Buy Alert: Banks Opportunity Unfolds
A Day in Cancun: Celebrating 30 Years of Friendship and Rediscovering What Matters
As I sit here reflecting on our recent one-day trip to Cancun, I'm reminded of the importance of nurturing friendships and prioritizing what truly matters in life. My college friend's birthday was the perfect excuse to embark on a quick getaway, and I'm so glad we made it happen.
While many of our friends, including my wonderful wife, opted for a longer 4-day weekend, I've always been a fan of short, action-packed vacations. There's something about breaking up the routine and injecting a dose of excitement into our lives that rejuvenates me. And what better way to do that than by celebrating a milestone birthday with someone I've had the pleasure of calling a friend for 30 incredible years?
Being surrounded by friends from high school and college is truly one of life's greatest joys. It's a reminder that, despite the ups and downs we face, there are people who have been by our side through thick and thin. As we soaked up the sun, explored the city, and shared laughter-filled moments, I felt grateful for these relationships that bring so much richness to my life.
Our Cancun adventure also had me thinking about the book I'm currently reading, New York by Edward Rutherfurd. The story follows the Master family through generations, and one of the themes that resonates deeply is the realization that professional achievements don't solely define success and fulfillment. The main character, a banking CEO, comes to understand that true happiness and purpose come from the relationships we nurture and the experiences we have along the way.
This reflection ties closely to trading psychology, where balance and perspective are key. Much like the importance of stepping back to appreciate life’s relationships and experiences, successful trading isn’t just about chasing profits or executing perfect trades—it’s about finding harmony between discipline and emotional well-being. A trader who neglects self-care and balance often makes impulsive decisions, just as someone too focused on professional milestones may lose sight of life’s true joys.
As I reflect on our whirlwind trip to Cancun, I’m reminded that life—and trading—is about more than just results. It’s about the people we share it with, the lessons we learn, and the growth we experience. So here’s to celebrating friendships, embracing the beauty of short getaways, and keeping a grounded mindset in both life and the markets!
Next week, I'll dive back into New York and continue exploring the Master family's journey. Stay tuned for more reflections on this captivating book!
Recent Trade Review
In last week's trades, I successfully executed a position in Amazon.com, Inc. ($AMZN), leveraging insights from the Dynamic Power Trader (DPT) model. During our Live Trading Room session last Wednesday, the DPT model identified $AMZN as a strong long opportunity based on its price action and underlying market conditions. (For those who missed it, you can watch the recording here: Live Trading Room Recording.)
What made this trade successful was the precision and timeliness of the signals generated by the DPT model, which allowed me to capitalize on $AMZN’s movement effectively. Trades like these underscore the importance of having real-time, actionable insights.
This is where the distinction between our paid services and free offerings becomes clear. As a paid subscriber, you receive SMS alerts that provide precise entry and exit points, ensuring you act on opportunities at the optimal time. Whether you're managing a full-time career or other commitments, these timely notifications make a significant difference in executing trades confidently and efficiently.
The $AMZN trade is just one example of how our models and tools help you stay ahead in the market. If you’re looking to enhance your trading strategy, I highly recommend tuning in to our Live Trading Room sessions and exploring the advantages of our premium services.
Stay tuned for more trade reviews and opportunities to come!
CURRENT TRADING LANDSCAPE
The stock market ended the week on a high note, with the S&P 500 eyeing its strongest weekly gain since early November. A combination of pivotal economic data and the eagerly awaited start of earnings season shaped market movements, leaving investors cautiously optimistic. Despite persistent geopolitical tensions and mixed retail data, major indices showed resilience, signaling that the market continues to adapt to an evolving landscape. Based on the latest data, I expect the S&P 500 to rally toward the $620–$640 range over the coming months, with strong near-term support at $560–$580. Investors will continue to monitor key earnings reports and economic releases for signs of sustained momentum or emerging headwinds. For reference, the SPY Seasonal Chart is shown below:
The S&P 500, which rebounded from earlier declines, demonstrated strength as it consolidated around its 50-day moving average. Meanwhile, the Dow Jones Industrial Average outperformed, buoyed by robust financial and energy stocks. In contrast, the Nasdaq Composite faced challenges, dragged down by headwinds in the tech sector. Volatility, as measured by the VIX, eased to 16, reflecting growing confidence among investors.
While the market shows signs of stabilization, the road ahead is unlikely to be without hurdles. Investors are balancing optimism about easing inflation and strong corporate earnings with concerns about interest rates, geopolitical risks, and the Federal Reserve’s future policy direction.
Earnings Season: A Strong Start with Financials and Tech Leading the Way
The quarterly earnings season kicked off with impressive performances from major U.S. financial institutions and select tech companies, offering a glimpse into corporate resilience amid higher borrowing costs and slowing economic growth.
