- Stocks have been on a hot streak but a variety of factors could stoke volatility heading into Q3.
- A hawkish shift by the Fed, Covid-19 variants, or an earnings surprise could derail the bull market.
- TradeZero America’s founder shares 10 most-shorted stocks set for higher volatility on the platform.
- See more stories on Insider’s business page.
US stocks have been on a winning streak and testing new records recently, but some investors are bracing for a choppy third quarter.
But several risk factors are looming. As seen in June, even the slightest hawkish shift by the
could roil markets. Investors who expect the Fed to announce plans to taper bond purchases later this year and implement the policy early next year are unlikely to take any sped-up timeline well, according to David Keller, the chief market strategist at StockCharts.com.
“We saw the ten-year yield spike higher after the June Fed meeting when Powell’s comments hinted that conversations were starting on implementation of this tapering timeline. Soon after, bonds continued their rally pushing the ten-year yield below 1.4% this week,” Keller said in an e-mailed interview. “The Fed has insisted that inflation is transitory, but if and when the market loses faith in that thesis, expect rates to bottom and gold to rally further.”
In addition, any earnings surprise during what Wall Street expects to be a blowout reporting season ahead could also derail the
. As Nicholas Colas and Jessica Rabe, founders of DataTrek Research said in a Tuesday note: “Analysts have been bumping Q2 estimates at a record clip, and they’re still too low. The market knows that. This earnings season needs to be much, much better than expected.”
stocks, large-cap growth stocks have regained leadership, with Amazon breaking out of a 10-month base, but the equities market needs a big earnings season, according to Keller.
“Earnings could be key this quarter to see if technology and communication services names can continue their recent uptrends,” he said. “Also, we are deep in the seasonally weakest part of the year, where stocks tend to struggle before a rally in the fourth quarter. Strong earnings could negate those seasonal tendencies and provide further upside for the S&P and Nasdaq.”
Volatility in the age of meme stocks
With all signs pointing to higher volatility ahead, Dan Pipitone, the co-founder of TradeZero America, has shared with Insider the top 10 stocks above $10 shorted this week by traders on his platform. These stocks, which are experiencing a lot of intraday volatility, could either be identified by Reddit traders as short squeeze candidates or continue to dip as short-sellers pile on.
TradeZero is one of the few online brokerages that facilitates both stock buying and shorting for retail investors.
“Because we pride ourselves on the ability to facilitate shorts, we are using this list internally to help us get ahead of our allocations, to ensure that if the stock continues to remain hot that we will have ample shares for our customers,” Pipitone said.
Externally, the weekly list has helped TradeZero users identify stocks that are “in vogue,” meaning that there is “enough volatility on the stock intraday to create enough alpha” for traders to actively trade, whether they are taking a long or short position.
“Whenever a symbol pops onto our list, typically and historically, that stock would be in vogue for the next few trading days at a minimum,” he said.
These 10 stocks, which represent the top 10 shorts on TradeZero on July 6, include meme stock favorite AMC, Chinese ride-hailing app DiDi, and space tourism company Virgin Galactic. The full list, along with stock tickers, market caps, and shares shorted on TradeZero (on July 6), is listed below.
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