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.
SPDR S&P 500 - SPY
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