Joe Duarte’s Smart Money Trading Strategy Weekly

By Joe Duarte Editor Joe Duarte in the Money Options

Investing Like a Beagle.  While Wall Street Freaks Out, Keep your nose on the scent of Money.

June 30, 2024

I once had a beagle who could sniff out any critter which was hiding anywhere, anytime.  Once she caught the scent, it was over for the varmint. Yet, her instincts, steadfastness, and joy in every moment of the hunt made me smile and taught me that as long as you do what you do as well as you can, the odds will be in your favor.

BEAGLE – Yes BEAGLE!!

I wish she could have helped me pick stocks. 

Next week could be another one of those weeks with Fed Chairman Powell speaking on Tuesday, followed the JOLTS job openings number, ADP private payrolls, the latest FOMC meeting minutes, a huge ISM and PMI data dump all week, and the non-farm payrolls on Friday, with July 4 on Thursday.

So, when the market frustrates you, take a deep breath and think like a beagle. Focus on what’s working and what you know. And don’t be afraid to look where others aren’t.  Sometimes it’s aggravating as you wait for a trade to develop, but over time combining a value seeking approach in stocks with pending momentum pays off.

I don’t talk Politics. But I do Trade them.

I’ve always smiled when analysts preface political comments by saying: “I don’t do politics.”  But the fact is, I don’t, and I have to intention of starting to do so.   On the other hand, politics is the elephant in the room; especially during a presidential election year. 

Yet, there is a misunderstanding as to how politics and investments interact.  So, my goal for this segment is not to influence anyone’s views, but to offer an approach to manage the next few months.

Back in the dark ages – the late 70’s, I took my required political science courses in back to back classes during a college summer session – Monday through Friday for six weeks.

Back then I was a nineteen year old rube, more focused on which rock concert I was going to on any summer night than on the vagaries of statecraft or policy deliberations. My professors, on the other hand, were quintessentially academic and outrageously interesting cats, whose discourse, against my wandering ways and heavy metal idled brain, helped to shape my analytical mind. 

One of them was a chain smoking libertarian, who promised to “tell the truth about how the world really worked” as he claimed to be dying of lupus. The other was a fedora hat, and Birkenstock wearing bohemian with a receding hairline and slightly graying goatee.  Somehow, they challenged me to think for myself.   What’s stuck with me over the years, is how the bohemian defined politics: “the process through which money is divided amongst the classes.”

So, while most people pick sides based on what politicians say and do, as an investor, it’s best focus on where the money is going because of politics.  And there’s no better place to see where money is going that in price charts.

That’s because Wall Street, like a good beagle, is good at sniffing out money’s direction.  Thus, when the political rhetoric and extraordinary events appear ahead of the upcoming presidential election, remember the following:

• Expect the unexpected; THERE ARE NO SURPRISES – JUST EVENTS;
• Stay patient and stick with what’s working – if any position holds up, keep it;
• Raise cash, trade small, hedge as necessary; and
• Consider trading options to reduce market exposure.

What’s the bottom line? Listen to what they’re saying.  Watch what they do.  And, like a beagle, sniff out where the money is going.

Where’s the Scent of Money?

While Wall Street’s been lamenting the inevitable pullback in NVDIA (NVDA), money has been moving elsewhere with lighting speed.  Here are two examples of recent trades I’ve recommended recently.  The first one is from Joe Duarte in the Money Options.com, a trade which is still active featuring HVAC and industrial climate control company AAON Inc. (AAON). 

The stock got clobbered because it missed its earnings report.  Apparently, no one read the earnings call transcript in which the company stated that even though it missed its earnings, there were special circumstances.  Specifically, orders fell as customers held back due to an approaching deadline for a government mandated change in coolants.  But the orders were just postponed, not really canceled. In fact, the company expects a rise in its future orders as the AI fueled data center binge for air conditioning systems is growing.

In other words, Wall Street sold the stock on a government regulation induced glitch while the company remained bullish.  That’s a great combination, which is why I recommended the stock on a move back above $80, which it hit on 6/20/24.  Since then, as the price chart shows, the stock has moved decidedly higher. 

And check out the developing short squeeze; falling ADI (short sellers building positions) and rising OBV (buyers moving in).

Another out of the mainstream money magnet, was a stock we just sold with an $800-plus profit, after a four day hold, at the Smart Money Passport service; LNG processor Cheniere Energy (LNG).  Again, the natural gas sector has been plagued with bad news – over supply, clean energy will replace it, yadda, yadda, yadda.  Meanwhile, the stock had been forming a base. It broke out on 6/24/24 when I recommended it at $165.50.  On 6/28/24, we took our profits at $172 plus.

