Those Tax Hikes I Warned About…

After switching my calls on the SPDR S&P ETF (SPY) and the SPDR Dow Jones ETF (DIA) a week ago (Apr. 16), both have declined over 1% and are on track for their first losing weeks in more than a month.

Despite the month’s promising start with blowout jobs reports, stronger-than-expected earnings, the lowest jobless claims in months, and more, remember how I said to stay vigilant on inflation and potential tax hikes?

Well, the market on Thursday (Apr. 22) tanked thanks to rumblings that President Biden could hike the capital gains tax rate for those earning over $1 million. This isn’t just some ordinary tax hike either. Biden would essentially double the current tax rate of 20% to 39.6% for those wealthy investors and hike it as high as 43.4% for the richest of the rich.

Not to mention President Biden has been talking for weeks about hiking corporate taxes to 28%.

Tax the rich? Guess Mr. President has to fund his spending sprees somehow, no?

Although April historically has been the strongest month for stocks over the past 20 years, with the S&P 500 witnessing gains in 14 of the past 15 years, not everything is smooth sailing right now. Especially if you’re a SPAC or a speculative sector.

In fact, for the broader market, I’d even caution that we may be at or around a peak, with most of the good news priced in already. Despite what’s been a rough week, the Dow and S&P are still at historically high levels. According to Binky Chadha , Deutsche Bank’s chief U.S. equity strategist, we could see a significant pullback between 6% and 10% over the next three months because of potentially full valuations and inflation fears.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

We could see more volatility and more muted gains than what we’ve come to know over the last year.

April is historically strong, but please monitor overvaluation, inflation, bond yields, and potential tax hikes. Be optimistic but realistic. A decline above ~20%, leading to a bear market, appears unlikely. Yet, we could eventually see a minor pullback by the summer, as Deutsche Bank said.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Is the S&P Still Too Frothy?

Figure 1- S&P 500 Large Cap Index $SPX

On the one hand, according to Sanford C. Bernstein strategists, the S&P 500 index could double by the end of the decade and reach 8,000.

Historically, we could really be at a strong entry point for the long-term too. Over two weeks ago, we marked the first anniversary of this bull market. Historically, S&P 500 bull markets since 1957 on average resulted in price gains of 179% and lasted an average of 5.8 years.

Because the S&P 500 has risen just about 84.81% since March 23, 2020, if history tells us anything, we may just be getting started.

Furthermore, earnings season is off to a roaring start, with companies crushing estimates. There’s no reason to believe this will end either. Not to mention, it’s April, historically the strongest month for stocks.

On the other hand, despite this week’s minor pullback, the S&P 500 continues to hover around record highs as it approaches 4200 for the first time in its history. It’s also potentially historically overvalued. I’m more worried about valuations than I am excited about earnings.

Also, I’m not pleased about potential tax hikes for this frothy market.

I don’t see this as a buyable index at the moment. While it’s not quite as frothy as it was a week ago and more of a HOLD as of April 23, 2021, if it pops anymore, it could be more sellable. I’d prefer a deeper pullback.

HOLD. The S&P has skyrocketed to unprecedented levels and valuations, but strong earnings could give the index some momentum. For an ETF that attempts to directly correlate with the performance of the S&P 500, the S&P 500 SPDR ETF (SPY) is a great option.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Earnings Season’s Hot Start

“Other than my Cincinnati Bengals breaking my heart, few things are more consistent than stocks higher in April.”

As a stock nerd and NFL fan, I love this quote from Ryan Detrick , the chief market strategist at LPL Financial.

Historically in April, the S&P 500 has seen gains in 14 of the past 15 years. April has also been the strongest month for stocks over the past 20 years.

April 2021 has been no exception. Although March, and Q1, for that matter, ended with more questions than answers, this month has been nothing but white-hot.

The month kicked off with a blowout jobs report. It then continued with two consecutive weeks of jobless claims crushing estimates, retail sales coming in almost ⅓ higher than projected, and bank earnings blowing past forecasts. The Dow Jones and S&P 500 seemingly hit fresh record-highs every other day, and despite complications with JnJ’s one-dose vaccine, all signs point towards our life returning to normal by this summer.

