Option Professor-Stocks-The Big Question Now- Should I Stay or Should I Go? Must Read This!

January 21 2023 Option Professor Opinions & Observations

The BULL Story

As the stock market gyrates between SPX 4035 and 3885; many investors are wondering whether we have the all clear sign and last years 2022 LOWS (20 & 40 yr cycles) at SPX 3491 was the low and the VIX being subdued between 18-25 is telling us VOLATILITY is dead so bring in the big buyers; it’s safe! This has certainly been the net case since the October Lows and on steroids GLOBALLY in the month of January ’23 Money flows into stocks are very good to start the year (January Effect) so sellers are far & few between setting the stage for Algos to press the OFFER side. China’s reopen and stimulus to return growth will help Asia & Europe as mobilizing that consumption/demand is considerable. If China growth does return to 6%+; one would assume that commodities & multinationals would rise substantially….discounted a bit? USA consumers seem able to handle rates in this area. This means SLOWDOWN in Growth-No Recession. TECHNICALLY. Friday was Options Expiration Day. DJTA ABOVE 50 & 200 Day MA. SPX ABOVE 4035-Up++

The BEAR Story

China may a number of short term challenges. The Lunar New Year Travel (back to 2019 levels) brings with it COVID. The UNEMPLOYED 18-25 yr old youth remain. Consumers slow to trust property. Trade Demand The Fed will be slowing the pace of rates (Duh…they went from ZERO to 4.25%… not going to 9% right). They know that getting the Fed Funds Rate ABOVE the inflation rate & keeping it there was the 80’s tonic. LABOR markets are still strong and wages have slowed but still rising (margins). There is some Easy Math here Inflation + Rate Hikes = Slower Growth. Should slower growth=lower earnings; the P/E ratios are key What will EARNINGS be in 2023? What will the multiple be? 2.10 X 17 =3570 or 1.80 X 16 =2880….get it? Let’s be honest. The YIELDS & THE DOLLAR have eased substantially. The US & Global Markets were VERY Oversold and have had a REVERSION rally. The 3 MOST CROWDED TRADES are Bonds, The Dollar & now EM/Asia/Europe. We imagine The Fed will REMIND us in 7 Trading days of their RESTRICTIVE POLICY. TECHNICALLY. SPX closes UNDER 3875 & 3800 may confirm BUT +4050 could lead to SPX 4200-4400.

Should I Stay or Should I Go? Well; we see a “Clash” coming between SPX 4035 & 3875. Go with the flow:)


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REMEMBER All investing involves risk an it is not right for everyone. CONSULT YOUR BROKERAGE FIRM to determine your own suitability and risk tolerance. Past performance is not indicative of future results. Information & opinions provided are for informational purposes only. It is NOT advice.

Jim Kenney

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