QQQ will gain strong upside momentum in case the broader market starts to rebound.
XLE has a good chance to continue its strong move as demand for energy increases during the summer season.
GDX could serve as a defensive asset if markets find themselves under pressure in the second half of the year and demand for gold increases.
Global markets remain volatile, and many investors are searching for safer options to protect their funds. ETFs offer an easy way to get exposure to indexes or market segments without picking individual stocks. In this article, we’ll take a look at several ETFs which could provide interesting opportunities this year.
Invesco QQQ Trust
Invesco QQQ Trust has been under significant pressure since the start of this year as traders moved away from higher-PE stocks. As a result, QQQ is down by more than 20% year-to-date.
QQQ dynamics are driven by the dynamics of leading tech stocks like Apple, Microsoft, Amazon, and Tesla, which are trading at a discount to their recent price levels.
In case the general market mood improves in the second half of the year, money would flow back into these stocks, which will be bullish for QQQ.
While Exxon Mobil and Chevron are trading at all-time highs, they are valued at roughly 12 forward P/E and have a good chance to gain additional upside momentum in case WTI oil spends this summer above the $120 level.
VanEck Gold Miners ETF
Gold has lost a lot of ground after touching highs near $2070 in March, so it’s not surprising to see that VanEck Gold Miners ETF has been under pressure in recent months.
GDX is a good bet on the gold price rebound which would be useful in case gold starts to move back towards its yearly highs due to increased uncertainty.
It should be noted that gold prices have moved lower due to rising Treasury yields, but it remains to be seen whether rates will continue to rise at a fast pace as the economy would face material problems if the 10-year Treasury yield settles above the 3.50% level. If Treasury yields settle in the 3.00% – 3.50% level, gold will have a good chance to gain upside momentum.
Target announced that it planned to “right-size its inventory for the balance of the year and create additional flexibility to focus on serving guests in a rapidly changing environment.”
As a result, Target expects that its second-quarter operating margin rate will be in a range around 2%. Previously, Target expected that its operating marging rate would be in a wide range centered around 5.3%. In the second half of the year, operating margin rate is expected to grow to 6%.
Put simply, Target’s second-quarter results will look bleak. In addition, the market is worried that the economic situation is worse than previously expected due to inflation.
What’s Next For Target Stock?
Analyst estimates have moved lower after the disappointing first-quarter report. Target is expected to report earnings of $10.6 per share in the current fiscal year and $13.3 per share in the next fiscal year, so the stock is trading at 11 forward P/E.
While current valuation levels are not expensive, traders should keep in mind that analyst estimates will continue to move lower after another gudiance cut.
More, recent news from various firms, including Tesla, signal that the economy may face problems in the second half of this year. In this light, it remains to be seen whether the market will believe that Target’s problems will be limited to the second quarter and that the company would get back to planned operating margin levels in the second half of the year.
Reuters reports that Elon Musk wants to cut as much as 10% of jobs at Tesla due to the problems in the economy.
The stock has immediately found itself under pressure after the release of this report.
Tesla is trading at more than 45 forward P/E, and analyst estimates have started to move lower, which may put additional pressure on the stock.
Tesla Retreats As Musk Has A “Super Bad Feeling” About The Economy
Shares of Tesla gained downside momentum after a Reuters report indicated that Musk wanted to cut about 10% jobs at the company due to a “super bad feeling” about the situation in the economy.
Not surprisingly, traders rushed to sell Tesla stock after the release of the report. Currently, the stock is down by more than 7%.
Fears about the slowdown of the economy have put serious pressure on markets this year, but markets have enjoyed a strong rebound from recent lows as traders bet that the Fed would not be too hawkish in the upcoming months.
Musk’s desire to cut as much as 10% of the workforce shows that even Tesla is not immune to problems faced by the auto industry.
What’s Next For Tesla Stock?
Analyst estimates for Tesla have recently started to move lower. Currently, analysts expect that Tesla will report earnings of $12.14 per share in 2022 and $15.87 per share in 2023, so the stock is trading at 46 forward P/E.
While current valuation levels are cheaper compared to the times when Tesla stock traded above 100 forward P/E, investors must keep in mind that the company remains expensive.
It remains to be seen whether traders will be ready to increase purchases of Tesla stock at current valuation levels at a time when the company looks ready to cut workforce due to the slowdown of the economy.
There were no other details, including when SpaceX will begin accepting DOGE payments.
It’s not the first time that Elon Musk influenced the price of DOGE.
Last month, DOGE jumped into the crypto top ten, by market cap, in reaction to Elon Musk’s plans to purchase Twitter.
In December, DOGE got a boost on news of Tesla accepting DOGE for some merch.
Dogecoin Price Action
At the time of writing, DOGE was down 0.21% to $0.08125.
Dogecoin Technical Indicators
A Dogecoin move through the $0.0824 pivot to target the First Major Resistance Level at $0.0887.
DOGE would need the broader crypto market to support a breakout from $0.085.
An extended rally would test the Second Major Resistance Level at $0.0961 and resistance at $0.10. The Third Major Resistance Level sits at $0.1098.
Failure to move through the pivot would test the First Major Support Level at $0.0750. Barring another extended sell-off, DOGE should steer clear of sub-$0.075 levels. The Second Major Support Level sits at $0.0687.
Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. DOGE sits below the 50-day EMA at $0.0836. This morning, the 50-day pulled back from the 100-day EMA. The 100-day EMA fell back from the 200-day EMA, DOGE negative.
A move through the 50-day EMA to $0.085 would support a run at the 100-day EMA, currently at $0.090.
At the end of the day, the price determines our loss or profit. Therefore, we should focus our research on price action rather than time lagging indicators or market fundamentals.
