Last Friday, as per the weekly charts, we saw $SPY crossing over SMA 200 on Thursday and crossing down SMA200 on Friday after the CPI numbers indicated that we are not done with inflation and it is getting worse. The economy has been holding so far surprisingly even though interest rates have been raised two times (75 basis points each time). It would take some time for the interest rates to affect the economy. However, the stock market always behaves in anticipation of the events and is always ahead of the actual events. For example, the Stock market went down last week after the CPI report in anticipation of a further increase in interest rates by the Fed.
In this blog post, I would like to share how I am investing/ positioning as the recession is getting worse. First, let us look at the charts to get a market overview
Photo by Karolina Grabowska: https://www.pexels.com/photo/man-with-laptop-on-desk-terrified-by-stock-market-chart-5717791/
How does the $SPY chart look so far?
This is the daily chart of $SPY. From the viewpoint of this chart, the lowest low before last week's low was 362.17. The market went 45 degrees below the lowest low and rebounded from a low of 348. However, It could not break the trend line drawn between the swing highs as shown in the above chart. Now, where is it heading? I had drawn a fib line for the previous wave. $SPY has reached 50% of that wave and is going down. It has two possibilities from here. Get down to a low of 346 (100%) and bounce or get down to a low of 334 (150%) and bounce. I believe that we would be seeing a low of 334 before a good bounce. Where are we heading when $SPY bounces back from 334? Let's look at the weekly chart below.
This weekly chart might give us a long-term view. There are so many hurdles for $SPY to rise to higher highs.$SPY has been falling for the past 9 weeks from a high of 431.73 formed at a 270-degree rise from 362.17. Whenever the stock tends to go below its previous low and rises, it tends to reach a 162.5% extension (Golden ratio). Now, when would it hit an all-time high of 475 at a 162.5 extension?
I expect $SPY to reach its lows by the week of October 21or at most November 1st week. Based on the trend lines drawn between the swing highs, it can reach 475 either by March 2023 ( very unlikely considering the bearish Ichimoku cloud ) or by September 2023 (possibly as the cloud can turn bullish). Some notable intermediate targets for $SPY would be 400, 420, 440, and 466 before ultimately reaching 475 and beyond.
How do the $BTC and $ETH charts look so far?
The coming weeks may be nasty for Cryptos. As per the weekly chart below, $BTC broke down through the trend line and is starting at 14296 at 150% extension and 10423 at 162.5% extension. I wish this move happens quickly and it bounces back along with $SPY. We could see a bounce to 30k by mid-2023 from the lows of 10k.
$ETH is not looking good too. It has broken down SMA 200 and is staring at 150% extension at 808. Once it reaches these levels, we could see a bounce to 2800.
How am I positioning for the moves?
Knowing the technicals helps to position ourselves for maximizing profits. What are some of the key things I have done during the downtrend to keep myself profitable and to position myself for the trend reversal?
1. I truly believe in the "exponential age". Exponential age is a fancy term for the technologies that will shape our future- blockchain, space exploration, electric cars, artificial intelligence, etc. Evaluated/rebalanced my portfolio with stocks that I believe in and some good dividend-paying REITs, ETFs and stocks. I have been dollar cost averaging them whenever there is a significant drop in prices. For example, GOOG at 100, AMZN at 100, and AAPL at around 120 are some of the key support areas and it makes sense to add more. In a nutshell, I am dollar cost averaging only at critical support areas now rather than dollar cost averaging every week in this downtrend market to maximize my gains when the market reverses.
2. Will be adding more long-term options(2024) at a delta of 80 rather for stocks that I believe in to get more value for the money invested ( Stock replacement) once $SPY has formed a low at the levels I had discussed in the chart section.
3. I am aligned with the market and have been hedging my long-term portfolio with Index puts and earning income with covered calls. For more information about hedging a portfolio, refer to the video below
4. Market is in a clear downtrend. I am leveraging the option puts and call spreads to trade the trend and have good gains in my short-term portfolio.
4. I am a strong believer in Blockchain and believe Bitcoin and Ethereum are here to stay. However, Since the price has been crashing, I focussed on increasing my assets quantity through companies like Crypto4Winners so that I can make a fortune when the market reverses.
5. Accumulating more cash than before so that I can invest when the opportunity presents and also for rainy day scenarios. For example, I love Real estate and am always evaluating deals. Real estate has fallen but not much to be profitable with rising interest rates yet. Keeping a close watch and would be ready to grab any deal with available cash when numbers make sense to invest.
So, overall, I am profitable and I am more closely monitoring and managing my portfolios than before. For me, first priority is to mitigate risk before considering profit in this market
Thanks for reading so far!!
Would love to hear how you are positioned in this recession-bound market.