The Week Of September 14, 2020
Jerome speaks! Market volatility continued this week, and, after several large price swings, prices stock prices remained mostly unchanged. Jerome Powell, chairman of the FED, spoke this week about the FED’s bond purchasing activity, and confirmed that the FED would be willing to hold interest rates near zero for years in order to get inflation rising again. Although the FED’s balance sheet hasn’t moved much at the end of the summer, they have informed the market that they will be able to continue quantitative easing as they see fit. This decision is bullish looking forward, because it means the FED could resume bond purchases at any time, and some FED members have started discussing using negative interest rates to force traders and investors out of the bond market and into risker markets. In addition, weekly jobless claims fell again below 1mm, which shows that the labor market may be finally bottoming out.
Halloween may have come a little early to the markets this year! This week we saw significant fear in the market and large swings up and down as traders attempted to exit derivatives positions before Friday, which is a time known as the ‘quadruple witching hour’ by many traders. The third Friday in September is a date when index options contracts, stock options contracts, index futures contracts and stock options contracts all expire simultaneously, which creates a significant amount of short term volatility in derivatives markets. The spike in volatility picked up where it left off last week, but large price swings might even out throughout the rest of the month. For now I still believe that limit sell orders should be used to ensure trade exit. The S&P 500 has closed with gains 2 out of the last 5 trading days.
Last week, I executed two Weekend Trades related to the shift to a stay-at-home life-style, and one related to reopening restaurants.
(These results are verified returns of The Weekend Trade™.)
This isn’t financial advice, but opinions on trade opportunities for educational purposes.
REMEMBER to only open positions that fit within your own personal risk tolerance, and NEVER ‘CHASE’ trades that you missed a good entry or exit on. There will be another opportunity for you just around the corner.
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