Author: Andrew Packer

Stock market strategies

Tastylive: Call vs Put Selling – This Strategy Wins 81% of Trades

Posted on by Andrew Packer

Traders have a variety of ways to profit from market moves. One of those ways is to use options. Generally, call options are cheaper to buy than put options. That’s due to investors using put options to hedge.

However, the market tends to rise over time. That should indicate a preference by traders for call options. Over shorter periods, however, markets appear much more randomized.

For instance, over a 45-day period, markets will only rise about 65 percent of the time. And that rise may not be big enough to justify the costs of options trading.

Given the higher premium in put options, most of the time, selling a put option makes more sense.

By selling a put option, an investor is essentially making a bet that markets will rise, stay flat, or only fall slightly.

The result is a win rate 81 percent of the time over a 45-day period. That compares favorably to a 63 percent win rate for buying a call option.

Even better, selling the put option has a better average profit and loss relative to the risk compared to buying the call option.

The downside is that in extreme market selloffs, selling puts can lead to big risks. Maximum losses can be higher. Events like the market meltdown of March 2020 could hit this strategy hard.

 

To look at how to best set up a high-win-rate options trade, click here.

Stock market strategies

Bigger Pockets: The 3 “Lies” You Can’t Afford to Tell Yourself in This Market

Posted on by Andrew Packer

When it comes to investing, we can be our own worst enemy. Our brain likes to use shortcuts. That’s fine for everyday decision-making. But not for financial markets.

Part of that process is not to focus on the truth, but on our worldview. That can lead investors into making bad decisions that cost them money, no matter where or how they’re investing.

The most important lesson about markets right now is that investors have agency. They can change their minds.

Today, it’s easier than ever to make a quick change and get out of a bad investment. Or to exit a losing trade and get into a winning one.

Investing, like other areas of life, will never be perfect. But striving to improve can lead to great results if practiced consistently.

In most cases in life, the idea has been drilled in that a mistake is a failure. However, that may not be the case. A mistake can be a learning experience.

 In the world of investing, that can help develop rules and parameters for investments and trades. Doing so can help avoid losses, better lock in gains, and make fewer mistakes.

What appears to be a failure is simply a form of feedback. A losing trade in the markets is a signal to get out and try a different approach.

 

To listen to the full interview on the common lies we tell ourselves, click here.

Economy

Heresy Financial: The 2024 Recession is About to Hit Hard

Posted on by Andrew Packer

While the market is looking strong going into the end of 2023, events may mean some pain for investors in 2024.

A series of macroeconomic factors at play could become a perfect storm that sends stocks tanking next year. Understanding those factors, and knowing what to look for as they unfold could be crucial to protecting and growing your wealth next year.

For starters, the 2023 banking crisis never really went away. The markets shrugged off the second and third largest bank failures in U.S. history back in the spring. Yet many banks have liquidity issues.

Plus, many banks have problems with their commercial real estate loans. A decline in office space demand and a rise in online shopping has hit that space hard. Losses on commercial loans next year may precipitate a banking crisis.

In the meantime, data shows that household debt is also on the rise. That includes high interest rate credit card debt.

At the same time, household savings are going negative. That indicates that consumers are draining their bank accounts. The last time this happened was in 2007.

While some of that decline may be moving off of excess savings from the pandemic era, it’s a danger. Consumer spending is a massive part of the economy. And if consumers have to cut back, the economy could stall out quickly.

 

To look at the full list of dangers that could culminate in a recession next year, click here.

Economy

Eurodollar University: One of the Worst Bear Markets in History Already Happened

Posted on by Andrew Packer

The past four years have been unprecedented for the economy. A global shutdown was attempted to halt the spread of Covid 19. Countries provided citizens with stimulus checks. And central banks took interest rates to zero percent.

Today’s economy stems from the moves to recover from that situation. In just over 18 months, interest rates in the U.S. have gone from zero to over 5%. That’s the highest level in 13 years.

