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Why Are Investors Fighting the Fed?

Why did the S&P (SPY) hit all time lows Monday right after the Fed stepped in with zero rates? Get the answer below along with insights on a trading strategy that actually gained +2.88% on Monday.

(Please enjoy the latest investment insights from the Reitmeister Total Return portfolio).

The ideas discussed below were going to be part of the weekly commentary on Wednesday. But in this fast moving market that is just letting too much time go by without sharing the insights.

The short version of the story is that more downside is likely in the offing. That is why I am glad we didn’t take the bait on the Friday’s rally because our hedge produced a +2.88% gain today while the S&P fell 12%.

Sure the market will continue to be volatile with more big up days mixed in. However, until we can start to see some signs of mitigation on the virus, then the stay at home trend…and everything closed trend…and the stock market in the toilet trend…will continue.

Back to the longer story. I bet a lot of you are scratching your head as to why the market tanked so hard today after the Fed slashed rates to zero including a new round of quantitative easing valued at $700 billion??? Meaning it seems odd given the typical advice: “Don’t Fight the Fed”.

That’s because this move signals that the Fed believes the world is falling apart. Kind of similar to the actions taken in the wake of the Financial Crisis in 2008. Not that we were unclear about how bad things were beforehand, but it does show us that even the most level headed economists are scared silly.

Plus let’s look at the history of Fed actions at time of crisis and how long it really took to stem the tide of stock market losses. I spent some time Sunday researching the timeline of Fed/Treasury actions in the wake of the financial crisis in 2008. And here is the same for 2009. As you will see it took quite a while to really calm nerves as we didn’t find bottom on the bear market til March 9, 2009. That includes shrugging off the $700 billion bailout packaged announced on October 3, 2008.

And then you have zero interest rates on December 16th & TARP bailout package December 19th. This did have some temporary benefit for stocks at first. Unfortunately that proved to only be a temporary detour as stocks tumbled another 30% from that little peak to the March valley.

To me it says we need more time for investors to assess the true damage to the economy. And until that is a tad more clear, then downside makes more sense than upside.

Or let me put it another way. My two daughters are home from school for the next month. 2 weeks for Spring Break, then 2 weeks of e-learning. After that their respective schools (local high school and Northwestern University) will determine if folks can come back to school.

I told my daughters that 2 month minimum is the likely stay at home period. And more likely they will not be going back to physical school this year. That truly stinks for my senior in High School, Mandy, as this affects big life events like prom and graduation.

Back to the main point. If everything was already in the process of being closed when we only had 1,000 to 2,000 confirmed cases in the US…and now we have 4,349…and next week closer to 10,000…and then 20,000 and then ???

Do you really believe that we will be back to business as usual in a month? Or two?

So yes, this is temporary…but it may be a lot less temporary than folks currently believe. And thus all the more potential damage to the economy and stock prices.

But given how low rates are. And given the truly unknown course of the virus. Then we may not be that far from bottom. We just may bump along bottom for a long while. Thus, I think our hedge is still the right call.

It certainly did the trick today. Sure it’s easy to see the big gains in the inverse ETFs. But also all the long positions fell less than the market average. Add it together and you appreciate how the +2.88% gain was created.

The point is that I have no need to get more aggressively short at this moment. The hedge seems plenty conservative enough and hard to complain with the gain when most everyone is experiencing so much pain.

What to Do Next?

TZA is just 1 of 3 inverse ETFs that I am using in the Reitmeister Total Return hedged portfolio. In fact, I highlighted that ETF in the article I posted yesterday: The Stock of the Week Is ???.

These downside insurance policies are a big part of my current hedged strategy that actually produced a +2.88% return on Monday while the market sank 12%. It is not too late to get on board this strategy if you have not protected yourself already.

Going forward I will look for spots to emerge from the hedge by buying more and more undervalued stocks for the eventual return to a bull market.

I know its crazy out there. And I am trying my best to help investors make sense and profit from the situation. The best way for me to do that is give you 30 days access to the Reitmeister Total Return.

This is my newsletter service where I share more frequent commentaries on the market outlook, trading strategy, and yes, a portfolio of hand selected stocks and ETFs to produce profits whether we have a bull…a bear…or anywhere in between.

Just click the link below to see 5 stocks and 4 ETFs in the portfolio now, and all the future trades as we find bottom on this bear and the new bull emerges.

30 Day Trial of Reitmeister Total Return

 


SPY shares were trading at $248.26 per share on Tuesday morning, up $8.41 (+3.51%). Year-to-date, SPY has declined -22.87%, versus a -22.87% rise in the benchmark S&P 500 index during the same period.



