Downturn Redux

down trend

Downturn Redux

 

MARKET OVERVIEW
Yet again, as it always does, Friday has arrived. There is plenty to discuss about the market this week, so let’s get to it. I will close this blog by repeating this, but be aware that there is no easy way to say this: it is a complex market at the moment. That warrants caution and wise trading decisions. After recently climbing back to $430 a share, the SPY ETF is back in sub $400 territory again, much to the chagrin of many long side traders. It is interesting to look at why this is, and how people have responded to it.

The rally over the last month, had some people thinking the bottom was in and everything was looking up from there. To be sure, some analysts are laying the blame for this bleed out of the markets squarely at the feet of Chairman Powell’s Jackson Hole speech where he outlines a commitment to the aggressive stance in reducing the Fed’s balance sheet as well as other means of quantitative tightening. There was a clear market reaction, and it continued this week. However, the rally of the past four weeks could very well be one of the infamous bear market rallies in that not many macro factors have changed drastically. Inflation is better, but it is still exerting undue negative influence on the middle class and below. And it is not near the Fed’s stated goal.

Gas prices are down, but consumer goods and food items remain much more expensive than they were. There are other signs of issues. For instance, the used car market is still extremely elevated. It is not uncommon to find used cars being sold above their original MSRP, and ordering mini models of new cars still remains virtually impossible due to supply chain issues.

Regardless, this week has a big downward movement with ample opportunities to play the trend with pets or other downward strategies, and… As always… If this is the end of the fall, no one knows. If you were day trading, remain vigilant, gather your data, respect your stops, and protect your capital.

And this week also reminded us how news items can drastically affect stocks.

 

INSIDE THE BOX
This week the US government announced it was banning the export of certain chips to China. This drastically affected Nvidia (ticker NVDA) and its stock price. The Nvidia play was of much interest this week. It fell more than 6% on Wednesday after the announcement, and many members in our community pay attention to the video on a regular basis. Quite a few of them were quick on the “Buy Puts Now” button, and entered into successful intraday and swing trades. And, of course, it truly plummeted even more on Thursday and Friday.

This highlights several benefits of trading within our community. No trader can monitor all news all the time, and there seems to be news items moving stocks across various sectors almost daily. If you trade inside our trading rooms, you benefit from other people watching these items, and posting them. As trading seems to come down to risk management and possessing solid data, having more eyes on the markets can only benefit you.

As mentioned above, there is no easy way to say this: it is a complex market at the moment. Stay nimble out there, and trade well! See you next week.