December 13th, 2023: Dove

Foreword

This is a quick note, which tends to be just off the cuff thoughts/ideas that look at current market situations, and to try to encourage some discussions.

PPI came in slightly below expectations, and the Fed goes full dove.

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

Coo.. cooo..

PPI came in cooler than expected by a smidge, and while stocks went up early in the day, they quickly reversed and was almost flat at around 1pm.

For someone with QQQ calls expiring today, that was painful to watch. Good thing I was busy at work and wasn’t really watching.

By the time I could spare a moment, the FOMC announcement was out (at 2pm) and stocks went up in a straight line — instead of the 2 expected cuts, the Fed’s dot plots shows 3 cuts in 2024, and to top off the dove parade, Chairman Powell was (in my opinion) extremely dovish in his press conference at 2.30pm. See for yourself:

Long and longer

Which is why, if you follow me on StockClubs (1), you’ll notice that I took profits on the QQQ calls spread opened yesterday with a healthy profit, and almost immediately put most of that money into another call spread expiring today at a higher strike (i.e. more leverage).

It was a good trade, and I guess my kids get to eat dinner tonight.

Santa v2?

As of now (after the close) the only short term bet I have left is the CAVA short (via bearish put spread), which isn’t doing too hot.

But given how the market has reacted to events the past few days, and how dovish the Fed suddenly turned, I’m inclined to think that the Santa rally is back on, at least until the end of the year.

This Friday (12/15) is opex, which tends to be volatile and tricky to trade, so I’ll probably sit pat until Monday — if nothing changes my mind by then, I’ll probably play for a Santa rally into year end.

Footnotes

1. Disclaimer: I am an investor in StockClubs and I’m only showing 1 (out of 10+) of my brokerage accounts in the app.