The bears played offense to start the week and used a full scale attack to push the major averages lower by 1.5%, on average. Futures were breaking down like a rented mule before the start of trading and much of the day’s headlines were negative. We said yesterday this week would be full of headlines and that some of the economic news could have an impact on trading.
Wall Street was already nervous before the open as the Chicago Fed National Activity Index showed another drop and came in negative at -0.46 for May. April’s results were revised lower from 0.11 to 0.08 and anything under zero means contraction. We mentioned last Thursday that the Philly Fed numbers were going to awful (they were) and that there are a number of similar reports this week. Futures were already showing a weak open but dropped like a rock on the news so we knew it was going to be a good day for our put option plays.
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