Stock Market-How to Survive the REPRICING Due to Liquidity Removal By the Fed? MUST READ!
May 7 2022 Option Professor Opinions & Observations
Well…It’s the First Saturday in May….so the good news is we get the “Most Exciting 2 Minutes in Sports” as today is the running of the 148th Kentucky Derby…….so pour yourself a Mint Julep and Enjoy Yourself:):)
We also have had 19 Bear Markets in the stock market over the last 140 years lasting an average of 290 days and an average of about a 37% decline…..we’ll see how number 20 plays out. The Fed came out this week and did their telegraphed 1/2 point hike but Powell had a senior moment and said the 3/4 point hike was not presently being considered which gave us a multi trillion dollar whipsaw in the markets. He stated accurately and was confirmed in the jobs report that the labor market is white hot (2x the jobs available to job seekers plus participation rates and quits remain high). This puts labor in the control position and assures us that inflation will be stubbornly high. The market know has known since the 10 yr Treasury got ABOVE 1.75% LAST YEAR that the destination of interest rates is Higher if demand is to weaken a is taking the Fed’s slow boat to China approach but rather is saying Let’s Get on With It!!
If you’ve read these updates for the last couple years…..you know our position on the markets and what we have suggested as a reasonable anticipated outcome. From 2008 to Nov 2021; the Fed gave us Free Money and we had Low Inflation and High Valuations. We warned investors that VALUATIONS were unsustainable and would contract and the SPX & QQQ ect. were so far ABOVE their moving averages that a REVERSION to the MEAN was inevitable. We said the Bond Market peaked on 2020 which is exactly when the Commodity Markets BOTTOMED (remember -$37dollars Crude Oil & OXY ect on the verge of bankruptcy!). We told everyone who’s listen that with no drilling and demand strong where else would prices go? We said that 2022 was the year where Will Rogers investment philosophy would prevail “I’m more interested of the return OF my money more than the return ON my money”.
Will the stock market stage a bear market rally by the end of May?…..Maybe?…should SPX hold 4037 and start closing above SPX 4220 a bear spike to SPX 4350-4450 may occur due to positioning and relief rally.
Our view since last year has been encouraging investors to Learn how to HEDGE Downside Risk and UPSIDE surprise via Replacement trades and many of you have thanked us for the information. We also have said that if you want to stabilize accounts…a short term (0-24 month) Treasury ladder since January would do the trick. Should an investor want to navigate this environment….staples, utilities and solid dividend paying stocks along with Energy Agriculture & Industrial Metals were the ways to go. Right On!
If you are looking at stock & bond salesman on TV or advisors in the brokerage firm to tell you to go to cash and wait out this repricing….you will be waiting for Godot….never happen…..no eyeballs for TV and no revenue for the brokerage firms. Truth be told….that is exactly where most investors should have been.
The SPX has support at about 4000 and 3700 so it is possible most of the decline may be behind us if 2 things happen in the 2nd half of 2022…Inflation rolls over & the Labor market softens…either not for sure
The OPTION PROFESSOR invites you to get the PDF REPORT How to Hedge Downside Risk & Upside Surprises. Also a PDF REPORT on How to Protect the Cost Basis of Stocks & PDF REPORT-Technical Signals
GO TO..optionprofessor.com & Submit your email & Valid Phone & learn how to get these in your INBOX The winds of change are blowing in the STOCK-BOND-COMMODITIES Markets….Educate Yourself Today!!
The Option Professor
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Remember All investing involves risk of loss and is not right for everyone. CONSULT YOUR BROKERAGE FIRM/broker to determine your own risk tolerance and suitability. Past performance is not indicative of future results. Information & opinions are for informational purposes only. It is NOT advice.