Meta Strategy Trading Portfolio – Probability Map Update.

– Positioning Update Thursday –

Pin Pong

What a week! Today’s report looks back for an overview of what happened throughout December and what the most likely path forward could look like.

A serious correction in the broad market had already started in the beginning of the month, while the S&P 500 had still been pinned in a tight range.

This broad correction initially was an anticipated, seasonal mid-December slump caused by a combination of window dressing and tax loss harvesting.

The Big Shakeout
On Wednesday, J. Powell broke the S&P pin and a perfect storm followed.

The FED chair’s super-hawkish press conference managed to catch the stock market on the wrong foot and the extreme level of long positioning, as the Achilles’ Heel of the current market, did the rest as we saw a violent unwind of leveraged positions.

A liquidity cascade hit the market during a window of potential weakness from Vixperation to the biggest monthly options expiration in history – just before a major holiday period!

OpEx Turnaround
This sets us up for the most likely path forward. Key is that stocks find a bottom soon, which may be facilitated by options expiration breaking an accelerating negative feedback loop.

Several factors speak for the possibility of a lasting turnaround as positive turn-of-year flows may gain the upper hand once more.

Happy Holidays