Hello, Reader.
Last week was a depressing one for Silicon Valley and its northern outpost in Seattle.
Amazon.com Inc. (AMZN), Alphabet Inc. (GOOG), Microsoft Corp. (MSFT), and Meta Platforms Inc. (META) all issued lackluster earnings reports, confirming that Big Tech’s post-pandemic boom of 2020-’21 is long gone. And that kept the S&P 500 and Nasdaq Composite from joining in the Dow Jones Industrial Average’s historic October – the Dow’s best month since January 1976.
Facebook’s parent, Meta, alone slipped more than 20% on Thursday following its weak third-quarter earnings report… and even weaker Q4 forecast.
However, it’s not all doom and gloom for tech stocks and the larger market. As we told our Strategic Trader members last week, three signals we monitor tell us there is reason to hope the recent uptrend in the S&P 500 will continue.
Plus, recent activity in “luxury items” reveals an extra note of positivity in one crucial sector.
So in today’s letter, we’ll let you in on those three catalysts… and how we’re playing the current situation.
How This Breakout Can Remain Strong
As we discussed in last Friday’s Trading Opportunities, the S&P 500 – after spending a month or so in bear-market territory – looks like it is beginning to break out.
And we see three signs that make us think that breakout has legs…
- Leverage and margin debt has returned to a more sustainable level, meaning traders are borrowing less.
- Bond traders have allowed the 10-year Treasury Yield (TNX) to drift back down to 4% after climbing as high as 4.33% on Oct. 21.
- And currency traders are easing up on the dollar and allowing its value to pull back and start consolidating. That’s great news for companies that earn revenue overseas.
While we wouldn’t jump back into growth stocks yet, there are shorter-term plays to be made in Big Tech. In fact, we just added a bullish specialized trade on one of last week’s tech losers to the Strategic Trader portfolio yesterday.
Microsoft has dropped about $25 from its “resistance” point at $250. That means traders haven’t let it get above that point for the past month or so. At the same time, Microsoft stock seems to have found “support” – traders won’t let it get below there – at $225 in the aftermath of its earnings announcement.
The stock started to recover last Friday, but it is currently hitting resistance between $235 and $236. It could break through this level, but we anticipate further resistance at $250 is going to be formidable.
Hence, we placed a “bet” that Microsoft is heading up in the near term… but not that far up. That goes right along with our… let’s call it tempered optimism in the current market.
To get the details on that MSFT trade – and all our specialized plays – learn more about joining Strategic Trader here.
While Microsoft and the so-called FAANG stocks are suffering, Harley-Davidson’s stellar earnings show us that consumers still have disposable income.
Here’s what that tells us…
From Hogs to Bacon
Meanwhile, Harley-Davidson Inc. (HOG) posted 13% growth and beat top- and bottom-line earnings expectations last week. And its forecast is sunny.Prada S.p.A. (PRDSY), LVMH Moet Hennessy Louis Vuitton SA (LVMHF), and MasterCraft Boat Holdings Inc. (MCFT) have also issued solid reports this earnings season.
If we’re buying “hogs” – not to mention boats, pricey liquor, and high fashion – then we’re most certainly also buying bacon… and other staples.
So we remain bullish on consumer-defensive stocks, particularly discount retail, which is underpriced right now. We’re looking for that sector to do even better than “luxury” stocks like HOG and MCFT.
In other words, now might be a good time to boost your holdings in stocks like Dollar General Corp. (DG), Walmart Stores Inc. (WMT), and Target Corp. (TGT).
Like Microsoft, Target is a stock that figures heavily into our Strategic Trader portfolio. We closed out one specialized play on TGT for a nice profit in early October.
In fact, year-to-date, we’ve closed out 101 trades – and have secured a 94% win rate. That’s 95 wins and six losses in a market that’s returning a loss of 17% since Jan. 1.
Going forward at Strategic Trader, we’re already lining up specialized plays on several stocks in our portfolio that are poised to make big profits as other retailers share earnings reports and the holidays kick into high gear.
Go here to learn how to join us.
Got Questions? Follow Our Livestream
Each week, we like to address your most burning questions about market trends, trading, and specific stocks in our livestreams and here at Trading Opportunities.
To get your questions answered, just drop us a line in the comments section of our livestreams or email us at feedback@investorplace.com.
If you’re ready for the market to pay off for you like it does for our readers and our portfolio, then we can teach you how. Click here to gain access to our Strategic Trader Masterclass, where you can learn how to make potentially $1,000 extra per week using simple and easy-to-learn strategies.
Sincerely,
John and Wade
