Last week was one of the most tumultuous week in quite some time where Markets lost 10% and entered correction territory. It was a blood bath and although we were hedged through various call/put strategies, we did smell a great opportunity and went all in (see below):
Markets was in a peril mode as all eyes were on the Fed chair, Jay Powell, who was expected to deliver a critical message on interest rate hikes to combat the rising inflation. When the policy statement hit the wires, everything looked normal as expected and by historical standards was considered very dovish. But then Jay Powell dropped the ball once again and exhibited his lack-luster communication skills by not providing any clarification that the Street was expecting regarding the rate hikes. Markets were priced in for 4 but Jay Powell did not address it specifically and left it open ended. That did it. Markets hate uncertainties and started selling off and we saw another 1000 point swing on the Dow. There was chaos everywhere as algorithms got fired (machine trading) and not many knew what to do. In situation like this money managers shoot first and think later but we kept our cool by sticking to our trades from Monday at the rock bottom prices! We knew that Jay Powell’s communication inability would be covered by other Federal representatives on the board in the next 24 hours and that’s exactly what happened but not with out huge volatility. Markets remained choppy but by the end of the week they came to a consensus and rallied hard in the close.
We don’t know what will next week bring but Markets were oversold and our experience shows that this are some of the best opportunities that cannot be missed. We may not be out of the woods yet and choppiness may continue but we are always hedged by various call/put strategies.
Bottomline, when there is blood on the street, just hold your nose, close your eyes and take a dive – Ready, Steady, Go!