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I have written numerous articles over the years about volatility: what it means “right now”, how to trade rising volatility, how to manage low volatility, what the relationship between volatility and price mean. The current market volatility we are experiencing is like nothing I’ve traded in my lifetime. For the first time ever, I am telling you to sit on the sidelines.

Normally I always offer “sitting back and waiting” as just one of many strategies you can use when volatility is high – not as THE trading strategy to follow. But there is just far too much uncertainty over erratic tariff announcements, the threat to fire Fed Chief Jerome Powell, and the resulting economic fallout to do anything but wait.

The VIX – the volatility index – spiked to over 52 on April 8. It has remained high since then with no relief in sight. In response, investors and traders have been panicking and dumping stocks. As of this writing, the SPX 500 is down 9.5% in the past month. The other indices are doing terrible as well.

Sit tight during the current market volatility 

The Explosive Options Swing Trading portfolio is sporting nice gains YTD, and I am not going to jeopardize that. I have taken all trades off the table and am holding cash.

Am I still monitoring markets and indicators? Yes, absolutely. But with few bullish charts out there, I am just not taking the risk of losing capital.

Could you diversify your portfolio right now to build wealth? Normally, if you spread out your capital along different asset classes that have a low correlation to equities is a smart move.

But… European equities are getting hammered as well. Bond yields are high and rising (not a good sign for equities), but there is the looming threat that major bond holders will dump Treasuries and tank that market. Gold and/or silver are usually safe bets, especially when market volatility is high. Right now, cash is the safest place to be.

Why hold cash right now

By holding cash right now, you will be able to sleep better at night. Anyone want to obsess over the futures market at 3am? Me neither.

Second, when the markets turn around, which they will eventually, you will be ready to scoop up some great names and bargain prices. And this is why you need to continue paying attention to the market action. Once a bullish trend is confirmed, you want to be ready to pounce.

You will know a new trend is forming when:

Sentiment indicators change direction

Sentiment indicators look at past behavior. An extreme bearish stance signals sentiment is about to change direction. It seems like that’s every day right now, but keep your eye on the bull/bear ratio, Citigroup Sentiment Index, Citigroup Emerging Market Weather Vane and Investors Intelligence. These are great indicators to follow

Put/call ratio starts to drop

When put/call readings are over 1, fear is high. When it starts dropping – and continues to drop – bullish sentiment is rising.

New highs/lows are consistently being made

If you watch my weekly chart analysis, you will know that I often say, “New highs and new lows are a textbook sign of a bullish trend.” Just remember that there HAS to be follow through.

Remember: bear markets are often short-lived

I know it doesn’t feel like a bear market will ever end when we’re in one, but it will. Be patient.

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