Stock Market Crash Starting | Get Rich with These Options

With the stock market waking up to the reality of the Federal Reserve raising interest rates and keep interest rates elevated for longer, the stock market crash 2023 is starting. A stock market crash coming means stocks are about to go down fast. This stock market news might be scary to some, but it’s important to remember that when you get a stock market crash starting, there are ways to make money with options trading, such as put options, which will allow you to get rich with these options. So let’s talk about how the stock market bubble is bursting, and how today’s stock market correction could turn into more of a market crash today. If you want the stock market crash explained, and want to hear the best stock market analysis, this will help you.

Understanding the market’s reaction to the Federal Reserve is far more important than understanding what the Federal Reserve does. Because if you can understand how the market reacts, you can predict where the market is going to go in the future. So let me just very quickly recap what the Federal Reserve did on Wednesday at their September FOMC meeting, then let’s focus on the market’s reaction so that we can make a good prediction for the next couple of weeks.

As expected, the Federal Reserve did not raise interest rates at their September meeting, but they did point to rates remaining higher for longer. Now, this should come as no surprise to anybody. After all, it’s exactly what the Federal Reserve has said they were going to do. And part of the reason that the Federal Reserve is going to keep interest rates elevated is because inflation is starting to tick up, which is not a good sign. And the economy remains quite resilient, at least if you look at the official government data, so for both of those reasons, the Federal Reserve remains committed to leaving interest rates elevated while continuing to do quantitative tightening.

And even though this came as no surprise to bond traders or economists, the stock market was a bit shocked because the stock market still had this belief, falsely so, that the Federal Reserve was going to start cutting interest rates very quickly here. And as the stock market starts to wake up to this reality that the bond market has known for many years now, the stock market is starting to sell off. Stocks slid as the Fed signaled it was not done hiking interest rates. The Nasdaq fell about 1.5% in about one hour, and the S&P 500 fell about 1% in one hour.

Now, of course, we will get the real market movement on the following day, which in this particular case is Thursday. So if the stock market continues to sell off over waking up to this new reality that the Fed is raising interest rates and going to keep interest rates elevated and that they’re not going to cut like the fairy tale that the stock market has been believing, so long as the stock market continues to wake up to this new reality, it should continue to sell off on Thursday. And longer term, it should continue to sell off for at least the next two weeks.

Of course, the Fed didn’t just say they were going to keep rates elevated for longer. They also signaled that they would raise rates one more time before the end of the year. And based upon the Federal Reserve’s current rate cycle, it looks like they will be raising rates by a quarter percentage point at their next meeting. Again, this comes as no surprise. This is exactly what bond traders and futures traders have been expecting and have been pricing in. It’s only the stock market that was not pricing this in, and that’s why we saw stocks sell off on Wednesday after these announcements came out.

Now, in addition to that, while I would expect the stock market to continue to sell off on Thursday, if – and this is a big if – if the stock market continues to believe that the Federal Reserve is going to do what they’re saying they’re going to do – keep in mind that so far for pretty much the entire year, the stock market has believed that Jerome Powell is a liar and that he will not do what he says he’s going to do, and yet for the entire year, Jerome Powell has done exactly what he said he was going to do – now, whether or not the stock market continues to wake up to this new reality, or if they revert back to their delusional state and the stock market rises, that is yet to be seen. But the logical response would be for the stock market to sell off on Thursday, and the logical response would be for stocks to continue to go down at least through the end of this month.

Now, there are other reasons for the stock market to fall through the end of this month beyond just the Federal Reserve. One of the biggest reasons is the government shutdown that is looming on September 30th. Very often the stock market will fall leading up to that government shutdown, before Congress works through the weekend and overnight in this miraculous plan to not come to an agreement but just extend the deadline. It’s all games. It’s all ridiculousness. Regardless, the stock market will usually sell off leading up to that September 30th deadline. And it’s one of the main reasons why the stock market is historically falling off a cliff in the second half of September before bottoming out, recovering, and rallying in October. Because usually what happens is we get right on the brink of a government shutdown. Congress agrees upon a budget at the last second, and come October, the stock market rallies. So if we continue with those historical ways that we normally go, I would expect the stock market to continue to fall through the end of the month and then bottom out and rally in October.

Now as all of this is going on, it just so happens that this is a really bad time for IPOs. Not only did we have the Arm IPO a few days ago, we also had the Instacart IPO and a few others, and they’re just not performing well. Instacart fell 11% on the second day of trading and it has now wiped out almost all of its IPO gains. And it’s not just Instacart. Arm has also wiped out its gains. And the other IPO that occurred – I can’t remember what it was – it wiped out its gains as well. So three IPOs in five days, and all three are below what price they started trading at. It’s just not a good time for the IPO markets.

So generally in an IPO, companies want to wait for the market to be extremely bullish, preferably extremely speculative, extremely overbought, extremely overhyped, because in that kind of environment, you can do your IPO and you can raise a lot more money than you can if the market’s sitting here in extreme fear and nobody wants to buy any stocks. You want to do your IPO when everybody is buying anything, and everything and they don’t care about valuations, and they’re just buying for the sake of buying – that’s when you want to do the IPO. So the fact that we are starting to get a lot of IPOs all come out at this same time shows us that we’re in that state where everybody’s just buying for the sake of buying. Nobody cares about valuations, and stocks are just rising for no good reason. And it’s just a sign of the times that we’re in.