Following and trading price simply means that the market tells the trader what to do and not the other way around. Being one with price deposits money into a trader’s account. Whereas fighting price withdraws money out of a trader’s account. The price action is “Always” right as it does not care what a trader’s opinion or bias is.
Bull markets can go on for many years, but bear markets happen unexpectedly and can quickly destroy a trader’s profits or even their account. Bear markets move with a greater velocity than bull markets and they are accompanied by high volatility due to investor emotions (Fear, Greed, & Hope).
The simple definition of a bear market is a drop in price of -20% or greater from its recent maximum peak. Therefore, once a market drops -by 20% or greater, it is a bear market.
SUDDEN BIG price action UP DAYS CAUSE “FOMO”
Bear markets behave differently than bull markets in that bear markets are known for having sharp rallies. These rallies may last from 1-2 days to a few weeks. When these rallies occur, they tend to be an irresistible trap for many investors who are experiencing the fear of missing out “FOMO” syndrome. Institutions and professionals use “FOMO” to liquidate existing holdings and/or short the market.
History has shown that some of the greatest stock market percentage gain days have occurred during bear market periods. The following table is from Wikipedia and shows us that most if not all the extreme daily percentage gains or losses occurred within bear market time periods.
LIST OF LARGEST DAILY CHANGES IN THE S&P 500 INDEX
“SUCCESSFUL INVESTING IS A BATTLE FOR FINANCIAL SURVIVAL” – G.M. LOEB
Volatility generally has ruined many investors and traders. It’s one thing to trade a stock that experiences a 1-3% daily move. Trading in a stock, however, that is swinging 5-10% or has a sudden earnings surprise gap down of -20% is dangerous as it has the potential and high probability of eventually bankrupting most trading accounts.
Gerald Martin Loeb (July 24, 1899 – April 13, 1974) was a founding partner of the E.F. Hutton & Co. brokerage firm, acquired by Shearson Lehman Brothers in 1987 for almost $1 billion. He was a renowned wall street trader and the author of “The Battle for Investment Survival”.
Loeb stated: “When I started investing about 1921, it seemed a peaceful enough occupation. By 1943, I started calling it a “Battle”, though a lot of people might have used the term much earlier from 1929 to 1932. But now in 1957, it seems to be a “War”.
Here are some relevant quotes for our current market environment from Loeb’s book:
“I favor doing one’s major forecasting from the tape or, to put it another way, from the price movement.” “This to me is elemental and necessary to success.”
“The preservation of capital should be looked upon as something that normally costs a price.”
“It is far better to let cash lie idle than to buy just to “keep invested” or for “income”.”
“Losses must always be cut. They must be cut quickly, long before they become of any financial consequence.”
“The lessons of the 1923 stock market break taught me what I had to know to not get caught in the crash of 1929 to 1932.”
“There have been at least 8 periods since the turn of the century (1000) when the stock market, as measured by the Dow Jones Industrial Average, has dropped as much as 40%.” “It has happened before and of course will happen again.”
Let’s review and study some current markets that are now in a bear market.
SPY S&P 500 -20.58%
SPY S&P 500 ETF – The SPY has experienced a sharp -18.04% sell-off during the last 51-days. Even though the SPY has not closed below the dreaded -20% peak-to-trough level, price action has violated this level intraday.
If or when we are fortunate enough to get a sharp multi-day rally back up, we should be looking to liquidate any stocks that we are still holding. Depending upon the rally magnitude a trader may want to consider buying an inverse ETF of the SPY such as SH ProShares Short S&P 500 Inverse ETF (-1x).
Market volatility remains high, and history has shown it may expand considerably. For most traders, the best advice is to go to cash and ride out this storm from the sideline. In case you think this statement seems extreme please review the accompanying stock charts.
SPDR S&P 500 ETF TRUST • SPY • ARCA • 4-HOUR
DEERE & COMPANY -29.01%
Deere (NYSE: DE), is a major American multinational manufacturer of farm machinery and industrial equipment.
Deere’s price action, after taking out a 10-month triple top and making a new all-time high, plunged by -29.19% in just 30+ days. This is the worst drop in 14-years as Deere cited supply chain snags, rising inflation, and unfavorable currency translation headwinds.
DEERE & COMPANY • DE • NYSE • 4-HOUR
TARGET CORPORATION -43.42%
Target (NYSE: TGT), is an American department store chain and the eighth largest retailer in the United States.
Target’s price action has dropped about -40% in the last 30-days including a whopping -25% a single day. Target had missed its earnings forecast by -$1.50 citing inflation, and supply chain factors. This was the biggest loss in Target’s stock price since 1987.
TARGET CORPORATION • TGT • NYSE • 4-HOUR
ROSS STORES INC -47.23%
Ross (NYSE: ROST), is an American chain of discount department stores.
Ross price action has dropped more than -35% in the last 30-days including an opening price plunge of just shy of -25%. Ross’s massive opening price drop was precipitated by the company’s first-quarter 2022 earnings update where they reported comparable-store sales declined -by 7% due to inflation pressures impacting the retail consumer.
ROSS STORES INC • ROST • NASDAQ • 4-HOUR
TESLA INC -48.95%
Tesla (NASDAQ: TSLA), is an American automotive and clean energy company that designs and manufactures electric vehicles, battery energy storage from home to grid-scale, solar panels and solar roof tiles, related products, and services.
Tesla’s price action has dropped more than -44% in the last 45-days. Only a few months ago Tesla’s market cap was over $1 trillion. At its current level, Tesla’s market cap is now $687 billion which represents approximately a $400 billion loss in value from its early January 2022 high.
TESLA INC • TSLA • NASDAQ • 4-HOUR
LEARN more about price action FROM OUR TEAM OF SEASONED Traders
In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.
