Experienced futures and options broker with DeCarley Trading shared her views on the E-mini S&P 500 futures market on the June 18th episode of Mad Money with Jim Cramer.
“The charts suggest that new highs could be on the table. I think Garner makes a persuasive case, just don’t get too comfortable.” - Jim Cramer, Host Mad Money on CNBC
The Fed has made it clear; they have shown up to the fight with brass knuckles and it probably won’t pay to go against them. The Federal Reserve’s move to purchase corporate debt individually, rather than via ETFs, will likely go a long way toward market stabilization. Recalling the 2008 and 2009 debacle, investors repetitively sold stocks as they eyed the spread between corporate bonds and risk-free Treasuries. Thus, keeping the spread tight will avoid the tendency for investors to use it as a signal to liquidate risk assets. Of course, there could be unintended consequences of these actions down the road but that is another discussion.
Although the VIX is well off its March highs, it is still elevated based on historical standards. This suggests investors still aren’t comfortable with the landscape, but it also creates some attractive opportunities for low-risk and high-reward trades for option traders willing to play the long game. We are looking for the VIX to work its way lower over time and the S&P higher, but it will be a bumpy ride. As the VIX declines to more normal levels, the S&P 500 is prone to melt-up price action.
Last week we were viewing the 3,000.00 level in the E-mini S&P as a significant psychological and technical level. Although messy, that level held late last week and assuming it continues to do so, the bulls will be in control. This opens the door for a retest of the all-time-high near 3,400.00. The RSI, Relative Strength Index, seems to support this premise; it is midrange and pointing higher.
We also looked to the monthly chart to confirm our findings on the daily chart and they seem to be aligning. We’ve seen the S&P 500 shift from irrational exuberance earlier this year to irrational fear, and now seem to be headed toward another bout of irrational exuberance. Momentum could eventually carry us into the 3,500.00 area in the S&P 500 according to the expanding trading wedge that has formed and an RSI (Relative Strength Index) hoving mid-range and pointing higher. It is difficult to imagine a run to new-highs given the economic data, but both the daily and monthly charts suggest that is the most likely scenario as we get deeper into the year.