What to do about volatility

In this new and completely free weekly feature, Guy Cohen will be giving his thoughts on current market conditions, along with other useful info that could help you to make some good investment decisions. I hope you enjoy it.

Duncan


So, I’ve been predicting volatility … and we’ve got volatility!

Last weekend it was something of a surprise that the volatility had sent the markets upwards the previous week, but I maintained volatility would continue.

This past week we got volatility right and our instinct for direction right, following the inflation report.

Now, the reasons behind the volatility aren’t always that important. What is important is that the market was signalling – to me at least – that volatility was imminent and likely to continue.

In turn this would mean challenging trading conditions, which we got.

Market Outlook

For the last two weeks I’ve maintained that “Increasing volatility is highly likely over the next few weeks. In due course, this will lead to very tradeable setups”.

And as per last week the same applies: “I believe this remains the correct guidance. Stay the course, be patient … we typically get it right, and that’s because my method has no confirmation bias. We play the odds when the odds look favorable“.

The big number for the SPY is 374 or thereabouts. If we slide through that, then the likelihood is hitting or even breaking down through the June lows. We really are at a critical juncture, and I do expect to – at the very least – get near to that 374 level.

The Main Indices

Two weeks ago I said: 

“… I expect continued activity at or below the 50-dma, with increasing volatility also a factor“.

Last week I mentioned I could see two outcomes … either a continuation of the previous three days upward momentum, or a bearish waterfall.

We got the bearish waterfall, and now the main indices are well below their 50-dmas.

Market Timers

  • Longer Term Market Timer (OVIsi): Red, and likely to stay red for this coming week.
  • Medium Term Swing Timer: Negative (oversold) 
  • SPY OVI: Negative

The interpretation of this is that we’re likely to pause for breath in the next few days.

Fast Filters Stock Selection

Definitely a challenge to find AAA setups this week but here is a sub-list to keep your eye on:

ARKK AVYA BMBL CDAY CHWY COST CPRI DKNG DLO DOCS F FITB FND GFS KBH LMT MCD MCHP MNST MOS NET NTES PLAY RIVN SBUX

Video Analysis

You can check out my full weekly review by clicking the video below…

Remember, you can play the video at 1.25x or 1.5x speed if you want to save time! I have placed all the stocks covered in today’s review in your “Latest Preview” watch list.

PS. Last Wednesday evening, I hosted a free webinar where I revealed my tried and tested ‘big money’ strategy. If you missed it, you can watch the replay here.