Recent Pullback Is a Bullish Sign for Stocks

Right now, a lot of folks are worried that stocks are about to start another big decline. That’s a possibility, of course. But as we’ll show you today, it’s not the most likely outcome. In the weeks and months following our 50-DMA breakdown signal, stocks were higher across all time frames, on average. And stocks performed better more often than in all market conditions. Our study shows that rather than this being the time to sell, stocks are likely a good buy today.

Right now, a lot of folks are worried that stocks are about to start another big decline. That’s a possibility, of course. But as we’ll show you today, it’s not the most likely outcome. In the weeks and months following our 50-DMA breakdown signal, stocks were higher across all time frames, on average. And stocks performed better more often than in all market conditions. Our study shows that rather than this being the time to sell, stocks are likely a good buy today.

By Ben Morris and Drew McConnell, editors, DailyWealth Trader


On Friday, the benchmark S&P 500 Index broke down…

It dropped below its intermediate-term trend line – its 50-day moving average (50-DMA) – for the first time in four months.

The trend is still up. But a lot of investors and traders start to worry when stocks fall below this widely followed level.

Last week, though, we told that this pullback could actually be a great buying opportunity…

Timing your trades isn’t always about nailing the exact right moment to get in… If you can simply identify higher- and lower-risk entry points – and take action when your risk is reduced – you’ll give yourself a major advantage in your trading.

With that in mind, the question we’re asking today is, “Is right now a higher- or lower-risk moment to buy stocks?”

The answer might surprise you…


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To help us answer this question, we looked at similar occurrences in the S&P 500 over the past 50 years. Specifically, we looked at the S&P 500’s returns following its first break below its intermediate-term trend line in at least three months.

In the chart below, you can see when this happened on Friday…

A lot of traders consider a break below the 50-DMA to be a bad sign. But let’s draw our conclusions from the numbers…

Over the past 50 years, the S&P 500 has held above its 50-DMA for at least three months 39 other times. (Friday was the 40th time.) The table below shows how the index performed following the first day that it closed below its 50-DMA…

On average, stocks climbed across all time frames. In the following two weeks, stocks were higher about 60% of the time. One and two months later, that percentage jumped to about 70%. And three months later, stocks were higher more than 80% of the time.

Those are good odds, especially when we compare them with the S&P 500’s “normal” performance…

The table below shows the same metrics for the S&P 500 for the past 50 years with no limiting criteria. In other words, the first number in the first row is the average two-week return for the S&P 500 over the past 50 years.

You might be surprised to see that the S&P 500’s average and median returns were better than normal after it broke below its 50-DMA across all time frames. The percentage of the time that stocks were up was better after the breakdown, too.

How can we explain this?

Well, if the S&P 500 has held above its 50-DMA for at least three months, it typically means the stock market is in a strong uptrend. And when the market is in a strong uptrend, you want to own stocks.

These results suggest that one of the best times to buy stocks in a strong market is after a pullback, like when the S&P 500 drops below its 50-DMA… as it did on Friday.

Here’s our takeaway…


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Right now, a lot of folks are worried that stocks are about to start another big decline. That’s a possibility, of course. But as we showed you today, it’s not the most likely outcome.

In the weeks and months following our 50-DMA breakdown signal, stocks were higher across all time frames, on average. And stocks performed better more often than in all market conditions.

Our study shows that rather than this being the time to sell, stocks are likely a good buy today.

It probably doesn’t feel like the right thing to do right now, but if you have some cash on the sidelines, you may want to consider putting it to work. At the very least, don’t exit your bullish positions right now unless they’ve triggered your stop losses.

We can’t promise you that today is the perfect day to buy stocks. But we can tell you – with 50 years of history backing us up – that your risk in the stock market is reduced. And generally, that’s the time to buy, not sell.

Our advice for stocks traders and investors right now is to stick to your stop losses and to stay long.

If You’re Not Bullish Here, You’re Not Paying Attention

There’s a big question on every investor’s mind this week… Will the stock market find its footing? Or continue down a slippery slope?

By Jason Bodner, editor, Palm Beach Trader

There’s a big question on every investor’s mind this week…

Will the stock market find its footing? Or continue down a slippery slope?

Some folks will point to the pandemic-battered economy and say there’s no way stocks can keep running higher. A higher stock market doesn’t agree with their feelings about the economy. Or the mainstream news blaring out of their television.

