Unpopular Opinion: Buy Stocks Now?
A quick look at what happened in the stock market after Russian invaded Ukraine, what I will be looking for this week.
The stock market's response to the Russian invasion of Ukraine and the Israeli invasion of Gaza has exhibited distinct patterns. In February 2022, following the Russian invasion of Ukraine, the S&P 500 index experienced a sharp decline of over 7% in the days and weeks that followed. This drop occurred as the United States and other nations imposed stringent economic sanctions on Russia, causing concerns among investors regarding the impact on commodity prices. However, within a month, the markets rebounded, with the S&P index trading at levels higher than before the invasion. Notably, oil prices remained elevated, exceeding $100 per barrel during this period.
Per wikipedia, Russia invaded on Feb 24, 2022. The market reacted with a large gap down followed by a rally and then a fade off lower 3 months later.
Conversely, the Israeli-Hamas conflict had a comparatively minimal impact on the markets. The S&P 500 advanced by 0.63%, the Dow Jones Industrial Average increased by 0.59%, and the Nasdaq Composite climbed by 0.39%. Unlike the situation following the Russian invasion, oil prices did not experience a sharp spike. Nonetheless, the conflict did influence asset prices, contributing to a decline in stock prices on a particular Friday when the S&P 500 fell by 0.5%. Investors sought refuge in safe-haven assets, resulting in a more than 3% increase in the price of gold on that Friday, and the US dollar reached a one-week high. Additionally, oil prices surged by nearly 6% as investors assessed the potential impact of the conflict on oil supplies from nearby countries within the world's leading oil-producing region.
My Opinion
Don’t buy just yet for long term investing. Definitely possible to hawk for a scalp.
SPY 428/430 is at a possible bounce spot, but assuming it breaks, we head lower. I’m watching for a big gap down for scalps to the upside. SPY 420 and 426 are key levels for support for bulls. If we can’t reclaim 432 fast on Monday watching for 430 break. 418.50 is a 7% decrease from 450, and if 438 is used as key 407 would be roughly the target.
Overall, my current opinion is we are in for rangy discovery centric moves for next quarter. Both long and short positions getting smoked on range tests followed by fast reversals — a highly desirable situation for momentum traders, but can test patience of investors.
Playing your risk/capital management right and being patient for entries for 6 to 12 point wave moves can lead to significantly outsized returns over the next 60-90 days. The kind of moves that can lead to 10x account growth. Reminds me of fall 2020/2021.
Bottom line, as a Two Hour Trader, the larger market situation isn’t as important as being able to identify the levels where there will be high probable trades/reactions and recognizing what the price action is telling us and being able to target the range on the moves.
This last 3 months I absolutely crushed where we are going and where we will reverse. We are now heading into a trickier in-between spot where moves in either direction can develop.
Recap of SPY 0.00%↑ moves
The day after FOMC I posted about swinging short into the highs (I rarely swing unless I see great risk reward)
SPY dumped to the 430-432 target zone days later. during the consolidation above 430, I shared the chart above project 420 as where the 430 BTFD would get smoked into. That happened.
We then got a double bottom off 420, and I shared ow I wanted 438 for the back test. We got that wave 200 and finally that was the reshort spot for where we are now.
Those waves imho were the easier trades to spot and plan reactions for. Now we need to see what market wants to do. If the larger choppier bigger pic perspective/ risks develop, we could see 390 or less in next month or two, but I’m also very open to how the market can discard rational behavior an expectations.
How to make money with all this volatility?
Keep an eye out for an announcement. I will be releasing services that work together to help traders:
The Two Hour Trading Week - focused on systematic trading of 3-10 trade plans/alerts a week that are signaled 10 to 30 min before trades develop so one can get positioned and go about their day. GOAL: Spend less than two hours a week planning/executing/managing trades.
The Two Hour Trading Day - For the more active trader that is focused on systematic trading. Will publish 0 - 3 trades plans/alerts a day that are signaled 10 to 30 min before trades develop so one can get positioned and then go about their day. GOAL: Spend less than two hours a day planning/executing/managing trades.
Edge Trade Planner (Beta) - For active traders that have their own trade ideas but need help to plan trades systematically. Imagine getting auto generated trade plans based on the principles I teach and price action. This tool helps traders identify opportunities, create trade plans, size systematically, set sell orders for systematic profit taking and protecting capital.
Until the services are launched keep an eye out on twitter for ideas/plans. Remember to honor your stops, I stop out often and will get back into a trade sometimes at much better prices and sometimes after confirmation. The purpose of stops is to protect your account, while you get positioned. Once your trade ideas starts to work, let it work. Let it get to your profit multiples/targets(I’ll talk about that in a future post.)
I need website/marketing content development help which is what is mostly holding up the launch. Send me a message if you want to help.
What I’m watching this week
This week, investors will be keeping a close eye on the ongoing conflict between Israel and Hamas, as well as economic data releases. Here are some things to keep an eye on:
Economic data: Watching Jobless Claims and Powell on Thursday
Safe-haven assets: As the conflict between Israel and Hamas continues, investors are turning to safe-haven assets such as gold and the US dollar. Any large shifts could represent tradable opportunities.
Defense and energy stocks: Defense and energy stocks have been performing well as the conflict in the Middle East escalates. Watch:
Boeing Co. BA 0.00%↑
Northrop Grumman Corp. NOC 0.00%↑
General Dynamics Corp. GD 0.00%↑
Rocket Lab RKLB 0.00%↑
Lockheed Martin LMT 0.00%↑
Oil prices: Oil prices have been volatile due to fears that Israel could strike out at major oil producer Iran, a long-term backer of Hamas
Bond market yields: Spikes in yield have led to market declines, while sharp drops have led to rallies. I like to watch /10Y.
TSLA 0.00%↑ reports on Wednesday. Market reaction to its results could tell us market’s risk appetite.