I hope you’ve been following along with the analysis here and paying attention to what’s been going on in the stock market over the past several weeks, and really most of 2022.
The name of the game so far this year as we’ve fallen into a bear market is volatility… And, yes, this is a bear market…
The pain train has left the station this week following a sharp rally after Wednesday’s FOMC interest rate announcement and 0.5% hike.
I’ve been dropping bread crumbs along the way to try and help you avoid getting massacred and tricked by bear market rallies like we saw Wednesday. Head on over to our Instagram page to see the nuggets I’ve been dropping…
Like this one about not getting tricked into midday market rallies and FOMO trades that you’ll end up on the losing end of…
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As well as our weekly WealthPress Live Roundtable discussions at 11:30 a.m. EDT each Wednesday. If you saw this week’s episode, I called exactly what would happen after the interest rate hike — a relief rally followed by a deep sell-off.
At the beginning of the show, I said the Federal Reserve is going to do what it always does… Come in soft and dovish … and the market’s going to love it. It’s going to create a relief rally, which we needed in the worst way. But it would lull everyone into a sense of complacency, which is good because at least it will stop the bleeding for a little bit.
But soon after, more pain…
And just like that, the SPDR S&P 500 ETF Trust (NYSEArca: SPY), which tracks the S&P 500, spiked 3%. So I expected Wednesday’s relief rally and nailed that analysis…
What I didn’t expect to happen quite so fast was what hit Wall Street on Thursday, when the market puked BIG TIME.
Bar Chart
By lunchtime on the East Coast, the Dow was down 1,051 points, the S&P 500 3.6% and the Nasdaq 4.8%, right around where we closed, while the VIX Volatility Index — also known as the “fear gauge” — rocketed 25% higher.
WOOF… It’s a chop shop out here…
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But this isn’t anything new when you’re in a bear market. Back in 2008, the biggest up days I’ve ever seen in my life came in the middle of a down-swinging market as Lehman Brothers and other companies were going out of business…
And as the internet stocks were imploding back in 2000, we also had huge up days.
The reason this happens is because people are leading short and they’re so ready to buy the bottom. As I said on Instagram this week… bottom pickers get dirty fingers. And picking bottoms is the worst thing you can possibly do.
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The reason bottom picking doesn’t actually create a bottom is because there’s this whole community of sheep with paper hands chasing these stocks into the close on big up days…
They’re trying to make a quick buck and whenever that happens, invariably, the market is going to do what it does… grind you up into sausage.
What we have to do is stop falling for the same tricks, the same game.
The game true pros are playing right now is to be super nimble. Trade both long and short — what I call fighting with both hands. You can’t force the market to do things your way and we can only trade what’s in front of us.
There’s no such thing as playing “defense” in a bear market. You only have two good options, which I explained in this quick-hitter on Instagram…
Now, I say all of this just to remind everyone that in addition to great content on WealthPress.com, we’re constantly dropping priceless nuggets of information and analysis in bite-sized pieces on our social media channels like Instagram and TikTok.
You won’t find this kind of market knowledge and honesty about what’s really happening over on CNBC, or the “cartoon network” as I like to call it, where every stock is the greatest thing ever and it’s always a bull market.
This dumpster fire of a market has been more vicious and violent than just about anything I’ve seen in at least 15 years.
That said, I expect some relief is coming soon in the form of the Plunge Protection Team over at the Fed, so it’s time for everyone to put their big boy pants on. Remember, in times like this, you have to be tactical and nimble.
And buy those dips and sell those rips!
