One of the blessings and curses of being a Market FIRE investor is that one needs to have a long-term investment strategy but one that is complemented by attention to often tumultuous short-term market trends. As I write this, the July/August rally has clearly gone bust, revealing itself to have been only a bear market rally as the overall bear market continues. The S&P 500 is back at its early June lows. As interest rates appear to continue on their upward trajectory and the economy is contracting, the downward slide is likely to continue until there can be some degree of confidence that inflation is receding and no longer threatened to undermine the economy.
Stock Market technical indicators show oversold conditions ripe for October relief rally
In the short term, the overall stock market appears to be due for a technical upward relief rally. Using the Relative Strength Index (RSI), the S&P 500, Nasdaq, and Dow Jones Industrial Average are all near or beneath a reading of 30, indicating that the indices are technically at oversold conditions, thereby signifying a short-term bounce-back in the near future.
September is historically one of the worst months for the stock market. As September ends, the beginning of October and the start of large-scale quarterly earnings report releases may be a time for the market to stabilize and also even experience some degree of recovery in price action, at least if there is any economic or company-specific news that could signify a lessening in inflation and continuing earnings strength. This is a setup where even bad news could be considered to be good news for the stock market, such as an increase in unemployment suggesting easing inflationary pressures. The likelihood that the early November Congressional elections will lead to divided government (historically looked upon favorably by the markets) would also be an expected near-term catalyst for upward stock price action.
Economic news for the week due to be released
Economic and financial news due to be released this week includes the following: On Tuesday, 9/27, durable goods orders for August and new home sales for August are to be released by the Commerce Department. On Wednesday, 9/28, figures on new contract signings for real estate are to be released by National Association of Realtors. On Thursday, 9/29, revised figures for 2nd quarter GDP are to be released by the Commerce Department, and weekly new unemployment claims for the previous week are to be released by the Labor Department. On Friday, 9/30, U.S. household spending and income for August is to be released by the Commerce Department, and the first reading of September consumer confidence figures is to be released by the University of Michigan.
Near-term stock and options positioning
For a stock market investor using the Market FIRE approach, the current bear market climate may present opportunities for opening or adding to positions in one’s long stock portfolio with certain attractively valued shares in profitable companies, including reasonably valued technology companies, financial institutions, energy exploration companies, and discount retailers. Dollar-cost averaging at this stage is appropriate. With an expected recession in 2023, it is also to be expected that the stock market has more downward movements ahead. Recognizing that the stock market usually anticipates macroeconomic conditions and may have already done most of the necessary correction in valuations, it would be impossible to call the intermediate-term bottom with any degree of confidence.
By this stage in the current market decline, many if not most of the Market FIRE investor’s covered call options should have become profitable to the point that it has been appropriate or may soon become appropriate to buy to close those short options. This condition should be advantageous for previously rolled-over covered calls from previously unprofitable in-the-money call options with earlier expiration dates from nearer to last summer’s relief rally. A pause in re-writing the covered call options against existing stock may be appropriate until the current oversold conditions have an opportunity to be corrected and stock prices can experience something of a renewed relief rally, projected to be in October. This pause could allow for maximizing the amount of options premium collected on somewhat appreciated underlying stock prices, thereby reducing the chances that these covered calls will become unprofitable by a sudden future increase in stock prices.
This is not individualized investing advice and is offered for informational and educational purposes only. Investors should conduct their own research and seek individualized advice from registered investment advisors before acting on any investment recommendations or commentary.
Above all, now is the time to stay disciplined, and try to remain calm! Good luck, everyone!
Stock Market FIRE.com 
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