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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
Continue Reading -->10 Books Every Trader Needs to Read
Whether a trader is a seasoned professional or just starting their career, they can turn to books written by experts who know the market to advance their trading knowledge. The books included in this list are stalwarts of the industry, having been resources for some of the most successful traders. They cover a wide range of topics, including technical analysis, trading psychology, futures and Forex trading, meaning any trader can find something they can learn from. Hit and Run Trading: The Short-Term Stock Trader’s Bible by Jeff Cooper Over his professional trading career, Jeff Cooper has developed dozens of proprietary strategies that help traders profit in any market. In “Hit and Run Trading,” Cooper explains how traders can use these strategies – which have helped trading pros like CNBC’s Jim Cramer — to succeed in both day and swing trades. This books is the foundation of a storied 30+ year career, and includes dozens of secrets for gaming institutions, playing gaps, and finding the best momentum names. (click here for a special deal on this classic) How to Make Money in Stocks by William J. O’Neil William J. O’Neil published the most recent edition of “How to Make Money in Stocks” after the 2008 market crash. He believes that proper market timing, trading, and interpretation of charts can have a massive impact on your profitability. Choosing the most profitable stocks and knowing when to buy and sell is crucial to making profits, and this book instructs traders on those principles. O’Neil has developed a powerful system — called CANSLIM — to minimize risk and maximize profits, even teaching traders how to earn more in a bearish market. Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude by Mark Douglas While Douglas’ book includes technical information about choosing markets to trade and determining entry triggers, most of the book focuses on how to overcome psychological barriers that prevent traders from succeeding. Douglas takes a closer look at the patterns within the market that lead to negative behaviors and mentalities for traders, proposing strategies that help traders understand the risk they are taking on and how to be more comfortable with the market. This book is a favorite of T3 Live’s Sami Abusaad. Reminiscences of a Stock Trader by Edwin Lefèvre Unlike other books on trading, ‘Reminiscences of a Stock Trader’ is a fictional story, although it’s based on the real life of famous trader Jesse Livermore. The book follows the career of Larry Livingston as he progresses from a quotation-board boy to an experienced trader. Readers can learn from the mistakes that Larry makes and watch him improve his own techniques. The Market Wizards Series of by Jack Schwager Schwager turned to legendary traders to provide advice for “The Market Wizards” series of books. He interviewed some of the most successful traders in the business to describe their experiences with trading psychology, strategy development, and profit maximization. The lessons in this book can apply to traders at any level, whether they are just starting out as interns or have been trading for years. There practically isn’t a trader alive that hasn’t devoured the Market Wizards series of books. One Up on Wall Street: How to Use What You Already Know to Make Money in the Market by Peter Lynch Most people believe that accomplished professionals have an advantage over average traders because they have more experience or work for major financial companies. But mutual fund manager Peter Lynch thinks the average investor actually has a leg up on Wall Street pros. He believes traders can use simple, everyday observations to gain an edge, and explains exactly how to do so. The Way of the Turtle by Curtis M. Faith In 1983, two professional traders, Richard Dennis and William Eckhardt, set up an experiment to determine whether or not traders were born with a special gift or if they could be taught how to trade successfully. Dennis believed he could train a group of people to be traders, just like turtles were raised on farms in Indonesia, so the group members were called “turtles.” The most successful of the group, Curtis Faith, wrote “The Way of the Turtle” to give further insight into the experiment, including everything the turtles were taught and the results they experienced from the lessons. The Intelligent Investor by Benjamin Graham Benjamin Graham is often considered to be the “father of value investing” or the “dean of Wall Street” because his ideas have been foundational to so many investors; one of his students was Warren Buffett, famous investor and one of the richest people in the world. Graham wanted to teach traders how to manage risk, increase profits and remain disciplined. “The Intelligent Investor” is key to developing smart investment strategies. Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by John J. Murphy In order to be successful, traders must understand technical analysis so they can predict market moves and know when to buy or sell. John J. Murphy’s “Technical Analysis of the Financial Markets” takes a deep dive into understanding market trends, chart patterns, intermarket relationships and trading tactics, among other things. It includes the basics of analytical methods, making the book a great resource for beginning traders or for anyone looking to advance their technical analysis skills. Trade Your Way to Financial Freedom by Van Tharp All traders want to make profits and have winning trades, but trading is just as much about reducing or avoiding losses. Van Tharp’s book focuses on helping traders manage their risk and reduce their losing trades so they can profit as much as possible. “Trade Your Way to Financial Freedom” also includes information on trading psychology, which can put traders in the mindset they need to get over their personal biases about the market and bounce back from losses. Tharp’s techniques can be applied to a variety of trading styles, including futures and Forex trading.
