First of all, Happy Hanukkah!

To all my Jewish Evolvers, Chag sameach!

And to everyone else, welcome to a new market!

Now that last week’s slew of economic data is behind us, we can start to look beyond the Federal Reserve and toward the close of this historically bearish year for stocks.

I’ve been talking a lot about monetary policy for a reason … It’s been driving the market for the past six months.

Up until last Wednesday’s FOMC meeting, there was a huge amount of uncertainty swirling in the markets…

But now, many questions have been answered, leading the way for the market to enter a new phase.

I think the focus is about to shift from the Fed to the economy, consumer sentiment, and corporate earnings.

The question is this…

Is 2023 about to be another doozy of a down year or are we poised for rip-roaring recovery?

Keep reading to hear my thoughts, my guidance, and my favorite setup heading into the end of the year…

It’s Time to Move On from the Fed

For the past several months, the market has been at the mercy of one man … Federal Reserve Chairman Jerome Powell.

You could even argue that Powell has been the most powerful person in the world this year.

Every word he’s uttered has been parsed, studied, and deconstructed by traders in an attempt to understand the inner workings of Fed policy.

But that was before Wednesday’s speech, where Powell confirmed that 50 basis points will be the new standard hikes and that these hikes will continue for some time…

This is both positive and negative…

On the one hand, there’s nothing the market hates more than uncertainty, and now there’s less of it swirling around.

That said, bulls were hoping that Powell would indicate a pause in rate hikes altogether, which he didn’t do. 

The market will likely be digesting Powell’s comments for a few days, but the initial reaction has been insanely bearish…

The Trend is Your Friend

By mid-day on Friday, the S&P 500 ETF Trust (NYSEARCA: SPY) was down more than 7% in three sessions. 

Don’t ignore this move. While it could be a knee-jerk reaction, the continuous nature of the sell-off leads me to believe it’s more than just a ‘flash-in-the-pan’ reactionary dump.

Plus, the fact that this sell-off is happening immediately after the uncertainty has subsided makes me think the market could be headed much lower in the near term.

Don’t fight the trend. The trend is your friend. 

Now, I believe the overall focus of traders will shift to corporate earnings. 

You should be watching the big tech companies closely, as any earnings miss from these major players could materially affect the major indexes.

But I’m zeroing in on a particular setup…

My Favorite Setup Heading Into 2023

It’s no secret that I’m bearish on crypto and have been for some time now…

I’ve written entire letters about my pessimism about the sector, and recently broke down the insane story of disgraced FTX founder Sam Bankman-Fried.

Since the downfall of FTX, Fried has been arrested and slapped with a litany of fraud charges … but Bitcoin (BTC) hasn’t dropped anywhere near as far as I think it should. 

BTC initially dropped from above $20,000 to around $15,700 following the news of the FTX collapse.

But since, the world’s biggest cryptocurrency has recovered a bit, steadily rising back to the $17,000 level (as of last Thursday).

On Friday, though, BTC dropped 3% … and I think this could be the beginning of another major down leg for crypto in general.

Think about it. There’s zero good news in the crypto sector right now…

• Exchanges are shuttering their doors left and right, which is leaving customers anxious about the fate of their funds (and causing many to withdraw entirely)…
• The last remaining large-scale crypto exchanges, Coinbase Global Inc. (NASDAQ: COIN) and Chinese-based Binance, are facing serious concerns about the solvency of their accounts. 
• The ‘BTC as an inflation hedge’ narrative has been destroyed. (During 40-year high inflation, BTC lost more than half of its value…)

So, in light of the headwinds facing crypto, I’m long 100 3/17/2023 $13 ProShares Bitcoin Strategy ETF (NYSEARCA: BITO) Puts at $2.72.

BITO is a fund that directly tracks the underlying moves in BTC.

This is a longer-term trade that I plan to hold for several weeks (or months) in an attempt to catch some major downside in the crypto sector.

I have a conservative price target of $10,000-$12,000 on BTC, which would put BITO near the high $7 level.

WARNING: Don’t chase this play without doing your own due diligence!

Final Thoughts

This is a new market, and soon we’ll be in a new year. It’s time to be nimble. 

If you keep trading the way you’ve been trading for the past several months, you probably won’t do very well.

The markets are dynamic. If you can’t swim with (as opposed to against) the tides of the price action, you’ll get smoked.

But as long as you’re flexible and take things one step at a time, you could potentially see opportunities that other traders are ignoring.