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What’s On Tap for Traders: May 8-12
Welcome to your weekly trading preview! We added a Table of Contents to help you jump around: Table of Contents This Week’s Trading CalendarThe Week in Review…It’s Inflation Time!Earnings Season Slows Down But It’s Not OverSo How Has Earnings Season Been?Traders Are in a Rotten MoodA Look at Sector Performance in 2023:Factoid of the WeekGet to Know Sami Abusaad This Week’s Trading CalendarClick the calendar image to enlarge it, then scroll down to see what’s coming down the pipe the week of May 8: The Week in Review…What a week! We survived:Big earnings from Apple (AAPL), AMD (AMD), Starbucks (SBUX), Shopify (SHOP), and Qualcomm (QCOM)The FOMC and ECB Rate DecisionsThe Nonfarm Payrolls ReportThe regional bank collapseAnd with Apple leading a big Friday surge, our big 4 horsemen ETFs recovered some of the midweek damage, with the QQQ’s even getting in the green for the week:Year-to-date, the QQQ’s are still crushing the other big ETFs thanks to huge moves in names like Apple, Nvidia (NVDA), and Microsoft (MSFT). The QQQ’s also have no exposure to banks or energy, which have underperformed. So it’s been smooth sailing in 2023:Now let’s look forward to next week. By the way, Scott Redler is hosting a free week in the Alpha Team VTF®, and he can walk you through all the events we’ll talk about. It’s Inflation Time!We’re walking into a big week for inflation… and it’s worldwide thing. Yes, the US has CPI on Wednesday and PPI on Thursday. Traders will be looking for evidence inflation is breaking down to support expectations that the Fed will pause after this past week’s 25 bps rate hike. The CME FedWatch Tool implies a 96.1% probability that the Fed does not hike at the June 14 Feed meeting. FedWatch also shows the market is pricing in a 38.1% chance of a 25 bps cut in July. We’ll see if the CPI/PPI numbers sway these expectations. And overseas, we get:Wednesday: Germany CPI, China CPI & PPIThursday: New Zealand Inflation ExpectationsFriday: France, Spain, Brazil, and Russia CPIEngland in particular has a busy economic calendar next week with:Monday: Retail SalesTuesday: House Price IndexThursday: Bank of England Rate Decision & Meeting Minutes, Industrial ProductionFriday: GDP, Manufacturing Production Earnings Season Slows Down But It’s Not Over85% of the S&P 500 have reported earnings (more on this below), but we’ve still got some notable reports hitting the tape this week. Several consumer names report, including PayPal (PYPL) on Monday, AirBnB (ABNB) and UnderArmour (UAA) Tuesday, and Disney (DIS) on Wednesday. Even with high inflation, The consumer seems to have unlimited money for things they desire (like iPhones and McDonald’s fries), so it will be interesting to see if these companies show strength or strain. AirBnB and Disney will also give us reads into travel demand. Electric vehicle enthusiasts will be watching Lucid Group (LCID) on Monday and Rivian Automotive (RIVN) on Tuesday. Tesla (TSLA) got slapped on earnings in April because of margin pressure, and Ford (F) is losing buckets of money in its EV business. We’ll find out if Lucid and Rivian do any better. And don’t forget about Carl Icahn! His company Icahn Enterprises LP (IEP) moved its report to Wednesday, May 10. IEP got smashed this week after Hindeburg Researched accused Icahn of accounting irregularities. Look at this rollercoaster of a chart — we’re all eager to see how this one turns out: So How Has Earnings Season Been?According to FactSet… not bad — at least relative to expecations. 85% of S&P 500 companies have reported, and so far:79% of companies beat EPS estimates75% of companies have beaten sales estimates.Earnings have declined by -2.2% vs. expectations for a -6.7% declineNobody’s celebrating a -2.2% decline in earnings but it’s not as bad as -6.7%. Remember, the market’s about expectations, and expectations were too low coming into earnings season. Speaking of low expectations… Traders Are in a Rotten MoodInvestors and traders remain remarkably bearish despite the market’s stability. According to AAII, just 24.1% of investors are bullish. That’s well below the 37.5% long-term average. Plus, AAII said “bullish sentiment is unusually low for the 50th time out of the past 70 weeks,” and “bearish sentiment is still above its historical average of 31.0% for the 71st time out of the past 76 weeks.” This is despite the SPY’s 7.8% gain in 2023 and the QQQ’s 21.2% rally. Now let’s dig below the surface to see what’s been working this year: A Look at Sector Performance in 2023:2023’s been a bizarre year. It’s almost like we’re risk on and risk off at the same time. On the risk on side: Housing (ITB) is leading the market despite a slowdown in housing, Tech (XLK, SMH) is booming and ARKK rebounded from a messy 2022. And on risk off, gold (GLD) is outperforming and Treasuries (TLT) are up. Who could have imagined both ARKK and gold outperforming? Factoid of the Week According to Bespoke Investment Group, nonfarm payrolls have exceeded economists’ estimates for 13 straight months.This chart is bonkers. Non Farm Payrolls has now exceeded expectations for a record 13 straight months. https://t.co/UaURbFdG6a pic.twitter.com/4urENerxmy— Bespoke (@bespokeinvest) May 5, 2023 Maybe we should stop trusting economists’ long-term predictions? After all, they can’t predict anything even one month out… Get to Know Sami AbusaadHow did Sami achieve greatness as a trader? Find out here:
Continue Reading -->What’s On Tap for Traders: May 1 – 5
What a week! We had: Big earnings beats like Microsoft (MSFT) and Meta (META) Whiffs like Amazon (AMZN) and Snap (SNAP) First Republic (FRC) melting down A slowdown in US GDP Here’s your trading calendar before we dig into one of the busiest weeks of 2023: (click to enlarge) First, let’s start with a quick review of the recent action: Tech Dominates… For Now Stocks finished slightly higher for the month as buyers overlooked Amazon’s (AMZN) post-earnings decline, the US GDP miss, and the First Republic (FRC) implosion. Related: How Jeff Cooper Nailed Amazon at $122 And in an impressive turnaround from a weak start, the SPY finished right at the highs of the day: Year-to-date, QQQ’s is decimating the other major index ETFs thanks to the tech stock boom. Of course, next week is huge for tech investors thanks to these earnings reports: AMD (AMD) on Tuesday Qualcomm (QCOM) on Wednesday Apple (AAPL) on Thursday Apple always demands major attention from investors, and the stakes are high thanks to the stock’s 29%+ gain this year: David Prince tells us “Slowing iPhone demand could be offset by the services business picking up steam, but the upside potential looks muted from here.” If you’re interested in trading Apple pre and post-earnings, check out Inner Circle because David and his team will be tracking the stock closely next week. AMD and Qualcomm should also be on your radar because we’ll get insights into where we are in the semiconductor cycle. And of course, it will be fun to see how many times they say ‘AI’ on their conference