Todd Horwitz Chief Strategist BubbaTrading.com
Be Prepared not Surprised.
A trend change is in the air as markets look to head south for the winter. We know that bear markets don’t announce themselves or ring a bell, they just show up. We are not ready to call bear market, but it appears a correction is coming.
We are seeing many warning signs, Lumber collapsing along with copper. The instability in government and a potential new tax plan. Add to that inflation a FED that doesn’t acknowledge it and many other things add up to a potential meltdown.
This market has many of the same characteristics of 2008, collapsing housing which was on fire. Crazy commodity prices, Covid and more. The price action is typical as dip buyers try and hold up the bull, but the lower highs tell a story.
Except for Call buying remaining the number one strategy the next four are bearish. Bear Put, Call Credit Spread, Short Calls a Bull Put Spreads. Remember we don’t know what the other side of the trade is, we only know what is being bought or sold.
The bears are being led by QQQ, SPY, DKNG, SPCE and FB. While the bulls are playing TSLA, XLE, AMD, AAPL and AFRM. The action is bearish as is the trend, look for a rise in volatility along with price swings.
Remember, we can’t predict what’s next, but the price action will give indications and guide us in the right direction. All signs are starting to point lower however flexibility is the key to trading successfully.
As traders and investors, we have one thing to remember, follow the trend of the market. Be patient disciplined and leave your emotions out. The most important thing to remember is money management and self-control.
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Todd “Bubba” Horwitz