Bears are nearly extinct after the past few trading days.

 

According to the Goldman Sachs trading desk, selling a NASDAQ (Ticker: NDX) 7-month NDX 90% put to buy a NDX 7-month 100%/120% call spread is the most expensive ever!

 

Now, I think this has a lot to do with the banks knowing about the Fed’s sneaky change in the calculation of CPI, which very well may fuel a massive and extended rally in risk assets. 

 

I’ve been talking about this change for a couple of days.

 

Meanwhile, we have another hawkish Fed FOMC meeting approaching, with implied volas at the lows and tech earnings just starting. 

 

What could possibly go wrong? 

 

Funny you should ask.

 

Da Bulls
The Bulls are feeling good right about now as CNN’s Fear & Greed index has gone from fear to greed in the past month:

 

 

This recent rally has simply been another massive short-covering squeeze

 

It started with oversold mega-cap stocks like Tesla (Ticker: TSLA), which has gained more than 40% since it hit a low of below $102 on Jan. 6 …

 

And ended with a massive squeeze of the most shorted stocks over the past three-days. Check out the trend in Goldman’s most shorted stock index …

 

 

The meme stock crowd is awesome at knowing when the market is vulnerable … 

 

After a heavy dose of tax selling at the end of 2022, the first few weeks of a new year are ideal for squeezing the market higher. 

 

What’s the Trade?

Sell QQQ, which has outperformed the S&P 500 and the Dow Jones index over the past week.

 

As you can see in the chart below, the 290 level provides a major resistance area to short against. 

 

I purchased a QQQ unbalanced put butterfly yesterday, buying to open a 288/280 put spread and selling two 272/280 call spreads.

 

By selling double the call spreads I was able to receive $.10 for doing the trade, which will expire on Feb. 3. I plan to close it prior to  the Fed’s policy meeting on Feb.1.

 

If the QQQ is anywhere between 280 and 288 on Feb. 1, the trade will make $150+ for a 1/3/2 butterfly. 

 

That is a great low risk/high reward trade after the rally of the past few days.

 

Bring It Home

This year will provide many swings in trading as there will be bullish and bearish fundamentals shifting back and forth. It will be a dream year for traders.

 

One way to make profits a reality is to join Andrew Giovinazzi live this Thursday, Jan. 26 at 7 p.m.

 

AG has been able to take the guesswork out of trade timing – and replacement it with triple-digit profit opportunity.

 

I know I’ll be tuning in!

 

In the meantime …

 

Live and Trade With Passion My Friend,

 

Griff