calls. Can they top Google, Microsoft, and META, each of whom said ‘AI’ nearly 50 times? Other Earnings Reports of Interest The fun does not end with tech. Starbucks (SBUX) reports Tuesday. The stock hit a 1-year high this week in the wake of strong numbers from McDonald’s (MCD) and Pepsi (PEP): So we’ll see if the struggling consumer still has cash for those fabulous orange mocha frappucinos: Crypto exchange Coinbase (COIN) reports Thursday. Bitcoin has been one of the best-performing risk assets this year, so we’ll see if that’s driving results for Coinbase, which has been down in the dumps thanks to regulatory threats: And on Friday, meme stock giant AMC Entertainment (AMC) drops its earnings numbers. We also have: Monday: Stryker (SYK), Vertex Pharmaceuticals (VRTX) Tuesday: Uber (UBER), Illinois Tool Works (ITW), Eaton (ETN) Wednesday: CVS (CVS), Estee Lauder (EL), Progressive (PGR) Thursday: ConocoPhillips (COP), Booking Holdings (BKNG), Shopify (SHOP), Square (SQ), Doordash (DASH) Friday: Cigna (CI) Okay, that’s enough earnings talk because… The Fed Is Dead Ahead We’ve got a critical week ahead on the US economic front. The Fed will announce its latest rate decision on Wednesday. T3 Live Chief Strategic Officer Scott Redler said “There’s a 90% chance they go 25 bps, and most think that’s end of the rate hike cycle. This could be an inflection point for this cycle. Many people think the Fed will cut in the second half, but I don’t see that happening unless we go to SPX 3700 or lower. If we hold above 4100 and start squeezing towards resistance at 4300, the Fed isn’t cutting.” IMPORTANT: Scott is hosting a Fed Day trading event in the Alpha Team VTF® on Fed Day. You can sign up right here. Scott’s Positions as of 2023-04-28 at 3.39.56 PM Click to enlarge On top of the Fed, we’ve got plenty of employment data coming including: Tuesday: JOLTs Job Openings Thursday: Initial Jobless Claims Friday: Nonfarm Payrolls We also have some key international reports, including: Tuesday: Australia Rate decision, Eurozone CPI Wednesday: China Manufacturing PMI Thursday: ECB Rate Decision Friday: Canada Employment How do Traders Feel? BEARISH Do traders hate this market? Yes. Hedge funds have the largest net short position in S&P 500 futures since 2011: Just as large speculators/hedge funds have built largest net short position for S&P 500 futures since 2011 (blue), leveraged investors have also boosted net short positions on 10y U.S. Treasury futures (orange) to record pic.twitter.com/zfcqdrHO57 — Liz Ann Sonders (@LizAnnSonders) April 25, 2023 And the American Association of Individual Investors says just 24.1% of investors are bullish, well below the long-term average of 37.5%: “Optimism is unusually low for the 49th time out of the past 69 weeks,” AAII says. Get to Know Kira Turner Rodeo is more dangerous than NFL football. And rodeo is where Inner Circle’s Kira Turner learned risk management. Learn more about her story in this episode of the Madam Trader podcast: We’ll see you bright and early Monday morning! Good luck out there!
Continue Reading -->The 20 Best Stocks of 2023
What are the best-performing stocks in 2023? AI stocks like C3.ai (AI)? Biotechs like Prometheus Biosciences Inc. (RXDX)? You’re about to find out. We fired up our scanner to find the 20 biggest gainers of 2023. We limited the list to stocks with market caps over $1 billion to eliminate the most speculative names And we found: Several takeovers Multiple biotech and pharma names One megacap semiconductor stock Several companies with little Wall Street coverage Our list starts at #20 and works its day down to #1. Dig in! *Data sourced from KoyFin on 4/25/2023 #20: Altair Engineering Inc. (ALTR): +54.0% Altair Engineering Inc. is a software company that provides advanced simulation and optimization solutions, helping businesses improve product design, engineering, and performance, while reducing development costs and time-to-market. The stock is covered by just 10 analysts, according to KoyFin. #19: West Pharmaceutical Services Inc. (WST): +54.1% West Pharmaceutical Services Inc. is a medical device company that develops and manufactures drug delivery systems and packaging solutions, helping to ensure the safety, efficacy, and convenience of pharmaceutical products. Aside from its huge earnings gap in February, driving by a huge beat, WST has been gently gliding higher with very little volatility. Impressive! #18: National Instruments Corporation (NATI): +57.3% National Instruments Corporation is a technology company that designs and manufactures electronic measurement and automation equipment, providing advanced solutions for industries such as aerospace, defense, automotive, and electronics. National Instruments was acquired by Emerson Electric (EMR) for $8.2 billion in April. #17: agilon health inc. (AGL): +57.4% agilon health inc. is a health care services company that partners with primary care physicians and health systems to provide value-based care solutions, focusing on improving health outcomes and reducing costs for patients and payers. This is one of the more interesting charts we’ve seen. agilon has a knac for huge drops… and huger rallies back up. #16: Seagen Inc. (SGEN): +57.9% Seagen Inc. is a biotechnology company that develops and commercializes novel cancer therapies, leveraging cutting-edge science and technology to improve patient outcomes and advance cancer treatment. #15: World Wrestling Entertainment Inc. (WWE): +59.1% World Wrestling Entertainment Inc. (WWE) is a media and entertainment company that produces and distributes live and pre-recorded sports entertainment programming, including professional wrestling events, TV shows, and digital content. On April 3, 2023, Endeavor Group Holdings (EDR) announced it was acquiring WWE for $9.3 billion. #14: UWM Holdings Corporation (UWMC) +66.0% UWM Holdings Corporation is a mortgage lending company that offers a range of loan products and services to homebuyers and homeowners, leveraging technology and innovation to simplify the mortgage process and provide an exceptional customer experience. The housing market is slowing, but UWM stock has shown remarkable momentum in 2023. #13: Samsara Inc. (IOT): +67.3% Samsara Inc. is an Internet of Things (IoT) company that provides fleet management, asset tracking, and industrial monitoring solutions, helping businesses optimize their operations and reduce costs through advanced technology. Samsara has nearly tripled off last year’s lows thanks to some big revenue and earnings beats. #12: e.l.f. Beauty Inc. (ELF): +69.6% e.l.f. Beauty Inc. is a cosmetic and beauty products company that offers affordable, high-quality makeup and skincare products, with a focus on inclusive and diverse beauty standards. e.l.f. put in a string of big earnings beats, setting the stage for big gains this year. #11: Align Technology Inc. (ALGN) +70.4% Align Technology Inc. is a medical device company that designs and manufactures clear aligners and other orthodontic products, providing innovative and effective solutions for patients seeking to improve their