Last week was ugly no doubt as most major averages posted weekly losses greater than 5%. This is why the fear index (VIX) gained 38% last week closing at $38.02, states John Person of PersonsPlanet.com.
Nothing was spared last week, bonds dropped -.28% and gold fell 1.37%. Last week was packed with lots of earnings surprises and pre-election positioning. Worries from a global increase in the number of reported new cases of Covid-19 had concerned the market, add the fact that there was no stimulus relief bill expected until after the election plus the Senate hearings on the social media giants weighed on that group as the political fallout may hit these tech companies with regulation changes due to their obvious biased censorship. This also weighed on the “FAAT” stocks, most of which had earnings last week. Almost all declined sharply including some of the Covid trades like Wayfair (W), Netflix, (NFLX), and Zoom (ZM). My “FATAN” acronym stands for: Facebook, Apple, Alphabet, Twitter.
Through all of this we did exceptionally well from the algo extreme SPDR S&P 500 (SPY) system trades in our live trade room and our newsletter stock picks along with our option trades, especially the calendar spread in Kohl's (KSS), the long call spreads in ProShares Trust (TBT), the bull spreads in live cattle futures, to the option trade for Amazons earnings. Ok that was just last week what about now? Well , let me ask this “IF” you know how the election results will turn out, please let me know and then I’ll be able to tell you which way to be positioned in the market. Otherwise, I’m only holding my current positions and most have either reasonable stops or are hedged with a collar strategy as we have in the Junior Miners (GDXJ) and the put option against the long stock position in Walgreens (WBA).
Last week I tweeted out and did a YouTube video sharing how we have traded using the Algo 17 program as well as an “unweighted” butterfly spread trade in Amazon, which worked out very nicely. It is posted on our website, and you are invited to review that. I had an opportunity to review the markets before the close while waiting at the surgeon's office to remove the stiches from my rotator cuff surgery and noticed an uptick in volume in Discover Financial (DFS) calls, it seemed as soon as I tweeted that out the stock surged on the close. We already have a long call spread on this stock as we took profits on the stock trade and used some of those profits and entered an option position. This stock has been sensitive to stimulus relief talk. My suspicion is after the election we will get a bill passed so I want long exposure to stocks that will benefit from that action regardless who wins the Presidency.
The unknown factors are trying to handicap the House and Senate races, or if this will be a long drawn-out vote-tallying event as happened in 2000 is beyond my paygrade and risk tolerance. If I just stick to my analysis and divorce myself from current events and fundamental news, I will say be short-term bearish, yet long-term bullish. There is no doubt we have two political parties with extremely different (polarized) views on economic, environmental, financial regulatory, and foreign policies. Bottom line is we did pretty good last week and have done very well this year, and unless you want to put on a December 300/250 bear put spread as a disaster hedge, I suggest don’t be in a hurry to trade new positions into election week. I’m sure, like we have had in my 40 years of trading, we will have plenty of trading opportunities after the dust settles. After all, “CASH” is a position.
To learn more about John Person, please visit PersonsPlanet.com.
