The Fed is in control of stocks

Yo Pit Crazies,

I have said on these pages that every market has a fashion, the thing that it clings to, the shiny new object.

Right now, it’s QE and the constant intervention of the Fed by massive monetary action. (It’s actually been that way for a few years.)

The central bank did it again to fix the banking crisis they helped create … by fixing the inflation problem they helped create with the other QE issues.

Fed intervention will be a constant until it is not. I think that will generate a more volatile market in the future. Trading volatility and using it for portfolio management is something that I teach in Option Pit Mentoring.

And here the market sits again at 4100 SPX.

Note from the chart below that is where stocks go to die since August.

Nine-month SPX chart with one-day candles.

Will this time be different? What the Fed is doing is a hint.

OPEC Raises Prices

When we were worried about inflation last fall, OPEC hikes were enough to send stocks down to 3800 and below.

On Monday, SPX rallied on the back of 7% gains in most oil names.  I closed a nice strangle in ExxonMobil Corp (Ticker: XOM) that nearly paid for a year’s worth of The Easy Button. The OPEC news did not matter to stocks or VIX.  The only thing that mattered was that two weeks ago, the Fed restarted QE (quietly through the overnight borrowing window).

Griff hits this note, which is another reason his products have killed lately, and he is correct.  The Fed pumped $600 billion back into the system to help banks needing fast liquidity after Silicon Valley Bank. Stocks have been straight up since.

The difference this time is can we break above the 4100 area? The Fed is pumping again, which is different from any time since August. Don’t be surprised if traders cautiously push us to 4200 by the CPI number next week on the 12th.  

To Your Trading Success,

AG