Unum Capital Trade Ideas: S&P 500 and CBOE VIX

Unum Capital Trade Ideas: S&P 500 and CBOE VIX

Dear Trader

After the worst December seen since 1929, the January 2019 equity market has started off on a strong footing, with most major indices gaining an average of between 7% and 9%. Now, with the bullish sentiment strong and the market seemingly discounting no Federal Reserve interest rate increases for 2019, it may be wise to act with caution as complacency seems to be the order of the day. From an economic standpoint, the US economy remains stable, with employment growth, wage increases as well as GDP in positive territory. Could the market potentially be making an error in believing that we will see no interest rate increases and that the short term strength in equities in ‘certain’ to continue? As it is said, there is no such thing as ‘sure thing’ in markets and on that basis, I am looking at two contrarian technical trading opportunities.

#1. S&P500 Futures

Key Technical Drivers: 

– Candle structure weakening (momentum slowing on lower time frames)
– RSI nearing overbought levels
– Momentum Indicator pointing lower while price makes new (recent) highs

Trade Levels:

Short/Sell S&P500 Futures at 2707

Stop-loss: 2740
Take Profit Target: 2540
Alternatively, traders could consider buying put options on the SPDR S&P 500 (SPY) ETF.
#2. CBOE Volatility Index (VIX)
Key Technical Drivers:
– Price down from 36 to 16 index points over 5 weeks – buy the dip.
– Price trading at a major support level
The decline from in price has reflected bullishness but now reflect complacency.
Trade Idea: 
Buy Call Options on CBOE VIX
Trade Levels and Detail:
Strike: 22
Premium: TBD
Expiry: 13 February 2019
Underlying Index Level: 16.57
(S&P500 VIX Futures now +0.61% in early Friday trade).

Please chat to the Unum Capital Trading Desk to take advantage of any trading opportunities.
All the best,
Lester Davids
Unum Trading Desk Analyst
e-mail: clientservices@unum.co.za
Tel: 011 384 2923

Leave a Reply

Your email address will not be published. Required fields are marked *