Is the Bottom Finally Here for These Markets?
Editor’s Note: Here is an insightful piece from Karim from two months ago about the state of the market. At the time of this writing (on May 12, 2022), the CBOE Volatility Index (VIX) was set at 33.74. Things have cooled down since then, with the “Fear Index” now sitting around 26.50. The put-call ratio has also dropped a bit, from 0.81 to 0.62, meaning investors have been buying more calls and fewer puts. Both signs point to an improving market environment, but is the sell-off over? Read the full article below to see the writing on the wall.
Is the sell-off over?
That is a question people are always asking.
They want to know when it’s safe to jump into the market again.
Well, for the past century, there has been no better place for the average individual to grow their wealth than the stock market.
Even if you had invested at the top of every market cycle to date, you would still be ahead of the game.
Imagine that… You put your money in at the absolute top but still came out ahead.
At the end of the day, investing is about achieving staying power and leaving fear behind.
No one will ring a bell when the market bottoms out.
However, there are great signs to watch for.
For example, there’s the put-call ratio.
The put-call ratio measures how many puts (bets that the market or a stock will go down) versus calls (bets that the market or a stock will go up) are being bought.
Right now, the put-call ratio is at levels we tend to see when the market is starting to get attractive.
There is also the advance-decline ratio, which is a volume indicator. You want to see declining volume over advancing volume at a ratio of more than 10-to-1. We saw this 2 months ago on the New York Stock Exchange.
And then you want to see irrational behavior – selling at all costs.
That is happening now and is measured by how many stocks are having their trading halted because of volatility. As this number increases, it tells you that fear is setting in.
So, while no one will tell you whether the sell-off is over, you can see the writing on the wall: The end is getting closer every day.
Now you know the signs.
The next step is to get a wish list of stocks together (we have one in The War Room) and dip your toes into the market.
It’s time to start buying quality stocks.
Sometimes you have to hold your nose. Good companies come back. They always have, and this time will be no different.
Action Plan: If you want access to my current “discount wish list” – which includes the exact prices I am looking to get into quality stocks at – you have to join me in The War Room. In this real-time trading platform, we discuss and recommend good trades every single day. And our win rate, even during troubled times, speaks for itself. We recently posted a 94% win rate during the Ukraine sell-off and recently recorded a 90% win rate with short-term trades.