Managing risk and expectations for both investments in real estate and the stock market is the key for long-term success. Do this, and you can avoid the rollercoaster ride of doing nothing to protect your investments.
Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:
A loss of 10% requires an 11% gain to recover
A 50% loss requires a 100% gain to recover
A 60% loss requires an even more daunting 150% gain to simply return to break even.
Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or months, while a 50% drawdown may take years to recover.
Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason. Most of them learned this principle the hard way.
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Shares have fallen back to support near $700. This area held in February. With widespread market weakness, we believe Tesla is more vulnerable than ever to a sharp breakdown – prices MUST hold $680 in May.
Tesla could break key support in the coming days. A daily close below $680 could spark significant selling.
To be fair I thought Tesla should have broken below $700 back in February, but prices held. Will it hold again? I’d be surprised.
Key Price Levels
The first level of support arrives at $550; below that, a quick trip to $420 would be in the cards.
Tesla and Twitter
The uncertainty regarding Elon Musk’s acquisition of Twitter is becoming an anchor that could drag Tesla shares lower.
We think a potential trigger event could be Elon Musk needing to sell more TSLA to finance TWTR. If selling becomes epic – we could see a waterfall type decline.
AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For regular updates, please visit here.
FTX. US is set to launch the stock trading feature over the next few months.
Binance, after an attempt in 2021, failed to continue its operations, citing regulatory concerns.
FTT has been stuck in the bearish zone for more than a month now.
In a press release today, cryptocurrency exchange FTX announced its newest venture, one that has been uncharted territory for its competitors.
Bringing regulated stock trading onto its platform, FTX will be deploying the feature for the users of the crypto exchange’s US arm FTX.US.
Stocks X Crypto
Combining crypto and stock trading is not a new attempt, as last year, Binance pioneered this field in its own unique way.
Instead of directly bringing US equities onto the exchange, Binance introduced crypto assets that were tied to the value of shares of stocks such as Tesla, Apple, and Coinbase.
However, after the exchange began facing pressure from regulatory authorities from all around the world, Binance stopped offering this facility to investors.
But unlike Binance, FTX will not be offering crypto tokens tracking stock prices, instead, it will directly provide regulated US equities.
Being an affiliated broker-dealer registered with the SEC and a member of FINRA/SIPC, FTX will be offering these services through FTX Capital Markets.
Commenting on the launch, FTX US’ president Brett Harrison stated,
“Our goal is to offer a holistic investing service for our customers across all asset classes. With the launch of FTX Stocks, we have created a single integrated platform for retail investors to easily trade crypto, NFTs, and traditional stock offerings through a transparent and intuitive user interface.”
Expected to be available within the next few months, stock trading on the exchange will be completely commission fees-free.
Furthermore, FTX US will also allow its clients to fund their accounts with the stablecoin USD Coin (USDC),
This will be a huge opportunity for the exchange to arise as a prominent player in the crypto as well as potentially the equity trading space.
FTT on the Charts
While the exchange is making strides in its own ways, its native token, FTT, has not been particularly impressive over the last few days.
After declining by 25.27% during the week-long crash of May 5, FTT managed to make a 10.46% recovery, but the same was invalidated yesterday after the price fell by 7.63%.
As a result, FTT has not been able to come out of the bearish zone that it has been stuck in since the first week of April, and neither has it been able to mark a bullish crossover at the same time period despite repeated attempts.
Thus as FTX expands its operations, it could potentially positively affect the price of FTT as well.
Elon Musk tweets that “20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher”.
Traders wonder whether he tries to negotiate a better price or walk away from the deal.
If the deal falls apart, Tesla stock could gain upside momentum.
Tesla Stock Rebounds After Musk Says He Needs Proof That Fake/Spam Accounts Are Less Than 5% Of Twitter Users
Shares of Tesla gained upside momentum in premarket trading after Elon Musk tweeted that his offer to buy Twitter was based on the assumption that Twitter‘s SEC filings on the number of fake/spam accounts were accurate.
He also noted that Twitter’s CEO refused to show proof that fake/spam accounts were less than 5% of the total account number. Musk added that the deal could not move forward until he sees proof of Twitter’s statements.
Traders are trying to guess whether Musk is trying to walk away from the deal without paying the breakup fee or trying to negotiate a better price.
Both scenarios are bearish for Twitter stock, so it’s not surprising to see that Twitter is losing ground in premarket trading.
For Tesla stock, the recent news is bullish. Traders are worried that Musk will have to sell more Tesla stock to finance the deal, so a lower priced deal or a full collapse of the deal would serve as bullish catalysts.
What’s Next For Tesla Stock?
There are two main catalysts for Tesla in the near term. The first catalyst is the fate of the Twitter deal. If the deal is scrapped, traders will have no worries about potential stock sales from Musk, which will provide more support to Tesla shares.
The second catalyst is the situation with coronavirus in China, which has already put pressure on both production and demand for Tesla cars. At this point, it looks that developments in China could serve as a bigger catalyst for the stock, so traders will need to keep a close eye on the country in the upcoming weeks.
It should be noted that Tesla’s valuation has recently declined to more attractive levels, so the stock may be sensitive to positive catalysts. In this light, Tesla will have a good chance to gain additional upside momentum in case Twitter deal continues to fall apart.
Tesla will be an interesting rebound play in case the situation with coronavirus in China stabilizes.
Ford is trading at just 6 forward P/E, which is attractive for value-oriented traders.
The general market is trying to rebound, which could provide additional support to automotive stocks.
S&P 500 has recently moved away from yearly lows, but many stocks remain under material pressure. The stocks in the automotive industry are not an exception as traders are worried that higher costs and potential slowdown of the world economy would hurt automakers’ profits. That said, some automotive stocks are trading at attractive valuation levels that have not been seen for quite some time.
