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Why This Market Is Not As Risky As Most People Believe

By Jani ZiedinsStock MarketsSep 27, 2022 03:16AM ET
www.investing.com/analysis/why-this-market-is-not-as-risky-as-most-people-believe-200630331
Why This Market Is Not As Risky As Most People Believe
By Jani Ziedins   |  Sep 27, 2022 03:16AM ET
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The S&P 500 skidded on Monday for the fifth session in a row and the eighth time out of the last ten.

SP 500 Index Daily Chart
SP 500 Index Daily Chart

Needless to say, it’s been a rough couple of weeks as the index shed nearly 500 points and is now challenging the summer lows.

Economic headlines remain mostly the same and nothing shocking or even unexpected happened over the last two weeks. Instead, sentiment simply swung from half-full to half-empty as investors looked down and developed a fear of heights. There is nothing more complicated about it than that. Owners lost their nerve and sold because they got scared.

But now that the market is retesting the 2022 lows, the most important thing to remember is that risk is actually at the lowest levels of the year. It sure doesn’t feel that way as waves of panic selling hit the market, but risk is a function of height and these are the lowest prices all year.

Undoubtedly prices can fall further, but this latest 500-point retreat can no longer hurt us because it already happened and we don’t need to be afraid of it.

We always give the edge to momentum and the trend, which is clearly lower. But at some point we are going to run out of sellers and the market is going to bounce because it always does.

We could tumble in one last dramatic violation of support before this latest round of selling capitulates. But bounce off of the lows or violate them, either way, the end will be here soon. If not Tuesday or Wednesday, then later this week or early next week.

I’m currently short the market, but I’m paranoid and standing next to the exits When this finally bounces, it will be hard and fast and I don’t want to give back all of these nice profits.

And more than just short profits, when this bounces, I want to switch direction and grab ahold of the next rally. Remember, the biggest and fastest rallies occur during bear markets. (Start small, get in early, keep a nearby stop, and only add to a trade that’s working.)

Stocks look horrible and they feel even worse, but that tells us this wave of selling is getting close to exhausting itself and the bounce is just around the corner.

Why This Market Is Not As Risky As Most People Believe
 

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Why This Market Is Not As Risky As Most People Believe

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Comments (5)
tcapital Neutral
tcapital Neutral Sep 27, 2022 12:16PM ET
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your basically making people lose money with these buy-side posts go back to deep sleep come back in 2025
Roger Pruzansky
Roger Pruzansky Sep 27, 2022 6:46AM ET
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I guess the debt market is not a red flag for a much lower when implosion happens is not a risk? 10 year only slowing because the Fred is buying and I say big downside risk ya well I to short the market now but while he cahsed in his profits, j will be taking some profits only to add to my shorts after the first bounce higher I see. I
Eldrish eldoran
Eldrish eldoran Sep 27, 2022 5:39AM ET
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so yield on us bonds sky rocketing up and both yen and pound is in dire straight. yeah no risk what so ever. And china ? No housing bust there?
Sharif Almeida
Sharif Almeida Sep 27, 2022 3:47AM ET
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Jani is in a great mood as he is sitting on profits and he is consciously aware of the fact that easy come can be easy go. He is thinking aloud out there. Fwd this article to everyone and let this get louder as i feel he has hit the nail on the head it will exactly pan out the way it is. 1) inflation, crude, and DXY has already made its peak therefore the headwinds are out. 2) bond markets have a limit all money locked up in one place makes no sense we need consumers(borrowers) for that money to pay up for those rates, eventually this balance has to give in and the stock market its constituents are by far the biggest consumer of funds . I agree with what Jani zeideins, the logic presented in points 1 and 2.
martin penny
martin penny Sep 27, 2022 3:26AM ET
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Maybe you earn easy money , that is why not risky
 
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