QQQ - Invesco QQQ Trust Series 1 23:54 PM - Mar 26 2023
by: Maverick

Stock Market Week Ahead: March 27, 2023 + Rest of Year Prediction (Fed, Recession)

Economic Calendar
  • Monday: Nothing.
  • Tuesday:  Consumer Confidence + Fed Bar Testimony (Banks) - Senate @ 1000
  • Wednesday:  Pending Home Sales + Fed Bar Testimony (Banks) - House @ 1000; Yellen @ 1545
  • Thursday:  Jobless claims & GDP @ 0830; Fed Collins @ 1245
  • Friday: ⚠️PCE @ 0830; Chicago PMI @ 0945; Fed Waller + UMICH @ 1000; Fed Williams @ 1500; Fed Cook @ 1745
  • NEXT Week: Non-Farm Payrolls/Unemployment + JOLTS

Market Thoughts:
  • Last week:  I ended the week in the green.  I had much better risk protection in there and it was a nice parachute twice. 😅 Best day of the week was FOMC, I executed some beautiful trades as he was talking, particularly when he went into hawk mode. 
  • Economic calendar:  It’s an uneventful week (I think), until Friday when we’ve got PCE and all the other items (see above)
  • So let’s just get right into where I think we’re going for the rest of the year.
  • If you haven’t watched the FOMC conference, you need to.  https://www.youtube.com/watch?v=y3dt5ZyL2OU&ab_channel=FederalReserve
  • 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.
  • Turning to the SEP
  • SEP showed downtick in GDP for 2023 (.5 -> 0.4) and 2024 (1.6 -> 1.2) https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20230322.htm 
  • 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
  • This is what I’ll be doing. 🫡

Technicals (Latest):
  • QQQ 200 MA: 290.11 (trading above/hasn’t tested lately)
  • SPY 200 MA: 392.34 (trading above/held)

Expected move (per options chain)
  • QQQ +/- 8.7
  • SPY +/- 9.1

Trading Plan (This Week):
  • Current position: I’ve got some QQQ puts for June 16.  I will look to exit these on a technical pullback to get out with some green.
  • I’ll then flip to long bias (in line with my comments above — this means I’ll be looking for reasons to go long vs short at every opportunity)

Screenshot 2023-03-26 at 23.53.46.png 429.06 KB



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Invesco QQQ Trust Series 1 - QQQ

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