Follow Tom Gentile Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
The thing is, there's no one right way to trade all the time. I'm not saying you can't make a lot of money in any kind of market – because you sure can – but you've got to know which way the wind is blowing, and make the right trade for market conditions.
The way I see it, how you trade is just as important as the stocks and ETFs you trade. It's a pretty simple idea, but it has some powerful results.
The Money Calendar tracks 250 of the top stocks and funds on the markets, and that's plenty, believe me. I've found again and again that you can play that field and make money no matter what the markets are doing.
Right now, the market's got me trading a specific mix of stocks – I'll share that with you now…
Here's What the Market Thinks Right Now
At midday yesterday, the Dow was looking set to snap a fragile, five-day winning streak despite another round of convincing evidence that the U.S. economy is rebounding nicely from the 2020 crash.
Jobless claims are down, employment is up; growth forecasts are up, U.S. COVID-19 infection rates and hospitalizations are down; the housing market's up, interest rates are down.
And of course, inflation is up – way up. A lot of this was expected as the post-COVID-19 economy heats up, but it might be a little too hot. At a 3% core inflation rate, we're 50% higher than what Fed economists think of as "acceptable." And maybe you've noticed that stuff just costs more than it did before the pandemic.
It's not necessarily going to impact you and I severely, but inflation can be bad for some stocks – and like rocket fuel for others. If it costs a business more to do business, bottom lines take a hit and earnings can suffer. But energy stocks, industrials, and financials – companies that can pass on price hikes and preserve their margins – can seriously outperform the markets at times like this.
So let's keep that in mind – and look at how to cash in…
Here Are the Trades to Make
Now, if you've been with me for a while, you know I like crypto – Bitcoin, Ether, and a whole basket of smaller microcurrencies. You can learn about why here.
Overall, right now, you want to trade for a bearish or at least sluggish market, and that means protecting yourself while going after big protective-profit opportunities on the "downside."
To do that, there are a couple of stocks and ETFs I like…
I like old-school gold these days because, as fiat currency's value diminishes, gold's value rises. You can buy physical gold if that's your thing – just make sure you've got a place to store it or some kind of arrangement for that. Personally, I like to keep it simple with the good old SPDR Gold Trust (NYSEArca: GLD) ETF that tracks the price of gold and is backed by the real thing. Gold miners right now are relatively cheap compared to the rest of the market, and they've been known to offer one to three times the return on investment (ROI) over the actual metal. The easiest way to get exposure there is a gold mining ETF like the VanEck Vectors Gold Miners ETF (NYSEArca: GDX). GLD and GDX are some of the most-traded gold and gold miner ETFs around, and a long strategy, like buying calls, selling puts, or a bull call spread could pay off nicely.
And I really like buying cheap, out-of-the-money (OTM) puts right now; they'll rise if a stock drops. You can take an index or market ETF like the SPDR S&P 500 ETF (NYSEArca: SPY), the Invesco QQQ Trust ETF (NASDAQ: QQQ), which tracks the Nasdaq 100, or the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) and buy really cheap puts on them right now. How cheap? For a buck, or less in some cases, you get a shot at double- and sometimes triple-digit returns
For example, right now you could buy SPY Aug. 20, 2021 $300 puts for $1, or $100 per option, and get ready to rake it in should the markets soften up even further.
Playing defense doesn't have to feel like you're under siege. This is how I think everyone should be trading right now. Before long, I'm sure we'll get back to a bullish posture on more and more stocks, but this is the short-term pattern for right now.
One of my favorite things about those trading patterns is that they work all the time. My tools find the money no matter which direction the market is moving – and there's a tremendous sense of security in that. I've been using a pattern I call the "Four-Day Profit Cycle" to help give my readers a shot at seeing automatic deposits hit their accounts. In fact, I can show you how to learn to trade it every single week to get profits into your account in a couple of days, and sometimes within hours. You can click right here, and I'll show you how it's done.
Follow Money Morning on Facebook and Twitter.
About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.