MINNEAPOLIS (Stockpickr) -- The S&P 500 is within 50 points of the lows reached in early August 2011, and investors can expect the market to test these lows in the next week or two. Given that we are still a few weeks away from third-quarter earnings, there is a dearth of news that could provide support to stocks.
The correlation among the S&P's 250 largest stocks is at 81%, vs. the 30% historical average -- the highest it's been since 1987. Stocks are moving in lock step, irrespective of individual fundamentals, which indicates a high degree of fear and inefficiency in the market.
Related: 5 Rocket Stocks to Buy This Week
What can break the spell of high correlation? Last week, several stocks releasing earnings results moved independently of the market in the moments of trading after news was released -- moments that provide a small window of opportunity during which fundamentals actually matter. Traders getting a good read on where the numbers will come in relation to Wall Street estimates can make big money trading stocks during this time of high correlation.Here are my thoughts on five earnings trades for a highly correlated market.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV