To The Moon

The stock market plummeted Heavily on Tuesday, with over $1.6 Trillion market value being evaporated as reported, more than 4% of the total market value of U.S. stocks.

The $NASDAQ(.IXIC)$ fell more than 5%，this is the biggest drop in 2.5 years after the outbreak began in March 2020. The$S&P 500(.SPX)$ fell 4.3% to 3,932.69, The $DJIA(.DJI)$ fell 3.9% to 31,104.97.

Data from: Tradingview.com

All sectors are miserable today, only 5 stocks( $Corteva, Inc.(CTVA)$ , $Twitter(TWTR)$ , $CF Industries Holdings Inc(CF)$ , $Albemarle(ALB)$ , $ Mosaic (MOS)$ ) in the $S&P 500(.SPX)$ closed slightly higher. The performance of each industry is as follows:

Source from: https://finviz.com/

Cyclical stocks sectors like materials, and technology stocks were fell the most due to sensitive to interest rates. Communication Services, Technology and Consumer Cyclical stocks all fell more than 5%.

Big tech stocks experienced a rough day: $Apple(AAPL)$ fell 5.87%, $Microsoft(MSFT)$ fell 5.5%, $Amazon.com(AMZN)$ drop 7%, $Alphabet(GOOG)$ decreased 5.9%, and $Tesla Motors(TSLA)$ declined 4%. Worst of all, Facebook parent Meta Platforms Inc. (META) slipped 9.4%.

Semiconductor stocks have been hit especially hard. $NVIDIA Corp(NVDA)$ , $AMD(AMD)$ ) and $Micron Technology(MU)$ all fell more than 7%.

Source from: https://finviz.com/

What's the reason for the drop?

WillThe broader market $S&P 500(.SPX)$ fall below 3900 points?

Where is the support and what are the hedging strategies?

1. The Reason for The Slump is, of course, Inflation.

Tuesday's CPI reading was higher than expected, reaching 8.3%. Core inflation, excluding cyclical consumer goods such as food and energy prices, came in at 6.3%, also above market expectations. See below:

Inflation is so strong, the FED can be expected to raise interest rates even more aggressively. Many people think that the next Fed rate hike will be a direct 1% increase, not the same 0.75% in the previous two time. It is estimated to increase to 4.3% by early 2023.

Interest rates on all U.S. Treasuries have risen. The annual U.S. Treasury yields rose to 3.78%, the highest since 2007. The 2-year U.S. Treasury yields surged to 3.75%, hitting its highest level since 2007. The 30-year interest rate rose to 3.57%, the highest since 2014. As interest rates rise, the dollar will naturally strengthen, The dollar rose 1.4% against a basket of six currencies, while the euro and pound fell 1.4% and 1.5%, respectively.

Investors have ramped up bets that the Fed will have to take more aggressive steps to curb inflation.

2. Experts and Institutions’s Views on Market Outlook

Billionaire 'Bond King' Jeffrey Gundlach,once again issued a warning to the market. Gundlach expects the $S&P 500(.SPX)$ to fall to 3,000, or nearly 24% from Tuesday's close.

Gundlach stressed that the performance of the credit bond market was consistent with economic weakness and the decline in the stock market.“ From now on, we have to be more bearish.”

Gundlach advised investors to buy long-term U.S. Treasuries, as the risk of deflation is now much higher than it has been in the past two years and has become a bigger threat. And he also hinted that the Fed's aggressive tightening will cause the economy to slow, and long-term U.S. bonds will outperform the broader market next year.

Greg Jensen ,The world’s largest hedge fund-Bridgewater'sco-chief investment officersaid in an interview with the media: "the stock market hasn’t fully priced in a recession, and that the U.S. is at the center of a global bubble that has yet to burst."

Greg Jensen—BLOOMBERG/GETTY IMAGES

He also pointed out that investors have overestimated the FED's ability to curb inflation. Continued inflation coupled with slowing U.S. economic growth will eventually lead to continued asset price declines. This isjust the beginning of the pain for investors.

Discuss：August CPI exceeded market expectations again！ And the September "hawkish" rate hike is reserved?75bps or 100bps? Click to discuss！

3. If US stocks continue to fall, where is the target support?

Bank of America strategist Stephen Suttmeier analyzed from a technical level: The $S&P 500(.SPX)$ has recently been supported near the low of 3810 at the end of May. The mid-July low may provide the next support between 3738-3712. However, if the index falls below the 61.8% retracement level of the June-August rally, or 3899.84, it means the index is at risk of a retracement to the year's low of 3636.

Morgan Stanley stayed bearish in a September report, warning that U.S. stocks have yet to bottom, and if investors turn their attention from Fed tightening to slowing economic growth, in a best-case scenario, The $S&P 500(.SPX)$ will end the year down to 3,400, and in a recession, the index will drop to 3,000.

