May 19th 2023

Market’s Fickle Focus: From Global Concerns to 9-Month Highs, Is the Rally Sustainable?

Has everyone lost their mind? I thought we were supposed to be worried about China invading Taiwan or Russia’s war with Ukraine, the US debt ceiling or a global recession or … or … or …

Or nothing.

Earlier in the week the Nasdaq (QQQ) hit a 9-month high. Yesterday it just crossed over a key swing high set last August.


Yesterday it was the S&P 500 (SPY) that had its turn in making a new 9-month high.  If there’s a follow-through tomorrow, look out for $430 or even higher.  

It’s hard to believe the performance of the market over the last 9 months, especially if you’re looking at your account and still seeing the remnants of the havoc that was 2022.

The market responded positively to finally breaking out of a range that we haven’t been able to touch since February.

Things are going so well in fact, that the market is now pricing in a 33% chance the Fed will once again raise interest rates.

Weren’t we just watching the market fall apart over the banking crisis and now we’ve switched to the market being so strong that we’re talking about rate hikes again?

Part of the reason is that jobless claims came in much lower than expected.

We also had the Philadelphia Fed Manufacturing Index give us a much stronger reading than expected.  While a negative number still indicates contraction in the manufacturing industry, the report is showing that manufacturing isn’t as bad as people thought.  

While the market is cheering the news now, it may be a different story if the Fed is pushed to raise rates once again during their June meeting.

I have a scan that I use from time to time and it focuses on oversold stocks that are looking to break higher and the options have to pass a range of criteria like bringing in premium.

I don’t like selling puts on up days, so the last couple of days have been somewhat limiting, but Prosperity Bancshares (PB) came across the screen. It’s in the financial space, and I can certainly argue that it’s not the greatest industry to trade at the moment.

It suffered with the rest of the financial sector, but has found some support at the $59 level.

The 16 Jun 23 $55 put is going for around 1.05 to 1.65. The mid-price is 1.35. Selling a put will cost you $5365 per sold option, but you’ll collect $135 in credit. That’s a 2.5% return if PB stays above $55 at expiration. The 52-week low is $56.72.

Have a great weekend everyone!! I will see you back here next week.

If you have any questions, comments, or anything we can help with, reach us at any time.
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Jeff Wood

Editor, Filthy Rich Dirt Poor
Coach, Options Testing Lab

Any trade or trade idea discussed is for educational purposes only.  They will not be tracked as an official trade recommendation. 


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