Weekly update – 1/23/22

The market got hammered last week and bullish traders and investors were not pleased as all the major indexes cooled off in an aggressive way. Continued worries over inflation, what the Federal Reserve is going to do and the threat of Russia invading Ukraine kept buyers at bay. That was too much for market participants to digest apparently, and those issues will carry over into this week. The S&P 500 is fighting to hold its 200-day moving average (and currently losing), which is a level it had not tested since June 2020.

It was an ugly finish to an ugly week for investors and long only traders. The selling hit every sector which can happen when the margin calls start happening. I think things are getting a little extreme to the oversold side so expect a bounce next week.
•QQQ ~ support at 340, (now 351)
•SPY ~ support at 430, (now 438)
•DOW ~ support at 34,000, (now 34,265)
•IWM ~ lost big support at 210-212, new support 190 (now 197)

Speaking of the Federal Reserve, members will most likely raise rates on Wednesday, but will it be 25, 50 or more basis points higher? Obviously, that decision could cause more volatility up to and after the announcement on Wednesday afternoon.

In addition, several other important economic reports are due out this week with many listed below.

Quarterly earnings will continue to accelerate this week with several big-name stocks like Apple and Tesla expected to release. Stay disciplined and focused, and remember that there is nothing wrong with sitting on your hands if you don’t think you have an edge.

The Jan Seasonal Trade
We are currently buying QQQ puts in line with the “January Defect” trade discussed in the last two issues. However, a week from now, a strongly positive seasonal trade will set up – the one we call “The Jan Seasonal.” One buys “the market” on the close of the 18th trading day of January, and holds for four trading days. Take profits on half the trade if SPY rises by 8 points from where it was when you established the position. For now, we will plan to exit all (remaining) calls four trading days later, at the close on Wednesday, February 2nd. #

Jan Seasonal Bullish Trade
At the close of trading on Thursday, January 27

Buy 2 SPY Feb (11) at-the-money calls and
Sell 2 SPY Feb (11) calls with a striking price 10 points higher.

Potential $VIX “spike peak” Buy Signal
There will be a new “spike peak” buy signal when $VIX closes at least 3.00 points below the highest price that it has reached during this current “spiking mode.” As of this moment, that high is 29.79, set during the day of January 21st.

$VIX “spike peak”
IF $VIX closes at least 3.00 points
Buy 2 SPY Feb (18th) at calls and
Sell 2 SPY Feb (18th) calls with a striking price 13
If bought, then stop yourself out if $VIX closes above that previous high price.#

Economic calendar 🗓 this week:
Jan 25: Consumer Confidence
Jan 26: Trade in Goods
Jan 26: New Home Sales
Jan 26: FOMC Announcement
Jan 27: Jobless Claims
Jan 27: GDP
Jan 27: Durable Goods
Jan 27: Pending Home Sales
Jan 28: Personal Income and Spendin

Earnings Calendar 🗓 this week: