Since the Great Depression of the early 1930’s, there have been 14 US recessions and, over the last century, the average recession lasted about 14 months. Historically, the standard rule of thumb for identifying a recession was two consecutive quarters of negative GDP growth. This was a straightforward, measurable benchmark which, for the general public, was easy to understand. However, once the political thought police began controlling the narratives, particularly during the Biden Administration, the National Bureau of Economic Research (NBER) broadened the definition of recession to capture a range of indicators such as personal income, employment, personal consumption (PCE), wholesale-retail sales and overall industrial production. This broader definition has since sparked a debate among critics who saw this as an attempt to downplay economic struggles amid rising inflation and other challenges.
Americans are not as dumb as the Washington Elites believe them to be.
It’s a fact that mainstream media, is no longer mainstream. The rise of independent bloggers, YouTube influencers, and platforms like X have diversified the media landscape, giving consumers and investors more options than ever before. These alternative sources often appeal to audiences seeking unfiltered perspectives, particularly for those who have lost trust in the legacy outlets. The influence of these new media personalities is undeniable. In fact, some of these independents have amassed followings that rival or exceed traditional TV networks and newspapers, so it’s not hard to find data that tells us we are heading straight into a major world-wide recession, or possible depression.
Social Media Platform X has indeed become a major hub for real-time information, with millions of users posting and debating news as it unfolds. Its format enables short, immediate updates that suits the fast-paced digital age, where users often have access to stories that break before they hit the traditional channels.
Be cautious because there is a flip side.
On the flip side, not all financial posts or influencers move the needle that much. Most lack the reach or credibility to sway big money, like institutional investors who dominate market volume. Data from Bloomberg (mid-2024) suggests that while retail trading spiked during the pandemic, its share of total U.S. equity volume is still only about 20-25%. So, unless an influencer’s call goes viral or gets picked up by algorithmic trading bots (which scan X for sentiment), the effect might stay contained. Plus, as more people post financial “advice”, the noise could cancel itself out, creating too many conflicting signals for anyone to dominate.
The Real Kicker is Context.
Volatility spikes when influencers hit a nerve, like during economic uncertainty or when a stock’s already on the edge like, Strategy, Inc. (Ticker: MSTR). Think back to Tesla in 2020 when one post from Elon Musk moved the price, creating a massive short squeeze which resulted in a vertical price move in the stock. We’ve also seen this with meme stocks like GameStop in 2021, where coordinated hype on Reddit and Twitter (now X) led to wild price swings.
I’ve reported on this strategy many times over.
As for me, I’d rather let the meme traders have their way with the price as I remain patient for the exhaustion of the move in the opposite direction. Once the volume dies out and the price action begins to pivot in the opposite direction, I am quick to put on a long-term calendar spread with the goal of collecting cash on my position, month after month, as I roll the short side of the spread. Our option traders are very familiar with this strategy as I focus on creating what I call “cash cow positions” through our Super Spread service.
Here is one example:
On November 21st, 2024, we published a trade idea on MicroStrategy Inc. (Ticker: MSTR) to buy the January 2027 400 LEAP Puts, while simultaneously selling the Jan 2025 300 out-of-the-money puts. Selling the Jan 300 puts allowed us to take in a sizable cash credit which, in turn, helped to pay down the cost basis of the Long LEAP Puts.
See chart below:
The stock has since broken out below a textbook triangle which will most likely lead to lower prices in the months ahead.
Don’t fear the coming recession….embrace it and learn how to profit from it.
Recessions are a natural economic cycle that help bring down inflation. When consumers run out of money, they cut back on their spending. When consumers cut back on their spending, inventories build up in the warehouses. Retailers and producers will then be forced to lower prices to sell their products and services. Yes, there will be some who will suffer due to corporate cutbacks but there are many opportunities for people to take advantage of, and trading from home on your own personal computer is one of those opportunities. Learning how to trade will take time, so I would not suggest that you jump into the market before learning how to manage the risks.
We can’t say we haven’t been warned.
The Federal Reserve Bank of Atlanta has recently published a GDP forecast (as of Feb 28th) that is shocking, and if their forecast is correct, we could see a massive selloff in the market that could trigger the next major bear market.
https://www.atlantafed.org/cqer/research/gdpnow
Note to Investors: Do not take this information as investment advice. However, I do suggest, you ask your financial advisor how to collar your long-term buy and hold positions. This is a basic strategy that could help mitigate downside risk while still allowing you to realize small profits on long positions, should the markets go higher.
Crawl before you walk…walk before you run…and run before you leap.
For a FREE, no-gimmick, two-week trial, and full access to AJ’s trade publications, education, market commentary, live webinars, & archived content, please head here.
For a StickyTrades.com offer, EXCLUSIVELY for ZeroHedge readers, check us out here.
