Special Risk Capital Management LLC

Lying In Wait December 11, 2022

December 9, 2022 – The markets are in a trading range and it sure looks like everyone is waiting for Mr. Powell to announce what the FED is doing with interest rates on Wednesday afternoon.  The feeling is he’ll back off to ½% rise and the market “feels” like it wants to go higher, but . . .  there still is a lot of negative economic news.  The concern is that we’re just now entering into a recession and consumers will throttle back spending after the holidays, which the FED is trying to get done.  The spin off effects on earnings is the main concern.  Lower inflation by reducing demand equals lower earnings.  Ouch. Note the relative sideways price action over the past 2 weeks (purple channel). 

Investors are really trying to like China, thinking that the Covid lockdowns will be lifted and China gets back to work.  We see that “front running” of China and Asian sectors in the short term Sector Strength table below.  How long will that last is debatable.

A final note is next Friday we’ll have monthly options expire.  Lately there has been a near equal mix of Puts & Calls right around the current market prices.  Will these options be continued (“rolled forward”) or just settled?  Is the big money hedged, long or short?  I expect next week to rather volatile as we head into Christmas and perhaps relative calm.  Have a good week.     ……..  Tom  ……..

Price chart by MetaStock; table by http://www.HighGrowthStock.com. Used with permission.