August 4th, 2024
This blog post is offered for free for all the Good Kids! Mr. Money Maxwell Inner Circle members gain exclusive access to my top 3 watchlists and specific trade ideas, including 3 intriguing dividend stocks I'm currently watching. Join now for an introductory price of less than $2 a week. Introductory sale ends next month!
August roared in like a starving, hibernating bear.
SPY and QQQ were raided and pillaged like buckets of honey. (Do bears even eat honey? I have no idea).
Let’s talk about this week’s market. Jay Powell repeated his usual lines Wednesday we all expect rate cuts in Sept, and the market initially digested it well, leading to a small inside bullish candle on SPY and QQQ on Wednesday.
Buy-the-dippers felt pretty good (I know I did). But then Thursday brought a bearish engulfing candle, and Friday opened at levels we haven’t seen since June and proved to be a blood bath for most of the day. There was some fear, but I’m not sure it’s capitulation just yet. Could be a little more pain in store for the Good Kids. Maybe I’m wrong, Hopefully I’m wrong.
How did you feel about your portfolio this week?
Drawdowns suck, so I don’t expect you felt great. Were you scared, thinking you needed to sell everything? If so, please listen up because it’s possible you are over-leveraged. I’m not saying this to beat you up or make fun of you. Even if you are sized correctly sometimes you just need to close your broker and stop watching your account balance.
I want you to consider if you are taking on too much risk or are too overweight in a single position, sector, or strategy. A good amount I’ve talked with are far too heavy teach right now. That’s a problem!
We’ve seen pullbacks over the last three weeks on SPY and QQQ. SPY is down 6%, and QQQ is down about 10%. Drawdowns are going to happen, what’s important is you don’t blow up your account.
The 50 EMA is a 15% pullback and the 100MA is 27% from the highs. I know 4 bear weeks suck.
Don’t be the person who sales your assets for pennies on the dollar because you can’t take the pain.
Think about this: Mental Stress Testing Your Portfolio
What if QQQ pulls back 5% or 10% MORE?
What would your account look like?
I’m not saying we’re definitely pulling back that much, but it’s worth considering NOW instead of waiting for it to happen and panicking. What is your next move? Did you read my document on hedging? (Good timing, eh?)
I’ve been stressing even smaller trades over the last several months. As the indices climbed without a pullback did your risk antennae go up? I know mine have been (not an actual picture of me )
Think about the following if you had a tough time this week:
Risk-Free Returns on Cash: With high rates, there are risk-free returns on cash this is a risk off time. Good Kids have been in SGOV, BIL and cash for a reason.
Value Stocks AND Growth Stocks: With upcoming cuts, value stocks will become more favorable. You want more than just tech stocks! We’ve been buying risk off names.
Diversification/ Sector Balance: Diversification is key. You don’t want to be in just one sector!
Avoid Over-Leveraging: Not over-leveraging when the market is this high is the smart move.
Multiple Strategies: Using multiple strategies is crucial.
Success in the market is just as much about capital preservation as it is growing your account.
Warren Buffett has two rules for us: Rule 1: Never lose money Rule 2: Never forget Rule No. 1
Watchlists
Many traders miss out on profitable opportunities because they don’t routinely monitor stocks that fit their objectives.
Watchlists are SO important even if you are a long term investor or an active trader. If you're not tracking it, you can't improve it.
With experience, reviewing watchlists becomes quick and efficient. You have to make the time for this! My success depends on regular watchlist reviews, and I want to help you achieve similar results.
Join the Mr. Money Maxwell (M$M) Inner Circle to access three of my favorite watchlists:
Dividend Stocks: Steady Growth and Income
These are my go-to dividend stocks that have consistently provided growth and income. They’re perfect for adding stability to your portfolio, especially during volatile market conditions.
Dividend ETFs: Diversification and Convenience
ETFs that not only offer dividend income but also diversification. These are ideal for those who prefer a more hands-off approach while still reaping the benefits of dividend-paying companies.
Stocks Under $100: High Potential Picks
For those looking to invest in promising companies without breaking the bank, this list features stocks under $100 that have significant growth potential.
Inner circle members also received 5 steps to getting the most value from my watchlists as well as 3 interesting charts.
Now is the perfect time to join at the introductory price of less than $2 a week. Act fast—prices will increase next month.
Make it a habit to spend a little time getting familiar with the companies on your watchlists. You'll discover opportunities and gain insights by applying your views to the content at GKT.
