Filling Stock Market “Potholes” for Profits

I’m back in Chicago this morning for the grand reopening of the options trading floor.

I’ll have some more updates on how the reopening goes later this week. Meanwhile, I just returned to the city once again from my lake compound — where we also had plenty of work to do over the weekend.

While Chicago cleans up from the aftermath of the protests, the Upper Peninsula is still recovering from a long winter. Teeth-rattling potholes formed along my drive that runs a quarter mile to the highway as water froze, then expanded throughout the winter.

The roadbed is solid. But damage caused during the colder months necessitated some quick repairs now that summer is on the way. The cratered surface is once again flat thanks to a big stone load and a tractor skidder to spread the precious cargo…

Filling the gaps

Filling the gaps…

As bad as it looked just a few days ago, it’s all good now. I rode out the bumps over the winter — just like we were able to endure some of the worst days of the coronavirus crash back in March.

With some hard work, the market has also repaired its damage. The market has filled the price gaps left by panicked sellers who now wish they had the foresight to ride out the bumps.

The road ahead for the major averages is much smoother now. The early buyers have finished the initial repair work as we’ve watched the S&P take out several upside targets. With reopening in the news, the road to new highs is beginning to appear over the horizon…

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Chart of the Day: Emerging Markets Fight for Higher Ground

Greg GuenthnerAs the US remains caught in the clutches of civil unrest and the ongoing coronavirus pandemic, most investors aren’t exactly paying close attention to the action in foreign markets right now…

But there are some interesting opportunities setting up in emerging markets. The iShares MSCI Emerging Markets ETF (NYSE:EEM) has gone on a tear lately, jumping an impressive 13% since early May.

EEM is now back at its March highs as it attacks its 200-day moving average for the first time since the crash…

EEM

Some analysts say this rally is pure FOMO…

Here’s an excerpt from Barron’s:

While the mania could last longer and go further than fundamentals may suggest, Arthur Budaghyan, BCA Research’s chief emerging markets wrote in a client note Thursday that a weaker than expected global recovery and rising tensions between the U.S. and China pose two big risks that will continue to weigh on emerging markets “after this recent mania phase runs out steam.”

But if EEM attacks these next levels with authority, we could potentially see an extended run higher. When laggards catch fire, they can produce some stunning moves that no one — no even the pros — see coming.

Trading Tip of the Day

You can’t “wish” your trades higher…

I know this trading tip sounds pessimistic. I promise this sentence isn’t scrawled on the entrance to trading hell. But it is important for you to heed its message…

Wishful thinking is poison when it comes to your open trades. If a trade hits your stop loss, but you are hoping for a strong earnings report next week, you cut your losses. You can’t wish the market higher. If you try, you’ll drive yourself crazy (and to the poor house).

Approach your trades unemotionally. If it’s time to sell, cut the cord and move onto your next play. Your portfolio will thank you.

— Greg Guenthner

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Alan Knuckman

Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

Transitioning from a clerk to a floor...

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