Part of that fallout is that fixed income investments are starting to look attractive in real terms. The cost of money is no positive after inflation. That encourages saving. It also discourages investing in the stock market.

Looking at last year’s bear market amid the high inflation, the 2022 drop was one of the harsher bear markets on record in real terms.

That means the economy could actually be in a recovery mode today. Stocks are rising, and inflation is coming down. While it’s not down all the way yet, markets have adjusted to higher rates so far.

While there could still be some lingering effects from these moves, we may be closer to normal than abnormal. After several years in uncharted waters, that’s a relief.

Today’s investors can still expect the stock market to rise, albeit at a slower rate than the past. But fixed income also offers a reasonable real return also.

 

To watch the full interview, click here.

 

Stock market

Elliott Wave Options: S&P Ignores Fed Concerns at Key Level

Posted on by Andrew Packer

The stock market’s strong rally in the past few weeks has taken stocks back to levels last seen in early September. Chart data shows a number of daily gaps – where the price jumped higher than the day before.

While markets may move to retest those gaps, Elliott Wave theory looks at how markets tend to make percentage moves higher or lower from key levels. Using October’s low as a key level, markets may be at a pivot point today.

That could mean the market rally takes a pause before moving higher. That’s a possibility known as consolidation.

Stocks had a brief last week consolidation when the S&P 500 got to the 4,400 level, but Tuesday’s positive inflation data sent the index soaring to 4,500.

If we don’t get an outright pause in the coming days, it could mean that markets pull back. It won’t be much of a drop, just enough re-test a recent gap around 4,450, and then “fill” the gap before they start to trend higher.

Either way, while the inflation data is improving, markets are soaring higher and overlooking the Fed’s lingering concerns.

That could set up a market pullback, although at this point it will likely be after the holiday season. For now, traders should bet on a small decline, then a market rally into the end of the year.

 

To watch the full video and key chart levels, click here.

 

Commodities

Asset Strategies International: Why Central Banks Bought Gold in Record Numbers

Posted on by Andrew Packer

Since 2010, gold prices have trended first lower, then higher. The net result has been a sideways move, with the metal around $2,000 per ounce. But one group have been regular, steady, and even large buyers of the metal.

That’s the central banks. They’re buying at the fastest rate since the 1950s and 1960s. And they’ve been net buyers of gold for the past 13 years. What explains the move?

A few factors are at play. First, gold is still seen as a hedge against uncertainties and crisis. That makes the metal valuable for a central bank to hold for unforeseen circumstances.

Second, gold tends to act as a long-term store of value. The past few years has seen countries rapidly expand their monetary supply. That’s caused inflation. Gold tends to hold its own against inflation. That makes it a more likely store of value than foreign currencies.

Next, some countries may also be concerned about the global financial system. Russia was cut off from the global payment system, underscoring that country’s desire to hold gold. Consequently, other countries may not want to be in a similar situation where they get cut off, no matter the reason.

Meanwhile, with gold acting as wealth insurance and a crisis hedge, it’s likely the metal will continue to track higher in the months ahead. Investors may want to emulate central banks and accumulate.

 

To read the full analysis, click here.

Stock market strategies

TastyLive: Scalping Was Hard, Until I Found These Videos

Posted on by Andrew Packer

The increase in daily options trading can make or break a portfolio account. While some traders still swing for the fences, others tend to look at scalp trades. Those are simply trades designed to get in and out, collecting a small profit, potentially within a matter of minutes.

That strategy can ensure a quick profit. And that a trade doesn’t start to lose value. Understanding how to scalp trade can help traders and investors alike earn better daily returns.

First, it’s important to use a liquid investment. Scalp trades work best with highly liquid positions, such as index ETFs for the S&P 500 or Nasdaq.

Some individual stocks may work, but only the largest will be the most liquid. Liquidity ensures that trades can be entered and exited quickly.

It’s also important to measure an opportunity. Some assets will move more than others. Tech stocks may fluctuate between 1-3 percent daily, and some commodities such as oil. A market index will likely be smaller.

