Stocks-Do We Get A 8%-10% Rally Off Lows Into July 4th or Do We Accelerate Into Abyss? Read It!
June 18 2022 Option Professor Opinions & Observations
We sent out 2 QUICK ALERTS this week on Tuesday & Thursday….the first brought to your attention the bigger than expected hike by the Fed of .75% and the fact that they had a lot more hike to get to their target of 2.5% to 3% in the next 3 meetings. We told readers that a combination of hot PPI numbers and the Fed trying to get in line with market rates (we even threw in the full moon) and said VOLATILITY was going tp spike. Equity risk premium is too low and so were put/call ratios were too low. We got the Fed message and then we sent out the Thursday alert outlining how the Fed has been all over the road with forecasts and expectations and the Fed was chasing inflation like the horses chasing Secretariat in ’73:):)! This rosy forecast on inflation and unemployment is just silly as to get to the Fed target of 2% inflation without unemployment rising is aspirational at best. We have a strong dollar which hurts most big firms that get 50% or more of their revenues overseas. We have Food & Energy price that backed off this week but a blip is not a trend. Central Banks tightening into DEBT TO GDP +300 AND contracting economies. Credit Spreads are starting to blow out to 500 BPS while Ron Baron says we are at generational bargains.
The VIX hit 35 which when that happened in Jan, Feb-March, April-May lead to nice bear market rallies. There was a feel of panic selling volume this week and put/call ratios did get elevated. There are gaps above the market that could get filled. Stocks like MSFT AAPL GOOGL AMZN fared better than many. The Big IF… Bond Yields & Oil PEAKED this week…pre-holiday, pre-Q3 earnings, EOM Q2 Window dressing plus the Russell realignment and maybe some corporate buys could aid a rally toward SPX 3900-4150. Our long term charts have a rising moving average at SPX 3711….if you’re bullish…above that level good.
The Fed is committed to get inflation down and they have been dealt a bad hand (oil-food-war). On Friday; interest rate sensitive markets (ARKK Travel Cyber Cloud China Solar) moved up.. but next week??
At the end of the day….we’re UNDER most important Moving Averages and most are pointing down. Yes….we are oversold by some measures but the risk of huge UP or DOWN moves are as great as ever!!
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Remeber All investing involves risk of loss and it is not right for everyone. CONSULT YOUR BROKERAGE FIRM/broker to determine your own risk tolerance and suitability. Past performance is not necessarily indicative of futures results. Information & opinions provided for information purpose only. It is NOT advice