While optimism is high right now, I implore you to remain cautious. I’m really not sure how much higher the Dow and S&P can go without pulling back somewhat. Not to mention, it still has not been smooth sailing for Cathie Wood stocks or SPACs for the last two months either. This rotation into recovery names is very real.

Remember that every month in 2021 thus far has started off hot and saw a pullback and volatility occur by the second half of the month.

We are now officially in the latter half of April. Although, as I said, April is historically a strong performing month, think about this. By the second half of January, we had Reddit trades spooking investors. In February and March, we had surging bond yields, inflation fears, or Jay Powell comments that rubbed people the wrong way. These concerns won’t just disappear because we want them to. If we could make things magically disappear, COVID would’ve been over yesterday.

According to Binky Chadha , Deutsche Bank’s chief U.S. equity strategist, we could see a significant pullback between 6% and 10% over the next three months because of potentially full valuations and inflation fears. Even if this $2 trillion infrastructure plan doesn’t pass in full, do we really need to spend any more trillions with an economy starting to turn red hot?

Plus, how do you think this will be paid for? Hiking taxes- namely corporate taxes . Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. While President Biden has indicated a willingness to negotiate his 28% corporate tax proposal, it’s still a tax hike.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

We’re hot right now.

However, we could see more volatility and more muted gains than what we’ve come to know over the last year.

April is historically strong, but please monitor overvaluation, inflation, bond yields, and potential tax hikes. Be optimistic but realistic. A decline above ~20%, leading to a bear market, appears unlikely. Yet, we could eventually see a minor pullback by the summer, as Deutsche Bank said.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 The Dow Jones- How Much Higher Could We Go?

Figure 1- Dow Jones Industrial Average $INDU

The Dow Jones remains red hot in 2021. Strong bank earnings, a recovering economy, and the potential for further infrastructure spending have sent the index to record highs in what seems to be every other day. Unfortunately, we are nowhere close to buyable any longer and are firmly overbought with an RSI over 72.

For the longest time, I’ve said to HOLD the Dow and let the gains ride. Now, I think it’s an excellent time to trim and take profits. Many analysts believe the index could end the year at 35,000 or higher, and the wheels are still in motion for that to happen. The problem, though? We’re above 34,000, and we’re only in mid-April.

You could do a heck of a lot better for a buyable entry point.

Having Dow exposure is valuable. The index has many strong recovery cyclical plays that should benefit from what appears to be an economic recovery and reopening going even better than expected. The Dow could also be quite beneficial as a hedge against volatile growth stocks and SPACs. You won’t see bond yields spooking this index as much.

But at this level, it’s probably better to SELL and consider trimming profits.

For an ETF that aims to correlate with the Dow’s performance, the SPDR Dow Jones ETF (DIA) is a great option.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Stocks are Heating Up

In keeping with its historical performance, April has started off white-hot. We ended March, and Q1 for that matter, with more questions than answers.

But April 2021 started with a blowout jobs report, and the indices haven’t looked back since. Right now, the S&P 500 is at yet another record, the Dow is just about at a record, and we’ve seen a furious comeback for Big Tech and growth stocks.

The sentiment is certainly better now than it was just a couple of weeks ago. However, I implore you to remember that every month in 2021 thus far has started off hot and saw a pullback/volatility occur in the second half of the month.

Think about it. In January, we had the GameStop trade spooking investors. In February and March, we had surging bond yields, inflation fears, or Jay Powell comments that rubbed people the wrong way. These concerns won’t just disappear because we want them to. If we could make things magically disappear, COVID would’ve been over yesterday.

But, as I mentioned before, April historically is a strong month for stocks. According to Ryan Detrick , chief market strategist at LPL Financial, “Other than my Cincinnati Bengals breaking my heart, few things are more consistent than stocks higher in April.”

During April, the S&P 500 has gained in 14 of the past 15 years. April has also been the strongest month for stocks over the past 20 years.