oral health and smile. Align had a big earnings beat in February to send it soaring, and it’s right back at those highs in late April. #10: Apellis Pharmaceuticals Inc. (APLS) +71.6% Apellis Pharmaceuticals Inc. is a clinical-stage biopharmaceutical company that develops and commercializes novel therapies for the treatment of complement-mediated diseases, using a proprietary platform that leverages advanced science and technology. #9: Qualtrics International Inc. (XM) +72.9% Qualtrics International Inc. is a software company that provides experience management solutions, helping organizations measure and improve customer, employee, product, and brand experiences through advanced data analytics and insights. Note that on May 13, Qualtrics accepted a $12.5 billion offer to go private. #8: Meta Platforms Inc. (META) +73.9% Meta Platforms Inc. (formerly Facebook) is a social media and technology company that operates a range of digital platforms and products, connecting billions of people around the world and providing a wide range of services and experiences. Meta has benefited from a strong Q4 earnings report and aggressive cost-cutting by CEO Mark Zuckerberg. #7: Lantheus Holdings Inc. (LNTH) +76.3% Lantheus Holdings Inc. is a medical imaging company that develops and manufactures diagnostic imaging agents and medical imaging equipment, with a focus on providing high-quality and safe imaging solutions for patients and health care providers. #6: Prometheus Biosciences Inc. (RXDX) +76.7% Prometheus Biosciences Inc. is a biopharmaceutical company that develops and commercializes novel therapeutics for the treatment of inflammatory bowel disease, leveraging advanced technology platforms and deep scientific expertise. On April 17, 2023, Merck (MRK) announced it was buying Prometheus for $10.8 billion. #5: Oak Street Health Inc. (OSH): +81.1% Oak Street Health Inc. is a primary care provider that offers personalized, preventive health care services to seniors, with a focus on improving health outcomes and reducing health care costs. On February 8, CVS (CVS) announced it was acquiring Oak Street Health (OSH) in a $10.6 billion deal. #4: NVIDIA Corporation (NVDA): +83.5% NVIDIA Corporation is a technology company that designs and manufactures high-performance graphics processing units (GPUs), providing advanced computing solutions for industries such as gaming, artificial intelligence, and scientific research. The semiconductor sector has been remarkable strong in 2023, so it’s no surprise that Nvidia has surged. #3: DraftKings Inc. (DKNG): +87.9% DraftKings Inc. is a digital sports entertainment and gaming company that operates fantasy sports contests, sports betting, and online casino games, providing users with real-time experiences and unique gaming opportunities. March Madness has been a big growth driver for Draft Kings in
Continue Reading -->What’s On Tap for Traders: April 24-29
We’re coming off an exciting week of trading with disappointing earnings from Netflix (NFLX) and Tesla (TSLA) and upside surpises from the banks. Now let’s look at what’s ahead this week. Click this image for a full calendar: (click to enlarge) Tech Earnings Season Rages On Tech has been remarkably strong in 2023 and QQQ is still crushing SPY by more than 2:1: As of Friday at 1:34 p.m. ET And that’s after earnings-driven declines in Tesla (TSLA), Netflix (NFLX), and the semiconductors this week. But we’re just getting started. We’re coming up on a pivotal week with plenty of big tech earnings reports including Tuesday: Microsoft (MSFT), Google (GOOGL) Wednesday: Meta Platforms (META), eBay (EBAY), Texas Instruments (TXN) Thursday: Amazon (AMZN), Intel (INTC) AI has been the #1 buzzword on the Street, which has close eyes on Microsoft and Google for opposing reasons. Investors want to know how far Microsoft is ahead, and how far Google is behind. Meanwhile, Meta has a lot to prove with the stock up over 75% this year. And Amazon is in close focus as a barometer for the consumer. On Friday, JP Morgan reiterated its stance that Amazon is the best internet play right now, so we’ll see how things pan out Thursday. David Prince of T3 Live’s Inner Circle rode up Amazon this week so follow him for more insights on the stock: $AMZN Has been a wonderful ride. I trimmed much of my position today given my 108s are up huge. We have 3-4 big cap reports b4 their print and might very well buy $AMZN on any pullbacks pre thur night. — The Inner Circle Trading Group DP David Prince (@epictrades1) April 21, 2023 A Big Regional Bank Report While bank earnings are mostly behind us, there’s still a biggie to watch Monday morning – even though it’s a regional name. Of course we’re talking about First Republic Bank (FRC), which is 90% off its February highs thanks to the regional bank crisis: This week, Charles Schwab (SCHW) — also caught up in the decline — bounced hard after its Monday morning earnings report: Traders will be eager to see if FRC is going the way of Schwab… or Signature Bank. Energy Earnings Energy has lagged in 2023 after crushing strength in 2021 and 2022, as you can see in this chart going back to January 2021: Exxon (XOM) and Chevron (CVX) report earnings on Friday, which will show us the strength of the industry. Even More Earnings… On top of those, we’ll get plenty of reads on the economy from the likes of: Monday: Coca-Cola (KO) Tuesday: Visa (V), Pepsi (PEP), McDonald’s (MCD), Danaher (DHR), UPS (UPS) Wednesday: Boeing (BA), T-Mobile (TMO) Thursday: Mastercard (MA), Honeywell (HON), Caterpillar (CAT) A Light US Economic Calendar We had few important US economic data points last week, but things get busier this week with: Tuesday: S&P Home Prices, Consumer Confidence, New Home Sales Wednesday: Durable Goods, Trade Balance, Retail Inventories Thursday: GDP, Pending Home Sales Friday: PCE Price Index, Personal Spending, Michigan Sentiment The PCE Price Index is a biggie because it’s one of the Fed’s prime inflationary indicators and could thus impact monetary policy. Overseas Action Speaking of inflation, Germany, France, Spain, Australia, and Singapore will reports CPI numbers this week, giving us a better read on global inflation trends. Germany, France, Spain, and Canada also report their Q1 GDP figures. Sentiment Is as Confusing as Ever The AAII Sentiment Survey shows that just 27.2% of investors are bullish, well below-the long-term average of 37.5%. That’s flat from last week: According to AAII, “bullish sentiment remains below its historical average of 37.5% for the 71st time out of the past 73 weeks.” Pretty bearish… right? Yes. But CNN’s Fear & Greed Index shows that traders are greedy: Permabulls always say everyone’s bearish. Permabears always say everyone’s bullish. The truth is somewhere in the middle… Video of the Week: Scott Redler on the Pro Trading Lifestyle Scott Redler of T3 Live’s Alpha Team VTF® talks to Greta Wall about his life in trading: Go here to sign up for Greta’s next event with T3 Trading’s Derrick Oldensmith. Sami Abusaad’s Gap Trading Webinar Want to learn Sami Abusaad’s gap trading secrets? Go here.
