HLGE - Market Speculative And Vulnerable
Summary
- Rampant speculation is going on in the options market, and most of it is betting that we will go up from here.
- The speculators and violent moves are making the market more vulnerable, and the market has the potential to turn hard either way here.
- The Fed meets again next week. I suspect that Powell will try and cool markets down a bit.
Nobody ever said it was easy making money in the markets. We told you last week that the head-scratching rally was coming just like in the summer. The bear market rally is on. The difference with this one is that the market has become much more speculative and vulnerable. In speculative stocks like GameStop ( GME ) and AMC , there was a game being played that was called a Gamma Clench. Speculators bought very short-term out-of-the-money call options which fed into the market, which propelled stocks massively higher as options market makers were forced to buy stock. Those speculators are now using large ETFs rather than single stocks. That is pushing the market up. Rampant speculation is going on in the options market, and most of it is betting that we will go up from here. The speculators and violent moves are making the market more vulnerable, and the market has the potential to turn hard either way here.
Had an astute client meet with a friend who sells furniture at a large store owned by Berkshire Hathaway and Warren Buffett. He told the client that sales were dropping like a rock and, in addition, now people were cancelling large orders. Remember, a couple of months ago, we told you about an investor employed in the lending arena for lower-income groups. He told us then that their earnings were going to be down 25%. Well, now the recession is catching up to the middle- and upper-middle incomes. Should be some rough numbers coming out in the next few months from corporations.
The Fed meets again next week. I suspect that Powell will try and cool markets down a bit. The G-20 conference is November 16 th . That should begin the turnaround in bonds and the US dollar. That would help stocks. The end of the year brings funding challenges. The more difficult journey has us headed higher for the next couple of months into the beginning of 2023. 4150 is the target resistance on the S&P 500 for now.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
Market Speculative And Vulnerable