Well, the bond yield curve has been the main talk of the overall financial markets and the economy. There have been many who have shouted recession over and over, We all know recessions happen and if I shout it every year, I am bound to be right! So far the SP 500 is holding its place on the daily chart. We saw some turbulence after the news of the bond yield curve inverse but it would seem the reaction wasn’t as dramatic as expected, as of yet. It would be smart to be on the P’s and Q’s, if you are holding positions that could be affected.
As traders and investors this could be good news. WHAT? I’m not saying I want a recession, well kind of! This does have the ability to offer traders a unique opportunity. As traders we often do not hold our money/risk in the market very long and therefore will not be affected by a sudden downturn. Looking backwards at the other recent crashes that occurred like the one pictured above in 2008, there offers the possibility to get into otherwise expensive and strong investments for cheap after the crash. I like the way Robert Kiyosaki the author of “Rich Dad Poor Dad” put it, He calls times of economic downturns the great transfer of wealth. I happen to agree. Many that had their money secured and stashed were able to capitalize on the foreclosed homes for cheap, as well as many other investments that would turn out to rebound.
If we go back and look at the last major financial market crash that occurred in late 2008, we can see how this may present opportunities. The very bottom of the market (meaning the S & P 500) hit a low in the triple digits at 665! I am using the futures chart, but the /ES mini future is a direct correlation to the SPY ETF. All track the S & P 500. Now, fast forward to today, and the price is around 2800. That’s one heck of an upside. I know we would not be able to hold futures contracts that long but the same type of bullish market trend could be applied to SPY options, or day holds/shorts of market leveraged futures contracts such as the DOW, ES mini!
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