Yo Pit Crazies,
Invesco QQQ Trust ETF (Ticker: QQQ) stocks went down yesterday. That should be a headline, but the mavens behind Invesco thought enough was enough with 7 or 8 stocks taking up 50% of the market cap of their QQQ ETF.
They’re throttling back Apple Inc (Ticker: AAPL), Alphabet Inc (Ticker: GOOGL) and all the other mega cap tech. Investors are getting ahead of the July 25th date by selling some holdings ahead of time.
QQQ finished up .12 when most of the big holdings were red. Sometimes markets don’t want to go down. I’m holding a couple of puts and put spreads in Microsoft Corp (Ticker: MSFT) as part of Easy Button, the put side of a strangle, and Nitro Trader, the second half of a pair with long SPDR S&P 500 Trust ETF (Ticker: SPY) calls I closed last week.
It looked like pay dirt as both puts turned green for a brief moment only to have them just turn red again. I am holding small losses in the two positions, not big but annoying. The MSFT example is just one part of a broader market symptom.
There’s only one thing that can bring down this market. We discussed it in the Trading Desk Monday afternoon.
And it is…
Inflation!
Inflation is the problem, if it is still a problem. In the bad old days, CPI numbers were a big thing and the market priced them as such. The March 2023 cycle number for Feb inflation priced the straddle, call and put, over $11 dollars for a 3 day hold.
That same straddle now is priced radically differently. Look below and see the same 3 day straddle is only $3.55. That is a massive difference waiting for the same news event. The market is pricing the Wednesday CPI number like a walk in the park.
That’s where a trade might be.
I think the market is underpricing the 3% CPI that the market is expecting. The big energy inflation and bottlenecks from last year are mostly gone, but a 3% expected CPI is a bit light. However, if we see it, I think we will make recent highs.
I’m likely putting a strangle on today. I would use a little more duration than just Jul 12 – more like Jul 14.
I don’t think inflation surprises are dead, so play the range not the direction. More on that for the Trading Desk today.
Questions about that? Leave a comment below!
To Your Trading Success,
AG