It’s been a volatile trading year. Stocks are bouncing around up and down in a wide range. The market is adjusting to the new normal, characterized by what the Fed calls normalized markets. If the Fed follows through on their promise to normalize markets, which still remains to be seen, interest rates will be higher, and a large boost of liquidity will disappear without the Fed asset purchases.
Higher volatility, wider index ranges is the new normal. The new normal also means we can’t just blindly buy the dip and expect the fed to come to the rescue. VIX is elevated and has peaked almost at 40 and stayed above 20 most of this year. The S&P 500 is trading in between 4300 on the downside and 4580 to the upside. There is scary news in the headlines. Ukraine, Inflation, Stagflation to comes to mind. These scary headlines have people trading emotionally.
The headlines don’t matter in investing. I’m not saying don’t follow the news, of course it’s important to know what’s going on, and as volatility traders knowing key dates is critical. What I am saying is don’t get trading signals from the news. Trust the charts. The charts will do a better job interpreting the news than anybody you read or watch on T.V. with the lone exception being me of course. The news is designed to shock and scare you. The stock market is far too rational for that.