PREMIERE EPISODE! Market Meltdown: Is the Worst Yet to Come? | Next Week on the Trading Floor

Jon Najarian  0:00  
I'm really thinking that this is going to be something that's going to help people set themselves up for the next week of trade and who better to do it with than you my friend.

Andrew Brill  0:15  
Next week on the trading floor was developed to explore current trading ideas, market trends and opportunities to watch. It's real time insight to help you make informed decisions in the ever evolving financial markets will even give you a stock or two to watch whether it be to buy or sell. I'd like to welcome Jon Najarian of market rebellion. John is a veteran of the stock market and a seasoned options trader. John, welcome to next week on the trading floor.

Jon Najarian  0:47  
Hey, great to be here, Andrew. I'm really thinking that this is going to be something that's going to help people set themselves up for the next week of trade. And who better to do it with then you my friend.

Andrew Brill  0:59  
Thank you yet we talked so much about what happened last week. And you know, even the weather, the weather is like what happened last week? What's happening now? Well, I know what's happening now. Let me know what's happening next week. So I can invest in something good and, and make some money. But, John, let's talk real briefly about some of the market happenings this week. Obviously, the PCE didn't come in where people wanted it. And then the GDP is not where the Fed wanted. Unemployment is low. So the numbers are all screwed up, if you will, there. Nothing's making sense. So where do we go forward with this market? Because we know we're not getting any interest rate cuts anytime soon?

Jon Najarian  1:38  
Yeah, that's one thing that became pretty clear. Even Austen Goolsbee, under the Obama administration, he was one of the advisors to President Obama in his Council of Economic Advisers. And even he said, I don't know if we're gonna see any cuts this year, guys. I think he is unusually accurate with that, I think the numbers that you just described, the PCE for instance, inflation rising at a 3.7% in the first quarter. That is not what the Fed wanted to see if they wanted to cut, they, of course, want to see it moving back down towards two. Well, it's not, it's moving higher still. And it's not making those leaps like it did Andrew when we got up above seven and eight, but it's still not in the zone where they could justify any cuts. And that's why I think, Fed Chair Powell and the rest of the Fed are more or less staying pretty silent about cuts. And instead just saying, Well, we're gonna keep looking at the data, which is more or less what they shouldn't be doing.

Andrew Brill  2:50  
And Austan Goolsbee of the Chicago fed, and he's a pretty knowledgeable guy. So I would, I would take him at his word at this point. So let's talk about the indices a little bit, the s&p, the NASDAQ, the Dow, they all slipped a little bit. But after everyone sort of absorbed this news and said, Okay, you know, what, maybe we're not getting rate cuts. Now everything seems to be climbing again, are we looking for? Is there more runway left here,

Jon Najarian  3:18  
there is potentially more runway. Although I would always point out that a lot of these companies are reporting numbers that are the worst earnings reports a number of the big tech companies, especially the worst earnings in one year, two years, four years, five years. That's not a sign that the economy is rip roaring right here. So I do think we can see dead cat bounces. I just don't know that we go higher than where we've been already. So I would say that we're in a zone right now, where without any interest rate cuts, I think we've more or less seen most of the highs for the year. And of course, the Fed would rather play neutral going into the election. Right now it's neutral, because they're not raising rates or cutting rates. And I think that's probably where they'll be into the election, which is not where the market watchers wanted us to be. They thought perhaps we see cuts into the final third quarter that it would help into the election. That doesn't seem like it's on the horizon.

Andrew Brill  4:33  
So we are as you alluded to, back in earnings season, as we were, you know, we happen to go through this every three months whether we like it or not. And in the last earning season, we went through a an AI bubble, you're talking about meta IBM, Google Microsoft, we're here once again, where artificial intelligence seems to be the story are you know these stocks although they're poor, like meta pointed out there Pouring $40 billion into AI, which is higher than they think they were 36 or 38. In the last quarter, is this what's going to drive the market? even further? I

Jon Najarian  5:12  
think it's a better bet than the metaverse, which Mark Zuckerberg famously poured 10s of billions of dollars into that. And it bore no fruit at all. Apple also kind of caught with their pants down, putting all their bets on a self driving car or an Eevee. And now they're reversing course. And going after AI. I think both these guys as smart as they were Zuckerberg, and of course, the chairman of Apple are now focused on where they should be focused, which is artificial intelligence, how is it going to help them provide more to their public, whether or not it's social media, in the case of meta, and diving through their and helping people use that or whether it's something similar perhaps with Apple, I think they're both going to have to spend a lot in the short term to help catch up to Google, and to some of the folks that are really taking advantage of artificial intelligence.

Andrew Brill  6:21  
I want to just talk a minute about the bank stocks. Now usually, when the economy is going well, bank stocks do well. And I guess the first week of earnings, we saw a lot of the bank stocks do really well, another anomaly because you it doesn't look like the economy's in great shape. But banks are doing well, again, it.

