Tom’s Weekly Newsletter December 21, 2022

Originally published via our newsletter previously. Subscribe for early access!

Fed Decision Day 2022-12-14

The Federal Reserve’s decision today was to raise interest rates by, (the anticipated), half a percentage point.

This now takes it to the highest level its been in 15 years.

Furthermore, Fed Chairman Powell said in his commentary after the interest date decision they will stay the course until the job is done.

This is to say they are going to or are likely to continue to keep interest rates higher through 2023.  Not only that, but they also don’t anticipate any reductions until 2024.

The markets were trading higher on the day, which is a bit unusual on Fed announcement day – usually it trades pretty flat ahead of the decision but gave those gains, closing lower than yesterday’s close post their decision.  

Corners of the Market

SPY – SPDR S&P 500 

Post the Fed decision to raise interest rates half a percentage point and with their intimation they are going keep interests rates higher through next year, SPY sold off.

This wiped out the gains SPY was experiencing on the day and even took out the low of yesterday.

This still didn’t take it through the horizontal price support seen and 390.

This seems like consolidation and there isn’t a clear indication of an up or down trend to come so consideration of sideways or channeling options strategies like Covered Calls or Calendar/Time Spreads, to name a couple, seem to be the better choices for now.

If there is a break down through support, ascending or horizontal I would slap on the Fibonacci Retracement tool to assess downside price targets for SPY.

TLT – iShares 20+ Year Treasury Bond ETF

The Darknet S signal doesn’t mean sell short, but if the run up is over and it retraces, here is a fib view of the retracement levels for TLT.

UUP – Invesco DB US Dollar Index Bullish Fund

UUP did indeed slide back to 28.

The annotation in the image above says potential support.

While it is now trading at that price of 28 which it traded up off of back in mid-August it could slide down through that price negating 28 as support.

Should UUP bounce higher off this price level e could then consider this a double bottom support level.

The gains made on UUP from mid-August to the latter part of September have been erased.

Investors that were in from 28 have a decision to make now, which is to either add to their position again at the price of 28 or bail at a break even.

The coming days price action will tell the conviction or lack there of for UUP and should it trade lower that could bring at least a bit of price stability in equities.

USO – United States Oil Fund, LP

So far the answer to last week’s question about USO being at a price point it break slower or bonces higher has been answered.

Last weeks price level is support, double bottom support to be clearer.

This is the type of price action that the current chart on UUP is not showing.  If and or when it does we could then deem that chart having formed a double bottom support.

As for USO, I have a couple of dotted, green, horizontal lines place in the chart image above to indicate possible price levels that would be come resistance… and when I say it could become resistance one could look at those as possible price targets to the upside.

I feel using those horizontal resistance levels may work better in analyzing or assessing upside targets than Fibonacci.

Of course, I love Fibonacci so if you want to use that tool, go for it!

GLD – SPDR Gold Shares

Don’t look now, but GLD appears to be ‘trying’ to break out.

Overhead price resistance was 168.  It was until yesterday when GLD traded above that price and ended up closing above that.

An aggressive investor / options trader might jump on a trade based on it breaking out with a close above resistance for 1-day, where a less aggressive investor / options trader may require a close at least 3 days in a row before taking action.

Whether today traded above resistance on a closing basis is up to you.  If you look at the closing price for GLD, it may be pennies higher than 168 and that may constitute a close above resistance for some.

I wouldn’t rush into a decision to trade just yet and would be more inclined to wit at least another trading day to decide.

Tools and Observations

One of my favorite new things in the tools created this year is my Morning Reports lists.  

These lists provide data on options specific to the category of each panel, like Expensive  and Cheap IV, Activity of Calls and Puts and Open Interest and Volume

These lists are updated each day at the final update for the tools that everyone can use / look at the next morning.

Whether or not you take a trade on any of these is up to you and your financial professionals / brokers.

One can do scans with my tools to find a stock poised to move higher or lower and reference these lists to see if there is any activity by the other options traders to help gain you conviction for a trade and maybe even which option to consider.