Key insights
- The author believes the market is near maximum pessimism, suggesting it's a good time to start dollar-cost averaging into solid companies. They anticipate a potential VIX spike and capitulation, followed by negative news over the weekend leading to a Monday sell-off. A change in the president's tone on Iran and intervention from a "plunge protection team" are expected to trigger a market bottom and reversal mid-week.
We are at almost max pessimism. It's times like these where if you have cash on the sidelines to start DCAing into some solid names that have crushed on earnings. Companies with zero correlation to the geopolitical climate and sheltered from the presidents mood swings.
A bottom indicator is typically a vix spike, followed by high sell trade volume and capitulation. Take a look at where the vix is now as well as options call/put ratio. I don't have a crystal ball but I would not be surprised if over the weekend we see some very negative news/events followed by a brutal Monday sell off.
Que the president change of tone on Iran and plunge protection team coming in Tuesday/Wednesday for a large intraday reversal marking the bottom.
I'm very rarely accurate on the exact time, but I'm always very close. Curious to hear others thoughts.