseas buyers. Remember, U.S. goods look cheap with the dollar in the dumps.
As the dollar recovers, stocks will initially struggle. For this reason, I feel as though the December S&P futures will be facing an uphill battle in the near-term. I cannot say that I am overly bearish in this market due to the seasonal strength that is typically seen going into year-end but it does seem that a patient strategy of selling on swift rallies could be the way to go. That said, since March the money trade has been being long so as a bear you should make it a rule to never chase the market lower. Let it come to you, or miss the trade....
The S&P has left some buy stops above 1103 and might eventually go for them but for now it seems like a move to 1070 is the in the works. Similarly, the NASDAQ might be headed for 1730 and the Russell 555.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
November 11 - We recommended that our clients sell the December S&P 1160 calls for $7 or better. Some were getting fills near $6.75 others opted to continue working the order at $7.
Russell Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.
NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
