The Beginning of the End of the Bear Market Rally

by | Aug 29, 2022

Last Friday, as Fed chair Jerome Powell was speaking about the economy, the market tanked … wiping out $1.25 trillion in a single trading day.

Almost every name in the S&P 500 ETF Trust (NYSEARCA: SPY) was red as traders indiscriminately sold stocks in every sector…

Could this brutal bloodbath be signaling the end of the historic bear market rally we’ve been experiencing since mid-June?

While I can’t answer this definitively, I think Friday’s selloff likely tells us something — this is the beginning of the end of the relief rally. 

I think the odds are high for further downside in the overall markets, which I expect to lead to some juicy setups on the short side.

Bottom line: I’m predicting more selling throughout September and October. 

Every rally or bounce moving forward could potentially be a put-buying opportunity. Trade accordingly.

With that in mind, let’s go over my game plan for the week and discuss a few names worth watching for short opportunities…

Why Stocks Tanked Last Week

First, it’s critical to understand why stocks are selling off…

Powell made it clear on Friday that there’s no end in sight for inflation.

This is bad enough as it is. Inflation hurts corporate earnings potential while simultaneously making it more difficult for consumers to buy affordable products.

The only reactive measure the Fed has left is to continue raising interest rates, known as quantitative tightening (QT).

And it looks like QT is only going to get more aggressive throughout the Fall.

This is always a negative for stocks, but it sounds even worse considering how far off the bottom they’ve come since making lows on June 17.

Now, there’s a lot more room for stocks to fall…

This is bad news for the average investor, but potentially great news for me (and by extension, for Evolvers)…

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How I’m Playing It This Week

Throughout the past several months, I’ve had a gut feeling that the broad market rally was nothing more than a brief respite from an intact bear market.

Now, we’re starting to get confirmation of this, which leads me to lean more aggressively into short setups. 

I live for opportunities such as this one, where large-cap stocks start to trade like penny stocks. 

And speaking of great opportunities, there’s an interesting one brewing in the EV sector…

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Aside from the scanner, what names am I watching closely as the bear market rally looks to be fizzling out?

  • S&P 500 ETF Trust (NYSEARCA: SPY)
  • Invesco QQQ Trust (NASDAQ: QQQ)

The two major indexes are as good as any individual options play for shorting right now. Put options on either index are a simple way to short the markets without overcomplicating things.

Apple Inc. (NASDAQ: AAPL)

  • Amazon.com, Inc. (NASDAQ: AMZN)
  • Microsoft Corp. (NASDAQ: MSFT)

This big-tech trio led the indexes down on Friday and will need to continue to do so if the market is gonna continue heading lower.

On red days, these names can be excellent put-scalping candidates…

That said, there will likely be sharp bounces in these charts on the way down. Focus on your timing when considering buying puts on these names.

Final Thoughts

I’m excited about this price action, and I hope you’re all ready to take advantage of the opportunities that lay ahead of us…

Am I positive that the indexes will drop more? No. There are no guarantees of anything in the stock market. But I have a strong feeling that they will.

As traders, all we can do is study the information at hand and make educated predictions based on our experience, instinct, and intellect…

Doing so for the past 12 years has made me into a multi-millionaire. I hope you can strive towards the same kind of success.

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Tomorrow right after market open…

I expect these 20 stocks could move FAST.

To make sure you get the names of these tickers, before it’s too late…

Meet Mark:

Mark Croock is a former accountant who after studying under Millionaire Trader Tim Sykes turned his small account into $3.19 Million in trading profits by applying Tim’s strategies to options trading.

He started Evolved Trader to pay it forward and help other traders learn how to leverage options

 

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