Good morning and Happy Friday!
Well on Wednesday, I mentioned that the markets needed a rest and we got it in the form of 2.5% down on the SPX. I was expecting more and in a “normal” market where a Fed was not printing $120B each month, the 2.5% down move would easily turn into 5%. But these are just nor normal times so this may be it.
Yesterday I loaded up on monthly credit spreads to take advantage of volatility that gave me much higher premium prices. I’m not worried since the market would need to move 8% down for those spreads to be beached and of course I would adjust them if the market was 3% away. I did have to adjust small 7 DTE position but for an overall credit and added a new 7 DTE trade.
The market may continue to move down but now the likelihood for the Fed to tighten is now very unlikely even with all of the pressure that the 5% inflation rate is creating. The Delta variant is Powell’s out. With all of the uncertainty that Covid is creating and the slowdown in the economy as a result, I cannot imagine that the Fed will ease their purchases. Powell has said so many times over and it would be a credibility issue to start the purchase reductions with still so many economic issues at play.
So in my opinion, Jackson Hole will turnout out to be just another nothing burger and the market will rally! The bond market is confirming this scenario. So bottom line is buy what you can now because the market is going to keep going up.
Talk soon,
Al Losada
Founder | SimpleOptionStrategies.com
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