The market concerns, though, are still intact. We still have to worry about inflation, bond yields, and stocks peaking. According to Binky Chadha , Deutsche Bank’s chief U.S. equity strategist, we could see a significant pullback between 6% and 10% over the next three months.

Another thing I’m a bit concerned about is the $2 trillion infrastructure plan. While this is great for America’s crumbling infrastructure, do we really need to spend any more trillions?

Plus, how do you think this will be paid for? Hiking taxes- namely corporate taxes . Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. While President Biden has indicated a willingness to negotiate his 28% corporate tax proposal, it’s still a tax hike.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

We’re hot right now.

However, we could see more volatility and more muted gains than what we’ve come to know over the last year.

April is historically strong, but please continue to monitor inflation, yields, and potential tax hikes. Be optimistic but realistic. A decline above ~20%, leading to a bear market, appears unlikely. Yet, we could eventually see a minor pullback by the summer, as Deutsche Bank said.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Russell 2000- Still Buyable?

Figure 1- iShares Russell 2000 ETF (IWM)

I proudly switched my call on the iShares Russell 2000 ETF (IWM) to a BUY on March 24. I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February and swore I wouldn’t make that mistake again.

We’re up to over 5% since then.

The climate right now supports the Russell 2000. The current economic policy is tailor-made for small-caps. The best part, though? The Russell is still very buyable.

The RSI is still hovering around 50. I also checked out the chart and noticed that almost every time the IWM touched or minorly declined below its 50-day moving average, it reversed.

Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Fast forward to now. The Russell 2000, despite its gains since tanking on March 23, remains right at about its 50-day moving average.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.

According to the chart, we may have found double-bottom support too.

Based on the chart and macro-level tailwinds, I feel that you can still BUY this index. In fact, it may be the most buyable of them all.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Tax Hikes are Coming

End of the month and first quarter of 2021. Is time going fast or slow? Markets have been moving at a dizzying pace to start the year.

As a side note, this will be our last newsletter for this week because the market is closed on Friday (Apr. 2).

The first quarter of 2021 is officially almost finished. Time flies when you’re having fun, right? While a broad correction did not happen by now, as I expected, the Nasdaq did enter correction territory twice since February. Despite the Nasdaq’s muted moves on Tuesday (Mar. 30), it’s right on the edge of its third foray into correction territory.

The market themes remain. There is still as much uncertainty for tech stocks today as there were at the start of March. Until there’s some clarity on inflation and bond yields, I can’t foresee this ending anytime soon.

Consider this too. President Biden is about to unveil a $2 trillion infrastructure plan during Wednesday’s session (wasn’t it supposed to be $3 trillion?). While this is great for America’s crumbling infrastructure, let’s be honest- does this economy, while recovering, need anymore spending?

Plus, how do you think he will pay for this? Hiking taxes- namely corporate taxes . Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. The market may have priced in a lot of optimism. It may have already priced in some pessimism from potential inflation. But one thing it has not priced in is a possible tax hike.

This concerns me.

Rising bond yields + Rising taxes= A double whammy of bad news for tech stocks.

However, despite the “what ifs,” for now, three pillars remain in motion as a strong backdrop for stocks:

  1. Vaccines
  2. Dovish monetary policy full of stimulus
  3. Financial aid

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

The market has to figure itself out.

More volatility is likely, and we could experience more muted gains than what we’ve come to know over the last year. Inflation, interest-rate worries, and the potential for tax hikes should be the primary tailwinds. However, a decline above ~20%, leading to a bear market, appears unlikely for now.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Russell 2000 – Time to Pounce?

Figure 1- iShares Russell 2000 ETF (IWM)

The climate right now supports the Russell 2000. The current economic policy is tailor-made for small-caps. The best part, though? The Russell is still very buyable.

I kicked myself for not calling BUY on the Russell after it saw a minor downturn during the second half of February. I wasn’t going to make that mistake again.

