It has been a brutal start to 2022 in the stock market, especially in tech stocks. Every growth stock in the tech sector has a chart that looks like someone has fallen off a cliff. The sentiment shift has been sudden and what characterized 2020 and 2021 as buy the dip is now sell to strength. If you observed the last week (Jan 18 – Jan 21), the morning session would start strong followed by chopping followed by a steep sell off into the close without any market moving news. The emotion is very strong.
Persistent Inflation, continued supply chain issues, rising interest rates, a stubborn coronavirus and a stimulus that has run long in the tooth has turned sentiment to extreme negative. Many are calling it a great valuation reset, and it has been indiscriminate. There is no benefit fighting the tape in the short term.
I failed to hedge adequately. Some of the puts that I had sold for growth stocks at deep out of the money 4 weeks ago seem incorrect decisions now. Some shorts got covered due to bull traps, altough no complaint against those outcomes.
I believe the way to make any money in the short term is to trade the indices and specific ETFs on volatility and avoid individual stocks. The noise may not settle until a firm Federal Reserve action to raise interest rates is taken.
Such market selloffs also intimidate the Buy and hold investor and if one is still in that category, you are The Rock.
Treading lightly in 2022