Navigating Market Volatility

This week I felt the SPY was at a pivotal moment.

The current level appears to carry significant weight for market direction. We’ve seen $590 act as a critical marker before, particularly in October, when the market struggled to break through. It finally did during the election rally, only to revisit this zone briefly before surging higher.

Fast forward from the election to this week, we found ourselves right back at this level after Wednesday’s sharp decline. This isn’t just a coincidence; it’s a test of the market’s resolve. I thought what happens next could set the tone for the remainder of the year.

Would we see a corrective drift higher, with the market regaining momentum and delivering a steady climb into year-end? Or is a deeper correction on the horizon, one that resets expectations and challenges the bullish trend we’ve grown accustomed to?

We got the news today as the market’s overnight action signals a potential breakdown rather than a breakout (shocker, it has rebounded some off of that same level so far).

On the whole, this week has been a challenging one for me. As someone who has maintained a bullish stance in these conditions, I intentionally take my time before shifting directions. I am very reluctant to start playing downside moves when the overall trend is still so bullish.

However, the current market is definitely calling for a nuanced strategy.

The market’s intense downside momentum is undeniable, but the long-term trend remains bullish. This creates a unique opportunity to position for both a potential snapback rally or a deeper correction. Reflecting on successful strategies from previous market crunches in March, July and September, I plan to implement similar “pair” trades.

Here’s an example of how that works from my Telegram back in March:

This week, I am more likely to go with QQQ puts and SPY calls. If we get a strong bounce back, the SPY should move well and stack up triple digits on the calls. If we collapse further, I assume the tech heavy Nasdaq will continue leading the way so the puts could jump in value a ton.

I still want to see where we end up today, but that’s definitely one way to approach uncertainty when it’s mixed with volatility.

As the days unfold, I’ll share more details, but this highlights the importance of adapting to market conditions while staying anchored to a long-term perspective. Balancing risk and opportunity is key in navigating volatile markets.

Talk Soon,

Nate Tucci