If you were dozing off for a week.......

Supposed you fell asleep for a week, or let's say a bit longer from the noon of the famous Wed (Dec 19) a week ago just prior to the last Fed rate announcement and suddenly woke up around 3 PM yesterday. What do you think you would feel about the market in the past 10 days? Absolutely nothing, you must claimed! Indeed, S&P was about 2530 prior to the Fed announcement and it was about 2520 around 3 pm yesterday. What all about the FUSS in the past week or so about the stock market, you must be wondering when you opening your dozing eyes and saw all the scary headlines like that:

Well, the market didn't do anything major if you just counted the two time points but in reality, it has gone through 3 major swings all breaking the historical records within the very short few days: On Monday, we suffered the worst Christmas Eve session ever. On Wednesday, we saw the largest single-day point gain in history. And then on Thursday, we had the largest intraday reversal in nearly a decade...  Honestly I was kind of speechless when seeing this kind of crazy gigantic gyrations never seen before. And all FA and TA are really looking stupid in trying to make sense what was happening during these days. But one thing I do know is that the world, which seemed to be ending, will never end as I was writing on Dec 24. Buying into this kind of horrific depression is never a fun and enjoyable but is often very profitable! As I put it: we may see a "rip your face off rally" that can often comes out of blue and we are seeing it now. But I'm pretty sure 99% or even more of people were running away not buying when the world is felt like falling apart. 


So now you have awaken up fresh and haven't felt anything ill and terrified and you are seeing the market is just trading around the level when you were dosing off. What would you do with all the cash you have now? While the market has indeed ripped everyone's face off by fighting back viciously in the past 2 trading days, we are in a tricky situation right now. On one hand, I'm convinced that we will still see some good days ahead with an ongoing uptrend for a few days at leas or even couple of weeks if lucky enough. I feel S&P 2600 is a very reasonable next target to reach or if the momentum is strong enough, we may even see 2700 soon! HOWEVER, and this is an important however, S&P has broken all the major and long term support lines in the past week or so and it has shifted its near term overall trend to the downside. Technically it has been damaged tremendously and it will require a lot of energy and more importantly time to recover. In other words, regardless how bullish it may look like at the moment and how high it may go in the next days or weeks, it may still be a "dead cat" bounce for the near term. We may still see a waterfall type of free fall at some point or Tsunami selloffs, especially when we start to see some overly bullish sentiment along with the up days. Right now I cannot tell you exactly when but I have no doubt that it will come pretty soon again. 


Don't get me wrong. I'm not in the camp of Bear Market at all, thinking we will see a full blown recession moving forward. A recession, which may be a prolonged one as I have said before, will come later but not so soon. I'm still very optimistic for the next year or two for the economy and the stock market overall. And I'm still looking for a "Melt Up" phase to come before we are finally hit by a true bear market with prolonged recession. This will be another topic for later. So how to manage the stock trading in such a super high volatile market? For the vast majority of investors, volatility is no fun and they are seeking stability and predictability. I certainly agree to try all your best to avoid risks in this high risk environment. Some people say cash is the king and you should go all cash now. It could be one easy risk free strategy but you may also miss some fantastic opportunity if the market is indeed entering into its final inning of the bull run. If I'm right, it could be very powerful with moonshot upside when it comes. Of course I cannot tell you exactly when this moment will come. It could be just a few weeks away or months away to start the journey. So we need to be a bit innovative with out of box thinking to find some way to invest while also with appropriate risk minimization strategy in place. I can offer you one way of doing so. What do you think if you can invest in S&P with knowing  that your downsize risk can be protected to a predefined level and in return you can enjoy a pretty good upside also to a predefined maximum? This to me sounds a very good deal for a vast majority of people who are so scared about the market at the moment. If you are one of them, then there is good news that you can easily do so via just one click of your mouse to let the strategy work for you without much risk involved. A brand new type of ETFs have recently been created which are truly very innovative in just doing that:

Innovator S&P 500 Defined Outcome ETFs – July Series:

• Innovator S&P 500 Buffer ETF (CBOE: BJUL): Designed to track the return of the S&P 500 (up to a predetermined Cap) while buffering investors against the first 9% of losses over the Outcome Period, before fees and expenses.
• Innovator S&P 500 Power Buffer ETF (CBOE: PJUL): Designed to track the return of the S&P 500 (up to a predetermined Cap) while buffering investors against the first 15% of losses over the Outcome Period, before fees and expenses.
• Innovator S&P 500 Ultra Buffer ETF (CBOE: UJUL): Designed to track the return of the S&P 500 (up to a predetermined Cap) while buffering investors against a decline of 30% of losses over the Outcome Period, from -5% to -35%, before fees and expenses. Investors are exposed to loss between 0% and 5% and over 35% over the Outcome Period, before fees and expenses.

These ETFs are designed to let you invest in the stock market without incurring too much risk for you as long as you also give up some profit potential. I think it is a very fair deal and a great strategy in the current crazy volatile market! On caution though. This is a very new type of ETFs created just in August this year. While till now it seems performing exactly as advertised, I cannot guarantee if they will meet up to their goal by performing exactly as it is supposed to be in the longer run. I'm just offering you an idea but you need to do your own research to decide if it is suitable for you. After all, your money, you call!!