Dan Passarelli, CEO - Market Taker Mentoring

There's been a lot of talk about possibly going into a recession. A question that was posed earlier this week is what does that really actually even mean? What is a recession?

A recession used to be defined as a two quarter decline in GDP, and this morning we had GDP come out. 
⇐click the image to view the video) As you can see here from this graphic, we had a small decline in GDP this quarter, as well as a small decline in GDP last quarter. GDP, of course, meaning gross domestic product. So by that definition, that means we're in a recession. But here's the thing.

They changed it on us. The National Bureau of Economic Research here says the 'traditional definition' of recession is "a significant decline in economic activity that is spread across the economy that lasts more than a few months". So what exactly does that mean and how exactly do you measure that? Well, that brings us to a good discussion point.

First of all, different people are going to disagree on this. We live in a time when people disagree on the color of the sky. People are definitely going to disagree on whether or not we're in a recession if it's that general of a definition, right? So, we don't mind sticking with what WE would call the traditional definition. They call this new definition, 'the traditional definition'. We prefer using what we call the traditional definition of two quarters of declining GDP, of negative GDP.

But that brings us to the point: what does that change? It is just a definition. It is really just a word. Wasn't it FDR who said: "the only thing we have to fear is fear itself", right? And when people talk about us being in a recession, that can be a little bit emotionally charging and can maybe even exacerbate it.

There's no real need to get super hung up on it. Continue watching earnings. Continue watching just what the market does and how well companies are doing and how well their stock prices are doing or theoretically related, but not always 100% related, of course. Keep watching those things and not get super hung up on what the precise definition is; and whether this word represents what the economy is doing right now or not; and move on and continue trading and finding great opportunities out there.

As they say, more millionaires are made in declining markets than bull markets so: go get 'em! I hope this helps.

Dan Passarelli, CEO - Market Taker Mentoring

In today's video, Dan talks about a stock that typically flies pretty much under the radar but has made some pretty big strides lately. In fact, it's up about 300% from April. The stock is Signa Technologies. S-I-G-A.

⇐click the image to view the video to see the year chart. This stock has been dormant for a long time but then in May it started heading higher and it's been heading higher ever since. The reason for it is this company has a drug called TPOXX that has been used to fight smallpox for a while and it has been approved in the EU to fight not just smallpox but also monkeypox. Monkeypox is under the scrutiny of the World Health Organization, and lots of other folks who deal with that kind of thing, fearing that it could end up being another global pandemic.

The SIGA stock is up about 8% this morning here. Dan recorded this video earlier this morning and it's one that he's been watching and one that he thinks is definitely experiencing a great deal of volatility. But, that said, probably has a lot more upside potential, especially if we start seeing more cases of monkeypox come out. This is a potentially interesting play and a potentially good one. So keep an eye on it. Hope that helps.

Dan Passarelli, CEO - Market Taker Mentoring

This is the real kickoff of earnings season. It started kinda in beta, I guess you could say, last week. But this week we have literally hundreds of announcements out each day. Next week is going to be about the same. Week after that is going to be about the same. So things are really happening. Now this is going to be a very unique earning season for a couple of reasons, and they both have to do with the Fed. So we have a Fed meeting this week and the Fed is likely to announce a 75 basis point hike in interest rates, could possibly even be 100 basis points. So that's going to have two big effects on earnings.

First of all, we've got both the cyclicals as well as growth stocks announcing earnings over the next couple of weeks. We have companies like Coke and McDonald's and UPS and 3M's as well as GE, all those real cyclical stocks announcing really just today. And then we're going to have a bunch of growth stocks too. This week got Apple and Amazon and all those. And so the market is going to be watching closely to see how the cyclicals are performing against the growth stocks because when interest rates go up, that tends to tip the scale more in favor of cyclicals and away from growth stocks.

We're going to see which of those two broad categories is outperforming the other, it's a very pinnacle week. Now the second thing for all you earnings traders out there, especially those who trade our Total Earnings Domination system: Monday and Tuesday are going to be very interesting days for trading earnings, and I think some advantageous days because volatilities are up across the board somewhat in anticipation of the Fed announcement. And that means that when volatilities collapse, they might not collapse quite as much, which is especially beneficial for earnings time spread traders who are long the back volatilities because they might not crush quite as much. Now the front, they might not crush quite as much either, but those back volatilities hanging in there are really really beneficial for times spread traders. So it's going to be a little bit different this week.

It's going to be very unique and it's going to be a very key earnings week relative to almost any I've ever seen. So I'm excited. I hope that helps.

Dan Passarelli, CEO - Market Taker Mentoring

The market was a little red today. We closed a little bit lower, about a percent or so in the S&P 500. But there were a couple of sectors that have led the market lower and there are some sectors that I might want to avoid for the short term or at least putting on any new bullish positions in the short term. So we're going to start by looking at the communications sector and if you look ATT yesterday had earnings, the stock was down quite a bit, fell from about 20 and a half down to about 19 as far as the closed before earnings and the open after earnings.

