What To Do About This One-Stock Stock Market

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I can think of 499 stocks that might as well hang it up...

Welcome to the S&P 1, where you can buy any stock you want… so long as it’s Nvidia. Buyers only, though - no sellers allowed.

I’m only half-joking. Diversification on the S&P 500 is now severely compromised; it’s more concentrated than it’s ever been. The combined weight of the Top 10 stocks is now north of 32%, having blown way, way past its Dotcom Bubble-era peak of 25%.

And it goes almost without saying that diversification as an investment strategy is dead, too.

But, like they say in Texas, “ya gotta dance with the girl that brung ya” and the only way out is through. Its Nvidia’s world and we have to trade in it.

The S&P 1, excuse me, S&P 500 largely shrugged off the Fed’s fairly hawkish comments earlier - Nvidia’s earnings were proportionally much more important to the mood this week. Around 30% of economists still think we’ll get a rate cut in May, but most aren’t seriously entertaining the notion until at least June. This was no surprise given the inflation data we’ve absorbed over the past few weeks.

Volatility, as measured by the VIX, has fallen more than 4.2% over the past trading week to settle at 13.72, suggesting investors believe Nvidia is going to be okay! Again, only half-joking.

The real driver of action right now is the dispersion trade. Not a lot of regular traders think about this phenomenon. I’ll show you how in a second.

And most importantly we’ll look at “catapult” trades - a way to roll your profits in a low-risk trade into a higher-risk trade. Think of it as playing with the house money.” Virtually no risk to your own seed capital.

And of course we’ll get a read on next week’s 64.22 expected move. This past week we saw a shorter four-day expected move of 66.97, so we’ll look at what this coming week might be like. Let’s dive in…

Video Length: 00:21:23

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