The “Shutdown Trade” I Didn’t Give Fox Business

Earlier this week, you saw me tell Stuart Varney on his Fox Business Network show Varney & Co. about the actual results of what has happened after every government shutdown since 1981.

What I didn’t tell him was how to profit from this historical trend.

For several weeks now, I’ve been promising a special options trade just for 10-Minute Millionaires – a little taste of what my elite subscribers get every week in Stealth Profits Trader. And the recent shutdown is the perfect opportunity to deliver on that promise.

Today, I’ll give you a few of the details of the market’s reaction after every shutdown – and then we’ll look at a trade that puts those probabilities on our side.

This is a short-term trade – because the “shutdown effect,” historically, takes just ten days to start working.

And, like most of the options trades I recommend, it has triple-digit potential.

Here’s what you need to know – and how to profit.

The Shutdown Is A Time-Honored Tradition – And A Political Tool

Let’s get some quick context about government shutdowns and then jump into our trade.

There have been 18 government shutdowns in modern times.  However only the 12 that have happened since 1981 have the characteristics that we associate with the recent shutdown – namely the temporary furlough of large numbers of workers.

What changed between the six shutdowns that happened in the 1970’s that affected only a few things and the more impactful 12 that hit since then?

Strangely enough, the big change was a pair of legal opinions written by Attorney General (AG) Benjamin Civiletti in 1980 and 1981.

The basis for shutdowns actually has support from The U.S. Constitution itself.  Article I, Section 9 reads, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”

Support for this section of The Constitution is provided by the Antideficiency Act that dates back to an 1870 law that has, of course, been updated over the years.

But…

It wasn’t until AG Civiletti’s opinions that the enforcement actions for expired congressional appropriations gained significant teeth.

The only expenditures that could continue during a government shutdown, Civiletti opined, were those where there is a connection “between the function to be performed and the safety of human life or the protection of property,” or where otherwise “authorized by law.”

So with that backdrop, the “government shutdown” has been used as a political tool by both parties since 1981.

Ten Days After A Shutdown, This Market Chart Turns Green

My fellow quants over at Paststat put together this dandy breakdown of how the S&P 500 has responded to the past 12 shutdowns.  Note that t+1% means percent change one trading day after the event, t+2% is the percent change two days after the evert, etc.  Here’s the data:

Note the area I’ve marked in blue.

While the results 1 to 5 days after a shutdown have been 50/50 in terms of results, after 10 days, the market was in positive territory every time.  And after 20 trading days (that’s about a full calendar month), the market was higher 9 out of 10 times.

While this analysis wouldn’t make it into a PhD’s thesis paper, it does indicate an edge for us as traders.

Why does the market go up after a government shutdown?

After all the political bluster leading up to a political shutdown, the event itself becomes a “sell the news” moment – meaning go the opposite direction of the news.  Government shutdowns are posed as bad (libertarians out there will disagree), so once it one actually happens, the market has already anticipated the event, and heads in the opposite direction or up.

That leads us with an edge for playing a continued push to the upside for the markets.

Let’s jump into our trade:

Find the Extreme

The Nasdaq index, with its emphasis on technology stocks, has been a market leader throughout most of this bull run.  We’ll look to this index to give us the biggest “bang for our buck” in this quick-hitting trade.

Note that in very strong bull moves like we’ve seen so far in 2018, pullbacks are typically very shallow as we see below. Here’s the chart:

Now let’s get our protection and targets in place:

Frame the Trade & Book the Profit Action Plan

This is a momentum continuation extreme, with an edge provided by post government shutdown price history. Our expectation is for a move up in between that 10 and 20 day sweet spot we saw in the data above.  Here’s our option selection along with our protection and profit target:

Buy: QQQ February 9, 2018, $171 Strike Calls (QQQ180209C00171000) at the best available price up to $1.75.  Do not pay more than this limit price.

Stop-loss: Apply 2% of your core capital or 5% of your speculative capital. Exit the trade if the price drops by 50% of the premium you paid.

For your profit-taking exit: Sell 50% of your contracts at a 100% profit, and hold the remaining contracts for further guidance.

What to Watch

The markets have had very little downside price action since the beginning of the year.  Remember that we are playing probabilities here, not certainties! Place your stop so that you protect your trading capital while giving this trade some room to run.

Great Trading and God bless you,

D.R. Barton, Jr.

44 Responses to “The “Shutdown Trade” I Didn’t Give Fox Business”

  1. It is a little confusing to find out which of your several emails per day, is the ONE that has the next trade included in the body of the email. It is way to ‘wordy’. Just send a simple email, clearing stating this is the next trade and provide the symbol and date.

  2. Richard Griffin

    I like you style very much DR. All seems to make perfect sense to me and is more than clear. But then I read your book two times and pour over all your messages and I especially like your weekly videos and “unfiltered” segments. Keep up the good work.

  3. Please don’t put hyperlink to open up new page. Some firewall blocks it. State exact buy recommendations on main email. PLEASE send us heads up email so we are better prepared to execute trades. It is very difficult to read it on time and take action since we all have different working schedules. Some of us missed last few good trades due to not being able to read emails early enough. Not all of us just can sit, read email, and execute right away during the week. Thank you.