Continue Reading -->What’s On Tap for Traders: April 17-21
We’re coming off an exciting week of trading with a cool CPI report, a more cautious Fed, and some upside earnings surprises from the banks. Now let’s look at what’s ahead this coming week. Click this image for a quick look at what’s on the calendar: (click to enlarge) Tech Earnings Season Begins With Netflix and Tesla Tech is outperforming big time in 2023, with the QQQ’s up 18.6% vs. a 7.3% gain for SPY: As of Friday at 1:30 p.m. ET But the scales may tip with Netflix (NFLX) reporting earnings on Tuesday. T3 Live Chief Strategic Officer Scott Redler notes “It’s hard to be long or short Netflix into earnings given how far it’s come. It’s been a real leader over the last quarter, so it will give traders a good gauge on tech stock sentiment.” Tesla (TSLA) follows on Wednesday. Dan Darrow of T3 Live’s Alpha Team VTF® tells us “Tesla’s earnings will be must-see TV. April deliveries were disappointing relative to high expectations, and it will take a strong report and guidance to break the stock out of its 2-month trading range.” FYI: Dan will join Greta Wall for a LinkedIn Q&A this Wednesday. Click here to sign up! Given Elon Musk’s chronic inability to stay out of the news, the world will be watching this show. Semiconductor investors will want to keep an eye on ASML Holding (ASML) and Lam Research (LRCX) on Wednesday plus Taiwan Semi (TSM) on Thursday. The VanEck Semiconductor ETF (SMH) is up a whopping 22.9% YTD to top our ETF leaderboard: Click to enlarge As of Friday at 1:30 p.m. ET Micron (MU) rallied after a horrible quarter, so we’ll see if the “it can’t get any worse” semi rally extends into Q2. Positions Disclosure: Scott Redler and Dan Darrow’s positions as of 2023-04-14 at 1.26.32 PM (Click to enlarge) Even More Bank Earnings: Schwab in Focus Bank earnings were on the strong side Friday, with JP Morgan (JPM) surging higher: We’ll get even more this coming week. Schwab (SCHW) is a big one to watch on Monday. We all know Schwab as a major broker and asset manager, but the company’s bond market losses got it caught up in the regional bank meltdown, and the stock’s been a mess: Traders and investors are eager to see the impact on Schwab’s financials. The options market is pricing in a ~9% move in SCHW next week. Given the uncertainty, we could see such a move. Other bank reports to watch: Monday: State Street (STT) Tuesday: Bank of America (BAC) and Goldman Sachs (GS) Wednesday: Morgan Stanley (MS) and US Bancorp (USB) Thursday: American Express (AXP) A Light US Economic Calendar The US economic calendar lightens up a bit this week. We’ll have Building Permits on Tuesday followed by the Philly Fed and Existing Homes Sales numbers on Thursday. Traders will be looking for more signs of a slowdown to get a better read on the Fed and monetary policy. Overseas Is Busier The global calendar has a lot more happening, especially on the inflation front. We have CPI readings on Tuesday (Canada) and Wednesday (England, Eurozone, New Zealand). Inflation seems to be cooling worldwide so we’ll see if the trend continues. Plus, China reports GDP and Industrial Production numbers late Monday. And on Friday, we’ll get England and Canada’s Retail Sales numbers. Sentiment Is Still… Confusing: The AAII Sentiment Survey shows that just 26.1% of investors are bullish, well below-the long-term average of 37.5%. That’s down from 33.3% last week: According to AAII, “bullish sentiment remains below its historical average of 37.5% for the 71st time out of the past 73 weeks.” Pretty bearish… right? Yes. But CNN’s Fear & Greed Index shows that traders are greedy: Permabulls always say everyone’s bearish. Permabears always say everyone’s bullish. The truth is somewhere in the middle… Video of the Week David Prince of Inner Circle talks to Jesse Martin, winner of two World Series of Poker Gold Bracelets and the 2019 $2 Million DraftKings Fantasy Football World Championship. Jesse is an IC member and shares how high-stakes poker trained him to succeed in the markets. Momentum Mastery Is Coming… JR Romero, Head of T3’s Newsbeat Program, is teaching his all-new Momentum Mastery Course LIVE. Want in? Contact Amber Buchetto for details. What did you think of this article? Let us know in the comments!
