Traders Edge Blog

Triple Top?…

Well, we got one broad index over the hump and the other dancing in the shadows of a record close. You’d think the bears would be hiding in their caves and bulls making more room on the bandwagon. Instead, you get lots of talk bout the current hesitation and whether that may portend something mighty negative for the long side of the equity market.

I’m not about to make a prediction as to whether we confirm a triple top and turn tail at such a juncture…but I would point out that the two previous occasions the SPX traded to these levels there was some serious headwinds. The market recognized these issues to be quite problematic and tanked accordingly.

My reaction this time around is “What?” As in, what is the real threat lurking this time around that would pull the rug out from beneath the bulls? Certainly lots of things out there that could prove to be problematic – Iran/Israel issues, ongoing quagmire in Washington, still-sluggish recovery here, Eurozone issues that have yet to be truly resolved, Chinese growth prospects (or lack thereof over the short term), the question of what happens when an accommodative Fed curtails its QE program and the likelihood inflation will set in thereafter, etc…etc…etc…

From that list, many things could happen. The only certainty is that the Fed will eventually reverse course and we will be looking at a less accommodative environment…which will undoubtedly translate to marked inflation on a comparative basis. Surely doesn’t stead well for equities down the line………But is such a fear likely to trip the market NOW for anything other than the short term? Food for thought…

We shall see!


Ask the Crew

Q: My brokerage can do spreads and straddles but I don’t see where they can do butterflies… is that a problem?  Can I still set them up manually?

A: You won’t need to access margin for the option trades but you will use what’s called maintenance requirements, which can be done in any qualified retirement account or cash account. Unless you’re trading the E-mini futures or currencies with the indicators, as those do require margin.

Q: I am new to your indicators. I have a couple of questions. When you put orders on using the E-mini, what is the symbol that you use? Also, when you place a long or short, are you buying the shares or are you buying options?

A: We use the ES (The S&P contract).  An E-Mini is an electronically traded futures contract (not an option) on the Chicago Mercantile Exchange that represents a portion of the normal futures contracts.

Q: I am very interested in joining the Swing The Ax indicators. I have mainly trade Forex and ask if the system and indicators are workable on spot Forex market EUR/USD?

A: The spot rate in Forex currency trading is the rate that most traders use when trading with an online retail Forex broker – so yes.