Now that the heavy news cycle from last week is over I expect we will see a nice rally through Wednesday of this week in the Stock Market.
This morning about an hour before the open the stock market is up a little over 1/2%. Of note, Financials are strong and everything else weak to unchanged.
Slightly positive premarket bias. Combine this with the early week bias and I expect we get a nice rally today. Of course, all bets are off if we get any breaking news.
We are in a unique situation as we head past the halfway mark in April. In May the remaining IG report is to be released. It promises to be earthshaking as to the irregularities surrounding the intelligence agencies and other matters. The early portion of the report came out regarding McCabe and it was astonishing on it revelations. So I expect the additional reports will be similar.
But we also have what appears to be the situation, that the Special Counsel is going to conclude his investigation around the same time and give his report to Congress and the U.S. Attorney. It also appears he is going to forgo the interview with the President in a rush to get this report out contemporaneous with the IG report.
There are 2 views of thought on the upcoming Special counsel report. 1. That it will exonerate the President on all avenues that were investigated in particular collusion with Russia and Obstruction of Justice. 2. That it will show violations of the law by the President.
Myself the idea that it is getting hurried to coincide with the IG report would indicate to me that it is not being released to bolster the IG report. This logically it is going to be critical of the President at the very least. Perhaps even going so far to suggest the President violated the law.
But it’s certainly not clear to me which way this will go. In addition, the idea that the President’s attorney was raided at the early hours of the morning would also suggest that his report is going to do the President no favors.
But this is all far from clear, to say the least. The reason this is important is that if the Special Counsel report suggests the President violated the law the markets at least initially is going to drop substantially. This will almost certainly coincide with our learned congressmen suggesting impeachment is on the way. Certainly, the Dems will pounce on this and the never Trumpers in the Republican party.
What will be interesting to me is how Ryan and McConnell react. Ryan is done this year so he does not have to worry about reelection. McConnell has never been friendly to the President.
We are rapidly coming to a head in all of this and it’s going to happen the first part of May. Which means I would be hedged at least until we see what the two reports reveal and the reactions. Then reevaluate. Timing to put on the hedge would seem to be around early next week.
You could do this by shorting SPY, buying SDS or buying puts in SPY. I am not sure which vehicle I am going to use as I want to see what the pricing is in the puts when I decide to put on my hedge.
I typically do not like hedges but this is a situation that is going to come around perhaps the last time in our lifetime. It’s a very special situation. I may even do a 200% hedge. A straddle would be perfect but the premiums are so high you really need to be able to find a good month and price to make it worthwhile.
As far as straddles go this would be the type of situation to consider it.
As of now, I have no mean reversion trades on and my swing trades in AMTX are neutral. I am waiting until we get a drop to at least 1.50 to start adding a position long. The stock is trading now at 1.66.
If I take any new trades this morning I will post them.
If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. Typically I talk about the overall day expected with the markets and also give some levels on the ES and NQ for failed breakout scalping.
It’s my private twitter feed for the stock market and its free. Sports Handicapping is the subscription-based part of this site. But considering the cost of joining it’s almost free:)
Good Luck Today
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