Bank ON America!
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The rolling correction has worked its way through most of the 11 market sectors, with REITs, utilities, healthcare, consumer staples and energy in their own bull markets. The narrative of the Fed having to take more hawkish actions to tamp down inflation has traders moving toward the mindset of a pending hard landing for the economy.
The notion of a global slowdown is taking hold the longer the war in Ukraine goes on, the 45 cities in China that are either in full or partial Covid-related lockdown and the ongoing supply chain constraints that are keeping prices of goods and services elevated. The effects are being felt much more outside the U.S. than here at home.
Bond yields have also moved up to levels not seen since 2018 after Fed Chairman Jerome Powell telegraphed a 50-basis point hike at the upcoming May 4 FOMC meeting. The market is more convinced a 75-basis point increase is coming. Adding to the angst, the yield curve inverted Wednesday, where this trifecta of negative news for bonds spilled over into the equity markets triggering a major downward reversal.
To the bullish camp, the labor market is very tight, wages are up and spending is healthy. If inflation is peaking, then a lot can change for the good very quickly. Traders will get several economic reports and high-profile earnings releases next week that will help determine if the market has overreacted to the downside. And we have to remember that roughly 70% of market volume is attributed to high-frequency trading tied to algorithms that trade off of headlines and technicals rather than fundamentals.
CURRENT TRADING LANDSCAPE
The week closed out on a solidly negative note after bond yields rose sharply. The $SPY broke short-term support at $441. The value/reflationary ($VTV) closed lower 1.0%, at $147, failed at to break the all-time highs. The technology sector ($QQQ) trades lower by 1.5% at $329, below the 50 DMA and the 200 DMA.
The $DXY trades higher to the $101.3 level and breaking above the March 2020 high. The $TLT trades lower by 0.7%, at $120, and below the July 20219 lows. The ten-year yield closed higher at 2.95%, retesting 4-year highs. The $VIX trades higher near the 26 levels, above the historical average.
The $SPY short-term support level is at $435 followed by $420. The SPY overhead resistance is at $447 and then $451.
Assuming the geopolitical risks in Ukraine have reached the status quo, it is reasonable to assume that the $SPY February low is set and the pattern of higher highs and higher lows will continue in the next two to six weeks.
I would be a buyer of the low beta stocks into the pullbacks and have a market BULLISH portfolio at this time.
I do not expect the $SPY to post new all-time highs in the first half of this year. There is a high probability that the $SPY main long-term support at $415 is now set but might be retested in the next few months.
The "BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at the $434 level using SPY and the "SELL" signal is at $450 for short-term traders.
If you are trading options, consider selling premium with July and August expiration dates.
Based on our models, the market (SPY) will trade in the range between $415 and $470 for the next 2-4 weeks.
NEW EARNINGS POWER TRADER SERVICE
We recently launched our new Earnings Power Trader service that we at Yellow Tunnel are very excited about. Each week, our expert traders use our AI Tools to provide the Top Bullish and Bearish Stocks, each with an Entry Price, Target Profit, and Stop Loss.
This new service is special because it offers real-time alerts via SMS and access to Vlad's live positions and orders. When I put together this system, I wanted to be in the fight with other investors. That’s why I don’t play on your emotions to sell newsletters - I put my money where my mouth is.
Every trade recommendation that I make using this system – comes straight from the list of trade recommendations I use myself.
Not only that but every trade I make is logged in detail for you to review at any time. You can see my entire trading history, updated LIVE so that you can see, learn from, and even copy my trading strategy.
Signals have historically averaged over 85% accuracy in my live trading since inception. Sometimes we hold position 2-5 days by using options (selling OTM Calls and Puts spread) and targeting 1% target gain and 1% stop loss using stock price. The green color should be interpreted as a bullish signal and the red as a bearish signal.
How To Use Our Signals
Once you become a member, I encourage you to review our Live Trading Room recordings to see how I trade Aggressive Power Trader signals in my account. A snapshot of how we produce our Live Trading Room Sessions shows how we pack in a lot of information that can be accessed from whatever device you’re driving.
As a reminder, consider buying near the "BUY" level with a "10 days prediction" higher than the close price. In our live trading room, I usually hold a position for 1-2 days.
I allocate less than 5% of my portfolio if the position is being held overnight. On average, less than 1% of the portfolio should be at risk if you own a position for less than one day.
I enter a position at the predicted LOW (BUY) price or yesterday's close price. My stop loss is 1% and my target gain is 1% of the stock price. I target 75% accuracy using these signals.
Few subscribers asked about Options trading using the signals provided. Please review live trading room recordings. I often sell OTM credit put spread using weekly options and collect 0.5% using stock price. For example, if the stock is trading at $100, I would sell an OTM Put (strike less than 100) with an option BID price close to $0.5.
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As my opening comments highlighted, bond yields are on the rise, and banks and financial institutions realize much higher cash flow from operations when they raise lending rates. This applies to all lines of business – mortgages, lines of credit and credit cards. Add to this bullish dynamic a consumer that is in a good place financially and from an employment standpoint, and the investment proposition for banks is compelling.
