Dow Slips on Intel-Led Tech Selling, No Stimulus Yet

Investing.com –The Dow fell sharply Friday led by an Intel-infused stumble in tech and renewed concerns about stimulus on signs that progress on talks have stalled.  

The Dow Jones Industrial Average fell 0.22%, or 63 points. The S&P 500 was up 0.07 %, while the Nasdaq Composite fell 0.07%.

Intel (NASDAQ:INTC) slumped more than 10% intraday after the chipmaker’s better-than-expected third-quarter earnings and revenue were overshadowed by weaker margins amid a wobble in its data center business.

Analysts have warned Intel is unlikely to see a recovery in margins in the immediate future.

“DCG fell short of expectation and gross margin disappointed by 200 basis points… and gross margin faces multiple mix-related headwinds in fourth reflecting lower enterprise and government and internet of things group, and higher consumer and education NB mix,” Oppenheimer said.

The fall in Intel weighed on the broader tech market, which was also kept in the red by mixed trading in the Fab 5.

Amazon.com (NASDAQ:AMZN), Apple (NASDAQ:AAPL) traded in the red, while Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL) and Microsoft  (NASDAQ:MSFT) were above the flatline.

And then there’s that stimulus talk that weighed on sentiment, with no signs of progress that it will be rolled out before the Nov. 3 election.

U.S. Treasury Secretary Steven Mnuchin indicated that House Speaker Nancy Pelosi was dragging her feet on key differences and said that the speaker would have to make concessions to get a deal over the line.

“We’ve offered compromises,” Mnuchin told reporters at the White House, according to Bloomberg. “The speaker, on a number of issues, is still dug in. If she wants to compromise, there will be a deal.”

Stocks linked to the progress of the economy including financials, energy, and industrials were in the red.

Energy fell 1%, paced by a decline in oil prices as ongoing demand concerns amid rising Covid-19 in the U.S. and Europe offset the prospect of an extension to OPEC and its allies’ production-cut accord.

In other news, Virgin Galactic (NYSE:SPCE) fell more than 7% after Goldman initiated coverage on the stock at neutral.

On the vaccine front, Aztrazeneca reportedly received the green light from the U.S. Federal and Drug Administration to resume its clinical trials for its Covid-19 vaccine. The news comes a day after Gilead (NASDAQ:GILD)’s antiviral drug remdisivir was given full authorization to treat patients hospitalized with Covid-19. 

Dow turns lower Thursday amid uncertainty about coronavirus relief from Congress

U.S. stock indexes flipped into negative territory early Thursday, as investors watched for developments around a long-sought-after fresh coronavirus fiscal relief package.

Growing doubts that a Congressional pact for an additional round of aid would materialize before Election Day, was restraining bullish sentiment on Wall Street, investors and analysts said.

What are major benchmarks doing?

The Dow Jones Industrial Average DJIA, -0.11% was trading 144 points, or 0.5%, lower to roughly 28,067, while the S&P 500 SPX, -0.14% fell 17 points, or 0.5%, to reach about 3,417. The Nasdaq Composite Index COMP, -0.47% SPX, -0.14%, meanwhile, declined 104 points, or 0.9%, to around 11,380.

The Dow DJIA, -0.11% on Wednesday ended a topsy-turvy session with a loss of 97.97 points, or 0.3%, at 28,210.82, while the S&P 500 SPX, -0.14% dropped 7.56 points, or 0.2%, to close at 3,435.56. The Nasdaq Composite COMP, -0.47% Index finished at 11,484.94, down 31.80 points, or 0.3%.

What’s driving the market?

Protracted negotiations around another fiscal relief package was putting pressure on stocks early Thursday, driving equities into negative territory after modest gains at the open.

Talks between Congress and the White House have captivated investors over the past few weeks, sparking debate over whether the economic recovery would lose momentum in the fourth quarter without another round of aid from Washington.

“I think the market is just frustrated with the back-and-forth,” in Washington around additional aid, Joe Saluzzi, partner and co-head of Equity Trading at Themis Trading, told MarketWatch.

Negotiations between House Democrats and the Trump administration on a deal had been seen making progress, with President Donald Trump pushing for a large deal, but Senate Republicans have resisted calls for a $1.9 trillion-plus package. On Wednesday, both House Democrats and the White House were playing down prospects for a deal before Election Day on Nov. 3, while planning to continue talks.

Progress on “stimulus talks are what the market is looking for,” said Saluzzi, who described the market has very fixated on headlines lately.

Read: Both sides in Washington play down Election Day as fiscal stimulus deal deadline

“The back and forth between the Democrats and the Republicans seems to be never-ending and traders are getting sick of the negotiations dragging on,” said David Madden, market analyst at CMC Markets UK, in a note. “The mood is a little downbeat because all the while that U.S. politicians are squabbling, the health crisis is getting worse. ”

In the U.S., the seven-day moving average of new cases was 59,527 as of Tuesday, while the 14-day average was 55,282, The Wall Street Journal reported, citing an analysis of data compiled by Johns Hopkins. When the seven-day average tops the 14-day, it indicates cases are on the rise.

