The price action has been very volatile the last few sessions. JPow talked last Wednesday and the SPY was at 395 before he started talking. We rocketed up to 410 the next day after the speech. Lingered around 407 on Friday near the close.
We had a light economic data this week, so the conditions favored the bulls. Well that faded fast as the market started selling off fast on Monday. We broke under 400 on Monday and haven't really looked back since. On Tuesday, we retested 400 and then proceeded to break 396, 395, 393, and bounced off of the 100MA at 392. Back to back days with some solid selling pressure. So the question that everyone is asking... Why?
Here is my brain dump on what is going on in the markets:
- JPow was dovish in tone and has all but guaranteed 50 BPS hike in December.
- Jobs Data came in way too hot. Wages went up as did the Job numbers.
- CPI and PPI showing inflation is cooling a little
- Oil is falling
- TLT (bonds) is rising
- DXY is above 105 which has been prior support
- VIX is hanging out near 20
- FOMC and CPI are scheduled for next week.
So with all that known in the markets, why the price action lately? Well, I have a theory that we have moved on from the Fed Trade (inflation, rate hikes being the focus) to the Recession trade. I expected this shift to happen after FOMC this month to give us one last Fed Trade reaction with the 50 BPS hike causing a spike, but it appears that info and reaction already happened last week with JPow's speech.
I will be monitoring the TLT moving forward. If it keeps rising and stocks and commodities stay flat or drop, then we know that there is a flight safety happening and we can assume that it is due to recessionary fears. We are getting near the end of the Fed Trade, and now it is whether it has already started or is this just a simple pullback. Time will tell.
Current Positions and Plays -
- I have scalped a lot lately with some good success. I did re-enter some Jan puts for SPX 3800. I am most likely going to exit these before FOMC next week.
Economic Data this Week (all times are EST)? -
THE PLAYS OF THE WEEK for SPY:
- Honestly it is just play the trend and stay super light. The 15 min chart with the 8 and 21 EMAs has been incredibly accurate this week.
SPY Technicals -
- SPY Technicals - The 30 min, 1 hour, and 4 hour are just above oversold. The daily chart is neutral.
- SPY is broke under its daily 200MA at 404.79. This MA was the top of the last bear market rally.
- SPY Fibs for ATH to June 2022 low - 390 is the .236 line. I expect us to retest this line soon and most likely it turns into support.
- SPY Fibs for COVID low to ATH - 380 is the .382. 418 is the .236.
Levels I am Watching
- $SPY - levels 386 > 390 > 393 > 396 > 400
- NOTE: I am turning into a swing trader for various reasons, so please keep that in mind moving forward. My options plays will be always a few weeks out because of this.
- This is not financial advice