Tesla stock has recently found itself under significant pressure due to lockdowns in China. Musk’s desire to buy Twitter has also hurt investor sentiment, although the recent news indicated that the fate of the deal remained uncertain.
Meanwhile, analyst estimates have moved higher in recent months. Currently, Tesla is expected to report a profit of $12.32 per share in 2022 and earnings of $15.8 per share in 2023, so the stock is trading at 47 forward P/E.
Such valuation levels are not cheap for an “ordinary” stock, but Tesla is not an ordinary company. At this point, it looks that demand for the stock may increase in the upcoming weeks in case the situation with coronavirus in China stabilizes after the lockdowns.
Ford stock is extremely cheap compared to Tesla. The company is expected to report earnings of $2.18 per share in the next year, so the stock is trading at just 6 forward P/E.
However, it should be noted that shares of legacy automakers have traded at a huge discount to Tesla for years, so the relative cheapness of Ford stock cannot serve as the main catalyst for the bulls.
However, Ford is also cheap on an absolute basis. It is not easy to see a world-class company valued at just six times its future profits nowadays. Analyst estimates have been trending lower in recent months, which partly explains traders’ skepticism, but current levels should still attract value-oriented investors.
Mark Zuckerberg has announced the testing of NFTs on Instagram.
The company has been looking into this feature since December 2021.
Twitter launched this feature earlier this year for a fee, while Meta is doing it for free.
The explosion of non-fungible tokens (NFTs) last year engulfed not just crypto niche organizations but also every major mainstream company, platform, and brand.
Meta brings NFTs
After revealing the beginning of exploring NFTs for its social media platforms, Meta finally announced today that the feature is now in the testing stage and will be deployed to Instagram and Facebook soon.
As reported by FXEmpire, Meta has been eyeing this space since December last year, when Instagram’s CEO stated that the platform intends to make NFTs accessible to a wider audience.
And today, the CEO of Meta, Mark Zuckerberg himself, stated that they are actively testing the same. Zuckerberg, on Facebook, commented:
“We’re starting building for NFTs not just in our Metaverse and Reality Labs work, but also across our family of apps. We’re starting to test digital collectibles on Instagram so that creators and collectors can display their NFTs.”
He also stated that the company would soon be bringing the same functionality to Facebook as well, in addition to integrating augmented reality with the NFTs to enable users to project them into 3D physical spaces in their Instagram stories.
Twitter leads the race
Earlier in January this year, Twitter enabled the option of displaying one’s Ethereum (ETH)-based NFTs as their profile picture with a distinct frame.
While Meta plans on doing this for free, Twitter made it available to its users for a fee of $3, which was criticized by many people, including current owner Elon Musk.
Calling it a waste of engineering resources, the Tesla CEO even went to the extent of making a collage of BAYC NFTs as his own Twitter profile picture recently to show that the feature doesn’t do much for NFT owners.
On Wednesday, Elon Musk briefly changed his Twitter profile image to a Bored Ape Yacht Club image, driving APECoin (APE) into a frenzy.
Musk has a similar impact on Dogecoin (DOGE) and Shiba Inu Coin (SHIB), and even Bitcoin (BTC).
The Elon Musk influence brings into question the ethos of decentralization.
Elon Musk, the world’s richest man, is no stranger to cryptocurrencies. In January 2021, the Tesla (TSLA) CEO showed his power over the crypto market by simply changing his Twitter account description to #bitcoin.
On Jan. 29, the Bitcoin (BTC) response was evident, surging from a day low of $31,996 to a day high of $38,632 before easing back.
In February of last year, Musk delivered further BTC price action with news of Tesla acquiring $1.5 billion in BTC. Once more, the Musk influence was evident, with BTC responding to the news.
Since then, Musk has continued to show his influence on the crypto market, with DOGE, SHIB, and now APE at the mercy of Musk’s Twitter account.
Musk Twitter account causes APECoin frenzy
On Wednesday, Elon Musk flexed his crypto muscles via his heavily influential Twitter account. By simply changing his Twitter profile picture to a Bored Ape Yacht Club NFT image, APECoin surged from $14.51 to a day high of $17.64, before easing back. APE holders enjoyed a 21% breakout within a 45-minute time span.
APE joined a growing list of cryptocurrencies that have fallen under Elon Musk’s spell. Dogecoin (DOGE) and Shiba Inu Coin (SHIB) have long been under the influence of Elon Musk.
APE joins DOGE as an Elon Musk dependent
Over the last 12-months, Musk’s influence on DOGE and SHIB has been unquestionable. Last month alone, DOGE investors faced heightened volatility as the global financial markets responded to Musk’s Twitter purchase.
On April 5 and April 25, two spikes were evidence of the Musk Spell. The April 5 breakout came in response to news of Musk taking a $3 billion stake in Twitter.
The April 25 breakout came in response to renewed talk of Musk buying Twitter, which briefly took DOGE into the crypto top ten by market cap.
Musk brings into question the ethos of decentralization
Since Tesla’s purchase of $1.5 billion in BTC, questions have surfaced over the influence of one person on the crypto market.
There has yet to be any regulatory scrutiny on the Musk influence despite the US Securities and Exchange Commission’s stance on cryptocurrencies.
For the crypto market, the Musk influence raises questions over the ethos of decentralization. The impact of a Musk Tweet on APE, BTC, DOGE, and even SHIB removes the concept of decentralization.
While crypto investors going long may appreciate the Musk influence, investors shorting APE, DOGE, and SHIB walk a treacherous path, with Musk able to create a price spike with a simple tweet.
Automotive stocks haven been under pressure since the start of this year.
Shares of legacy automakers have declined to attractive levels.
Current problems may have been already priced in by the market.
