Hi everyone and welcome to the Yellow Tunnel community, an aggressive short-term trading service dedicated to all classes of traders seeking to elevate their trading skills, market awareness, and trading profits.
Markets ended the week on a very mixed note after the Labor Department reported nonfarm payrolls increased only 194K versus estimates of 450K. At the same time, hourly wages increased by 0.6% month-over-month implying wage inflation is persistent. Hence, the yield on the benchmark 10-yr Treasury climbed to 1.6% leaving traders in a bit of a quandary about the near-term direction for market momentum.
The market has entered what is termed a blackout period where companies aren’t speaking to stock buybacks and guidance right in front of earnings season, which begins in earnest next week. It should be noted that lower guidance from Nike Inc. (NKE), PPG Industries Inc. (PPG), PulteGroup Inc. (PHM), and Sherwin-Williams Co. (SHW). These are very well-managed companies, so when they are struggling to navigate the global supply chain disruptions, then it should be assumed multiples of companies will be also issuing similar downside guidance.
That being said, the rotation out of bonds is going to provide further capital flows into equities that are inflation-sensitive, namely the banks and energy, which are both having very strong weekly performance. With rates moving up along the entire curve and WTI crude topping $80/bbl for the first time since 2014, the wind is fully to the back of both sectors and should be considered a focus of traders looking for long-side opportunities.
Sector rotation is occurring almost daily – and this is exactly where the power of our AI models in our Weekly Power Trader advisory service becomes so valuable in identifying those ETFs and stocks with which to trade.
The $SPY was able to break out of the recent range and settled right below the 50-day moving average at $439. The value/reflationary traded higher, up 0.8%, and settled above the 50-day moving average. The technology stocks closed in the green, up another 0.80% above August's lows.
The $DXY is short-term overbought and started its topping process near $93, long-term overhead resistance from the September 2020 high. The $TLT had another pullback and retesting key support levels (July and August lows), the 200-day moving average. The $TLT pullback is the key development in the market.
Volatility dropped back to $19. The $SPY short-term support level is at $436, followed by $428 (sustained break below $428 is a low probability event at this point). The SPY overhead resistance is at $443 and then $452. I expect the bottoming process to continue this week and next. At this point, I believe the recent low at $428 is set.
The unemployment numbers were soft on the surface by inflationary per the rise in hourly wages, sending yields higher. I would be a buyer of value stocks on pullbacks and sell technology stocks on rallies.
I would consider rebalancing my portfolio at this time and have a bullish portfolio. The market bottoming process may continue for the next 1-2 weeks. Market corrections are never a one-way trade.
If you are trading options consider selling premium with December and January expiration dates.
"BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at $436 level using SPY and the "SELL" signal is at $446 for short-term traders.
Based on our models, the market (SPY) will trade in the range between $428 and $455 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.
What makes this new service so special is that 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 86% accuracy in my live trading since inception. Sometimes we hold positions for 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 color 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 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 OTM put (strike less than 100) with option BID price close to $0.5.
THIS PHENOMENON OCCURS 4 TIMES A YEAR, AND IT’S HAPPENING RIGHT NOW!
Every year, I mark down four different sets of dates on my calendar.
I’m not talking about somebody’s birthdays or an anniversary of some kind. I’m talking about earnings seasons. And it’s starting right now.
Please let me be clear: it sounds dry, but using earnings seasons to your advantage can lead to incredible successes.
It’s like the changing of the seasons 4 times per year: something you know you can expect to happen.
It’s the same cycle, over and over again: rumors start building around a company in the run-up to earnings season, shareholders rush in, stocks go up, shareholders cash out.
Because these traders knew the past, they knew what to look for in the present. They saw the signs, bought in, and made their money on the backbone of strong earnings reports.
Can this earnings season be different with supply shortages hurting the top line, higher wages squeezing profits...
Interest rates are trending higher and that is sweet music to the banking industry. The majority of profits is generated from net interest margin where banks borrow from the Fed at next to nothing and are able to charge more to borrowers, thereby increasing net income. This in addition to proprietary trading should fuel a robust third-quarter earnings season as well as set the table for a strong fourth-quarter outlook.
The Financial Select Sector SPDR Fund (XLF) makes for a great trading vehicle to trade the banks, brokers, and asset managers with the best leading names in the sector occupying almost 55% of the top ten holdings.
Our AI-driven Seasonal Chart is providing a very bullish outlook for XLF, with three of four 20, 30, 40, and 50-day probability periods registering “Higher” readings. When we get such a strong set of signals, it fits our trading profile to a tee. I hope all readers of this blog take full advantage of when we pull the trigger to go long this trade.
TRADE OF THE WEEK
Within the top holdings of XLF, traders can look to those stocks that are Dow Jones index weightings that garner the most attention – one of them being Goldman Sachs Group Inc. (GS). The company is the most coveted investment banking firm traded by professional money, and for good reason. Goldman has blown away earnings estimates for the past four quarters, with earnings per share exceeding estimates by an average of 60%. No other financial company is putting up such stunning results.
The company is scheduled to release third-quarter results this coming Friday, October 15, where the stock could get some bullish action in front of the earnings print. The 5-day chart shows the stock pivoting higher where a strong Q3 report could put a serious bid under the stock.