It’s an extended holiday weekend, but come Tuesday… Wall Street’s bigger plays return from vacation and get back in the saddle…
With so many traders chasing alpha… it means things can even whackier.
Market volatility has taken a toll on a lot of traders already… but the last stretch of 2019 looks no different…
Currently, there are several catalysts on the table that can potentially pop off and send volatility through the roof.
… we still don’t have a trade deal – and U.S. tariffs have already hit Chinese goods at 12:00 AM today… U.S. presidential election on the way, interest rates signaling a potential recession, the Fed, and so many more landmines all over the place.
So how can you adapt in a way that allows you to profit in this environment?
It’s simple really…
All you have to do is focus on what the charts are saying and only trade your best setups… also, shortening your holding period can help (don’t be scared to take profits quickly or cut losers right away).
That’s exactly what I’ve been doing with my Bullseye Trades. It’s my one trade a week – highest-conviction idea – that I aim for triple digit returns (or better).
And so far, it’s been working really well.
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Heck, I haven’t a single loser yet…
And you know what else?
I’m going to be sticking to my guns and focusing on the strategies that can generate massive returns like the one you see below… regardless if the trend is up, down, or sideways…
But despite my bearish bias… I won’t let my ego dictate my trades… and if the charts are screaming a buy… I won’t hesitate putting on bullish bets either… like this one:
If you know me, I also focus on the macro view, and even though sentiment hasn’t always been the easiest to read… I’m now seeing a clearer picture, and feel a real good sense on where stocks are headed next.
With that being said, it’s charts-galore in this edition of The Jump – and I’ll be going through with you my favorite setups, as well as my top macro ideas, the economic catalysts I’m watching, and some surprises too…
Before we get into what I’m watching over the short term, I’d really like to take a moment to give some perspective on where we are in history… because a lot of the times history repeats itself, and we’re seeing some similar action in the markets right now.
Check out this chart of the 30-Year U.S. Treasury Yield vs. the S&P 500 Dividend Yield.
We’re just seeing the S&P 500 dividend yield provide higher rates than the 30-Year Treasury yield…
… the last time this happened?
Yes, we’ve seen long-term bond prices skyrocket… but short-term yields currently offer more than their longer counterparts. Hence the inverted yield curve.
We’ve seen inverted yield curves signal recessions… and we could be due for that.
Right now, the 10-Year Treasury Yield is right near levels we haven’t seen since the aftermath of the Great Recession.
However, during the recession – the Fed was trying to stimulate the economy and bought bonds to do so… right now, we don’t have the same easy money policy… and the Fed may be running out of ways to continue the economic stimulation.
So how does this make sense?
It really doesn’t.
Considering the other yields around the world are negative, where would you park your money?
So, the question I am asking myself now is whether investors will forgo bonds for the stock yields?
In the short-term, we’ve seen and could continue to see an appetite for safe yield stocks. We’ve already seen this with utilities and consumer staples outperforming the broader market.
Here’s a look at the Utilities Select Sector SPDR Fund (XLU).
Here’s a look at the Consumer Staples Select sector SPDR Fund (XLP)
Now, here’s a look at the SPDR S&P 500 ETF (SPY).
When you see those two charts, you can see that clearly XLU and XLP have seen on a tear… while SPY has been all whipsawy.
Not only that, we’re seeing some moves in precious metals – something traders turn to when there’s heightened volatility.
Just take a look at this massive run that the SPDR Gold Shares (GLD) has had over the last 6 months.
Silver has also been on a tear…
… and we’re seeing platinum prices breakout now too.
So how am I going to adapt this environment?
Well, for the most part… it’s simple. I’m going to only be focused on my best ideas and keep my holding periods shorter… as well as, keep my crashing stocks strategy in my back pocket.
Right now, you can see that the positions I’m in currently have no more than a few trading weeks until expiration (I’m trading options).
Some names I’m watching currently are NFLX, FB, DE, IWM, ROKU, FIVE, BYND, DIS.
