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6.26.2019 - Free Investing Newsletter Bookmark

Now the wait


This will be one of the shortest Financial Intelligence Reports of the year. Why? We’re in a holding pattern.


Just 4 sessions ago, we had set new all-time highs. But since then things have faded a bit, as market participants wait to see what’s going to happen with 1) Iran and the back and forth there, and 2) the weekend chat between Trump and China’s Xi.



Let’s chat about Xi/Trump for a minute. Both sides need and want a deal. Both sides are run by alpha males that don’t want to look like losers.So, saving face is very important on both sides. However, both nations truly do need to kiss and make up so that we each benefit.


So, if they do come away with a deal, even if it’s not perfect, this market is going to take the consolidation it’s been in, and it’s going to roar higher. However, what it does if there’s no deal, is a bit more perplexing. Why? The Feds.


The Feds have buttered us up for a rate cut. It’s probably going to be a 50 basis point event. If China and the US do NOT come to an agreement, traders will instantly put their faith in the Feds coming to the rescue. The question then becomes, will it be enough? Would we still go higher with no China deal, but a big fat 50 basis point cut?


Maybe not. We are in the beginning stages of earnings season. For the most part people are expecting earnings to come in pretty soggy. With no China deal, they might start to think that a rate cut isn’t going to be enough to improve Corporate revenue and profit levels.  


Then of course there’s the Iran situation. The rhetoric back and forth has become pretty intense. Their version of a President, said that he thinks the White house is mentally retarded. Trump blasted back at them saying they’re the stupid ones, because they could have a great deal “so easily” with him.


Right now, there doesn’t seem to be any give and take on either side. Finally all this bickering has begun to weigh on the oil markets, something that even the downed drone didn’t do. The XLE got a lot of action, early on today.


So here’s the problem/question. We will not get the results of the Xi/Trump meeting until the weekend. So whatever the outcome and the effect on the market, will not be evident until the futures open Sunday night. Do you take a position ahead of things, and “hope “ that there’s a deal? Do you buy some puts instead, just in case there’s no deal and things got worse? Or, do you simply wait and play the hand that gets dealt next week?


With the market flirting with the all-time highs, the reaction could be pretty severe. A “no deal” situation could send us down significantly, yet anything that reeks of a true solution, will be celebrated “bigly”.


That makes this even more difficult and dangerous. Go long and there’s no deal, there’s not much to stop a slide. Go short and there is a deal, and you’ll get beheaded.  You could try playing a straddle, taking a put and a call option on something like the  DIA or SPY. But the options are expensive, and you’d need a lot of movement to make the winning leg of the straddle pay off.


For me it’s easy. I’m not getting involved. I’ll trade something tomorrow and maybe Friday, but I’m going into the weekend flat. No open short term trades.

For any of you that are wondering, the stocks and options we’re playing in our long term holds newsletter will not change. We are well positioned there, and I’m not adjusting a thing.


So that’s it for today folks. A short letter, just to show you what we’re up against this weekend. We’ll be back to a much more in depth letter on Sunday.

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