Becoming Fearful When Others Are Greedy…

Becoming Fearful When Others Are Greedy…

Posted On August 1, 2022 3:01 pm

The market is a bit hard to read. Before, everyone was worried about just how far the market would fall… Now, we are asking the opposite question.

Regardless of the latest rally, there are still plenty of bearish indicators…

Since the market can turn on a dime, it’s critical that we structure our trades the right way.

Earlier this afternoon, I sent out this alert to Options360 members. It might give you some insight into my thinking about how to stay reasonably safe and profitable right now.

Options360 already has a bearish bias between the short-term VIX, the longer-term SPY bear butterfly, and even the short-term SPY diagonal.

As for QQQ, I’d like to see where tech names are headed over the next few sessions. Some of the big names popped on better-than-expected earnings, but does that mean the rally will continue a couple weeks down the line?

Last week, a nice combination of big-cap tech companies (MSFT, GOOGL, even AMZN) delivered earnings that, in this market, were welcomed news.

Interesting to point out, even a lot of the dreck, such as AFRM and RBLX, have jumped 20%-25% in the past two weeks.

I know short covering, moving toward more institutional accumulation of stock, and a hasty 21% retreat of the VIX all seem to line up for more upside.

However, I’m feeling an audible.

I am leaning bearish on QQQ. This is not a signal, just the feeling I get after the rally we saw in the economic environment we are in.

In other words, I don’t think we are out of the woods just yet.

I think as the weeks go by, stocks will begin to falter once again as more and more economic data is released.

Also, the “market maker” dynamic could come into play. Just as money managers pushed the market to have one of its best Julys in almost 80 years, they could soon look to take their profits and then wait to buy back lower.        

To see just exactly how we are going to make this trade, just click here and take advantage of our $19 trial subscription.

There’s a reason we are up over 15% YTD in a market that has fallen off a cliff. Isn’t it time you find out what that reason is for yourself?

About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.