Over a two-day period last week (October 26 and 27), financial website MarketWatch ran the following headlines…   

  • “This is the best time to buy stocks since Trump’s election, says Wells Fargo”

  • “The Wall Street analyst who called this stock-market rout sees another nasty drop for the S&P 500”

Both headlines came after the S&P 500 and Dow Jones Industrial Average plunged 5% last week. Since October 1, both indexes are down about 9%.

The first story cites Darrel Cronk, president at Wells Fargo Investment Institute. He said there’s no better time to go shopping for beaten-up stocks, stating, “Current conditions have the potential to create some of the best entry points into equity markets since the November 2016 elections.”

We don’t blame you if you’re confused.

And if you’re anything like me, confusion causes uncertainty. And uncertainty makes me nervous and gives me sweaty palms.

But my palms are dry right now… That’s because at the Daily, we have a game plan. And we stick to it.

We don’t let the whims of the markets or confusing headlines rattle us… And if you follow the plan we’re sharing with you today, you’ll be mentally prepared to handle any market situation.

Tune Out the Noise

The first part of our plan is the simplest (yet probably the hardest) thing to do: Stop listening to market pundits.

We read through all that stuff so you don’t have to. Plus, most of these pontificators are spouting nonsense. No one really knows why the market dropped last week. It could be rising interest rates, trade war fears, or anxiety over the upcoming midterm elections.

Maybe it’s a combination of all of those reasons… or none of them at all.

What we do know is that we’re still in a bull market (See Monday’s essay, “Teeka Tiwari on ‘Is This Bull Market Over?’.” And stay tuned for my interview with our Wall Street insider Jason Bodner, who also believes we’re still in a bull market.)

But not even a bull market goes straight up forever.

That brings us to the second part of our game plan: Implement an exit strategy. That way, you won’t panic and sell at the worst time.

A simple exit strategy is the “trailing” stop loss. A trailing stop automatically adjusts higher as the value of a stock climbs. Then, it stays pinned to the highest price.

We use trailing stops in a number of our services. They help us lock in big gains while protecting us from massive losses.

For example, the recent market sell-off triggered trailing stops on several positions in The Palm Beach Letter portfolio. In one case, we took a 0.1% loss on the BlackRock Resources & Commodities Strategy Trust. But in another, we locked in a 580% gain on Nvidia.

Why You Should Stay in the Market

Trailing stops are good for exiting individual stocks… But when is it time to exit the broad market?

There’s no tried-and-true method to time a market crash. But there are signs you can look for.

One way to read the signs is to follow technical indicators such as “trend lines.”

Drawing a line between the high and low points of a stock chart or index chart creates a trend line. It can show you key points of support and resistance.

As long as a stock or index stays above the trend line, the trend is going up. If the stock breaks below the trend line, that’s a sign it’s going down.

As you can see in the chart below, the S&P 500 is still above its trend line…


Another technical indicator I follow is the 170-week moving average (MA).

An MA line is just a way to smooth out the price of a stock by taking its average price over a certain period. In this case, it’s 170 weeks.

As you can see, when the market stays above its MA line, the uptrend remains intact… and the market tends to continue rising.

At the time of this writing, both the trend and MA lines are right near 2,400. The market is still 300 points above that number—which means you don’t need to panic.

I’m still holding onto my positions… and waiting for the right time to put some new money to work.

Regards,

Nick Rokke
Analyst, The Palm Beach Daily

IN CASE YOU MISSED IT…

After spending the past three years showing readers how to make a killing in cryptos, PBRG guru Teeka Tiwari has spent the past six months developing this service to show you how to consistently bank fast cash profits, month after month, using three of Wall Street’s most closely guarded money-making secrets.