Dear Reader,
Right out of the gate this year the S&P 500 dropped over 10% before rallying in March.
And then the “We’re back in the saddle” rally only recovered about 15% of the market’s decline, only to be followed by the S&P 500 tanking again – 20% by June.
By this time, inflation was shooting like a rocket, crushing all hopes for making money and recovering portfolio losses.
And now, the Producer Price Index (PPI), a gauge for inflation, has risen higher in November, exasperating our situation by coming in higher than estimates.
So now we know two things: Inflation is likely to remain high for an extended period of time, and market volatility is very likely to follow.
With that in mind, let me tell how Quantum Data Scripts are defying the market’s rollercoaster ride due to inflation and recessionary concerns; and, the options strategy that’s whooping the market this year.
What the PPI is saying
For three of the four months prior to November, core PPI was up 0.2%, which was also what was expected for November’s reading.
However, the November report came in higher at 0.3% – reflecting an increase in prices month over month.
And the big picture isn’t very settling either. Estimates called for the year over year PPI to come in at 5.9%, but instead, it also came in higher at 6.2%.
While the index is not the highest reading we’ve seen this year, it is still at historically high levels.
Well, the Fed is trying to curb this historically high inflation by raising interest rates. Unfortunately, short-term treasury rates are increasing while longer-term rates are decreasing.
And since two-year bond rates have exceeded 30-year rates, the yield curve has inverted, which is something that precedes recessions.
Take a look at the comparison charts below to see what I mean.
The graph illustrates what a normal yield curve should look like – short-term rates lower than longer-term rates.
The right side of the image reflects short-term interest rates being higher than longer maturity rates – an inverted curve, which is a precursor for recessions.
So, I look to other things for a silver lining, since I can’t control what happens to the market or the economy. That silver lining is Quantum Data Scripts.
How Quantum Data Scripts Are Saving the Day
In April this year I released my new software, which is used for searching out tradeable patterns in thousands of stocks.
The software uses artificial intelligence and locates technical patterns found in stock trends over extended periods of time.
Once it finds and lists the stocks, the list is then narrowed down to a manageable number of potential trading opportunities, which then also identifies specific options that can be traded.
One of the fascinating things about this powerful software is that it identifies patterns that have repeated themselves, thereby creating higher probabilities for successful trading.
It then narrows the list down to a manageable number of potential option trades, which in turn I can narrow down to the best of the best.
Let me show you an example of a recent trade my software helped identify for my readers.
My software located a trading opportunity on stock symbol DAR. So, on November 22 we entered a $65/$70 put option spread and paid $133 per contract. Then, on December 7, we exited the trade for a credit of $378 per contract.
This trade resulted in a $245 profit, or 184.2% return on risk in a matter of days – not months or years.
But one single trade isn’t the reason Quantum Data Scripts is winning the day – or in this case the year.
Since launching the Scripts in April this year, the strategy above, which is known as a vertical option spread, has produced many winners.
This single vertical spread trading strategy has produced 65 winners and 35 losers – netting a 330% return on this specific option strategy so far.
So, regardless of what’s happening in the general stock market, my Quantum Scripts has proven itself to locate trading opportunities in both bullish and bearish markets – including the rollercoaster ride we’ve experienced this year.
It’s a big reason I don’t need to worry so much about interpreting what is happening in the news. The data working in my software speaks for itself and is reassuring.
I speak about my software and trading opportunities regularly.
In fact, there’s more to come in my discussions this week, Monday through Wednesday.
Join me at noon ET to find out what’s next.
I’ll see you there,
Tom Gentile
America’s #1 Pattern Trader
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