On Thursday, the S&P 500 saw its fifth biggest one-day reversal in history.The market opened almost 4% lower, then soared 5%, ending the day way up.This hasn’t happened in over a decade, and speaks to the unique (and frankly terrifying) environment we’re in.This pattern has only occurred 10 times in the last 30 years, according to a chart MarketWatch shared on Friday:
(Click here to view larger image.)
A huge cluster of these happened in 2008 after a sharp drop-off. And other times, it often correlated with market bottoms.All this means is something you probably already knew — stocks may be oversold in the short term.But there is absolutely no reason to believe we are out of the woods yet.
A Harbinger of Things to Come
My portfolio was heavily leveraged in March 2020. I lost 70% that month, double the rest of the market.Stocks were so oversold, however, that in April alone I was able to recover half my losses.But I didn’t chase the market higher. At least not yet…I remember sharing my opinion with Mike Carr about this. My hypothesis was the market was too technically damaged to go straight back up.And on a technical basis, I was probably right. But what I grossly underestimated was how far our government was willing to go.So much has been written about how zero-percent interest rates and massive money printing after 2008 fueled the most grotesque financial bubble in history.We already needed a crash so things could return to “normal.”But then COVID happened, and we spent ANOTHER $6 trillion and shut down the economy to combat a respiratory virus.We gave some workers double what they were making at their jobs in unemployment benefits to stay at home.And this year the Biden administration proposed ANOTHER $2 trillion in stimulus.We needed a crash before COVID.But now, because of COVID, the crash we need is going to be much worse.And this time, it’s coming.
We Are Living in a Financial Matrix
This is something you’ve probably thought about, at least in the back of your head.Economists celebrated this amazing new digital economy, which fueled bubbles in nonsensical assets like cryptos and NFTs.We shut down the economy. Things were supposed to be bad.And yet, everything went up — including a historic spike in depression (you don’t need a Ph.D. in psychology to figure that one out).We entered this bizarre world where everything is made up, and nothing is real.Where printing trillions of dollars has zero consequences.Where you can leave your job and get paid by the government to stay home.A world, essentially, where nothing matters.I’m not here to mince words with you today. We are living in a financial matrix — and that matrix is really a nightmare.The speculative euphoria that fueled bubbles in everything over the last 10 years is gone.And there is only one way out.
We Need a Crash
A crash is the only thing that will help our economy return to some semblance of normal.Higher unemployment is the only thing that will make people appreciate their jobs and return to work.It’s the only thing to squelch this new “quiet quitting” phenomenon affecting businesses across the nation, where employees are too depressed and disengaged to work at their former productivity.And it will be the only chance for you to buy into financial assets at prices that make sense — so you can safely secure the retirement you actually deserve.Perhaps the Fed is right when Jerome Powell says some “pain” will be required.But you can’t rely on the government, or ineffective leaders to guide you toward the path to financial salvation.The only person you can rely on, is you.The strategies you used over the last five to 10 years are not, and cannot be the same strategies you use over the next five to 10 years.That’s why I would highly encourage all of you to take Mike Carr’s new Options Master Class.Options are the only investment that provide you with the flexibility you need to trade this market .I’ve recovered about 50% of my losses trading them this year. And not just with the one-way directional bets you’re used to hearing about. I’m using spreads and straddles – two advanced strategies that are best learned from the experts, like Mike Carr in his Master Class.I should mention, Mike teaches options trading on Wall Street at the New York Institute of Finance. In fact, he’ll be there this week teaching again.People fly in from all around the world and spend close to $2,000 — travel not included — to sit in a classroom for just two days to learn from Mike.What we’ve done with the Options Master Class is condensed that course into a short, three-hour format that you can take online.Mike teaches you about every sort of options trade under the sun, and the right times to place them.It also doesn’t cost $2,000. It’s a small fee, and it includes a year of trading guidance. We also ask that if the course doesn’t completely demystify options trading for you, that you ask for your money back.You can sign up to take Mike’s Options Master Class right here.I hope you do. We created this for our readers so you can prepare for the tumultuous times we are entering. Learning how to trade options, with different kinds of strategies, will help you more than anything else.Remember, we need a crash. We’re likely to get one.You have to prepare. And learning to trade options effectively will be the best way to do that. You can write me and the rest of the True Options Masters team at TrueOptions@BanyanHill.com.
Talk next week…
Chris CimorelliChief Editor, True Options Masters
