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.
This week, the Fed announced its latest interest rate hike, mega-cap stocks like Google and Amazon reported earnings, and the latest GDP data was released. Also, this week I took my six-year-old son fishing. We went up to Michigan, about a three-hour drive, and got ourselves a boat to go out on the lake. Ever since I took him fishing on our last vacation, he has not stopped talking about going fishing again, so I figured what time was better than now.
I remember going fishing with my father. It certainly left an impression on me, even after all these years, I remember it fondly. A special memory I get to share with him. And just as he hoped to brighten my youth and create a memory with his son, I hope for the same. I surely will remember this summer as the one I showed my son how to fish and I hope to experience this, as well as many other activities and memories, for years to come with him.
Just like I will remember fishing with my son in regards to that relationship - as a trader, it is important to know what will leave a meaningful imprint on the market. As I stated, it was a news-heavy week: FOMC, GDP, and Q2 earnings. Inflation concerns fluctuate weekly and while the market's reaction to these headlines and reports is important, it is also important to separate the news from the noise. When we look back on 2022, what will we remember as the pivotal moments of the market?
Parsing through these events can be overwhelming at times, especially if you are going through each of them alone. That is why I recommend being part of a trading community where you can discuss and dissect with others. This is exactly what we did in my latest Strategy Roundtable, which we hold weekly on YellowTunnel. I recommend checking out our latest Roundtable webinar in its entirety below:
On Wednesday, markets responded positively to the latest FOMC decision. The Federal Open Market Committee voted to raise the federal fund's target rate by another 75 basis points, bringing the range to 2.25% to 2.50%. The immediate question is now how quickly the Fed will raise rates in the future. The Fed also said that it expects "permanent adjustments in the target range" to be appropriate.
Then, the release of data on second-quarter GDP, which revealed that the United States economy had shrunk by 0.9% between April and June, surprisingly helped boost stock prices Thursday. The results were the second-consecutive quarter of decline, following a -1.6% first-quarter performance in 2022, traditionally an indicator of recession. The GDP report raised some concerns about a recession, however, the market kept moving higher through Thursday and Friday.
Next week, earnings will continue pouring in with a focus on retail and economic reports to watch out for, including July employment and manufacturing data. Q2 corporate reports we will see include PayPal, Caterpillar, Starbucks, BP, Uber, Toyota, CVS, Moderna, Alibaba, Berkshire Hathaway, and DraftKings. With another news-heavy week, I will be keeping an eye on volatility as we parse through the latest data. The market will likely continue to respond with an added focus on inflation and it will be as important as ever to separate the news from the noise.
To this point, I can’t emphasize how vital it is for blog readers and members of the Yellow Tunnel community to keep referring to our Live Trading Room so as to maintain a close tie of how our AI platform is navigating us in and out of select trades. It’s FREE and I highly encourage everyone to sign up to the Live Trading Room and keep checking in throughout the trading day.
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I also want to emphasize to traders how vital a stop-loss discipline is to winning and being successful in an unforgiving market. We employ specific stop-loss instructions with every trade. The buy and sell programs controlled by high-frequency related algorithms can create great profits or cause sudden losses, so it is imperative to maintain an element of controlling risk with each trade.
CURRENT TRADING LANDSCAPE
As of Friday, the 5-day chart shows the $SPY was trading 3.41% higher, just over $409. The S&P 500 held onto its gains on Friday as the latest GDP report appeared to have little impact on the market. Oil and gold traded higher to end the week. European markets saw solid movement higher while Asian markets closed in the red to finish the week.
The $DXY marginally fell on Friday, near the $106 level, whereas the $TLT rose throughout the week and continued to do so on Friday, near the $118 mark.
Looking at these levels and the movement of the market following this week's announcements, I still do not believe this is the restart of the bull market but rather an impressive rally in a bear market.
In my opinion, the short-term rally will continue into August, and the bear market will resume its downward trend in the September-October time frame.
The dollar's retreat is a key factor and booster of a short-term resurgence in the cyclical and commodities sectors. This, combined with the dollar's recent 20-year peak, should provide fuel for a brief period of appreciation in the next two to four weeks.
As we've seen, the Fed's decision on Wednesday sparked some volatility and I encourage members not to chase the market and sell into the rallies. Earnings, GDP, and PCE data this week, for example, also provided some volatility while the market ultimately finished higher.
The unique circumstances of the present bear market have generated a 20-year record bearish sentiment among retail and professional investors.
Keeping this in mind, I'd be a seller into the rally and have a NEUTRAL portfolio right now. The market is currently overbought, and it is on the verge of top building.
The "BUY" signal based on the Aggressive Power Trader Portfolio is at the $390 and then $380 level using SPY and the "SELL" signal is at $401 and then $409.
Consider selling premium if you're trading options. November and December expiration dates are ideal for selling premium.
NEW EARNINGS POWER TRADER SERVICE
I recently launched our new Earnings Power Trader service which I am 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. Click here to learn more.
Signals have historically averaged over 85% accuracy in my live trading since inception. Sometimes I 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 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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With the FOMC decision behind us, I am looking ahead to see where the next market-moving news will come from. Outside of GDP and FOMC news, mega-cap tech earnings dominated the week but dwindled significantly in the upcoming week. While we will still see plenty of earnings next week, the mega-caps, which traditionally are indicators of the rest of the market, are done reporting.
Having the likes of Apple, Amazon, Google, and such behind us means the market will not be supported by rosy guidance of the major tech players and will deal with the remaining economic and earnings reports. These will likely move the market but not as significantly as mega-caps. So, with this in mind, and the latest GDP and inflation reporting, I am focusing on a sector that I think could produce some good profits.
I believe the market is overbought at the moment and the rally will likely continue into August, however, downward momentum could resume as early as September. The tech sector has withstood the latest troublesome inflation reports and recession concerns. However, as we move further from the latest Fed decision and earnings season, both of which supported the market, I believe this sector is a prime candidate for a great hedge.
TRADE OF THE WEEK
This week's choice is ProShares Short S&P 500 ETF (SH), an inverse ETF that is a simple way to short the S&P. Traders should be able to get a great trade on this inverse ETF, which should provide some stability following another big Fed rate increase and as we make our way through the end of the current earning season.
The SPY inverse ETF YTD Daily Total Return is currently at 15.5% and the ETF enables investors to make a single-day wager against the S&P 500.
The end goal of this leveraged and inverse product, like most leveraged and inverse products, is to provide one day's worth of inversion exposure to the underlying index—a cap-weighted basket of 500 large-cap U.S. firms chosen by the S&P Index Committee—with over $2.6 billion in assets.
The current overbought nature of the market provides a good spot for this ETF to work as a hedge and our A.I. arsenal is signaling just the same.