Transcription
Get this. Stocks are at an all-time high. Gold is at an all-time high. Bitcoin all-time high. Home prices all-time high. And yet, the Fed is now expected to cut. It's basically a certainty at this point that the Fed cuts rates. So, what happens when the Fed cuts when the markets are near all-time highs?
Well, the Fed is on break for August. We know that. So, the next Fed meeting is not until September 17th. Now, if the markets are near all-time highs on September 17th, there is a long road ahead to assume that. We'll we'll touch more on that in a second. As you guys know, August and September are the two choppiest and sometimes worst months in the stock market. But if the Fed cuts and the markets are still within 2% of an all-time high, then we are in good shape. However, just like every other August, this has been a choppy August so far. For those of you day trading this, how many of you have seen days that open green and end in red or open red and end in green? Now, we're up a respectable 2% so far for the month of August. But that doesn't mean that we are out of the water.
Here is the VIX over VIX 3M. I've talked about this measurement before and I promise not to bore you, but this is basically the current VIX, which right now is low at 14.49 divided by the VIX that is expected in 3 months. In short, when this metric hits a low like we see here, then we tend to get volatility spikes. So, the last time that the VIX over VIX 3M was at this level, you could see back here in February. What happened in February? Well, we got a major VIX spike. We also got one in March and April. If we look at December when the VIX over VIX 3M was at this level as well, what happened to the VIX? Well, the VIX spiked all the way near 30. So, at this stage, in my opinion, it definitely makes sense to hold some VIX hedges here. And I'll get into that when I talk about the trades.
As I do in every video, I want to give you some free game and talk about some of my favorite trade setups towards the end of the video. Now, all this comes about when the S&P 500 is by far valued at the highest valuation if we're talking about price to sales. This didn't even occur during the dot boom. But as we talked about before, earnings have also been good. So there is some justification for these prices, but obviously there is a time when the prices get too inflated and have to come back down to reality. The question is, is that going to be now? Well, as you guys know, I usually am bearish for Q3, and August, September, and October aren't really the best months. In one of my writeups a couple weeks ago, I showcased what happened the last five times during August, September. So last August, we started with a 10% correction that bottomed August 5th. 2023, we literally started the correction August 1st, and we didn't bottom until October. 2022, we were already in a bare market. August 16th was actually a deadcat rally, but after August 16th, we fell another 20%. 2021, August was actually flat, and the correction didn't start until September 1st for - 9%. And August 2020 was actually green, but September 1st started a minus5% correction.
Now, Nvidia doesn't report earnings until August 27th. And the last time we had a V-shaped recovery, if you take a look at 2020, the first couple weeks of August, we were actually green. And then the last week of August, we started dropping. We bottomed out in October of 2020. Obviously, I'm not saying it has to happen exactly like that, but so far it is looking like we are on track for a green first couple weeks of August, but I think it makes total sense to hedge here using the VIX. I'm not going to try to short the market from here until structure is broken. As a matter of fact, I did have a QQQ debit spread when we broke structure here on the 4 hour and retested this. But in full disclosure, I closed that for a loss after we crossed back above all-time high.
Now, as I've told you in my previous videos, I would not short the market from here outright without being heavily invested. I'm still heavily invested. Here are my returns as of yesterday. My portfolio hit another all-time high. And I really don't want to create more drag on my portfolio by having a hedge that is open that continues to lose money, if that makes sense. I also have a VIX hedge open. So, I did not want to have two hedges open against my portfolio. So, I was okay closing the QQQ put spread, letting my portfolio ride the gains, but keeping this open because the the VIX can spike at any moment. And when we start getting to these levels, not only on the VIX itself, which we had the lowest close of 2025 today, but also on the VIX over VIX 3M, that is when we get VIX spikes. And I definitely want to capitalize off that. So, I'm going to talk about some of my favorite trade setups in a minute, but what happens if the Fed cuts near all-time highs?
