26 Mar 2023 SPX Weekly - Inflation vs Bank Crisis
Accuracy: 54/60 (90%)
SPX above 3800 - Correct!
Paper Trade
SPX closed 3970. Got it almost right in the middle of the condor again, max profit $342. Seems like this risk reward ratio can be quite a good range for the strikes as long as I get keep the win rate above 70%. Maybe I should start tracking win rate to see if this actually is long term consistent.
Last Week
We had some pretty volatile movement due to FOMC, Powell and Janet Yellen speaking. Resulting in some huge intraday moves but closed not far from the start of the week.
In the 30 minute chart, we see the big red candle. That's the day where we initially got a good bullish momentum from FOMC and Powell speech. But on that same day, right after Powell finish his speech, Janet Yellen starting hers and the market didn't like what she said. But we eventually found support at 3920 and moved up on Friday.
This shows there's alot of short term news and event driven emotions in the market mainly due to the inflation and bank crisis.
Economic Calendar
Now there's something new to look for in the economic calendar. Other than the usual inflation related events, now Treasury Secretary Yellen Speaks becomes something that will move the market.
Inflation vs Bank Crisis
Just want to touch on this abit, it's actually an interesting situation here. Last week I actually mention this Bank Crisis is a bigger monster than Inflation. It's still true in most cases but there's a very interesting effect that has developed.
Feds are increasing interest rates to deal with inflation, its complicated to explain in depth here but the gist of this is they are trying to tighten the banks monetary lending. But the bank crisis, which is the supposingly bigger monster, is actually causing the same effect of tightening.
So the bank crisis now indirectly becomes the solution to inflation, which could lead to Feds being less aggressive in their stance. This is actually good news for the market in general.
The only concern now is the Bank Crisis don't worsen, meaning the domino effect stops. No more new banks surfacing with issues. With the Feds and US Gov responding so fast to the bank crisis, I do think and hope the bank crisis will not worsen. Which means we might expect more upside for the market.
The only new thing that might happen with all these with increasing chances would be recession. But then again recession should be good for the stock market too. Just that we might get more volatility which we already see anyway.
Next Week
Using the 2 hourly chart to show more things. Few key things to highlight.
Green markers - We see the downtrend resistance becomes a support in the recent dip.
Yellow markers - We see the recent higher lows.
Green line - Key resistance at 4200
Yellow line - Current area to see if it will break or reject 4000
Red line - Key support at 3800
With Friday bullish momentum and with hope that bank crisis neutralise inflation. I lean on the bullish side.
Prediction
This is more for SPX maintain it's higher low.
SPX above 3800
Paper Trade
Doing the same thing, getting 3900-4080. Generally leaning upside. Risk reward still near 2:1.