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September 9, 2022 – di·chot·o·my, /dīˈkädəmē/ noun: A division or contrast between two things that are or are represented as being opposed or entirely different.
A market dichotomy . . . and that’s what we’ve got. One on hand the market is going up & up and on the other there are near record numbers of Put options being bought, presumably for hedging / protection. The last three days have been impressive but beneath the surface it may be primarily driven by currency trading* (the Euro and an overbought US dollar)* and by short covering driven by computer algos that cover short positions when things start to look bad (prices rising when short). The blue lines show my estimate of possible future movement.
So what to do? Well next Tuesday we get some inflation data that could likely move the market one way or the other and on September 21 we have the next FED meeting. While stocks are generally rising, I don’t see a rush to get onboard right now. Volume is pretty average. So while things (prices) are improving somewhat I remain cautious. I’ll be a little more interested mid next week IF the strength continues, volume picks up and those Puts lurking below the current price start to dry up; and they can quickly.
I am lightly invested and heavy in Cash. Have a good week. …………… Tom ………….. Price chart by MetaStock. Used with permission. Sector Strength table at: www.Special-Risk.net .