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January 29nd, 2023 | Issue 167 |
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Markets kicked off the week on a positive note but experienced some retreat during midweek. Market watchers are now eagerly awaiting ongoing earnings season reports, including those from $GE, $MSFT, and $TSLA, as well as purchasing managers' index (PMI) data that may drive the next market move. Ultimately, investors will be digesting Friday's PCE data which will further inform inflation levels leading into this week's FOMC meeting. At home, our book club recently read Jordan Peterson's "12 Rules for Life," and one of the main points that stood out was the importance of listening to both sides. With the current split narrative regarding the recession and inflation levels, this part of the book is particularly apt to our current market conditions. The book emphasizes that someone with whom you disagree always has some knowledge that you do not possess, and it is our job to find that information and maintain healthy, balanced dialogues. The main message of the book is that we should always seek the truth. With so many different opinions on what is right and wrong, the book argues that the only way to make a decision is to speak the truth, live the truth, and maintain healthy dialogue. This message applies not only to our personal lives but also to the world of finance. The stock market is often filled with conflicting narratives, with some people predicting a soft landing and others predicting a hard landing. In the spirit of the current situation, those who believe in a soft landing may not want to listen to messages of a hard landing and may even ridicule those who hold a different view. The opposite is also true for those who believe in a hard landing. Are you a bull or a bear when it comes to the stock market? Regardless of your perspective, it is important to have a cash management strategy in place. So let's break it down: |
Q: How much cash should I have if I am a bull? A: As a bull, you may be more optimistic about the market and therefore have a lower cash allocation. It's a good idea to have around 30% cash on hand and consider deploying some of that cash on pullbacks. This way, you'll be able to take advantage of any buying opportunities that may arise. Q: How much cash should I have if I am a bear? A: As a bear, you may be more cautious and have a higher cash allocation. It's a good idea to have around 50% cash on hand and consider raising cash on market rallies. This way, you'll be able to protect yourself in case of a market downturn. Q: How much should I risk per trade? A: Risk management is crucial when it comes to trading. In our live trading rooms, we suggest using a dollar-cost averaging (DCA) strategy and risking 1% of your portfolio per trade. This way, you'll be able to manage your risk effectively and not expose yourself to too much downside. |
Whether you are a bull or a bear, it is important to always listen to arguments from the other side. Even if you do not change your opinion every time the wind blows, at least you can consider the possibility that the other camp might be right. This can help you make better decisions when it comes to managing your cash, the number of positions you hold, and the size of your positions. That is why I suggest joining the YellowTunnel trading community, where you can review our non-opinionated AI trading program and openly discuss and explore different trading strategies with other participants. We offer a 30-day risk-free trial that gives you access to the YellowTunnel platform and lets you decide for yourself. If, after 30 days, you believe YellowTunnel's predictive software and trade intelligence platform is not for you, we will refund your membership! That is how confident we are in our signal accuracy and trading tools. For more information on the YellowTunnel tools and our trading community, I suggest reviewing our latest Strategy Roundtable, which we hold weekly on YellowTunnel. I also recommend checking out our latest Roundtable webinar in its entirety below: |
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| Vlad Karpel
YellowTunnel and Tradespoon Founder |
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P.S. Click here for access to the Power Trading Live Strategy Roundtable Recorded every Thursday. P.P.S. Join our Discord Community to participate in our Free Live Market Volatility Trading Room Session every Monday and Wednesday at 8:15 am CST. Click Here To Join |
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TRADE IDEA OF THE WEEK Sticky 3M(MMM): Money, Money Money |
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3M Co. (MMM) is a diversified American company that operates in various industries such as industrial production, worker protection, healthcare and consumer goods. 3M is known for its strong brand and innovative products, such as Post-it notes and Scotch tape. The company has a long history of paying dividends to shareholders and has generally been considered a stable and reliable investment. However, like all stocks, the value of 3M's stock can be affected by a variety of factors, including economic conditions, industry trends, and the performance of the company. Just this week, 3M provided a bleak outlook for the economy in the upcoming year, highlighting an expected decrease in consumer spending. The company's fourth-quarter earnings failed to meet expectations and its guidance for 2023 also fell below analyst predictions, which caused its shares to decrease during early trading... |
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Earnings Season is here and Apple (AAPL) will announce its earnings this Thursday. |
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The last time we traded AAPL during Earnings Season we had a 23.90%** return on risk. Let me repeat that, we had a 23.90% return! That's a pretty good return after holding the position for only 1 day! |
Be prepared: APPLE (AAPL)is scheduled to announce its earnings on February 2nd. This is my favorite time of year! |
(A portion of Yellow Tunnel sales will go to directly help the Ukrainian people) |
CURRENT TRADING LANDSCAPE |
This week, the markets rose in expectation of fresh PCE data and the existing earnings season. The $VIX index stayed tranquil near its $20 mark while investors waited to see how CSX, BA, and TSLA's quarterly earnings reports – along with GDP Data – would affect the market's trajectory. Currently, the $SPY overhead resistance levels are at $402 and then $416, while the support is situated at $396 and then, later on, down to $391. In my estimation, I believe that it will remain in a sideways trade for 2-8 weeks - thus making me MARKET NEUTRAL AT THIS TIME. As such, I highly recommend taking precautionary steps by hedging your positions accordingly. |
