No disagreement that short term sentiment seems to likely push higher. The one difference now, however, that is different from all the prior instances of high Put/Call is inflation. None of those markets had inflation like it is now, and that is the very reason why rates are knocking on the door of 2%. High inflation and elevated rates could still cause downward pressure.
This is a narrative that has only recently become popular (now that the markets have corrected). However, I think the time to have that kind of reflection was in early January before the market panic (you may have seen our videos from early January discussing that the markets would panic following the 180 degree turn in monetary policy of the Fed).
From what we’re seeing, investors are pricing in much too tight monetary policy (which is unlikely to materialise any time soon) and are expecting the tight money to trigger a bear market instantaneously (which is never the case). Once investors realise this, we’ll see yields begin to cool down (especially as we see the 2 and 10 year at resistance). I think that should relieve some of the selling pressure we’ve seen on tech since November (that’s 3 months of tech underperformance) and fuel a strong rally.
Of course, like always, we could be wrong. Let’s watch.
When we’re talking about opportunities in ARKK, we also need to consider a bear case scenario.
How would you estimate the probability that the previous 20 days (starting around the 20th of Jan) we’re forming the bear flag with the target around 50.40 (or even 36.87)? The situation could be similar to the bear flag around the 20th of Dec, 2021.
Would there be an opportunity to short the Russell after yields revert to the trend line?
@Hutch0321
As mentioned in one of our recent market updates (https://www.gameoftrades.net/sp500-close-to-marking-a-significant-market-bottom-sentiment-extremely-fearful-yield-consolidation-should-help-tech-recover/), the recent disconnection between IWM/SPX and yields is likely to prove to be a significant buying opportunity for small caps.
Once the broad market bottoms (which may already have happened) we are likely to see IWM perform exceptionally well.
No disagreement that short term sentiment seems to likely push higher. The one difference now, however, that is different from all the prior instances of high Put/Call is inflation. None of those markets had inflation like it is now, and that is the very reason why rates are knocking on the door of 2%. High inflation and elevated rates could still cause downward pressure.
This is a narrative that has only recently become popular (now that the markets have corrected). However, I think the time to have that kind of reflection was in early January before the market panic (you may have seen our videos from early January discussing that the markets would panic following the 180 degree turn in monetary policy of the Fed).
From what we’re seeing, investors are pricing in much too tight monetary policy (which is unlikely to materialise any time soon) and are expecting the tight money to trigger a bear market instantaneously (which is never the case). Once investors realise this, we’ll see yields begin to cool down (especially as we see the 2 and 10 year at resistance). I think that should relieve some of the selling pressure we’ve seen on tech since November (that’s 3 months of tech underperformance) and fuel a strong rally.
Of course, like always, we could be wrong. Let’s watch.
CPI:)
Hello Peter,
Thanks for the amazing content! In line with the potential Nasdaq bounce: would you say FB is a good option to play that bounce after such a hit?
Regarding the IWM, any particular names you could recommend? Any thoughts on TDOC?
Many thanks in advance!
When we’re talking about opportunities in ARKK, we also need to consider a bear case scenario.
How would you estimate the probability that the previous 20 days (starting around the 20th of Jan) we’re forming the bear flag with the target around 50.40 (or even 36.87)? The situation could be similar to the bear flag around the 20th of Dec, 2021.