By: Tom Gentile
on December 6th, 2023
Originally published via our newsletter previously. Subscribe for early access!
The path of least resistance seems to be to the upside in the markets.
That could be because of a number of factors.
- The latest reading on GDP showed it rose 5.2% in the third quarter. It came in higher than expected as it was previously anticipated coming in at 4.9% annualized.
- An anticipation of the Fed NOT raising rates the remainder of the year.
- End of year window dressing. It may be institutions are acquiring more of the high growth, popular, maybe the ‘Magnificent 7’ stocks to show prospective new clients they should put their money under their management.
- That last point may account for the retail traders operating under FOMO: Fear Of Missing Out. They want to get in on these price runs before its too late and that extra buying could be helping stock price continue to crank higher.
The markets end up mixed as the Dow was slightly higher while the S&P500 and NASDAQ were slightly down.
Today two Fed governors gave their opinions on the Feds course of action for interest rates with one, Christopher Waller, saying (and I paraphrase), if inflation continues to cool consistently, there was “no reason” to insist interest rates should stay high or really high.
Another Fed governor in a Yahoo finance article said, “My baseline economic outlook continues to expect that we will need to increase the federal funds rate further to keep policy sufficiently restrictive to bring inflation down to our 2% target in a timely way,”.
Markets aren’t fans of uncertainty and this differing view on rates didn’t help today.
Market in Focus: Invesco QQQ Trust (QQQ)
The Q’s is an ETF that tracks the NASDAQ 100. One can use their broker or charting websites to chart the NASDAQ Composite as a whole if they want.
The chart below is the Year-to-Date view of the Q’s and as you can see it is at highs for the year.
The below view is an image showing how close the Q’s are to their all-time highs (or at least highs in the last 999 days).
A place to start finding trading ideas might just be in Tech.
Tools and Observations
Correlation Analyzer is a tool within my suite of tools www.TomsOptionTools.com, that can see how much as a percentage one security correlates to another.
One reason one would do this is to see how closely a stock compares to an overall index or ETF.
If one wants to choose a stock that trades with the wind in its sails, so to speak. If the index is trading higher and one wants to trade or invest in a stock that should perform similar to that index, correlation analyzer could help find those. Here is what part of the page looks like in the tools.
List 1 is the List one wants to select to see how it or stocks in that Index or ETF correlate to List 2.
List 2 is the Index / ETF one selects to run the correlation.
If you want to find stocks in the SPY that move up and down with the QQQ ETF, enter QQQ in the List 2 text box and select S&P 500 Optionable in List 1.
Click highly correlated in Correlation Types and have Stock Price selected in Correlation Data Types.
Here is the first 10 stock results listed by highest correlation to lowest from left to right.
This is not a list for one to go trade as the purpose wasn’t to show a results list to work off of, but rather an end result list showing what a results list looks like when one does this exercise.
Subscribers feel free to run whatever correlations you want and always work with your broker / financial professional as to what stocks or ETF and or the options trades on them are suitable for one’s portfolio.
— Tom Gentile
C1P: Chief 1-Percenter
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
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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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