Predictions for Friday, May 06th 2022

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Our weekly predictions are here, available exclusively to our subscribers (competition participants get it a day and a half earlier if they leave their email), for Friday, May 06th 2022 (4pm EST; at market close). Keep in mind that our accuracy is much better for low volatility assets, so interpret the predictions with caution. For an overview of our accuracy thus far, see here.

Our estimate for the Friday close for our 5 major indicators and 2 stocks this week is the following:

This week we’re looking at a slight rebound from Tuesday’s lows, following the FOMC meeting and its announced 50bps rake hike. The initial knee-jerk reaction was a rally across the board, with all the major indices going up almost 3%. Same thing happened back in March, markets merely reacted to reduced uncertainty. Also, Fed chair Powell dismissed, for now, even higher rate hikes (i.e. by 75bps) in the future.

The reaction however led the S&P and DJI already above our targets, which suggests that by Friday they should drop down a bit to get closer to our 4200 and 33,200 targets. If they don’t we’ll have a first loosing week in Q2 (with limited losses as usual).

How did we trade this? We traded 10 SPY 06/05 iron condors, ranging from 411/412 to 429/430 (10 contracts) for $500 immediate gain. We only bought downside protection this time, one SPY 430 06/05 put for $12.70.

In addition we also traded 10 iron condors for DIA, 325/326 to 336/337, for $250 immediate gain, and also bought a put for protection (1 DIA  06/05 338p) for $7.70.

So similar to last week, purely a downward directional hedge, even though our predictions are all calling for higher levels of the main indices and stocks. After Wednesday’s rallies, this might seem unwarranted, but it was necessary to have some protection. After all, we should allow the S&P to close the gap with the BASON a bit :)

DISCLAIMER: This prediction survey is still in its testing phase. Neither the survey nor its results act as investment advice of any kind, nor should they be considered as such. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum bears no responsibility for your investment choices based on these predictions.

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