Fitch Ratings & AAPL ER Accelerated August Weakness 😮‍💨

Thanks to Tiger for awarding the weekly top predictions for SPY this week. Again, it’s a reminder of the August weakness - first with the Fitch rating downgrade followed by AAPL unfavourable earnings leading the way downhill to Friday’s close. Join me to take some puts to profit next week 🤩

63% gain taking SPX calls at open and puts towards market close from the rapid sell offs. Better to avoid swinging calls and employ options scalping strategy for safety sake 😎

It's probably not a coincidence that the stock market had a difficult week, with the S&P 500 dropping 2.3%, the Dow Jones Industrial Average falling 1.1%, and the Nasdaq Composite dipping 2.8%. The S&P 500, after all, entered the week up 28% from its bear-market low in October, and strategists, many caught off guard by the massive rally, have responded by acknowledging what has already happened and marking their forecasts to market.

For reference, not financial advice ✌️

Not that there's anything wrong with that. If we learned anything this past week, it's that the economy remains resilient, but not so strong that it forces the Federal Reserve to do something unexpected. The U.S. added just 187,000 jobs in July, according to the latest payrolls report, and earlier months were revised lower. Chalk that up as one more sign that a soft landing is still a possibility.

Earnings, too, have been stronger than expected -- Amazon.com (ticker: AMZN), which gained 8.3% after its report, was a particular standout -- which was especially important, given the S&P 500's premium valuation.

Yet rushing to buy after the S&P 500 has had its best first seven months of the year since 1997 feels, well, unnecessary. It doesn't change the fact that the index is still expensive at just over 19 times 12-month forward earnings, up from about 15 times at the start of the rally, or that stocks like Apple (AAPL), which had helped drive the rally, are showing signs of topping out. It all reeks of desperation and the fear of missing out.

S&P after >10% growth in 1st 7 months 🤑

The market always needs a reason to fall, and this past week it found one in surging Treasury yields. It's hard to tell exactly what made them pop. Though some blamed Fitch's downgrade of the U.S. credit rating to AA+ from AAA, it's more likely a combination of massive issuance -- the Treasury said it plans to issue more debt than had been expected -- and solid economic data that forced market participants to reconsider their growth targets. Higher yields make stocks worth less, all else being equal. As long as they don't rise too much, though, it could present a buying opportunity.

That's especially true as markets look ahead to 2024. Some 61 S&P 500 companies that had reported second-quarter earnings raised profit guidance as of Tuesday, while 23 had cut outlooks, according to Wells Fargo. That's partly why analysts expect sales and earnings to grow next year.

"The market's looking at 2024," says Doug Bycoff, chief investment officer of the Bycoff Group. "If we get a 5% pullback, we're going to be waiting to pounce."

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⚠️ Trading tips: If you’re familiar with options, take puts after breakout from support. If you’re holding on at least 100 shares, sell covered calls to collect premiums. Time to pick up options strategies to profit from uptrend, sideways and downtrend. It’s a powerful tool instead of just buying shares by holding and hoping in this market condition.

Really have to buy shares? Market watchers are waiting for a 5% pullback. Wait for the U-turn sign before taking 3 separate tranches on the way up instead of catching a falling knife. Not easy to avoid FOMO buy and get worried to panic sell. In other words, don't buy when everyone is excited -- buy on dips and go to sleep.

Don’t be that bear to finally throw in the towel after July’s rally, cut loss and now regretted with the current sell off. We are in a bull market but August to early October are weaker months. There are plenty of opportunities for traders in a spiraling market. Investors just have to hibernate for awhile and pick up some options trading knowledge during this hold and hope season.

Weekly options trades summary

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