In our first blog post of the New Year we identified the current condition in stocks as a bear market and explained some of the differences between bear markets and bull markets. The way to trade bull markets is to “buy the dip.” The way to trade bear markets is to “sell the rip.” As the chart below illustrates, we’ve had a nice “rip.” The E-mini S&P 500 futures is now probing important resistance levels, providing us with an opportunity to get short.
Failure of the market to significantly breach the 2600 level could cause prices to reverse. This sets up a retest of 2018 lows of 2313 in the front-month futures contract prior to the expiration of the March E-mini S&P 500 futures options on March 15. The severely oversold conditions that marked Holiday trading have been eliminated, providing room on the downside.
Bear market conditions will dominate as long as prices remain below the 200-day moving average. RMB Group Trading Customers may want to consider buying March 2300 / 2400 bear put spreads which are trading for roughly $750 each as we write this. If filled at $750, your maximum risk is that plus transaction costs. Each spread has the potential to be worth as much as $5,000 should the E-Mini S&P 500 futures hit our 2300 objective prior to option expiration. Prices can and do change, so check with your personal RMB broker for the latest.
NASDAQ 100 Can Also Be Sold
Similar opportunities exist in the NASDAQ 100 E-mini futures as well. Like the S&P 500, the NASDAQ 100 has rallied into resistance at its downtrend line. (See chart below.) Bear put spreads can be used effectively here as well. The NASDAQ 100 led the market down during the last leg of the decline. We would not be surprised to see it happen again. Watch this space for more detailed explanations as opportunities arise. Visit RMB Group to learn more.
Please be advised that you need a futures account to trade the markets in this post. The RMB Group has been helping its clientele trade futures and options since 1984 and are very familiar with all kinds of option strategies. Call us toll-free at 800-345-7026 or 312-373-4970 (direct) for more information and/or to open a trading account. Or visit our website at www.rmbgroup.com.
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The RMB Group
222 South Riverside Plaza, Suite 1200, Chicago, IL 60606
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