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Monday Market Momentum – Still Heading Lower


That's out downside for the S&P 500  and it SHOULD provide support but that doesn't mean we can't overshoot to the downside by the same 160 points (weak) or 320 points (strong) that we expect for our bounces off the 4,000 line.  An overshoot is not out of the question if people begin to panic and, don't forget, this is a market CORRECTION, not a pullback.  A pullback assumes you will retake the previous highs while a correction assumes the previous traders WERE HIGH and now we are heading back to rational levels that can be supported by rational traders using rational valuations.  

We've taken a very hard fall since the Fed Meeting last week, when we never should have gained 5% in the first place.  Overall, the S&P is simply regressing from the 20% overshoot of the 4,000 line and, of course, if 4,000 is the correct middle of our range, then a 20% drop to 3,200 is not out of the quesition either – but we'll cross that bridge when we come to it. As you can see from this chart of S&P P/E Ratios, we're only just now coming into a "normal" range but those averages include the over-stimuluted averages of the last few years so I would say the lower, 10-year average is our best-case for settling in as reality once again begins to take hold.

This is why we pumped up our hedges last week, ahead of the Fed and that will help smoothe out the bumps along the way to 4,000 or even 3,200 but, if 4,000 doesn't hold, we will begin to add even more hedges and even to begin reducing our longs as there's no sense riding out another drop like the one we've already had.  In order to find a proper bottom the things that are driving us there have to stop – or at least ease off:

  • Is the Fed done tightening?
  • Is Covid done infecting?
  • Is Putin done invading?
  • Are prices done inflating?
  • Are jobs being filled?
  • Are supply chain issues resolving?
  • Is the Earth done warming?

Yes, some of these are going to be tough to fix but we've certainly tried ignoring them and that led to an overpriced market based on willful ignorance of the issues at hand and we're seeing how that works out now, aren't we?  After telling us to BUYBUYBUY as the market dipped this year, CNBC is pretty much holding a funeral for it this morning – that's an interesting bit of capitulation.  Still, we need to consider that the Energy Sector is up 20% this year and that sector will crash when oil prices come back down because, as usual, it is priced like they never will.

There's not much on the data front to put the brakes on a slide this week.  We do have 9 Fed speakers this week but Kashkari was already on CNBC this morning, looking to put out some fires. It's not a big data week with nothing really going on until Wednesday's Atlanta Fed, CPI Report (ruh-ro!) and a very scary 10-Year Note Auction – supposedly with less Fed support for the first time this Century.  PPI and the 30-Year Auction on Thursday and Consumer Sentiment Friday – not too much going on

One alarming bit of data left over from last week is Consumer Credit, which jumped $52Bn in March with Revolving Credit up 21.4%, which is terrifying as wages are simply not keeping up with inflation.  "All of this newfound debt that Americans have is only going to get more and more expensive in the coming months," said Matt Schulz, chief credit analyst for Lending Tree.  And, don't forget, Trillions of Dollars of Student Loan payments are still on hold – I don't even see how people will be able to afford for those to resume.  

We still have plenty of earnings reports to contemplate as well:


Let's be careful out there!


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  1. Good Morning!

    ES futures now have daily options? Should be fun… :)

  2. Phil-I'm getting a NOT SEcure on my screen for your site? Had it Friday too.? Just ignoring it for now.

  3. Good morning from Las Vegas!

    We had a dust storm yesterday afternoon, pretty low visibility.  Shades of 1930…

    Certainly around the strip, mask-wearing is less than 10%.  Casino workers don't have to wear them, waiters don't etc. but most people seem to be surviving.  I have a sniffly nose but all right otherwise.  I wore my mask the whole time on the plane.

    You would think, with all the Trillions of Dollars the Government spent, that some of it would have gone towards more automatic doors.  That's one of the things here that freak me out is how many handles and rails I end up touching that thousands of people must have touched the same day!  Same thing with elevators – would it be that hard to give them a Siri or Alexa interface that let you tell them what floor you want?

    On the whole, Vegas is pretty packed.

    /ES/Rn – That's an accident waiting to happen.

