Hey There Income Hunters,
The Fed will announce an even more aggressive QE taper this week and the market seems to be readying for it in stride …
The broad index is anyway, but the inside scoop tells a very different story.
You see, the Fed’s new mission is to break the back of the stock market. Central bank chairman Jerome Powell was transformed from a dove to a hawk to save his job.
Now, J-Pow must give the stock market a beat down similar to 2018 until he breaks the back of the broader market.
Just look at the beating Invesco QQQ Trust ETF (Ticker: QQQ) took in 2018 after Powell tapered and raised rates.
#IncomeHunters must adjust and move from “buying the dip” to “selling the rip,” especially in large cap tech names, which have already started playing downside catchup to value.
Today, we’ll take a look at the most beaten down names that offer tremendous upside in Q1 2022 …
Buy Beaten Down Value Paired with Bear Strategy in QQQ
The most crowded trade in the market right now is long the FAANG names and their peers in the tech space.
This trade has become the safe haven trade of choice to carry into year-end.
However, we have seen a few nasty reversal days in QQQ, showing how crowded the trade is. When sellers come in, it’s tough to find liquidity.
Check out volatility over the past couple of weeks:
QQQ at 400 is a good level to sell against outright and paired with longs in high value stocks.
Tax loss season has had a major impact on the market this year. Look at how bearish the market has gotten on names other than large cap growth …
NASDAQ Index Internal Indicators Flashing Red
Historically, when the NASDAQ has reached 400 stocks hitting new 52 week lows, it continues until you get 800 stocks reaching new lows.
Many names under pressure get sold into year-end to create tax losses to offset gains, capital is being parked in few large-cap names (FAANGs).
This trend will reverse in Q1 as capital flows back into value during a tightening cycle.
A few names to consider accumulating and holding outright or hedged with put spreads in QQQ include:
- AT&T Inc. (Ticker: AT&T)
- Intel Corp (Ticker: INTC)
- Uranium Producers (DNN, UROY, URNM)
- SPDR Biotech ETF (Ticker: XBI)
Bring It Home
This week is an opportunity to set up for Q1.
I am heading into the FOMC meeting on Wednesday with outright put spreads in QQQ.
I am also accumulating names that I think will snap back in Q1. The key to trading the next couple of months is keeping in mind that the Fed’s new goal is to break the back of the broader market.
It will be hard for the general market to understand how policy will impact the market and many will be blindsided.
Power Income and Power Income Trader will keep you in tuned to the Fed’s next moves and how to get out in front of the market to capitalize on the real money flows.
Have a great week and as always …
Live and Trade With Passion my Friends,