See: Global cases of COVID-19 41.28 million, 1.13 million deaths and U.S. death toll tops 222,000

Analysts said renewed jitters over the presidential election could also make investors more reluctant to embrace risky assets in the near term. The U.S. on Wednesday accused Iran of interfering in the election, blaming the country for threatening emails to registered Democratic voters in battle ground states, while also saying that Russia had obtained voter registration data.

Trump and Democratic challenger Joe Biden face off for a second and final televised debate Thursday night. Biden continues to lead Trump in nationwide polls but has seen his advantage shrink somewhat in recent days.

Read: Thursday’s debate looks like the last-chance saloon for Trump, analysts say

Meanwhile, earnings reporting season also remains in full swing, as investors digested results from a number of closely followed companies, including electric-vehicle maker Tesla Inc. TSLA, +2.01%.

In U.S. economic news, first-time applications for weekly jobless benefits fell to 787,000 last week, the Labor Department reported Thursday. Economists surveyed by MarketWatch, on average, had looked for 860,000 initial claims.

Separately, the Senate Judiciary Committee voted to approve Judge Amy Coney Barrett’s nomination to the Supreme Court, overcoming a decision by Democrats to boycott the vote, and setting the stage for the full Senate to vote on Monday.

In other U.S. economic reports, existing-home sales increased for the fourth consecutive month in September, as the U.S. housing market benefited from low interest rates. Total existing-home sales rose 9.4% from August to a seasonally-adjusted, annual rate of 6.54 million, the National Association of Realtors reported Thursday

And a report on leading economic indicators rose 0.7% last month, following increases of 1.4% in August and 2% in July, the Conference Board said Thursday.

Which companies are in focus?

How are other assets performing?

In global equities, the Shanghai Composite SHCOMP, -0.37%  closed down 0.4%, while Hong Kong’s Hang Seng Index HSI, +0.12% gained 0.1% and Japan’s Nikkei 225 Index NIK, -0.69% retreated 0.7%. The pan-European Stoxx 600 Europe SXXP, -0.14%  was trading down 0.3%, while London’s FTSE 100  UKX, +0.15%  was off less than 0.1%.

Oil futures CL00, +2.04%  were trading higher, with U.S. benchmark 1.1% at $40.48 a barrel. Gold futures GOLD, -2.44% tumbled 1.2% to 1,905 an ounce.

The ICE U.S. Dollar Index DXY, +0.28%, a measure of the currency against a basket of six major rivals, was up 0.3%.

The yield on the 10-year Treasury note TMUBMUSD10Y, 0.839% was 1.8 basis points higher at 0.83%. Yields and bond prices move in opposite directions.

Foghorn Therapeutics To Debut On Nasdaq On Oct 23

Foghorn Therapeutics, founded in 2015, is a pre-clinical stage biotechnology company developing drugs that target the *chromatin regulatory system for a wide range of cancers through its proprietary Gene Traffic Control Product Platform. *The chromatin regulatory system is a system that orchestrates the movement of molecules that turn genes “on” and “off.”

The Cambridge, Massachusetts-based company plans to list its stock on the Nasdaq Global Select Market under the symbol “FHTX” on October 23, 2020.

The company has offered to sell 7.5 million shares in the offering – with the initial public offering price expected to be between $15.00 and $17.00 per share. The underwriters have a 30-day option period to purchase up to 1.125 million additional shares.

Underwriters:

Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Cowen and Company, LLC, Wedbush Securities Inc.

Pipeline:

–The company’s lead candidate FHD-286 is a selective allosteric ATPase inhibitor, which is under preclinical testing, for the treatment of acute myeloid leukemia, or AML, and uveal melanoma.

— FHD-609, a protein degrader, is for the treatment of synovial sarcoma cancers, under preclinical testing.

–Selective BRM modulator is currently under discovery stage targeting non-small-cell lung cancer.

–Selective ARID1B program, a protein degrader, for the treatment of ARID1A mutated cancers, which is under discovery stage.

Collaborations

In July 2020, Foghorn Therapeutics entered into collaboration with Merck to develop novel oncology therapeutics against a transcription factor target.

Near-term Catalysts:

–An Investigational New Drug Application for FHD-286 is expected to be filed with the FDA in the fourth quarter of 2020, and if approved, separate clinical studies in AML and uveal melanoma are slated to commence in parallel during the first quarter of 2021.

–Investigational New Drug Applications for FHD-609 is anticipated to be submitted to the FDA in the first half of 2021, with phase I trial in synovial sarcoma to commence thereafter.

