4/10 Recap

Inflation came in hotter than expected this morning and stocks sold off. Tomorrow we have PPI and that likely is hot too. The reality is, so many assets from real estate to growth stocks have been front running rate cuts for months now. That is just silly, we cannot cut rates with inflation raging like this. We absolutely need to cut rates considering how much we borrow, but if we do, you may as well pour some gasoline on this fire because it isn’t going to be put out. Unfortunately we haven’t endured the pain necessary to kill this inflation if the fed mandate is 2%, now I’ve said for a long time I think at some point the fed will accept 2% isn’t doable and raise their inflation target, but that is a whole different pandora’s box I don’t think they want to open right now.

Good companies will do great here. If you make money and don’t need debt, you can thrive in this environment. Basically the big 6, Tesla not included. That’s why the Nasdaq is down 200 point and most are barely down with META and NVDA green. It probably takes a few days but they will circle back to megacaps. Again, these 6 names comprise over 30% of our market, there’s a reason for that, they make alot of money. You want to own them through thick and thin. Energy also was green today and overall nothing really shocking, this CPI print was expected with the last 2 months energy has had.

So what now?

The SPY is now below the 8 and 21 ema, those look like we’re going to see an 8/21 bear cross in the next couple sessions barring a big move up that untangles this. The 50 day is right below 510. As long as the 50 day holds this is ok, but you need to be cautious anytime we go below the 21 ema, the trend is starting to wobble, we did this last week too. Again that doesn’t mean sell everything, it just means lighten up, sell covered calls, close up short term calls, whatever you want. You just don’t stay all the way in especially with short term trades in this tape.

The QQQ, below, is sitting on the 50 day, if it loses that, next support is the 100 day at 420 another 4% lower. Things aren’t looking pretty in tech land for the moment, that could change with earnings season coming up, but before that, seems hard to see how.

The dollar made a monster move today to highs. This is simply not good for most names and a sign we’re probably going to be in this higher rate environment for longer than most want to admit. It’s kind of silly looking back at even a week ago when everyone was saying “but the bond market said”. Who cares? Seriously the bond market has been wrong for some time now, stop listening to it. Now rate cuts have been pushed out to September, we likely won’t even cut there unless Biden is feeling the heat into the election, but inflation is now a multi month story again and any talk of rate cuts is silly, the fed is in a very bad spot again.

Recent Trades

Last week on 4/3 I wrote up PAAS and it has been a rocket ship since up another 13% in the past week. Those October $20 calls the player paid $1.15 for are now $2.40 up well over 100% in a week if you sold those puts in October you gained a ton there too as those have gone from .85 down to .50 in a week.

Trends

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Today’s Unusual Options Activity

Here is today’s link to the database, as always this expires at the open tomorrow and I will have the rest of the days action updated by this afternoon

Link