Continue Reading -->SPY vs. QQQ for Day Traders: What You Need to Know
SPY and QQQ are the two most discussed ETFs in the world. Every single trader out there has bought or sold them at some point. But what are the differences between SPY and QQQ? And are they more similar or different? SPY vs. QQQ: In ShortSPY and QQQ are very similar, but have some important differences. QQQ is more volatile because it is more concentrated in technology and high-growth stocks. It also has no exposure to energy or financials. Many active day traders like QQQ more than SPY because of its increased volatility. So as you’d expect, SPY outperforms when financial and energy stocks are in favor. SPY also has a lower expense ratio and higher dividend yield, which help it appeal to swing traders and long-term investors. The Basics of SPY and QQQSPY is the symbol of the SPDR S&P 500 ETF Trust.It is managed by State Street Global Advisors, one of the largest asset management companies in the United States.SPY tracks the performance of the benchmark S&P 500 index.QQQ is the symbol for the Invesco QQQ ETF, which is managed by Invesco.QQQ is based on the Nasdaq 100 index, not the Nasdaq Composite as commonly thought.Traders never use the full names of these ETFS.You often hear people SPY called simply SPY, SPYs (pronounced like spies), or “spiders” which is a reference to the SPDR brand name.And when you hear a trader say “the Qs” they are talking about QQQ.What SPY and QQQ Have in CommonSPY and QQQ are similar in many ways.They give you instant exposure to a variety of companies, though in different ways, as you will see below.Both ETFs are extremely liquid.At the time of writing, SPY traded 81 million shares per day, while QQQ’s average volume was 58 million. Plus, both have active options markets.So it’s easy to get in and out of positions.SPY and QQQ are also inexpensive. SPY has an annual expense ratio of 0.09% while QQQ’s is 0.2%.Short-term traders love the liquidity of these instruments. And long-term investors like the low expense ratios.SPY and QQQ are also both based on market cap-weighted indices, meaning that the stocks with the biggest market capitalizations have the biggest weightings in the funds.SPY vs. QQQ: A Holdings ComparisonThis is where things get interesting.SPY and QQQ have many holdings in common. In fact, the top 4 holdings in each are identical. And 6 of the top 10 are the same.Here’s each fund’s top 10 holdings by weight. HoldingSPY QQQ#1 Apple (AAPL): 7.0% of the fund Apple (AAPL): 14% of the fund#2 Microsoft (MSFT): 5.3% Microsoft (MSFT): 9.9%#3 Amazon (AMZN): 2.6% Amazon (AMZN): 5.7%#4 Tesla (TSLA): 1.9% Tesla (TSLA): 4.0%#5 Alphabet Class A (GOOGL): 1.7% Alphabet Class C (GOOG): 3.2%#6 Berkshire Hathaway Class B (BRK.B) Alphabet Class A (GOOGL): 3.1%#7 UnitedHealthy (UNH) Nvidia (NVDA): 2.8%#8 Alphabet Class C (GOOG): 1.5% Pepsico (PEP): 2.5%#9 Exxon Mobil (XOM) Costco (COST): 2.1%#10 Johnson & Johnson (JNJ): 1.4% T-Mobile (TMUS): 1.9%Data Source: MorningstarAnd if you notice, the QQQ is much more top heavy. This is because it is comprised of 103 stocks vs. 503 for the SPY. Note: the Nasdaq 100 has 103 stocks in it and the S&P 500 has 503 stocks. This is because some companies like Alphabet (GOOGL) have more than one share class.The top 10 stocks in the QQQ account for 49.2% of the fund, so just 10 out of 103 holdings account for almost half the fund’s performance. Apple (AAPL) is number-one at 14.0%.SPY’s 10 biggest holdings are 26.0% of the fund, with Apple weighing in at 7.0%.Now let’s talk about sectors.People often equate QQQ with technology because 50% of the fund’s assets are in tech stocks vs. 26.2% for the SPY. And interestingly, QQQ has zero exposure to energy, financials, materials, and real estate.SectorSPY QQQConsumer Discretionary 10.8% 15.4%Consumer Staples 6.9% 7.1%Energy 5.4% 0%Financial 11.6% 0%Healthcare 15.4% 7.6%Industrials 8.3% 3.8%Information Technology 26.2% 50.0%Materials 2.6% 0%Real Estate 2.6% 0%Communication Services 7.3% 14.7% Communication Services 3.0% 1.5%SPY vs. QQQ: VolatilityAs you’d expect, the QQQ is more volatile than SPY.Beta is a common measure of volatility for stocks and ETFs.The SPY has a Beta of 1.0, while QQQ’s is 1.10.So for every 1% SPY moves up or down, the QQQ is expected to move 1.1%.For that reason, many active day traders gravitate towards QQQ. They can get more movement, which is critical for day traders..Of course, on any given day, the performance can vary by a wide margin, particularly if there is big movement in tech stocks like Apple, Microsoft (MSFT), and Amazon (AMZN).During earnings season, you can expect dramatic differences between SPY and QQQ when a big name like Apple reports.SPY vs. QQQ: PerformanceSPY and QQQ’s performance is almost always in the same neighborhood because each has significant exposure to major sectors of the economy.However, performance during a given time period varies based on the risk appetite of the public.When markets are in a state of euphoria, expect QQQ to outperform SPY.In 2020, QQQ rose 48.6% because tech stocks like Apple and Tesla rallied so hard after the pandemic bottom.And when the market is bearish, QQQ will underperform because tech stocks get devalued quickly.When the tech bubble burst in 2000, QQQ fell -36.9% vs. a -9.2% drop for SPY.Sectors also play a role at times.In 2021 and 2022, SPY outperformed because of strength in energy stocks, of which there are none in the QQQ.Yes, 2022 is a down year as of this writing, but SPY is down less because of energy exposure.SPY vs. QQQ: Dividend YieldSPY’s dividend yield is 1.61%, more than double the QQQ’s 0.68%.That’s no surprise given that QQQ has no exposure to the highest-yielding sectors like financials, energy, and utilities. SPY vs. QQQ: Which Is Better?So what’s better? SPY or QQQ?The answer is… it depends on what you need and want.If you want more volatility in your portfolio and can stomach of risky technology stocks, QQQ fits the bill. In fact, many traders prefer QQQ because of the volatility.If you want stability, SPY makes more sense. What do you think? Do you trade SPY,
Continue Reading -->Elon Musk: 5 Fun Facts You Need to Know
