In the beginning of the year, the S&P 500 experience extreme emotional volatility due to the COVIC-19 epidemic. The market rallied based on the quick action from the fed to stimulate the economy by providing liquidity into the market. Based on market psychology, we are seeing the state of complacency. However, we believe the confidence will quickly change as effect stimulus package runs out and we begin to reveal actual economic impact from the virus. The unemployment number for April increased to 22 million and we are getting more announcements on the furlough. With the expectation of ~30% drop in GDP with record level global debt. The chance of v shape recovery is low and we are going to see a market adjustment.
Please share your thoughts!
Let us analyze, learn and trade!
GenXInvesting
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Looking back to the chart it was more of a wedge pattern, now it has broken the support line and we are expected to have more downward movement. We are currently holding put option on SPY and call option on UVXY.
Feeling now that futures broke above your black resistance line?
genxinvesting
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@jojopotatoe, We believe that this bull reversal is not sustainable and still holds a bearish view in the S&P 500. We are going to see the stimulus package boost to fade out and real economic impact to take hold of the market sentiment. Let us see how it play out next couple of days. :)
BonoboJoJo
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@genxinvesting, sounds good, thanks for the reply. I feel the same, I worry I might be a little early with my SPY puts expiring 5/15, but that’s how it goes sometimes! We shall see
genxinvesting
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@jojopotatoe, We are seeing a tug of war between buyer and seller around $2,850. If the seller wins the better, it will be good news for your put option. Hope it works out for you sir.
BonoboJoJo
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@genxinvesting, yes, it’s an interesting day! I don’t think I will get off my position- will either win big or expire worthless. With the VIX increasing, feels like a little blood in the water. Thanks for the well wishes! Will continue following your analysis
genxinvesting
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@jojopotatoe, This might work out for us. If SPX drop below $2,750, we will see greater fear and volatility in the market. All of the positive sentiment from the stimulus and v-shape recovery will move out of the market and market will begin to price in the fear/uncertainty
BonoboJoJo
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@genxinvesting, it’s been very interesting day. I am 90% convinced we will see a huge massive economic pullback, still not totally sure of my timing, but it’s gonna happen almost for certain with the state of oil.
The increase in Implied volatility alone has made my 265p almost break even today. Even another 2% drop and could exit at a very nice profit, and probably reopen another position for mid June expiration. Hope you’re enjoying the ride!
genxinvesting
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@jojopotatoe, I definitely agree with you on the point of the view. The oil market which is not impacted by the Fed's stimulus is showing the true color of the state of the economy.
We are seeing increased volatility and downward pressure on the market. The roller coaster ride is definitely exciting dropping down if you are prepared with safety belt :)
BonoboJoJo
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@genxinvesting, I’m strapped in! I have put a stop loss at -$100 on my put, as I think getting back to that point would mean a trend reversal, and possible sideways movement beyond my expiration.
We are in a very critical spot here for your theory to play out. But hopefully we see a heavy fall like your chart would suggest :) so far so good.