Hi everyone and welcome to the Yellow Tunnel community, a family of trading services dedicated to all classes of traders seeking to elevate their trading skills, market awareness, and trading profits.
It was another week dominated by earnings and the latest inflation-related economic reports as worries of a potential recession continued to fluctuate while optimism regarding Fed action bubbled up. The tech sector saw shares under pressure following underwhelming Q3 earning data from some marquee names. Also this week, GDP data offered some support while PCE reports were released on Friday, further illuminating inflation's impact on the market.
At home, things remained steady. The kids are a quarter through the school year, winter weather incrementally increases, and our book club is on to its next title. This month, we are reading F. Scott Fitzgerald's second novel The Beautiful and Damned. Originally released in 1922, the book followed a glitzy couple within the social elite living in New York during the Jazz Age.
While the novel serves as a unique account of the roaring 20s, the story primarily follows a young married couple who would rather wait for an inheritance than create a working life for themselves. With no real purpose other than waiting for an inheritance, the protagonist couple over-indulge in a life of partying and mindless alcoholism. The inheritance is jeopardized by their ways but eventually, after a long legal battle, the couple receives theirs, at which point they care little about anything outside of themselves and deteriorate their marriage as well as each other. They care for nothing and spend the majority of their life aimless with no meaning.
Before diving into the contents and meaning of the book, our book club had a rigorous discourse regarding the monotonous storytelling nature. Meandering from party to party, the repetitions of their aimless nights, and the lack of change in any particular character was deeply scrutinized and appeared to grow in shallow and vapidness as if serving no noticeable utility to anyone or anything. Within this discourse, it became clear the lack of depth and change in character was intentional. Pointing this disagreement out, I stated, and like to always believe, every story has a lesson worth noting.
Fitzgerald shows us that complaisance does not serve an individual. Furthermore, an overt reliance on our parents or financial help outside of one's self stunts personal growth, undercutting the ability to develop a meaningful life.
Most in our book club are fairly wealthy, have their own children, and could relate to fears of “spoiling” them. Similarly, while we cannot relate to the main characters of the novel, we do find ourselves in a unique situation. I certainly did not grow up like these characters and had a much different upbringing. However, most of us within the book club do find ourselves in the potential position of bestowing much more wealth on our children than what we had grown up with. This is something that my wife and I have discussed and ramped up following the astute observations in the novel.
We do not want our children to feel complacent. While we do want to give them every benefit we can, we also want to instill a drive to succeed within them. A self-generated drive for a meaningful life which in turn is a rewarding experience. Having had this discussion in our book club, we now see the deeper meaning offered by this novel and hope to take those lessons back to our lives.
Similarly, stock market observers can also obtain a lesson from this book. Often stock market participants become complacent in their ways. Relying on the hope of a bull market return and being unwilling to shift strategy reminds me of the protagonist from Fitzgerald's work, simply waiting for their inheritance to come in. Are these traders becoming better investors simply off the speculation of a bull market return? Are they honing their skill to navigate volatile market conditions? Have they gained anything by their unchanged ways?
The answer, I believe, in most cases, is no. The market landscape is ever-changing. If you began trading at the height of the pandemic when stocks hit record lows and eventually returned to their pre-pandemic levels, you would think you are a great trader and will just continue waiting out the current slump to regain gains once the bull market returns.
As a trader, you cannot sit and wait for the bull market to return. Financial support is not promised and you must maintain the skills to work through the ups and downs. Developing different skills, and tools and finding unique trends/signals to generate income in a bear market separate "trust fund" traders waiting for a lucky strike and the self-made, self-generated successful traders that find a way to thrive in all market conditions.
This book helped push me to continue studying the market, search for innovation, and book gains where I can. I want to learn as many strategies as I can and learn to apply them in the right market conditions. Complaisance is no trait for a successful trader. And being a successful trader often requires a strong trading community to surround yourself with many viewpoints and strategies.
That is why I started our YellowTunnel trading community, where you can discuss and dissect together. 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:
With the unpredictable nature of the market and the uncertainty ahead of us, I can’t emphasize enough how vital it is for our 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 I and my AI platform is navigating us in and out of select trades. It’s FREE and I highly encourage everyone to sign up for the Live Trading Room and keep checking in throughout the trading day.
Every Monday and Wednesday, I highlight our best strategies and potential trading setups via the DISCORD server. It’s the future of bringing together a trading community’s total services, educational products, live chat venues, support, news, how-to tutorials, webinars, live-trading demonstrations, and tons of market analysis. It is incredibly interactive and full of crucial and timely information. Just go to:
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 optimism that the Federal Reserve would contemplate smaller interest-rate hikes at its November meeting, all three major indices traded higher this week, despite some big tech companies posting weak earnings. Underwhelming reports from the likes of Microsoft and Meta stressed Nasdaq levels throughout the week before finding a path higher on Friday. The positive GDP report, which broke the 2-quarter streak of down reports, also offered support for shares this week, ahead of the upcoming November Federal Reserve Open Market Committee policy update decision.
As of Friday, the 5-day chart shows the $SPY was trading over 3% higher, near $388. The S&P 500 is up 2.25% on Friday, with the Nasdaq and Dow also seeing gains greater than 1%. The $VIX hit a high of $29 to open the week but gradually sold off, now trading near the $26 level.
Following underwhelming Q3 earnings reports from Microsoft and Google's parent company, Alphabet Inc., on Tuesday, the Nasdaq slumped significantly and saw similar tech and comm shares slide on Wednesday and Thursday. Apple and Amazon followed up on Thursday with the Apple report providing one of the only bright spots in tech earnings during the current season.
