Strength in the Equity Markets
Equity markets have been more persistent, creating a situation where it becomes more difficult to stick with swing positions for any length of time. As a result, we have been trading more options and less common shares.
SPY – Equity Markets
After hours trading on the SPY created a line in the sand at 282.69 with three blocks each accounting for 11 million shares traded. Additionally, the fact that institutions choose to disguise their massive trades after hours leaves one perplexed at their motives. Since we do not know, we can only remain bullish if price action surmounts this level. If we do not trade above 282.69, we will look for a fade.
More than 11% of S&P 500 companies have reported earnings.
With the S&P 500 near 20 times 2018 estimates, the index could move up to 2,925 (+/-). Also consider if the S&P 500 makes it up to 23-times average estimates, it would equate to 3,100 in 2018.
That said, tax reform will necessitate modifications to earnings (PE) and these have only trickled through the media. It is this last consideration that has us cautious, with SPX and SPY trading without a hint of a drawdown.
Suffice to say, we remain in “hit and run” mode, concentrating on short term swings; trading more options than common to reduce risk.