After the iShares Russell 2000 ETF (IWM) went on its latest rally to start March, I checked out the chart. I noticed that almost every time it touched or minorly declined below its 50-day moving average, it reversed.

Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Fast forward to Tuesday (Mar. 23). The Russell 2000 saw its worst day since February 25, dropped below its 50-day, and I switched the call to a BUY.

Now, as we start the final week in March, we may be looking at the 6th reversal after dipping below its 50-day. The IWM has been up about 3% since March 24.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.

Consider this too. The Russell is on track for its first losing month in almost five months. According to the chart, it may have also found double-bottom support.

Based on macro-level tailwinds, its first losing month in five, potentially finding double-bottom support, its RSI, and where it is in relation to the 50-day moving average, I feel that this is a solid time to BUY.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Para ver todos los eventos económicos del día le recomendamos visitar nuestro calendario económico.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The Three Pillars for Stocks

We’re officially almost through with the first quarter of 2021. While a broad correction did not happen by now, as I thought, the Nasdaq dipped into correction territory twice.

There might also be as much uncertainty for tech stocks today as there was at March’s start.

However, let’s look at the big picture almost a week after we hit the 1-year anniversary of the market’s bottom. Three pillars remain in motion as a strong backdrop for stocks:

  1. Vaccines
  2. Dovish monetary policy full of stimulus
  3. Financial aid

While the major indices are still positive for 2021, every month this year has been marked by hot starts, marred by mid-month uncertainty and downturns. We’re dealing with rising bond yields, inflation scares, volatile Reddit trades, and an improving yet slowing labor market recovery.

Plus, although earnings came in strong this past quarter, stock valuations are still at an overly inflated point not seen in years. In fact, Ray Dalio , founder of the world’s largest hedge fund, Bridgewater Associates, says there’s a bubble that’s ‘halfway’ to the magnitude of 1929 or 2000.

We could see some more volatility on tap this week as the market continues to figure itself out.

  1. Suez Canal- There’s been a gigantic tanker blocking arguably one of the most crucial waterways for global trade for the last 6 days. There are indications that the tanker may be on the way to being freed. But the sooner this happens, the better. The Suez Cana controls about 10% of global trade, so you can only imagine the hundreds of billions of dollars bleeding per day the more this drags on.
  2. Economic Data- Consumer Confidence, the March job’s report, the unemployment rate, and the PMI Manufacturing index will be released this week.
  3. Earnings- Chewy (CHWY) will report Tuesday (Mar. 30) after market close, and Walgreens Boots Alliance (WBA), Dave & Busters (PLAY), Micron (MU) will all report after market close Wednesday (Mar. 31).

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

Over a year after we bottomed, there is optimism but signs of concern.

The market has to figure itself out. More volatility is likely, and we could experience more muted gains than what we’ve known over the last year. Inflation and interest-rate worries should be the primary tailwind. However, a decline above ~20%, leading to a bear market, appears unlikely to happen any time soon.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Russell 2000 – Time to Pounce?

Figure 1- iShares Russell 2000 ETF (IWM)

I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February. I wasn’t going to make that mistake again.

After the iShares Russell 2000 ETF (IWM) went on its latest rally to start March, I checked out the chart. I noticed that almost every time it touched or minorly declined below its 50-day moving average, it reversed.

Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Fast forward to Tuesday (Mar. 23). The Russell 2000 saw its worst day since February 25, dropped below its 50-day, and I switched the call to a BUY.

Now, as we start the final week in March, we may be looking at the 6th reversal after dipping below its 50-day. The IWM has been up about 4.25% since March 24.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.

Based on the RSI and where we are in relation to the 50-day moving average, I still feel that this is a BUY.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

The REIT Special – An Inflation Hedge

In the premium editions of my newsletters, you know that I have been consistently touting the iShares Cohen & Steers REIT ETF (ICF) as a potential hedge against inflation.

In this REIT Special Edition, I will break down the WHY. But not, we aren’t going to just talk about the ICF ETF. We will dig into what specific real estate sectors you might want to consider when looking at REITs to invest in.

But first and foremost, what is a REIT, and why are they such strong bets right now?

