The Senate has passed the $1.9 trillion stimulus package. Here’s what comes next…
The weekend’s revelation that the latest stimulus bill had passed the Senate has many investors feeling more optimistic after last week’s drop. The Dow had gained more than 600 points by mid-day yesterday and the S&P 500 rose nearly 1%.
Even though a change to limit the $1,400 stimulus checks to those making less than $80,000 per year was needed in order to garner enough votes in the Senate, it’s widely expected that the revised version of the bill will be quickly passed back through the House and signed into law.
That means that billions of dollars in stimulus money will soon be pumped into the economy.
While hopes are high that the massive spending bill will have a positive effect on the market, it’s important to remember that no money has been distributed yet.
After the market’s big plunge last week, many are wondering if the newest round of stimulus money will be enough to keep the market moving up.
Here are some of the early returns and what we can look forward to…
Where’s the money?
The promise of at least a sizeable chunk of money reaching the stock market was enough to buoy many of the stocks that had begun to flag during last week’s market swoon.
Among the biggest winners to begin the week were stocks in airlines, automakers, and retailers – industries that have big post-pandemic upside.
Meanwhile, tech stocks continue to suffer, with the Nasdaq being the only major index to move down yesterday. That could eventually lead to a buying frenzy of discounted tech stocks once stimulus checks start hitting bank accounts.
But I believe there’s actually an even more important catalyst that could have an even bigger impact on the market.
Here’s what I mean…
How do I get some?
The stimulus money is a big deal for both the market and the economy. Analysts were initially expecting $700-$800 billion, and in the end, we got $1.9 trillion.
As much as I think this is important for the stock market, I think interest rates increase will be even more important and that is something that I am keeping a big eye on.
Fears abound that the influx of money will ultimately not be enough to counter rising interest rates and will cause inflation which would combine to hurt margins, weaken earnings, and create a drag on stock prices.
For now, I would advise exercising moderation when entering new positions until we see what the full effect of the new stimulus bill will be on the market.
The Short Squeeze Edge You’ve Been Looking For…
One thing that does not seem to be uncertain about the market right now is the huge profits that are being made from hunting stocks with the highest short interest.
Just yesterday, GameStop Corp. (GME) gained as much as 48% over Friday’s close.
But GME isn’t the only short squeeze game in town…
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In the Spotlight:
Despite the beat-down that tech stocks are currently taking, there’s hope for a select few.
There are indications that the FAANG stocks – Facebook, Inc. (FB), Amazon.com, Inc. (AMZN), Apple Inc. (AAPL), Netflix, Inc. (NFLX), and Alphabet Inc. (GOOG) – will have an incredible year.
I don’t think the rotation out of tech is over just yet, but when the time is right, I’ll be back to let you know when to jump on these proven winners.