Automotive stocks have been moving lower in recent months. Legacy automakers, speculative EV stocks like NIO and Rivian, and even Tesla found themselves under pressure due to worries about supply chain problems and the negative impact of rising commodity prices. This pullback has pushed the stocks of legacy automakers to attractive levels.
General Motors has recently released its first-quarter report. The company reported revenue of $35.98 billion and adjusted earnings of $2.09 per share, missing analyst estimates on revenue and beating them on earnings.
The report did not provide much support to the stock, which continued to trade near yearly lows due to general market sentiment.
Analysts expect that General Motors will report earnings of $6.89 per share in the current year and earnings of $6.88 per share in the next year, so the stock is trading at less than 6 forward P/E.
While analysts do not expect that General Motors will be able to grow its profits in the near term, current valuation levels look attractive.
Ford has also released its quarterly results this week. The market’s reaction was negative, and the stock slipped to yearly lows.
Ford is also valued at less than 6 forward P/E, so the market is somewhat skeptical about the near-term financial performance of legacy automakers.
However, there is room for multiple expansion, as higher interest rates will likely force investors to search for cheap companies with solid fundamentals.
Inflation and supply chain problems will remain the key bearish catalysts for Ford and other automotive stocks, but these problems may have been already priced in by the market.
One way investors handle these conditions is by getting defensive – sometimes the best offense is a good defense. So, today I want to highlight defensive ETF opportunities. The focus will be on great companies that sell what’s in demand, regardless of economic conditions. Typically, that means bigger firms with solid balance sheets and cash on hand to pay dividends.
Markets and Big Money in the Last Six Months
My research firm, MAPsignals, measures Big Money investor activity. That includes institutions, pension funds, big individual investors, and so on. Our research shows Big Money moves markets. In fact, we created the Big Money Index (BMI), which measures large-scale investor activity and is a gauge of the market’s past and future (the BMI tends to lead markets). It’s nosedived recently:
That’s due to heavy selling and an absence of buying:
These conditions are making investors play defense. As such, we’ve identified some defensive ETFs we think have good current prospects as well as solid long-term potential: MLPA, XYLD, VDE, SCHD, and HDV. Blended together at equal weight, a portfolio of these ETFs would pay a dividend yield of 5.3%.
Long-term investors should look for ETFs (and their stocks), with great setups. Remember, ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.
Let’s get to the five best defensive ETF opportunities for May 2022.
Global X MLP ETF (MLPA) Analysis
This ETF focuses on master limited partnerships or MLPs. It offers the benefits of investing in MLPs (like favorable tax treatment) along with the ease and liquidity of an exchange-traded product. MLPA offers a current 7.3% dividend yield, which is enticing, and is full of solid energy companies.
MLPA holds several powerhouse stocks. One example is Energy Transfer LP (ET), which is up 37% this year, grew sales in a year by 73.1%, and has a profit margin of 8.1%. Here are Big Money signals for ET:
Global X S&P 500 Covered Call ETF (XYLD) Analysis
What makes XYLD special is it uses a “covered call” strategy. A simple way to think of it is earning dividends on dividends. This ETF holds a nice mix of growth names for tomorrow and household names of today, plus it pays a nearly 9.6% dividend yield.
One great stock XYLD holds is Tesla Inc. (TSLA). It’s a long-time Big Money favorite with fantastic fundamentals, including a 10.3% profit margin, 3-year EPS growth of 336.2%, and 3-year sales growth of 37.8%. As the multi-year chart below shows, it’s been a growing giant for a while:
Vanguard Energy Index Fund (VDE) Analysis
The energy sector has been red hot for a while now. But just as geopolitical situations can move markets up, they can also move them down, and that’s happened in energy recently. We can see that in VDE below. Still, there are tailwinds like inflation and global energy needs, so there’s still a bullish outlook. Don’t forget the dividends either – VDE pays a 3.2% current dividend.
This ETF holds the big energy producers we’ve come to know, including Exxon Mobil Corporation (XOM), which is a dividend cash cow that’s been on a tear recently. The company has a one-year sales growth rate of 57.4% with a profit margin of 8.2%. It’s also been a Top 20 Big Money buy for years:
Schwab U.S. Dividend Equity ETF (SCHD) Analysis
If the best offense is a good defense, then SCHD is a stalwart because it’s long on defensive positions, especially great dividend stocks. It pays a current 2.9% dividend yield, saw big buying in early 2022, and could see more as people flock to defensive investments:
A great dividend stock within this ETF is Pfizer Inc. (PFE), a profitable healthcare company (27.6% profit margin) with growing sales (3-year sales growth rate of 23.8%) that’s been a Big Money magnet. The multiyear chart below shows lots of Big Money buying:
iShares Core High Dividend ETF (HDV) Analysis
This is another strong dividend play as this ETF has been trucking along this year, despite headwinds and uncertainty. HDV holds household names with strong balance sheets and attractive dividend payments. It also pays a current 3.2% dividend, which is a likely reason it’s attracting Big Money buys:
A fantastic stock in HDV is Johnson & Johnson (JNJ), the healthcare giant. It’s a steady large-cap stock that has paid dividends for years. The fundamentals look good too as it’s profitable (22.3% profit margin), grew sales recently (1-year sales growth of 13.5%), and has rising earnings (3-year EPS growth of 13.3%). That’s probably why Big Money has been all over it for years:
Here’s a Big Money recap:
When Big Money buying pours in, stocks tend to go up
Red selling on great quality can be a great opportunity
Repeated buying usually means outsized gains
Bottom Line and Explanatory Video
MLPA, XYLD, VDE, SCHD, and HDV are my top defensive ETFs for May 2022. I believe these funds can rise higher in rough environments primarily because they hold great defensive stocks. These ETFs feature solid balance sheets and attractive dividend yields, so they’re high quality and battle tested.