Let’s just say, if you want to invest in real estate but do not necessarily have the capital, you will want to read on. If you don’t have the patience for illiquid assets like buildings, you will want to read on. And suppose you want the easiest, most convenient way to diversify your portfolio and add real estate exposure. You will want to read on.

A REIT, or real estate investment trust, is a company that owns, operates, or finances income-producing real estate assets. Think of REITs as mutual funds for real estate. REITs pool the capital of numerous investors.

For the most part, REITs trade on public exchanges like stocks, which makes them highly liquid, unlike physical real estate assets. But the thing I love most about REITs? They also almost mirror the consistent income streams you can get from real estate assets. REITs pay some of the best and most consistent dividends on the market. All while you as an investor don’t have to get your hands dirty and buy, manage, or finance the property.

REITs invest in almost every real estate sector. However, in this edition, we will focus specifically on multifamily, hospitality, industrial, and healthcare. Why? Multifamily and hospitality could see substantial recoveries after 2020. Industrial and healthcare had strong 2020s and could continue to succeed in 2021 and long after.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Multifamily

Figure 1- iShares Residential Real Estate ETF (REZ)

Multifamily or residential REITs own and operate apartment buildings and/or manufactured housing.

The most important factors to focus on when researching multifamily REITs are affordability, population growth, and job growth. For example, large cities such as New York and LA have higher living costs and more renters. But their job growth and population growth are severely lagging right now. You want large urban centers that show strong in-migration trends and job growth.

Figure 2: Marcus & Millichap Forecast

Consider the multifamily market in the Sunbelt and Mountain region. Even before COVID, there was a migration boom and significant employment growth, especially in the Sunbelt region. Plus, this region didn’t lock down as strictly as big cities like New York and LA and saw fewer job losses during the pandemic.

The Mountain region is also seeing a rapidly growing population, a strong quality-of-life, and affordable living costs. Do you know the ONLY state that saw year-over-year job growth for total nonfarm payrolls in January 2021 while also leading in year-to-date growth? Idaho .

While multifamily growth will be likely be fragmented based on region, there are two ways you can play this:

  1. Research individual REITs with the most exposure to growing regions.
  2. Add broad-based exposure to multifamily assets through ETFs like the iShares Residential Real Estate ETF (REZ) . While this ETF does not focus EXCLUSIVELY on residential REITs, as it has exposure to healthcare and self-storage, too, this is an easy and convenient way to give yourself multifamily exposure.

For more of my thoughts on REITs focusing on hospitality, office, industrial, and healthcare, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Markets Daily Recap: One Year From Stocks Bottom

Next edition of this newsletter, we’re going to do a special on REITs. We will discuss which real estate sectors could see significant recovery after a brutal 2020.

Which real estate sectors could be long-term solid bets? There are a few you might not be thinking of, and we will also discuss why REITs could be a great hedge against rising bond yields and inflation scares.

Do you realize what Tuesday (Mar. 23) marked? One year since the market bottomed. Can you believe that it’s already been a year? Calling it a roller coaster is an understatement.

One of the most crucial market concepts is that the market never looks back. It is a forward-looking instrument. Talking about the past as it relates to the market really doesn’t do anyone any good.

However, after the year we’ve had, it’s essential to take a breath, reflect, and see what lessons we can learn from.

Ethan Wolff-Mann, a Senior Writer for Yahoo! Finance, put out a great article, “ What we have learned in the 12 months since ‘the bottom ’” and discusses several key points:

  • ‘Every crisis is the same’
  • Panic can hurt a portfolio
  • You genuinely don’t know what’s going to happen
  • Rebalancing comes out as a huge winner

As we sit here a year later, we can finally see the light at the end of the tunnel. Vaccines are weeks away from being available to all adults over 16 in the U.S., while COVID numbers continue to drop. But we are still confronting the reality of a pandemic that is still raging in Europe and other parts of the world. Inflation signs are flashing, and unstable bond yields are scaring tech investors every few days. But keep the above lessons in mind.

