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it reason the exade fslWhy Did the Market Sell-Off?
At 1:30pm ET today, SPY hit $475.73 and decisively broke downwards for the day. At 2:05pm ET, it fell below yesterday's close at $474.84, from there it waterfalled all the way to $468.26.
This was a major and abrupt rom the highs of the day.
# Why did it sell off?
First of all, it's without a doubt that the stock market has been overheated for a while now. SPY is hitting all-time-highs, other indices are hitting resistance, fintech stocks are pumping to Mars. In some ways, it feels like we're back in 2020-2021.
However, it's important to note that an overheated market is not a reason to sell. ATHs are often bullish signals, else the indices wouldn't be where we aof the sell-off can't be known by us outsiders, there are reasonable speculations. A major one is the selling of 1 million open SPY $475 call options that triggered the sell-off of the index. This sudden spike in selling pressure triggered a cascade of selling as 0-dte options gamblers cut losses and institutions bailed from the market.
This is just one speculation, but a plausible one and backed by market data.
However, we also have to give credit to a negative macroeconomic backdrop. The closing off of the Suez Canal for global shipping due to Houthi aggression in the Red Sea is alarming for inflation. Ships have to divert a long distance around the horn of Africa, significantly increasing time and cost to final destination. Add to this the poor Fedex earnings report from yesterday in which the stock fell over 10%, as well as the already significantly overheated markets, and it's clear there's a growing wall of anxiety in the market. No wonder all it took is a spike in selling for the market to sell off in a big way.Hindsight s 20/20 but that doesn't mean we can't learn from the past.
# So what happens next?
You can be in one of two camps from here. One camp thinks this is a healthy bull market pullback and we'll consolidate around here or below before rocketing back up again.
The second camp thinks that the market is yet to appreciate the full effects of the closing of the Suez Canal, as well as the economic canary in the coal mine from Fedex's earnings report, and this is the start of another major pullback.
The prudent thing to do is to reduce risk, monitor the market and the geopolitical situation, then decide your next move. The situation right now is unknown and highly dynamic and any big bets at this point is premature.
If I had to pick a side, I think this is just a healthy bull market pullback.
#business re todayc.While 1.5i%
At 1:30pm ET today, SPY hit $475.73 and decisively broke downwards for the day. At 2:05pm ET, it fell below yesterday's close at $474.84, from there it waterfalled all the way to $468.26.
This was a major and abrupt rom the highs of the day.
# Why did it sell off?
First of all, it's without a doubt that the stock market has been overheated for a while now. SPY is hitting all-time-highs, other indices are hitting resistance, fintech stocks are pumping to Mars. In some ways, it feels like we're back in 2020-2021.
However, it's important to note that an overheated market is not a reason to sell. ATHs are often bullish signals, else the indices wouldn't be where we aof the sell-off can't be known by us outsiders, there are reasonable speculations. A major one is the selling of 1 million open SPY $475 call options that triggered the sell-off of the index. This sudden spike in selling pressure triggered a cascade of selling as 0-dte options gamblers cut losses and institutions bailed from the market.
This is just one speculation, but a plausible one and backed by market data.
However, we also have to give credit to a negative macroeconomic backdrop. The closing off of the Suez Canal for global shipping due to Houthi aggression in the Red Sea is alarming for inflation. Ships have to divert a long distance around the horn of Africa, significantly increasing time and cost to final destination. Add to this the poor Fedex earnings report from yesterday in which the stock fell over 10%, as well as the already significantly overheated markets, and it's clear there's a growing wall of anxiety in the market. No wonder all it took is a spike in selling for the market to sell off in a big way.Hindsight s 20/20 but that doesn't mean we can't learn from the past.
# So what happens next?
You can be in one of two camps from here. One camp thinks this is a healthy bull market pullback and we'll consolidate around here or below before rocketing back up again.
The second camp thinks that the market is yet to appreciate the full effects of the closing of the Suez Canal, as well as the economic canary in the coal mine from Fedex's earnings report, and this is the start of another major pullback.
The prudent thing to do is to reduce risk, monitor the market and the geopolitical situation, then decide your next move. The situation right now is unknown and highly dynamic and any big bets at this point is premature.
If I had to pick a side, I think this is just a healthy bull market pullback.
#business re todayc.While 1.5i%
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