- JPMorgan Chase (JPM) reported strong results, driven by robust demand in consumer lending and investment banking. CEO Jamie Dimon struck a positive tone, emphasizing the bank’s ability to navigate economic challenges while maintaining healthy profitability.
- Goldman Sachs (GS) exceeded expectations, posting earnings of $11.95 per share, well above analysts' estimates of $8.21. The firm benefited from a rebound in M&A activity and heightened market volatility, with trading and investment banking divisions leading the charge.
- Taiwan Semiconductor Manufacturing Company (TSMC) delivered a stellar performance, with a 57% increase in quarterly profits. Despite geopolitical tensions and export restrictions on advanced AI chips, the company’s results underscored its critical role in the global tech supply chain.
- Other major financial players like Wells Fargo (WFC), Citigroup (C), and Bank of America (BAC) also surpassed expectations, driven by stable credit quality, disciplined expense management, and solid consumer activity. Notably, Citigroup announced a $20 billion stock buyback program, further boosting investor confidence.
Broadly, banks reported gains in investment banking, lending income, and capital markets revenue. Analysts forecast continued net interest income growth in 2025, aided by a more favorable regulatory environment.
As earnings season progresses, investor focus will shift to technology, healthcare, and consumer goods sectors, with key reports from Netflix (NFLX), Procter & Gamble (PG), and American Express (AXP) expected next week.
Inflation Data: Signs of Cooling Bolster Market Confidence
This week’s inflation reports painted a more optimistic picture, reinforcing the narrative of moderating price pressures and potentially softening Federal Reserve policy.
- Consumer Price Index (CPI): The headline CPI rose by 0.2% in December, bringing the year-over-year rate down to 3.2% from November’s 3.7%. Core CPI, which excludes food and energy, also increased by 0.2%, matching expectations. These figures suggest inflationary pressures are easing, even amid higher energy costs.
- Producer Price Index (PPI): The PPI, a leading indicator of future consumer prices, also rose by 0.2% in December, reflecting a year-over-year increase of 3.3%. This moderation in wholesale prices signals improving supply chain dynamics and supports the broader disinflationary trend.
Treasury yields responded favorably to the inflation data, with the 10-year yield retreating to 4.65% and the 30-year yield falling below 4.88%. Lower yields boosted growth-oriented sectors like technology and consumer discretionary, while also signaling that markets are beginning to price in the possibility of rate cuts later in 2025.
Economic Reports: Mixed Signals from Retail and Labor Markets
While inflation data provided a positive backdrop, other economic indicators offered a more nuanced view of the U.S. economy.
- Retail Sales: December retail sales rose by 0.4%, slightly missing expectations of 0.5%. However, core retail sales, which exclude autos, showed stronger growth at 0.4%, up from 0.2% in November. These figures indicate that consumer spending remains resilient, particularly in discretionary categories and e-commerce, despite ongoing economic uncertainty.
- Labor Market: Initial jobless claims increased to 217,000, slightly above forecasts. While the labor market remains historically tight, this uptick suggests modest cooling, which could influence the Federal Reserve’s policy decisions.
Overall, the mixed economic data underscores the delicate balance the Fed must strike as it considers future rate adjustments.
Market Sentiment: Consolidation with Optimism
The market’s recent performance suggests a consolidation phase, as investors digest a mix of economic and corporate news. Key factors influencing sentiment include:
- Geopolitical Risks: Ongoing tensions in Eastern Europe and concerns about Taiwan remain on the radar, creating pockets of uncertainty.
- Fed Policy Outlook: With inflation cooling, markets are increasingly optimistic that the Federal Reserve may adopt a more dovish stance. Fed Governor Christopher Waller’s comments this week hinted at the possibility of multiple rate cuts in 2025, further boosting sentiment.
- Volatility: The VIX dropping to 16 reflects growing confidence, but investors remain vigilant about potential risks from earnings disappointments or unexpected economic developments.
Conclusion: A Positive Start to 2025
The stock market’s strong start to the year is a testament to its resilience in the face of uncertainty. Cooling inflation, robust corporate earnings, and stabilizing economic data have provided a foundation for optimism. While challenges remain, the long-term outlook appears promising as markets find equilibrium amid shifting dynamics.
As next week brings earnings from major players like 3M, Abbott Labs, and Johnson & Johnson, along with updates from the airline industry, investors will gain deeper insights into how different sectors are navigating the current economic landscape.
With the market entering a period of consolidation, this week’s performance highlights the importance of staying informed and strategically positioned for what lies ahead.
Why do some stocks tick up overnight?
Every trading day, otherwise unremarkable companies find themselves delivering outsized gains to shareholders.
25%... 45%... 64%... and more.
If you recently owned one of these companies, you pocketed market-beating gains.