About the Author: Steve Reitmeister


Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

More...

The post Why Are Investors Fighting the Fed? appeared first on StockNews.com
stocknews March 17, 2020 11:31am

The Stock of the Week is ???

TZA is the perfect choice for protection from this bear market. Find out why below...

Sorry for the seeming bait and switch. But actually our stock of the week is an ETF. And more than that, it is a 3X inverse ETF that rallied +41.49% on Monday while the S&P (SPY) fell to new lows.

That ETF is the Direxion Daily Small Cap Bear 3X Shares (TZA).

The idea of shorting the market with an inverse ETF should not be so novel at this point as we are already head deep into a nasty bear market. And likely will be in this mode for quite some time longer (for more on the topic on the length of the bear market, then check out this recent commentary: Long Bear vs. Short Bear?).

But why specifically select TZA?

First, we all know the expression of “Flight to Quality” at the onset of any stock market correction. And even more true during a bear market. This means that investors will cling to the safest stocks in their portfolio which skews to large caps. This also puts smaller stocks on the chopping block as they will more likely be sold leading to even larger declines.

Monday is a great example of this in action. The S&P (SPY) was downright ugly at -11.98%. But even worse was the hideous -14.27% beating of the small caps in the Russell 2000.

However, when you are shorting small caps, the ugliness becomes downright beauty as the gain accumulates in your pocket. Then you get to triple your pleasure with more the 3X leverage. That makes TZA a particularly appealing choice at this time.

Now back to the bigger issue...why should folks consider an inverse ETF at this time?

Until there is some sign of containment on the Coronavirus, then we should all expect to stay home longer...and most everything else closed down. This will equate to SERIOUS economic damage which is why the Fed dramatically lowered rates to zero over the weekend.

Why didn’t stocks jump on that news? Because it was a clear sign that they are deathly afraid of what comes next. Kind of like all the Fed actions in the Fall of 2008 in the wake of the Financial crisis. Yet all the while stocks continued to fall further and further until eventual bottom in arch 2009.

No, I am not a perma-bear by any stretch. And I very much look forward to finding bottom in coming months to start riding the bull again. But right now the tea leaves say that more downside is likely in the offing and a position like TZA make a heck of a lot of sense at this time.

By The Way...

TZA is just 1 of 3 inverse ETFs that I have in the Reitmeister Total Return portfolio.

These downside insurance policies are a big part of my current hedged strategy that actually produced a +2.88% return on Monday while the market sank 12%. It is not too late to get on board this strategy if you have not protected yourself already.

Going forward I will look for spots to emerge from the hedge by buying more and more undervalued stocks for the eventual return to a bull market.

I know its crazy out there. And I am trying my best to help investors make sense and profit from the situation. The best way for me to do that is give you 30 days access to the Reitmeister Total Return.

This is my newsletter service where I share more frequent commentaries on the market outlook, trading strategy, and yes, a portfolio of hand selected stocks and ETFs to produce profits whether we have a bull…a bear…or anywhere in between.

Just click the link below to see 5 stocks and 4 ETFs in the portfolio now, and all the future trades as we find bottom on this bear and the new bull emerges.

30 Day Trial of Reitmeister Total Return

 


TZA shares fell $3.32 (-3.15%) in after-hours trading Monday. Year-to-date, TZA has gained 200.37%, versus a -25.22% rise in the benchmark S&P 500 index during the same period.



About the Author: Steve Reitmeister


Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

More...

The post The Stock of the Week is ??? appeared first on StockNews.com
stocknews March 16, 2020 6:40pm

3 “In Home” Entertainment Stocks You Can’t Ignore

These 3 stocks (BABA, ATVI & ZNGA) all benefit from the "stay @ home" trend created by the Coronavirus. Gladly their appeal is still great even after the crisis ends. Read on for more...

Day by day our worlds are closing in thanks to the Coronavirus. The pull is to go home...and stay home.

Right now our schools and companies are saying it will only be for a month. However, the more research I do, the more I suspect that is wishful thinking and likely this at home trend will continue longer. Thus it is incumbent upon us as investors to look high and low for all the stocks that benefit the most from this trend.

The key is to make sure that they are still attractive even when our lives go back to normal. I think you will find that is the case with these 3 “in home” entertainment stocks: Alibaba Holdings (BABA), Activision (ATVI), and Zynga (ZNGA). Let’s review the merits of each below.

Alibaba Group Holding (BABA)

In all honesty, BABA was my favorite stock before the Coronavirus came on the scene. That is why I bought shares for the Reitmeister Total Return portfolio in the midst of the China Trade war at a healthy discount. Then after rising to a high of $230 BABA shares are on discount again thanks to this latest crises.

