The title of this post is a takeoff from one of my favorite ongoing SouthPark bits involving our friendly Canadian neighbors :)
There seem to be better bearish setups on my radar than bullish ones. This makes sense as I prefer to trade with trends and the overall stock market trend in 2022 has been down. Ballsier traders than me like to step in and "buy the dip." But I'd rather let the market prove itself to me first.
One of the most beaten-down sectors has been tech stocks. Steve Strazza summed up this sector with one word: "Awful." Yeah.
The stock in my crosshairs today comes from this area.
Well, well, we're zooming out and looking at the big picture again.
This is that time again where we try to see through the fog of short-term moves and identify the long-term structure of the market. Every month, this process helps have a clear vision going into the new month. So let's dive in and look at some of these charts!
No one likes a bear market, except for the bears of course.
They haze the uninitiated, test market veterans, and remind everyone that assets can go to zero.
Not fun for most!
When we take a step back and assess all the data in front of us today, the outlook remains dismal for the overall market.
The New York Stock Exchange and the Nasdaq have posted more new lows than new highs for 31 weeks and counting. Leadership groups carry a defensive tone. Topping patterns continue to resolve lower. Support levels are being ignored and violated. Long story short, it's ugly out here.
And it's not only stocks... Bitcoin just booked its worst month and quarter in over a decade and bonds are having one of their worst years in history.
No wonder investor sentiment is in the dumps. It’s clear we are in the midst of a bear market.
They’ve replaced the comical “stocks only go up” memes with images of the grim reaper coming for our favorite names. Even memes aren’t as funny in a bear market!
For this week's trade, we're selling an $XLE August 65/85 Short Strangle for an approximately $2.75 credit. This means we’ll be naked short equal amounts of the 65 puts and 85 calls.
Get the full details, risk management procedures and targets for this trade here:
Earlier this week, I laid out some similarities between now and 2008. From a price, liquidity, breadth and sentiment perspective, the echoes are there.
The comparisons keep popping up.
A couple of days ago, there was a chart showing that the ongoing decline in equity market value (relative to GDP) exceeds any other drawdown in the past 40 years with the exception of what was experienced during the Financial Crisis.
Today, it’s data from Gallup showing economic confidence is at levels only seen in 2008-2009.
