What the VIX and the futures market is telling us
It seems difficult to know exactly where we stand in the market right now. The sentiment is negative. The psychology is negative. But that is often when the market makes a turn. So from a risk/reward standpoint, and from a trading standpoint, I'm much more bullish and a buyer down here at this point in the market. Selling in a hole has not been proven to be successful for the last decade-plus. There are plenty of indicators right now that suggest that the market could turn positive. So I think it's a good time to get in a position for a bullish bounce. What I'm doing is trading long-term options, with December/January expiration dates. If we get back above 3900 and especially 4000 in the S&P 500, that will be the evidence that the bottom is in place. Another thing to watch out for: right now, the VIX is not that high, only at 28. That means fear isn't as high as you might think it would be with a 20% downturn. Look at the chart: | |
What I think this tells me is that the markets have digested some of the worst news that has been thrown at them, especially the interest rate hikes. People believe that the interest rate hikes that are still coming will continue to devastate the markets and panic investors. But Wall Street was all over the last rate hike, predicting it perfectly. You don't make money predicting what the rate hike is going to be, you make money by forecasting how the market is going to react. Right now, we know where the rate hike roller coaster ends. The futures market is telling us that rates don't climb above 4% all the way out to 2030. Smart investors aren't too afraid of that, and you shouldn't be, either. Best wishes, Alan Knuckman P.S.: While these bearish markets persist, there's a better response than fear. I've been working with a team of researchers for months to prepare for these exact markets, and I've built a strategy to take advantage. Learn all about it here.
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