As you know, the Chinese and others around the globe are hesitant to shop in traditional brick-and-mortar stores as a result of the coronavirus. BABA is poised to benefit from this phenomenon.  The company's Chinese delivery services have quickly returned to their pre-pandemic levels.  Though it might be hard to believe for panicked consumers in the United States and Europe, BABA's delivery operations are now fully staffed.

The company's rapid return to "business as usual" is largely attributable to the Draconian yet seemingly effective measures taken by China's totalitarian leadership.  If you believe the coronavirus numbers reported by the Chinese government, it appears as though they have the virus beaten.  I for one don’t believe the #s at all. Just like how the government fakes their GDP and other economic figures. Thus, I expect there to more folks enjoying BABA service at home in China for quite some time more.

Look for BABA sales to spike as a result of consumer’s hesitance to frequent malls, shopping plazas, supermarkets and public spaces.  Furthermore, BABA provides cloud computing services through its Alibaba, Tmall and Taobao online platforms.  BABA is also dipping its toes in the digital media waters.  All signs point to BABA continuing to diversify its services in the digital realm and beyond as the world rapidly transitions toward a tech-centric society. BABA’s digital media and entertainment is still a loss maker yet improving as time progresses.  Look for BABA to expand its footprint in this space and capture that much more market share as more people turn to in home screens for entertainment as well as work.

Even with the bear market at our doorstep I expect BABA to make it to $250 this year. And $300 not out of the question if this ends up being a short bear market with stocks on the march in the 2nd half of the year.

(BABA is one of only 5 stocks currently in the Reitmeister Total Return portfolio)

Activision Blizzard (ATVI)

Ask anyone who knows anything about video games and you will likely hear all about how Activision Blizzard makes some of the industry’s most captivating content.  ATVI games are bound to sell that much better now that the majority of people will primarily remain indoors in fear of exposure to COVID-19.  Take a look at ATVI’s 6-month and 1-year charts and you will find this is a successful business that does not need a pandemic to rake in the cash.

ATVI’s most popular titles include:

  • Call of Duty: Modern Warfare
  • Skylanders
  • Spyro
  • Crash Team Racing
  • Destiny
  • Sekiro
  • King’s Quest

It is important to note the video game-obsessed millennial age cohort is the largest in all of the United States.  Demographic experts are well aware of the fact that millennials are somewhat brainwashed to spend a considerable amount of their discretionary income on gaming.  According to Neilsen, members of the massive millennial age group spend a whopping $112 on video games every single month.

Add it all up and you realize why ATVI shares are breakeven this year with so many other stocks down 20%+. But that is just in the short run. This is a great growth story which explains the 164% gain for shares the last 5 years. No, past performance is not a guarantee of future results, but right now trends are quite positive for shares and should continue to outperform in the weeks, months and years ahead.

Zynga (ZNGA)

This may be one of the last stocks in the alphabet, but ZNGA should be one of the first you run to during this coronavirus crisis. Everything gaming-related is about to receive a considerable boost thanks to the society-wide withdrawal from outdoor, social-oriented activities.

Perhaps the only silver lining to the coronavirus pandemic is those invested in gaming stocks such as ZNGA stand to benefit.  However, even if the coronavirus does not turn out to be a once-in-a-century plague, ZNGA still has a solid business model as one of the industry’s leading game developers and publishers.

Zynga's top titles include:

  • FarmVille Game of Thrones
  • Slots Casino
  • Dawn of Titans
  • Words With Friends
  • Crazy Cake Swap
  • Zynga Poker
  • Bounzy
  • 1010!
  • Empires & Puzzles: RPG Quest

ZNGA is up about 7% on the year which stands in strong contrast to most every other stock that is painted red. This outperformance is why shares are boasting a POWR Rating of B (Buy) with

Want more great stock picks? Then check out these additional resources:

3 More “Stay at Home” Stock Winners

All POWR Rating A (Strong Buy) Stocks

Reitmeister Total Return portfolio

 


BABA shares closed at $194.00 on Friday, up $8.90 (+4.81%). Year-to-date, BABA has declined -8.53%, versus a -16.32% rise in the benchmark S&P 500 index during the same period.



About the Author: Steve Reitmeister


Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

More...

The post 3 “In Home” Entertainment Stocks You Can’t Ignore appeared first on StockNews.com
stocknews

Is Now the Time to Buy FAANG Stocks?

