We are entering one of the most uncertain phases of the bear market rally.
It’s this point where things could quickly tip either way.
A sharper rally may be in the cards.
Or…
This market could see the bottom fall out in a matter of days.
It’s a pivotal moment for the bear market overall, and we are stuck right in the middle of it.
That’s why I call it “No Man’s Land.” There’s no telling what to expect next.
Today, I want to tell you how I’m trading through it and the one takeaway to keep in the back of your mind no matter what happens next.
Let’s dive in…
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Make Money in Both Directions
This is the trick.
If you only make money when stocks go up, good luck.
That’s been a losing battle for over a year now. Why play that game?
Everyone can make money on both sides of the market.
One of my favorite ways to do this, in a stock trading account, is with inverse ETFs (exchange traded funds).
These come leveraged, so they aren’t meant to be held for an extended length of time. A couple of months is really the max. That’s because they lose value overtime, so the longer you are holding it, the weaker your returns are going to be.
I’m not buying and holding these inverse ETFs.
I’m trading them.
In and out on the swings in the market.
It’s a simple, yet very effective way to make money from the downside in the market.
One of my go-to ETFs is the Direxion Daily S&P 500 Bear 3X Shares (NYSE: SPXS).
In fact, I’m in the middle of transitioning many long positions in my retirement account, into this ETF.
I like it because it is a pure play on a broad market pullback. There are sector inverse ETFs that you can trade too, but it’s hard to tell which sector will fall the sharpest when this next wave of selling hits.
What I do know is that I expect the market to go lower in the months ahead.
I’m positioned for that, while I continue to play the rallies.
Something as simple as adding this inverse ETF should help you sleep better at night, and, ultimately, wake up with some nice gains in the months ahead.
That brings me back to my big takeaway from today.
One Big Takeaway
Right now, markets are trending upwards.
But, at any moment, the rug could be pulled causing a rapid crash.
So, the number one thing to keep in the back of your mind as we go through this, is that we are still in a bear market.
Don’t forget it.
If you are playing both sides, as you should, play the longer trend to the downside. That’s where stocks are ultimately heading, while you take quick trades on the rallies. In and out, whether you have profits or not.
Hence the ETF. It’s not going to expire next Friday limiting my timeframe. I can hold it for months while the market sinks.
It’s just the name of the game in a bear market like this.
The selloff could be drawn out for a bit, sucking in buyers the whole way down.
Or it could be a Black Monday type of move, where a single week for stocks sees a major 20% decline.
I’m leaning towards the latter.
Stay prepared.
Let’s get it!
Chad Shoop, CMT
Editor, Bank It or Tank It ELITE