Last week: I made two trades last week - closing out the MNQ short I had (for 9 days!) for a profit; re-opening it a bit higher - currently holding that.
Economic calendar: There’s some quiet killers on the calendar for this week. Empire State, PMI, and all those speakers on Thursday.
On Wednesday, CPI showed nice headline decline, but stickiness in core - so we got the rip and fade. That was the low for the week. Note that a lot of headline was tied to the dip in oil that has now roared back.
Nothing has changed in my strategy/view from last three Sundays. The bulls are still in charge.
Exact repeat of last week: Technically though - we’re staring down a pullback. It tried on Wed & Thu, but then Friday did its normal “nope”
Heading into FOMC next month, the bulls can’t scream banking crisis, then report record earnings on Friday. It’s one or the other.
I wouldn’t be surprised to see another bank or two sacrificed to JPow ahead of May 3, worked last time. Short KRE?
Earnings season should be a wide array of big beats and screams of pain
Fed is already putting out there they are coming in with higher rates than even were talked about last time. They didn’t get their 50bps and they know they need to keep going while things are hot. They’e backstopped the banks/financial sector - so what’s the problem?
I’m seeing no pain yet - jobs are insanely strong, I look around while out. not seeing it. Yes, groceries are expensive as hell, but that’s about it.
I remain bearish, just clearly many months early.
If you look at the PPO, MACD, RSI - it’s all just looking for a high-volume reason to jump off a cliff. It just hasn’t had one yet - amazingly - that the market cares about.
Fun fact: QQQ is almost exact price it was 1 year ago today. We’ve gone nowhere despite a wild ride.
Technicals (Latest):
QQQ 200 MA: 292.25 (trading way above)
100MA is about to cross upwards over the 200MA - bullish
SPY 200 MA: 394.07 (trading well above)
Expected move (per options chain)
QQQ +/- 6
SPY +/- 6
Trading Plan (This Week):
Current position: I’ve got MNQ short (mini NASDAQ futures). Looking at the PPO and negative MACD for some action to the downside.
If we get a dip to 313, I’m learning my lesson for the third time, and closing and going long for now - unless it’s on major fundamental news.
With VIX @ 17 (incredible), I’m going to stack some puts for September or later, starting Monday.
Last week: My plan (as I wrote on Sunday) was to exit my puts/shorts on a pullback and then look for a moment to go long. I submitted an order to close my QQQ puts on Tuesday around QQQ 305 (small loss) and my order missed by about .05. I stubbornly held waiting on it to dip just a little more to fill me, never went long and well…it raged on to 320 with me in awe. I was so right and so wrong.
Economic calendar: The week has some fun every morning. I’d say JOLTS, OPEC, and Bullard x2 are the highlights.
Nothing has changed in my strategy/view from last Sunday - the market only confirmed it - big time - last week.
He said they had expected - up until the banking issues in the last few days - to go higher for longer. He expects the banking problem to contribute to tighter financial conditions, though they are not sure of full impact (much, little, or none). Keep tabs on that here: https://www.chicagofed.org/research/data/nfci/current-data
The 2% target is not changing - he keeps restating this because people aren’t listening.
He said twice during the conference he does not see rate CUTS happening this year.
The market is completely betting against what he’s saying. Fedwatch tool is showing the market expecting not just a pause in May, but rate CUTS in July.
They maintain looking for unemployment to hit 4.6 (it’s currently 3.7) (that’s a significant jump)
No change to Fed Funds rate for EOY 2023 @ 5.1 (currently 5) - he all but said pause and hold is the path for foreseeable future (and that’s reflected in SEP)
Analysis…
Tech keeps pushing up because DXY declining (as it should based on recent events)
Market, and especially tech, is not pricing in a recession and rates being held - so either Fed is going to pivot (cut) OR tech/market is going to break down — they both can’t be right.
It’s very straight forward - bears believe that market is going to break (finally believe Fed isn’t cutting this year + recession is coming); bulls believe no recession + Fed is going to break
This provides a beautiful trading opportunity if this plays out like I think it is.