The FAANG stocks, including Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG), had all been leading beneficiaries of the bull market in stocks

 

The FAANG stocks, including Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG), had all been leading beneficiaries of the bull market in stocks. The risk-off conditions that have gripped markets across all asset classes have caused many investors and traders to move to the sidelines. In 2018 and 2019, the trade war between the US and China caused periods of market volatility, but Coronavirus is different as it is a medical emergency that triggered a financial crisis.

The US Fed responded to the current situation with a fifty-basis point rate cut on March 3. Last week, the central bank blasted the market with a one and one-half trillion-dollar liquidity bazooka. While monetary policy accommodation and more liquidity in markets have some impact on markets, it does nothing to slow the spread of the virus, which continues to spread around the globe. At the same time, the price carnage in the oil market caused by a decision of OPEC and the Russians to address demand destruction in the energy commodity by flooding the market with petroleum only exacerbated selling in markets. The potential of rising bankruptcies has put additional pressure on companies and the financial sector. The US also faces a divisive election later this year, which is another factor that has led to what is developing into a perfect bearish storm.

The high-flying FANG stocks were not immune from risk-off conditions, but all of the companies are likely to continue to earn profits in the current environment, and some may even do better as more people remain in their homes.

Facebook stumbles

Facebook (FB), the company that connects people all over the world via mobile devices and computers, had its market cap sliced and diced to $485.375 billion at a closing price of $170.28 on Friday, March 13.

(Source: Barchart)

The chart shows that FB shares fell from $224.20 on January 29 to $170.28 at the end of last week or 24%. As more people stay at home, hours spent on Facebook will likely rise. However, the advertising revenue in the current environment will present a challenge for the company.

Amazon and Apple correct

Jeff Bezos is the world’s wealthiest person, but his billion have dropped with Amazon (AMZN) shares. Amazon fell out of the trillion-dollar club with a market cap of $888.591 billion.  

(Source: Barchart)

Amazon (AMZN) shares fell from $2185.95 on February 11 to close at $1785 on March 5, 18.3% lower. Amazon could see more business as people avoid stores and order products online in the current environment.

Apple (AAPL) shares remained in the trillion-dollar club, but the market cap fell to $1.216 trillion at $277.97 per share as of the close of business on March 13.  

(Source: Barchart)

Apple shares fell from a high of $327.85 on January 29, a decline of 15.2% from the 2020 peak. Sales of Apple (AAPL) products could suffer as fewer people venture to their local Apple stores to talk to the “geniuses” over the coming weeks as social distancing interferes with the company’s business. However, an improvement in the conditions in China is likely to support its business in the world’s most populous nation.

Netflix moves lower

Netflix (NFLX) could be one of the most significant beneficiaries of Coronavirus, as homebound people will seek entertainment. In a world without sporting events, the demand for entertainment could reach a new peak. However, Netflix was not immune to the risk-off environment as its market cap dropped to $147.569 billion.

(Source: Barchart)

Netflix (NFLX) shares fell from $393.52 on March 3 to $336.30 on March 13, a decline of 14.6%.

Alphabet slumps

Finally, more people at home will be googling on their computers and mobile devices, but the market cap of Alphabet (GOOG) dropped to $837.04 billion.  

(Source: Barchart)

Alphabet (GOOG) shares fell from $1532.11 on February 19 to $1219.73 on March 13, a drop of 20.4%. While usage could increase, advertising revenue is likely to decline as the US and global economies slow.

FAANG earnings could benefit as people stay home

The stock market has been ugly since reaching a record high on February 20.  

(Source: CQG)

As the chart of the E-Mini S&P 500 futures contract displays, the contract fell from a record high of 3,397.75 on February 20 to 2652.75 on March 13, a decline of 21.9%. When it comes to the FAANG stocks, only Facebook (FB) underperformed the E-Mini from the high price of the shares in 2020. Alphabet (GOOG) outperformed, but the shares still dropped by over 20%. The two companies are most likely to suffer from a decline in advertising revenue, putting them at a higher risk during the current risk-off period.

Meanwhile, Amazon (AMZN), Apple (AAPL), Netflix (NFLX) outperformed the E-Mini S&P 500, which could be a sign the three companies could thrive in the current environment and would experience explosive moves when fears calm. However, we are in the early days of the Coronavirus crisis, and things could get a lot worse before they get better. FAANG lost its bite over the past weeks. Still, the leaders of the stocks market will eventually make stunning comebacks as they all have incredible market share in their respective business sectors. On further downdrafts in the stock market, buying FAANG stocks on a scale-down basis leaving lots of room to add at lower levels, could wind up being the optimal approach for investors with a long-term horizon. Be cautious in markets in this environment of unprecedented risk.

