Yo, Pit Crazies,

So the election results are in and Congress is divided.

Stocks rallied a little bit, but not a whole lot.

That is the market saying one guy is not a lot better than the other. I am sure traders will be happy to be proven wrong.

So what did the new House leadership do?

They are going to investigate the Bidens.

Sigh….

Anyway, the big issue is inflation, interest rates and energy supplies. Once again, there is some clarity on rates. The Fed hinted that 7% is the terminal rate for Fed Funds. 

That is 3% – and quite a ways – more than they are now.

In the good old days of this summer, VIX traded 20.

Will it trade there in 2023?

Take a Look at the SPX Term Structure

The S&P 500 has daily option volatilities now.

Even with the holiday, the IVs are diving into the teens. It is possible we see a 20 VIX next week

Remember that IV has to go lower in the short term in order for VIX to drop. That just started happening this last week.

Will it go lower?

Doubtful.

But 20 would be enough for my SPYMaster strategy to be happy.

I don’t think we see lower than 20 until the pace of rate hikes is locked.

We are not there yet.

To Your Trading Success,

AG