July trading is in the books
Monthly Candle and key takeaways
I wrote last week about many of the top 500 companies in SPY are tech. Look at the heatmap for spy for the past month. See the large red blocks of tech? Hard to miss I know.
Pay attention to sectors that are entirely red and look at sectors that are mostly green. Do you notice how tech rotation continues, but how there are also sectors that are green.
Yes, I know this was the last month, we know previous performance isn’t indicative of future returns, but as avid readers you realize I’ve been pounding the table about value stocks (Consumer Defensive, Utilities, Basic Materials and Healthcare) for over a month.
Buying high and selling higher is NOT my favorite strategy, but this is why we pyramid into shares sometime. You do NOT have to buy entire positions all at once. Most of us aren’t that good to catch the bottom or top.
Please consider dividend stocks in addition to growth. All my tech friends think they need to invest in tech because it’s “what they know” but you also know a lot of the boring companies that happen to be green on this heat map above! And if you don’t know Google/FinViz/Koyfin are waiting for you
Index Updates
SPY- bullish doji on SPY, might not match how you feel if you were an active trader
Now lets look at the weekly candles for spy.
Do you have recency bias because in the last two weeks as the market pulled back? We’re right back to where we started the month. How does July feel to you compared to the weeks?
When you look at the monthly do you see the difference between the weekly?
Zooming out and zooming in gives you different perspectives. We ran up the first half of July and pulled back the second half.
QQQ- Tech continues to be sold off for 4th consecutive week, think about how much the sector has run. Interesting to note we bounced in the area I outlined last week. Do you see why support and resistance is important? Was it exactly on the line I drew? OF COURSE NOT…
Tech is selling off because it’s outperformed, people are taking profits because even when a company reports good earnings the bar (of expectations) continues to be raised. These BILLION dollar companies have a hard time meeting expectations.
A pullback is healthy, I’m a tech buyer after we get to more of a correction territory. You’ve noticed I’m setting up 1-1-1’s and 1-1-2’s because you can make money in a pullback.
IWM- Bearish engulfing this week. Right back at my entry on my swing.
Remember small caps often take on debt, so rate cuts are bullish for IWM, July was a strong bullish month, the market is getting ahead of this. The Good Kids were well ahead of this.
TLT- Look at the weekly candle on treasuries. We’ve been well ahead of the market on this trade as well.
This is not to brag; I’m simply pointing out the market moves in cycles so it’s important to learn the cycle.
Why I Love Dividend Stocks
For the better part of two months, I've been pounding the table about the importance of including dividend stocks in your portfolio, especially with interest rate cuts on the horizon. They’ve been a core position for me for decades.
Some traders think many dividend stocks are boring and are currently overvalued. While I love buying dips like everyone else, sometimes you need to get some exposure even when prices are high.
Here's why dividend stocks are a powerful addition to any portfolio:
Tax Advantages: Did you know a married couple in the US can earn up to $123,250 in dividends annually and pay zero in taxes? This is a huge benefit that shouldn't be overlooked. (I'm not a CPA, but I encourage you to look it up!)
Growth and Income: When you buy dividend stocks at support and sell them at resistance, you not only benefit from price appreciation but also enjoy a steady income from dividends. This combination can significantly enhance your portfolio's performance.
Options Income: If you own 100 shares, you can increase your income by selling calls against your shares or selling puts to acquire more shares before an ex-dividend date. This strategy allows you to create your own dividends, who doesn’t love DOUBLE dividends?
ETFs for Convenience: You don't have to trade individual stocks. There are many ETFs available that not only provide exposure to dividend-paying companies but also sell covered calls as part of their strategy. Yes, they have higher fees, but they offer a more passive approach.
My Watchlists: For Mr. Money Maxwell Inner Circle members, I'm providing a watchlist of my favorite dividend stocks, along with a list of dividend ETFs to consider. This will help you avoid reinventing the wheel and give you a solid starting point for your investments.
Review your portfolio and consider integrating these dividend strategies to enhance your trading success and diversify your portfolio.
If you’re an Inner Circle member, check out my watchlists and start benefiting from these powerful strategies. If you are not in the Inner Circle join today for the introductory price, act soon as the sale is ending this month.
Dividend Stock Ideas
I still like the following dividend stocks and I own them in my longer term accounts:
but this is for M$M Insiders. Join today for my current favories and 3 stocks I'm watching! Show your support and keep GKT free!
Until next time!
Happy Trading Good Kids!
-$Maxwell
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