The "Bull Market" Buzz
Last week, the stock market was hotter than a Kardashian scandal. The S&P 500 Index entered a bull market, meaning it rallied 20% from its low in October. Meanwhile, the last time the Nasdaq Composite had a streak of weekly gains this long was back in the "before times" (2019), with this most recent run fueled by those tech stocks that seem to have magical powers. It's like they're casting spells on investors and saying, "Buy me, and you shall prosper!" Make sure to check out our weekly Options Forecast Stream from this Sunday to see how we are playing the market this week: https://www.youtube.com/watch?v=iJP6EvZyHog
Fear and Greed
The United States managed to avoid a debt ceiling catastrophe, allowing everyone to breathe a sigh of relief. The Cboe Volatility Index (VIX) closed at its lowest level since January 2020 last Thursday, and CNN's Fear and Greed Index reached "extreme greed" - not to be confused with "extreme gluttony".
The Fed Meeting Drama
Now, let's turn our attention to the main event - the Fed's meeting on June 13 and 14. It's like a high-stakes poker game, except the chips are stocks, bonds. According to the CME FedWatch Tool, there's a 71% probability of a pause, which means the Fed might take a break from raising interest rates. But hey, they could still surprise us with a rate hike to keep things spicy!!
Inflation and the CPI
Speaking of spicy, we have the May Consumer Price Index (CPI) coming in hot! Normally, this would be a crucial factor in shaping the Fed's monetary policy, but this time around, investors are like, "Meh, as long as it's not wildly different from expectations, who cares?" It seems they believe the Fed won't change its mind about anything, even if inflation is doing the hokey pokey.
Volatility and Quadruple Witchcraft
On June 16, we have a "quadruple witching," where options and futures on stocks and indexes expire simultaneously.
Picture a cauldron filled with various financial instruments, bubbling with excitement and anticipation. During quadruple witching, four types of derivatives contracts reach their expiration date simultaneously: stock options, stock index options, single stock futures, and stock index futures.
Why is this day so enchanting? Well, it often leads to increased trading volume and heightened market volatility. As the contracts expire, traders scramble to adjust their positions or roll them over to the next expiration date.
The impact of quad witching on the market can be both thrilling and perplexing. Sudden price swings, unusual trading patterns, and increased liquidity can make even the most seasoned investors feel like they've entered a world of bewitchment. Some market participants speculate that large institutions and traders may use this day to rebalance their portfolios or execute complex trading strategies.
However, it's important to note that quad witching doesn't possess any inherent magical powers. It's simply a phenomenon that occurs as a result of contract expirations aligning on the same day. While it can introduce temporary turbulence, the long-term impact on the market tends to be limited. So, as we approach this mystical day of quad witching, keep your eyes peeled for unexpected tricks and twists.
Brace yourself for increased trading activity, wild price movements, and an atmosphere that's as electric as a wizarding duel in that new Harry Potter video game.
Remember, in the realm of finance, things can get a little enchanting, but with a dash of knowledge and a pinch of humor, you can navigate the magical currents of the market like a true sorcerer.
June 14th 2PM EST
June 14th 2PM EST is when we will know whether or not this will be the first time in 18 months that the Fed has not to raise interest rates. However nothing is set in stone yet, as there is a 1 in 4 chance that the Fed will once again increase the rates. The CPI report will be coming in on the first day of the Fed Meeting, which could change some minds one way or the other. If the rates don't change, the real question is whether or not that will continue to be the case in the future. Make sure to join our FREE trading discord so you can stay up to date with all the news coming out of this meeting and how we are playing the market!! https://discord.gg/pennybois
