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How to Prepare for the Upcoming Frenzied Bull Market, Says the Author of the Best-selling Tao of Trading

Be nimble, be quick, and don’t count on buying the dip.

That was the research arm of BlackRock’s Investment Institute, which on Monday revealed a non-‘Goldilocks’ landscape for investors grappling with inflation and recession concerns as earnings season ramps up.

Our call of the day comes from the founder of the Tao of Trading Options Academy School and author of the book of the same name, Simon Ree, who also sees this as a good time for investors to shake up their routine.

Included in his Bear Market Trading Advice is a proposal to “hold a lot more money than you’re used to holding” and abandon the traditional mindset that dictates eggs are needed “in a certain number of baskets,” Ree told MarketWatch in an interview Monday .

Rather than asking where to put their money, investors should educate themselves on “how to identify high-probability, timely moments to own stocks, commodities, crypto, whatever it is,” he said.

After that, the process should be something like this: “I’m going to buy it, I’m going to manage it, and I’m going to set a profit target and maybe just let a few of these trades go through my portfolio each month or year and just try to build on those way to get a return,” said the Singapore-based trader, who has 25 years in private and investment banking and has worked at Citigroup and Goldman Sachs.

And a fresh strategy is even more important as Ree prepares for a lot of volatility. “Potentially difficult market here. I think stocks are preparing for a rally that will destroy shorts and make bulls nice and comfortable before destroying bulls followed by a big flush down. Stocks have never celebrated the prospect of a recession like this before,” Rees said tweeted last week.

Explaining this tweet further, he said that the slowdown in commodity markets could fuel hopes that inflation has peaked and that the Fed will pivot in a dovish direction, fueling stock gains. Markets appear to have priced in an imminent recession, but strong labor and housing markets will provide a buffer for now, he adds.

Those hopes may or may not be sparked by Wednesday’s June consumer prices, which some say are reaching nearly 9% annually.

“But the big picture is this: monetary tightening has led to recessions in all but 10% of cases since the Fed’s inception in 1913,” Ree said.

As for a bull-crushing flush down following a rally, we may have to wait.

“I think once it’s confirmed that we’re in a recession, the S&P 500 SPX,
-1.15%
could be significantly lower than it is now and the Fed is likely to start easing again. I think that’s a long way off and I don’t think the Fed will start easing until unemployment overtakes inflation as a concern of the day,” he said.

Our final word from Ree addresses what he sees as a blind spot among investors. “I think this buy-the-dip mentality is just so ingrained, I think by the time this bear market runs its course, people will have sworn off stocks for another generation… but this will be the buying opportunity.”

The Buzz

A new survey shows that small business owners have never been so pessimistic about the future of the economy. Later we’ll hear from Tom Barkin, President of the Richmond Fed.

Canoo GOEV,
-8.14%
Stocks soar after Walmart WMT,
+0.04%
ordered 4,500 of its EV delivery vehicles.

main field PTON,
-12.63%
were down after the home fitness company announced it would shut down operations at Tonic Fitness Technology in Taiwan as part of a plan to divest all of its own manufacturing operations.

shares of BYD 1211,
-11.93%
tumbled in Hong Kong on speculation that major supporter Warren Buffett’s Berkshire Hathaway BRK.A,
-0.92%
may be preparing to sell stakes in the Chinese electric car maker.

Bill Ackman’s special purpose acquisition company Pershing Square Tontine Holdings PSTH,
-0.05%
closes and will return $4 billion to shareholders.

Amazon’s two-day Prime Day event kicks off Tuesday, and bargain hunters are hoping to score big discounts amid rising inflation.

PepsiCo PEP,
-0.82%
reported forecast sales and earnings. We will hear from Delta Air Lines DAL,
-1.45%
on Wednesday, JPMorgan Chase JPM,
-1.31%
and Morgan Stanley MS,
-1.19%
on Thursday, with Citi C,
-1.35%,
Wells Fargo WFC,
-0.97%
and United Health UNH,
-0.32%
on Friday. By July 29, more than 70% of S&P 500 members will have reported.

Read: Why Wall Street’s earnings expectations for megabanks have cooled

The graphic

It was quite a dogfight among forex traders, with the euro EURUSD,
-0.10%
inches from parity before rising against the dollar early Tuesday. This will be a first since 2002.

The markets

Dow Futures YM00,
-0.88%
fell over 200 points, with S&P 500 ES00,
-0.75%
and Nasdaq Futures COMP,
-2.26%
also falling, along with TMUBMUSD10Y bond yields,
2.919%
and oil prices CL.1,
-4.90%,
while the dollar DXY,
+0.27%
roars ahead. bitcoin BTCUSD,
-3.60%
slipped below $20,000.

The tickers

These were the most searched stock tickers on MarketWatch as of 6am:

ticker

security name

GME,
+1.21%

GameStop

TSLA,
-6.55%

Tesla

AMC,
+1.98%

AMC entertainment

NEVER,
-8.98%

NEVER

AAPL,
-1.48%

Apple

TWTR,
-11.30%

Twitter

MULN,
+4.27%

Mullen Automotive

AMZN,
-3.28%

Amazon

BABA,
-9.37%

Alibaba

NVDA,
-4.33%

NVIDIA

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