— IND-enabling studies for selective BRM modulator are expected to begin in the second half of 2021.

For comments and feedback contact: editorial@rttnews.com

Business News

Dow Stutters as Traders Continue to Sweat on Stimulus Progress

Investing.com – The Dow struggled for direction Wednesday as House Speaker Nancy Pelosi said she was optimistic over a stimulus package, though flagged Senate GOP leader Mitch McConnell as a likely stumbling block to getting a deal over the line before the U.S. election.  

The Dow Jones Industrial Average fell 0.35%, or 98 points. The S&P 500 slipped 0.24%, while the Nasdaq Composite fell 0.28%.

Pelosi said she is optimistic “over the prospect” of an agreement, though admitted that President Donald Trump would likely have to sway McConnell to back the deal, Politico reported, citing Pelosi’s comments on Sirius XM (NASDAQ:SIRI).

McConnell previously expressed little desire to back a large stimulus package, preferring to roll out a $500 billion skinny relief bill. The Senate GOP, however, failed to garner enough votes to advance Wednesday as Democrats voted against the legislation. 

The latest remarks on a deal come amid mostly positive news on the vaccine front. 

Johnson & Johnson (NYSE:JNJ) and AstraZeneca (NYSE:AZN) are set to resume their U.S. trials this week, Bloomberg News reported. AstraZeneca did, however, report that a volunteer in its Covid-19 vaccine trial in Brazil had died. Brazilian health authorities will allow the trial to continue as the volunteer was not part of the cohort that received the vaccine, according to media reports.      

The downside in the broader market was kept in check by a jump in communication services as social media stocks followed Snap Inc (NYSE:SNAP) higher.

Snap surged 28% after the social media company reported a surprise quarterly profit, led by a jump in user growth. The better-than-expected performance prompted Wedbush Securities to suggest that growth is likely to continue into Q4.

While Snap did not provide guidance, management did note that “revenue growth between 47 – 50% appears attainable, and the implied revenue figure of roughly $825 – 841 million is well above our prior estimate of $710 million and the prior consensus figure of $728 million,” Wedbush said.

“Management also expects total DAUs of approximately 257 million, vs. our prior estimate of 255 million and prior consensus of 250 million,” Wedbush added and raised its price target on the stock to $34.50 from $25.

Snap’s bullish results pointed to signs of robust ad spending and triggered a surge in Twitter (NYSE:TWTR), Pinterest (NYSE:PINS) and Facebook (NASDAQ:FB).

Elsewhere on the earnings front, Netflix (NASDAQ:NFLX) fell 7% after third-quarter profit and subscriber growth fell short of estimates as pull-forward demand seen earlier in the year faded.

Texas Instruments (NASDAQ:TXN), meanwhile, fell more than 3%, despite reporting quarterly results that topped Wall Street estimates. 

Energy was among the biggest losers intraday, paced by a fall in oil prices as data showing a draw in U.S. weekly inventories was overshadowed by ongoing fears about demand weakness amid rising Covid-19 infections.

Charting a bull-trend pullback: S&P 500, Nasdaq maintain major support

U.S. stocks are mixed early Wednesday, largely treading water after a mixed batch of earnings reports and amid fiscal-stimulus talks that have been extended.

Against this backdrop, the S&P 500 and Nasdaq Composite continue to digest early-October breakouts amid an orderly pullback that has thus far inflicted limited damage.

Before detailing…

Wall Street muted with eyes on stimulus

(Reuters) – The S&P 500 advanced slightly on Wednesday in volatile trading as investors tracked Washington negotiations for a fresh coronavirus stimulus package and appeared skeptical a deal would be reached before the Nov. 3 U.S. elections.

U.S. House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin were scheduled to talk at 230 PM EDT (1830 GMT) about details of a relief package that Democrats want be in the range of $2.2 trillion.

Pelosi, who over the weekend had set a Tuesday deadline for an agreement, said she hoped to resolve the “appropriations piece” of the aid bill Wednesday. However, Senate Majority Leader Mitch McConnell does not want to bring a large coronavirus aid bill to the Senate floor before the election, a senior Republican aide said.

“The market’s maybe finally realizing it’s not happening or if it does happen its going to happen after the election,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.

But investors were taking that prospect in their stride as a pre-election agreement has been in question for some time.

“We’re not seeing a lot of panic or fear. Apathy is a good description,” said O’Rourke.

At 2:25 p.m. ET, the Dow Jones Industrial Average rose 0.13 points, or 0%, to 28,308.92, the S&P 500 gained 5.71 points, or 0.17%, to 3,448.83 and the Nasdaq Composite added 8.02 points, or 0.07%, to 11,524.51.

Seven of the 11 major S&P sectors were lower, with Energy leading the percentage decliners.

Instead of plowing money into the market broadly, O’ Rourke said investors picked stocks as they looked at results coming out of the third-quarter financial reporting season.

