2022

Return of VOL?

2022 has potential to be a year full of fireworks. This year was crazy as hell with all the QE and stimulus money injected into the markets. On top of that, this Christmas rally has been one for the books so far after trapping many bears at 4500 (huge gamma support). The real question is when will it all stop?

Current bid of the ES is 4784 which happens to be the poc (point of control). The rally isn’t done yet and I fully expect this to test the huge gamma wall at 4800, run stops, and top out above it. There are some other things going on under the surface that confirms this bias such as the JPM collar trade, vanna, and charm. Not to mention retail chasing price down and buying puts on the offer. We all know citadel loves front running trapped shorts.

I’m also bullish airlines going into the new year. At least until early Q2. Many airlines cancelling flights over the holidays but that’s ok. The demand and airport congestion are above pre pandemic levels. There is demand for flights and travel but covid is still causing some problems. Once the fear goes away and people realize omicron is way less deadly and potentially protects you from delta, that will cause even more demand for travel. Especially after trying so hard to keep people locked up and quarantined. This also makes me bullish oil. Oil inventories already at all-time lows causing more demand for the limited supply. City congestion is above pre pandemic levels in some cities. People are transitioning back to normal life and want to travel! Flights in Austria and Germany have increased recently as well. Omicron did interfere but we are seeing a bounce in activity.

VOL should pick up next year. Wouldn’t be surprised to see 10% drawdowns at times. Poor structure below us needs to be repaired. Way too many traders and firms on margin which is really scary when you think about it. Inflation is a real threat, and it might force the fed to really tighten up. Now, GS expects inflation to peak in 2022 and they could be right. With acceleration of the taper and no more stimulus money injected it could happen. Also, if these supply chain issues get resolved and we stop freaking out about covid that will confirm that as well. I expect $AAPL to bid less than $120 next year giving us a great dip buy. $TSLA will dip as well trapping more shorts on its way to $3000 over the next few years. ES will be interesting to watch next year. There is a POC (point of control) at 2920!!! That is the ultimate dip buy opportunity. Will it trade next year?? Who knows, but the ES can easily trade under 3500 next year. Another macro risk is deflation. No one seems to talk about it but Cathy, but it is a real risk. Severe shortages of skilled workers and advancement of tech exposes this risk. If the FED does raise interest rates so much money will leave the system. Money will have more value and people will not spend it so easily. Demand is already peaking, and I know holiday spending was record breaking, but you got to think people may be trying to beat high inflation. I don’t know. I’m not really an expert economist. I’m a trader.

Lithium is in high demand. With the EV market catching on fire with $TSLA leading the way I’m bullish lithium and $TSLA. I believe in Elon Musk. I believe in their tech, and I love how far ahead of the game they are with their tech. $TSLA will disrupt many industries over the next 5-10 years. I’m really excited for the semi-truck to come out. If they nail the production, its over! I think $TSLA has potential to get involved with the metaverse as well. One of the main lithium producers in Australia just cut its supply due to shortage of skilled workers and supply crisis. Demand for electric cars will only get stronger. $TSLA will be the leading EV in China which owns the biggest EV market. The model 3 is quickly becoming the most popular car in many European countries every day. Other companies are now playing catch up creating even more pressure on the lithium suppliers.

Thanks for reading. Will post more random thoughts and opinions early January including why I am bullish India next 20 years! Follow me on twitter @ovotrader_