Invest and Trade Profitably with Jon Johnson

Weekender for 4/28/2024

1. Market Summary

  • Meta (NASDAQ: META) guidance lowered futures, Q1 Gross Domestic Product (GDP) doubled the premarket losses
  • Q1 Personal Consumption Expenditures (PCE) surges, making the Friday PCE stand-alone reading extremely important
  • Stocks gap lower on the one-two earnings/GDP punch, but pull out a very credible recovery
  • Precious metals, oil and gas perform the best while banks take the day to test a bit and set up quite nicely
  • Alphabet, Microsoft report excellent results, jump higher
  • It is PCE versus big-name Nasdaq earnings
  • Watching the test of the 50-day moving averages (MAs) as the indices rebound on earnings

Futures sported triple-digit-percentage losses before the economic data then doubled up the pre-data losses after GDP spelled out the worst of both worlds: dramatic miss on growth, dramatic jump in prices. Santelli said it after the data, this is stagflation. Of course, the theme continued by all other PO’ed (Paid Off) analysts was inflation still trending lower, still great economic growth, this outlier notwithstanding. Oh, whew. All is well. Thank goodness.

NOTE: The figures and facts above are from the 4/25 report.


Click here to watch!

NOTE: The video is from the 4/24 report.

2. Targets Hit

Investment House Daily:

ProShares UltraShort QQQ (NYSEARCA: QID): All through late January through March, the Nasdaq and Nasdaq-100 (NDX) both showed indications of at least a near term to.  Lots of volatility with new highs being sold off within a session or two, sharp gaps higher sold and reversed to the downside by the close. Not once or twice, but multiple times. Thus, as these indices tested the 50-day MAs, we were watching for a breach that we could play downside.

On April 15, they dropped big, just cracking the 50-day MAs. The next session they paused, showing a doji. On April 17, they started lower again.  That was our signal.

We like to play the QID calls as NDX and NASDAQ drop. That instrument moves inversely to NDX — when NDX falls, QID rises. So, we play the calls on QID as NDX falls.

We saw the move and issued the alert to buy the May $47.00 calls that were asking 2.70 with QID trading at $47.85. NDX dropped hard that session, and we had almost 20% in the bank.  We opted to sell part of the position with the options bidding $3.19, taking that one-day gain, leaving the rest to appreciate as NDX sold.

Sure enough, that is what happened. NDX sold more, QID rose more, and on April 19, when the move down was smaller, we issued the alert to sell another half with the options bidding $4.20, a 55% gain. Again, we let the rest of the position work. On Friday, April 20, NDX had dropped five of six sessions.  We figured there might be some short covering and perhaps the move would continue into next week as in real selloffs.

The move, however, was not as anticipated as there was little short covering.  That looked all the better for letting the play run, which is what we did.

Monday, however, the market opened higher, clearly not indicating it would sell off further. It did start to sell after the open, but when it showed it was holding and starting to rebound, we issued the alert to bank the rest of the position with the calls bidding $5 for a solid 85% gain. Sure enough, NASDAQ rebounded some ahead of the big-name NASDAQ earnings. We are, however, looking to reload if the rebound move stalls.

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3. Covered Call Options Play

American Coastal Insurance Corp. (NYSE: ACIC) — American Coastal Insurance Corp. is currently trading at $10.90. The May 19 $11 calls (ACIC20240519C00011000) are currently trading at $0.70. That provides a return of about 9% if ACIC is above $11 by the expiration.

Learn more about our Covered Call Tables here!

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