Smaller moves can mean smaller profits. But catching a move in an opportunity can still mean making a sizeable profit quickly.

Finally, it’s critical to have a strategy that’s consistent and repeatable. That way, opportunities can be acted upon, and traders can know when to take quick profits and move on to the next opportunity.

 

To review the best strategies for scalping trades, click here.

Income investing

Dividend Growth Investor: 8 Dividend Growth Stocks Rewarding Investors With a Raise

Posted on by Andrew Packer

Whether the market moves up, down, or sideways, dividends can greatly improve total returns. Reinvested dividends can make up more than half of an investor’s returns in the stock market over an investment lifetime.

That’s why owning dividend stocks should be a core strategy for any investor. And investing in companies that grow their dividends over time can be even more rewarding. Fortunately, the market has dozens of stocks raising their payouts right now.

For instance, Microchip Technology Incorporated (MCHP) develops and sells connected control solutions. That’s a steady business, and the company just raised its dividend for the 85th consecutive quarter.

With a payout of about 2.3 percent, that’s just slightly more than the average stock right now. But the company has managed to raise its payout by 9.9 percent annually over the last five years.

KLA Corporation (KLAC) provides management solutions for the electronics and semiconductor sectors.

They pay a lower dividend of 1.2 percent. However, they’ve been growing it faster, by about 16 percent annualized over the past 5 years.

Plus, earnings are up nearly 8-fold in the past 10 years.

With interest in the semiconductor industry growing, KLA is likely to continue raising its dividends well into the future. That gives investors both current and increasing income over time.

 

To see the other six companies that recently raised their dividends, click here.

Stock market

FX Evolution: The Last Time This Happened, Stocks Moved Over 20%…

Posted on by Andrew Packer

The last hundred years of financial markets have shown seventeen events similar to the market’s recent drop and subsequent rally. The good news? Stocks are likely to trend higher, at least in the short term. That’s even after the S&P 500 soared nearly 6 percent in the span of a week.

That said, stocks are in a sensitive area, and could see some volatility in the coming weeks before a muti-month move higher.

The market’s recent move is based in part on the idea that the Federal Reserve is done hiking interest rates. While some see interest rate cuts coming in the next few months, that may be an overly optimistic view.

However, following the rapid increase from zero percent to over five percent, a breather on the interest rate front should allow stocks to move higher.

In the meantime, a rare signal has just occurred in stocks. Known as the Zweig Breadth Thrust (ZBT), it’s triggered just 17 times since 1945.

Each time, the markets are almost always higher. The average works out to 4.8 percent within 1 month, 7.5 percent within 3 months, and over 23 percent in a year.

With both a bullish fundamental and technical factor in play, investors may want to bet on a market rally in the coming months.

 

To watch the full video, click here.

Economy

Game of Trades: It’s Much Worse Than You Think

Posted on by Andrew Packer

The economy has held up well, at least according to headline data. GDP growth remains strong, and unemployment is still near lows. That’s helped the stock market recover from its autumn slump.

However, some dangers lurk underneath the headlines. Consumers may be close to tapping out excess savings. And that could lead to a drop in consumer spending. If that happens, the economy may tip over into a recession at a stunning pace.

For instance, only 39 percent of Americans have an emergency fund with at least $1,000 in it. Plus, many Americans living paycheck to paycheck. Over a third of those earning over $150,000, a high-earning income level, are doing so.

Credit card debt has doubled in the past decade, and has recently topped $1 trillion. And savings relative to income have dropped to zero percent. That’s in contrast to 10-12 percent in the 1950s and 1960s.

In other words, consumers are now spending more than they earn. Either earnings need to rise, or consumer spending needs to drop.

Other consumer debt has been on the rise. Total consumer debt is $5 trillion higher than before the global financial crisis of 2008.

Adding up the current conditions, and it’s clear that markets may trend higher in the short-term, but could face significant headwinds once consumer spending starts to drop.

 

To view the full analysis, click here.