DailyPlay Update – November 3, 2022

Fed Chairman Powell did exactly what I expected he would: Raise rates by 75 bps. and continue his hawkish stance to fighting inflation. I saw nor heard anything bullish for stocks in his press conference. Period. End of my statement.

In my opinion, stock investors have very little to look forward to between now and year’s end, and barring an exogenous event (like Putin unexpectedly ending the war, or keeling over, or something as unlikely as that), stocks will likely slide this year to make new 2022 lows – even in the face of the well-known seasonally-favorable period that we are now in.

I suspect that this week’s SPX high of 3912 (which was just 4 pts. above the weekly cloud model’s Base Line of 3908) was the top of Wave 4 of Wave III down from all-time highs. That suggests not only a high likelihood of new lows, but also that the bigger market move has well more downside to go before all is said and done. (This also means that it is still not too late to be exiting long stock positions – whether they be winners or losers.)

Looking into yesterday’s price action, I see two areas I’d like to use to sell into rallies: One is in the SPY $377 to $379 area; the other from ~ $381.50 to ~$383.50.

As far as our portfolio’s positions, I want to look to exit all tactical longs I’ve recently given you (that all expire no later than Nov. 18th.) We’ve already taken a good amount of them off, but let’s not get stubborn about exiting the rest.  You can do all today; some today and some tomorrow; or all tomorrow.  Your choice. But I do recommend being out of these bullish spreads by tomorrow’s close, as I will likely exclusively be looking to be a seller in the immediate future.

As mentioned in Wednesday afternoon’s monthly Q&A webinar, we will stay short the AIG call spread, using a close (or two, your choice) above $58.39 as our reason to exit the bearish trade.

AIG – Daily