Yo Pit Crazies,
Stocks once again got close to 4,200 last week, but the S&P 500 failed to make the leap.
Vol Man is going over the falls on the SPX because the economic news was – wait for it – too good.
SPX 10-day chart with one-minute candles.
There is a trade here, but it’s in a range, and 4,200 is the top.
Let’s go do it.
Reasons to Rally Are Few and Far Between
I am an optimist at heart but the market has been selling the rallies to 4,200. Stocks are still too reactive anytime the news points to the Fed holding onto their rate-raising regime. The market has not felt any QT yet either.
Overall, it is a tough environment to be long in the broader market. The next headline is the dreaded “R-word.” Stocks don’t like recessions and the job market is so strong one wonders if we will really head into one.
I think setting up fade-the rally-trades, like put butterflies in the SPX, could work well, with a cheap VIX put as a hedge. I set one up in our Pro Small Group on Thursday that is working well.
The only way VIX really goes down is if the market stops selling off into every rally. And as long as we keep seeing selloffs after rallies, the SPX put flies should pay.
To Your Trading Success,
AG