loader image

6 Stocks to Play the Fed’s Most ‘Grande’ Bounce Ever

by | Sep 21, 2021 | Stocks

If Monday’s market action scared you, you weren’t alone.

The financial media was freaking out right along with you…

But when the smoke cleared, one of the key indicators we look for during a market sell-off — volume — was down versus Friday, both the three-month one-year averages.

So did you buy the dip? If you missed out, I still have some ideas for you in this Fortune Research Weekly Watchlist.

Source: Bloomberg, Fortune Research

That’s not the type of thing we expect to see if markets were about to crash… In fact, it’s quite the opposite.

And Tuesday’s pin action, well… let’s just say it didn’t exactly convince anyone of the market’s imminent demise either.

Although the Volatility Index, also known as the “fear gauge” or the VIX, did manage to make a new high above 28 Monday, it fell back significantly Tuesday.

Source: Bloomberg

A score of 20 represents average volatility — a 1% move up or down on any given day — and anything higher or lower is above or below average, respectively.

And in fact, relative to its position right now, it’s still more likely to head back below 18 than it is above 30.

When that happens, prices go up, not down.

With the Federal Reserve set to meet Wednesday, we expect to hear less about tapering and more about remaining “accommodative.”

If language like that is used, expect a “grande” bounce rather than an “Evergrande” crash.

However, that assessment bears a quick look under the hood to see if anything did well Monday, what did well this past week, what’s done well over the past few months and what — if anything — those factors may indicate for the future.

Your Fortune Research Weekly Watchlist: Sept. 21, 2021

Monday’s performance was negative across the board, with only gold moving higher on the day — and even then to lower highs — and only oil still positive on the week.

Source: Fortune Research

But a closer look at the one- and three-month performance shows a few sectors actually posting positive returns over both periods.

Source: Fortune Research

Big tech, Consumer Discretionary and Financials… in case anyone needs a refresher, those were three of the five sectors leading the market higher at the beginning of the year.

Source: Bloomberg

And the search terms most associated with those categories of stocks? 

For Financials, it was interest rates. For tech services and commodities, it was inflation. 

And for the Consumer Discretionary sector… it was “short squeeze.”

Source: Google

Now this was a special period in history. The U.S. economy was growing comparatively faster than at any time in the past 70 years — if only because last year’s numbers were so bad.

In general, during periods of high growth and high inflation, we see volatile small-cap momentum stocks with high short interest outperform more stable, large-cap names.

Well, if we were to look at those same tables as above but using Friday’s close instead, look at the results…

Source: Fortune Research

Among the best performers were volatile, high-beta, small-cap, momentum stocks with high short interest.

I’m not saying we’re headed back to monthly short squeezes, but it certainly doesn’t look like the market is about to crash.

Plus, next earnings season is coming up in just a couple of weeks, and those companies are going to fare exponentially better than they did last year.

So this edition of the Fortune Research Weekly Watchlist has a couple of old favorites in the Direxion Daily S&P 500 Bull 3X ETF (NYSEArca: SPXL) and the Proshares UltraQQQ ETF (NYSEArca: TQQQ).

In addition, we’re putting in exposure to a defensive sector in the Real Estate Select Sector SPDR Fund (NYSEArca: XLRE), and those three early 2020 drivers as well… Financials, tracked by the Financial Select Sector SPDR Fund (NYSEArca: XLF)… Consumer Discretionary, tracked by the Consumer Discretionary Select SPDR Fund NYSEArca: XLY)…  and the small-cap Russell 2000, tracked by the iShares Russell 2000 ETF (NYSEArca: IWM).

*price at Tuesday’s open

That should give us the opportunity to pivot in any direction once the Fed meets…

And that versatility is what we’re looking for when we need to pivot on a dime.

So keep an eye out for Wednesday’s play…I’m sure it will at least be interesting.

All the best,

Matt Warder

Fortune Research

P.S. Every week, millions of traders both on and off Wall Street grind it out Monday through Friday…

But what they don’t know is that there are hundreds and even thousands of dollars in easy profits up for grabs every single weekend.

Anyone who knows what to look for on Friday afternoon can place a simple trade just before the market closes…

And wake up the very next Monday morning with potential gains like 95% on UAA… 486% on BIIB… and even 610% on CRSR. 

For the first time ever, New Money Crew Head Trader Lance Ippolito is revealing this rinse-and-repeat strategy that anyone with a cell phone and brokerage account can use.

WRITTEN BY<br>Matt Warder

Matt Warder

What to read next

99 Problems and a “Pivot” is One

99 Problems and a “Pivot” is One

A friend of mine sent me this chart about three months ago. I should probably print it and keep it in my wallet next to a photo of my daughter. Given the sheer number of questions I’ve fielded lately, I’ll probably end up showing this chart more than her picture.

read more
Everything Everywhere, Going Down, All At Once

Everything Everywhere, Going Down, All At Once

When our momentum reading went negative last week, I didn’t know that we’d have the second largest bank failure in U.S. history three days later. All I knew was that it went negative… and that we got out of the way.

read more
Trust But Verify…

Trust But Verify…

I want to talk about our version of “Trust but Verify” in the markets. Qualification is the most important part of the investing process. And this F score value strategy looks to be crushing the current market.

read more

Have any questions? Contact Our Customer Service Team