Happy Friday, traders…
I got hit with a serious case of the meat sweats this week.
There’s only so much barbecue your body can accept. At some point, it questions your choices.
The uber-carnivores among you know what I’m talking about…
It’s too much of a good thing. And with stocks closing in on all-time highs, I see traders like you sweating your next move.
I don’t blame you.
An honest look at how far stocks have rebounded demands that you re-evaluate your stance.
The SPDR S&P 500 ETF Trust (NYSEARCA: SPY) has bounced back over 23% in just two months following the momentum stock bloodbath of late February and March:
Which didn’t surprise me. I knew the market overreacted to tariffs. But once it realized the trade policy wasn’t as disastrous as initially expected, stocks rallied. Pretty simple.
Now that we’re back near all-time highs, there’s a question about whether stocks deserve to be trading at these levels (especially when you factor in recent economic data).
It’s a “fork in the road.”
Here’s How I Want You to Play It…
This Week’s Jobs Numbers: A Double-Edged Sword
This week, we got a slew of economic data related to U.S. jobs numbers:
ADP National Employment Report
The ADP report indicated that private-sector employers added 37,000 jobs in May, significantly below the forecasted 110,000. This marks the weakest performance in over two years, raising concerns about a slowing labor market.
Job Openings and Labor Turnover Survey (JOLTS)
In April, job openings increased by 191,000 to 7.391 million. However, layoffs also rose by 196,000, the largest increase in nine months, suggesting that while employers are posting more jobs, they’re also reducing the workforce.
On the surface, this data looks negative for the economy, which should be bad for stock prices…
But underneath the hood, these numbers are doing something else: giving Jerome Powell a reason to cut interest rates.
I think we’re going to get a full 1% rate cut in the next 12 months. It has to happen.
The national debt needs to be refinanced. More jobless claims give Powell cover to cut, and the market knows it.
We saw that in the price action yesterday. Stocks dropped in the first 30 minutes based on initial knee-jerk reactions to the jobs numbers…
But then, the charts recovered all their losses as traders digested the increased likelihood of rate cuts.
It was a textbook “bad news is good news” scenario in the stock market. Counterintuitive to the average person, but unremarkable to experienced traders.
All this to say, I’m not worried about stocks being near all-time highs with this economic data.
Rather, I think the reaction makes sense, and I expect to see rate cuts relatively soon.
Considering that, I’m building a very specific watchlist for next week…
My Top 7 Stocks for Next Week
Amazon.com Inc. (NASDAQ: AMZN)
This thing has been getting lit up with call flow, especially around the $215 level. You could practically hear the “bing, bing, bing” across the tape. If you missed the first move, a pullback to $209.25 might offer a second chance. Otherwise, I like the idea of getting long above $210.50 with June $215 calls.
Kohl’s Corporation (NYSE: KSS)
You’ve probably seen this one. We’ve got a textbook run-rest-run setup. It moved, consolidated, and now looks ready for another leg. I’m watching $12.80 as the level. If it clears, I’m looking at the June $13.50 calls.
Asp Isotopes Inc. (NASDAQ: ASPI)
Here’s a name most people haven’t heard of, and that’s exactly what makes it interesting. We saw a flurry of call activity late in the day, over half a million in premium. It’s a low-float name with a 30% short float. That’s real fuel for a big move higher. I’m watching $9.10 and targeting the July $10 calls. Watch carefully. If it squeezes, the move could be quick.
Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH)
The September 19 and 20 calls got hit hard yesterday. It was over $3 million in call premium. If the name clears $18.50, I’m interested. Risk is easy to manage with a stop at $17.50.
Wells Fargo & Co. (NYSE: WFC)
This stock gapped up and is now pulling back into what I call the buy zone. I’m watching it around the $75 level. I like the June 20th $72.50 or $75 calls if we start to turn higher. I don’t want to chase, this is all about timing and location.
Alphabet Inc. (NASDAQ: GOOGL)
Sitting just under $171 with a clean breakout setup. If it clears that level with volume, I’m targeting the June 6th $170 calls. I love this company and know the chart can make huge moves when it breaks out.
And speaking of huge moves…
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Happy trading,
Ben Sturgill
*Past performance does not indicate future results
