SPX turns one of the biggest selloffs of the year!

BY ANDREW GIOVINAZZI

May 1, 2024

Yo Pit Crazies,

Stick a pitchfork in this class from Licia because you will be done! As in well done on learning Licia’s signature trading technique, The Pitchfork.

This is really what the market is dealing with on the front page of the Wall Street Journal Tuesday evening. Tech and innovation on one side and stupid US GOV policy on the other threatening the bond market and spiraling rates.

One of my sayings is that only a government can ruin an economy. And our current US GOV and just recent ones keep spending to fix problems they create. The only thing that stops them is the bond market and what folks will pay for bonds. This next FOMC meeting is big because it is right around the time when inflation started re-accelerating. There is 0 economic reason to cut rates.

From a trading point of view, stocks sold off into the announcement today. The first time in a long time I can remember in this inflationary cycle that this has happened.

That will provide an opportunity.

Most of the end of day selloff was 0DTE covering

The old adage of more sellers than buyers comes to mind but this selloff also stretched out the range for SPX. Yesterday in my blog I had the S&P 500 Trust ETF (Ticker: SPY) moving $7.00 this week and it moved $7.00 in one day. That is 70 points SPX.

SPY 1 DAY CHART

A savvy trader would close put spreads today in SPY. I did so in Weekly Profit Cycles. Some of my students even sold some at the end of the day. From the flow I saw at the end of the day, some of the hard selloffs could be 0DTE covering. Not a MS Gamma Bomb yet but the idea of how fast they can accelerate is clear from the chart.

VIX managed a 1 point move up just barely so not enough to really change long term expectations. I would not be surprised if stocks recovered the entire move by Thursday.

I would double load the upside, but hedge a little on the downside.

To Your Trading Success,

-AG