Posted in
Big Picture
By: Tom Gentile
on October 27th, 2023
The financial markets had a bearish August and a true to form bearish September. Based on the past 10-year look back with seasonal analysis it showed a bullish past history that had me and others anticipating a bit of a snap back month for October. That did not happen.
My buddy and I Chris Johnson recently completed the latest Profit Strategies Podcast where we discuss this and our outlook until the end of the year.
4 Corners of the Market Analyzed to Assess Market Direction
First let me go over what the corners of the market are. These are the 4 different asset classes I use, monitor and analyze to assess my directional bias for those asset classes and the overall financial markets.
Equities / Bonds / US Dollar / Commodities
Equities: SPY
SPY is my representation for US Equities. It is the SPDR S&P 500 ETF Trust (SPY).
Bonds: TLT
TLT is my representation for Bonds. It is the iShares 20+ Year Treasury Bond ETF (TLT).
US Dollar: UUP
UUP is my representation of the US Dollar. It is the Invesco DB US Dollar Index Bullish Fund (UUP).
Commodities is studied over two commodity sectors. Oil and Energy and Gold (precious metals).
Oil and Energy: USO
USO is my representation for Oil and Energy. It is the United States Oil Fund, LP (USO).
Gold: GLD
GLD is my representation for Gold. It is the SPDR Gold Shares (GLD).
I will also keep my eye on SLV for Silver.
Profit Strategies Podcast
In the video, whose link I am providing here, Chris and I look at the technicals (the chart) on these ETF’s and discuss are outlook for them.
We then discuss what we see on the horizon for some of these corners of the market.
The podcast can be found on my YouTube channel: https://www.youtube.com/@TomGentileTrader
Please subscribe for free to get notified when I post my latest educational market education and outlook.
The video, which is the latest Profit Strategies Podcast with Chris Johnson, and I can be viewed here:
Diversification
The mid-part of this podcast discussed diversification. Investors have had a rough month. During the podcast I looked at the markets being down 1% at the time where a portfolio of mine was up a half %.
It isn’t just because of the mix of strategy and stocks I have, but it has something else to do with what I call ‘correlation’.
I show how to use a part of my online software / options analytic tools: www.tomsoptiontools.com called correlation analyzer.
I show how to search stock that are highly correlated to the market, the SPY and then those that are inversely correlated. It is the inversely correlated that may help in that while the market is trending down these inversely correlated securities may not be so much.
The security that has the largest ‘inverse’ correlation on the list when run is Netflix, Inc. (NASDAQ: NFLX). It announced earnings mid-October and gapped higher and has been hanging on to those gains thus far.
Whether or not they do is up to ones analysis now, but that is how the correlation analyzer works. It searches up stocks that either correlate or inversely correlate to the SPY.
Folks, I even have an ‘extremely non-correlated’ search that shows LMT as the first security on that list, meaning it is working opposite than the SPY.
This scanning tool may be a starting point for some of you who are new to options trading in building a list to have to start researching companies to then look for options trades.
Upcoming Market Newsletter
If not this week make sure you read next week’s Toms Weekly Newsletter for in one of the I teach a basic way to analyze options pricing to help ascertain an estimation of a stock’s future price move higher or lower.
In the later part of this podcast, I teach a basic way to use the options pricing on a stock coming up on an earnings announcement to gauge a future potential price move.
Watch Support Levels
At the time of this writing the SPY is continuing its move lower after breaking below a support level of 420.
The next price level lower it may hit, and I will watch to see how it reacts is $410.
App: Toms Option Tools
Toms Option Tools scan the markets for bullish and bearish trade opportunities using our proprietary scans and strategy algorithms. TTR Darknet finds bullish entries based on triple stack channel collisions. Money Calendar identifies seasonal patterns with at least 90% accuracy looking back 10 years. Weekly Cash Clock finds short term opportunities that last a week on average. Microcurrency Trader applies Darknet technology and moving averages to cryptocurrencies. Velocity Trader utilizes volume spike and Velocity indicators on custom stock lists. Quantum Scripts scans the markets for momentum acceleration signals and employs Quantum noise filters. Optimal Trader finds directional pre-earnings opportunities that are optimized for entry date, stock movement, and volatility surge. My Trades tracks the profit/loss of your trades, displays stock charts and risk graphs, creates new trades, and edits existing trades. Morning Report provides top 10 option rankings in 6 categories each day.
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Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
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