Elon Musk… you can love him. You can hate him. But you can’t ignore Tesla’s (TSLA) polarizing CEO. Because most executives can’t move markets with a single Tweet. But you might be surprised to learn the self-proclaimed “Dogefather” hasn’t always liked crypto and is a citizen of 3 countries. So let’s learn a little more about the man.. Musk Was the First Person in History Worth $300 billion Tesla CEO Elon Musk is the richest person in the world and his climb to the top has been historic. The Bloomberg Billionaires Index shows Musk had a net worth of $27.6 billion at the end of 2019. By the end of 2020, that number ballooned to $161 billion. That’s the biggest one-year increase for any person in history. In 2021, he became the first person ever to be worth more than $300 billion. Musk crossed that milestone on October 28, 2021 as Tesla shares jumped to $1,114. Musk’s worth has fluctuated along with Tesla’s share price, but he still remains on top of the billionaire’s list. Tesla is the Only Stock Musk Owns During a 2018 interview at South by Southwest, Musk said, “I actually don’t invest in anything. In fact, the only public security that I own of any kind is Tesla.” As of February 2022, Musk holds an estimated 177 million Tesla shares, after selling a bunch of the stock in the second half of 2021. Those share sales were part of a 10B5-1 trading plan filed by Tesla with the SEC in September 2021. But Musk had a little fun before executing the sales, sending out a Twitter poll in November asking if he should sell 10% of his stake. Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this? — Elon Musk (@elonmusk) November 6, 2021 That poll prompted a short-lived selloff in the stock, and Musk proceeded to sell more than $16 billion worth of shares by December 28. But he also exercised options to purchase more shares at the same time, increasing his total stake by the end of the year. Although he doesn’t own any other stocks, Musk has become a big fan of cryptocurrencies. Speaking of which… The Dogefather Has Not Always Liked Crypto It’s safe to say Musk’s feelings about crypto have changed over the years. In a February 2018 tweet, the Tesla CEO said he literally owned zero cryptocurrency. Not sure. I let @jack know, but it’s still going. I literally own zero cryptocurrency, apart from .25 BTC that a friend sent me many years ago. — Elon Musk (@elonmusk) February 22, 2018 We don’t know exactly when his attitude about crypto changed, but Musk was all-in by 2021. He boosted the value of Dogecoin by tweeting about it, and even proclaimed himself the Dogefather before hosting SNL in April 2021. The Dogefather SNL May 8 — Elon Musk (@elonmusk) April 28, 2021 But he’s also worked to enact change in the crypto space. Musk changed his mind on Tesla accepting Bitcoin as payment in May 2021, raising concerns about the environmental impact of mining. Speaking at the virtual B Word Conference in July 2021, he said the automaker would probably accept Bitcoin again in the future. “I wanted a little bit more due diligence to confirm that the percentage of renewable energy usage is most likely at or above 50%, and that there is a trend towards increasing that number, and if so Tesla would resume accepting bitcoin,” Musk said. Tesla’s 2022 annual report with the SEC showed the automaker still holds about $2 billion worth of Bitcoin. PayPal Helped Musk Start Tesla In March 1999, Musk cofounded the online banking site called X.com. A year later, X.com merged with Max Levchin and Peter Thiel’s PayPal. When PayPal was bought by eBay for $1.5 billion in 2002, Musk received a $180 million payout $70 million of that money went into Tesla. Musk is from South Africa Hearing Elon Musk speak, you might wonder where he’s from. He was born in Pretoria, South Africa on June 28, 1971. The billionaire was raised in that town by his South African father and Canadian mother. He moved to Canada at 17-years-old to avoid being forced to enlist in the South African military. Musk then came to the U.S. two years later when he transferred to the University of Pennsylvania. He holds triple citizenship in South Africa, the U.S., and Canada. So an immigrant from South Africa started the most valuable car company ever and cemented himself as the richest person in history. Talk about your success stories…
Continue Reading -->The Fed: 9 Things Traders Need to Know
Fun fact: the Fed’s job is not to make the stock market go up. Believe it or not, the Central Bank doesn’t care about your 401K balance. So what is the purpose of the Federal Reserve system in the U.S., and how did it come to be? We’re gonna talk about that and a whole lot more today: The Fed Was Born Out of a Fake Duck Hunt on Jekyll Island The U.S. Federal Reserve system was born out of a secret meeting disguised as a duck hunting trip on Jekyll Island off the Coast of Georgia. Seriously. No wonder there’s so many conspiracy theories about the Fed… Rhode Island Senator Nelson Aldrich invited five friends, mostly bankers, on a “duck hunting trip” at the private Jekyll Island Club in November 1910. But the trip wasn’t for hunting. The group was meeting to establish a framework to centralize the U.S. banking system. JP Morgan was a member of the club and is believed to have arranged for them to use the clubhouse. The meeting came in the wake of a series of U.S. financial crises, including The Panic of 1907, and was kept secret to avoid controversy over banking executives being involved in reforming the banking system. Aldrich took the group’s ideas back to the National Monetary Commission established by Congress to study reforms of the banking system. After three years of debate, Congress passed the Federal Reserve Act in late 1913. President Woodrow Wilson signed it into law on December 23, 1913, creating the Federal Reserve System simply referred to as “The Fed” or “The Central Bank” today. And the Jekyll Island meeting? Participants did not publicly admit it happened until the 1930’s. But it’s more than just one big bank. There Are 12 Federal Reserve Banks The Fed is more than just the central bank located in Washington, D.C. The system consists of regional Federal Reserve Banks in 12 districts: Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Each regional bank has its own nine-member board of directors who appoints a president, subject to the approval of the larger Federal Reserve Board of Governors. Each president serves on the Federal Open Market Committee which sets monetary policy, including interest rates. The New York Fed is the Most Important District The Federal Reserve Bank of New York is the most important district and is the only regional bank with a permanent voting position on the Federal Open Market Committee. New York is the bank that actually implements the policies decided by the FOMC. The New York Fed’s Open Market Trading Desk buys Treasury bonds and mortgage-backed securities from large commercial banks in order to manipulate the money supply in the U.S. economy. The Fed System Has a Board of Governors In addition to the regional Fed presidents, the U.S. Federal Reserve system has a seven member Board of Governors. All seven members are nominated by the U.S. President and confirmed by the Senate for a 14-year term. Their terms are staggered, with one of the seven expiring every two years on January 31. This stagger is meant to create political independence at the Fed by ensuring one President cannot “stack” the board with members of a particular political persuasion. A Fed Governor cannot be reappointed after serving a full 14-year term. The President chooses the Federal Reserve Chair and Vice Chair for four-year terms out of the members of the board. The Chair and Vice Chair can serve multiple terms throughout their 14-year board term. The FOMC Was Not Established Until 1935 The Banking Act of 1935 established the Federal Open Market Committee (FOMC) as the policy decision body of the Federal Reserve. Before this, the 12 Fed regional banks worked together to decide monetary policy each year. The FOMC consists of all seven members of the Board of Governors and the 12 regional