Market Context

Good day all, Whipsaw price action, a clumsy-thumbsy  US President and here we are a weeks price range of 2800-2621 in the SPX. Closing on the lower side of the weeks’ range at 2633. The yield curve inverting, along with the usual trigger finger of the US President Trump had a large part to play in the markets decline. Post the G20 summit, the markets were all green, the very next day Trump went on raving on how he’s a “tariff man”. This was enough to send the markets into a tailspin. Combine this with the arrest of cellphone company Huawei’s CFO, and rally no more.

All of this is to say that volatility is here to stay. The volatility index (VIX) saw a low of 16 on Monday and from there it was back to being above the 20’s. Friday’s close had the VIX settle at 23. What does it matter? Is it going back below 20? Your guess is as good as mine. All I can say is that we will position ourselves to take advantage of this volatility!

Subscribers, recall having placed the unbalanced condor that is set to expire December 12th for a credit of 0.80. This gives us protection down to 2530 (another 100 SPX points lower). Can we get there? Absolutely. Is it probable? In all honesty, we closed above the weekly and daily bearish price levels, above 24,364 and 24,195 on the Dow, which if elected warned of added downside pressure. This would likely suggest the possibility of a brief rally followed by more selling leading into the close of the next week.

The more volatility increases, the greater our hedging strategies. Protect your capital and remember the markets like to take everyone by surprise.


Risk & Reward

Our hedge for next week.  If this market rallies, we still yield!