Elon Musk and Dogecoin founder engaged in a conversation about Dogecoin’s future today.
Musk’s influence on the meme coin continues to grow every day.
Dogecoin has rallied by over 16% in the last 24 hours.
The DOGEfather made some comments about the meme coin today, and naturally, the Dogecoin market went into a frenzy.
Although it wasn’t just this comment as the ongoing deal talks about Elon Musk buying the social media giant Twitter seems to be coming to a conclusion soon.
Dogecoin Doesn’t Need Ethereum
Dogecoin’s founder, Billy Markus, more famously known as Shibetoshi Nakamoto, put out his opinion on Twitter today about what all could add utility to Dogecoin. The three things he mentioned were:-
1) Businesses accepting doge – the more it can be used as a currency, the better.
2) Using doge as a tipping currency – the most pure use case that brings happiness.
3) Dogecoin / Ethereum bridge – allows doge to be used with web3.
In response to this, the Tesla CEO stated that while Dogecoin certainly needs more acceptance, it could do without an Ethereum bridge.
Ethereum is known as the home of the Decentralized Finance since the chain not only houses the most protocol and TVL in the entire DeFi space but that it also holds the most utility for both investors and developers.
Due to its prominence in the crypto space, the chain serves as an excellent opportunity for other chains to attract protocol and investments by forming a bridge between the two chains.
However, in response to Elon’s comment, Shibetoshi said,
“yeah – personally i see web3 as a developer playground which is why i support it, tho i also think it’s not named properly as i don’t think it’ll take over the web, i think it’s more just like “log into some things with your crypto wallet + track virtual goods”, but i do like the idea of purchasing virtual items with dogecoin more seamlessly and being able to build EVM projects with dogecoin in mind.
ex. a website reads your crypto wallet, sees you have dogecoin, and unlocks some feature for you, i think that adds some utility to doge (sic).”
Now whether or not Dogecoin will implement an Ethereum bridge is yet to be seen but given Elon’s influence on the meme coin, it could not happen.
In fact, this influence has grown so much that even the remotest development surrounding Elon is affecting Dogecoin.
And the Same Happened Today As Well
As Twitter began facing pressure from its shareholders to take up Elon’s $43 billion offer to sell the social media platform, Dogecoin noticed some spikes.
But in the last four hours, as reports surfaced that Twitter would be accepting the offer, Dogecoin went into a frenzy.
Within the next couple of hours, the altcoin jumped and shot up by 16% and is continuing to rise, creating an overall 17.44% rise in the last 24 hours.
Thus trading at $0.1524, if the coin can manage to keep going, it will recover all the losses it faced throughout the month of April.
BTC was still under the $40K mark, trading at $38,796 at press time.
While most of the top assets noted losses on their daily charts, Dogecoin noted decent gains.
Nonetheless, sell pressure dominated buy pressure at press time.
Bitcoin’s price for the better part of April has been on a downtrend. At the time of writing, with bitcoin’s price below the $40K level, the larger market was painted red as most of the top altcoins shed their value.
The total crypto market cap depreciated by close to 3% over 24-hours and stood at $1.7 trillion at press time. Over the last week, the cryptocurrency market has been largely unmoved due to BTC’s rangebound movement.
Nonetheless, some tokens like the popular meme token Dogecoin (DOGE) registered gains owing to external news surrounding the coin. So amid a larger market consolidation, here could be the top cryptos to watch in the coming week:
Bitcoin’s price attempted recovery on April 19 and continued its uptrend for three days, reaching as high as $42,916 on April 21. However, as the weekend approached, bears came into action and pulled the coin’s price down by almost 8% over a day.
Data from Coinglass highlighted that funding rates across crypto derivatives exchanges returned to the negative territory during the weekend, tilting towards bearish. Furthermore, BTC’s failed attempt at a recovery pulled the Crypto Fear & Greed Index into ‘extreme fear.’
At the time of writing, RSI’s downward slope towards the negative territory indicated a minor advantage to bears. Since the price had fallen below $39,100, a rise in selling pressure could be expected.
If selling pressure pushed BTC’s price further down, the asset could test the next support near $37,500.
Nonetheless, many in the market were still optimistic about the top coin’s movement. Technical analyst ‘Crypto Rover’ pointed out on Twitter that BTC’s price structure looks ‘ultra bullish.’ he further added that risk-off assets like BTC could see price in times of uncertainty with war and interest rate hikes gains.
Notably, according to the analyst, BTC has moved up against the SPX and seems to be forming similar consolidation patterns like 2017-2020.
After reports claiming that Tesla CEO Elon Musk could probably become Twitter’s new owner, the entrepreneur’s favorite token, Dogecoin, saw an almost 15% spike in price. DOGE’s price jumped from $0.1254 to nearly $0.1418 in a few hours.
Despite the larger market’s bearish momentum, DOGE’s price picked as the Musk-Twitter saga continued. Interestingly, the Dogecoin price was retracing a bullish pattern on the weekly time frame.
DOGE traded at $0.1389, noting a 4.41% rise on the daily and 2.17% rise in the weekly time frame. The meme token traded close to the $0.147 resistance, and a move above the same could further aid the coin’s uptrend in the short term.
However, once the social attention around Twitter, Musk, and DOGE fades, a pullback from the higher price range could be seen. If the price falls below the $0.130 mark in the coming week further bearish momentum could trigger a price downtrend.
Yuga Labs’ ApeCoin – the native token for the BoredApeYachtClub NFT project, was one of the best-performing cryptocurrencies in the past week. The coin surged by over 50% as the platform’s developer community dropped hints about an upcoming metaverse project.