Next FOMC is May 3 — market pricing in 86% chance of pause for then. I agree this will happen - despite inflation ticking up.
Market is still on Fed Trade (I am shocked, frankly), it will run into the pause in May, then at some point figure out the underlying reason for pause (bad reason), then we flip to recession theme.
So, we’ve got our time table. Now how do we position?
I think you go long on QQQ (options, futures, ETF) whenever you get an opportunity on technical pullbacks from now until May 3. There will be a few.
Be out of your longs before the meeting - and start buying starter positions in 6 month out puts on QQQ and any overpriced tech
Once we get confirmation that the final gush has happened - then start adding on to your puts/shorts and just sit back and watch it all happen
CPI is coming out on Tuesday morning, but I won’t be trading it - it’s looking like a mixed one. If there’s shock to one side or the other, I’ll jump in in the waves an hour later.
PPI (Wednesday), however, is expected to slow down quite a lot - that could be interesting (bullish).
The NFP news on Friday was actually bullish - adding jobs + lower wages. It just got totally lost in the 0DTE volatility + overwhelming focus on banking news.
There’s going to be an address from Biden about banking system. I wouldn’t be surprised to see JPow pop up somewhere, as well making everybody feel good.
All this to say, I think we’re looking bullish for Monday. I expect a gap up from wherever we open up, regardless of where futures push it.
Beyond that, we’re going to need to see what all announcements are made. I’m less interested in technicals for the next 48 hours because Fundamentals always….always…trump technicals - and we’ve got several incoming.
This is going to be an exciting week, no matter what - so keep your stops in to protect your downside — and stay agile. Between major economic announcements and 0DTE stupidity, roller coaster for sure this week.
Technicals (Latest):
QQQ 200 MA: 290.09
SPY 200 MA: 393.16
Expected move (per options chain)
QQQ +/- 12
SPY +/- 10
Trading Plan (This Week):
Current position: I traded the rip on Sunday night with NQ after I saw Fed announcement.
I’m just looking for another spot to go long, expecting a rip up at/before the open.
I plan to write a Wednesday update to see where we are then.
The yield curve is 100% inverted. The 2/10 continues to push higher. QQQ was rising with it (shouldn’t be) and finally got the message late last week.
The bulls sound like they’re getting a little sweaty up here — for the short-term.
Repeat from last week: I think we could see an uptick in CPI (as early as the March 14 report) and JPow to come in with a 50bps with new SEP. FOMC next meeting + SEP will be March 22. If not then, then it’ll be during the summer/June meeting. Inflation is pushing higher at some point.
Repeating from last week: I expect pretty much any dip to get bought until either CPI reverses course OR unemployment ticks up a few notches. No hope for the bears until then, because even earnings aren’t missing quite enough yet.
Well….updated CPI consensus numbers came in last week and they ticked higher.
MoM and especially Core MoM is what Bulls are betting on most. As I’ve been pounding the table on, inflation isn’t dead - not even close - it just slowed the pace down for now. Easing financial conditions (clearly visible on NFCI) + 25bps + Jolly JPow are only adding fuel to that fire. Mark it - they will have to come back and hit it harder at some point - before they even pause - not after.
Now let’s talk charts….
SPY held a key number - 405
QQQ basically held a key number - 300
Opening under 299 should be a quick move down to 296
Opening above 300 would be impressive, but I think it gets sold off by EOD (derisking this spicy CPI)
Technicals (Latest):
QQQ 200 MA: 291 (well above it)
SPY 200 MA: 394 (still well above it)
Trading Plan (This Week):
Current position: I entered an NQ short on Friday at the close and added more to it on Sunday night for an average of 12,320 NQ
I’m looking for 12250 at least, but 12200 before CPI
I will NOT hold through CPI. I intend to be neutral on Monday afternoon or early Tuesday at the latest
After CPI, I’ll decide what to do - I want to review the data (not the initial market reaction)
If warm/higher than expected, I’d expect QQQ 292. I do not expect a ‘hot’ reading.