My personal biggest takeaway from the last year that I have applied since the several market downturns we’ve had thus far in 2021? Nobody can predict the future and never ever try to time the market. Many investors a year ago didn’t stick it out through the volatility and lost out. Some panic sold near the bottom and never bought back in.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

A year after we bottomed, there is optimism but signs of concern. The market has to figure itself out. More volatility is likely, but I don’t think that a decline above ~20%, leading to a bear market, will happen any time soon.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Russell 2000– Time to Pounce?

Figure 1- iShares Russell 2000 ETF (IWM)

I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February. I also realized I may have broken my own rule about “not timing the market.” I’ve wanted to buy the Russell 2000 forever but never thought it dipped hard enough (whenever it did). I was waiting for it to at least approach a correction.

But once I looked at the iShares Russell 2000 ETF (IWM) chart, I had an epiphany. I noticed that almost every time it touched or minorly declined below its 50-day moving average, it reversed.

The chart does not lie. Look at it above. Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Fast forward to Tuesday (Mar. 23). The Russell 2000 saw its worst day since February 25- and I loved every second of it. I felt almost similar to how I felt over the weekend during March Madness when I correctly called 13 seed Ohio to upset 4 seed defending NCAA champion Virginia. Finally, after weeks of waiting for a time to pounce on the Russell 2000 and missing golden opportunities, I think the time has come. We’re back right below its 50-day.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.

I’m finally switching this to a BUY.

For more of my thoughts on the market, such as inflation fears and why I love emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Return of the Rising Yields

March Madness started on Thursday (Mar. 18), but stocks got the jump on their own brackets this week. Let’s dive in.

Although Wednesday (Mar. 17) saw the indices have a nice St. Patrick’s day green reversal thanks to Jay Powell babying us on inflation thoughts again, Mr. Market isn’t stupid. Manic, but not stupid. We saw a return to the strong rotation trend out of growth stocks the day after Powell’s testimony (Mar. 18).

Thursday (Mar. 18) saw bond yields surge to their highest levels in what seems like forever. The 10-year yield popped 11 basis points to 1.75% for the first time since January 2020, while the 30-year rate climbed 6 basis points and breached 2.5% for the first time since August 2019.

Predictably, the Nasdaq tanked by over 3% for its worst session in 3-weeks.

Jay Powell and bond yields are the most significant market movers in the game now. Get ready for the market next week when he testifies to Congress. That’ll be a beauty. What’s coronavirus anymore?

So after what’s been a relatively tame week for the indices, we can officially say bye-bye to that.

Bond yields, though, are still at historically low levels, and the Fed Funds Rate remains at 0%. With the Fed forecasting a successful economic recovery this year, with GDP growth of around 6.5% — the fastest in nearly four decades — the wheels could be in motion for another round of the Roaring ’20s.

The problem, though, is that the Great Depression came right after the first Roaring ’20s.

Many are sounding the alarm. However, like CNBC’s Jim Cramer, others think the current headwinds are overblown, and a mirror of the 2015-2016 downturn is based on similar catalysts.

Figure 1: Jim Cramer Twitter

Cramer argued that Powell is a talented central banker willing to “let the economy continue to gain strength so that everyone has a chance to do well.”

Nobody can predict the future, and these growth stock jitters from rising bond yields may be overblown. But for now, it’s probably best to let the market figure itself out and be mindful of the headwinds.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

There is optimism but signs of concern. The market has to figure itself out. A further downturn is possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen any time soon.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Nasdaq- Another Buyable Dip?

Figure 2- Nasdaq Composite Index $COMP

The last time I switched my Nasdaq call to a BUY on Feb 24 , that worked out very well. I will use the same criteria again for the Nasdaq as the market figures out bond yields: The RSI and the 13000 support level. I need the Nasdaq’s RSI to dip below 40 while also falling below 13000 before buying.

We’re not quite there. This is an excellent dip, but it’s really only one down day and its worst down day in weeks. I think we may have some more buying opportunities next week if bond yields pop due to Jay Powell’s testimony. I mean, it seemingly always happens after he speaks.