You can see here that if the Fed cuts and we are 2% within an all-time high, then next year has always been green, 100% green. But if you notice that none of these recent cuts came as a result of a necessity to cut, meaning when hits the fan. And you guys know that the recent jobs numbers, if we look at the BLS job report, were terrible because they had to revise down uh numbers from May, which means that all the jobs that they told us they added in May were revised down. And it looks like only 14,000 jobs were added as opposed to the 147,000 jobs that that they thought we added. And in May, we thought we added 144,000 jobs. That was revised down to 19,000. And not for nothing, but the BLS head was fired by Trump and Trump is now looking to appoint a new one. So when the Fed cuts by necessity, as it did in 2020, as it did in 2007, as it did in 2000, that is when we tend to get recessions. That's why you hear, oh, whenever the Fed cuts, we get a recession. Yes, it's when they cut by necessity. But in the 90s, for instance, when we had a much more responsible Fed, and I hate to give them credit, but I have to. We had a much more responsible Fed, we did a lot of cuts that weren't out of necessity. And it just seems like now we have a Fed since the year 2000 that only cuts when there's a necessity. The Fed only raises rates when inflation is out of control. And we tend to cut rates when hits the fan.
And lastly, we're going to find out this week what Berkshire Hathaway's mystery stock could be. We know that they've made some purchases recently. A lot of people are thinking it could be United Healthcare. We are going to get Berkshire's 13F filings this week on Thursday. Now, I looked at the options flow for United Healthcare. There is actually a 265 call expiring August 29th that came in for 7.4 million, mostly at the ask. We don't know for sure, but this can indicate a buy position on United Healthcare. For all we know, this could be a crazy guy just making a bet that this is United Healthcare. And we know that Warren Buffett does actually like insurance companies because one of their biggest holdings is Chub. Now, God knows who came up with that name. Chub sounds really suspect, but they revealed their holdings in May of 2024, and the stock actually went from 240 all the way until 302 before now chopping around. Based on its last 10 Q reports, some suspect that it could be an industrial company and has nothing to do with United Healthcare. We'll find out.
And lastly, speaking of Buffett, the Buffett indicator, not the one that you're thinking of, has just lit up once again. So, when Berkshire Hathaway has a 3mon disappointing return, cuz it does usually beat the S&P 500, but when it has had a three months that don't beat the S&P 500, it typically predates some of the worst things in history. And we are at that point now. Buffett famously doesn't time the market, but when thing when there is little value, he also doesn't invest in the market. So when he doesn't make any new investments and the market is being inflated or if it's in a bubble state that is currently being inflated, of course in the short term, the market is going to outpace Berkshire Hathaway. But as we see here, he's done a really good job most of the time of predicting predicting bubbles even though he's not really predicting them. He's just looking around saying there's nothing of value for me to buy yet, so I'm not going to buy anything. there thereby Bergkshire Hathaway tends to not perform well for 3 months and then the market tanks.
All right, let's get into some of the top stocks to buy and some of the trades, some of my favorite trade setups right now. I just want to take a moment and shout out a couple of members. Shout out to Theas who pulled in $31,000 from our analysis on AMD. I told you that AMD, you have a better shot of doubling your money with AMD than you do of on Nvidia. AMD absolutely ripping it, hitting the July 2024 high of 185. You better hope and pray for a correction on AMD. And shout out to Miss Martinez who was up 180K this year. Not only did she not sell during May, you can actually see her profit curve right here. She doubled down in April and May. And not only is her portfolio back to where it was before Liberation Day, but it's a lot higher at almost 300K. If you want to trade live with me every single day at market open, I go live every day at market openw.com/thetraveling trader. You also get access to my swings, my macro analysis, my long-term stock picks, etc. Let's get right into the plays.
So, as I said, right now based on where the VIX is, I think that it behooves you, not you, anyone to hold a VIX position just in case we get a VIX pop. Volatility here is way too low to not take advantage of. Now, luckily, there's a real cheap way to trade the VIX in my opinion. So, you could buy a cheap call spread on the VIX. What people do is they pick some crazy leveraged ETF like UIXie or UIX, which is a horrible way to hold a a position because it's a leveraged position. So, if you don't really have a time frame and you're just going to hold it, that thing is going to continue decaying just by the nature of its existence. But if you bought a 20 call for instance and sold the 25 call, this is called a debit call spread expiring September 17th, this is going to cost 88. And the max profit on this is going to be $5. And you paid 88 for it, which means that your max net profit is going to be $412 or $412 per contract. And if you're wondering what platform this is, shout out to Public. This is on Public. Yes, you could trade the VIX on public. Not only are options trades fee free, but they actually pay you a rebate of the order flow. Whereas other platforms like Weeull or Robin Hood, they take the entirety of the order flow to themselves. But Public shares with you the rebate, the order flow in the form of rebates. So this is how much I made in rebates, options trading on public this year.