Legendary investor Jeremy Grantham, who has successfully predicted three market bubbles, has warned that the current "super bubble" in U.S. stocks and other assets appears to be entering the final stage before bursting. In January of this year, he warned that U.S. stocks were in their fourth “super bubble” in the past 100 years. He is convinced that this bubble will burst like the 1929 stock market crash, the dot-com bust of 2000 and the 2008 financial crisis, and the $S&P 500(.SPX)$ could fall nearly 50% from its peak to around 2,500 points.

Will the S&P retrace to 3600? 3400 points? 3000 points? 2500 points? Which prediction do you think is more reliable?

4. What Short/ Bear Hedging Strategies To Consider?

JPMorgan analyst John Schlegel said in his latest opinion: "If we are heading for a more general market decline, the U.S. stock market will fall below the mid-June low and CTA may further short stocks."

The short of the broader market, as well as Bear ETFs performed well on Tuesday, For ordinary investors, you can choose to buy a bearish ETF, or buy an inverse ETF for a single stock to hedge against the decline of the broader market or an individual stock.

Specifically there are four types short strategies as low:

• Tickers to Short the Broad Market Index

ETFs to short $DJIA(.DJI)$: $ProShares Short Dow30(DOG)$, $ProShares UltraShort Dow30(DXD)$, $Dow30 Bear 3X ETF(SDOW)$;

ETFs to short $NASDAQ 100(NDX)$: $ProShares Short QQQ(PSQ)$, Bear 2X-$ProShares UltraShort QQQ(QID)$, $Nasdaq100 Bear 3X ETF(SQQQ)$;

ETFs to short $S&P 500(.SPX)$: $ProShares Short S&P500(SH)$ , $S&P 500 Bear 2X ETF(SDS)$ , $Direxion Daily S&P 500 Bear 3X Shares(SPXS)$;

ETFs to short $iShares Russell 2000 ETF(IWM)$ ：Bear 2X-$ProShares Short Russell2000(RWM)$,  $Direxion Daily Small Cap Bear 3X Shares(TZA)$;

• Tickers to Short Specific Industry

ETFs to short semiconductor stocks：$Semiconductors Bear 3x Shares(SOXS)$

ETFs to short tech stocks：2X Bear- $ProShares UltraShort Technology(REW)$

ETFs to short biotech stocks: 2X Bear-$ProShares UltraShort Nasdaq Biotechnology(BIS)$

ETFs to short financial stocks：$ProShares Short Financials(SEF)$

ETFs to short energy stocks: $Direxion Daily Energy Bear 2x Shares(ERY)$

ETFs to short real estate stocks：$Direxion Daily Real Estate Bear 3X Shares(DRV)$

ETFs to short oil and gas stocks: 2X Bear- $ProShares UltraShort Oil & Gas(DUG)$ , $Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares(DRIP)$

ETFs to short consumer stocks: $ProShares UltraShort Consumer Services(SCC)$

• Single-stock Bear ETFs

At present, there are only relevant short ETFs for 6 stocks of $Apple(AAPL)$ , $Tesla Motors(TSLA)$ , $NVIDIA Corp(NVDA)$ , $PayPal(PYPL)$ , $Pfizer(PFE)$ , and $Nike(NKE)$ . The relevant tickers are as follows:

$Tesla Motors Bear ETF-AXS(TSLQ)$ , $NVIDIA Bear 1.25X ETF-AXS(NVDS)$ , $PayPal Bear 1.5X ETF-AXS(PYPS)$ , $Nike Bear 2X ETF-AXS(NKEQ)$ , $Pfizer Bear 2X ETF-AXS(PFES)$, $Direxion Daily AAPL Bear 1X Shares(AAPD)$, $Direxion Daily TSLA Bear 1X Shares(TSLS)$ , $GraniteShares 1x Short TSLA Daily ETF(TSLI)$

• Tickers to Short other Asset Areas

Bull Fear Gauge: $Cboe Volatility Index(VIX)$ ,$VIX Short-Term Futures 1.5X ETF(UVXY)$

ETF to Short Oil: $Bloomberg Crude Oil Bear 2X ETF(SCO)$

ETFs to Short Gold: $DB Gold Short ETN(DGZ)$ , Bear 2X ETF- $DB Gold Double Short ETN(DZZ)$, Bear 2X ETF- $ProShares UltraShort Gold(GLL)$ ，

ETF to Short Silver: Bear 2X ETF- $ProShares UltraShort Silver(ZSL)$

ETF to Short EUR:  Bear 2X ETF- $ProShares UltraShort Euro(EUO)$

ETF to Short China: $FTSE China Bear 3X Shares(YANG)$ ,

ETF to Short Emergency Market: $Direxion Daily MSCI Emerging Markets Bear 3X Shares(EDZ)$

In addition, users who are familiar with options can conduct trading methods such as sell call options or buyput options to hedge.

Welcome Tigers to share great strategies under the post, wish you a great in investing.