The MARKet Update – 12/13/22

Good afternoon O$ members!

Yesterday was an interesting day. The market had considerably large buying momentum before the announcement of the CPI this morning. Inflation rose again — but this time only 0.01% so the market took it as a big win and ran with it buying up futures again before the market even opened. However, a gain of 3% in the overall market for having an increase in inflation, coupled with the given news that tomorrow during Powell’s press conference, he will say the same thing he’s been saying the past few months… “We’re making headway, but inflation is still too high. We need to have accommodate rates, and may need to hold interest rates for longer periods of time, etc.” The market is expecting a half-point point increase tomorrow. So this alone won’t drive the market up or down. Inflation is slowing down, so it doesn’t necessitate a more significant percentage rate increase. Based on how the market reacted the past two days, it still seems the market really wants and semi-expects Powell to say there will be a pause or pivot next month. With 7% inflation still around, that is not realistic for the FED to pivot anytime soon. From 4180 throughout 4100 the buyers didn’t stick around and folks were mostly unloading in this range. If Powell says what he’s expected to say, it makes me hesitant to buy at these levels and make me wonder if that 3980 level will be key level of demand/support once again for the rest of the month and into January if the market is dissapointed tomorrow not hearing about a pivot and sells off after the press conference.

Fortunately, some of the puts we entered recently like CROX and MNST are up today despite the rise in most stocks today. Due to volatility typically caused by Powell’s press conferences, we should have a good opportunity to enter a short-term put/call play.