We're all playing a game here. It's a game that involves multiple levels and nuances that none of us can quite grasp the exact depth of. Nevertheless, we show up everyday with the intention of making the best decisions possible in the face of quickly shifting circumstances and volatility.
Given that this is a game, it's important to understand when the nozzle of the manipulation hose is turned onto the power stream setting and when it's set to just drip.
In the 5-7 trading leading up to option expiration, there is a tendency for the skull drudgery to be amplified considerably. The reason is simple: the derivatives market is a massive entity and as such, whenever there is an abundance of money on the line, there will be efforts to maximize profitability for the house and minimize profitability for the players.
We're setting up between exactly now and next Friday the 15th for an abundance of deceptive market moves that will be neither useful or real. In fact, they should largely be ignored. However, since it's our intention to profit from these types of market moves, here are the plays:
- Defensive sectors: Reits looks especially attractive. Single family rental reits, such as INVH and AMH have been a favorite here for nearly all of 2019.
- Metals: While we are intermediate term bearish on gold, there is a small window there where a 1-2 week move up could yield some profits. KL is a leader in the sector, as well as a favorite from a trading perspective.
- Short financials: Financials have had a nice run. They are susceptible into option expiration next week, as interest rates will likely soften a bit in the midst of market chaos.
- Long housing: With interest rates moving down, housing will attract some dip buyers. There has been some fairly substantial profit taking recently, allowing an opportunity to gain short-term exposure.
The firepower gained by the market by throwing a few curveballs to investors at this point in the game should allow for a move to 3150 to take place in the S&P 500 by month end.
Game on.
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