Of the major industry sectors communications services was the biggest gainer, up nearly 2%, after Snapchat messaging app owner Snap Inc (NYSE:SNAP) beat user growth and revenue forecasts, as more people signed up to chat with friends and family during the COVID-19 pandemic.

The results boosted the shares of social media companies Facebook Inc (NASDAQ:FB), up around 5%, and Twitter Inc (NYSE:TWTR), up around 8%, helped lift the communications services sector along with a 2.7% rise for Google-parent Alphabet (NASDAQ:GOOGL) Inc. Smaller social media firm Pinterest (NYSE:PINS) Inc was up 8%.

Dampening the mood, Netflix Inc (NASDAQ:NFLX) was down more than 6% after it kicked off earnings from the Big Tech club. The video streaming service missed expectations for subscriber growth as competition increased and live sports returned to television.

Of the 84 S&P 500 firms that have reported third-quarter results, 85.7% have topped expectations for earnings, according to IBES Refinitiv data.

After touching a one month high early, Wall Street’s fear gauge edged lower in afternoon trading.

Investors were also worried ahead of the elections.

Republican President Donald Trump and Democratic challenger Joe Biden will face off in their second and final debate on Thursday night, with Biden leading the race, according to national polls.

Indexes changed little after the U.S. central bank’s “Beige Book” report, a snapshot of the economy gleaned from discussions with business contacts, showed that employment increased in almost all districts, though growth remained slow.

Electric-car maker Tesla (NASDAQ:TSLA) Inc rose 1.4% as investors geared up for its quarterly report after the closing bell.

Declining issues outnumbered advancing ones on the NYSE by a 1.42-to-1 ratio; on Nasdaq, a 1.38-to-1 ratio favored decliners.

The S&P 500 posted 19 new 52-week highs and no new lows; the Nasdaq Composite recorded 53 new highs and 28 new lows.

Singapore Stock Market May Erase Tuesday's Losses

The Singapore stock market on Tuesday snapped the modest two-day winning streak in which it had added almost 20 points or 0.8 percent. The Straits Times Index now sits just beneath the 2,530-point plateau although it’s predicted to rebound on Wednesday.

The global forecast for the Asian markets is mixed to higher on renewed optimism for economic stimulus in the face of the coronavirus pandemic. The European markets were down and the U.S. bourses were up and the Asian markets figure to follow the latter lead.

The STI finished modestly lower on Tuesday as losses from the financials and properties were mitigated by support from the industrials.

For the day, the index lost 14.93 points or 0.59 percent on to finish at 2,528.64 after trading between 2,523.21 and 2,542.39. Volume was 1.99 billion shares worth 1.09 billion Singapore dollars. There were 228 decliners and 162 gainers.

Among the actives, Comfort DelGro plummeted 3.38 percent, while SATS surged 1.96 percent, Wilmar International plunged 1.81 percent, Genting Singapore tanked 1.47 percent, City Developments tumbled 1.42 percent, DBS Group skidded 1.25 percent, Yangzijiang Shipbuilding spiked 1.03 percent, Singapore Press Holdings retreated 0.98 percent, SingTel declined 0.93 percent, Thai beverage surrendered 0.86 percent, Singapore Technologies Engineering advanced 0.83 percent, Hongkong Land Holdings added 0.78 percent, SembCorp Industries gained 0.71 percent, Keppel Corp sank 0.66 percent, Ascendas REIT dropped 0.62 percent, Singapore Airlines shed 0.57 percent, CapitaLand Mall Trust lost 0.52 percent, Oversea-Chinese Banking Corporation fell 0.46 percent, CapitaLand and United Overseas Bank both slid 0.36 percent, Singapore Exchange dipped 0.22 percent and Mapletree Logistics Trust, Mapletree Commercial Trust and CapitaLand Commercial Trust were unchanged.

The lead from Wall Street is positive as stocks opened higher on Tuesday, fell from afternoon highs but still ended solidly in the green – cutting into the previous session’s losses.

The Dow climbed 113.37 points or 0.40 percent to finish at 28,308.79, while the NASDAQ added 37.61 points or 0.33 percent to end at 11,516.49 and the S&P 500 gained 16.20 points or 0.47 percent to close at 3,443.12.

The rebound on Wall Street comes amid renewed optimism about lawmakers in Washington reaching an agreement on a new stimulus bill as Democrats and Republicans work to narrow their differences.

Reports that Moderna’s coronavirus vaccine could be available for emergency use in December if it gets positive results from its interim trial next month further aided sentiment.

