Although the markets ticked up over the past couple of days they seem to be reaching for air as there is little to pull stocks higher–but seemingly plenty of events that could drag them lower.
The result is a market with a whole lot of churn–and that's often to our benefit. The constant back and forth within a range is what makes us money. This past Friday our Goldman Sachs (GS) call spread expired for a nine-day 25% gain, and our SPX condor finished for an impressive nine-day 28% profit.
So to keep that profit trend going with this week's trades let's take a look at…
The Markets and How They Affect Us
The SPX continues to march higher–but with far less conviction…
As you can see from the chart above the SPX has traded into a bearish rising pennant which often foretells a breakdown–and we're liable to get one as early as tomorrow morning.
Apparently former FBI Director Comey is a habitual note taker and some of those notes have surfaced–and they could be incriminating. A memo has appeared claiming Trump asked Comey to "let the Flynn investigation go"—allegations that could lead to serious consequences. The urging of the president to end the investigation could be seen as coercion and obstruction of justice.
Comey's refusal to end the investigation is now being seen as the real reason for his termination. It was also alleged that Trump called for Comey to begin arresting reporters for leaking and publishing classified information. That would also be illegal since it has long been held that a reporter has no responsibility to keep information private–that is up to the original holder of that information. Comey had shared his notes from the meetings with senior FBI officials who interpreted Trump's remarks as coercion.
The Democrats are already talking impeachment calling for even tougher special prosecutors and more testimony. The Republicans have yet to mount a defense. Nobody from the House, Senate or White House has been willing to go on camera as of this writing to rebut any of the allegations–although that could change by tomorrow.
With commentators talking about impeachable offenses it is not surprising the S&P futures are down 14 points as of this writing. Whether this storm blows over or not President Trump will be battling this event long enough to impede his agenda. Senators are already saying they will subpoena all of the White House records, notes, tapes, etc along with any notes and memos from Comey and the FBI and there is no doubt that Comey will have to testify multiple times. After the way he was fired and the negativity he received afterwards, he will not likely testify favorably about his conversations with the president.
The problem is much of the market's rise since November has been predicated on Trump's agenda getting passed–tax reform, less cumbersome regulations and a more workable health care plan. Unfortunately all that is in jepardy now as the focus shifts to Trump's survival.
This is such a market distraction that better than expected earnings, strong employment and increasing GDP expectations for the coming quarters start to fade as market influences. With the conclusion of earnings in May seen as a time of seasonal selling, traders may just decide to get out now and lock in the past several months profits–the question is…
How do we make money on it?
For our aggressive trade we've got a put spread on a stock that will likely attract money in spite of the rest of the market–although we'll be looking for a sell off tomorrow morning to get filled at an attractive price for a potential 10-day 22% gain.
And for our Roth trade we sold an out-of-the-money call spread for a potential 10-day 25% plus gain.
We've got two trades looking good for this market–so let's get started…
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Keep up the good work,
Peter