Was it luck? No. It takes more than luck to find these types of trades. This isn’t like playing a slot machine.
Click here to learn more
Sector Spotlight
As markets navigate a complex landscape of easing inflation, resilient earnings, and cautious optimism, one sector has emerged as a bastion of stability and growth. Often overlooked during periods of heightened volatility, it is now positioning itself as a critical player in the market’s recovery. With robust fundamentals and strong momentum in key earnings reports, this sector is proving that it can thrive even in challenging conditions.
The spotlight this week is on Financials, a sector that continues to demonstrate resilience and adaptability in the face of economic uncertainty. The Financial Select Sector SPDR Fund (XLF), which tracks the performance of leading financial institutions, has shown strength in response to better-than-expected earnings from major banks. With inflation cooling and the Federal Reserve hinting at potential policy adjustments in 2025, financial stocks are well-positioned to capitalize on improving market conditions.
Financials are gaining momentum as a standout sector in the early stages of earnings season, supported by strong consumer lending, robust investment banking activity, and disciplined cost management. One of the key factors driving this performance is the increase in net interest income. Elevated interest rates, while raising borrowing costs, have expanded net interest margins for banks, resulting in earnings beats from major players like JPMorgan Chase and Goldman Sachs.
Consumer activity has also proven resilient, with retail sales data and credit card usage pointing to steady demand that continues to bolster banks' revenue streams. Additionally, stabilizing Treasury yields have provided further support to the sector. The 10-year yield’s decline to 4.65% has alleviated pressure on bond portfolios, reducing concerns over unrealized losses and enhancing the overall outlook for financial institutions. This combination of favorable conditions has solidified the financial sector's strength in the current market environment.
XLF, which includes top holdings like JPM, BAC, and GS, is currently trading at $50.21. The ETF has seen increased inflows as investors recognize the sector’s potential to outperform in a cooling inflation environment. With strong support at its 50-day moving average and upside potential toward $54–$56, XLF offers an attractive opportunity for those seeking exposure to a sector poised for continued growth.
Trade of the Week: Citigroup (C)
This week’s trade idea focuses on Citigroup (C), a financial powerhouse that has started 2025 on a strong note, outperforming analyst expectations and reaffirming its commitment to shareholder value. With improving market conditions, easing inflation, and robust earnings across the sector, C is well-positioned for gains in the coming week.
Citigroup is emerging as a compelling buy this week due to several key factors. The company recently reported earnings that exceeded expectations, driven by strong performance in both consumer banking and institutional services. Adding to this momentum, Citigroup announced a $20 billion stock buyback program, highlighting its solid financial health and dedication to enhancing shareholder returns.
The broader macroeconomic environment is also turning increasingly favorable for financial institutions. Cooling inflation, as reflected in the latest CPI and PPI data, sets the stage for a more supportive operating landscape. The possibility of rate cuts in late 2025, alongside stabilizing Treasury yields, provides further momentum for Citigroup’s business model to thrive.
Despite its solid fundamentals, Citigroup remains undervalued compared to its peers, presenting an attractive opportunity for investors. At its current price of $79.66, the stock appears positioned for a potential move higher, aligning with the broader strength observed in the financial sector. Tradespoon’s proprietary A.I. models also support Citigroup as a strong buy this week, citing favorable technical indicators and robust price momentum that signal promising near-term performance.
From a technical perspective, Citigroup has consolidated around its 50-day moving average and is showing signs of a potential breakout toward the $85–$90 range. With support from both fundamental and technical factors, C presents a compelling opportunity for investors seeking exposure to the financial sector.
This week, I’ll be adding Citigroup (C) to my portfolio!
And one more thing! Our track record speaks for itself from the standpoint of a Winning Trades Percentage, Average Return Per Trade, and Net Gain. Just take a look:
The consistent performance of our services is just incredible. My historical stellar performance is made possible by being right on 83.65% of all trades that I made, with an average profit of 37.81% per trade on our collective trade recommendations. To my knowledge, this trading performance is one-of-a-kind and stands alone in the marketplace for superior trading advice where our numbers and results speak for themselves.
Visit our website at www.yellowtunnel.com and select one of our services as your default trading system. With our AI-powered platform, let's make 2024 the most profitable year yet for your portfolio! Remember to conduct thorough research and assess your risk tolerance before making any investment decisions.
One more thing, I've had the opportunity to take additional action with a great organization supporting families in Ukraine directly. Gate.org is a foundation where fundraising is held for specific families, allocating funds to multiple families currently living in Ukraine. I am on the board of directors for this great initiative and encourage everyone to check it out and donate if possible. The war in Ukraine is escalating and families are being negatively impacted and displaced daily. To learn more about this initiative to help families, please see the link below:
Wishing you a week filled with resilience, growth, and prosperous opportunities!