    Security/Pirate – I'm not seeing it.  Maybe refresh?   If anyone else is getting a "Not Secure" message, please let me know.

  4. It's Chrome that says site is not private. Just have to adjust settings.

  5. My guess is most of the people there have already had Covid. My wife has had her fourth shot and just came back from a trip and was sick. Covid positive with cough, myalgias – like a cold. Good news is that Paxlovid helped and she felt better 24 hours later. Tested negative on day 5.

    On another note, looking forward to buying at the bottom!

  6. Phil / SQQQ

    The 2024 30 C SQQQ is at $30.25. Should we look at rolling the 2024 30C-60C SQQQ positions higher to lock in some of the gains?

  7. Why the Stock Market Keeps Plunging

  8. Good Morning.

  9. I really don't miss springtime in Vegas. Dirt and wind, then summer heat. 


    Fall is the best time to visit because it can get real cold – and windy – in the winter…..

  10. Bottom/Eca – If we ever find it.  

    First we want to see downward momentum slowing:


    And watch the VIX, of course. 

    SQQQ/Jij – See charts above and, as I said this morning – what factors are we looking at that will reverse this plunge?   Tjhe 5% Rule tells us we SHOULD bounce off 4,000 but that means, if we DON'T, then look out below.  Also, we don't just roll the entire position – generally we cash out long calls and then set up a higher set of longs to cover the remaining short calls but we did that trick already and there are no 2025s and the last thing we want is to end up not short enough in the STP as the LTP is taking a big hit, which is fine if it reverses but not fine if we hit a prolonged downturn – then we are really going to need that $2M.  

    Of course our SQQQ longs are now $1.2M and the TZAs are $1M so there's our $2M already, both sets of short calls are out of the money so, if these levels do stick – we make $2M!

    Dollar looks like it still wants to go higher:

    Winter in Vegas/1020 – I was here for New Year's once and was surprised how cold it was.  I did not pack correctly. 

    Wow, Nas down 3.6% today.

  11. BitCoin getting crushed too.  Almost down to $32,000.

    Oil $103.50  but /RB still at the highs.

    Biotechs holding up for a change – good sign.

  12. Phil / AMZN

    My worst position is in AMZN. I have sold Jan 23 2500 puts & Jan 24 2800 puts. When they were well in money, I didn't sell. 

    The market sentiment on AMZN seem to be really bad after earnings. Now, it wouldn't surprise me if AMZN goes to 1,900 in the short term. With portfolio margin, I don't know how this would work. Of course, I can roll Jan 23 2500 puts to Jan 24 2500. Though they seem to have built excess capacity in retail, the AWS is doing really well have and high market share.

    I didn't hedge – mostly because I wasn't knowledgeable enough – is it too late now?

    What do you think?

  13. sk2020  thanks for asking, I find myself in a similar position.  I might wait till the 2025's are out to roll.  Lets see what Phil says.

  14. Phil/SQQQ – im in a solid TZA hedge, think there's still time to enter a new trade on SQQQ?

  15. I sold SQQQ Friday and LABUed too soon! Oops. LABU today though? I mean, 5.58?? COIN's 75% off it's high. Crypto crashes of yore were 80-93% off previous highs. We're getting close to the buy point on COIN. I still like Bitcoin @ $13.5k in September (-80% off peak). No need to revise that prediction yet, though $22k is a good buy point to start testing the waters.

  16. $22K apparently is when MSTR start getting margin calls on their bitcoins.

  17. AMZN/SK – Well, the 2024 $2,800 puts are $735 with AMZN at $2,220 so not much premium left to burn.   I would roll the loss out to June 2024.  You can sell the June 2024 $2,200 puts for $395, that should help a lot.  At this point, just getting even would be a huge victory so no sense in doing anything foolish trying to "win".   By doing that roll, the short puts are back to all premium so, at worst, it's a net $2,200 entry vs I suppose about net $2,500 on the original.

    The only reason I wouldn't wait is because the VIX is so high, you may not get this much money for selling again.

  18. I took a 25% position into XBI at 90 (down 35% from ATH of 138). Now at 65, down 52%. At some point these prices are going to seem cheap. VZ at a 5-year low and pays 5.3%.

