5 Stocks to Watch

Even though the stock market has been flirting with new high in the S&P over the last few days, there are a lot of stocks that are down 10% or more off their highs. There has been a massive rotation to value names, which the like hasn't been seen, and what some traders see as an almost computer generated shift, meaning not based on any fundamentals of the underlying stocks that have been crushed, but of an algorithm placed by the investment banks to try to achieve alpha. So should you chase the momentum into value or is this a great opportunity to buy some stocks on sale? Here are some names that I have on my watchlist, that are all amazing run companies and no how to turn a profit.

Mastercard

Coscto

McDonalds

Intuit

and a high growth, still negative earnings company that has been hit hard:

Twilio


I'm looking to add each one of these stocks to my portfolio. Each one of these 5 for me would be an investment and not a trade. I described the difference in investments vs trades in an earlier post.


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Will the FED cut rates this week?

 Chances are increasing that the Fed will not cut rates at its meeting this week. 30 days ago the market was at 100% probability that the Fed will cut rate at their September meeting. Fast forward to now and the market is suggesting a 34% probability that the Fed Will not cut meaning that only 2/3 of investors believe a rate cut will happen this week.  When Jerome Powell gives his talk on the 18th most likely it will not be what the street wants to hear. The market has dropped significantly after the last two fed meetings with Powell not being as Dovish as the market would like. I expect more turmoil to happen after this weeks meeting, so I would not be putting any buys in no matter what until we get better direction.

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Buy gas now!

After the drone bombings over the seeking in Saudi Arabia, Brent oil spiked 13% when futures opened tonight! Oil might spike as much as $10/barrel because of the damage done and loss of production from what is the highest capacity region in the world. What does this mean for the market? It’s not good news! The futures just opened, and the DOW is showing futures down already by 150 points, and the NASDAQ futures are down a whopping 1.1% . Looks like Monday will start off pretty heavily in the red. Buy your gas now! With oil up $10/barrel, that could lead to an increase at the pump of .20-.30/gallon. With increases at the pump, the market is worried that it will be another pressure on the economy.

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Will the rotation to Value last?

I discussed the difference between value stocks and growth stocks on an earlier post. Over the last few weeks, there has been a momentous rotation out of the high growth, no earnings stocks into the value sectors. High growth stocks like the cloud companies OKTA, and TEAM, along with newly minted IPOS UBER, WORK, and LYFT have all been absolutely crushed during this rotation. Money has been flowing into Financials, Materials, and Energy! The Value index is up an amazing 5% in the past 2 weeks alone! So what's going on??

Here it is: Investors are beginning to think that there will not be a slow down in the US economy, things are not so bad, and the "Value" stocks may actually not be heading off the cliff. Over the last year, if you wanted to buy growth, the only place to get it was by getting into some of these high fliers. Now, some of the more stable names are peaking interest, and that's why you have seen the market continue to climb higher, even as tech names has been beaten down. The always looming trade war is also impacting these moves, but overall I say this is a good thing for the market! Sure, I actually own both OKTA, and TEAM, so it's been a painful few weeks, but these stocks are still up over 100% for me, and I'm not selling anytime soon.

If you are over investing in high flying growth stocks that don't have any earnings yet, it might be time to make sure you are diversified.


Stock to watch:

I have been watching INTU . This stock has come down from almost $300/share to $264 since the beginning of September. Intuit is the maker of tax software, TurboTax. They have had very consistent growth over the past 10 years. (averaging approx. 25% return over the past decade). If this dip continues, I will be a buyer in the 250 range.

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New round of Tariffs go into effect. Futures down 175 points on the Dow!

It’s still a ways away from the opening bell, but futures are pointing to a big drop on the Dow as the new round of trump’s tariffs went into effect. Trump bumped up his 10% tariff to 15% on $112 billion worth of Chinese goods, and this went into effect on Sunday. There was some hope that he would delay imposing this new round, but to no avail. So since the US tariffs went into effect, the Chinese automatically retaliate by putting additional tariffs on US products like oil.

There is plenty of time for these futures to change before tomorrow morning, but it looks like we are starting September the same way we ended August, and that’s with volatility. The trade war looks like it will continue to escalate and this doesn’t bode well for stocks in the near term. However, it’s not all doom and gloom. I’ve been using the bad days on the market to pick up shares of companies at some decent entry points.I’ll discuss my new additions in a later post.

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August and it’s wild ride are over, get ready for more!

The S & P 500 fell about 2% in August, which was the second worst monthly performance of the year, behind only the huge hit the market took in May.  So is anyone breathing a little easier now that August is behind us? I can say, I'M NOT! September is historically one of the worst months of the year for the stock market, and with the same issues we have been dealing with still looming large, I think we are going to be in for another roller-coaster month.

The same two things that have driven the market all year, are still playing out, and we have not really made any new headway into either. And of course those two things are:

1) Will the FED cut rates again at their September meeting, which is just a few weeks away?
2) Will we see any sort of calmness and resolution to the trade war with China?


Let's talk about the FED first. At the last cut there were plenty of FED governors that dissented, and over the last few weeks, it's seems as if their is no clear path for what Jerome Powell should do. Of course Trump will non stop tweet at him, and call him names, which only makes the decision all the more difficult, since he can't seem to be playing into the presidents hand. The economy has slowed a bit, but it still strong, especially compared to the rest of the world. Powell has stated again that the FED will look to the data and the data only before making a decision on if to cut rates again in a few weeks. Expect the market to swing as the data gets released over the this month, and this starts with the August employment report which gets released on Friday, and the manufacturing reading which gets released on Tuesday.

And now the real issue - The Trade War. Never before have I seen such a market that can change 500+ points in a few minutes on a tweet. Its hard to get a reading on the market, when in the blink of an eye, Trump could tweet about US companies pulling out of China, and the market tumbles 700 points in an instance, or then he changes his mind the next day, and says talks are still on, and the market goes up 350 points. I'm going to save everyone the trouble of trying to figure this out. We all have no clue what's going to happen with Trump's trade war. It seems like he would not want the market to tumble after he bashes China since he needs to get re-elected, which is then why he tweets about Powell and then calls for a rate cut immediately, and blames the FED on the market's downturn. Its amazing how the market can recover and tread higher during tweet silence. If you are curious, do some digging into the times in between trade tweets, and see how the market settles in after a few days and calms down, then Trump out of the blue decides to wreck the market and does and early morning tweet. This is basically what played out in August and what made it so impossible to understand the next move.

So what to do?

Well all this means there will definitely be one thing that happens in September.. Volatility! I know it's been awhile since my last post, but if you followed me on that last trade, buying the VIX calls at .40, you made out like a bandit! Those calls skyrocketed at over $4.00 each after a few days of Trump Tweets! I wish I bought more, but I only bought 15 call contracts for $600, but was about to sell them in only a few days for over $5,000. Not bad!! The power of options! If you have not traded an option before, each contract gives you the option to buy 100 shares of the underlying security. So for example, each call option I bought of the VIX was $40. (100 chares @.40each). that's how it works, so in essence I bought the option to purchase 1,500 shares of the VIX at 19, and it costs me $600.

I will be looking for more VIX trades in September for sure, and will keep you posted when I make a trade.

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