I’m going to be sticking to my charts and the money pattern.
Basically, once I see my charts telling me a stock could pop or drop… I put it on my watchlist and wait for my signal.
For example, here’s a look at Five Below Inc. (FIVE).
Sure, we saw FIVE gap up massively… but the money pattern is signaling FIVE could pull back. Not only that, we saw FIVE get into the gap up it had last week.
With that being said, I’m look at putting on a put spread if I do see a break below… and I’ll be sure to let my clients know when I’m getting in… just as I did with my massive FIVE winner just 2 weeks ago.
I’m pretty much going through the same process with all the stocks I’m watching.
Now, it’s time to look ahead and see what catalysts are on the table because they could give us clues as to where stocks can head.
Monday, September 2
- Markets closed
Tuesday, September 3
- 7:45 AM EST ICSC Weekly Retail Sales
- 8:55 AM EST Johnson/Redbook Weekly Sales
- 9:45 AM EST Markit US Manufacturing PMI
- 10:00 AM EST ISM Manufacturing
- 10:00 AM EST Construction Spending
- 4:30 PM EST API Weekly Inventory Data
Wednesday, September 4
- 7:00 AM EST MBA Mortgage Applications Data
- 8:30 AM EST Trade Balance for July
- 10:30 AM EST Weekly DOE Inventory Data
- 2:00 PM EST Fed’s Beige Book released
Thursday, September 5
- 7:30 AM EST Challenger Job Cuts
- 8:15 AM EST ADP Employment Change
- 8:30 AM EST Nonfarm productivity
- 8:30 AM EST Unit Labor Costs
- 8:30 AM EST Weekly Jobless Claims
- 8:30 AM EST Continuing Claims
- 9:45 AM EST Markit US Services PMI
- 9:45 AM EST Markit UC Composite PMI
- 10:00 AM EST Factory Orders
- 10:00 AM EST ISM Non-Manufacturing Index
- 10:30 AM EST Weekly EIA Natural Gas Inventory Data
Friday, September 6
- 8:30 AM EST Change in Nonfarm Payrolls
- 8:30 AM EST Change in Private Payrolls
- 8:30 AM EST Change in Manufacturing Payrolls
- 8:30 AM EST Unemployment Rate
- 8:30 AM EST Average Hourly Earnings
- 8:30 AM EST Average Weekly Hours
- 1:00 PM EST Baker Hughes Weekly Rig Count
Other Key Events:
- Baird 2019 Global Healthcare Conference, 9/4-9/5, in New York
- Barclay’s CEO Energy-Power Conference, 9/3-9/5, in New York
- Barclay’s Global Consumer Staples Conference, 9/3-9/5, in Boston, MA
- Citigroup 14th Annual Biotech Conference, 9/4-9/5, in Boston, MA
- Citigroup 2019 Global Technology Conference, 9/4-9/6, in New York
- Cowen 12th Annual Global Transportation Conference, 9/4-9/5, in Boston, MA
- DA Davidson 18th Annual Technology Conference, 9/4, in New York
- Deutsche Bank 9th annual Aircraft, Finance and Leasing Conference, 9/3-9.4, in New York
- Goldman Sachs 26th annual Global Retailing Conference, 9/4-9/5, in New York
- KBW Inc. Insurance Conference, 9/4-9/5, in New York
- Wells Fargo Healthcare Conference, 9/4-9/5 in Boston, MA
- Fed’s Williams speaks in New York on Wednesday at 9:25 AM EST
- Fed’s Bullard and Bowman at event in St. Louis on Wednesday
We’ve got a relatively light earnings calendar… but there are still some names to keep an eye on this week.
With so many potential catalysts on the table that could spark even more volatility… now’s the time to lock in and focus on charts and clear signals.
They’ve proven they can work in choppy environments, and that tells me that when markets finds a direction… I can achieve even higher returns, especially if stocks start crashing.