Unfortunately, being that we’re at the end of September, and the stock market usually goes down, there’s a pretty good chance we’re probably at the end of that little cycle, and these IPOs are just late by a few months, and that’s why they’re all going down. So I don’t know how it’s all going to work out. I do remember the Facebook IPO that dropped for like six straight months, got down to 50% of its IPO price before finally finding a bottom and then rallying whatever it’s up, I don’t know, 5,000%, 6,000% from the bottom. So, I mean, there’s always a good chance for these stocks to rally in the future. But in the short term, they’ve got some insane valuations they’ve got to fix.

Yesterday Arm stock was trading at about a PE ratio of 540 and today that PE ratio dropped down to about 520. Just absolutely insane PE ratios. I mean, you thought Nvidia was overbought at a 60 PE ratio, or Tesla was overbought at an 80 PE ratio – No! Arm has a PE ratio of 500 and something. So it just gives you an idea of just how insanely overpriced these IPOs are right now and why they’re so likely to come down.

Now, in addition to that, we got something else going on in the news we got to keep our eyes on, although I would expect this to get resolved fairly quickly, and that is the United Auto Workers strike. GM and Stellantis said they just laid off more than 2,000 additional workers because of the strike. Now, this headline is kind of clickbait. Yeah, they did lay them off, but it’s temporary, meaning they’re just going to rehire them as soon as the strike is over. Should the strike get resolved tomorrow, they’re rehired tomorrow. So it’s a little bit of a clickbaity title. They’re not really firing, letting go of these people, they’re just temporarily laying them off until the strikes are over. Basically with the plant shut down, there’s no need to produce additional parts since they’re not assembling any vehicles. So they’re just shutting down some of the suppliers so that they’re not getting an overflow of supplies that there’s no cars to put those supplies into. So that’s basically what’s happening there.

Now, as far as the strike itself, they’re still working on some things. I know the White House is involved. Former President Donald Trump is involved. There’s other people that are all trying to get involved now, just trying to get this resolved because it is such a big deal for the US economy. And the UAW has now said that they are going to increase the amount of workers who are on strike on Friday if they don’t come up with an agreement by then. Usually these things get resolved over a weekend where they have a lot of time to really focus on negotiations and work something out without all the distractions of the day to day operations of the business. So I would not be surprised to see this get resolved this weekend or maybe next weekend at the latest.

I don’t think this is going to be a very long strike just because it is such a crucial part of the economy. I think the US government is going to step in, especially the White House, and they’re going to come up with some kind of consolation to the automobile companies in order to get this strike resolved fairly quickly. I don’t think this is going to be like the writers strike that the media companies are dealing with right now because as a media company, they just don’t have a huge impact on the overall economy like the automobile industry does. So that would be my guess, is this will probably get resolved fairly quickly.

I know a lot of people think this is going to be good for Tesla stock. In my personal opinion, I don’t think it’s going to have an impact on Tesla’s vehicles or deliveries because I just don’t believe that somebody that’s going to go spend $60,000 on a car is going to buy a Tesla EV when what they really want is a Ford or a GM or whatever else they’ve got their eyes on. I just don’t see people buying a Tesla just because Ford and GM are on strike. I don’t think it’s going to work that way. I know I wouldn’t. Let’s just say I really wanted a F-150 pickup truck, and that’s what I had my eyes set on. I’m not going to go buy a Tesla car because I really wanted a F-150 pickup truck and I can’t get one. It just doesn’t work that way. So I don’t think this is going to be as good for Tesla as people think it will be.

And you know what? If Tesla’s running up in price, do you really think it’s going to sell off at the end of the strike? No, you’re right, people are going to buy Tesla because they want to buy Tesla. They’re going to come up with any reason, any excuse, to buy it. Kind of like when Tesla first started getting into China and everybody is saying, oh, China is the new market. It’s going to be huge for Tesla. It’s going to cause the revenue to skyrocket and it’s going to change everything. China changes everything. Buy Tesla because they’re getting into China. Buy, buy, buy. Then when Elon Musk started cutting the price of the vehicles in China, and cut the price of the vehicles in half – killing all of the margins and literally taking a loss on vehicle sales in China, just trying to gain market share. Those exact same Tesla bulls came out and said China doesn’t really matter. It’s a very small part of Tesla’s overall sales. It’s really negligible. It’s irrelevant. Don’t even worry about China. China doesn’t matter. Just buy Tesla stock.

You know, you can’t have it both ways. China is either super important and it’s going to change the world, or China doesn’t matter at all. You can’t just pick and choose based upon what’s happening at the moment. So this is just kind of the way it is with people that are really hyped up about a particular stock. They’ll just find any reason whatsoever to buy, and they’ll just dismiss any reason to sell. It’s just the way people are. So, you know, I just say all these things just to say that the market is irrational. And as you guys know, if you watch this channel, I’ve got Tesla puts right now. I know the market’s irrational. I know you don’t bet against Tesla. I’m just hoping for some sanity to come back into the market and for stocks to get back down to some fair valuations. I don’t know if it will or not. That’s just my bet.

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