Strategy Note: WOTE Special Ops & US 60
Gearing up for the January/February SPX parabola.
Discussion
As discussed Monday, the set-up is in place for a 5-10% move up in SPX over the course of January 2024 (and perhaps into February) once the market gets past the JPM 4515 collar pin that expires on 12/31.
The most straightforward way to participate in the parabola is via SPY calls. However, given the crowding in MAG7 I believe calls on MAG493 (played via RSP and IWM) could provide even greater upside juice. RSP and IWM are volatile coming out of key market lows, as demonstrated by price action in the April-June 2020 time frame, so I want to wait for a pullback in these securities before entering.
My hunch is December 13 could be a catalyst for a pullback in MAG493 as Powell attempts to push out rate cut pricing. Depending on the extent of the pullback, I’ll likely enter a basket of RSP, IWM, and SPY calls in Special Ops in the final two weeks of December, as well as add the final tranche of securities in the US 60 strategy.
Exhibits
On watch for a 2018/2020-like SPX parabola in January/February 2024.
A pullback in IWM and RSP relative to SPX into the end of December would provide an excellent entry point.