  4. Mind numbing how many BS emails daily, with overly verbose sales language. Its like you’re trying to convince those of us who are already on board how much more incredibly smart you are. Why not just cut to the chase and give the stock suggestion with a few supporting paragraphs? I’m about 3 emails from cancelling altogether and getting a refund.

  5. Those of us who are already part of this program, should have been already filtered out and not be receiving the promos for this program any more. Just like it says “just the facts ma’am.” Or in this case ” just the trade, Sir”. We are already in it, wordy promos are just the
    Waste of time. One line trade with may be a single paragraph explanation should suffice. That goes for all the other money map press as well. Thanks.

  6. I agree with all the above comments. Also, I have no idea the “QQQ” means. And how would I know if the price dropped–is there website where options trading is displayed? Does anyone answer any of the question or concerns raised in tbese comments?

  7. Buy: QQQ February 9, 2018, $171 Strike Calls (QQQ180209C00171000) at the best available price up to $1.75. Do not pay more than this limit price.
    D.R. I would also like to see your answers to the prior replies, a little green myself and am working on limited funds like most of us.

  8. I would like to under stand the hook patter better and how to Identify it in the charts i have read your book and still would like more clairafcation on time frame of charts is it 6 months 3 months what. and I sing up for text alerts and haven’t gotten any. were do we find answers to questions???

  9. I don’t understand why there’s so much confusion, I was in this trade when the market opened, got in at 1.50, now I wish I had bought more, because it closed at 2.15, up 0ver 40% in 1 day! What I’d like to know is there enough upside to buy more? Thanks DR great call, are we selling in 3 days?

  10. Agree with all the above. Need to have some type of teaching, webinar or vids on how to:
    – trade options – step by step on what everything means. Basically walk through a trade from the start point of getting the alert, then showing how to enter the trade, then how to exit the trade.
    A lot of us have never even done an option trade and have no idea as to how. The terms you use are like trying to understand French language when youve never learned it. Trading options for idiots might be a good title for it. I’d be the first to sign in for the teaching.

  11. Thank you for providing this door of opportunity to voice our complaints and suggestions. The entire staff needs to listen. Clearly differentiate between your “advertisements” and the weekly/daily “recommendations”. I too am getting to many advertising emails from you and the rest of the staff.

  12. I appreciate the information your team has provided. The price is small when it comes to the value of the information received. I’ll be better prepared to take advantage of the information very shortly. Keep up the good work…

  13. I had no problem with the trade instructions, I’ve traded options for a number of years. The only thing left out of the instructions is the duration of the trade order. My trade order didn’t get filled on Friday, should I leave the order open looking for a pullback or has the opportunity passed?

  14. I was thinking that my concerns on not understanding emails & not getting emails just on recommended trades. I have read DR’s book which is a great read but still need better instructions on how, with dates, on how to specifically make the trade. I was so excited about DR’s program but really concerned about my future participation.

  15. I missed getting in on QQQ trade, had my option money in another trade. Glad I did still lost money when market went south. I do like your positive attitude about trades you recommend . I have no problem understanding how to make the trades. From reading other comments I understand their confusion. I only read your comments from Money Map Press . The important thing to remember is to protect your investment. No one else can do that for you. Thanks for your labor of love.

  16. The above comments are the exact reason why I haven’t spent all the money to follow all the info from you and many others in Money morning. Options for the newbie are not easy to understand and I don’t believe the explanation will answer all the questions. Two, with all the emails you guys send out how do you even know which ones are the trades you are looking to do. Three, the one I do subscribe to I have never seen any follow up on stocks I’ve bought as to when to sell or whether to hold. Four, the information is interesting but too much and too long, it’s overwhelming. Five, i feel like everyone is constantly trying to sell their service and it Makes me feel like it’s a marketing scam and you know how people get turned off by those. And lastly, I never see anyone of you guys answering the questions people pose, so where is the service that goes along with the price tag. I would really like to hear back from people who actually have used these services and can tell me whether they really are easy to use and understand, really are making money from them and if they really have gotten questions answered when needed.

  17. I agree to what Ms. Debbie said. I have a hard time understanding how it works because everytime i try to click on what it tells me to click, it takes me to another service whichi have to pay for. I ddnt get a name of a single stock yet to play on the 10-minute millionaire which i subscribed. Can I call the company and guide me thru all the basics? looks like im lost even if i’ve read the instructions and watched the vidoe. PLEASE HELP!!!!

  18. D.R. I am 3 months new with stocks and I picked your basic program because you seemed honest and I thought I could learn the basics from you. But your over all presentation seems to be over my head by leaps and bounds. I do like Nova X Report and Michael Robinson has been very good for me. So I have taken advantage of his lifetime offer because I do need help finding possible trades that fit within my comfort and money levels. I do respect your knowledge and maybe one day I will be able to understand enough to work with your program again. I do not want to re-new my current contract with you at this time.

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