Cycles Write Their Own Script
Hello All,
It’s been a relatively quieter week thus far free of economic data / events & in terms of the remainder of the week, we just have PCE #’s on Friday, but thus far, all of the indices have more so performed inline, all around about -50bps on the week after initially & briefly making new highs earlier on in the week, but into the remainder of September, it does typically tend to be ‘weaker’ in regard to seasonality although seasonality in general has been quite a dud thus far this year & more so hasn’t been much signal… we’ll see if we get a bit of disruption in the recent & continued slow churn / grind higher within the indices.
Earlier on in ‘24, a series we had started was ‘Educational Pieces’ with each including a wide variety of topics, some even suggested by you all & we’ve finally decided to release Part Trois.
Nevertheless, for those whom may have missed the first educational piece along with the subset of topics included:
General background / knowledge on all option strategies
In-depth talk on risk / reversals & how to go about expressing / utilizing them
Options Structuring
When to used naked calls / puts vs. spreads
Choosing expiration dates
Identifying key pivots / supports / resistance zones
General briefing on stock gaps
What to look for in regards to fundamentals
Implementing fundamental / macro / technicals into a trade
Hedging
Creating risk/reward setups
Taking profits / managing losses
Overall Process
Book recommendations
I include a link here to the original.
And given the amount of positive feedback we had received on the first educational piece & how helpful it was for many, we decided to release Part Deux earlier on in ‘25 & for those who may have missed, a link to Educational Piece Part: Deux can be found here.
And then FINALLY, a link to the last part of the series, Part Trois (for now), can be found here.
Psychology is the silent driver of performance & your edge often comes not from knowing more but from managing yourself better.
As we mentioned earlier but it’s been a fairly quiet week all things considered as there hasn’t necessarily been much economic data of significance reported & it’s more been just a plethora of Fed speakers with mixed dovish & somewhat hawkish signals (Arguably a bit of a political war going on here), but nevertheless, the one interesting datapoint today was New home sales posting quite the beat as August sales jumped 20.5% m/m compared with expectations for a slight decline (-0.3%)… maybe this # will end up getting revised back lower, but don’t necessarily think the #’s are too far fetched given mortgage rates did ultimately make 1-year lows & a plethora of individuals whom have been flushed with cash have been waiting for lower rates rather than lower prices (Wealth Effect is quite real) & one would expect this general trend to continue on if mortgage rates can steadily inch lower (5-handle would likely spur a lot more demand & so on).
Into the remainder of the week, we don’t have too much going on besides the standard jobless claims report tomorrow & then just PCE #’s on Friday but as we’ve discussed more recently, given inflation is generally expected to be a shorter-term blip / one-time price shock per the Fed, there’s a lot less emphasis on inflation data for now & much more emphasis on jobs / labor market data as the Fed is pretty concerned about a deteriorating labor market & further weakness remains unwanted.
And as we’ve covered several times but immigration has absolutely played a huge role on the labor market this year & Powell more so emphasized that point in his recent FOMC speech as prior breakevens for job growth were around 150k whereas Powell now thinks they’re within the 0-50k range (Even the breakeven estimates below were higher than Powell stated)… general point being, the labor market is undergoing a normalization period (although certainly is signs of slowing as well) which arguably makes the UER that much more to pay attention too but further weakness / deterioration from current levels still remains unwanted & as long as the recent slowing growth concerns remain, emphasis on jobs data rather then inflation data will likely remain.
Thats not to say PCE #’s aren’t important Friday as after all, it is the Fed’s preferred gauge for inflation & as of now, headline is expected to uptick slightly higher toward 2.7% from 2.6% the prior month whereas core is expected to remain unchanged at 2.9%. Nevertheless, given the read-through from this past PPI report in terms of the PCE-related components, majority of the components were relatively tame which should be a generally good signal for PCE on Friday as well in terms of no specific surprises & maybe even potential for a downside surprise (Would arguably start to see talks for a 50bps cut in October if we were to see a downside surprise whereas hotter likely gets shook off as inflation is generally expected at this point; shorter-term blip rather than persistent).
