Yo Pit Crazies
The die is cast and the fix is in.
The Fed will raise, as they should, in late July, as much as 1.00 basis point.
The big question now is are companies still profitable in this inflationary environment?
This administration owns a 9.1% inflation rate, the highest in 40 year. As of now, they have not changed any policy to help bring it down, save the Fed moving on rates. Government spending is still off the chart.
What will earnings season bring?
Taiwan Semiconductor Manufacturing Co. (Ticker: TSM) Brought in a Strong Number
I view that as a good bellwether for earnings. It is a stock I have traded in and out of in Capitol Gains but have avoided since December due to the general Tech Wreck that has plagued most equites.
Pre-market this morning TSM is up $1.40 on great earnings. While the number was good, the reaction was flat-to-up. That bodes well for tech and chips going forward.
That is a volatility killer. A market-wide volatility killer, if companies produce decent-if-not-spectacular earnings. Below, VolMan is riding the Top 3 wave of 60-day volatility in the Standard and Poor’s 500 Index (Ticker: SPX) for the last decade. This is a subject I have broached before and wild stock swings have reasons.
This reason was the 1-2-3 punch of supply chains, Ukraine invasion and inflation. Note Volman is about to pitch off the 10 day realized volatility wave. That is a bearish vol signal last giving us 20.29 Cboe Volatility Index (Ticker: VIX) low for the recent inflation cycle.
Two-year chart of SPX on top with one-day candles and 60-day realized vol in blue and 10-day in white
If the earnings slide is just half-decent, expect a lower VIX over the next several weeks and the August cycle could be the put buying ticket.
The Rundown
SPYMaster
I have gains of 12% and 24% in my last two SPYMaster VIX/SPY combinations and set for a good exit pre-open in the fourth trade. 3-for-4 going out of the gate is looking good.
Power Gains
Bill and I sold the SPDR Biotech Index (Ticker:XBI) call spreads out at a 22% gain and closed the Invesco QQQ Trust (Ticker: QQQ) put spreads out for a 27% gain. Great result on our market neutral strategy with just small moves in QQQ and XBI.
To Your Trading Success,
AG