Continue Reading -->2020 Trader Poll Results: You LOVE Amazon
Yesterday, we held an informal, unscientific poll to measure traders’ expectations for 2020. This is what we found: 52.8% of survey respondents believe the SPX will rise more than 10% in 2020. 17.6% said it would fall more than 10%, with 29.6% saying it would finish somewhere in the middle. Then, we measured expectations for a crash. 31.7% of respondents said the SPX will fall more than 10% in a singly day. This seems awfully high, considering that this has only happened three times going back to 1929. In terms of asset classes, traders are most bullish on stocks. 55.1% said stocks would perform best in 2020. We next took a lot at sectors to see which sectors traders are most bullish and bearish on. Survey respondents were most positive on tech, with 71.1% said they were bullish on technology. Real Estate was down at the bottom, with just 15% bullishness reported. Traders’ positive view on tech is no surprise given that QQQ is up almost 40% in 2019, with the Semiconductors ETF (SMH) up 63%. And finally, we asked traders what their #1 stock of 2020 was. And the positivity towards tech continued there. AMZN was the #1 choice by a country mile, with more than double the number of votes of the second place pick, AAPL. MSFT and TSLA were in the 3rd and 4th positions, respectively. Want to participate in our next Trader Survey in January? Join our mailing list below:
Continue Reading -->50 Stock Trading Terms You Need to Know
Trading can seem daunting to anyone just starting out, and all the terminology you have to learn makes it worse. Learning some key terms can help a beginner trader start to understand the basics of trading, and prepare them for more in-depth trading education. Below is a list of 50 terms that all traders should know. This is an amazing way to start your trading education journey. This guide to trading lingo is especially helpful for T3 Live subscribers — it will prepare you to better follow our instructors and to start profiting quickly. Arbitrage Arbitrage is the practice of buying and selling an asset in two different venues simultaneously to profit off a difference in the price. There is typically no holding period because both transactions happen at the same time. Ask The ask price is the price a seller is willing to accept for their stock. An ask quote will include the price and the number of share available to be sold at that price. Bear Market A bear market is a market that has declined 20% from the highs. The phrase “bear market” sometimes also refers to an individual security or commodity that has declined by at least 20%. More on Bear Markets Bid In comparison to the ask price, the bid price is the amount a buyer is willing to pay for a stock. Blue Chip Stocks “Blue chip stocks” are big name companies that are well-established and with a large market value. The name comes from blue poker chips, which are the most valuable chips. Blue chip companies are usually valued at $10 billion or more and can be found in a major market index, like the S&P 500 or Nasdaq 100. Bull Market A bull market is the opposite of a bear market. In a bull market, stocks are 20% off the lows. More on Bull Markets Candlesticks A candlestick looks like the wax part of a candle, and marks the opening or closing price of the stock and will be either black or red (if the stock closed lower) or white or green (if the stock closed higher). The thinner parts of a candlestick on the top and bottom, which look like the wicks on a candle, mark the highest and lowest prices of the day. T3 Live Director of Education Sami Abusaad explains the candlestick chart in the Strategic Day Trader Ultimate Guide Common Stock Common stock is the type of stock that most people invest in; it represents a share of ownership in a corporation and affords the investor the right to vote on the company’s board of directors and policies. Common stock owners also have a claim on profits, although they are at the bottom of the priority ladder if the company goes bankrupt (creditors and preferred shareholders receive their shares first). Cover Covering is the closing (or reducing of a short position). When a short position is initiated, the trader is selling shares they don’t actually own. Covering is when some or all of those shares are bought back. Day Trade A trade is one where thee position is bought and sold within the span of a single trading day. Day traders capitalize on short-term market moves in order to make a profit. T3 Live’s Strategic Day Trader subscription will help you understand day trading and guide you into making the best trades. Dividend When a company makes a profit, they can distribute portions of their earnings to stockholder through dividends. Dividends may come in the form of cash, additional shares of stock, or other property. Not all stocks pay dividends. Earnings Report Each quarter, public companies publish an earnings report detailing their most recent performance. The report includes an update of the company’s profit and loss statement, assets, liabilities, equity and cash flows. Shareholders can learn more about the company’s financial health and change their investment accordingly. The value of the company’s stock will fluctuate wildly on the day the report is released. Equity There are multiple financial definitions for “equity,” although the most common refers to the amount of assets that shareholders can claim if the company liquidated or paid off their debts. This is also called stockholders’ equity. In comparison, owner’s equity refers to the money that remains when the company has repaid its creditors after liquidating its assets. In some cases, equity is simply used to refer to stocks, particularly common stocks. ETFs ETF stands for exchange-traded fund, a grouping of multiple securities that can be traded on major exchanges like a stock. ETFs are divided into shares, which give the shareholders proportional shares of the total assets, although they do not own the underlying assets (which are owned by the fund provider). ETFs are designed to track the value of an asset, although they trade at prices determined by the market. ETFs that track a stock index will pay out lump dividend payments to investors for the stocks that make up the index. Fill When an order is placed to buy or sell a stock, the fulfillment of that order is called a fill. There are multiple ways of filling an order, depending on which type it is. If a market order is placed, the investor is telling the broker to either buy or sell that stock at the best available current price. If a limit order is placed, the order will be filled once the stock reaches a specific price; if that price is not met during the predetermined period of time, the order will not be filled. A stop order, or stop-loss order, is a limit order that becomes a market order once the set price is achieved. The order will be filled at the next available market price. Forex Forex is simply a nickname for the foreign exchange market. The market includes multiple countries and exchanges currencies rather than assets. Forex is the largest exchange market in the world, with trading occurring 24 hours a day, 5 days a week.
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