But in Palm Beach Insider, we don’t let emotions or preconceptions dictate our investment path. We let data do the talking – specifically, our Big Money Index.

And today, I’ll show you what it’s telling us about the stock market over the next few weeks – and further down the line…


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Data Beats Doom and Gloom

In March, guided by our Big Money Index, I told anyone who would listen to buy stocks. Meanwhile, the mainstream media was calling for a new Great Depression.

What happened next? The Invesco QQQ Trust (QQQ) – an exchange-traded fund (ETF) of tech stocks – rallied 84% trough to peak.

It just goes to show… you shouldn’t believe everything you hear. The media wants you afraid and pessimistic. That’s because their advertisers pay them money to have viewers. And when viewers are happy and stress-free, they don’t watch the news.

Now, with a bit of stock weakness, the news is coming out with plenty more negative fodder.

So, are we headed for the reckoning that many feel is long overdue? No. As I said last week, this market is just having a much-needed pullback. And that’s mainly due to profit taking in the tech sector.

For months now, new day-traders armed with stimulus checks have pushed up tech shares to a parabolic rise. I fully believe our future is tech-driven, but the recent price rise needed a come-back-to-earth moment. This is it.

And while the tech sector took headlines in last week’s selloff, only 32% of stocks in the sector experienced net selling in the past seven trading sessions.

The real damage is in energy. 67 out of 58 stocks we track were net sold last week. (That’s not a typo. It means that several of the energy stocks we track were sold for multiple days – and it was only a 4-day week. Therefore 116% of the energy sector saw big-money selling.)

In any case, big money is coming out of tech and energy and sloshing back into discretionary, healthcare, and some staples stocks. (You’ll remember I tipped you off to this rotation a couple weeks ago.)

On a broader level, the market at large is clearly seeing less demand for stocks. But the Big Money Buy/Sell Index saw this coming…


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The Big Money Index Is Heading Back to Its “Sweet Spot”

If you’re new to Palm Beach Insider, the Big Money Buy/Sell Index (BMI for short) is our proprietary system to spot big-money buying and selling in the broad market.

And as we’ve observed for months now, the BMI has steadily fallen from its June peak – even as the market trudged higher.

Remember, when a market gets overbought, it can stay that way for a while. (This time the BMI established a 30-year record, at 84 days overbought.)

But since that peak, the big money demand for stocks has come back to earth… And we’re now officially out of overbought territory:

image

Now, when the index level dips to 25% (the green line in the chart) or lower, sellers have taken the reins, leading the markets into oversold territory. And when it hits 80% (the red line) or more, it means buyers are in control and markets are overbought.

Generally speaking, we like when the BMI is gently trending higher – but between the green and red lines. It means there’s a healthy balance between buying and selling, with a bias toward buying. That’s the “sweet spot” for a bull market. These conditions allow a gentle up-trending market to continue for a long time.

This year has been nothing like that. We came from extreme overbought in January, to extreme oversold in March, to extreme overbought from May all the way to September. 2020 will mark an historic year for humanity, but also for the data we collect.

We may not see a market environment like this for years, possibly decades. Or, it may happen again next year. That’s the thing… We never know what’s to come. All we can do is interpret the data and react accordingly.

And right now, our data indicates a waning appetite for stocks in the short-term. I suspect the next few weeks will be choppy and form a base.

After that, though, buying will come in again to lift markets in the late fall and early winter.

How do I know this?


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Nowhere Else to Turn

The inescapable truth is this: Interest rates will remain at near-zero for the foreseeable future.

Doing some number crunching, I found that owning the S&P 500 for its dividends is 244% better than owning the 10-year Treasury for its yield (after taxes).

INVESTMENT AMOUNT INVESTED YIELD MAX
TAX RATE
RETURN BEFORE
TAX
TAX
OWED
RETURN AFTER
TAX
10-YEAR TREASURY $100 0.67% 40.8% $0.67 $0.27 $0.40
S&P 500 $100 1.79% 23.8% $1.79 $0.43 $1.36
Advantage of owning stocks over bonds 244%

Everyday investors, seeing their “high-yield” savings accounts and Treasury bond rates whittle down to practically nothing, understand this all too well.

