State of the Markets - Oct 2022

State of the Markets - OCT 2022

Been a while since we did a basic state of the market check (Here is the one we did last year).

Looking back, it was perfectly well timed - purely coincidental. We did have a bit of a flush down from then onwards but its almost impossible to time the markets.

Here is what the markets have done since then. Down about 700 points on the SPX.

Lets take a quick look at the longer term chart for perspective again:

Even on a 10 year weekly chart, the retracement is somewhat evident. So, is it now a safe time to jump head-in into the market - long. Not so fast.

How about Shiller PE Ratio:

Surely it has come down a bit from 37ish to 27ish. Still from a long term perspective the market is far away from being over sold; long term averages over decades is in 17-20 range i believe; and over sold is when it dips below that. That's quite a ways away from here on the downside - another 25% down perhaps.

Though, that does not mean we can't reverse back from here and go straight back up to 4800s and higher. Markets can do anything they damn want.. anytime.

So what are you supposed to do? Answer is quite evident - stick to your plan. If your backtested plan calls for nibbling down here.. you do that. If it says stay away and is wanting you to wait longer you do that. Is it easy? Its never going to be easy - either ways.

Markets are wonderful. They will always be the same and always different; they are never too hard and never easy either.

Best you can do is ignore the noise and news; and stick to a plan. And, If you don't have a plan.. go back and read the article from last year for advice on what to do. Good advice never changes fundamentally, and no reason for me to go on a rant again.

Personally I have been nibbling on some individual stocks from a long term perspective. Will post a simple fundamental screen I am using in the next post. As for delta neutral trades, that's the beauty of them - they don't change no matter what (that does'nt guarantee profits though :)).

Good luck trading!

-gariki