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A Short Trade Idea as ‘Angry’ Fed Brings the ‘Pain’

by | Sep 23, 2022 | Market Outlook, Stocks

As the stock market continues to fall, I feel like a broken record saying that it’s been yet another horrific week of nonstop selling… 

Let me be the first to admit that I did not think the selling was going to be this bad… I’m surprised by how offside the market still seems to be Friday as we’re down big again in all three major indexes.

It’s been a slow-motion crash all week long, opening Monday at $382.26 in the S&P 500-tracking SPDR S&P 500 ETF Trust (NYSEArca: SPY)… 

S&P 500 chart

We were all the way down to $365 about 45 minutes before the close Friday, about 5% lower. 

This all on the back of the latest, most obvious 0.75% interest rate hike ever by the Federal Reserve, which has done the worst job managing monetary policy I’ve ever seen. 

Everyone knew the Fed would raise rates another 75 basis points… But it was the post-meeting press conference where Chair Jerome Powell did nothing to instill confidence. In fact, it was quite the opposite…

He seemed angry and dead set on causing “pain,” a word he used over and over. It seems to me this guy has no place running the most important central bank in the world, but two different administrations have chosen him for that job…

The Brutal Week That Was 

I was looking at the CBOE VIX Volatility Index — also known as the “fear gauge” — Friday morning, and it was only in the high 20s. A score of 20 notes average volatility… meaning 1% moves up or down each day… and you’d expect it to be well above 30 with the amount of selling and fear we’ve had (it did tick above 31 late Friday).

The Nasdaq, meanwhile, is even more oversold. If you go back to Sept. 12 and look through Friday’s close, 12% straight down from about $310 to around $274 45 minutes before the close, which is wild…

QQQ stock chart

So now we need to go back and look for previous levels of support to try and decipher how far we could fall from here. Check out my video up top and let’s discuss what the charts say about where a bounce could come. 

I also have a short trade idea to share because now more than ever, you have to be able to play both sides, as we do in our Link Trades strategy that is holding up well and still returning gains in this brutal market. 

Are there any topics you’d like to see me cover or questions you’d like answered? Send me an email at jeff@joyofthetrade.com! And be sure to stay ahead of the markets by subscribing to our YouTube channel and our Instagram page for all of the latest!

P.S. The Rise of the Laptop Landlord

I knew it!

My research earlier this year pointed strongly to a looming housing recession. Now most experts agree that it has arrived. 

The Federal Reserve raising interest rates resulted in 30-year fixed mortgage rates climbing above 6%, just as I anticipated. Look at the trend since last year… the blue line represents 30-year mortgage rates.

We haven’t seen rates like this since 2008… 

an interest rates chart

As potential homebuyers cringe away from the burden of these rates, existing and new home sales continue to retreat.

Instead, those would-be homeowners are turning to single-family rentals like never before. 

And That’s Where Opportunities Abound 

WRITTEN BY<br>Jeff Zananiri

Jeff Zananiri

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