As usual I give an overview of the financial markets August/September and deepening the world of small investors.
I had already announced in previous articles the risk of bubble on financial markets, on 2020/09/03 the Nasdaq suffered a loss of 4% after a long series that lasts too many months.
Why too many months? Because financial markets’s rise is something unlikely, Covid 19 has caused and continues to infect the whole world while real economy is in deep crisis.
Like so many professional investors I struggle to analyze the charts of the various world indices, as many financial analysts have asked me the question: where can I invest money?
I’ve been buying Put options on Nasdaq for a while now, S&P 500, I’m at a loss but it’s not important right now. I forgot I bought a Put option on Zoom Video Communications because I absolutely do not believe in this rally for a company of this caliber.
Since I have been thinking for many months that there is a high probability of a bubble on financial markets, I want to invite you to look at Cboe Nasdaq Volatility Index and you will see that from August 19, 2020 volatility continues to rise, reminds me the years between the end of 1999 and the beginning of 2000 during the explosion Dot-Com bubble’s explosion.
I want to tell you to go look at the chart Cboe Skew Volatility Index, this chart shows us the difference between put out of the money and put at the money, where large investors (hedge funds) are afraid and cover themselves for fear of a collapse in financial markets.
I would like to add that the exponential increase in technology stocks has been boosted by all those fund managers, who do not know where to invest have increased exposure on the magnificent tech (Apple, Amazon, Netflix, Microsoft,Google).
Financial bubble is about to burst or the sell-off on Nasdaq is an isolated case, why have strong hands started to take profits? One word, keep tabs on the trends of the Vxn and Vix to try to “read” financial markets.
So many of you who follow me have made me think about something I had never seen, the rise of free platforms to trade especially during the Covid 19.
In America and beyond ( in Asia trading numbers are scary) lockdown has forced millions of Americans to stay at home, many not knowing what to do and influenced by advertisements about trading with the dream of “easy gains”, they started trading continuously.
Data (source Bloomberg) points out that 20% of transactions on Wall Street have been affected by small investors, compared to 10 years ago the numbers have doubled.
In addition to advertising on websites, social networks and You Tube have added trading platforms such as Robin Hood and Schwab bringing trading fees to zero dollars.
You can imagine that Wall Street has become a “virtual” Las Vegas where 25% of volumes in some days have been moved by small investors. I don’t think it’s sustainable even because so many people who write to me don’t have any ideas about how financial markets work. Fortunately reading my articles they start to reason in a different way avoiding losing money.
Always be careful, stock market and all the derivatives are complex, it takes years of study, I study markets every day and I can assure you that it is not simple, too many “experts” sell miraculous courses or magic books but the reality is not so.
To be the best you have to study with the best, have perseverance, commitment, passion, patience and talent.