Options Made Clear

🇺🇸 Here is my Equity Market Forecast for this week. Please share it with anyone else who may find it useful.

We had a very eventful week last week and I don't think the banking issues are over just yet. This week's volatility is likely to remain high, particularly with another interest rate decision from the Fed due Tuesday. My view is another 0.25% hike as inflation remains high, especially food and energy costs. And we have rates on the 2Y Yield having pulled back, which is positive for Bonds. Remember there is an inverse relationship between yields and Bonds, so falling yields mean higher Bond values. With the Banking issues as well, more people are finding a safe haven in Gold. Stocks are likely to remain rangebound heading into Q2.

S&P 500 (SPY ETF)- we finished the week with a Bearish Inside Bar candle formation on falling volume. I see the SPY pulling back to the downward trend line at $382 where we may see a bounce due to the confluence of both the horizontal support line and a downward trend line intersecting.

Nasdaq 100 (QQQ ETF) - we have reached a pivot point after a recent run-up, with a Doji candle and falling volume Friday. I see the QQQ pulling back to the 20-period Moving Avg line (in yellow) with my price target of $296.85.

Volatility (VIX) - remains high with the banking issues unresolved and a Fed rate decision. I see us heading back to 27.50. If the banking situation worsens, we could go to 30.

The 2-year yield is down 0.85% in the last 3 trading days. In the last 40 years only once has the 2-year declined this much over 3 days, the 1987 stock market crash. 💥

🇺🇸 Here is my Equity Market Forecast for this week. Please share it with anyone else who may find it useful.

We had another turbulent week for investors, and this week promises more with inflation data due out on Tuesday and options expiration on Friday which is likely to add to volatility and move markets.

The collapse of Silicon Valley Bank (SVB) continues to reverberate through markets. The fallout is a byproduct of the fastest interest-rate hiking cycle and I believe we still have not seen the full effect and if more credit problems lie ahead, particularly in auto loans, which have the potential to be the next sub-prime crisis. We are still in a Bear Market and my bias remains on the downside.

We may see a brief bounce Monday on news of the SVB bailout and falling 2Y yields, but the inflation data could be the trigger for another leg down. I am not planning on looking for any new positions until the inflation data is out of the way, no point in adding unnecessary risk.

S&P500 (SPY) ETF - we are approaching a brief pivot point with decelerating candle bodies and also a wide divergence from the 20 Moving Avg, so I anticipate a brief bounce to $390 before pulling back to the downward trend line in yellow.

Nasdaq 100 - I see us bouncing higher to the $290-$293.50 area before pulling back.

VIX- likely to head higher for the week with the inflation data and options expiration Friday with my target of 27.50.

Markets are now anticipating higher interest rates as high as 6% to tame inflation with US 2YR yields off on the next run. Bad news for stocks.

🇺🇸 Here is my Equity Market Forecast for this week. Please share it with anyone else who may find it useful.

Looking at the big picture, the PPE inflation data released on Friday confirmed that inflation is still high and proving hard to reign in. The S&P500 has now given up 5% of its 2023 gains, with the Dow flat for the year. The spike in interest rates (as a means of controlling inflation) over the past few weeks has lowered the odds of further meaningful rallies for the rest of Q1.

The chart of the 2Year Yield attached shows it breaking out to new highs which is a big risk for stocks. It would need to start falling for stocks to rally. Higher interest rates are now starting to impact consumers and this could lead to problems in the credit cycle. All of this would precede a recession and another leg lower in stocks.

S&P500 (SPY ETF) - Friday finished with a bullish candle indicating that the most recent rundown is due for a pause. I see the SPY going higher in the early part of the week to test $402.50 before resuming its next leg down.

Nasdaq 100 (QQQ ETF) - we finished Friday with a Doji candle, normally associated with a pivot point, but we continue to make new lower highs. I see a small bounce higher Mon/Tues to $296.50 before resuming the next leg lower.

Volatility VIX - look to drop to the 50-Day Moving Average (in red) early in the week before going higher to the 23 level.

More evidence that Inflation is proving harder to contain. The fastest monthly rise since June 2022. The odds of further interest rate rises for longer just increased. And that is bad news for stocks. 💸

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