The Week Ahead
Volume 40
Good Afternoon world,
I hope everyone had a lovely week and has relaxed this weekend. What a great week! As I mentioned last week, 12,000 was on the cards for the Nasdaq-100, and how conservative was I?!
After holding Nasdaq front-month futures long from mid 11,100s I cut the majority at 12,000. I was given another chance to buy indexes in the week, therefore I was a buyer of S&P front-month at 3965 which I trimmed @ 3991 and cut in full @ 4065 off a 2pt drawdown.
Equity-wise, I trimmed up on TSLA at 180 and some a bit earlier. In Volume 30 of the Week Ahead, dated November 6th 2022, I had decided to go overweight META 0.00%↑ (10% weighting at $91), I at long last trimmed up just shy of 10% of the position this week at $150 on the dot. I also started selling some calls on these positions on Friday. I didn’t buy too much this week, as I already had been going overweight FAANGs at their lows (META, GOOGL 0.00%↑TSLA 0.00%↑, AMZN 0.00%↑) (Regret selling NFLX 0.00%↑ at 300)! Anyway… I was finally a buyer of MSFT 0.00%↑ at 232 making it a 1.5% weighting. A sneak peek of two of my higher weighted longs… FWONK 0.00%↑ at 56 and ON 0.00%↑ at 60.2!
For paid subscribers, we had a great week with all the above.
The main trades of the week were given on Monday;
01/27 4020/4060 ES (bull call) given at 10.5, closed at ~35
01/27 4050/4100 ES (bull call) given at 7.25, closed at ~30
01/27 4030/4060 SPX (bull call) given at 6, closed at ~23
A few others in the week were;
01/27 V 0.00%↑ 222.5 straddles at 6.9, closed at 9
01/27 MSFT 0.00%↑ 250/240 bull put at -5.65, closed at -2.4
01/27 0d NQ 12150/12100 bull put at -33, closed at -14
01/27 0d ES 4100/4080 bull put at -15, closed at -9
01/27 TSLA 0.00%↑ 140/138 bull put at -1.08, was closed pre-earnings at -0.65
A few 10yr trades, the last one was a long at 114’140, stop at 114’080, and target 114’225, met on Friday just after the equity session closed. (Fat-fingered this trade twice, size and no limit order. I am still holding this position)
Sounds like a very solid yet unrealistic week. But in reality, the only loser of the week was a long euro position which was about 10 pips… Short-term trading… it was a record week for me. Yet… longer-term positions outperformed it.
Anyway… less about the past, past performance isn’t indicative of future performance and all that, lol… let’s get onto the week ahead.
FOMC meeting this week, therefore, I think I will start this post with what I expect to happen and perhaps discuss…
different scenarios for the FOMC later on.
In all honesty, my gut says there is more up to come. It’s actually shocking that from what I have seen… net length… there hasn’t been that much covering (tech being one of the lesser sectors experiencing short-covers) . A lot of short covering has happened, but, people are still shorting (higher up). That’s why metrics look that way. It’s that daisy chain like I mentioned, short, cover, short higher up, cover higher up, over and over again.
It really does feel, the higher we go, the more bearish people get. The more they put to work in shorts… DANGEROUS.
This has been quite frankly the most hated rally of this bear market thus far. No catalyst, just sheer brute force and money being put to work. People are vastly underweight, and I actually don’t think chasing has begun. Index now up over 7% since LOs finally began buying!
The vol compression is an absolute killer.
So yep. Pretty boring for several of you I am sure! But I think this thing has more to go. As I said last week, I finally began seeing through the cycle the week before and I think many others are too. 4150 ES, 12450 NQ. Those are my targets. Extreme case - 4163 & 12570.
As well as vol compression, something else that could happen this week with the Fed is the DXY finally crossing 100. This would lift cable above 1.25 and EUR/USD above 1.10. Something no one would've imagined several months ago.
Since the last FOMC decision… wage growth and inflation data have been encouraging that the Fed is getting inflation down, while signals on activity growth have been mixed and at times concerning. The market’s pricing of 25bps is spot on.
What is most important about the meeting on Wednesday is what Jay will say about future hikes, markets may have got a little ahead of themselves with the 200bps of rate cuts before the end of 2024.