 

 


AAPL shares were trading at $256.00 per share on Monday morning, down $21.97 (-7.90%). Year-to-date, AAPL has declined -12.61%, versus a -20.93% rise in the benchmark S&P 500 index during the same period.



About the Author: Steve Reitmeister


Andy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with ETFDailyNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles.

More...

The post Is Now the Time to Buy FAANG Stocks? appeared first on StockNews.com
stocknews

Is this gold ETF overbought?

gold bars to invest in
From Taylor Dart
NYSE:GDX July 23, 2019 10:20am

Will oil prices move higher amid increased tension with Iran?

Will Canntrust (CTST) pull off a miraculous recovery this week?

From Aaron Missere:

Right now Canntrust is down, but are they out?

There is no denying that Canntrust's value has been decimated in a matter of days after the news that health Canada would be putting the company under investigation for growing cannabis in rooms prior to obtaining their license to grow. In a short week the stock declined consecutively every single day since the announcement to close the week down almost 50%. Its astonishing how fast a company who carried a strong reputation in the high growth cannabis sector can be demolished and have their reputation tarnished overnight. Now as serious as the news really is, there are always two sides to a story, and most of the time someone's loss is another one's fortune. The question remains on many of our minds, will this be the case for canntrust once the dust settles. This week is going to be a very crucial week for canntrust and their shareholders for a few reasons.

The Fate Lies in Health Canada's Hands

This is going to be a big week for Canntrust and I can see the stock having more volatility than last week. More than likely a large amount of short interest has accumulated on Canntrust after last week's news, and I wouldn't be surprised if we see a short squeeze in the trading sessions to come. There is a perfect catalyst coming up this week that could cause a massive bounce in shares of Canntrust. The company has until July 18th to respond to health Canada'sregulator'ss report. At that point Health Canada will determine if the company receives a fine of up to a million dollars Canadian or a suspension/cancellation of their federal license. In my opinion if health Canada eases back at all hinting at a possible fine and allows Canntrust to pick up the pieces of their broken reputation, shares will rally immensely. Often times when things look like they could not get any worse and there is no hope are the times that you need to think logically, weigh the pros and cons and see through the darkness. Its human nature to join the crowd and rain down negativity on Canntrust as many investors within the community have done so. I truly believe "this too shall pass" but let's talk about the worst-case scenario. If Canntrust was to lose their federal license than the company would indeed be in big trouble, at that point I think they would have to be bought out, rebranded and dismantled. Brands and reputation definitely carry value especially in the cannabis sector so Canntrust has taken a big hit.

How Far Will Health Canada take it?

In my opinion Health Canada is making an example of Canntrust and they came in guns blazing. On Friday we felt the waves of fear ripple through the cannabis sector with a broad selloff from large caps to small caps. Selling quality cannabis grown in licensed facilities should be on the top of their list, but completely destroying a company for breaking the rules once is another story. It would make more sense to even increase the size of fines for non-compliance in the future to deter companies from breaking the rules, but a suspension or complete withdrawal of one's license seems a little overboard. This would also look bad for the Canadian government allowing the destruction of so many jobs. We will be waiting on the edges of our seat this week to see the final verdict from health Canada but I wouldn't be surprised if we see more volatility than last week. At this point buying the dip in shares of Canntrust is very risky business but for a high-risk investor, there is lots of potential for returns. Buckle your seatbelts if you are on the Canntrust coaster, we could be in for a wild ride!

__________________________________________________________________________________________

About the Author  Aaron Missere is the CEO and founder of financial media company Departures Capital Inc.  He is an avid and experienced investor, with a primary focus on the cannabis industry.  In addition to being a featured contributor to StockNews.com and ETFDailyNews.com, he is an author for SmarterAnalyst.com.  Aaron also currently hosts a weekly show on YouTube that recaps and explains the movement in the stock market, with a heavy emphasis on marijuana stocks. 
CannTrust Holdings Inc. (CTST) was trading at $2.81 per share on Wednesday morning, up $0.06 (+2.18%). Year-to-date, CTST has declined %, versus a 12.77% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of StockNews.
NYSE:MJ July 17, 2019 10:00am

What’s preventing silver from breaking out to the upside?

silver bar
From Mike Hammer: Many silver traders are pulling out their proverbial hair over silver's inability to pick a direction. Not that silver traders probably have much hair left at this point... (Supposed to be a joke, and full disclosure: your friendly Gold Enthusiastis balding!)
NYSE:SLV June 18, 2019 2:15pm

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