My point is that if you listen to Wall Street, when it comes to politics and investing, you may miss something tangible, which is easily addressable via price chart analysis and deep dives into what companies are saying and doing.  Both AAON and LNG are perfect examples of how politics works its way into investments. Both LNG and AAON are benefitting from the AI boom , and the electric grid expansion triggered by federal money moving into specific sectors of the economy.

I own shares in AAON. For more potential winners you can review my latest pics via the Smart Money Passport service or with a FREE Two Week trial to Joe Duarte in the Money Options.com. 

Bond Yields Test Upper Range

Bond yields got the hiccups at the end of the week, as the presidential election rhetoric heated up and traders got jitters about the upcoming jobs report.

The U.S. Ten Year Note yield (TNX) bumped up against its 200-day moving average, causing a bit of heartburn to the bond bulls even as the PCE deflator data was stable.  Traders are suddenly concerned about more deficit spending after the election, while worrying about next week’s data.

Meanwhile the average 30-year mortgage is now below 7% for the third week.  A move above the 200-day for TNX would be a negative for mortgage rates.

The iShares U.S. Home Construction ETF (ITB) is consolidating.  Note the quiet uptick in OBV as smart money builds long term positions.  Check out my latest on housing and real estate here.

Meanwhile, the rental market is quietly picking up. The iShares U.S. Real Estate Market ETF (IYR) is on the verge of a breakout.  Check out the quiet rise in OBV here as well.

What could go wrong?  Rising interest rates and failing job markets would upend the bullish case.

ETFs make sense in this market as they let you trade sectors which can withstand inflation and volatility. My new service, Joe Duarte’s Sector Selector is all about ETFs and tactical trading.  It’s FREE with your monthly membership to Buy Me a Coffee.  Sign up here. 

Market Breadth Is Testing Support

The Nasdaq 100 and the S&P 500 made new highs which remain unconfirmed by New York Stock Exchange Advance Decline line (NYAD). This is still not fully sorted out.   Keep an eye on the NYAD’s 50-day moving average which has been an excellent support level since the November 2023 bottom.

The Nasdaq 100 Index (NDX) moved above 20,000 but could not hold the level.  The RSI is still overbought and ADI and OBV are consolidating.

The S&P 500 (SPX) is acting similarly to NDX with 5500 being the key resistance level. 

VIX Remains Below 13.

The CBOE Volatility Index (VIX), is below 13, remaining bullish.  A move above 15-16 would be very bearish.

VIX rises when traders buy large volumes of put options.  Rising put option volume leads market makers to sell stock index futures to hedge their risk and leads markets lower.  A fall in VIX is bullish signaling lower put option volume, eventually leads to call buying which is bullish as it causes market makers to buy stock index futures raising the odds of higher stock prices.

To get the latest up to date information on options trading, check out “Options Trading for Dummies”, now in its 4^th Edition – Available Now!

#1 New Release in Options Trading

Now in Audible Audiobook Format

Options Trading for Dummies (4th Edition)  Audible Audiobook – Unabridged

Joe Duarte MD (Author), Terrence Kidd (Narrator), Tantor Audio (Publisher)

4.5 out of 5 stars    61 ratings

#1 New Release in Investment Analysis & Strategy

# 1 New Release on Options Trading

Good news! I’ve made my NYAD-Complexity - Chaos charts featured on my YD5 videos, and a few more available here.

Joe Duarte is a former money manager, an active trader and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com - now in its third edition, The Everything Investing in your 20s and 30s and six other trading books.

Meanwhile, the U.S. Ten Year note yield (TNX) is trading in a The Everything Investing in your 20s & 30s at Amazon and The Everything Investing in your 20s & 30s at Barnes and Noble.

A Washington Post Color of Money Book of the Month is now available.

To receive Joe’s exclusive stock, option, and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.as

JoeDuarteInTheMoneyOptions.com is independently operated and solely funded by subscriber fees. This web site and the content provided is meant for educational purposes only and is not a solicitation to buy or sell any securities or investments. All sources of information are believed to be accurate, or as otherwise stated. Dr. Duarte and the publishers, partners, and staff of joeduarteinthemoneyoptions.com have no financial interest in any of the sources used. For independent investment advice consult your financial advisor. The analysis and conclusions reached on JoeDuarteInTheMoneyOptions.com are the sole property of Dr. Joe Duarte.