Stock Market-Reversion to Mean is Well Underway-Now What to Expect? Must Read
January 22 2022 Option Professor Opinions & Observations
This Week…We will be brief and to the point…Some of the things we spoke of for the last 6 months are coming to fruition which essentially has to do with long term charts and long term moving averages. We referred to the break of SPX 4700-4650 areas as potential confirmations that a test of longer term moving averages was on (5yr-20yr charts). We have suggested investors be ready with hedging tactics (collars-married puts-replacement trades) and those that elected to use them are happier with this weeks action. We spoke of the 12-24-36 month SMA’s on our 5yrs charts at SPX 4650-4560-4475 which have all been taken out. We spoke of the VIX taking out 23 as a sign of acceleration to the downside which also happened this week as the VIX closed at 28.85 with a high reading of 29.79. The QQQ’s & IWM has been even weaker and may suggest more to come for SPX. Our 20 year graphs have 12-24-36 SMA’s coming in at SPX 4335-3796-3524 so over time the correction as potential to be quite a bit deeper. The numbers on QQQ are 357-309 and 270 with IWM coming in at 220-188-177 so you can see that those markets have already reverted more to the mean which may or may not be indicative. The Transports numbers are 259-221-210 (IYT)—watch QQQ 357 & IYT 259. Energy/Nat Gas may back off short term but have structural shortages. International Markets-Dividends-Value held up. The Fed has 2 tools in the Fed Funds Rate & Balance Sheet run off with no experience with the size of this unwinding. Last cycle they took years to taper (2013-2015-2017) now if it’s quicker and open ended the landing will be rougher.
NEXT WEEK- OVER 100+ S&P companies report (AAPL_MSFT) & Fed’s Powell talking and Econ Numbers-Help on Way?
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Remember- All investing involves risk of loss and it is not right for everyone. Consult your brokerage firm/broker to determine your own suitability and risk tolerance. Past performance is not indicative of future results. Information and opinions are for informational purposes only. It is NOT advice.
