It’s volatile out there. There’s no need to be greedy, no need to be a hero right now. It’s a good time to be safe and preserve capital! 

I really feel that the market has found a really good tradeable bottom. I do think we will retest things at the lows, so I don’t want to get too excited about yesterday’s rally and chase things here. I do think we will pull back in again before we eventually end up trading higher.

In the short term, I think the bulls and bears still need to battle it out for a while. And this is where an Iron Condor Strategy comes into play. 

There’s so much pessimism in market sentiment right now. All the magazines and financial media websites are all so negative and bearish, saying how you should avoid or get out of the market. That’s the type of thing you want to see when you’re at a short-term bottom in the market.

Yes, there’ll be higher rates. Yes, growth might be slowing compared to last year, but will it be terrible? I don’t think so, especially when it comes to larger tech earnings. I think they will continue to do well. I’m a big fan of GOOGL, big fan of FB here. We saw great earnings from MSFT, AAPL had great earnings as well. NFLX not so much, but that’s a bit of an outlier. To be honest, I don’t think it’s one of the great tech stocks of our generation anyway, it’s a great business, but you kind of hit worldwide saturation at some point, I don’t think it can’t continue to grow like that. 

But I do think tech will continue to grow. These are huge companies that can continue to do well in an economic slowdown. We’ll still continue using our iPhones, we’ll still be searching GOOGL, which will continue to dominate your search experience online. FB continues to benefit from politics and social discord. These companies are pretty much bulletproof until proven otherwise. 

Up until yesterday, it was the worst January on record. The whole month stocks got smoked. Could the worst be over? I think so, this could be a bottom be in the short term. This could be a great place to buy some great companies at a discount. Now I’m not talking about the next 3-6 months. A lot can happen, and there is still uncertainty. But for the short term, 2-4 weeks out,  this could be a great spot to pick up some oversold stocks.

I think we’ve probably already seen the bottom. I think at some point we retest it, but the short-term bottom could be in. I’m getting excited about buying stocks again and looking to sell some put spreads. That makes a lot of sense to me when a pullback occurs and support levels get tested. 

I’ve also been looking at sectors outside of tech., stocks that can do well in a higher inflation environment. That is sectors such as consumer staples, oil, financial stocks, and defense stocks such as Lockheed Martin (LMT) for example.  

The Market Trade

We got a big bounce in the QQQ’s yesterday.

The QQQ is trading higher from the descending triangle as traders pushed above resistance as they are looking to buy the dip in the markets.

After bouncing off the $340 level twice in the 3rd week of January, buyers are finally able to push the bears out of the way as they are making their run higher.

At this point, I’m thinking we might be range-bound while traders fight over who is in control, and I’m about to get filled on my order. 

When that happens, I’ll look to sell an Iron Condor and take advantage of the sideways price action between $333 and $377.

I got filled on my Iron Condor at $0.65.

Bottom Line

I think the short-term bottom in the QQQ’s is in, although I expect to retest the support level. 

I also don’t think the market will go too much higher in the short term as the bulls and bears battle it out. When I think the market will stay range-bound, I use a strategy known as an Iron Condor. So long as the QQQ’s stay within the range I have specified, I will collect the full premium on the trade. This strategy is my go-to when I think a stock or index will trade sideways.