How This Expert Options Trader Is Preparing For The Market’s Next Big Move

The battle between the bulls and bears is intensifying this week as major earnings reports are released and the latest inflation news is digested.

The key isn’t the reports and the numbers that will be released, but rather the market’s reaction to them. The bulls have been persistent dip buyers recently and have been able to shrug off various negative headlines.

There hasn’t been much upside progress, but support is holding, and the bears have been incapable of producing sustained selling pressure.

Since the start of the year, the bears have been convinced that the market would eventually be forced to recognize that growth is slowing, a recession is coming, and corporate earnings will fall. Even the Fed has admitted that a ‘mild’ recession is likely.

However, the bulls just aren’t buying the argument. They may be convinced that inflation is under control and the Fed will likely start cutting rates later this year. If there is any economic slowing, it will be mild, and the Fed will address the problem quickly.

The battle lines are drawn, and the reaction to earnings this week will provide some insight into whether the concerns about economic growth are gaining some traction. Microsoft (MSFT), Meta (META), and Google (GOOGL) have all reported this week, along with hundreds of other names from a variety of sectors. These big tech earnings reports have shown they’re still able to post better-than-expected results, despite any economic slowing. However, this hasn’t been quite enough to send the market higher… yet.

Last week, an adverse reaction to Tesla’s earnings caused some weakness at the end of the week and there was some soft action again on Monday morning. But big tech has the boom in Artificial Intelligence, which may offset weakness in other areas.

My game plan is to stay focused on price action and let that guide what I do next. I won’t try to predict how the market will react to news or earnings reports, but I feel that the bulls are too optimistic about how the economic situation will unfold. We have already seen that the market can continue to ignore that for quite a long time, but if (and when) the price action shifts to the downside, it will be essential to limit risk and hold high levels of cash.

If the bears are right about the potential for slow growth and a recession, we should start seeing some negative reactions to earnings this week.