Stock Market-Why Such A Big Rally? Positioning & Liquidity…Trust It & What’s Ahead? Read This!
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May 28 2022 Option Professor Opinions & Observations
We just got the biggest rally this week in a long long time. We told readers that when the 10 yr Treasury backed off its extreme overbought condition at 3.20%…we got the green light for the pre holiday rally. If you use your common sense; you can see that the extreme rally followed 8 weeks of extreme selling. With the high volume selling that occurred when the 10 yr Treasury yield was making new highs and the SPX was making new lows; anyone who has been around the block knew that if rates ease; a rally ensues.
It is amusing to us (decades of knowledge & experience) to hear that these companies are now great, the Fed is going to pivot/pause (they haven’t even hiked yet:):), and inflation has peaked and we’re roaring. Do you know what’s happening in the month of June??? The Fed is hiking interest rates and doing QUANTATIVE TIGHTENING and the CPI is coming out. One of the Fed guys (Bostic who DOES NOT even VOTE) says he thinks we should pause in September….What does he know and what authority…NOTHING!
Powell has made it clear that they want INFLATION to go down toward 2% from 8%-15% where it is now. Do you think the stock market going to new highs, household saving declining back to 2008 levels (spending) and credit card usage-availability & exploding retail sales off the charts helps the Fed’s goals?
Short covering, high frequency trading, and spec buying, end of month window dressing (are you going to tell your boss you are in cash as the SPX rallies 350 POINTS!!) has its limits will take us only so far up. The SPX has technical resistance at 4177 and then 4270 and 4396 and 4450 so the hurdles are waiting. As we saw when we got that suckers rally to SPX 4631…the market can break thru resistance sometimes but if it is a FUGAZZI RALLY..down it comes..if not..is the Fed is for real (who knows?)…their mandate is cooked
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