Google, Microsoft, and Meta shares saw additional boosts on Friday while Amazon continued lower, trading near the $101 level. Amazon's shares dropped 10% following their prediction of a slower-than-average holiday season in sales and profits. Additionally, they reported that growth in their key cloud-computing business was below expectations.
Beyond earnings, the primary focus and market driver this week were the GDP and PCE reports. The GDP report was able to offer some support as the U.S. economy was reported to grow 2.6% in the third quarter, which is a positive sign for the state of the economy.
Although economists are still concerned about a potential recession, the latest GDP report included some positive data points. Most importantly, people continued to spend money at the same rate throughout the year. After two discouraging GDP reports in 2022, any data from Q3 that was positive made a big difference. GDP data is still due to get updated but additional key figures include a decline from the record high trade deficit (exports up 14.4%, imports down 6.9%,) government spending was up 2.4%, and the rate of inflation was down at an annual 4.2%.
Released on Friday, the Personal Consumption Expenditures Price Index report showed inflation rose by 0.3% in September. However, details within the report showed that inflation remains rampant and the lower figure was primarily driven down by the lower price of gas. The report highlighted that, in the span of one year, the general rate of inflation remained at 6.2%. However, in that same time frame, the core rate of inflation saw a slight uptick to 5.1% from 4.9%.
The GDP report offered substantial support while the PCE data revealed what most had already accepted: inflation remains hot. Both are coming ahead of what could be another market-supporting event: midterm elections. Any clarity regarding how the government will move going forward should help the trading landscape going forward.
However, we have observed several trends that could produce a larger impact during the last few weeks of 2022. Within them, there is one particular sector and symbol I'd like to highlight, but first, let's review the latest levels and reading of the market based on my A.I. toolset.
Currently, I am watching the overhead resistance levels in the SPY, which are at $390 and then $400. The $SPY support is at $380 and then $370. The market is currently rising and I predict this trend will continue for the next two months. In the short term, however, the market may fall back slightly as it is presently overbought. I would be a buyer into any further sell-offs and have encouraged subscribers not to chase the market to the downside.
The market is divided on how to feel about inflation. Some think that the Fed will change its direction, while others believe that rate hikes are inevitable. While some companies have fared well despite the recent economic turmoil, others- like several tech giants- are beginning to show declining revenue and other troubling signs. GM and Visa, for example, have shown resilience.
So long as SPY is above its past few lows, I predict the market will continue to move upwards. It's worth mentioning that U.S. yields are still being closely watched, especially long-term yield rates which have recently surged to new all-time highs. The short 2-year yield is traded near 4.0%, while the 10-year pulled back a bit after it was trading much higher than that earlier.
The global marketplace still lacks liquidity, as Japan's and the U.K.'s currencies have shown us with their recent levels. Just recently, the Chinese Yuan hit an all-time high. In China, Xi was re-elected for a third term (and probably for as long as he wants) which pushed the Yuan up. China then announced it would be selling U.S. Dollar shares which did somewhat impact the strong dollar negatively.
As the focus remains on earnings and the upcoming midterm elections, I will continue looking for buying opportunities on any pullbacks. Looking at next week's FOMC, investors expect a 75 basis point increase in the November meeting.
Also, next week, the Federal Open Market Committee will update its policy, which will be the main economic release to drive markets. The meeting will conclude on Wednesday with Powell sharing any available updates and guidance. Key reports next week include ADP employment, unemployment, average hourly earnings, and the ISM manufacturing index. Quarterly earnings reports released will primarily be from the retail and energy sectors.
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 Earnings 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 entered 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.
A 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.
Have You Had Your Coffee Yet?
On November 3rd, STARBUCKS CORPORATION (SBUX) will announce its earnings.
The last time we traded STARBUCKS CORPORATION (SBUX) on April 23rd, 2021, we had a 97.47% return on risk. Let me repeat that, we had a 97.47%** return!
That's a pretty good return after holding the position for only 1 day!
This is my favorite time of year!
Every trading day, otherwise-unremarkable companies find themselves delivering outsized gains to shareholders.
25%... 45%... 64%...** and more.
(A portion of Yellow Tunnel sales will go to directly help the Ukrainian people)
The market landscape is constantly changing. Fed outlook can flip on a dime, and while rate hikes are expected, optimism regarding a shifting Fed perspective has gained momentum as of late. Only following the Fed, will it be clear where the market will head. However, due to the latest levels in the market, there is one sector set to benefit and display a clear path higher. With the FOMC decision on deck and midterms thereafter, market clarity should push this particular sector higher.
The Consumer Discretionary Select Sector SPDR Fund (XLY) is a renowned ETF that highlights S&P performance with a focus on retail, hotels, restaurants, leisure, luxury goods, automobiles, and consumer services. With over $14 million in assets, XLY is currently trading at $144 and slightly above its 52-week low of $133. Going back to December of 2021, this symbol was hitting its 52-week high of $215.
While such a high might not be the exact outcome of the ETF as we head into the final months of 2022, it does show a promising pathway toward its upside. Holidays are right around the corner and an annual holiday rally is expected. Similarly, clarity from two more Fed decisions this year and the upcoming midterm elections could offer shares support through 2022. With plenty of room to trade higher, and plenty of market drivers to push it in that direction, I am going to be focusing on the retail sector for the next few trading sessions, hopefully finding a good entry into XLY. Before I commit to the sector, let's review my A.I. model's forecast.
XLY's 10-day forecast, using the Stock Forecast Toolbox, is generating several optimistic signals. First of all, the symbol is showing a positive vector score to the end the week. A key indicator in trends going forward, when reviewing the vector score, we look for positive, steady trends in one direction. XLY is offering just that.