The S&P 500 made a new low for the year yesterday.
Let me count the reasons why …
- Recession
- Inflation
- War
- Supply Chain Crisis
- Rising Rates
- High Tech Multiples
None of these issues are good … and none of them are going away.
The good news is that the market knows what they are – but every timeime a new problem pops up SPX takes another leg down.
So when will the market make a bottom?
Every Bear Market Is Different
The No. 1 issue in any bear market is a lack of liquidity. By that I mean new money coming in and buying stocks.
For reference, from March 2020 to November 2021 was the opposite of lack of liquidity. Money was getting tossed around on historic levels while the Federal Reserve watched it happen.
The central bank now needs to end the party and that is a known factor. Stock prices are back to mid-2020 levels in many cases, or far below. In fact, only the top 10 stocks in the SPX are still above pre-pandemic levels.
Oil and gas is getting back there in a hurry. That is a sign that funds are selling winners to pay for losers or to raise cash. So, in all, but a relatively small number of stocks remain positive … the bear market has done its work.
VIX 3-month chart with 1-day candles
We are still in what I would call the “Fed QT and rate raise” vol event. The market has not accepted higher rates until VIX gets back to 20.
I find it easier to trade vol events because the reasons that set them off are identifiable. As of now, things will stay bumpy for the foreseeable future.
Check out my Market Survival Summit and grab two techniques for this bear market.
The Rundown
The market is tough but Option Pit is still finding ways to help our students make money.
Nitro Trader
Mark hit an Exxon Mobil Corp (Ticker: XOM) gusher with a call diagonal and put for 32% gain.
Big Money Flow
American Airlines Inc (Ticker: AAL) puts flew in a cool 98% return as gas prices hit travel.
Vol Edge
Mark was at it again closing the Cboe Volatility Index (Ticker: VIX) upside flies for a 12.5% gain
To Your Trading Success,
AG