There’s basically nowhere else for investors to grow their money but stocks. That will encourage further stock investment over time.

With these factors at play, it’s clear the market isn’t headed for disaster. It’s headed for a few weeks or months of chop before another bull run.

That means it’s time to have your shopping list ready, and to scale into your favorite positions on down days. That’s a sustainable strategy that pays off massively over time.


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I’ve haven’t been this excited to buy stocks in months…

You see, the BMI isn’t just a way to see if the market is too hot or too cold. It tells me, specifically, which stocks the biggest institutions are buying right now.

In the past, the signals I get from this system have put my readers into stocks that the mainstream media didn’t pick up on until much later… After they’d already run up hundreds of percent.

My system works so well because it cuts out the emotion and “white noise” of the market. It dials in on where the big money is placing their bets… and discovers outlier stocks before they race higher. Find out more here.

A New Bull Market Is Just Getting Underway

The Biggest Opportunity of the Decade Is Starting Now. A new bull market is just getting underway. It has the potential to overshadow the tremendous gains the U.S. market saw over the last decade.

By Brian Tycangco, analyst, True Wealth Opportunities: China

A new bull market is just getting underway.

It has the potential to overshadow the tremendous gains the U.S. market saw over the last decade.

Indeed, this very same market helped a small group of investors pull down three times the returns in the S&P 500 Index during one of Wall Street’s best periods in history.

Now, I don’t say this lightly. But this could be the last opportunity you’ll have to profit from this kind of boom…

There’s good news, though. I’m perfectly situated to show you what opportunities lie ahead. The reason is simple… My entire life has prepared me for this moment.

Let me explain…


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I have been living smack-dab in the middle of this massive opportunity – a market that has largely been off-limits to investors like you for too long.

And I’ve seen for myself the life-changing gains that are possible…

It started with my dad, who taught me about the stock market when I was just barely a teenager. He was a surgeon by profession. But that wasn’t exactly a path to riches in the Philippines, where we lived.

Instead, it was his stock investments in this part of the world that afforded us a beautiful home worth millions of dollars… not to mention a huge diamond ring for my mother.

I became instantly hooked on investing…

After graduating with a degree in economics, I started learning the ropes. I paid my dues, working for scraps as a stock trader.

In a couple of years, I was doing research for banking giant BNP Paribas analyzing food and beverage companies. Now, those were much more rewarding times.

The pay was better than what I made as a professional stock trader. I managed to make enough money to take my wife (then girlfriend) out on some nice dates. It was also during this time that I pointed our firm’s investors to a little-known company called Jollibee Foods (PH: JFC).

You may have never heard of Jollibee Foods. And sure, that’s understandable… It only went on to clobber McDonald’s in the Philippines – a country with 100 million consumers.

Today, Jollibee is still beating McDonald’s in the Philippines. It has even branched out overseas, including many parts of the coastal U.S.

Along the way, the company has managed to buy up Burger King’s local partner, as well as build the Philippines’ largest pizza chain.

Investors who got in early could have made as much as 3,325%. Meanwhile, investors in McDonald’s did only one-third as well.

That’s the kind of opportunity setting up in my part of the world… in emerging markets.

And importantly, I’m not talking about China. Instead, I’m talking about countries and companies set to become the “Next Chinas”…

These companies are set to rise like China’s greatest companies have over the last decade, as Asia’s emerging markets follow China’s path to success and dominance.


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There’s a lot to this story. So tomorrow, I’ll give you a few more details on what’s going on… and why today’s opportunity is so incredible.

This Sector Is on Big Money’s Radar

The Wall Street asset managers and billion-dollar hedge funds are the real movers of the market. And soon enough, I realized the average investor could profit by following in their footsteps. So I built my own system off of decades of research and thousands of man-hours to zero in on these movements before anyone else knows about them.

By Jason Bodner, editor, Palm Beach Trader

If you watch nothing but the talking heads on the news, it can seem like the world is ending.

Whether it’s the coronavirus pandemic, or the presidential election, or some other doomsday scenario, the media is only too happy to give you more things to worry about.

They’re quick to tell you that this state of things is our new reality – and that there’s no going back to how things were before.

Meanwhile, just take a look outside, and you’ll see it’s not as bad as they’re making it out to be.

