We hit an equity peak last Tuesday and have had five choppy days since our last equity peak with 4 out of 5 losing days in extreme chop. This market is really bottled up and setup for a big move as we go into FOMC tomorrow.
The amount of chop feels like capitulation of chop as we hit a worse case drawdown today in the portfolio. We anticipate and expect worse case drawdowns. This is the reason we wait for a drawdown to start.
Today we were down -$5,525 on the 200K Portfolio and down -$1,380 on the 50K Portfolio. Since we started on a drawdown in August and have had several equity peaks, we are down 1% on the month on the 200K and almost 2% in the 50K Portfolio (since we had some additional slippage). We are up on the quarter in these portfolios.
Its a really hard market to trade as the the Fed hasn't really done much to fight inflation yet or the market would be much lower. They have propped up the stock market for 14 years and it is difficult to trade on days like this when the market should go down but has multiple rallies instead.
Every time the market tries to sell off, there are dip buyers holding it up with 150-200 point rallies in the Nasdaq. The market feels manipulated on the micro level by market makers and on the macro level by the Federal Reserve acting as the plunge protection team. If you choose to trade the markets, you have to realize that the markets are not always free and fair and that there is massive manipulation at times. We still find a way to trade it.
The FOMC statement and press conference is tomorrow. If the Fed is not more hawkish than the market expects, the market could rally. Any slight hint of any dovishness, the market could rally hard. Its difficult to imagine the market could sell off but that is also a possible scenario. The fundamentals are bearish, the sentiment is bearish and the technicals are bearish, but the market isn't trading much lower over the past week since CPI. Another leg down is certainly possible. Its also possible the market could just participate in more wide ranging chop. Its important to manage risk here.