  19. Phil/BYND – I'm in a Jan 24 45/60 BCS. Thoughts on spending about $.58/contract to roll it down to a 30/40 BCS? 

  20. i am a new premium member. is there a link where we can access the online list of the LTP and STP as we see them in the portfilio review videos?  i have searched the site, but with no success. apologies if this is an annoying newbie question.  i did read through the introductory materials.


  21. BYND/Swamp – We got out of them in the Future is Now Portfolio.  Too erratic.  Earnings are this week, I would do the roll, though.

    Welcome Gunderblitz!  There's a tab on top called portfolios but sometimes I don't get around to tagging our reviews correctly.  Generally our reviews are in the Member Chats or Posts from Expiration Week each month but the STP we updated last Tuesday.  

    Don't be afraid to ask questions.  Remember:  There are no stupid questions but holy crap are there a lot of idiots who ask questions!  wink

  22. 4,008!

    Nas down 4% in one day…

    These are not the kind of things that are likely to turn around easily and we don't really have any good catalysts either.

  23. Oh- I wasn't tracking that we exited BYND since entering it on March 23.

    Still think it is a good price now

  24. Phil – The Future is Not portfolio has CRSP (15 long $60-100 BCS, 5 short $60 Put). CRSP is now in the low 40s – should we be modifying the trade? The 60s can be rolled down to the 40s for <$8. Or is spec biotech just a falling knife now?

  25. I think they executed poorly and, of course, Covid threw everything off schedule so we're more watching and waiting for now.  Let's take a close look at earnings.

  26. Well, the markets are going to hell but have you shaken off some rust from your poker game?

  27. The markets usually go to hell when Phil is not at his post. Fairly reliable indicator or coincidence? ;)

  28. Oh no, 4,000!  This better hold.  It's down 3% on the day for /ES.

    That's true, Randers – every time I go somewhere they pull this crap. 

    Poker/Pstas – I was up $600 off a $200 start last night but gave half of it back – that's the rust.   Still, as long as it pays for dinner, I'm happy.

    Speaking of dinner – lunch time for me – I'll check in later.

  29. a usual and customary crypto meltdown. nothing we haven't seen dating back to 2011. AWESOME buying opportunity, though no clue when (of course). 

    Crypto market cap topped out at $3.0T, now $1.4T. Could go as low as $500-$800B. This will really shake out the weak hands, recent reddit zoomers and "diamond hands." Next 10X crypto run goes to $7-10T, 3-year time frame.

  30. Sell in May and Go Away … haha, but jeez…

  31. does anybody think NFLX is cheap enough yet to sell put options on it?

  32. No not cheap enough!

  33. I would, if I has a NFLX position. The premium is so high right now.

    Here's a plausible scenario. Barron's is reporting red-hot inflation might be cooling off. If the FED sees data like this they might put the brakes on rate hikes as the market crash they caused accelerates us toward a straight-up Great Depression. If they indicate this in some language between meetings the market could rally 10%.

  34. COVID easy money was the perfect storm of over-demand (from the free cash, hot economy) and under supply (from supply chain destruction). Capitalism efficiently allocates scarce resources – prices re-adjust, inflation craters, FED calls this "transitory" but starts sweatin' they're killing the economy. Cheap debt back on baby. Unless one thinks we're going to reverse the last 50 years of fiat currency "Miller Lite" development (Tastes Great, Less Filling)?

  35. With the market down big but BND actually up means the principal risk now may be beginning to turn into one of recession instead of inflation. BND and TLT and the like may be safe entries here.

  36. Let’s not jump to any conclusions over a bounce off of 4000.

    NOT changing course here would have mean we are doomed so the best we can say at the moment is we are not doomed.   We will just have to see how it plays out 

  37. The main weak bounce line at 4,160 doesn’t change, of course, but the current fall is from the strong bounce line at 4,320 so then we can calculate what kind of immediate bounce we should be getting from that so 4,064 Is our goal for today and then on to 4,128 tomorrow or we really have to question whether 4,000 is going to hold.   

    When we have a major support line in a major index, then everything should bounce back along with it. So we can expect bonds to bounce, etc.