August 17, 2023

Markets:

Stock futures nudged higher Thursday as investors digested the Federal Reserve’s latest commentary that future rate hikes are not out of the picture.

Retail giant Walmart jumped 1.6% in premarket trading after reporting an earnings and revenue beat in the second quarter. The company also raised its full-year guidance and underscored strength in grocery and online sales.

Computer networking company Cisco Systems also gained 2.8% before the bell on a better-than-expected quarterly earnings report. Meanwhile, Wolfspeed
plunged 13% after posting its fiscal fourth-quarter earnings results, which missed expectations on the bottom line.

Markets reflected investors’ concerns after officials said in the central bank’s July meeting minutes that additional tightening may be necessary to bring down inflation. The federal funds rate is currently in a range between 5.25% to 5.5%.

Stocks have been suffering through a rocky August, with the major averages well in negative territory for the month. Valuations are coming down from their lofty heights.

Traders will also have an eye out for the latest weekly jobless claims report.

Portfolio:

We enter the new trading session holding positions in IONQ, NNDM, HPE, and CVE. S&P broke our short-term line, next we are looking at is 4411, last month's low. Really interesting scenarios should we dare to break lower and hold that line. The hard line still remains 4350. I doubt we see that tested short term but keeping all possibilities on the table as we navigate the final two weeks of this ho-hum volume in this market.

Pay attention to what's happening under the hood for this market and what helps fuel our indicators and thought process. VIX dealers continue to try and suppress Vol into OPEX. This selloff has some of the same fingerprints as what we experienced in June before we moved higher. Fixed Strike Vol on calls was higher yesterday as we moved lower into the key 4400 area, indicating clear demand for upside calls. Think about this, SPX down roughly 150 points from recent higher but yet VIX only went up a few points. We saw clear put selling and call buying into this selloff, especially yesterday.  Always pay attention to what is happening under the hood rather than a picture /narrative that they attempt to show retail.  Aug OPEX is tomorrow 8/18, would not be surprised at all if they run this towards 4460 – 4470 level, right towards the 50.

Again, pretty similar price action we had in June. Pull up the charts. Lack of volatility with vol for the most part being suppressed and a chop downwards before we crushed to the upside. Just keep in mind what's coming around the corner. Let's see how this develops and let's be ready to capitalize. Just please stay patient here as we come to the end of August.  There are massive rewards to those who remain patient through this chop.