If we come and we look here and pull up the earnings data, the earnings were $0.60 estimated and they actually ended up being $0.65. And that's why I tell people earnings is so difficult to predict direction wise and should stick to volatility trading around earnings and stay away from trying to predict direction. Needless to say, after that big gap lower, ATT continued lower today and Verizon symbol VZ, kind of a similar thing. It gapped lower yesterday in sympathy with ATT. And then this is definitely a case of sell the rumor and also sell the news because the stock gapped lower when earnings came out today.

So that's the communications sector; a little bit of a bloodbath there. And then the technology sector was not really great either. And one of the big ones there was Snapchat. SNAP fell from, let's see, it closed before earnings at $16.35 and opened at $11.10, just a massive 39% lower is where it closed.

And then of course we see Amazon and Apple and a lot of the tech sector falling in sympathy with that. So those are the sectors that really perform the worst today and ones that I might stay away from. Or if I see some stocks that I like in the long term, maybe consider some cash secured puts because we often have higher volatility when stocks go down. I hope that helps going into the weekend. Have a great weekend.

Dan Passarelli, CEO - Market Taker Mentoring

Well, it looks like the market found its way higher yet again a little bit today. That's that expected followthrough through the 50 day moving average that I expected we're just kind of kissing the 400 area, which is a par level, so there could be some psychological resistance there.

So if you did play the run up, great. If you're looking to take short term profits, I wouldn't argue about that, but there's a chance I think this market could head higher.

As far as that goes, though, let's talk specifically about what were some of today's winners. Well, first of all, it was kind of interesting today because we had consumer discretionaries kind of leading the charge here today.

If we look at the XLY. That is the select sector spider trust ETF, it's the consumer discretionary ETF. That one's had really a pretty good 1234567 in a week and a half here of trading really having to follow through that 50 day moving average. Now we kind of juxtapose that against the technology sector. So we got XLK, which is the spider technology ETF here. We kind of have the same paradigm. Now, you don't always see the consumer discretionary stocks and tech stocks moving in the same direction. Consumer discretionary stocks are the ones that are sort of like these very common items, but they are elastic. So they're the ones that people spend discretionary income on. If the economy is doing worse, they'll get hurt a little bit more, whereas the technology companies, they kind of had a little bit of rough go around for the last year, a little bit with interest rates rising because low interest rates are really beneficial to those growth companies and technology is sort of at the head of those growth companies.

I also want to take a look at the healthcare sector. Now that's a similar picture for today. If we were to look at it just as a one day chart, but it's a little bit different if we kind of look back across the past five days or whatever, we're kind of just sort of bumping up against a little bit of resistance here. And yesterday I could argue we're bumping down against a little bit of support. So we could end up seeing a breakout here. But I did want to call attention to it because this ETF was up 1.58% today. It was one of the day's leaders and I think stuff like that is important to look at. So I hope that helps. 

Dan Passarelli, CEO - Market Taker Mentoring

The market has held up for a pretty good part of the day here, shooting this video shortly before the close, but looking; I'm not going to say strong 'strong'; but hanging in there pretty well. And I'm looking at that and I've been talking about earnings for the past week or so because that's the one thing that I really focus on. And that's part of the reason why the S&P was up a bit today.

Netflix, and this is a pretty interesting story and I think very telling of what I think is going to play out throughout this earning season. Netflix announced better than expected earnings, fewer than expected lost subscribers but analysts gave a bit of a warning. They think that there could be some things that could hold the company back in the future. That's why we didn't see it really soar as much as it did. But it's still up about 6% today. We can pull up that chart of Netflix right here and we see that it bounced up above the 50 day moving average a few trading sessions ago and up recently. Well, today, like I said, of about 6% right now. It was up just a teeny bit more than that at some point during the day. I think we're going to see a lot of that throughout earnings. I think that some companies are going to, of course, announced surprises to the upside, some surprises downside.

I think that earnings will be reasonably okay with some caution. We've seen that with Apple. We've seen that with some of the other tech stocks that announced that maybe they would not hire as many people, not spend as much money in fear of a future potential recession. And I kind of want to take a step back too. Let's skip all the minutiae of the exact numbers and such, but a lot of folks have been concerned that this earning season might be a bit of a letdown, might be worse than last quarter or the quarter before. Well, guess what? The last several quarters, the last year, year and a half have been fantastic quarters for earnings. So when people say that the earnings aren't going to be as good, they're not going to say that they're bad. It's not that they think companies are going to be losing money. It's just that these amazing earnings that we've been seeing, we might not see play out this time.

So I think the earnings season might be a little bit more stable, and Netflix is a good example of that. We've seen some really big moves happened in Netflix over the past few quarters, and it was, to me, a surprisingly small move in Netflix today, following their earnings. And earnings is going to continue driving markets for the next few weeks through the rest of this earning season, through what we call retail earnings. Season after that. And if you're interested in trading earnings and you haven't yet attended our webinar on trading earnings, we're doing a final encore of that this evening, and we'd love for you to come. <<--just click the orange letters to register now.