The COVID-19 pandemic has caused a lot of concern among traders and investors of all experience levels.
With businesses closing their doors, people staying inside, and a major labor shortage, there have been many events since March 2020 that have impacted the economy.
As the COVID-19 pandemic continues, we are likely to see even great economic effects across the globe.
So, should you be worried about a stock market crash in the near future?
David Jaffee of BestStockStrategy.com says no, the stock market will not crash.
Keep reading to learn why a stock market crash is not likely to occur in the upcoming months and how you can invest wisely during these uncertain times.
What happens before the stock market crashes?
David Jaffee does not believe the stock market will crash anytime soon.
With an Ivy League degree, a career in investment banking, and a thriving options trading business, David Jaffee is in tune with the stock market and the latest investment strategies.
Through his platform, BestStockStrategy.com, David Jaffee teaches people how to trade options and understand the stock market.
While many talking heads may try to predict a stock market crash, the truth is that they oftentimes try to sell fear to their audience as a way of increasing ratings.
Constantly reading the latest news, consuming the newest reports, and watching interviews with so-called gurus is usually a waste of time.
David Jaffee has two primary reasons why he believes the stock market will not crash, including a lack of euphoria in the marketplace and the fact that the VIX is still trading above 15 (and not at the 12 or 13 level which usually indicates complacency).
Indicators of a Stock Market Crash
By paying attention to the stock market, you can notice key indicators of an impending crash.
Before the stock market crashes, there is typically a lot of euphoria in the marketplace.
You can look back on some of our notable crashes in recent years to identify this pattern of euphoria preceding a stock market crash.
In February of 2018, December of 2018, and February and March of 2020, there was a large run-up to those specific crashes.
This was not as noticeable in December of 2018 because the market had a relatively significant pullback and volatility expansion in October of that year, however it rapidly recovered those losses in November 2018 and became complacent again in late November & early December of 2018 prior to a significant pullback.
In January and early February of 2020, the market went up tremendously.
This also occurred in January of 2018 when the market went up euphorically before crashing in February 2018.
In general, prior to a crash, there tends to be a sense of euphoria and investors and traders are very complacent.
The other marker of a large pullback event is that typically volatility would be trading very low, with a VIX reading of around 12 or 13.
In March of 2021, the VIX was trading at about 20.
As of early June 2021, the VIX is trading around 16 – 17.
While the VIX is currently trading lower than it has been at any time since February 2020, it is still relatively elevated from a historical perspective.
Large Companies Have Already Pulled Back
Additional supporting information to discredit an upcoming stock market crash can be seen in other ways.
- Amazon is trading at about 12% to 25% below its 52-week high.
- Tesla is trading at about 20% to 25% below its 52-week high.
- Apple is also trading at about 15% to 20% below its 52-week high.
When you combine the fact that many of the largest companies in the world have already pulled back, the market is not currently in a euphoric state, and the volatility in the S&P 500 index (measured by the VIX) is already relatively high, it does not seem like we are headed for a stock market crash.
What happens when the stock market crashes?
While it is not likely that the stock market will crash anytime soon, it is best to be prepared.
David Jaffee teaches his students to reduce portfolio volatility and place high probability trades, no matter the market conditions.
With the best options trading strategy, you can protect yourself against in volatile markets and learn how to make wise decisions about when to trade.
David Jaffee also encourages his students to be disciplined and patient when placing trades so that they optimize their probability of profit.
When options traders get too comfortable and overconfident, they may start to trade too big or too often.
In the event of a market crash or a significant pullback, these traders could be left with massive losses.
Maintaining an options trading strategy for consistent profits can help you be successful when the market is going strong or during a downturn.
More than 1,500 students have learned how to win ~95%+ of their trades by selling option premium through David Jaffee’s online options trading course.
You can enroll in the 7 day trial, it's only $19, at https://beststockstrategy.com/memberships