Jon Najarian  6:39  
Yeah. It's kind of strange. But those banks that especially were able to lean up during the slower times, when they were waiting for rates to go up. They also got that benefit of last year, those banks that were in trouble during the March, April May timeframe. Many of them, of course, are no longer here. And instead they're part of, for instance, Jamie diamonds group, you know, jpm, instead of being independent, like, first, and some of those others that got absorbed, Silicon Valley Bank, Signature Bank, a lot of these first republic, a lot of those banks are now parts of bigger banks, which those bigger banks didn't have to buy them, Andrew. So if there was any value there at all, and clearly there was these guys got a steal, picking up these banks for virtually nothing. And I think that's partly why some of these big money center banks, the too big to fails, posted up some pretty strong numbers. And I wasn't terribly surprised by

Andrew Brill  7:52  
that. What is the bank stock that you're really high on this coming week? Well,

Jon Najarian  7:57  
I'm still very high on Goldman Sachs. I mean, the stock Andrew hit a 52, week high, like roughly $430 $429, something like that. It's on a tear, the first quarter revenue surged nearly 30%. That's a very strong quarter for anybody. And obviously, Goldman Sachs has a bunch of levers to pull, because they have prime, banking and clearing. So that one is one where, of course, a lot of hedge funds clear through Goldman Sachs, Goldman Sachs also trades pretty aggressively, and that they're their revenue number being up, I think it was nearly 29%. For the first quarter was phenomenal. Seems like DJ Solomon, which he's dropped the DJ. And I think that's a good thing. He has, again, put his eye on the ball rather than taking his eye off the ball, perhaps, which a lot of us had thought that he had done in the previous perhaps eight quarters, this was a phenomenal quarter for them. I think you're going to continue to see investment banks like Goldman Sachs, like Morgan Stanley, like JP Morgan, do very well with a lot of the big m&a mergers and acquisitions that we've started to see popping up again. And we'd had a dearth of that for several quarters. But now, it seems like people are really into finding a partner squeezing more out of that partners so that they can drive more of that revenue. And that's why Goldman Sachs is one of my top picks going into next week. Yeah,

Andrew Brill  9:45  
and you mentioned their investment banking in their, their wealth management services also jumping so you know, they have they have a lot going on in a very positive direction. So that's a really good thing for them. And it seems like the bigger banks the fundamentals right now for the bigger banks. seems to be going trending in a really good direction. Yeah,

Jon Najarian  10:03  
and less competition will do that. I mean, quite frankly, Andrew, a lot of these, again, you look at some of the regional or even super regional banks that are either under some sort of merger, or that are trying to compete with that big three, you got to throw Citi Group in there as well. I think there's a lot of upside in these banks. What they don't need is, of course, a bunch of legislation to be thrown at them into the election. I think that's something that is not in the cards that legislation, in other words, something that would limit what they can do, I think that ship has sailed. And that end of the election, it should be pretty smooth sailing for any of these investment banks. And obviously, just some of the Super Regionals as well. Is

Andrew Brill  10:59  
investment banking back and you know, obviously, Goldman Sachs is investment banking is skyrocketing. For a while there, there wasn't a ton of activity going on with investment banking, investment banking back,

Jon Najarian  11:11  
I'd say, Yes, it is. And it's likely to continue. A lot of these banks, of course, derive pretty significant fees from putting company any together with Company B. And I think a lot of those companies out there have cut staff, everybody from Microsoft, to Mata and so forth have cut staff, because they were overstaffed. And so now how do you squeeze more money out of the business that you've got? Well, you leaned it up. That's great. Now one of the ways you can do it is you bolt on another, somebody that is going to be accretive to your earnings. And I think that's exactly what's happening right now. We've seen it in the oil patch. And those aren't small mergers. Of course, when we're talking about that, we saw it with IBM, when they decided to spend six and a half billion dollars on a cloud player that a lot of people probably hadn't heard of hashey Corp. But that was almost an afterthought in their earnings announcement. But these guys have customers like Walgreens boots Alliance, Lufthansa, Airbnb, they do a lot with security in the cloud, as well as helping people squeeze more out of the cloud. And now they're going to be doing that under IBM. And I imagined that that bolt on will be something that's gonna pay dividends for years to come.

Andrew Brill  12:46  
So one of your positives for this coming week is Goldman Sachs. Let's look at the negatives a little bit and I got a feeling you might go to the airlines for this. There's a bunch of airlines discount airlines that are hurting a little bit. And I think that one of your losers this week is is in that boat?