Just this past weekend, I went to the mall with my wife. We live in South Florida. Instead of encountering an empty wasteland, we actually had trouble finding parking. When we went inside, it was more than half-full. The food court was packed.

This isn’t unexpected. People have been cooped up for months now due to the pandemic. And all that pent-up demand is ready to explode, like a shaken-up Coke bottle. People are desperate to return to normal, unlike what the media says.

And you can see the evidence with your own two eyes, whether you’re looking outside… or at the stock market.

Below, I’ll explain how we’re already seeing this play out in the market today… and the best way we can take advantage…


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Don’t Follow the Headlines…

I learned early on that while headlines sometimes move stocks, following what the media says is more often than not a recipe for failure. You might make a quick buck here and there, but over time, it won’t lead to continued success.

So instead, I like to go to another source to see how the market’s really doing: the big money.

These players – the Wall Street asset managers and billion-dollar hedge funds – are the real movers of the market. I know because I worked for some of them, regularly making trades worth billions of dollars.

And soon enough, I realized the average investor could profit by following in their footsteps. So I built my own system off of decades of research and thousands of man-hours to zero in on these movements before anyone else knows about them.

It scans nearly 5,500 stocks every day, using algorithms to rank each one for strength. And it’s already paid off for my Palm Beach Trader subscribers. We’re now sitting on gains such as 460% on The Trade Desk (TTD)… 287% on SolarEdge Technologies (SEDG)… and 188% on Paycom Software (PAYC). And we just had three more positions hit all-time highs.

All because we let the big money lead us to those stocks.

But my system can do more than analyze individual stocks… it can also track the broad big-money buying and selling in the market. And looking at the data, the market is 81% overbought.

There’s still plenty of buying going on with very little selling. So even though the market is overheated right now… it’s still primed to climb higher.

And if we take a closer look at the data, we can get an idea of what the big money is piling into…


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The Next Sector on Big Money’s Shopping List

The big money is still flowing into the market, but it is moving from sector to sector. And if we use my system to examine which sectors are seeing more big-money buy signals, we can bet on those sectors to rise in the near term.

Right now, it looks like the big money is moving into discretionary stocks. These are companies that provide goods and services that people want but may not need. Think restaurants, furniture makers, and consumer electronics.

Naturally, this sector took a big hit when COVID-19 first hit the U.S. and people stopped buying unnecessary items. But lately, it’s getting a boost from the big money.

Take a look at this chart, which compares the number of big-money buy signals (represented by the green bars) in discretionary stocks with our proxy for the sector, the Consumer Discretionary Select Sector SPDR Fund (XLY).

image

As you can see, discretionary stocks suffered through May, when the coronavirus hit and big-money buying vanished. Then, big money piled into the sector in June.

While the big money started rotating into tech and health care stocks after that June spike, ever since the start of August, discretionary is leading the way again as it creeps upwards.

Out of a total of 731 buy signals in discretionary stocks this year, 67% of them have come since June, and 18% in August.

And based on what we see in the real world (not on television), it makes sense. We’re getting closer and closer to a vaccine that could signal the end of this pandemic. That’s inspiring people to start leaving their home, return to normal, and spend their money as they normally would.

If you’re looking to take advantage, consider buying XLY. It should provide solid exposure as buying in discretionary stocks ramps up. Just remember not to bet the farm on a single trade.


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Like I mentioned before, my system doesn’t just track the market by sector. It can identify individual stocks that are seeing big-money buying. So we can buy them before Wall Street’s moves send them soaring.

That’s why my Palm Beach Trader subscribers are sitting on an average win rate of 70% in our portfolio… with an average gain of 49% on our winners, across multiple sectors. We can find the dominant stocks in any area of the market.

So if you want to profit as this market continues to climb, there’s no better way than using my unbeatable system. I’ll tell you more about it right here.

Use This Versatile Pattern to Spot Opportunities Most Traders Miss

Every market is comprised of one larger overriding pattern. And, at any given time, it‘s possible to pinpoint exactly where in that pattern a market likely is. In today’s essay, I’ll walk you a trade setup that utilizes this pattern. Once I discovered this specific pattern, I was able to make better sense of sloppy-looking charts – and make massive profits trading them.

By Andy Krieger, Editor, Money Trends

I’ve traded a lot of different markets in my career. Stocks, bonds, energy, commodities, metals, livestock, currencies, even cryptocurrencies…

The pattern I’ll show you today foretells big moves in all of them.

