When the Bond prices goes up, the Yield goes down

•  However, In Late Nov 2021 Fed announced that the central bank would speed up tapering bond buying program which was launched in 2020 to help fight COVID-19 economic crisis. This caused market to drop almost 7% from all time high

• Fed’s stimulus has fueled a historic rally that has lifted major market indexes far beyond their pre-pandemic highs. ( Too fast too soon – almost like a BUBBLE)

• Fed’s current plan is to reduce purchases by $30 billion a month to end in March 2021

• Inflation rose to 6.8% in Nov 2021 from a year earlier. The fastest pace since 1982 ( Source: labor department)

• One and half year of Fed stimulus has driven a rise in household income, raising a sharp run-up in home values. This has boosted wealth for many Americans and fueling stronger demand. But the tight and shortage of labor market and supply chain issues has restricted supply leading many businesses to raise prices. This is big reason Fed is speeding up tapering.

• The sooner the fed completes the wind down ( tapering ) the sooner the fed would be able to focus on bringing inflation back down to its 2% target

12/15/2021 –

Highlights from FED meeting today:

– Unemployment rate is lowest in a decade
– Inflation is no longer transitory
– High CPI index
– Fed to taper bond buying
– Inflation moderately exceeding 2% target as being met and Fed would keep rates near zero until they were satisfied labor market conditions were consistent with maximum employment.

– Fed Officials now expect the unemployment rate to fall to 3.5% next year, below their long-run estimate of 4%. They now see core inflation ending this year at 4.4%, up from a projection of 3.7% in September, before falling to 2.7% at the end of 2022, versus a projection of 2.3% in September.

– After projecting three quarter-percentage-point rate rises next year, most officials penciled in at least three more rate increases in 2023 and two more in 2024. That would leave short-term interest rates slightly below what is known as the neutral level designed to neither spur nor slow growth.

– Market (S&P 500) rallied almost 1.63% and  QQQ tech heavy index rallied 2.28%

– Now get ready for Santa Rally 🙂

Market Recap

• All of the Indexes closed small percentages over the course of the week due to inflation fears (after CPI report on Wed), but we had a nice rally day on Friday to offset some of those losses.
• We are now staying below the all-time highs we set about a week ago, and that high will be resistance in the future. I think we will consolidate around this level to provide some support and filling after the big run-up. That could mean a choppy price action. Remember that November and December are traditionally good months for markets in general.
• Support at $SPX is likely 4525/4550 which is still 100 points below current levels.

The 10-year Treasury yield and the US dollar made some big upward moves through the week’s end.

VIX

The VIX or the fear indicator was also noticeably higher in the middle of the week (almost touched 21 on wed 11/17), but then fell again at the rally on Friday. The indicators based on VIX and its derivatives remain generally bullish for stocks so far.  Additionally, $ VIX remains trending down as the 20-day moving average of $ VIX is still below the 200-day MA.

Put-Call Ratios

The put-call ratios for pure stocks remain solid on buy signals as they continue to fall rapidly. As long as they go down, that’s bullish for stocks. The ratios are approaching the lower regions of their charts. That is, they are “overbought”. But they won’t produce confirmed sell signals until they roll over and start an uptrend.

What to Watch

• The latest retail sales number for October will be highlighted with some real estate reports.
• Quarterly earnings remain slow, but several retailers are expected to announce this week, which is in line with retail sales numbers expected on the Tuesday before the opening.
• BTC (Bitcoin) pulled back after a strong rally as many traders await another surge on possible new highs.

• Retail and home sales on Wed.
• Manufacturing index Friday
• Earning reports continue
        ○ Retail – WMT, HD, LOW, TGT
        ○ Chinese stocks including – BIDU, JD, BILI and BABA
         ○ Tech – NVDA, LCID and AMAT

Watch List:

AAPL – $146 to $153 – range bound for the time.
DIS – Sold off on earnings news. Maybe support around $153 for a bounce back.
DKNG – $40 looks like next area of support. Either it holds or we head lower to $35
FB – $320 now looks like support – $350 next area of resistance. Long.
LCID – forming a pennant – break and hold above $46 for next leg up.
PYPL – Looks like it is trying to hold that $200 level – Got long with bull put credit option trade.
RBLX – looks strong and could challenge high of $110. Long.
TSLA – Took a big hit on news of Musk stock sale – $900 critical level of support now.
MSFT – Long 21 Jan 2022 calls
AMZN – The stock has been holding its own, and the 50-day moving average around the $3,400 level may be a good area to set up another bull put spread on this monster of a stock.
AMD – After ripping higher over the past month and a half, the stock pulled back last week. On Friday a buy setup triggered, which may lead to bull call spreads.

Current News :

• Airbus receives first major deal since start of Covid-19 – (Read Here)
• Shaq’s newest store-front in his food empire – Read Here
• Toshiba announces split – Read Here
• Bitcoin upgrade: What’s next? – Read Here
• Johnson & Johnson Split – Read Here
• Apple’s Digital ID – Read Here

Trade safe ..!!