The animal spirits are at it again…
S&P off 3% on the CNY currency adjustment news. Last time that happened was Aug 2015 and we were off 5% in 3 days. I don’t think this will be like Aug 2015 because we knew it was a distinct possibility in ratcheting up the trade war.
As I type this in the overnight session, the ES futures market is down another 50 handles.
Believe it or not, this is the most ideal scenario. A gap down after an ugly Monday trade sets us up well for “turnaround Tuesday.”
Right now, we’re pretty loaded up with put spread sales, so no need to add to new stock setups.
We’ve been smart and picked our levels and scaled in, but it never feels good when the rug gets pulled into the market. Make sure into any bounce that you are aggressive in scaling out of your Tier 3 and Tier 2 positions, as odds are we will retest the low whenever it gets carved out.
Trade #1: TLT
TLT is overbought, but I want to see a little more of a stretch to start fading this move. We should see it if the gap higher holds tomorrow.
Expected Price: 140
Sell to Open TLT Sep 145/147 Call Spread
Tier 1: Enter at 0.30, Exit at 0.05
Tier 2: Enter at 0.50, Exit at 0.25
Tier 3: Enter at 0.70, Exit at 0.45