Pay very close attention to the index and its swings.

If the tech sector takes another big dip, don’t get scared, don’t time the market, monitor the trends I mentioned and look for selective buying opportunities. If we hit my buying criteria, selectively look into high-quality companies and emerging disruptive sub-sectors such as cloud computing, e-commerce, and fintech.

HOLD, and let the RSI and 13000-support level guide your Nasdaq decisions. See what happens over subsequent sessions, research emerging tech sectors and high-quality companies, and consider buying that next big dip.

For an ETF that attempts to correlate with the performance of the NASDAQ directly, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as a potentially overbought Dow Jones, small-caps, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Stock March Madness – Who you got?

Stocks will be hanging onto Jay Powell’s every word and every breath on Wednesday (Mar. 17) and scrutinize his thoughts on interest rates and inflation.

Pretty much, we’re the Fed’s hostages until this thing gets some clarity. Even if Powell says nothing, the markets will move. That’s just how it’s going to work.

Rick Rieder, BlackRock’s CIO for global fixed income, echoed this statement. “I think the last press conference, I think I watched with one eye and listened with one ear. This one I’m going to be tuned in to every word and the markets are going to be tuned in to every word. If he says nothing, it will move markets. If he says a lot, it will move markets.”

Jay Powell is the biggest market mover in the game now. What’s coronavirus anymore?

So far, it’s been a relatively tame week for the indices. The Nasdaq’s continued playing catch-up and has outperformed, while the Dow and S&P are still hovering around record highs.

The wheels are in motion for pent-up consumer spending and a strong stock rally. Plus, we have that $1.9 trillion stimulus package heating up the economy and an army of retail traders with an extra $1,400 to play with.

Inflation fears and surging bond yields are still a concern and have caused significant volatility for growth stocks. But let’s have a little perspective here. Plus, jobless claims beat estimates again and came in at 712,000. This is nearly the lowest they’ve been in a whole year. Last week’s inflation data also came in more tamer than expected.

But bonds yields still remain the market’s biggest wild card. Yes, yields are still at a historically low level, and the Fed Funds Rate remains 0%. But depending on how things go around 2 pm Wednesday (Mar. 17), yields could potentially pop again, reinvigorating the rotation into value and cyclical plays and out of tech and growth plays.

Time will tell what happens.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

There is optimism but signs of concern. The market has to figure itself out. A further downturn is possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen any time soon.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Russell 2000- Lessons Learned

Figure 1- iShares Russell 2000 ETF (IWM)

The Russell 2000 was the biggest laggard on Tuesday (Mar. 16). I think I’m starting to figure this index out, though, for a solid entry point.

I have been kicking myself for not calling BUY on the Russell after seeing a minor downturn when the markets got rocked in the second half of February. I may have broken my own rule about “not timing the market” also. I’ve wanted to buy the Russell 2000 badly forever but never thought it dipped hard enough (whenever it did). I was waiting for it to at least approach a correction.

But I think I figured out a pattern now. Notice what happened with the Russell almost every time it touched or minorly declined below its 50-day moving average. It reversed. Look at the above chart. Excluding the large crash and subsequent recovery in late-March and April 2020, 5 out of the last 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Now, look at the index. As tracked by iShares Russell 2000 ETF (IWM) , its rally since November and year-to-date have been mind-blowing. Pretty much, this is the one reason why I’m more cautious about buying the index.

Since the market’s close on October 30, the IWM has gained about 51.04% and more than doubled ETFs’ returns tracking the more major indices.

Not to mention, year-to-date, it’s already up 19.12% and around at an all-time high.

With that $1.9 trillion stimulus package set to greatly benefit small businesses, the Russell 2000 could pop even more.

Unfortunately, I’m keeping this a HOLD. But I am monitoring the Russell 2000 closely.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for. The next time the index approaches its 50-day moving average, I will be a little more aggressive.

