EB Daily Market Report - Special Report - Monday, June 13, 2022
Today's DMR will be very brief. I just want to quickly share with all of you what I'm seeing with max pain as I begin to look at June monthly options - which expire this Friday. When the QQQ was trading this morning at 277.83, I calculated max pain to be 322.75, 16% above current price! The value of net in-the-money put premium on just the QQQ was nearly $5 billion!!!!
Throw that in with the equity-only put call ratio ($CPCE), which Friday printed the highest reading (.89) since March 2020 (pandemic) and we're seeing extreme panic beginning to grip the market. And there's a MOUNTAIN of profits available to market makers if we reverse this week.
Listen, we could still go lower today and over the next couple days. Anything is possible and there are NEVER any guarantees. The work that we do at EarningsBeats.com simply helps us to manage risk. I believe the odds of a VERY significant turnaround to the upside is growing. Do we have the possibility of more short-term pain ahead? Yes, it's still quite possible as tomorrow morning we'll get the May PPI report (inflation at the producer level). Then we have the Fed meeting starting tomorrow and ending with the policy statement at 2pm ET on Wednesday.
But I feel like a stock market rubber band is being pulled back aggressively right now and a snap back rally could occur at any time later this week that could blow our socks off.
What does this mean to me? Well, first and foremost, I'd book profits on the short side. I'd make sure I capture those profits before market makers strip me of those later this week. (Full Disclosure: I'm not shorting anything right now)
I took a small position in the QLD this morning, knowing full well that we could see very quick deterioration in equity markets over the next couple days. Trading on the long side presents incredible short-term risk as well, given the current market environment and extreme volatility. But let me end with this.
That $5 billion in net in-the-money put premium on the QQQ goes up by $134 million every dollar that the QQQ falls. Again, this is simply one ETF. The amount of net in-the-money put premium across the entire market is UNBELIEVABLE - the highest I've ever seen. While market makers don't lose money if the stock market keeps going lower, the amount of profit available to them if we rally cannot be ignored.
I see a very significant rally ahead - maybe in the 5% to 10% area, maybe more.
I'll provide a normal DMR tomorrow, I just wanted to get this information to you quickly! Also, we'll be having our regular max pain webinar Tuesday, June 14th at 4:30pm ET. This one will be extremely important, so be sure to join me OR make sure you check out the recording afterwards.
Happy trading!
Tom