2/2 Best Idea For The Week Ahead

It appears the tariff war is ramping, last night Canada imposed their own tariffs and now we await to see the futures reaction tonight. We closed Friday right below the 8 ema and then continued another $3 lower ending the after-hours session at 598.88. That is right ontop of that 21 ema, should we lose that Monday, the shorter term trend is bearish and you’d want to lighten up all your short term trades, simple as that. We have yet to close below the 100 day since early August and that currently sits at 586.48.

Why am I not really concerned longer term about the tariffs? Because nobody on this planet loves the stock market more than Donald Trump, it is his literal barometer of how the economy is going. Exhibit A is the highlighted tweets below from Mads Capital. No President has ever cared so much about what the market does day to day and knowing Donald Trump if this tariff war really began to impact his markets negatively he would likely reverse course. Yes, even if he said Friday stocks were of no importance to him, I find it hard to believe he’d sink equities longer term over this especially after constantly blaming every red day in the market on Joe Biden the last few years. So while there may be some initial panic Sunday night into the following week, let us wait and see if markets are bought where they should be and how concerned participants really are after a few days. A daily close below the 100d I noted above would be probably your sign to really take things off in the short term.

In times like this you really just want to play defense: sell covered calls on longer term positions, get rid of shorter term calls, and try to focus more on defensive names in the interim. Basically, don’t try to be a hero until we reclaim the 21 ema on the SPY and you will be ok. I myself am in my recent META risk reversal, but don’t think I wouldn’t close it up if things went south. While I do think META reported a great quarter and I do think it is going materially higher by the time my risk reversal comes up in 2027, I also would cut this whole trade for a profit on a close below the 8 ema, which I’m expecting it ride up this quarter. I’m very technical and there’s always another trade so I’m not going to let myself get hurt especially with all this margin required on my short puts. Right now there is room another $20+ lower to the 8 ema.

This week’s best idea is a $100B+ market cap name in the XLV which right now is looking like the place to be. We’ve got 4 bullish trades recently including one very large risk reversal placed recently. This sector in general is defensive, healthcare, but look at this weekly chart below. That is a very strong setup and if you want to allocate some capital to the XLV here, you can see a bullish MACD crossover near unfolding.