Jon Najarian  13:03  
Yeah. And I'm surprised that you and I actually even consider them a discount airline. Because I don't know if you've priced southwest lately. But it is anything but a discount airline? Yeah, you do get to include two pieces of luggage. But my gosh, these guys, those tickets are more expensive than I pay when I have to fly commercial on United or American. They're just, I think they do very well. But that's the pause. But the problem is they're not going to be getting as many planes as they'd hoped. So their growth will not be 6%. They've cut that to 4% Already, maybe it even goes lower than that. And Southwest is basically losing money, which is something no airline wants to see. And southwest lost a lot of that money to the point where now they're going to cut four airports out. I think three of them in the United States, one down in Mexico, close them out. And then they're still considering cutbacks at O'Hare in Chicago and Atlanta. So those are things that most airlines would not be cutting back service at any airport right now. But these guys are because they can't stomach the losses. And apparently it's expensive to operate in Chicago. So they're cutting back. They're not eliminating that, but they're eliminating Houston and like I said Koza Mel, an airport in Washington, I think Bellingham or something like that. And again, Southwest had a real problem with this aircraft, slow down production at Boeing. And Boeing is going to end up hurting a lot of these airlines with that slowdown. And Southwest has been extremely loyal. It's the only plane they fly. I, there is no regional jet with Southwest. There is no Airbus with Southwest. And so that helps them stay lean and mean with their crews. Because obviously you have to repair and keep those aircraft flying. But my gosh, right now I think Southwest is in a little bit of a hurt. So they're sort of in my penalty box right now, Andrew? Yeah,

Andrew Brill  15:23  
they were their high was about $39. This year, they're down in the mid 20s. So that's not and I did, I did read about those four airports that they're going to cut out if they cut out South Chicago, my son will not be very happy, because that's where he lives. And Southwest is one of the airlines that he flies. So that's a that's gonna be a big, they're

Jon Najarian  15:42  
just cutting back. They're not eliminating Chicago, right?

Andrew Brill  15:46  
I'll let him know. And hopefully he'll be happy about that. Is there a way for them John to become cash positive, I know that a lot of their efforts now are raising cash. And the way to raise cash is to make cuts is, is there a an avenue for them to get healthier?

Jon Najarian  16:05  
Well, cutting those four airports that we described, that will help somewhat, because they must not have been operating at peak efficiency. And thus, they're not making as much I doubt that they were losing a lot of money on those airports. But there's a real push right now for them to maybe address some of the fees that they don't charge or have not charged, but every other airline does charge. So that two free bag thing that I described earlier, they could end up having to make some adjustments to things like that, they've already gone out and you can buy that first group boarding on Southwest. So you don't have to just it's not just dependent on, you know, you rushing to get your seat, you can be in that first line. But they're going to have to find some other levers to pull, maybe some of them are the role of boards and things like that, and still give you the free checked bag. But maybe they can start charging for roller boards and things. That's what everybody else does, really, unless you're a high level flyer with American or United. If you're boarding in group eight or nine, they're going to charge you to check that bag at the gate. So I imagine Southwest is exploring avenues like that.

Andrew Brill  17:31  
So let's go to one of your bread and butter things. And you and Pete have a new book out, it's called it's not an option. options is really how you make your money. And there it is, it's not an option. And you know, you can pick that up, you can go to market rebellion and find that book, I believe you can find it on Amazon as well. So

Jon Najarian  17:51  
it's not an option.com, they can claim their free book right from that website.

Andrew Brill  17:56  
Exactly. So there are there's plenty ways to find that. And options trading is really where you excel. And that's what that's the part of the market that you love. And we we talked about uranium and CCJ explained to us why you're excited about this. I know it has to do with the smart money getting into the stock and explained to us the unusual options activity that you look for with respect to this stock.

Jon Najarian  18:23  
Sure. So I'll go right to the basics, because many of the folks watching this segment may have never traded an option may have never really heard of calls and puts. Or perhaps they've heard of them but don't really know too much about them. A call option gives you the right to call or take stock at a certain strike price for a certain period of time. So when we see large numbers of calls being bought, that's a bullish trade that somebody is making their giving us a target, because that's the strike price that they're buying stock might be trading at 25. But if they're buying the 30 strike call, that's a bet that the stock is going to be moving up, perhaps in the short term very quickly, or perhaps grinding higher over weeks and months, depending how far out the expiration of that option is. So in this case, there's very short term trading in options that will expire Friday, May 3, and they were buying the 52 call options. That gives them the right to take stock at 52 bucks. And as we said they have earnings on April 30. Before the market opens, demand has been high for uranium products. And in fact, this stock was up almost 15% in the last month. That's a move that anybody in the material and metal space would love to see and only the precious metals and the uranium stocks. were participating in that kind of Move, the rest of them were just kind of languishing, they were down on average about 1%. But this stock up very strong in the last month, I imagine they're going to tell us what the buildings look like, and Russa that would be, you know how much demand there is and supply and demand really does matter. So when we see them buying these calls that expire next Friday, May 3, that's a bet that the stock is going higher. They're also buying options out in September, at the 65 Strike 60 Strike, actually, January they're buying at the 65 strike. So the great thing about options is that they really do tell you timeframe and target to get there. And it's not that they're always right. But when they're buying in big quantities, and they were buying a million shares at a time through the options, two days in a row in this one. So if I'm a betting man, I'd say that that's a pretty good bet that we see positive news guidance as well as earnings out of CCJ on Tuesday next week. So

