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What Is Happening in the Stock Market?

By Andrew Aziz  |  
Andrew's Newsletter  |  
Oct 30, 2023

Dear Traders,

My apologies for missing a few days of trading at the open. I’ve been having trouble getting up early lately. Today, I arrived late and noticed the market was selling off again. I managed a nice reversal on $TQQQ in the chatroom for a whopping $4,600 profit. It was amusing how people in the chatroom joked that Andrew would make a $TQQQ reversal while I was still sleeping!

If you want to see the full story and learn how to profit by seizing the various opportunities the market offers throughout the trading session, be sure to check out my recap here.

The market is selling off, with $SPY now trading below its 200 SMA and down almost 15% from its all-time high. It seems $SPY is soon entering bear market territory. $QQQ is also trading around 15% below its all-time high, while $IWM is deep into bear market territory, down 35% from its peak.

Today, the bond market was up, with $TLT (long-duration US treasuries, approximately 17 years) bouncing back. As everyone in the chatroom knows, both Ardi and I sold puts for January 2025 on $TLT at $80, and I collected $46,000 on them.

What’s happening in the market?

It seems the market might remain volatile but within a range. Both $SPY and $QQQ may trade within this range, which is great for day traders but a challenge for investors.

Essentially, the equity market can’t provide significant returns, while the bond market is becoming more attractive. Some hedge funds might reposition and buy bonds now that prices are attractive, leaving equities. This is evident in the significant drop in 2,000 small businesses. Few are interested in holding them, as there’s little belief in significant US economic growth in the coming years.

When you look at normalized performance from the Trading Terminal homepage, you can see the nominal return of three important indices.

Now, assuming an average inflation rate of 4% for the last 5 years, you see a much lower return:

  • $QQQ: 20% (avg. inflation-adjusted return per year over 5 years)
  • $SPY: 7% (avg. inflation-adjusted return per year over 5 years)
  • Dow Jones: 4% (avg. inflation-adjusted return per year over 5 years)
  • $IWM: -3% per year (avg. inflation-adjusted return per year over 5 years)

These returns are quite pathetic, especially for $IWM small caps.

What’s the best approach in this situation? I believe active trading is a good solution for both traders and investors. Instead of leaving all your money in 401k or margin accounts and investing in small caps or watching your money erode due to inflation, you can learn how to actively trade and add income to your portfolio.

Another viable option is to potentially invest in dividend income ETFs like $JEPI and $JEPQ, in which I have a significant stake. These ETFs hold positions in solid companies and write covered calls on them. The downside is their underperformance in bull markets, but they outperform in bear and sideways markets.

Ardi has created a very nice video explaining what $JEPI and $JEPQ are and how you can benefit from them. I should mention that I hold a huge position of $JEPQ, and I’m not being compensated by JP Morgan to promote their funds, although I wish I were!

Carlo Zarratini and I published a paper on active trading and how, with proper use of leverage and rigorous risk management, a portfolio of day trading $TQQQ can significantly outperform $QQQ. If you haven’t read this paper, you can find it here.
I hope you enjoy this volatile market and consider joining our Elite program. Tonight, we have the mentorship webinar with Thor. Paras has also added a new Sunday evening mentorship program, free for all Elite members.

To your success,