Following the high social sentiment, APE rallied to a high of $18.3. The token even surpassed Decentraland’s MANA to become the market’s largest metaverse token.
At the time of writing, APE was the 29th coin by market cap and traded at $17.63, noting a 2.34% rise in 24-hours and a 56.95% rise over the last week.
APE broke out from its larger downtrend on April 18 as RSI on its daily chart finally picked up. The same indicated a rise in buying pressure, and technicals flashed bullish signals. APE’s recovery above the $14.19 mark ensured the coin’s uptrend.
With the next significant resistance at $18.4, if bulls could push the token above that mark, APE’s price could witness another leg up in the near term.
Over the last week, DeFi token AAVE rose by almost 10%, trading at a one-week high of $196. The coin’s quick recovery outpaced the larger market’s short-term gains as AAVE’s rallied on the back of high trade volumes indicative of retail interest going up.
After two days of retail-backed gains, AAVE’s price faced rejection $190 mark and made its way downwards. Over the last four days, AAVE’s price has slumped by close to 20%.
At press time, the DeFi coin traded at $161.97, noting a 4.17% fall on the daily time frame.
The RSI for AAVE presented a steady decline indicative of sell-side pressure taking over in the market. If the price fails to maintain above the key support level at the $158 mark, the coin could face further price losses.
After rallying by almost 20% from April 17-22, privacy token Monero’s price has started to correct. On April 22, XMR’s price faced a strong rejection near the psychological level of $300.
The coin’s rejection around the $290 level indicated that bears were active around the higher price levels. With XMR oscillating below the 20-day EMA of $245, sellers outpaced buyers for the coin at press time.
The $245 mark has acted as strong support and a price fall under that level indicated that bulls were not too keen on buying the XMR dip and expected further downward momentum.
At the time of writing, XMR traded at $240.60 noting a 5.23% decrease in price in 24-hours and a 4.87% decrease in price over the last week.
Further rise in sell-side pressure could pull the coin’s price down to the $233 mark in the near term.
Around the world, venture capitalists have collectively invested $30 billion in cryptocurrency or Web 3.0 startups throughout 2021, with institutions like Tesla, Block, and MicroStrategy all incorporating Bitcoin into their balance sheets.
These astronomical figures are made all the more impressive considering that Bitcoin, the world’s first cryptocurrency, has only existed since 2008 – and has since accumulated a value of $41,000 per coin, at the time of writing.
2021 represented a boom period for Bitcoin, as decentralized finance and NFTs grew into the ecosystem, presenting fresh opportunities for investors and enterprises alike, but the year also ended with brand new challenges for the asset as global inflation rates hit the pockets of investors hard.
As geopolitical tensions in Eastern Europe spilled over, it represented an unprecedented test for the staying power of Bitcoin. Although it’s early days, we can see evidence of Bitcoin trending upwards in the wake of Russia’s invasion of Ukraine – suggesting that the asset is still regarded as a safe haven asset for investors amidst a testing economic landscape.
Institutional interest in Bitcoin and the wider cryptocurrency landscape is rife. Besides leading trading platforms like Coinbase, a growing number of institutions are investing in various crypto projects. In the case of software developer MicroStrategy, the company is simply purchasing BTC with the intention of holding it on its balance sheet.
Others have developed tools to enable the broader integration of cryptocurrency into the economy. Silvergate Capital, for instance, operates a network that enables the around-the-clock remittance of dollars and euros – a key capability as cryptocurrency markets never close. To facilitate this, Silvergate acquired the stablecoin assets from Diem Association.
Elsewhere, financial services company, Block, has been looking at developing applications for everyday use as a digital alternative to fiat currency. Google Cloud also launched its own blockchain division to help customers accommodate the emerging technology.
As more institutions look to develop blockchain and cryptocurrency solutions, it’s highly likely that it will result in considerably better staying power for the likes of Bitcoin and other crypto. In turn, better institutional interest is likely to help to keep cryptocurrencies anchored in spite of their famous levels of extreme volatility.
Emerging use cases in the field of blockchain have also paved the way for NFTs and DeFi projects to gain prominence, broadening how cryptocurrencies can influence the world.
Bitcoin’s Utility Amidst Geopolitical Tensions
Perhaps most significantly of all is how Bitcoin has recently demonstrated that its technology is capable of becoming a mitigating force against factors that can cause economic downturns.
To illustrate this, Maxim Manturov, head of investment advice at Freedom Finance Europe, notes how Bitcoin was swiftly made legal tender in Ukraine in the wake of the Russian invasion in February 2022:
“Ukraine has legalised cryptocurrency. President of Ukraine Volodymyr Zelenskyy signed the law ‘on virtual assets’ adopted by the Verkhovna Rada of Ukraine on 17 February 2022,” Manturov noted.
“The National Commission on Securities and Stock Market (NSSM) and the National Bank of Ukraine will regulate the market of virtual assets. What provision does the adopted law on virtual assets make? Foreign and Ukrainian companies will be able to work officially with crypto-assets, open bank accounts, pay taxes and provide their services to the people.”
Significantly, the move also helped Ukraine to set up an avenue to receive humanitarian aid in BTC.
Due to Bitcoin’s decentralized nature, the asset may help during national emergencies throughout countries around the world – particularly when economic complications lead to the devaluation of fiat currencies through hyperinflation.
The Road to the Mainstream
Despite Bitcoin still sitting some 40% adrift from its all-time high from November 2021 today, institutional faith in the cryptocurrency remains. Deloitte figures suggest that 88% of senior executives believe that blockchain technology will eventually achieve mainstream adoption.
It’s worth remembering that it wasn’t until recently that Bitcoin’s blockchain framework finally began to achieve the levels of global recognition for its technological framework that it deserved. Since then, we’ve seen the rise of DeFi and NFTs as a taster of what distributed digital ledgers can achieve.
