Big Bounce in the Market Today, Will It Hold?

Dear Traders,

The market certainly sold off at the Open today but it has reversed significantly by the time I am writing this newsletter at 11am ET. Market volatility has been so high lately that it is challenging to write some commentary with any sort of confidence during market hours! Brian and I each had nice reversals on TSLA and booked substantial profits. You can watch our recap here.

The market has definitely been oversold in the short term, but to date there has not been sufficient strength for a rally. Most of the rallies are in fact being sold off. Concerns about inflation, higher than expected interest rate hikes, and the Russia/Ukraine conflict are all causes of this. While an interest rate hike in March is fully anticipated by the markets, traders are pricing in a 20% chance of an additional 50 basis point hike. Some view that as unlikely though as Chair Jerome Powell has generally tried to avoid making surprise moves. However, should evidence emerge that people are losing faith in the central bank’s ability to control inflation, policy makers could be forced to act.

But it is not all gloomy everywhere in the market. As Jim Cramer says, no matter if we are in correction or not, there is a bull market somewhere. Natural gas is ripping higher and the energy sector has had an amazing time.

As for all of you, I hope everyone is having a good Friday, and have so far survived the black January. I am looking forward to seeing you in the chatroom.

To your success,