We warn of this selldown just 1 week ago while everyone else is calling for dip buying and all-time high targets
Now the market is calling for a 50bps hike. Some are going as far as a 75bps hike for March 2023.
So what happened here?
1) Unprecedented activity in the options market. Massive buying of call options by FOMOers and YOLOers has a material impact on the stock market. However, these trades are considered short-term weak trades. They have no holding power. Hence, once the options expired (17 Feb 2023 was the option expiry), there was no genuine buying to support the market.
2) Threat of inflation evident in NFP, CPI, PPI, and retail sales data
3) The nail in the coffin; 50bps hike is being considered for March 2023 FOMC.
And finally, price action and technicals are now aligned with the macros.
We are already holding put options on Home Depot (before earning crash) and Apple (before 17 Feb 2023). We will be adding more short/put options to our portfolio while trimming our long positions.
Expect more downside on Nasdaq 100, S&P500, discretionary and tech stocks.
Now the market is calling for a 50bps hike. Some are going as far as a 75bps hike for March 2023.
So what happened here?
1) Unprecedented activity in the options market. Massive buying of call options by FOMOers and YOLOers has a material impact on the stock market. However, these trades are considered short-term weak trades. They have no holding power. Hence, once the options expired (17 Feb 2023 was the option expiry), there was no genuine buying to support the market.
2) Threat of inflation evident in NFP, CPI, PPI, and retail sales data
3) The nail in the coffin; 50bps hike is being considered for March 2023 FOMC.
And finally, price action and technicals are now aligned with the macros.
We are already holding put options on Home Depot (before earning crash) and Apple (before 17 Feb 2023). We will be adding more short/put options to our portfolio while trimming our long positions.
Expect more downside on Nasdaq 100, S&P500, discretionary and tech stocks.