Crude oil futures moved higher on Tuesday on expectations of a drop in U.S. crude inventories and that OPEC and its allies will scale back production. West Texas Intermediate Crude oil futures for December ended up $0.64 or 1.6 percent at $41.70 a barrel.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

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How Will the Election Affect the Stock Market? Dow Jones Forecast

How Will the Election Affect the Stock Market? Dow Jones Forecast

Oct 19, 2020 (MENAFN via COMTEX) —

(MENAFN – DailyFX) Dow Jones Price Outlook:

  • Data from the last ten Presidential elections reveals the Dow Jones Industrial Average typically climbs around an election
  • Still, it is difficult to attribute any equity strength to an election singlehandedly as an infinite number of themes are at play in the market at any given time
  • Dow Jones: A True Cross Section of American Industry?

How Will the Election Affect the Stock Market? Dow Jones Forecast

Global stock markets have been on a wild ride in 2020 thus far, juggling the coronavirus and the various monetary and fiscal decisions central banks and governments have made in response. If a global pandemic were not enough, the Dow Jones, Nasdaq 100 and S & P 500 will have to negotiate a looming Presidential election – an event that frequently dominates media and popular culture in the lead up. While it may feel like the election and its social implications can take over everyday life, what impact has it had on the stock market in the past?

Dow Jones Performance in the 12-Months Before and After a Presidential Election

Data Source: Bloomberg. Compiled by Peter Hanks

With the assistance of data from the last ten US Presidential elections, history reveals the stock market – more specifically the US benchmark Dow Jones index – typically rises on average before, during and after an election. That being said, there are a few caveats for which we must account. First and foremost, stocks generally rise over time in general, with the 30-year annualized return of the S & P 500 at roughly 8%. Similarly, the 30-year annualized return of the Dow Jones is slightly more than 5%.

Difference between Dow, Nasdaq, and S & P 500: Major Facts & Opportunities

With that in mind, seeing the Dow Jones rise modestly on average across ten presidential elections is not entirely surprising. To that end, drawing such conclusions from only a limited sample of data is presumptuous. Consequently, the saying that ‘past performance is not indicative of futures results’ is very apt for circumstances such as this where statistics cannot assure better equity performance than a non-election year.

Top 8 Forex Trading Strategies and their Pros and Cons

As displayed in the graph above, some years are dominated by themes other than the Presidential election. 1996, 2008 and 2020 are just three instances whereby external influences like the ballooning of the Dot-Com Bubble, the Great Financial Crisis and coronavirus respectively have (or are currently) exerted as much or more influence than the changing of the guard in the Oval Office – although the coming election may surprise yet.

Suffice it to say, 2020 has proven to be anything but ordinary and external factors like trade wars, monetary policy and the pace of the pandemic recovery may all have varying degrees of influence over the stock market. Further still, the trajectory of these themes could be altered significantly after the election – possibly changing the shape and scope of an issue like US-China relations or technology regulation. Undoubtedly then, stocks will have their hands full in the coming months and it is difficult to say that Presidential elections are a positive development for equities.

One theme we can attribute to an election with more confidence is an increase in volatility. Elections and their potential impact on government and fiscal policy can create uncertainty – a phenomenon most investors detest. With uncertainty often comes volatility and this volatility can be observed in the October VIX futures contract as it reflects the lead up to the election. In the subsequent months’ contracts, the assumption of volatility in VIX pricing steadily declines as the election impact fades into the rearview.



Recommended by Peter Hanks Trading Forex News: The Strategy Get My Guide

Thus, it can be surmised that an election’s impact on stock prices would inevitably fall with a general trend of strength, but expecting an increase in volatility may be the more likely outcome. As the election draws closer and potential policies are given more clarity, specific sectors may rise or fall depending on the forecasted outcomes. Healthcare, energy, technology and companies with sensitivities to US-China relations may all be subject to fundamental changes after the election.

Stocks like Amazon, AbbVie and Zoom are just a few examples of those with potentially heightened sensitivity to changes in the US administration, while corporations like Caterpillar, Boeing, Lulu and Walmart may be more closely aligned with the pace of economic recovery. Evidently, various themes to be negotiated around the election are already at play and divergent performances are likely.

Data source: Bloomberg. Compiled by John Kicklighter

With increased volatility to boot, these moves could see their magnitude increased regardless of direction, especially as trends in seasonality exacerbate election uncertainty. With the election drawing ever-closer, 2020 surely possesses the catalysts to differ from the typical election-year and trading opportunities are abound as a result. As the election nears, check back at DailyFX for election coverage from a macroeconomic perspective.

Open a demo FX trading account with IG and trade currencies that respond to systemic trends.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX

MENAFN1910202000760000ID1100982893

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Liz Weston: Playing the market is a bad idea, especially now

The current day trading boom will end as these frenzies always do: in tears. While we wait for the inevitable crash, let’s review not only why day traders are doomed but also why most people shouldn’t trade, or even invest in, individual stocks.

