October 14, 2022, 2:43 pm EDT
Watch Out for High Volatility
Volatility indicates a surprising level. High volatility is not a good sign for market participants. Because it means that a trader is trying to catch a ballon in a dark room. Without a clear vision, any catch is simply luck who behaves like a gambler.
As we indicated yesterday that a stable CPI number created a huge swing from a negative to a positive area of more than 5% movement.
The same thing could happen today in the opposite when the stock market opened higher with a few hundred points of gains for Dow Jones. But, it is down about -400 points one hour before the closing bell.
The only thing for sure is that economy is going down for the future 6-12 months. High inflation, rising rates, wars, and political uncertainty (Europe, Asia, US) are coming together to the already fragile economy. Long term picture is definitely bearish. The stock market is likely to bump up and down along the downtrend.
Therefore, the investment strategy should be lightweight in the portfolio holdings. Keep high levels of cash position. Some people may consider some bearish bets on ETF for the long term.