I was in a live event Wednesday when Fed Chair Jerome Powell was speaking so I missed it… But I can say that the market did not like it!
Check out this move in the VIX, otherwise known as the “fear gauge.”
That is a HUGE move after the press conference. In fact, it was the second-biggest single-day move in the S&P 500 (SPY) all year, falling 3%.
Technically, the move puts the SPY in a precarious position. However, after such a move, we normally expect a couple of days of consolidation or a bounce, which we are seeing this morning with the SPY up 0.8% minutes after the open.
The news that the market is reacting to is a single event — the fact that rate cuts will likely slow in 2025 — not something that is ongoing and developing.
The market will likely take some time to digest it.
I was anticipating this sort of thing AFTER the new year, but we got it this week instead. We will have to watch the market action very carefully today, which as I mentioned, things are strong so far this morning.
Now for a quick lesson that I think will be helpful for everyone…
As patient people think I am, the markets are constantly teaching me to be even more patient and stick to my trading plan.
On Dec. 5, I issued a Gamma Pockets trade alert to buy the PespiCo (PEP) Jan. 17 expiration, $160 strike put. I gave an estimate of Dec. 20 for PEP to reach the Gamma Pocket at $155, and projected the price of that option would be $6.20.
Well, PEP broke through $155 during yesterday’s brutal sell-off, with two days to spare in my timeline, sending the option to $6.40, slightly above my estimate.
Unfortunately, I got impatient with the chop that we experienced during the first week of the trade, and we officially exited with a decent 18.2% gain rather sticking to the plan for much juicier gain of around 65%.
Lesson reinforced:
- Make a plan BEFORE you execute your trade.
- Trade your Plan
- Be PATIENT and do not exit unless your plan tells you to!
If you want to learn more about how we trade Gamma Pockets, be sure and check this out!
We have a 78.5% win rate on 93 trades, with an average return of 49% including winners and losers!
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. Is the Santa Rally Still Coming to Town?
Goldman Sachs says the “Santa Claus Rally” is coming to town!
When and if the “Santa Claus Rally” hits, the stock market tends to rise in mid-December through early January, opening up nearly limitless opportunities.
But you have to know what to look for to find them.
That’s why I designed a way to identify top trades to take advantage of this potential year-end boom…
And it targets a handful of predictable opportunities throughout this historical stock surge period.
