That Was The Week ending 04May

Uneventful, But Reminiscent of 2017

All the tiny daily gains wiped out on Thursday,then a big up on Friday. Weak pound/strong dollar, and non farm payrolls may have given FTSE a boost. Of course the old adage ‘Sell in May’ go away, come back on St. Legers day may still hold water. St. Legers day is 5th September and is probably irrelevant since the age of the computer. Money never sleeps. So, the question is, are we back in volatility flatline mode? That is not good for traders,and it just makes us want to sit things out. As if!

Non-Market Moving Events

So again the Trump saga continues, we had local elections, Iranian nuclear expose´Royal baby, Brexit, Tesla’s big cash burn and so on. What really moves markets is when traders make a decision about things that might happen,and so banks lead the way, while tech is keeping prices aloft. FAANGs continue apace. I ‘d hope to see Tesla up there some day, that’ll make an interesting acronym.

So What Is Ahead of Us

There was a 90% chance of the Bank of England hiking rates-that has now dwindled, but they may surprise us yet. The £ sterling meanwhile dropped 6%. So if there was one over-arching barometer, it has to be the chart. Sadly we can no longer get FTSE at Stockcharts.com, but our new favourite site:https://uk.investing.com really provides a first class resource, for free. So, what does their chart say? In the last 3 days we have double topped and may be forming the right shoulder of a head and shoulders chart pattern*. Or, we could be going on to new highs. Elliot wave? Who knows? Investing.com tells us all the technicals point to a strong buy.

Sit on Our Hands? Or Bite The Bullet and Trade Something?

With vol flat, and the market rising, for us unoptimistic options traders, we can either wait for a drop and subsequent vol expansion,go long(ugh!) or take a very low cost position that captures that vol expansion. We’ll discuss that in trade 78 

*http://stockcharts.com/school/doku.php?id=chart_school:john_murphy_s_charti#reversal_and_continuation_price_patterns

Filed Under: FeaturedInformative

About the Author: First found out about options in 1995.From the arcane magazine Exchange and Mart! First trade- a covered call on VOD in 1999. Made 10%,VOD almost doubled. That's when I realised I was not a good trader,and I was forgiven thanks to the amazing world of exchange traded options

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