EOT Position Update – December 16, 2015
Market Snapshot
Ready or not… higher interest rates are here.
The Fed is poised to end its zero-interest-rate policy (ZIRP) today. This policy has been in place since the 2008 financial crisis.
Under ZIRP, the Fed has kept interest rates near 0%. They also used periods of quantitative easing or bond buying to help boost asset prices and economic growth. This has been a true test of the effectiveness of monetary policy in the face of economic crisis.
There have been some side effects like excessive risk taking in asset markets and growing income inequality between the rich and poor. But overall the policy has been a success. Since 2009, the US economy has created more jobs than every other advanced economy combined!
This is no ordinary rate cycle…
The early stages of the cycle are simply normalizing rates. There is no precedent for what this means because the US has never maintained a ZIRP for this duration or in this way before.
All signs point to the Fed increasing rates gradually. Interest rates will still be below historic averages for some time. Keep in mind, the economy must continue to grow and strengthen in order for the Fed to continue raising interest rates.
Right now the S&P 500 is hugging the 200-day moving average.
This moving average is acting like a magnet over the last few months. Anytime the index gets too far away it snaps back in the other direction and the momentum carries it beyond the moving average until it snaps back the other direction.
The relative strength of the S&P 500 has been declining since early November when it reached 70… a level indicative of an overbought market. It’s now below 50 and trending lower. But the RSI would need to hit 30 before it indicates the market is oversold.
The MACD indicator is in the same boat. It indicated markets were overbought in October. Since then, market momentum has waned. But it hasn’t given us a signal that this trend has ended.
Editor’s Note: This is the last update of 2015. We’re giving our dedicated staff the next two weeks to enjoy the holidays and prepare for an exciting 2016. But before we go, there will be a new trade later this week… so don’t miss it.
Happy Holidays from everyone at Elite Option Trader and Hyperion Financial Group.
Now, onto the updates…
Position Updates
Just a quick note: Remember, we won’t update every open position every week. We try to focus on the positions that have some significant news or price movement.
FB January 15th 2016 $110 Calls
FB touched the 50-day moving average a few days ago. As expected, it immediately turned and began moving higher. Look for bullish momentum to build in this stock in the weeks ahead. Support is at $100.00 and $99.00. Resistance is at $110.00 and $115.00.
KR January 15th 2016 $37.50 Calls
KR has continued to move higher after their quarterly earnings report. The stock is above our $42.00 resistance level and our option is up a whopping 246%! It’s time for everyone to cash in this option. Congratulations to everyone on a great trade.
Category: EOT Update
