The 2024 Growth Scare
Market Volatility has been insane the past few weeks.
Both to the downside AND the upside.
The VIX skyrocketed over 250% in just a few trading sessions, only to plummet -77% back to previous levels.
The SPY sold off 9.7% between July 16th and August 5th (August 5th being the day of the massive VIX spike).
Then from August 5th to August 16th, SPY rebounded 8.7%.
We also saw a huge volume spike on August 5th, marking the recent low with some significance.
In addition to these massive market swings, we’ve also seen a mix of interesting economic data, including rising unemployment readings, continued easing of inflation, a yield curve about to un-invert and more.
So what does all of this mean for us as traders?
In the long-term, we are eyeing several macro factors pointing to a slowing economy and potential recession in the coming months (TBD).
However, in the short-term the recent market action likely means that risk-on trading is back, especially with the VIX now dipping below 20.
This is something we’ve been discussing recently in our community discord. Check us out (free) if you haven’t yet.
A VIX below 20 is what we consider a “Low Vol Regime” - Characterized by risk-on trading, higher prices, buy-the-dip, etc.
If the VIX had continued to persist above 20, we would have assumed a shift into a “Moderate Vol Regime” - Characterized by many sudden market drops, choppy side-ways trading, or lower-trend markets.
Volatility Regimes is a concept we discuss in our Geek University course, included in all memberships.
However, with the complete collapse of the VIX (now back in a Low Vol Regime) and with the market moving into positive GEX this past week, we want to switch our focus and look for long opportunities in some of the mega-cap growth leaders along with relatively inexpensive short plays and diversifiers for hedging purposes.
This is in line with our asymmetric risk-reward approach.
Trade Setups We’re Watching
GLD
We closed out our 220-225 call debit spread on GLD this past week at a decent profit and now are watching the 230-240 strikes for volume and GEX confirmations for a potential continued move higher.
The largest GEX concentration for the past several weeks has been at the 230 strike.
GLD was trading above 230 on Friday and now we’re seeing volume come in at the 240 strike.
Btw if you’re not a member and you’re interested in our GEX tools and analytics, check out our site here.
GS
The financials have been a relative outperforming sector in the past month and we recently added a double calendar spread on GS, aiming to both collect premium and take advantage of a potential move higher.
In the chart below you can clearly see GEX concentrated between 500-520 and we think GS has a decent probability to grind higher over the coming weeks in this zone.
QQQ
With volatility collapsing, we took the opportunity to add an ‘inexpensive’ short play on the QQQ’s to our portfolio.
The primary goal being to scoop up some cheap protection in the case market volatility does come back. Although this is no longer our base case in the short-term, we aim to give ourselves exposure to multiple market path outcomes, especially if we can get that exposure at low prices.
Our base case scenario is that we will lose money on this play while profiting overall on our other long biased plays.
NVDA
NVDA had an almost unbelievable rebound over the past 2 weeks, rallying over 25%.
Although we had a terrible trade entry on an NVDA debit spread that we entered at the end of July, the rally last week allowed us to close out the position with a profit.
The positive GEX concentrated at 120-130 remained throughout the recent selloff, which was a silent indicator that market participants were holding their ground at those levels.
Heading into September we see GEX concentrations growing between 130-150, so we’ll be watching these levels for opportunities.
NVDA still has relatively high implied volatility compared to the past 52 weeks, so we’ll be searching for premium collection strategies in particular.
We’ll be discussing these ideas and others in the coming week - We invite you to check out our community discord for our latest market conversations.
If you’re interested in learning more about our strategy approach, we address all of these topics in our Geek University course which is included in all memberships.
If you’re interested in accessing our tools and analytics, be sure to check out our website!
Thanks for being part of our community and know that we invite your feedback!
We have a variety of educational videos on YouTube as well!
The information provided by Geeks of Finance LLC is for educational purposes only and is not intended to be, nor should be construed as, an offer, recommendation or solicitation to buy or sell any security or instrument or to participate in any transaction or activity. Please view our Investment Adviser Disclaimer and Risk Disclosure.