In fact, you could slide any price chart of any market in front of me and my method of analysis would be the exact same.

That’s because every market is comprised of one larger overriding pattern. And, at any given time, it‘s possible to pinpoint exactly where in that pattern a market likely is.

In today’s essay, I’ll walk you a trade setup that utilizes this pattern. Once I discovered this specific pattern, I was able to make better sense of sloppy-looking charts – and make massive profits trading them.

Read on, and learn how to start applying it to any market you want to trade…


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Two Important Waves Every Trader Should Know

In my last article for Money Trends, I introduced you to the Wave Principle – and specifically, this overriding pattern…

To recap: this pattern basically tells us what moves to expect in an underlying asset. After identifying the first few waves, we can use this pattern (along with three key rules) to determine when the asset will move next – and in which direction.

(Note: For a bear market, simply flip this pattern upside down.)

Today, we’re going to focus on one of my favorite trade setups using this pattern.

But before we dive in, it’s crucial to understand the different kinds of waves that make up the overriding pattern above.

You see, there are two kinds of waves: motive waves and corrective waves. Motive waves propel the market in the direction of the larger trend, whereas corrective waves are counter-trend movements.

There’s also a specific type of motive wave called an “impulse wave.” A key characteristic of impulse waves is that they always develop in five subwaves (the numbered waves in the chart above). Corrective waves tend do develop in three subwaves (the lettered waves in the chart above).

Corrective waves mess traders up because they tend to be choppy, sloppy, and time-consuming. Trying to trade a corrective wave is usually a futile effort.

The key to successful trading is being able to understand when the market is correcting… and then staying OUT until the market is ready to trend once more. Here’s how to tell…


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My Favorite Trading Setup

Let’s take a look at my favorite trade setup: the triangle.

Triangles are a very special wave pattern because they can only occur at very specific points on a price chart. Specifically, triangles take shape in Wave 4, Wave B, and as part of the final sequence of a more complex corrective pattern.

The movement that follows a triangle is known as the “terminal thrust.”

This is why triangles are so exciting to trade. They give you the direction for your next trade… and also warn you of an imminent change in trend. They’re also highly specific… They only take shape when certain conditions are met.

Triangles are composed of 5-subwaves labelled A-B-C-D-E. (Note that these subwaves are not an impulse wave – they’re a corrective pattern.) Take a look at the chart below…

Here we have a typical triangle formation, drawn on top of our overriding pattern.

Once the A, B, C, and D waves of the overriding pattern are completed, you can draw a trendline connecting the A-C and B-D points. That’s what forms the triangle.

Oftentimes, the E wave will shoot over/under the A-C trendline. But, so long as Wave E does not violate the extreme of Wave C, the triangle is still valid. It is also fairly common for Wave B to exceed the extreme of Wave A.

Trading triangles is very simple, but requires patience. Triangles tend to move sideways for a long time before they complete.

I like to wait for the price to break the extreme of Wave D, which gives me confirmation the pattern is complete. I place my protective stop just beyond the extreme of Wave E.


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Our Setup in Action

Now that you understand how triangles work, let’s look at two different triangles that have popped up over various markets recently.

First, we have a great example in Bitcoin…

Notice the overall sideways movement of this triangle and that the pattern itself formed in the Wave 4 position. Also note that once we broke past the extreme of Wave D, the price thrust upwards and out of the triangle structure.

Next, we have a triangle that recently broke out in the USD/RUB currency pair…

Note the similarities between the two triangles we’ve studied so far.

The USD/RUB triangle also takes place in the Wave 4 position, and it has a sideways look to it. In this case, we can see that the thrust out of the triangle is just taking place.


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An Essential Trading Tool

Using triangles with the overriding pattern of the Wave Principle is a vital part of any trader’s toolkit. It’s so valuable because of its versatility (remember, this pattern works across all markets) and how it can bring tradable structure to a messy-looking chart.

Once you grasp the basic concepts of these patterns, and start implementing them in your chart analysis, you’ll be shocked at how many tradable setups show up that you couldn’t spot before.

Whenever I spot a big trade opportunity using this pattern, I’ll write up my thoughts and send them to your inbox. But don’t hesitate to start using it now… It’s a game-changing tool that very few traders know how to use effectively.