July's Fed Meeting Promises Another Volatile Week Ahead By Larry Benedict, editor, The S&P Trader Last week was one of our busiest ever. We had a total of 12 trades with 10 winners. That came against a backdrop of higher volatility. Key economic data showed inflation heating up and durable goods orders tanking. Plus, Tesla (TSLA) and Alphabet (GOOGL) sold off heavily, with earnings coming in lower than expected. That caused both the Nasdaq and S&P 500 (SPX) to gap lower. Another four of the “Magnificent Seven” are due to report earnings this week. So I’m expecting even more volatility ahead. Our two losers saw us finish slightly down for the week. We dropped $48 per contract. But overall, we’re still tracking along strongly. Our rolling profit year-to-date (YTD) is $5,774 per contract. 
(Click here to expand image) Given the increased volatility, we continued placing our spreads 15 points apart rather than 20 points like we’ve done for most of this year. And that proved to be the right call… By choosing 15-point spreads, we limit our max loss to $1,500 per contract minus the premium we earn. So the 15-point spread saved us from racking up bigger losses on the two trades that went against us. As we discussed last week, picking the gap between the strike prices is a trade-off. A narrower gap means you collect less premium. But it also reduces your max loss if the trade doesn’t go your way. Rest assured that I always choose the spread based on the best balance of reward and risk for any trade. As of Friday, we’ve now done 179 trades since the start of the year with an 82.7% win rate. We’re also averaging a 1.28% gain on capital committed per trade. That’s not 1.28% a year… our average holding period is just one day. If you made 1.28% a day and repeated that over the 252 trading days in the year, you’d be up 322.56%. Now let’s turn our gaze to the week ahead… Big Tech and the Fed As I mentioned, four Big Tech heavyweights will announce earnings this week. These include Microsoft (MSFT) tomorrow, followed by Meta Platforms (META) on Wednesday. Then both Amazon (AMZN) and Apple (AAPL) are due to release earnings on Thursday. As we saw with TSLA and GOOGL last week, the market may severely punish any misses. Beyond earnings, we also have the Federal Reserve’s interest rate decision on Wednesday. No one is expecting the Fed to cut rates this week. But the market had been increasingly looking to a cut as early as September. That’s especially true after last month’s Consumer Price Index (CPI) inflation data came in at -0.1% month-over-month. Yet Friday’s Personal Consumption Expenditures (PCE) monthly inflation data came in 0.1% higher than expected (to 0.2%). So all eyes will be on Chair Jerome Powell’s press conference to see which way the Fed is leaning on rates. Plus, we also have key jobs data… Tomorrow, we’ll get to see the latest Job Openings and Labor Turnover Survey (JOLTS). Then on Friday, there’s both nonfarm payrolls and unemployment data. Add in a presidential race that’s heating up… and we can expect to see even more volatility ahead. It’s all shaping up to be another busy week. So make sure to keep a close eye on your inbox. And if you haven’t already, be sure to download our free mobile app and enable notifications. You can download it for iOS here and Android here. Don’t forget, if you have any questions, comments, or suggestions for The S&P Trader, you can send them to feedback@opportunistictrader.com. I’m always glad to interact with readers. Happy Trading, Larry Benedict
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