Although it’s hard to predict just how the adoption of cryptocurrency will grow, and whether it may take another NFT-style emergence to act as a catalyst for more mainstream applications, the fact that Bitcoin’s technology is playing an active role in aiding economies in the face of an economic crisis shows that there’s enough potential for the asset to not only outlast its expectations but to outperform its benchmarks during downturns.
Although there are likely to be more twists ahead before the global economic outlook recovers, Bitcoin is already showing that its use cases can ensure that crypto is very much here to stay in one form or another.
Jack Dorsey believes that building on Ethereum has many points of failure.
He also stated that he doesn’t feel that social media should be owned by rich people.
Ethereum has been performing terribly this year as an institutional investment asset.
In a Twitter discussion, two of the biggest influencers shared their opinion on Elon Musk’s proposal to buy the social media giant Twitter.
In response to one of these threads, Ethereum took a shot for not being the most ideal blockchain to build a decentralized social media.
“Not Ethereum”, Says Dorsey
Replying to a tweet from Ethereum’s founder Vitalik Buterin himself, former Twitter CEO Jack Dorsey shared similar views on Buterin’s statement that wealthy individuals or organizations should not hostile takeover social media.
While Dorsey agreed to this, another reply from an apparent decentralized social media protocol, ‘DeSo’, triggered him. Replying to DeSo’s pitch, Dorsey said,
“if you’re building on ETH you have at least one, if not many, single points of failure and therefore not interesting to me.(sic)”
When he was further assured that it was not being built on Ethereum and was a Layer-1 protocol owned by a ‘Foundation’ and not a ‘Corporation’, Jack simply replied that ‘a foundation is a single point of failure’.
Being a Bitcoin maximalist, Jack has always been vocal about his views on crypto, and at the moment, they do not seem to be siding with Ethereum.
But he isn’t the only one who isn’t in support of Ethereum at the moment, as on the investor front, the altcoin king hasn’t been noticing much preference either.
“Not Ethereum”, Says Institutional Investors
As per the CoinShares fund flow report for the week ending April 15, Ethereum failed to make a dent in the market once again as the assets marked another week of outflows amounting to $97.3 million.
Ethereum during the week led the second highest outflow at $27.1 million, led by Bitcoin at $72.1 million.
However, considering the year-to-date flows, Ethereum is the worst performing asset, with $153 million pulled out of the asset, while the king coin has $145 million flowing in.
The recent market recovery might improve investment in the asset in the coming weeks, but the current outlook falls in line with Dorsey making Ethereum a bad investment vehicle and Dapp chain.
Tesla reports Q1 2022 results, beating analyst estimates on both earnings and revenue.
The material improvement in operating margin serves as the main upside catalyst for Tesla stock.
Investors will also stay focused on Musk’s attempts to buy Twitter.
Tesla Stock Jumps As Q1 2022 Operating Margin Impressed Investors
Shares of Tesla gained strong upside momentum after the company released its first-quarter report. The company reported revenue of $18.76 billion and adjusted earnings of $3.22 per share, easily beating analyst estimates on both earnings and revenue.
The company noted that its operating margin was 19.2%, which was a material improvement from the operating margin of 14.7% in the fourth quarter of 2021. The comparison on a year-over-year basis is even more favorable, as operating margin was just 5.7% in the first quarter of 2021.
The big increase in the operating margin, together with the continued increase in revenue, provided significant support to Tesla stock. However, it should be noted that the stock has already pulled back from session highs as some traders decided to take profits after the rally.
What’s Next For Tesla Stock?
Analysts expect that Tesla will report earnings of $10.56 per share in the current year and earnings of $13.72 per share in the next year, so the stock is trading at 76 forward P/E. However, earnings estimates keep moving higher, so traders are not worried about the rich valuation of the company.
The major improvement in the operating margin may serve as a longer-term positive catalyst for Tesla stock as it shows that the company’s profits could grow at a fast pace.
At this point, investors are not worried about Musk’s plans to buy Twitter and their potential impact on Tesla stock, although this topic may return into spotlight in the upcoming days.
The broad stock market index lost 0.06% on Wednesday following its Tuesday’s advance of 1.6%. Stocks were gaining ahead of quarterly earnings releases. So far, we’ve seen some mixed reactions on those releases. There’s still a lot of uncertainty concerning the Ukraine conflict and Fed’s monetary policy tightening plans. However, this morning the S&P 500 index is expected to open 0.8% higher and we may see an attempt at breaking above the 4,500 level.
S&P 500 Technical Analysis
The nearest important resistance level is now at around 4,500, marked by the recent support level and last Monday’s daily gap down. On the other hand, the support level is at around 4,350-4,400. The S&P 500 index broke above its downward trend line, as we can see on the daily chart (chart by courtesy ofhttp://stockcharts.com):
Futures Contract – Just Below the Important 4,500 Level
Let’s take a look at the hourly chart of the S&P 500 futures contract. On Tuesday it broke above its short-term downward trend line and it retraced some of the recent declines. The market gets close to the 4,500 resistance level.
Recently, we closed a speculative long position with a gain of 100 points. (our premium Stock Trading Alert includes details of our trading positions along with the stop-loss and profit target levels) (chart by courtesy ofhttp://tradingview.com):
Forecast and Calendar
This morning the S&P 500 index is expected to open 0.8% higher following a positive reaction to yesterday’s TSLA quarterly earnings release. The market will get close to the 4,500 level and we may see some buying pressure if the index breaks above it.
The S&P 500 index will likely extend its short-term uptrend today; a breakout above the 4,500 level may fuel additional rally.
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Sunshine Profits: Effective Investments through Diligence and Care
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The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.