Day trading basically means rapidly buying and selling investments, hoping to profit from small price fluctuations. Brokerages have reported a surge in trading and new accounts this year, starting with March’s stock market crash when investors rushed in looking for bargains. As pandemic lockdowns kept people from their jobs and classrooms, trading continued to soar, especially among young adults.

The poster child for this gold rush is Robinhood, a commission-free investing app that uses behavioral nudges to encourage people to trade. Robinhood added over 3 million accounts this year and in June logged more trades than any of the established, publicly traded brokerages. More than half of its customers are opening their first investment account, the company says.

People can start trading with small amounts of money because Robinhood offers fractional shares. In addition to stocks and mutual funds, the app allows trading in options, cryptocurrencies and gold. Customers start out with a margin account, which allows them to borrow money to trade and amplify both their gains and their losses.

Alexander Kearns, 20, is one example of what can go wrong. The University of Nebraska student killed himself after seeing a $730,165 negative balance in his Robinhood account. The novice trader may have misunderstood a potential loss on part of an options trade that he made using borrowed money as a loss on the whole transaction. In reality, he had $16,000 cash in his account when he died.

Research has shown that the vast majority of day traders lose money, and only about 1% consistently get better returns than a low-cost index fund. A rising stock market, and a flood of inexperienced and excitable investors willing to bid up stock prices, has convinced more than a few day traders that they’re part of that 1%. They’re being egged on by the few people who actually will make money: the hucksters selling seminars, e-books and strategies that purport to teach you how to successfully trade.

STOCKS DON’T ALWAYS GO UP

Stocks overall are an excellent way to gain wealth over the long term. If you can weather the downturns, stocks historically have offered good returns.

Those downturns can be doozies, however. Stocks lost half their value during the Great Recession that started December 2007. The market lost nearly 90% of its value in the early years of the Great Depression.

Extended downturns have popped previous day trading bubbles, including the one that formed during the dot-com boom. The Nasdaq composite stock index rose 400% in five years, only to lose all of those gains from March 2000 to October 2002.

Markets that go down eventually come back up. That’s not true of individual stocks. Any single stock can lose value, sometimes all the way to zero, and never recover.

The sensible way to hedge that risk is diversification. That means buying stocks in many, many companies, including companies of different sizes, in different industries and in different countries. That’s prohibitively expensive for most individual investors, which is why mutual funds and exchange-traded funds are a better bet.

THERE’S NO SUCH THING AS A FREE TRADE

Another way to grow wealth is to minimize investing costs. That means trading less, not more, because trading incurs costs even when there are no commissions involved.

Investments held more than a year benefit from favorable capital gains tax rates, for example. Those held less than a year are taxed as income if the trade wasn’t made in a tax-deferred account such as an IRA.

Another way cost is incurred is in what’s known as the bid/ask spread. The banks and financial institutions that facilitate trading in various stocks are called market makers. They offer to sell stocks at a certain price (the ask price) and will purchase at a slightly lower price (the bid price). People who trade stocks instantly lose a little money on each transaction because of this difference. That’s not a big deal for infrequent traders, but the costs add up if you churn stocks in and out of your portfolio.

The biggest potential cost, though, is that every trade exposes your portfolio to the many ways we humans have of screwing up our money. We’re loss-averse and we want to avoid regret, so we hang on to losing stocks. We think that we can predict the future or that it will reflect the recent past, when this year should have taught us that we can’t and it won’t.

We also think we know more than we do, a cognitive bias known as overconfidence. If you’re determined to trade, or day trade, don’t gamble more than you can afford to lose, because you almost certainly will.

____________________________________

This column was provided to The Associated Press by the personal finance website NerdWallet. Liz Weston is a columnist at NerdWallet, a certified financial planner and author of “Your Credit Score.” Email: lweston@nerdwallet.com. Twitter: @lizweston.

RELATED LINK:

NerdWallet: What Is an ETF? http://bit.ly/nerdwallet-etf-definition

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The Keys to Profits for the Next Five Days… and the Next Five Years

We’ve always believed the biggest profits go to those investors who pay just as much attention to the short-term outlook as they do to the long.

In other words, the folks who can trade as nimbly and quickly (and most of all, correctly) as possible, while not losing sight of where the markets and their wealth will be in the next one, two, or five years.

Fortunately for us, we’ve got access to some of the best financial minds in the industry who, together, pack what we’re confident is the biggest, most diverse moneymaking “toolbox” this side of Wall Street. With research like this, it’s just as easy to bag doubles on quick two-point moves in Amazon.com Inc. (NASDAQ: AMZN) as it is to, say, grow our buy-and-hold gains by 10%, 15%, or more every year.

On the one hand, you’ve got Michael A. Robinson, whose open Nexus-9 Network model portfolio is up nearly 70% on long-term holds alone.

On the other, you’ve got Tom Gentile, whose “in on Monday, out by Friday” approach to his Weekly Cash Clock model trades has pulled down 27 double- and triple-digit winners in 2020; most of these were closed for profits in one or two days.