Andrew Brill  21:07  
help me understand right now they're they're the options that expire may 3 are at 52. Right now ccjs, selling at about 49. So if I buy, you know enough options, it goes up three bucks, I can sell that option, or hold on to it and let it go higher. Yep,

Jon Najarian  21:26  
you can do either. So that option gives you the right to take stock at 52. No matter where it goes to the upside, it could be 5355 57, wherever, if they had just a runaway fantastic report, and maybe it goes that high. And the person that owns the right to take that stock at 52 would be rewarded for making that investment in that option. And the option seller who's the seller of that option? Well, maybe somebody that owns a lot of CCJ stock. And they just view it as you know what if it goes up three bucks, I wouldn't mind selling and getting back in at a later date. Or I'm just counting on using this money that I get from the premium in this option to basically be a rent collector for this apartment Camco CCJ, it's a $49 stock. So 1000 shares 49,000 bucks, it's awfully nice to be able to make a couple $1,000 for selling that upside call. If I owned that stock, that's known as a covered right. And I think a lot of people probably do exactly that kind of trade. But if these guys do report a fantastic result, that person would likely have to buy that option back if they want to hold on to their stock. So

Andrew Brill  22:52  
this is part of your three and three. And explain to us what that three, three I know it's it's unlocking rebellion, you put it up on Twitter, what's your three, a three.

Jon Najarian  23:02  
So three, three, Andrew has a brief program that usually runs between five and 10 minutes at three o'clock Eastern time. And it's basically the three best opportunities we've seen that day. And we post it up for our subscribers, who in many cases are already in some of those stocks, but they don't know ahead of time, which ones I'm going to cover, because I go through all of the list of perhaps 2530 different stocks that we've seen. And I say okay, let's do this one. Let's do CCJ. Let's do for instance, Mehta, and let's do American Airlines and see how these three stocks perform. Because that's where we're seeing that unusual activity. In other words, that's the smart money I want to follow. So you're

Andrew Brill  23:52  
following the big, big dollars going into the the options for those particular stocks. And explain to me your vertical approach.

Jon Najarian  24:01  
Well, what I like to do is a vertical spread is where for instance, if the stocks 49, I'm probably buying the 50 strike call that gives me the right to buy at 50. And I'm selling the 50 twos or 50 threes. What was the catalyst for getting into that trade, the unusual activity following the smart money, but I also like moving the ads further into my favor by collecting a premium for the option above the market and owning an option at the market, the market being where the stock is trading at that moment. And if I do that, I think I've moved the odds into my favor. I've committed less capital to the markets, and I'm in a good position that if the stock does react positively to earnings, I could double or triple my money on that bet and that's what I'm always trying to do. And when it doesn't work out Andrew, I cut my loss move on to the next trade

Andrew Brill  24:59  
and you can find Find all of that information on market rebellion.com. That's where John and his brother Peter put all their information and you can find it right there. But let's recap real quick, your winner Goldman Sachs for this week in terms of stock your loser, Southwest, luv. And as far as options, you're going with CCJ. Those are your three picks for this week. Good luck to everybody out there. And John, thanks so much for joining us. And this is a it's been great, you know, it's all you always like I said at the top, we always look back. We never give anybody that that little that little nudge forward and say here, go make some money. So we appreciate it. love doing it. Thank

Jon Najarian  25:38  
you, Andrew.

Andrew Brill  25:39  
So John, where can people find you? I know it's market rebellion.com. I know you have the rebels edge. But where can people find you on social media? Well,

Jon Najarian  25:49  
on Twitter Andrew, I'm at JONNAJ A r i a n. And on Instagram, I'm the Dr. J ta G do CTLR the letter J. And I'd love to interact with as many of our viewers as we'd like to come on over and listen. So please check those out. Follow us follow Andrew Brill as well, folks.

Andrew Brill  26:15  
Thanks again, John. Appreciate it. Sure. Thank you for watching next week on the trading floor. We hope you enjoyed the insights and forward looking information from John and market rebellion. If you need help being financially resilient, please head over to wealthy on.com. Sign up for a free no obligation consultation with one of our registered investment advisors. And remember to follow us on social media for the latest news and information to help you invest wisely. And if you could like and subscribe to the channel, we greatly appreciate it and don't forget to hit the notification bell to find out when we post new videos to the channel. Thanks again for watching and until next time, stay informed, be empowered and may your investments flourish.