All right, another stock I'm looking at here for a potential breakout is Tesla. So if you look at Tesla, Tesla has not acted obviously like any of the MAG 7 this year has not acted like the indices just coiling here in this penant. However, we did finally break above this pennant and we are retesting it and there is a pretty lowrisisk trade here to attack these obvious equal highs. Now these equal highs sit at about 368 369. So, in my opinion, you could set a pretty tight stop and buy some calls or a call spread here in order to take advantage of that move. We did also have a couple of huge darkpool orders this week on Tesla at the 339 price point. You can see two major darkpool orders here. One for 280 mil, another one for 308 mil. And that is right around this level here. Now, darkpool orders don't mean that it's an automatic long or that you have the liquidity necessary to go long, but it does give us an indication of interest right around this level. And the reason you have a stop limit is obviously because this can be a fake out and we can trade back down in here.
We also had the biggest darkpool order come in on Robin Hood in almost 2 months at this 108 level. Now, Robin Hood, in my opinion, is going to get added to the S&P 500. And it just seems like this stock will not correct. Every single time that we see a tiny bit of a pullback, it tends to get bought up to make a new high. Now, I do think that, like I said, Robin Hood will be entered into the S&P 500 this year. That is my speculation. And as long as it continues growing like this, then it can justify its crazy valuation. I mean, it is definitely overvalued by traditional metrics, nowhere as near as a company like Palunteer, and that stock just keeps going. But if you think about the craziness of the 2020 2021 uh trading bonanza with Wall Street Bets and GME and AMC, we are doing basically double that revenue right now on Robin Hood and a lot of that is due to crypto as well. So I'm not saying if you are a new investor to go balls deep in Robin Hood. I think you have missed the boat on an optimal price, but there could be a trade here in my opinion off of these equal highs that we broke above and are now retesting. This is a stock that I also want to add to my list if we do get a significant correction for sure.
In the last few weeks, I gave you guys Apple. I told you that fund managers are going to run out of places to put money. Every other stock is inflated back to its all-time high, and Apple is one of the lagging ones. And all we needed was a tiny headline that they were going to spend money on AI. They didn't even give really any details. And we are now up like 15% in a week and a half. I currently hold Apple, but I'm not looking for a trade here. One thing I do find interesting is small caps. I did some history. We've never hit a bare market before small caps hit an all-time high. There have been a couple times that we had relative equal highs near the highs. So, I do think that IWM does get back to this 240 level here. I'm not looking to take a trade on it yet, but if it does something like retest these highs, then I might look to take a trade depending on where we are in the mic market cycle.
All right, traders, that is it for this video. Hopefully, as always, I gave you guys some good data to work off of, gave you my the update to the best of my abilities, and gave you some free game as to some of the things that I'm looking at. Obviously, it's not the entirety of everything that I'm looking at. If you want access to all of my day trades, I go live every single morning and I talk about the markets and what I'm looking at. Sign up. Links in the description below. I also send out my swing trades, which are not day trades, but they're they are typically over the course of multiple days or multiple weeks, as well as my long-term stock analysis and stock picks, what I'm buying for the long term, for the 5 10 year horizon. So, sign up, links in the description, subscribe to the channel, hit that notification bell. Stay safe out there, traders. Peace.
When I first started trading, trading was expensive. We did not have commission free brokers. And then with the advent of commission free brokers, I thought, cool, I'm not paying anything to trade. It's actually free. What I didn't realize is that most of these platforms still charge hidden fees. Think contract fees, regulatory fees, etc. And that's one of the main things that attracted me about public.com and one of the main reasons that I moved there. The fees for stocks and options ETFs are offset by the rebates that you receive. And the more that you trade, the higher the rebate. In other words, instead of paying a fee for stock options trades or even on commissionfree brokers, in this case, you are actually earning something. It flips the entire model on its head. Aside from that, Public has such a clean and modern trading experience built for actual traders. So, not only do you save money, the tools are great. What more do you need?