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Is This Rally for Real?

After being down over 35% from the all time high, S&P 500 has rallied over 20% from the recent lows in just two weeks. Is this rally for real? Or is it just a bear market rally, a "dead cat bounce"? What the "experts" are saying? Has the market bottomed? Will the selling resume?

A lot of questions.

I decided to check some of the "expert" opinions about the current markets, based on the recent articles by the most popular Seeking Alpha contributors.

On March 29, a well known SA contributor James A. Kostohryz wrote an article The Next Leg Down: Another Massive Decline Is Coming. Based on his opinion, "the next leg down in the current bear market cycle is soon at hand." Not only he's predicting the next leg down, but he also seem to know exactly where this leg down will take us: "this would imply a trough for the current bear market cycle in the range (S&P 500 index) of 1876 to 1463."

Mr. Kostohryz makes some very compelling arguments to support his case, including: Cumulative loss of output, Peak unemployment, Cumulative loss of hours of production, Massive financial crisis, Loss of wealth and more. His conclusion: "It is critically important that you have the right portfolio strategy to deal with the current unprecedented economic and financial crisis." The logical conclusion is that you need to join his subscription service to have this "right portfolio strategy".

Unlike Mr. Kostohryz, another well known SA contributor Avi Gilburt published an article on March 22 called Sentiment Speaks: Many Did Not Believe We Would See 2200SPX Again, And Many Will Not Believe What I Am Thinking Now. His forecast is very different from the previous contributor: "I am going to be looking for bottoming signals in the coming weeks, followed by more bullish signals supporting the potential for this market to set up a multi-year rally to 4000+."

Mr. Gilburt is basing his forecast
on Elliot Wave methodology, and of course, the forecast is based on a lot of conditions. This is how Elliot Wave works: it will always allow the "forecaster" to say "I was right" no matter what happens.

Of course Mr. Gilburt's conclusion is the same: join his service to make the right decisions.

As a side note, both articles have the following disclosure: "I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours."
Both contributors make very bold predictions without actually having any skin in the game. None of them also has any public track record of performance.

So... two completely opposite opinions from two very well respected Seeking Alpha contributors. Obviously only one of them will be correct. Which one? It's up to you to decide.

Personally I don't buy this rally. The damage is too big, and it doesn't make sense for the bear market to last only 2 months, considering all the crisis. I believe we will see another leg down. I believe it will get worse before it gets better. How far the next leg down will take us? I have no idea, and I don't want to play the guessing game.

Fortunately for me and for SteadyOptions members, we don't need to guess who is right. We don't need to try and catch markets tops and bottoms. We don't need to time the markets.

We can make money in any market using non directional options strategies. We have proved that we can make money in any market. Here is how our strategies performed during some of the down months:

  • Mar.2020: S&P 500 -12.5%, SteadyOptions +3.3%
  • Feb.2020: S&P 500 -8.4%, SteadyOptions +26.6%
  • Dec.2018: S&P 500 -9.2%, SteadyOptions +17.3%
  • Feb.2018: S&P 500 -3.9%, SteadyOptions +3.7%
  • Jan.2016: S&P 500 -5.0%, SteadyOptions +10.6%
  • Aug.2015: S&P 500 -6.3%, SteadyOptions +11.7%
  • Jan.2014: S&P 500 -3.6%, SteadyOptions +22.9%

Our model portfolio is up 68.3% so far in 2020. Bull, bear - we don't care. 

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