DailyPlay Updates – December 13, 2022

Investment Rationale

A solid up day yesterday brought the SPX from recent support to a 50-point gain, and as much as this looks good to the average eye, it also marked a daily Standard Sequential +12 count, meaning that all today need do is open or close above 3977.02 AND also trade as high as 4027.26 to mark the +13 today. It should not go unnoticed by institutional players who know this model.  However, they may not do anything until Wednesday’s Fed announcement/press conference, BUT, if the news is bad the 13 count is going to bring on even heavier selling than if it wasn’t there. (Something to keep note of.)

SPX – Daily

Yesterday we significantly trimmed several positions; most of them longs. As I explained on Monday’s webinar, anytime you have a big outside catalyst to meaningfully push a market one way or another, I often take down trading exposure so that a bad result wouldn’t kill all the hard work/profits put in and made over the past several weeks.  Successful trading is about risk management, and I much rather be cautious than hope that a number comes out in a way that helps my positions. (Which also means that if you like what you hear tomorrow from the Fed, you can always put back on what you took off. That’s much easier to do than get out of something when it’s moving quickly against you.)

With today’s CPI number released at 8:30 am ET today, we’ll have a good clue as to investors’ take on what the Fed may very well do tomorrow. We certainly could see an SPX 100-pt. move happen tomorrow – even in just in the last 90 minutes of trading – so make sure you are on top of positions that need to be monitored.

Though I know this could disappoint some, I am not putting on any new option positions until after tomorrow’s Fed statement. I think it the prudent thing to do, given the possibility of them either creating or killing the chance for a Santa Claus rally. And as none of us have a clue as to which way they are going to lean on that choice, I don’t need to put on new exposure today that could possibly be down or up 50-100% a day later. (But of course, you are always free to do as you see fit that best suits your own risk tolerance.)

I spoke with Tony yesterday and he suggests taking off the long Visa Dec. 16th $205/$185 put spread we have on that expires on Friday. (At this point, I’d personally wait until we see what happens Wednesday afternoon on the odd chance that the market dives.) Also, Lennar (LEN) reports after the close on Wednesday. As we have 1 of 3 remaining bullish spreads in it and have made good money on the two spreads we’ve already exited, I will likely hold it until we see what it does on Thursday. It expires on Friday and will be out of it by Thursday’s close regardless.