And those are just two of our experts.

If those results don’t prove the long view is just as important as the short term… well, I don’t know what does.

Today, I want to share with everyone the very latest in thinking about our long- and short-term prospects. We’ll look at where our biggest, fastest profits will come from, and also what we think makes sense over the next year or more.

To do that, I spoke to two of our experts with different market approaches and different experiences, but who do in fact share one goal: making you money.

Be Long on the Markets in the Long Run

Shah Gilani is our Chief Investment Strategist and a Wall Street pro since the 1980s, when he started his own hedge fund and owned his own seat on the Chicago Board Options Exchange; he did some important work there on what would later become the “infamous” VIX, which is to this day one of the most widely used market barometers.

In addition to overseeing the Money Map Report model portfolio (currently heading into its 14th market-crushing year with 24 double- and triple-digit long-term stock and ETF winners), Shah writes the 10x Trader and Straight Line Profits trading research services.

WARNING: 22 million shares of this stock trade hands every day – make sure you’re nowhere near it. Click here

When I wanted to know about the long-term moneymaking arc of the stock market, Shah was the first to come to mind. This interview has been edited for clarity.

Greg Madison: You’ve been one of the most consistently bullish guys out there, to the point where three years ago, you went on national television and predicted the market would double in five years. And despite everything that’s happened since, the market’s on pace to do just that. Has the bullish case changed at all – for the weaker or the stronger – between then and now? Why do you think that is?

Shah Gilani: Greg, the bullish case hasn’t changed. Sell-offs, corrections, and panics happen, and they’re often necessary and even healthy, but the basic equation hasn’t changed.

In fact, it’s as basic as it gets: There’s more capital being “manufactured” every day, from a huge variety of “generators” – wages, profits, money-printing, crypto creation, initial public offerings (IPOs), and special-purpose acquisition companies (SPACs). I mean, there’s leverage, too – it just goes on and on. And so all of that capital – every nickel – is chasing fewer and fewer shares.

GM: From buybacks, you mean?

SG: Yeah, there are fewer shares available because of trillions of dollars’ worth of buybacks. In 2018 alone, I think the figure was something like $1 trillion. But there are also mergers and acquisitions, companies being taken private, shares being parked at sovereign wealth funds and at central banks – yes, I said central banks. And we’re not seeing so many new issues these days that could add to that diminishing pool. When I said “basic,” I really meant it; it’s like Economics 101: More money chasing fewer shares equals rising prices.

And now you’ve got powerful dynamics, like TINA-

GM: “There is no alternative.”

SG: Exactly – and we’ve got pension funds not able to meet obligations increasingly fishing for returns in equities, I could go on. But, when you see what I see, you come to the same mathematical conclusion I reached: This market’s goin’ up. Of course we’ll double. And once we do that, we’ll double again.

GM: But with all that said, it hasn’t quite been a straight line up, has it? The post-“COVID Crash” run-up, from the March low to the September peak topped 60%, but even there we saw the bulls take a vacation a few times. But each time, we’ve seen a sell-off – even down to classic “correction levels” – but then stocks consolidate and gather the strength they need to power back up…

What I mean is, do you think there’s a chance we’ll see a prolonged slump of any kind?

SG: We could see a prolonged sell-off, but it’s just not all that likely given the amount of money at the ready to buy into stocks at lower prices. That’s the headline story. The not-so-headline story is, of course, the Fed.

GM: I knew they’d come into it…

SG: Absolutely. Any meaningful, or should I say, serious market panic – and I mean the kind of moment where investors would be weighing either existential or systemic reasons to sell, meaning they’re expecting nigh catastrophic losses – would be met in a New York minute by the full force of the Fed; the unlimited application of liquidity and solvency solutions. That alone would basically be grounds for buying back in, which would halt the panic.

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But, then again, there are existential and systemic “bombs” that could blow the markets up. One of them is the Fed itself. The magic of central banking is the magic of fiat currencies and fractional reserve systems. It’s all based on faith, as in, “the full faith and credit of the United States.” How many other sovereign debt issuers backed their bonds with “full faith and credit” and defaulted?

GM: Plenty.

SG: Faith in the Federal Reserve is basically no different. If that falters (and there are a couple of ways it could falter) or if it fails, we’d get one of those prolonged corrections you asked about – only it’d be a crash, not a correction.

GM: So in other words, a secular downturn is possible, but not probable – short, sharp dips are somewhat more likely. What do you recommend folks do when the bulls do take those breaks, be it for a few days or weeks? How can they protect themselves and stay in the right mindset, ready to pivot to a bullish stance once the bulls start running again?

