The two-year treasury yield went over 5% for the first time since 2007. That’s not good news for stocks as there is a reasonable alternative you can use to park your hard-earned money.
The S&P 500 (SPY) did find a way to stay positive yesterday, bouncing off the 50-day moving average I showed yesterday. We’re still within the channel, but investors would certainly like to see the market start moving higher from here.
Why the heck happened and what did Fed Chairman Jerome Powell say to spook the market?
Over the last two days, Fed Chairman Powell’s speech can be summarized as “more rate hikes coming to combat inflation” and “monetary policy not on a preset course.”
It’s that second one that concerns me a bit. We have two remaining reports for the week – Jobless Claims today and the Employment Situation on Friday. If either one of them comes in hotter than expected, we just may see the Fed reverse course in two weeks and jump back to 50 basis-point increases.
Here’s what you should be looking for in Friday’s report, releasing at 8:30 am EST on Friday.
Nonfarm Payrolls, Private Payrolls, and Average Hourly Earnings are the areas I’m watching. The Fed has mentioned wage inflation as the next hurdle, so if these numbers are better than expected, the Fed could look at raising rates faster. That could lead to a 1-2% drop in the market in a day. But if you’re not that bearish in the market, I have a neutral to bullish trade idea for you.
At the recent Investor’s Blueprint Live conference last week, I learned that several readers of this newsletter enjoy trading cash-secured puts. So, I tried to come up with one for you today. I’m using pre-market prices, so this idea may change once the market opens.
Here’s an hourly chart of Perion Network (PERI):
The March 17th 35 put has a mid-price of 0.40. If the stock stays above $35 by next Friday, the cash-secured put seller would make $40 on a $3460 risk. That’s about a 1% return in nine days, or 40% annualized.
I don’t particularly like selling puts on an up day, but this stock passed my screen of reward-to-risk parameters as well as some other momentum indicators.
That’s my pick for the day, but my colleague Michael Shulman trades cash-secured picks multiple times per week. If you want to know more about selling cash-secured puts for weekly income and want to know how Michael Shulman researches his picks I invite you to unlock your access to the Investor’s Blueprint Live recordings.
Cash-secured puts were just one of many sessions over three days of speakers, offering up a variety of tactics traders can use today to potentially generate weekly income using options. It’s well worth your time to check it out. Of course, I’m biased because I was one of the speakers.
That’s it for me today. Let’s see how the market reacts post-Powell speeches.
If you have any questions, comments, or anything we can help with, reach us at any time.
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Coach, Options Testing Lab
Any trade or trade idea discussed is for educational purposes only. They will not be tracked as an official trade recommendation.
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