Nick’s Note: Regular readers know I like to use technical analysis when it comes to getting into—and out of—trades. My colleague Jeff Clark is one of the best technical analysts I know.
When Jeff says the charts are showing him something important, it’s a must-read. Today, Jeff tells us why the indicators are signaling a buy…
By Jeff Clark, editor, Market Minute
Think back to when the stock market entered this correction phase almost nine weeks ago.
The S&P 500 broke down from a parabolic move. It erased all of January’s huge gains in just three trading days. The Volatility Index (VIX) spiked higher. The McClellan Oscillator dropped into extremely oversold territory. The S&P traded about 60 points below its 9-day exponential moving average. And investor sentiment flopped from wildly bullish to extremely bearish.
That’s when I decided it was time to buy. And I was horribly early.
The market continued to fall. Oversold conditions got even more oversold. The proverbial rubber band kept stretching. And I kept buying.
I told my Delta Report subscribers the three target levels on the S&P 500 at which I was willing to put money to work—2650, 2595, and 2530.
By the time the market stopped falling, it had hit all three of those levels and I had the most long-side exposure I’ve had in several months. Much of it was considerably underwater.
But, here’s the thing—the rubber band always snaps back… eventually.
It took less than a week—from the time the stock market hit bottom on February 8—for the S&P 500 to rally all the way back up to our 2730 target and create profits on all of that long-side exposure.
Ever since then, I’ve been talking about using a retest of the February lows as a chance to establish some aggressive long-side positions. We’re in the area of that retest right now.
Right now, technical conditions are quite similar to where they were in early February. I have no doubt that we’ll probably be early when we start adding positions. I also have no doubt that we’ll be profitable on the trades we take—eventually. Because the rubber band always snaps back.
Why am I telling you this today?
Because when the time comes to start buying, you’re not going to want to do it. It’s going to be horribly uncomfortable. It’s going to be the exact opposite of what the folks on the financial television shows are telling you.
That’s exactly how it was back in early February—just before the rubber band snapped back.
So be ready to buy—a little at a time. Be ready to be a little early. Be willing to suffer with the trades underwater for a short while.
If you believe, as I do, that this tired old bull market still has one more rally left in it, buying into this current correction should prove profitable over the next few weeks.
Best regards and good trading,
Editor, Market Minute
P.S. If you’d like to receive my free daily market insights in the Market Minute, click here and I’ll automatically add you to my list. You’ll also receive a link to my “Guide to Options Trading” just for signing up. This free report will teach you how to trade options the right way… and dramatically boost your overall returns.
Each month, we update our Elite 25 portfolio. We remove stocks that are too expensive and replace them with new stocks that meet our three criteria for elite status.
Before I get to the update, I want to address a couple of questions I’ve received recently from readers like Jordan R.:
Hi Nick. I’m using the Elite 25 as part of my portfolio… and since it’s been active for a while now, I was hoping you could give us an update on its results versus the market. I also think it’s REALLY important to note that—with all the trading involved—using a normal brokerage account likely wouldn’t be effective because trading fees would add up so fast.
Well, Jordan, the first year of the Elite 25 wasn’t as good as we hoped. The portfolio was up about 2% while the S&P 500 was up 12%.
I’m quite disappointed by that result. I was hoping for outperformance from the get-go.
But it’s still too soon to draw any conclusions…
Some systems take a while to outperform the market. Even Warren Buffett—the world’s greatest investor—has underperformed the S&P on an annual basis multiple times.
It all comes down to whether you believe the system works: You either believe buying quality companies that are trading cheaply will outperform the market… or you don’t.
And if you believe it’s a winning strategy in the long term, keep following the system.
Regarding trading fees… They shouldn’t really add up too much. We’re only making about four trades per month. And you shouldn’t pay more than $5 per trade. So that’s only $20 per month max in trading fees.
There are also services (like RobinHood) that allow commission-free trading. So even small investors can take advantage of the Elite 25.
Now, back to the update…
March was another down month for stocks… but our portfolio outperformed the broad market. The S&P 500 fell 2.7% compared to a 1% drop in the Elite 25.
We should expect the Elite 25 to continue to outperform as the market remains choppy.
American Outdoor Brands (AOBC)
Foot Locker (FL)
National CineMedia (NCMI)
O’Reilly Automotive (ORLY)
Cambium Learning (ABCD)
Natural Health Trends (NHTC)
Ruth’s Hospitality (RUTH)
Spark Energy (SPKE)
On March 29, Palm Beach Confidential editor Teeka Tiwari sent his subscribers an update while on vacation (Confidential subscribers can watch it right here.)
Here’s what Teeka told them:
I’m in my hotel right now; I’m on vacation. My kids are playing down by the pool, and I’m looking at the markets and I’m like, “You know what? I’ve got to get something out to my friends. I’ve got to let them know what’s going on and just give them some historical perspective.”
Readers appreciated his commitment… but also wanted him to spend more time with his family…
From Anthony V.: As is the case with all his posts, Teeka’s March 29 update was extremely helpful and greatly appreciated… especially during these uncertain times. Even more so because he sent it while on vacation. Unlike others in the investment newsletter business, Teeka never leaves us hanging. Enjoy your time off and your family, Big T. Let them know how much we appreciate the work you do!
From Bob F.: Teeka, thank you for your updates even while you are on vacation! They’re very useful and timely. If anyone doesn’t want your frequent updates, you can send them to me. Have a great time with your family and keep the updates coming.
From Shawn D.: Big T, go enjoy time with your wife and girls… The cryptos and I will be here when you get back.
From Derek H.: Teeka, I just want to thank you again for all the work you’re doing for us. You’re the real deal… and I truly believe out of all the investment letter guys, you truly care for us. Thanks again, and now go enjoy your vacation.
From Dr. Wiedemann: Love, Love, LOVE Teeka’s March 29 “hand-holding” update. I need this kind of support.
Like he says, “This is a BIG part of my job.”
Yes, Teeka… even on vacation!
From Cynthia W.: Thank you, thank you, thank you, Teeka. No, no, no, you’re not irritating us by sending so many updates. Yes, yes, yes, we need you to reassure us. Every day, I look forward to your updates. Just to know you’re there watching the markets—even while on vacation—is why we like and trust you.
We’re excited to announce that Teeka just released a new Cryptocurrency Master Course in partnership with media personality Glenn Beck.
Glenn doesn’t make recommendations often or lightly… but he believes Teeka’s new online course could be one of the best investments of your life. (You can watch his testimonial below.)
This course will teach you the ABCs of cryptocurrencies and their underlying blockchain technology. It includes video lessons, instructional guides, downloadable resources, and a free electronic copy of Teeka’s new book on cryptocurrencies, New World Money.
Here’s the good news… If you’re a Palm Beach Letter subscriber, we’re giving you a free year of access to the course. Just click here and log in with your current PBL username and password.
If you’re not a Palm Beach Letter subscriber, you can learn how to sign up for Teeka Tiwari’s Crypto Master Course—and get a free gift from Teeka and Glenn—right here…