Shares of Financial Select Sector SPDR ETF (XLF) are a good place to trade the sector and the leading stocks that are the most coveted by institutional fund managers.
Top Ten Holdings
Our trading system relies heavily on artificial intelligence, our proprietary algorithms that power our AI platform and its tools provide traders with a major edge in determining the level of conviction one can have on long and short trades. In the case of XLF, when we apply our AI-driven Forecast Toolbox to this ETF, we get a bullish Model Grade “A” probability reading with a Predicted Resistance price target of $40.31, representing a roughly 10% move higher than where XLF trades.
This is a very high conviction setup and for traders looking for a rate-sensitive sector to work with. XLF is one ETF that might be the right trade. It fits perfectly well in this market landscape, where we intend to put this ETF to work for our trading services in the week ahead. Readers of this column shouldn’t miss out and get in on our bullish strategy when we take action.
TRADE OF THE WEEK
From our perspective, Bank of America (BAC) is poised to rally in the days ahead as the market finds a trading bottom. BAC has a very high level of consumer exposure, more so than most any other money center bank that coincides with the strong consumer narrative.
The post-earnings conference call was quite bullish. As the Federal Reserve embarks on its rate-hiking cycle, Bank of America expects "significant NII (net interest income) improvement through the next several quarters," CEO Brian Moynihan said following the release of solid Q1 results.
CFO Alastair Borthwick went further, laying out some forecasted numbers. "If loans grow and rates in the forward curve materialize, we would expect to see NII in Q2 increase by more than $650M over the Q1 level and then grow again significantly on a sequential basis in each of the following two quarters," he said.
"And I think if you look at the forward curve, yes, you would expect to accelerate over the course of the year," Borthwick added when asked if he thought the net interest income gains would accelerate in the latter half 2022.
Put simply, "generally, a higher sustained rate environment will help us earn a lot more money," Moynihan said. First-quarter earnings per share of $0.80 beat estimates by $0.05 and revenue of $23.2 billion beats by $110 million.
Technically, the stock is breaking out of a three-month ascending pennant formation that almost always indicates a very bullish move higher over the near term.
The stock is in the midst of a new and powerful long-term uptrend and looks to continue higher in the days and weeks ahead as momentum builds. When we apply the Forecast Toolbox, we get a bullish Model Grade “B” rating momentum for the next ten trading days with a Predicted Resistance price target of $43.61. This is broad confirmation from our algorithm that it should be considered a high-conviction trade.
our AI indicators will signal in the next week when we should buy into this trade on a forecasted minor pullback. This is where our AI tools are so crucial in determining precise entry and exit points.
I’ll be looking to trade BAC this week to trade it from the long side, given its amazing sales and earnings prospects and the sharp pullback in the shares this week.
Trading Thoughts: consider buying near the "BUY" level with a "10 days prediction" higher than the close price. In our live trading room. I usually hold a 1-2 days position and allocate no more than 5% of trading capital to any single trade.
I allocate less than 5% of my portfolio if I hold a position overnight. On average, less than 1% of the portfolio should be at risk if you have a position for less than one day. I look to enter a position at the predicted LOW (BUY) price or yesterday's close price. For Weekly Power Trader, my stop loss for stocks is 2% and my target gain is 2%. I target 75% accuracy using these signals.
We tie our Tradespoon Live Trading Room to help you manage the current inflationary wave. And we update our closed positions daily. Our AI platform works seamlessly to provide our subscribers with the most robust trading experience available anywhere in the market today.
The beauty of our AI-driven system is that we are always equipped to bring new trades ideas to our members. Trades in best-of-breed stocks and ETFs that are not yet recognized by the larger universe of traders.
We really pride ourselves on this kind of discovery process to bring trades with very high probability risk/reward parameters to members throughout each week. Our track record speaks for itself from the standpoint of a Winning Trades Percentage, Average Return Per Trade and Net Gain.
Considering the volatile landscape of late, we’re taking advantage of market dislocation and valuation distortion. We’re striving to help our members ring the register all the time and this is why serious traders should not trade without checking in with market-proven AI tools.
The consistent performance of our services is just incredible. Our historical stellar performance is made possible by being right on 85.42% of all trades that we made, with an average profit of 37.33% per trade on our collective trade recommendations. To my knowledge, this trading performance is one-of-a-kind that stands alone in the marketplace for superior trading advice where our numbers and results speak for themselves.
Once you’ve become a member of any of our services, I highly encourage you to view the instructional videos on how to best use your membership and participate in live weekly strategy roundtable workshops that are also archived in the event that they need to be viewed at a later time.
Traders seeking the most-timely directional trading strategies where historically over 85% of all my trades were profitable to come alongside the Yellow Tunnel community and make one of our services your go-to AI trading platform for no-excuses Trading.
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Go to our website at www.yellowtunnel.com and make one of our services your default trading system where the AI that powers my all-world, the proprietary platform, can help you make 2022 the best year on record for your trading portfolio.
Have a wonderful week ahead, continue to embrace the people of Ukraine in your thoughts and prayers, and let’s create some meaningful wealth together in 2022.