We're just about two-thirds of the way through historically one of the worst performing months in the stock market. At the start of this week's session, the market was down 32.92% from all-time highs. That's roughly a third of all value lost in a matter of six months. So, where do things look like they're going from here? Here's our quick stock market recap for Tuesday June 21st, 2022.
Well, based off the technicals, there's no immediate end in sight. The market has had plenty of relief moves where it has tried to overtake its 9D and 20D moving averages, and has consistently failed at doing so. If you ask us, this still looks like a normal decline. Notice how light the volume is on today's relief move. Low volume green candlesticks are the epitome of a weak market. Even if the market can overtake the 9D (which it could not do so today), it will likely face some issues at the 20D, the next line of defense standing in the way.
Meanwhile, the VIX is still sitting at $30.19, which is still relatively high volatility. Given this technical environment, we're planning to continue selling premium - selling some puts when the market goes down and calls when it tries to make a relief move. During high VIX periods, forget about making any money on call options that are purchased with the intent to hold for a few days or more. Even the strong names in the energy sector have been seeing failing breakouts consistently for the past five to six months. Buying puts can occasionally be lucrative, but a surge in the VIX makes the probability of seeing large returns very difficult. The market is already pricing in a great deal of volatility, and we all know that the market notoriously overprices volatility during tough times.
Yes, it's been much more tough to make money with strategies that thrived all through last year with breakout after breakout. But this price action is a friendly reminder that nobody, not even the best traders, are invincible. The goal in these time periods is never to aim for home runs, you want to focus almost entirely on base hits that keep your account hanging in there while playing damage control to the downside. What we can say with 100% certainty is that the good times will be back, likely sooner than anyone thinks, and we'll all be off to the races again with some incredible gains once again. For now, this is just not the time to be aggressive.