SG: Buy the dips. Seriously, buy the dips. The way to stay in the right mindset is simpler than most investors would ever imagine: You don’t buy “all in” on the dip you face, you apply maybe 20%-25% of the capital you’re going to allocate to each new position or average down on existing positions. If there’s a leg lower, you buy into that next lower leg with another 20%-25%, and so on. Your mindset will be excited about buying in lower, averaging down to get into positions as close to the lows as you can get. You’ll be in, you’ll be ready for the bounce, and you’ll ride that bounce back higher, whether it happens in a week or a month. And, hey – if there aren’t more legs lower, at least you’re in somewhere and can add in on the way up. As much as I like buying stocks on the way down, I love buying stocks that only go up.

GM: Thanks so much for your time, Shah – we’ll talk soon!

SG: Anytime!

Free Up Some Capital to Be Flexible in the Short Term

Trader Andrew Keene’s coming from a different direction, entirely. Around here, we call him the “Millennial Millionaire”; he’s younger than I am. But he’s one of the best, most successful short-term traders we’ve ever seen.

His story is extremely compelling, too. Like Shah, he started on the floor of the Chicago Board Options Exchange – as a clerk. Within nine months, he was promoted to floor trader… and market mover.

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But, like a lot of folks, computers began to replace flesh-and-blood floor traders. Andrew had his share of strikeouts, too, to the extent that he actually moved back in with his parents.

In the search for a “reset button,” Andrew found himself at a Buddhist monastery in Thailand, where he had the time and headspace to really grapple with the true forces moving the markets. He returned to the States with a new mindset, a plan – and an algorithm hecreated. His first year back, he’d made $1.5 million… then $3.4 million… By the time he hit 30, he’d amassed a $5 million stake.

Andrew wanted to give back, so he began to show other investors how to transform their lives as well, using his proprietary S.C.A.N. algorithm. That’s why he created The 1450 Club, where people get the chance to trade in real time right alongside him. In his Super Optionsand Project 303 services, regular people get a shot at exceptional windfalls.

When I considered the short-term prospects of the market, Andrew was top of mind. Once again, this interview has been edited for clarity and to add tickers.

Greg Madison: Thanks for talking to us, Andrew. Let’s get right down to it: Where do you see this market going in the next few days, weeks, and months?

Andrew Keene: You bet, Greg. Frankly, when I weigh the coronavirus – all the fallout for the economy – and the polarization and the chance for political chaos like we haven’t seen before… I’ve gotta say I see more downside than upside at the moment. I think, for the rest of the year, the market’s capped at 10% upside, whereas a move 20% lower would not shock me at this point.

GM: A lot of investors would hear that and get scared, I think. What should they do about it?

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AK: Well, there’s no reason to be scared. The main thing for traders is volatility – it’s responsible for all the profits, basically. But even for investors, it’s not necessarily anything to worry about. If you’re going to buy and hold, buy quality stocks that can leverage the massive changes we’ve seen lately. Tech stocks, of course; tech’s helped us keep the lights on, after all, but also the so-called “stay at home” stocks, like Zoom Video Communications Inc. (NASDAQ: ZM), or Amazon.com Inc. (NASDAQ: AMZN), or even Papa John’s International Inc. (NASDAQ: PZZA). Protect those with stops, or even “zero-cost collars” – I’ll get to those in a sec. Hedge your portfolio with options on index ETFs; you can actually make more money trading downturns while you keep your long-term holdings locked down. You can speculate with trades on leveraged inverse ETFs, too, as long as you don’t pour too much capital in.

GM: So… are you a bear or a bull or what?

AK: If you had to put a label on it, I’m very bearish in the short term, but very bullish in the long term. Take the election – if Trump loses, the markets could sink into fear over the prospect of higher taxes, which would then be an opportunity to trade puts on stocks – heavily. Stocks could go down left and right.

But on the other hand, if Biden wins, we’ll see that short-term shock, but in the long term, some policies could be very good for profits; we could see an infrastructure bill, or more capital flowing into green energy.

So there are good reasons to be bearish for now, bullish for later.

GM: As a day trader – and a hell of a good one – what protective strategies do you like right now?

AK: Thanks! If you’re long stock, you’ve got to put on “zero-cost collars.” That means buying puts against a stock position and selling calls on the same position so they zero each other out; they pay off if the stock goes up or down. You’re not gonna rake in fistfuls of money doing this, but you are going to protect your holdings; you’ll live to fight another day, you know?

GM: Andrew, very illuminating. Thanks so much for your time! Catch you soon.

AK: You got it. Thanks for having me.

BUY THIS, NOT THAT: The Best (and Worst) Stocks in America

Shah Gilani is going live in his first-ever segment of BUY THIS, NOT THAT.

In 30 minutes or less, he’ll going to run through all 50+ stocks you should know about – for better or for worse.

Shah is not holding back; prices, tickers, and company names will be coming your way fast.

Be ready to take notes! Watch now

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