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Stocks took a turn for the worse even as Joe Biden notches up a win to avert a strike with railway unions.

It comes at quite a cost as inflation is ripping through everything and will undoubtedly make transport by train more expensive.

That is the problem.

Wages can go up, but it just makes everything more expensive until we start to kill demand. 

The Fed is stuck with 10 years of QE and three years of reckless government spending.

10 Day SPX Chart With 1 Min Candles.

With the easy inflation kill off the books due to  the big CPI number this week, stocks are looking for a friend.  

I might have found one.

SPX Skew Is at Very Low Levels

I was on the OptionsInsider Option Block Program on Thursday and Mike Tosaw remarked that 3900 SPX is the level. 

Not the bottom, but really the axle around which the market spins.

I think there is good reason to believe that is true.

Below is a copy of today’s skew snap from the Edge Hunter Butterfly sheet. It shows a historically low skew for the current level of VIX. In fact, it’s in the bottom 15% of the standard deviation range.

In short, there is little demand for 3800 puts and below.

That means the news is out and inflation is going to be with us for a while.

Mostly what we have is an economy with jobs coming back from Covid right into slackening demand caused by rate hikes.

At least until the next Fed meeting.

Iron Condors set up well in SPX right now with the flat skew.

We are going to be more aggressive with commodities in the Cap Gains program.

That is where the inflation – and inflated profits – will be.

A Dark Winter is coming, but we’ll stay toasty

To Your Trading Success,

AG