Don't Chase This Bounce

Markets are green this morning.

$DJI ( ▲ 2.49% ) up 0.75%.

$SPY ( ▲ 2.91% ) up nearly 1%.

$QQQ ( ▲ 3.39% ) leading at 1.1%.

After two straight weeks of red Wall Street is breathing a small sigh of relief today.

Here's why. And more importantly, here's why you shouldn't get too excited about it.

The optimism this morning comes down to one thing.

A few oil tankers successfully made it through the Strait of Hormuz over the weekend.

Not many. But enough to give the market hope that the blockade might be loosening.

Oil pulled back on that news.

WTI dropped over 3% and is sitting around $95 a barrel.

Brent is holding just above $102.

Both briefly crossed $100 again in early trading before pulling back.

That is the entire bull case this morning.

A few tankers got through a strait.

Not a ceasefire. Not a resolution. Not a diplomatic breakthrough.

A few tankers.

Let's be clear about what this morning's green does not fix.

The Iran conflict is entering its third week with no end in sight.

The Strait of Hormuz — through which roughly 14 million barrels of oil flow on a normal day — is still essentially closed.

Trump is pressuring NATO allies to help break the blockade, warning of a "very bad future" if they don't cooperate. That is not the language of a situation that is close to resolution.

Oil is still elevated.

Inflation was already sticky before the war started.

The most recent data, covering February CPI and January PCE, predates the conflict entirely. Which means the Fed is about to make a decision this Wednesday using information that doesn't yet reflect a 40%+ spike in oil prices.

Former Kansas City Fed President Esther George said it bluntly this morning, now is not the time to be focused on when rate cuts resume. There is simply too much uncertainty pulling in too many directions.

The market knows this. Which is why 81% of traders still think Q1 ends in the red, even on a green Monday morning.

All of this sets up what is shaping up to be one of the more consequential Fed press conferences in recent memory.

The rate decision itself is not the story.

Nobody expects a cut or a hike. Rates are staying put.

The story is what Powell says about the war. About inflation. About where the Fed goes from here in an environment that changed dramatically in the span of three weeks.

A few weeks ago the Fed was quietly optimistic.

Tax refunds were flowing.

Gas prices were low.

The labor market was stabilizing.

There was genuine discussion about the path back to rate cuts.

That conversation is now on hold indefinitely.

Watch Wednesday's press conference closely. Not for what Powell says, but for what he's willing to admit out loud about how much has changed.

Here is the framing I want you to take away from today.

Green days in a volatile market feel like relief.

They are not permission to abandon discipline.

The investors who get hurt in environments like this are not the ones who hold through volatility.

They are the ones who see a 1% up day and start making decisions they would not have made last week, chasing positions, adding risk, convincing themselves the worst is over.

The worst may not be over.

Or it might be. Nobody knows.

That uncertainty is precisely why having a strategy that does not require you to predict the outcome matters so much.

When you are selling cash-secured puts on quality stocks at prices you already want to own them, a bounce does not change your plan.

When you are selling covered calls and collecting premium weekly, a green Monday is not a reason to suddenly get aggressive.

You stay in your lane.

You execute the process.

You let the market do whatever it does.

That is not passive investing. That is disciplined income investing.

There is a significant difference.

$NVDA ( ▲ 5.59% ) GTC conference kicks off this afternoon with Jensen Huang's keynote at 2pm ET.

This is the biggest AI event of the year.

Whatever Huang announces is going to move the Nasdaq, in one direction or another.

If you have tech exposure, keep an eye on it.

If the last three weeks have made you question whether your current approach is built for markets like this one, that feeling is worth paying attention to.

The Ark Options Workshop is a 90-minute training where I walk you through exactly how the Ark Strategy works — cash-secured puts, covered calls, and how to generate income from quality stocks regardless of what the market decides to do any given week.

You will also walk away with my premium calculators and trade log template completely free.

👉 [Register for the Ark Options Workshop here]

Build the Ark.

— Pete

This newsletter is for educational purposes only and is not financial advice. Options trading involves substantial risk and is not suitable for all investors. Most traders lose money. Past performance is not indicative of future results.

ChatGPT is insanely powerful.

But most people waste 90% of its potential by using it like Google.

These 1,000+ proven ChatGPT prompts fix that and help you work 10X faster.

Sign up for Superhuman AI and get:

Claim your free prompts