All week: These Fed Presidents are all over the calendar again. Expect volatility in both directions.
Monday: ECB Lagarge @ 3:40am
Tuesday: Election Day (US) - results in evening.
Wednesday: Fed Williams @ 3am (from Switzerland)
Thursday: Too much going on Thursday. CPI is the main event at 0830 ⚠️ then we have Fed Mester at 12:30; Fed George at 1:30; and finally Williams again at 6:35pm
Friday: UK GDP at 2am; UoMich consumer sentiment @ 10am (always moves the market)
As noted last week, earnings is off my watch now with the majors out of the way, this will be the last week I mention it.
Thoughts - General:
Last week: I fumbled the ball more than once overtrading - I had the right positions. A series of ‘If only I had held’ mostly….grrr. My biggest takeaway from last week? It’s okay to have a “long-term” puts position, leave it alone, and trade calls on clear short-term momentum. That’s been hard to get my head around for two weeks now, but it damn sure works.
Last week: There really was no good news last week - from earnings, Fed, or unemployment. There were tiny strands that the bulls ran with, but nothing solid - from my view.
Elections: I don’t follow politics much beyond its direct impact on the market, but it sounds like it’s going to end up in gridlock in Congress, which is generally positive for the market. If that’s the case then Wednesday should be political optimism + CPI optimism and it could be very green.
Fed: I think we just listen to JPow. He’s going to go higher than he expected and hold it for longer. Once everybody gets over this 75 vs 50 debate for December, they’re going to get hit with the fact it doesn’t mean a damn thing - because the updated projections are what’s going to drive the move at December FOMC announcement. I don’t see CPI getting better or worse by an amount enough to sway his move by then. We’re likely to see 50bps in December, but only if the CPI is flat/easing a little.
Fed Speakers: We had three of these folks come out of nowhere on Friday (I only saw 1 planned on one calendar only - and I didn’t see it until after the fact because it was only on the MW calendar); and that sent the market on rides the entire day. It was quite an intraday chart to behold.
Tech: We’ve already got some negative tailwinds for the week - Apple delays in China due to COVID and META expected to announce major layoffs. Last week saw a fair number of beefy layoffs starting at other tech companies. The jobs number is going to catch up with all of this soon enough.
Overall, the Fed is still the major driver of the market right now. I’m shocked SPY has survived all the hits that came out in the last two weeks. I know it’s just a math equation, but still doesn’t seem right. Oil and healthcare really holding the entire market up? If those give, does it do a whiplash catchup of QQQ?
Looking at this week, it looks like a raging bull week to me - unless data comes in unexpected.
I think we’re going to see the Midterms be a positive catalyst that run right into CPI being a just barely cooler number - and that’s going to send us above 390 at least. Plus you’ve got all these Fed people out in full force again and they tend to say things that make the market happy.
If the data comes in hot, then all bets are off and we’re going to the recent bottoms - quick.
Outside of bad data, I’m - for now - expecting November to be a little green and December to very red.
I remain full bearish, however, and will keep my puts - and add to them at key levels. I will trade calls as momentum shows up.
Chart - Weekly: Bearish - back on trend due to FOMC meeting.
Chart - Daily: Bullish - looks like it wants a few days of green.
Chart - 4h: Bullish - same as Daily.
Trading Plan (This Week):
Current position: SPX 3600p 12/30 - I was at a tidy profit on Friday, but that huge rally EOD got me.
I am adding NQX to my trading watchlist. This instrument is 1/5th of the NASDAQ 100 and is treated similar to SPX. There looks to be more opportunity in NQX/QQQ right now vs SPX/SPY
I’ll buy calls on a dip on Monday anywhere near 373.50-374.50. I’d hold these through Wednesday afternoon; then I’ll switch to a Friday expiration call to play CPI which I expect to be positive.
I’ll continue to hold my core puts.
Putting the long-term SPY chart below just so you can see where we are on the projected path…. ( I’ve got March 2023 @ SPY 327)
