To The Moon

45% gain taking calls from QQQ & SPY on Thursday riding on the double bottom towards the top. ⚠️ Looking for a break above 429.67 for calls and puts under 427.7 on another “Trending Friday”. All eyes on CPI data next Tuesday to determine a Fed pause next Wednesday.

Testing for that breakout

Barry Bannister, the chief equity strategist at Stifel reportedly said there won't be a textbook recession anytime soon and that he expects the S&P 500 to begin to level out around the 4,400 level in the third quarter.

"Since October 2022, economic resilience and policy prudence indicated to us no immediate ‘textbook' recession…Recessions and bear markets are surprises and not so widely (perhaps universally?) anticipated," Bannister wrote in a Tuesday research note, according to a Fortune report.

He also argued that a recession won't hit this summer as many on Wall Street anticipate. A “textbook” recession refers to two continuous quarters of negative GDP growth.

Notably, Bannister had claimed earlier that the National Bureau of Economic Research (NBER) would not declare a recession in the first half of the year, according to the report.

Wall Street is divided about the possibility of a recession. For instance, DoubleLine Capital CEO Jeffrey Gundlach said it looks increasingly possible the U.S. will tip into a recession.

However, Gundlach's take stands in contrast to Goldman Sachs' prediction about the economy. The investment bank has revised its estimate about the U.S.' chance of entering a recession over the next 12 months, reducing its judging probability from 35% to 25%.

Market: In the wake of economic resilience and the optimism surrounding A.I., Bannister expects this year's stock market rally to continue for some more time, although at a gradual pace.

"We see the S&P 500 beginning to level out around 4,400 in 3Q [2023], wrapping the bull market from October 2022 lows," he wrote on Monday, according to the report. "Most gains since October 2022 were cyclical growth (tech, et al.), but now we see cyclical value in a catch-up P/E-led rally to 3Q [2023]," he wrote.

The rise of dip buyers

Buying the dip - that is, buying stocks the day after a selloff - is yielding some seriously strong gains for investors in 2023, according to a team of analysts led by Benjamin Bowler, the head of global equity derivatives research at Bank of America Global Research.

Average one-day returns for the S&P 500 the day after a selloff have climbed to nearly 0.3% in 2023. That means the strategy is on track for its third-best average return ever for a calendar year, and its strongest since 2020.

Major equity-market indexes like the S&P 500 and Nasdaq Composite have seen gains in 2023, thanks in large part to the performance from a handful of megacap technology stocks and other tech and semiconductor names.

These stocks have benefited from a surge of interest in artificial intelligence, a trend that has propelled chip maker Nvidia Corp. (NVDA) up 164.6% this year.

As a result, the S&P 500 is up 11.8% year-to-date, according to FactSet, following a pullback of 19.4% in 2022, the worst yearly performance for the index since 2008. The Nasdaq, which is more heavily weighted toward highflying tech
names, is up 26.3%, according to FactSet.

Time for a pause?

Buying the dip gained widespread popularity as a strategy for short-term traders during the years following the financial crisis of 2008 as U.S. stocks trudged ever higher while the Federal Reserve and other global central banks
kept interest rates anchored at rock bottom, or even negative, levels.

In April, a team of analysts at Bespoke Investment Group found that since the creation of the SPDR S&P 500 ETF Trust (SPY), a pioneering ETF that allows investors to easily and cheaply trade the S&P 500, buying the S&P 500 the day after down days has yielded returns of roughly 740%.

The strategy broke down in 2022 as investors endured wild swings as stocks moved steadily lower. Since then, several factors have helped the strategy regain some of its lost luster, according to Bowler and his team.

"Equity investors' eagerness to buy the dip never went away with last year's selloff and is now being fueled by a narrative of 'Fed done, inflation out of the way, recession postponed,'" they said in a note to clients shared with
MarketWatch.

"Add to this the successful debt ceiling extension, the AI boom, and relatively low equity exposure, and you get a powerful recipe for near-term upside."

Trade #1

Trade #2

Trade #3

Trade #4

Trade #5

Dip buyers are once again making good on Thursday, as the S&P 500 and Nasdaq rebound from Wednesday's pullback. All three major U.S. equity indexes were trading in the green Thursday afternoon, with the S&P 500 up 0.6%, the Nasdaq up 0.9%, and the Dow Jones Industrial Average , the only one that finished higher on Wednesday, up 183 points, or 0.5%.

The SPY has resistance above at $436.79 and $447.06 and support below at $426.56 and $420.76.

@CaptainTiger @MillionaireTiger @TigerStars @Daily_Discussion