23 Banks Pass Stress Test and 2% GDP Growth in Q1!

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Market News and Short-Term Predictions

Here are the major stories in the stock market this week:

1. All 23 major banks passed the Federal Reserve's annual stress test, which simulated a severe global recession scenario. This comes as the banking sector grapples with the fallout from regional bank failures in March and the possibility of stricter regulation. This has led to outperformance in the sector this week.

2. The U.S. economy showed much stronger-than-expected growth in the first quarter than previously thought, according to a big upward revision Thursday from the Commerce Department.

Gross domestic product increased at a 2% annualized pace for the Q1 period, up from the previous estimate of 1.3%. This was the third and final estimate for Q1 GDP. The growth rate was 2.6% in Q4.

With GDP back in growth mode, it seems like a recession may have been kicked down the road. At least that is what the bond market is also projecting.

3. Microsoft is in a legal battle with the Federal Trade Commission over its nearly $70 billion deal to acquire Activision Blizzard. The regulator has concerns that Microsoft will limit or block the availability of games for other consoles. Microsoft has proposed 10-year deals to ensure the availability of Call of Duty on Nintendo and Sony consoles following the sale, a move that Sony has contested​.

What is interesting here is if the deal doesn't go through, ATVI will receive a $3 billion termination fee. Not too shabby, that may be why after the initial fall from news the deal may not go through it has sneakily rallied right back up over the past few weeks.

4. Overstock.com acquired the bankrupt home goods retailer Bed Bath & Beyond's intellectual property and digital assets. The company plans to change its website's name to Bed Bath & Beyond in the coming weeks, hoping that the brand's name recognition will prove beneficial​.

I'm not so sure changing to a name associated with going bankrupt is the best business move, but what do I know :)

In regards to short-term market movement, I think the market is headed right back up to $440 on SPY. I'm not trying to time pullbacks unless RSI is above 70 (like it was a week back when I called for some type of pullback).

With the number of short positions out there, it feels like any 3-5% dip is causing some covering and bulls are using it to push the market higher.

Lessons to Be Learned

This week I received a $7.64 dividend from UNH. It may not sound like a lot, but it has the potential to grow into something even more over time because UNH is what I like to call a "dividend compounder". This means the company has continued to grow its dividend payment each year and while the yield currently sits at 1.58%, the underlying payment if you have held shares over the years has increased.

The company has grown its dividend for 13 years straight which shows its commitment to continuing the trend. Their payout ratio is 30% which means they are still retaining 70% of profits to grow the business and have room to increase the dividend payout in the future. That is why you won't see me chasing dividend stocks that pay a higher yield (an example would be AT&T). You find out they are increasing their dividend lower than inflation, they have too high of a payout ratio that is strangling the business's capability to grow, and there isn't any stock appreciation.

Portfolio Update

Options Trading Portfolio

Closing Trades

I closed one larger loss of $286 related to one of my last remaining iron condors that got blown up to the upside with this past month's price action. I also closed out both my strangles in PLTR/SOFI for tiny wins/scratches ($5 total) because I adjusted the positions by rolling the call strikes down and then the charts looked more bullish to me. With the IVR already deflated and the chart setups looking bullish, I didn't want to leave on positions that were essentially delta neutral and possibly get whacked on another growth stock rally.

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