Option Professor-Stock Market Run-Does Fed Stop the Presidential Cycle This Week? Read It!
January 29 2023 Option Professor Opinions & Observations
For those of you who missed the QUICK ALERT; there is a Presidential cycle that starts in October of the 2nd year of the presidency and goes to April of the 3rd year (we’re in that right now). During this cycle the market is UP over the October price about every time we looked. Impressive if not belated. We have seen a literal stampede into China, Europe, Pacific Rim/about everything that benefits from a falling dollar.
We’ve seen yields come down, talk of Fed being done, Dollar top/China open , rate cuts sooner than later. WOW! We’re getting drops of 1% in retail sales, PCE still with a 5% handle/CPI with a 6% handle & 3.5% jobless rate (record). The jobs coming out of tech are from the gross over hiring & cap ex cutbacks by cos.
THIS WEEK; we will may get gasoline or water thrown on the fire (Employment Cost Index-Big Tech Earnings-Fed hike & statement, jobs report ect.). No doubt; spending has softened by consumers and corps. and PMI’s and LEI’s are pointing down. How else did you think the inflation numbers could come down? The Fed will stay flexible as this thing could brake EITHER way into a real downturn or people could go back to spending as the Fed is characterized as dovish. Our view is that Fed Funds must get ABOVE the Inflation rate as well as real interest rates (nominal rate minus inflation rate) before Fed stops.
Before the year is out (and there is a lot of year left); we see the word LIQUIDITY & Operating leverage being front and center as QT & lag effects of Fed hikes hit home. Revenue declines & Labor costs (WMT jumped minimum) may pinch operating margins. Do we make it all the way to SPX 4300 area (61.8% retrace of 4810-3491)??? Mob psychology is in full bloom & all those financial wizards have got “some of their money back” which keeps the game going. If EARNINGS don’t get hit by Q2-3; the soft landing wins.
Technical support SPX 4045-3940-3875/QQQ 285-275/IWM 185-180/10 yr Treasury 3.48%-3.37% Let’s see
We’re getting a rally out of the darkness but remember a lot is being discounted and positioning more up At some point selling covered calls, collars, trimming, and marries puts make be appropriate. We Can Help you understand what that means. Does the Fed want monetary conditions to ease? We’ll see soon.
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We’ve told readers of the turns in metals, oil, SPX, Food, EM, China, Europe, The Dollar. How much more?
The Option Professor-Graduate Boston College-40 yrs of Knowledge-Stocks-Opts. Rates-Dollar-Gold Oil
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