Today, we need to talk about a major pillar of my trading strategy — catalysts. 

Why? 

Because when a company has an eye-catching headline with its name involved, it usually brings some juicy volatility to the share price.

And this week, certain events are happening that could have major implications on the craziest tech stock on the planet (and the overall market).

WARNING: If you’re unaware of these headline events, you’re trading with blinders on!

By failing to follow these all-important catalysts, you could potentially miss a five-star setup. Or worse, you could make a mistake that leads to losses.

With that in mind, keep reading and I’ll show you how I’m approaching this week’s two biggest market catalysts…

Nvidia Corporation (NASDAQ: NVDA) Earnings

I’ve talked at length about NVDA recently because it’s been the most overextended stock in the market all year.

At the time of writing, NVDA is up 218% YTD. 

For a penny stock, this wouldn’t be notable at all. But for a $1.1 trillion company, it’s absolutely remarkable.

But today, after the bell, a major catalyst is coming into focus for NVDA — the company’s earning report for the fiscal quarter ending in July 2023.

Make no mistake … this earnings print is the biggest test yet for NVDA’s insane momentum run.

If CEO Jensen Huang can deliver the goods this afternoon, all bets are off for how high NVDA can go…

(Think of Tesla Inc.’s [NASDAQ: TSLA] unbelievable surge in 2021…)

On the other hand, any sign of weakness from NVDA’s revenue or forward guidance could throw cold water all over the bulls.

I have to lean bearish here. The chart is so overcrowded. If the numbers don’t greatly exceed expectations, I think NVDA will tank tomorrow afternoon.

However, I almost never bet on earnings reports because doing so is closer to playing roulette than it is to trading.

Think about it … if you’re buying calls or puts into earnings, you’re basically betting on red or black.

Actually, it’s worse than that. Let me explain…

In roulette, if you hit your color, you’re guaranteed to get paid. 

But with options, even if you’re right about a company’s earnings, there’s no guarantee as to how the market will react. 

SPOILER ALERT: The market isn’t always rational.

If I had a penny for every time I’ve seen a company report incredible earnings only to watch the stock get slammed to the downside (or vice versa), I’d be even richer than I already am.

Additionally, there’s another problem with trading options around earnings reports — incredibly high implied volatility (IV).

Elevated IV makes every contract more expensive to buy, which naturally reduces your overall upside. 

So, rather than gambling on NVDA’s earnings prior to the report being released, I have a different suggestion…

Wait to see how the market initially reacts to the report, then consider playing options tomorrow once the big picture is more clear.

But don’t get tunnel vision on NVDA. There’s another massive catalyst occurring this week…

Jerome Powell’s Speech in Jackson Hole

Speaking of the big picture, few events are more crucial to it than Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole, Wyoming on Friday…

Unless you’ve been living under a rock for the past few years, you’ll know that when Powell speaks … the market listens.

The meeting — where Federal Reserve members come together to discuss monetary policy — is happening at a good time for the central bank. 

Before this, many people thought the bank was failing to react to inflation after the world reacted to the COVID-19 pandemic. 

But now, many analysts feel the Fed is close to finished raising rates.

This is in spite of the fact that consumer prices are still about 50% higher than the 2% target they usually aim for each year.

All this to say, Powell’s comments on Friday are of the utmost importance. He’s moved mountains in the past with a single speech.

This is why you must know your history…

Powell’s now-infamous August 2021 “Jackson Hole speech” ended the summer rally altogether, sending the market down for two straight months after. 

Bottom Line: if you’re not listening to Powell’s speech, you’re missing a major catalyst (and a huge part of what’s driving the market this week).

Going into Powell’s speech on Friday, consider the following:

• Monetary Policy Signals: Jerome Powell’s speeches often provide insights into the Federal Reserve’s current thinking about monetary policy. 

You should pay attention to any hints or indications about potential changes in interest rates, quantitative easing, or other policy tools. 

• Economic Outlook: Powell’s assessment of current (and future) economic conditions can influence market sentiment. 

You should listen to his views on economic growth, inflation, unemployment, and other key indicators. 

• Inflation Commentary: Given the importance of inflation in monetary policy decisions, Powell’s remarks about inflation trends and the central bank’s stance on inflation targeting are crucial. 

You should watch for indications of whether the Fed views recent inflation as transitory or more persistent, as this can affect interest rate expectations.

• Forward Guidance: Central bank officials often provide forward guidance, indicating their intended path for interest rates and other policy measures. 

You should listen for any changes in this guidance, as it can influence market expectations and direction.

• Market Sentiment: It’s essential to gauge market sentiment before and after Powell’s speech. Traders often react to his words, which can lead to short-term volatility. 

You should assess the overall mood of the market before, during, and after Powell’s speech to help you make more informed decisions.

• Historical Context: Understanding Powell’s past speeches (and how the market reacted) can give you valuable historical context. 

You should consider how his previous remarks have influenced markets and how this might relate to the current context.

Ultimately, remember that the stock market is highly sensitive to news and statements from central bank officials. 

It’s critical to approach Fed-related trading with a well-defined strategy, risk management plan, and a thorough understanding of current economic conditions. 

And speaking of developing a well-defined strategy…

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