After a strong opening to the week, markets stumbled as tech giants reversed course. Microsoft – America's second-largest firm by market cap – particularly weighed down enthusiasm after their earnings report included a sobering outlook and sent investors into selloff mode. Consequently, all three major U.S. indices declined on Wednesday amid this negative news cycle from an industry leader. By Wednesday's close, however, shares began picking up with the Dow Jones booking a marginal gain. On Tuesday, purchasing managers' surveys uncovered that U.S. manufacturing and services industries have contracted for seven straight months since January, further affirming the prospect of a "hard landing" as investors become increasingly worried that the Fed's relentless rate hikes could drive an already moderating economy into recession. Although Wednesday's reports have been less than stellar, tech earnings are not the only cause for concern. Boeing (BA) managed to achieve positive cash flow for two quarters in a row but posted a quarterly loss when analysts expected a profit, leading its stock prices down by 0.3%. Abbott Laboratories' (ABT) adjusted profits exceeded Wall Street estimates; however sales dropped 12% compared to last year and their stocks plummeted 2.1%. After the market close on Wednesday, all eyes will be turning towards Tesla's (TSLA). Next week, the Federal Reserve is gathering to make a decisive judgment on monetary policy and most likely hike interest rates by one-fourth of a percentage point as it transitions towards more relaxed policies. Investors were closely monitoring the fourth-quarter Gross Domestic Product (GDP) report on Thursday to decide if economic expansion has decelerated. When results were posted, investors received a bit of surprise. Gross domestic product growth for the fourth quarter was 2.9%, a slight decrease from the previous quarter's 3.2%, but still indicating a strong economy. This was higher than economists' predictions of 2.3%. On Friday, the Personal Consumption Expenditure (PCE) figures for December are due to be released. Although there is no indication of any unexpected results in this significant report, it will play a major role in dictating both how the Federal Reserve and markets behave moving forward. Following the release of surprising positive inflation data from Europe and America, interest rates decreased while the value of the U.S. dollar remained steady. The yield on 10-year bonds is currently below 3.5%, a level that had previously been considered supportive, as sales figures did not meet expectations. Given this situation, as the period for reporting earnings continues and markets remain sluggish, I plan to capitalize on this opportunity by investing in a specific symbol and sector; more details to come. |
Despite the market's uncertain nature, there is one type of trade that tends to perform well during such times. Although the beginning of 2023 had some positive rallies, it has since returned to a bearish trend. With various challenges emerging, this specific industry may be positioned for hardships in the upcoming weeks - and thus present a perfect selling opportunity. |
ProShares Short S&P 500 ETF (SH) shorts the S&P 500 and is currently trading near the $15 level, below its 52-week high. The symbol has been on the decline this week - making it an opportune time to buy low. As I've outlined above, the bear market is here. The Fed is set to hike rates in an attempt to combat inflation which will surely inflict some volatility on what is already an unpredictable market landscape. Based on this, I like what I'm seeing for $SH in the weeks to come and will be adding it to my portfolio. But before I do that, let me verify with my priority A.I. models. If selloffs are to ensue, then I will not only be looking to add $SH but also looking to short one specific symbol. |
If selloffs are to ensue, then I will not only be looking to add $SH but also looking to short one specific symbol. |
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NOTE: We encourage all subscribers to view the instructional videos on how to best use your membership and invite our members to participate in live weekly strategy roundtable workshops that are also archived for your convenience so that they can to be viewed at a later time. |
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How To Trade a Bear Market Strategy Roundtable 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: |
https://discord.gg/YjBfkaqGGu 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. |
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To effectively trade in today's rapidly moving equity markets, active day traders and swing traders must stay ahead of market changes due to inflation, global uncertainty, politics, as well as innovations and technological changes used by hedge fund traders and proprietary trading firms. With traders like you in mind, we designed this intensive roundtable where you will deepen your understanding of all aspects of stock and options trading in today's changing market. |
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DISCLAIMER: Vlad and his team may have a financial interest in the picks as they trade many of the same equities and options they pick. Vlad Karpel and YellowTunnel (Company) is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. All investing strategies are made available to the general public on a regular basis. We do not provide personalized financial advice or investment recommendations. As an investor, you know that any kind of investment opportunity has its risks. There is no such thing as low-risk stocks and we recommend you invest wisely and that only risk capital should be used to trade. Investing in Stocks and Options is highly speculative. No representation is being made that the use of this strategy or any system or trading methodology will generate profits. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed here and on our website. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE SUCCESS: It should not be assumed that the methods, techniques, or indicators developed at YellowTunnel will be profitable or that they will not result in losses. Nor should it be assumed that future picks will be profitable or will equal past performance. All of the content on our website and in our email alerts is for informational purposes only and should not be construed as an offer, or solicitation of an offer, to buy or sell securities. Remember, you should always consult with a licensed securities professional before purchasing or selling securities of companies profiled or discussed on YellowTunnel.com. Performance results that are discussed above are from the Live Trading Room. Multiple YellowTunnel tools were used to achieve these results. Trade % Gain/Loss is calculated by dividing the $ Gain/Loss by the Max Risk, which is the posted Stop Loss for the trade. Yellow Tunnel's performance data represents the average return on all trading recommendations from January 1, 2020, to today. *Win rate percentage reflects the average that Yellow Tunnel's software helped me identify a profitable investment strategy.** Triple-digit returns are not typical and are not intended to reflect the likelihood of similar returns in the future. |
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