Fed presidents. But the 12 presidents don’t all have a voting seat at every meeting. The seven Fed Governors and the New York Fed all have permanent voting positions. The other 11 regional presidents serve on a rotating schedule in the other 4 voting seats on the FOMC. The rotation schedule is as follows: One from Boston, Philadelphia, or Richmond One from Cleveland or Chicago One from Atlanta, St. Louis, or Dallas One from Minneapolis, Kansas City, or San Francisco Each voting member serves a one-year term in the seat before it rotates to the next one in line for their seat. By tradition, the Fed Chair is elected by the FOMC as its chair and the New York Fed president is elected the FOMC vice chair. The Fed Has a Dual Mandate You might be surprised to learn the Fed’s job isn’t to make the stock market go up. In 1977, the Fed was given a mandate from Congress to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.” Although that’s actually three goals, this is often referred to as the bank’s “dual mandate”. In plain English, that means the Fed’s purpose is to ensure economic conditions in the U.S. are conducive to a fully-employed labor market with stable inflation. They accomplish these goals by changing interest rates and manipulating how much cash is circulating through the economy. The Fed Doesn’t Set the Interest Rate on Your Car Loan The Fed’s most widely used tool is interest rates. But we’re not talking about the rate on your mortgage or car loan. The interest rate set by the Fed is the federal funds rate, which directly impacts banks, and then consumers down the line. Commercial banks lend each other money for short periods in order to meet the cash reserve requirements from the Fed. These are typically one-night loans. But when one bank sends another money, the recipient bank must send the cash back the next day with interest. The rate on that interest is the federal funds rate, which
Continue Reading -->The Top 11 Economic Indicators Traders Need to Know
Traders are obsessed with economic indicators and data. Why? Because economic numbers move stock prices, commodities prices, options prices, interest rates, and just about everything else you can think of. So it’s a good thing the government is always giving us a fix! But which ones should you pay most attention to as a trader? Here’s a breakdown of the top 11 indicators that traders like you need to know about. 11. Homebuilder Sentiment From the National Association of Homebuilders Released at 8:30 a.m. ET in the third week of the month Measures builder confidence about current and future market conditions To judge Homebuilder Sentiment, The National Association of Homebuilders conducts a monthly survey of its members in partnership with Wells Fargo. The survey asks NAHB members to rate market conditions based on their personal experience. The questions are centered around the current state of the market, conditions 6 months from now, and the traffic of prospective buyers. Builders are asked to rank current and future sales conditions as “good”, “fair”, or “poor”. Prospective buyers are rated as “high to very high”, “average”, or “low to very low”. NAHB seasonally adjusted the number of responses in each category, “Good/High” or “Poor/Low” They then use this formula: (Good/High – Poor/Low + 100), to calculate the monthly index on a scale from 0 to 100. If every response was Good/High then the index will be 100. If all responses were Poor/Low it would be 0. Readings above 50 are considered positive. This index is a leading indicator for future home construction, since it is based on future expectations. The market uses this report to gauge how builders themselves are feeling about their future. NAHB has conducted the monthly survey since January 1985. 10. New Home Sales, Starts & Building Permits From the U.S. Census Bureau Housing Starts and Building Permits report released on the 12th workday of the month at 8:30 a.m. ET New Residential Sales report released on the 17th workday of the month at 10:00 a.m. ET Measures pace of new home construction and sales of newly built homes Housing starts measure how many new homes builders broke ground on each month. It’s a lagging indicator because it measures past activity. Building permits measure how many new permits were approved to build homes in the months ahead, making it a leading indicator. The numbers are reported together by the Census Bureau to measure the health of new home construction. Housing starts and permits include both single-family homes and multi-family buildings. The Census Bureau also reports new residential sales each month. This is a measure of how many newly constructed homes were sold the previous month and is a lagging indicator. The report includes sales data on both single-family homes and multi-family units. The data is reported at a seasonally adjusted annualized rate in order to avoid large swings based on season. The new residential sales report includes data on supply (how many units were for sale at the end of the month) as well as prices. It also breaks down new homes by construction status: not started, under construction, or complete. This group of reports gives the stock market a measure of the overall health of the new home market. 9. Existing & Pending Home Sales From the National Association of Realtors Existing Sales report released in the 3rd week of the month at 8:30 a.m. ET Pending Sales report printed in the 4th week of the month at 8:30 a.m. ET Measure of existing home sales closed in the previous month and number of contracts signed to purchase a home The National Association of Realtors reports existing home sales around the 20th of each month. This report measures the total number of closed sales in the previous month, making it a lagging indicator. Sales are reported at a seasonally adjusted annualized rate, which means the numbers are smoothed out to eliminate the impact of seasonal changes. Home sales are typically faster in summer and slower in winter. The existing sales report also includes data on supply levels and home prices. NAR reports pending home sales in the week after existing sales. This report is a measurement of the number of contracts signed to purchase a home in the previous month. Pending Home Sales are a leading indicator for the housing market. This report typically impacts home building stocks directly. 8. Retail Sales From the U.S. Census Bureau Released mid-monthly at 8:30 a.m. Measure of consumer spending in the U.S. The retail sales report measures the total amount U.S. consumers spend on goods and services per month in 13 categories: Motor vehicle & parts dealers Furniture & home furnishing retailers Electronics and appliances Building materials and gardening Food and beverage stores Health & personal care Gasoline Clothing and accessories Sporting goods, hobby, musical instruments, book store General merchandise Miscellaneous retailers Nonstore retailers (online) Food services and drinking places (restaurants and bars) The monthly report includes a headline number, and retail sales excluding auto and gasoline sales. Auto and gas numbers are considered volatile because prices rise and fall more often than other categories. Each monthly report also includes revisions for the two months prior. Retail sales is a lagging indicator, reporting data from the previous month. The market will typically rise on a good retail sales report and fall with a bad one as it signals the strength of the consumer side of the economy. 7. GDP From the Bureau of Economic Analysis Released at 8:30 a.m. ET, typically on the last Thursday of the month Measures U.S. economic growth by quarter GDP stands for Gross Domestic Product. The Bureau of Economic Analysis reports GDP on a quarterly basis. The advanced estimate for each quarter is typically released on the last Thursday of the first month following the conclusion of the quarter. The first revision is then printed the following month and the final revision the month after that. So for the first calendar quarter ending in March, you
