Todd Horwitz Chief Strategist BubbaTrading.com
Be Prepared not Surprised.
Markets got crushed last week and it appears the selling has just started. The markets have not seen much panic and the selling has been orderly. If you are a trend trader the action couldn’t be more perfect, slow, and steady always win the race.
There are so many issues that have markets worried and in typical fashion, the sellers waited too long. Inflation is exploding, supply chain collapsing, China is shut down, and gas is twice the price of 18 months ago. This is not a good recipe for a strong market.
As the pressure mounts on markets, we should see accelerations in the selloffs. However, there will always be the rip your face off rallies which are common in bear markets. Typically, those rallies are selling opportunities when they reach resistance.
Option strategies turned bearish a couple of weeks ago. Although Call Buyers continue to lead the way we remind that can be misleading. Long calls can be used in bearish strategies. To round out the top 5 strategies we saw, put, and put spread buying, call and call spread selling. The VIX has popped above 30, another bearish sign.
The bulls were buying AAPL, NVDA, M, TWTR, and TNA. The bears were selling, QQQ, FB, GM, EBAY, and MARA. This is an ugly mess especially with the NASDAQ on 52-week lows. The selling figures to continue with sharp rallies, which is a classic sign of bear market rallies.
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.
Todd “Bubba” Horwitz