Fed Week Watchlist

Ahead of the Fed meeting this week, I will be watching AAPL and high-beta stocks.

If I knew exactly what the market would do this week I’d be on an island somewhere, but I have some ideas of where to look to get a better idea of what could happen.

AAPL is one of the top stocks I watch at any given moment because of its positive correlation with the overall market. 

Check this out…Here’s AAPL’s chart:

Image from wallstreet.io

And here’s SPY:

Image from wallstreet.io

You can’t mistake the similarities. That’s why I say it all the time: 

As AAPL moves, so does the market.

And I expect that this week AAPL and the market will continue to move in tandem like they always do.

There is another set of stocks that positively correlate with the overall market – just at a higher magnitude – called high-beta stocks.

These stocks will show exaggerated moves of what the market does. Best Buy Co., Inc. (NYSE:BBY), Exxon Mobil Corporation (NYSE:XOM), and Chevron Corporation (NYSE:CVX) are a few high-beta stocks.

For example, let’s take a look at what happened to XOM around the last Fed meeting:

Image from wallstreet.io

XOM moved to a peak of $97.52 just a few days after the Fed meeting, then fell back to the pre-Fed low of $87.19 – nearly a $10 drop in less than a week – only to rally again into and through the Fed minute drop on the 17th. 

There’s a possibility that the market and these high-betas will move similarly to the last Fed meeting, since rates will likely go up again. 

But there’s also a chance that the move could be more exaggerated or even reverse since there is now an 84% chance that the Fed will hike to 300-325.

This week, in the live show and here in the Profit Takeover newsletter, I’ll cover how we’ve played options around the Fed in the past, our plans for this week, and what to look for when the Fed minutes drop in about 3 weeks.  

I’ll see you then,

Mark Sebastian

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