Continue Reading -->DWAC: 8 Things You Need to Know About This Meme Stock Monster
What was the biggest story in the stock market this week? Tesla’s (TSLA) big earnings beat? Intel’s (INTC) giant miss? Evergrande defaulting on debt payments? inflation? The broken global supply chain? NO. The biggest story in the market was… DWAC. Yes… Digital World Acquisition (DWAC), which became the biggest meme stock on planet Earth. Here’s what you need to know:Trump + SPAC + #wallstreetbets = BOOMThe #memestock boom began in early 2021 when traders on Reddit and other social platforms started piling into a small number of story-based stocks like AMC (AMC) and GameStop (GME). Look at this long-term monthly chart of GameStop:In December 2007 before the housing crash, GameStop hit a then record high of $63.77. The video game retail business was BOOMING thanks to the emergence of Halo, Call of Duty, and Guitar Hero. (ain’t that a blast from the past? But thanks to #wallstreetbets and the meme stock boom, GameStop hit $483 in early 2021 — while the business was clearly in decline. The meme stock universe is always hungry for hot, crazy, fast-moving stocks, especially when there’s some kind of populist or antiestablishment theme. These people do not want to hear about fundamentals and market caps and enterprise value and earnings. These traders want to strap themselves to a rocket and make fast cash, especially when there’s a chance to go against the Wall Street establishment. Now let’s tie in DWAC. On Wednesday night, former President Donald Trump announced he formed a new company called Trump Media & Technology Group (TMTG) which would merge with the SPAC Digital World Acquisition Company, which trades under the ticker DWAC. And just like that, a meme stock was born. What made DWAC a meme stock? 3 things: 1) DWAC/TMTG’s business model, the centerpiece of which is a platform called “Truth Social,” was mocked. Mostly for claiming Truth Social would compete with Facebook (FB) and Netflix (NFLX). DWAC also has an unconventional leadership team, including CEO Patrick Orlando, who operates another SPAC called Yunhong International (ZGYH)… which operates out of Wuhan, China of all places. Remember, the #wallstreetbets community reflexively supports what Wall Street hates. 2) DWAC is a SPAC, which #memestock fans love because they can run so fast. 3) President Trump brought a real story and maximum emotion to the equation. Regardless of how you feel about President Trump, we can all agree on two things: he is a magnet for attention, and he still has a lot of fans that automatically like what his critics attack. This created an absolutely EXPLOSIVE meme stock situation. So let’s look at what happened.DWAC Had Perhaps the Most Shocking Stock Explosion in HistoryWe can’t reliable claim this the single biggest explosion in a stock ever, but it’s got to be pretty darn close. Let’s look at DWAC’s daily trading volume last week.DayVolume Closing Price High Low Monday 10/18 1,100 $9.97 $9.95 $9.95 Tuesday 10/19 49,900 $10.01 $10.01 $9.95 Wednesday 10/20 697,900 $9.96 $10.04 $9.95 Thursday 10/21 498,782,500 $45.50 $52.0 $12.62Friday 10/22 131,612,900 $94.20 $175.00 $67.96DWAC’s volume Monday was 1,100 shares. And on Thursday, it was 498,782,500. That means the volume increased by 453,437% in 4 days! But you want to know what’s really interesting? Check this out…There May Have Been Some Funny Business Going on…The DWAC-Trump announcement hit Wednesday after the close. Reuters covered it in a story at 10:08 p.m. that night. Yet… volume on DWAC had mysteriously picked up in the days ahead of the release. DWAC’s volume went from 1,100 Monday to 49,900 Tuesday to 697,900 Wednesday before the news came out. How does an unknown SPAC see a nearly 700-fold increase in volume from Monday to Wednesday? Did somebody know something? Yet…There Was PLENTY of Time to Get in DWACBut even with potential funny business going on, there was plenty of time to get In DWAC. The story was buzzing on social media during the premarket Thursday. Here’s a 15 minute chart showing the early action:As you can see, volume started coming in around the $10 to $12 range between 7 am and the open. By that time, the DWAC story was all over Reddit, Twitter, StockTwits, Facebook, and Discord. It was also a heavy topic of discussion in T3’s own Virtual Trading Floor® rooms, where our room moderators called out ideas in DWAC and ancillary plays like Phunware (PHUN). (we’ll get to PHUN later in this story…) So you didn’t have to be Johnny on the spot. Heck, even if you waited until after the open, you could have easily gotten in under $15… and rode it to a close of $65.50.DWAC Was Halted Multiple Times, Causing Traders TREMENDOUS StressAccording to the SEC, “a U.S. stock exchange that lists a stock is required to issue a trading “pause” in a stock if the stock price moves up or down by 10% or more in a five-minute period. And since DWAC was moving so fast, it was halted multiple times on Thursday and Friday. This was tremendously stressful for traders, who were forced to wait 15 minutes or more to see what happened next. The stock would open and you could be up or down 20% in the blink of an eye… only to see it be halted again. Bid-ask spreads were also very wide, and with the stock jumping around so quickly, it was difficult to place limit orders with any semblance of precision. Many traders just entered market orders and hoped for the best. Some Traders Won Big… Others Got Left Holding the Bag…As you can see in this 15 minute chart, the DWAC boom started in the $10-$12 range Thursday morning. It went up all day Thursday…. then continued skyrocketing overnight. Now, here’s what’s REALLY crazy. On Friday morning, DWAC opened at $118.80 and hit $131.90 almost instantly. Then it was halted for 30 minutes… and reopened at $175 on the dot, which was the high of the day. Presumably, traders expected a GameStop like move and were taking a “whatever it takes” attitude towards getting in…. or out. One trader we spoke with said “I sold about 80% of my DWAC at $157 and then started panicking because they kept halting it and I wanted out. I eventually just put in a market order and sold the rest
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