Author: Andrew Packer

Stock market strategies

Tastylive: Stay Profitable During Low Volatility with This Strategy

Posted on by Andrew Packer

Traders need markets to move to have profitable trades. Using tools such as options can take a smaller market swing and turn it into a profitable trade.

However, one component of option pricing is related to market volatility. With market volatility at four-year lows, that makes it more challenging for investors to profit. With the right tools and strategies, however, traders can still make reasonable profits while waiting for higher-volatility ones.

Less volatility means fewer opportunities, especially for directional bets. Buying a call option ahead of a stock’s surge higher is a great way to leverage a return. However, when volatility is low, stocks are less likely to soar like that.

Stocks are also unlikely to see a big dive. That means just buying a put option can also struggle in a low-volatility environment.

One strategy to make money in such an environment is with a strangle. This is a trade that uses multiple options. And it can benefit from the underlying stock staying within a certain range.

Even if a stock breaks out of its range, one part of the option trade will still show a profit. That helps reduce the total possible loss.

The strategy can also be used for a market index as a whole. That’s also where zero-day options can be used to book profits on a regular basis.

 

To look at the best way to profit while trading in a low-volatility environment, click here.

Commodities

Heresy Financial: Rumors of the Dollar’s Demise Have Been Greatly Exaggerated

Posted on by Andrew Packer

The past few weeks have seen a number of rumors about the role of the U.S. dollar in international trading. Russia announced it was ending dollar (and Euro) trading on its stock exchange.

There was talk of Saudi Arabia ending global oil trading in dollars as well. That rumor has been false. However, Saudi Arabia has allowed oil to trade in other currencies besides the dollar over the years. Either way, these rumors point to a major potential global change.

Meanwhile, the U.S. dollar currently acts as the world’s reserve currency. For most around the world, the dollar is much less inflationary than their home currency. And it’s the most common currency for settling payments in global trade.

Some nations are working to expand the acceptance of their own currency. Or engaging in more bilateral trade, bypassing the use of the dollar.

Meanwhile, the less the dollar is used or accepted globally, the more danger that poses for everyday Americans.

That’s because less global demand for dollars could mean the full impact of inflation is felt at home. Without the dollar spread around the world, the costs of America’s soaring budget deficits could mean more pain.

So is the dollar dying? No. Is the dollar being gradually phased out as a global standard of trade? Yes.

 

To view the full explanation of how the dollar isn’t dying, click here.

Stock market

The Big Picture: Bull Market Signposts: What Happens Before S&P 500 Peaks?

Posted on by Andrew Packer

Markets often climb on a wall of worry. Because bull markets tend to start during times of heavy pessimism, many investors miss the early part of a rally. As stocks continue to rise, fears of a big drop keep investors out.

It’s only during the manic peak that investors tend to once again get all-in. And that’s the worst possible time to invest. That’s why understanding signs of a peaking market are crucial for investors to monitor.

What should investors look for? One sign is sentiment. Today’s investors are somewhat wary about today’s stock market. Especially since the recent rally has been driven by just a few tech stocks.

That’s reminiscent of the 1990s tech bubble. However, it’s only when investors have thrown caution to the wind that it’s time to be wary.

The other factor is valuation. Market valuations are slightly above average. And some tech stocks are trading at extremes.

But market darling Nvidia (NVDA), despite its massive gains, isn’t overpriced. In fact, its share price rally has been less than its earnings growth over the past two years.

If anything, the likelihood of a major market decline soon is low. However, even in a long-term uptrend, some occasional setbacks and soaring volatility can and will happen.

 

To read the full analysis on market peaking trends, click here.

 

Stock market

Game of Trades: It’s Coming. (Imminent Market Volatility)

Posted on by Andrew Packer

Since the market’s latest rally started in November, there have been only a few small pullbacks. Those declines haven’t even managed to lead to a 5% pullback, much less a healthier 10% one. And the Nasdaq has now nearly gone a record amount of time without a 2% down day.

These signs indicate complacency in markets. That’s also supported by today’s low market volatility, which has been rather subdued. It wouldn’t take much of a crisis, real or perceived, to see volatility spike.

