Yo Pit Crazies

Jerome Powell seems to be happy with the pace of rate hikes.

That was enough to erase the malaise of the last two weeks as traders looked for any sign that interest rate raises might slow down.

Wednesday was another corker of a move on a day where the Fed Chairman opineed on all things rates …

That does not mean the Fed funds won’t be higher next year … just not as high as fast.

Let’s look at the tale of the tape.

Big Tech Rallied Huge

I even posted in the Pro Chat that I thought SPX was not a bargain at 3900 yesterday.  

Apparently it was, but really folks bought Big Tech again like Apple Inc. (Ticker: AAPL), Alphabet Inc. (Ticker: GOOGL), Microsoft Corp. (Ticker: MSFT), etc.

Each of these companies rallied 5% and took the Invesco QQQ Trust (Ticker: QQQ) up 4%

Earnings growth in 2022? Tepid.

I am not a stuffy bear by any stretch, but these snap rallies are something.

Traders have no trouble bidding up the multiples in the big tech if they think inflation and rates are going to peak.

At least for now, that is the brew,

QQQ 30-day chart with one-day candles.

Thanks to J-Pow we are once again at a good inflection point. He clearly walked back the rhetoric of the last six months and is taking a pause.  The test is if VIX can trade in the teens, then I would believe it. 

For now, I like the idea of short QQQ and short VIX via puts or put spreads.

Since there is really no change in rate policy, they are still going up, I would expect QQQ to give back some gains over the following weeks. If it does not VIX will close the year on the lows.

I covered this in my open house session last night, so click the link to grab it.

To Your Trading Success,

AG