SPY - SPDR S&P 500 20:51 PM - Nov 02 2022
by: Maverick

Stock Market Day Ahead - November 3, 2022 - SPY 368/376 range; JPow came in hawkish; brace for new lows.

What Happened Today (Wednesday)
  • SPY traded ~375 - 389
  • What an exciting day.  
  • A huge majority of the market partipants were expecting him to ease up, pause, pivot, whatever word you want to use.
  • I’ve been writing for weeks that it makes zero sense right now.  However, I was really worried about him giving into all this pressure and the bulls had me largely convinced it was going to happen - I just wasn’t prepared to gamble with them.
  • But…I cut my March 2023 SPX 3400p for a sizable loss this morning - just to get out of the way.
  • Then I went in with an options strangle since I knew it was going to be violent move by end of day.
  • The initial 75bps came out at 2pm and it was a non-event to me because it was expected.  The market took a line or two from the statement to mean he was for sure going to back down - and it rallied almost to 390.
  • I exited the call around 387.50 (not bad) not seeing what the excitement was about.
  • Then he took the mic and he was crystal clear in his message: I’m not backing down without sufficient data showing FOR SURE inflation is coming down, we’re not even discussing a pause, we have much work to do, everything is too strong right now (employment, consumer, etc).  He did acknowledge housing was coming unglued….but then he gave the wildcard I was hoping for: that he expects to revise the terminal rate up (projections - he even went so far to say that he if he were doing them today, he’d revise them upwards) - that’s not on the table until December meeting.
  • That was it.  I went into puts and traded them around a few times - but I shouldn’t have.  I would have been 3x profit what I ended with if I just stuck with my initial move.  There was one candle and statement from him that made me question myself and make a bad move.
  • He threaded the needle initially, then went full hawk mode and put the bulls back in their pens.
  • He earned more respect from me and I suspect from many others today for not caving into political pressure/media/companies and doing the right thing for the US economy.  Kudos, Mr. Powell.

Thoughts - Technicals (Latest):
  • SPY levels:  363, 369, 373, 380, 386
  • Chart - Weekly: Bearish - I wasn’t buying a reversal and that looks correct now.  Long ways to go down from here.
  • Chart - Daily: Bearish - trend reversal today - fundamental event will do that.  MACD/RSI did a 180.
  • Chart - 4h:  Bearish - same as Daily, but more pronounced

Looking Ahead (Thursday)
  • The entire narrative the bull’s had was thrown out the window today.  They’re going to need to dig deep to pull out anything bullish from his statement & comments that will help.  I don’t think it’s there for now.  They will try.
  • More pain is required - maybe in December if CPI and PCE are showing signs of cooling off, but even then, I don’t think it will be enough to get a 50bps out of him.  On the contrary - if it doesn’t start cooling down, he’s going to hit it with 100bps in December.
  • We’ve got ECB in premarket, but probably not relevant.
  • Friday is the next big event - unemployment - in premarket.  Though based on JOLTS and ADP - it should be another decent jobs add (not what JPow wants).  I’m unlikely to hold through this event even though I am pretty sure that it’s bad market news.  I will jump back on the party bus after it’s out of the way.
  • If you didn’t get to watch the FOMC statement & Q/A, you really need to watch it, hear the tone.  Take the time, it’s worth it.  I’m going to rewatch it tonight or tomorrow.
  • I’m looking for 373 to break at some point on Thursday which will cause a snap down.
  • If unemployment comes in hot on Friday, we’re looking at 363-365


SPY | SPX Trading Plans (This Week)
  • I expect that we’ll see dip buyers at the open - maybe a pop to 376/377. I’ll fade that rip.
  • I held SPX Nov 11 3750p overnight, but I anticipate adding to it on opening pop.
  • I’ll likely exit at the close to avoid messing with unemployment data.
  • Then get back in the puts if it’s hot.
  • I see no bullish case right now.

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SPDR S&P 500 - SPY

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