Typically, the volatility index trades between 15-20. It may go a bit higher, perhaps to 30, in a market selloff.

Volatility spikes over 50 tend to occur every few years. The last big jump occurred in 2020 during the Covid crash.

Volatility is technically a two-way street. Stocks can get more volatile as they rally. However, because a market crash usually starts when volatility is low, it’s often the sign of a pullback.

With market volatility now at a four-year low, the price to hedge market risk is also low. It will soar when a selloff actually starts.

Meanwhile, deteriorating consumer spending and jobs data suggest the economy is slowing. That’s good for bringing down inflation. But it could also mean companies start to miss on earnings. That could kick off a market pullback and lead to a volatility spike.

 

To look at how a volatility spike could unfold and how to prepare, click here.

Economy

David Lin: Roaring 20’s Is Back: S&P to 8,000 Says Economist Who Called Rally

Posted on by Andrew Packer

While bear markets tend to last for 18 months on average, bull markets tend to last for years. Both 2020 and 2022 saw bear markets. It’s unusual to have two big market declines so close together.

But it could also mean that stocks are on track for further gains through the rest of the decade. That means that investors should use small 10% pullbacks as a buying opportunity in the years ahead.

As with the bull market of the 1920s and 1990s, technology will lead the way. Instead of radio or the internet, AI is still in its early stages, and companies haven’t even started to see the financial benefits yet. That suggests that the next few years could see the S&P 500 hit 8,000.

From today’s prices near 5,500, that’s another 45% rally over the next few years. Given how markets return 10% annually on average, that’s not a huge prediction.

But it’s also a sign that the trend in AI stocks remains sustainable. AI-related companies, particularly big-tech ones, have far outpaced the market.

In order for stocks to safely make new highs, other sectors will need to join in the market rally in the years ahead.

Given AI’s potential to revolutionize and improve productivity and profits across nearly every sector, such a move is possible.

 

To listen to the full interview on how the S&P 500 will rally to 8,000, click here.

Stock market strategies

Let’s Talk Money: 10 Stocks to Buy BEFORE They Split Next

Posted on by Andrew Packer

Nvidia (NVDA) has helped the stock market reach new all-time highs this year. And in the past few weeks, shares have seen a boost thanks to a stock split.

A stock split simply turns 1 share into multiple shares. Nvidia did a 10-for-1 split, meaning the owner of 10 old shares had 100 new shares. While this doesn’t change the total valuation or ownership stake in a company, a split can help boost returns.

That’s because the lower price makes it easier to trade, whether directly with shares or with options.

Several other companies are looking to split their shares in the months ahead.

That includes Chipotle Mexican Grill (CMG). The quick service food chain has never split its shares since going public but is about to. Today, the stock trades at over $3,000 per share.

If it made a 10-for-1 split like Nvidia, it would still trade over $300, but that could make it easier to investors to add to their position. That could lead to further gains.

Online travel platform Booking Holdings (BKNG) hasn’t split shares since 2003. The stock now trades for over $3,800. That makes it one of the priciest stocks on the market today, and tough for investors to afford a position.

 

To view the full list of upcoming stock split opportunities, click here.

Commodities

Michael Snyder’s Substack: The Truth About What Is Happening To the Petrodollar

Posted on by Andrew Packer

The past few weeks have seen a number of stories about the death of the petrodollar. Essentially, the petrodollar is a deal struck between the U.S. and Saudi Arabia in 1974.

In exchange for military protection, the Saudis agreed to price oil sales in the U.S. dollar. And to invest excess cash into assets such as U.S. Treasury bonds. This deal has held up for the past 50 years. But the world is changing.

While the petrodollar isn’t officially dead, it is shifting. Most oil continues to be sold in dollars globally. But other currencies, such as the Euro, are also used to facilitate deals.

And emerging market countries, led by the BRIC nations, are working on a new currency and trading agreement. That could further weaken the use of the dollar as the standard for international trade.

As this trend shifts, so too will demand for U.S. dollars in international trade.

