Fear is Ripping Through the Market – Here’s How to Play It

Fear, uncertainty and doubt. The market is full of it right now. 

Between the threat of World War III, higher oil prices, sticky inflation and rising interest rates… The market is taking on a gloomy tone. 

The Nasdaq and the S&P 500 are down 5% and 4% from their respective highs. Even bitcoin is down 10% from its March 13th high of $73,700. 

In times like these, it’s easy to tune out and stop paying attention. But it’s also times like these when real bargains can emerge.

To be clear, I don’t think the market volatility is over. 

That doesn’t mean it’s time to sell stocks and crypto. It means it’s time to build your shopping list. We’re still in a bull market. And in a bull market you’ll frequently get sharp, scary pullbacks.

Just take a look at 2023. 

In that year, we saw stocks swoon lower in March only to rally 20% through July. We had another shot to buy stocks on the cheap in November when they dropped 11% only to see them rally 28% over the next five months. 

Friends, it bears repeating: We’re in a bull market. And in a bull market, if you are a trader, you buy the dips and sell the rips. That’s true if you’re trading the Nasdaq, the S&P 500 or bitcoin.

I recently wrote an article on how to play this recent volatility in bitcoin. In that article, I suggested you could get long on a partial position at $62,000. Since then, we’ve seen bitcoin hit $59,000 and change… Then rally back to as high as $67,000.

Was that the bottom of the down move? I don’t know. 

The great thing is I don’t need to know because I know the most important thing there is to know. What is that you ask?

We are in a bull market. And in a bull market we always make new highs. 

We might have some scary dips along the way… But because we’re in a bull market, I know prices will recover. And that is the most important bit of information to know.

That’s why I wrote the article on how to gain more exposure to bitcoin in a methodical measured way should this dip continue. I strongly urge you to read it.

But what about equities? 

Well, I’ll tell you right now stock valuations are crazy high. We are approximately two  standard deviations above the market’s historical valuation trend line. 

Without getting into the weeds, the standard deviation measures how far valuations have moved away from their average. 

Over the past 70 years, market valuations have only reached these levels three times. First in 1968… Again in 2000 during the tech bubble… And finally in 2021 during the pandemic bubble.

That’s nuts. But it can get even more nuts before the bull market has run its course. 

In December 2021, the S&P 500 peaked at 2.45 standard deviations above its historical trend line. So we can go a lot higher before this party has run its course.

The key piece of information to know is that stocks are still in a bull market. In my opinion, they’ll end the year higher than they are now. 

That is why I’m not selling any of my stocks. I’m holding them (even the few dogs I have in the portfolio) because we are in a bull market. 

In a bull market you sell into strength. YOU DO NOT SELL INTO WEAKNESS. 

As the market recovers, I’ll start selling the dogs and reposition that capital elsewhere. But for now, the best thing to do is get clear on what you want to buy should we see further weakness in the stock market.

The two simplest trading vehicles to play broad market weakness are the SPDR S&P 500 ETF (SPY) the Invesco QQQ Trust (QQQ), which track the S&P 500 and Nasdaq, respectively. 

An ugly sell off could send both indexes near their 200-week moving averages. That implies a 17% drop for the S&P 500 and 20% drop for the Nasdaq.

Again, I don’t know if we’ll see a sell off that ugly… or if the sell off will continue at all. But if we do, you want to be a buyer – not a panicked seller. 

By year end, stock prices will be higher. In bitcoin’s case, the price is going MUCH higher. I’m on record calling for a minimum move to $150,000 on bitcoin over the next 18 months.

To put that move in perspective… It can take 7-10 years to double your money in the S&P 500. Bitcoin should do that (and possibly much more) before the end of next year. 

Let The Game Come To You!™

Big T