Welcome to the first newsletter of 2022. I am planning to send this newsletter out every Monday in order to help traders navigate the trading week with some data-driven insights. This week is all about the inflation numbers being released on Wednesday. They are important and they will likely dictate how the Fed will act in March.
The Big Picture
While there is still a lot to fear in the market, the majority of indicators that I look at on a daily basis signal risk on. Take a look for example at the lumber to gold ratio, which is trending higher, affirming there is strength in the housing market.
While it is true that unemployment has come down dramatically, we are still far below the 64% historical participation rate. Many people have left the job force, and that makes it much harder for the Fed to act aggressively.
Option Trades for the Week
It was quite a busy week for me and I unfortunately was not able to trade last week. I am, however, running a few calendar spreads and credit spreads to take advantage of the heightened implied volatility.
Tweet of the Week
Although I was not able to trade, I certainly did follow the market this past week. I found it very interesting to watch the sentiment of the market and how quickly it changes. I thought the tweet below really summed up the commentary that is out there.
In short, rather than listening to people on Twitter and CNBC, I encourage everyone to use lead/lag indicators and volatility indicators to predict where the market is going.
As always, please do not hesitate to reach out to me should you have any questions.