If the U.S. is unable to continue enjoying a massive global market for the dollar, there could be trouble. That’s because spreading the dollar globally makes it easier to print money and fund debt. With a smaller circulation, it would make it more likely to produce inflation.

With U.S. debt soaring, the dollar’s decline in world trade could prove a long-term danger. But the petrodollar isn’t quite dead yet.

 

To read the full analysis, click here.

 

Economy

The Compound and Friends: Get out of Cash

Posted on by Andrew Packer

Markets stand at a pivot point. Growth is slowing. And unemployment has ticked higher. It’s now at 4%, right at the Fed’s target rate. However, the Fed is still contending with inflation running hotter than desired.

The trade-off now is to either let unemployment rise higher or let inflation kick up again. Meanwhile, markets have adjusted to the idea that interest rates won’t drop much this year. But it does mean that investors need to consider their options now.

Currently, cash looks attractive. Yields stand at 15-year highs. It’s easy to see why investors continue to sit on record levels of cash.

However, if interest rates drop, yields will drop. And that will make other assets like real estate and stocks better alternatives.

While yields may not drop much, markets have adjusted to today’s high rates. That suggests that stocks can continue higher. Especially if the rollout of AI technology leads to bigger profit margins for companies.

Either way, cash offers low returns, even with markets at all-time highs. Investing in long-dated bonds could be attractive once interest rates start to drop. That could mean locking in a high yield and seeing capital gains.

Alternative assets have also been performing well. And analysts expect alternatives like gold and bitcoin to see continued gains in the years ahead.

 

To listen to the full episode, click here.

Stock market

The Maverick of Wall Street: This Is the Unhealthiest Stock Market Rally in History

Posted on by Andrew Packer

Stocks continued higher over the past week, with the Nasdaq and S&P 500 hitting new all-time highs. However, while the headline numbers have been ticking higher, behind the scenes, danger is emerging.

That’s because the market rally is being driven by just a small number of companies. In Wall Street speak, that’s known as market concentration. And market concentration has now become worse than compared to the tech bubble.

For 2024 alone, Nvidia (NVDA) has been responsible for 32% of the S&P 500’s entire rally. And if you add in the next two mega-cap tech companies, add another 13% to that total.

Meanwhile, the lowest 400 stocks of the S&P 500 have been negative this year, on average. That’s an unhealthy sign.

In a healthy market, most stocks will rise when the index rises. Backing out the tech giants, one could even argue that we’re not even in a bull market. And, we haven’t been since the end of 2021, over two and a half years ago.

If the big tech names take a hit, the overall market could easily reverse. And today’s all-time highs could quickly turn the other way.

As the old Wall Street saying goes, they don’t ring a bell at the top. But there are signs. And massive concentration masking a potential bear market already is one of them.

 

To watch the full analysis (language warning), click here.

Economy

Lead-Lag Report: From Nord Stream to Taiwan: Brandon Weichert on Global Flashpoints

Posted on by Andrew Packer

The stock market is having a strong year. So far, the only thing that has derailed the market rally has been some geopolitical fears back in the spring.

Those events led to the market selling off about 6% peak-to-trough. And the geopolitical flare-ups also led to two “risk-off” Fridays ahead of the uncertainty of the weekend. While events have calmed down, a potential resurgence could occur at any time, and tensions could flare up again.

That’s why astute investors will consider potential global flashpoints and their implications.

For instance, Russia’s invasion of Ukraine led to an immediate jump higher in energy prices. Fortunately, that moderated. As did a jump in wheat, a major global commodity.

But other flashpoints are possible. After the Nord Stream pipeline was bombed, supplies from Russia to Western Europe were curtailed.

Such an act of sabotage could occur on another pipeline. If that happens, energy prices could not only rise, but stay higher.

A further escalation of conflict in Europe threatens a significant global market. And it also threatens to further draw in the United States. U.S. food and material aid continue to move into Ukraine, but the speed could greatly accelerate.

If tensions rise over Taiwan, the United States and China could potentially go head-to-head. Before a shooting war starts, however, economic sanctions will likely surge. That could lead to higher prices and shortages in both countries.

 

To get a full idea of the potential global flashpoints and their investment implication right now, click here.