For more of my thoughts on the market, such as tech, if small-caps are buyable, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Markets Weekly Recap: Big Trading Week for Stock Markets

The real story, though? We’ve still got the Dow, S&P, and Russell firmly at record highs.

This week should be full of excitement for the indexes. Will we see more record highs? Will the Nasdaq catch up and recover? How will the newly signed $1.9 trillion “America Rescue Plan” impact the market? Will inflation fears and accelerating bond yields spook investors again?

As you can see, there are clearly questions right now for stocks- despite the wheels in motion for pent-up consumer spending and a strong stock rally. Plus, we’ll start having many retail investors with an extra $1,400 to spend looking to have a little fun.

Inflation fears and surging bond yields are still a concern and have caused significant volatility for growth stocks. But let’s have a little perspective here. Bond yields are still at a historically low level, and the Fed Funds Rate remains 0%. Plus, jobless claims beat estimates again and came in at 712,000. This is nearly the lowest they’ve been in a whole year. Last week’s inflation data also came in more tamer than expected.

So what should you pay attention to this week?

More inflation data, jobless claims, and consumer sentiment will be released throughout the week, for one.

But pay incredibly close attention to the Fed. Bonds still remain the market’s biggest wild card. With the Fed meeting Tuesday and Wednesday, bond yields could take their cue from what they say. No action is expected to be taken, and the Fed is expected to indicate more substantial growth. Fed officials are also not expected to alter their interest rate outlook and may stick to the plan of keeping rates this low through 2023.

If this goes as expected, bond yields could potentially pop again, reinvigorating the rotation into value and cyclical plays and out of tech and growth plays.

Time will tell what happens.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

There is optimism but signs of concern. The market has to figure itself out. A further downturn is possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen any time soon.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Is the Dow *Gulp* Overbought?

Figure 1- Dow Jones Industrial Average $INDU

Not much new to report on this. Except for that, it keeps ticking up towards overbought territory and hitting record highs. Year-to-date, we’re now up about 7.1%- almost double what the S&P and Nasdaq have done so far this year.

It also managed to gain over 4% this past week.

I don’t feel that we’re buyable at all right now. If you have exposure, HOLD and let it ride. Maybe start to consider taking some profits too.

The index could greatly benefit from the stimulus package due to all of the cyclical stocks it holds. I can definitely foresee some pops in the index as investors digest the unprecedented amount of money being pumped into the economy, coupled with reopening excitement. But you can’t expect the index to keep going up like this and setting records every day. Plus, the RSI is almost 69 and showing overbought signs.

So, where do we go from here?

Many analysts believe the index could end the year at 35,000, and the wheels are in motion for a furious rally. But you could do better for a buyable entry point.

From my end, I’d prefer to stay patient, assess the situation, and find better buying opportunities.

My call on the Dow stays a HOLD, but we’re approaching SELL.

For an ETF that aims to correlate with the Dow’s performance, the SPDR Dow Jones ETF (DIA) is a reliable option.

For more of my thoughts on the market, such as tech, if small-caps are buyable, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Market Daily Recap: Stock Records Were Made to be Broken

Every index closed in positive territory, and the Dow, S&P, and Russell all closed at record highs. Meanwhile, the Nasdaq led the way again with a 2.52% gain. After touching correction territory two times in the last week, the Nasdaq is up over 6.3% for the week. This is why you buy the dips, and why I said the second, the Nasdaq drops below 13000 support that you should buy.

Be bold, a little contrarian, block out the noise, and never try to time the market. Sure, when you buy a dip during uncertain times, you run the risk of encountering more pain. However, in the long-term, stocks trend upwards.

For example, do you also know what happened precisely a year ago, on March 11, 2020? The headline on CNBC read like so: Dow plunges 10% amid coronavirus fears for its worst day since the 1987 market.

You know what else happened? The market didn’t bottom for another 2 weeks and declined another 21%.However, if you bought the Dow-tracking DIA ETF on March 11 and held it this entire time, you’d have gained 40.51%.

Imagine if you bought the dip as I recommended for tech.

I cautiously said to BUY the QQQ ETF, which tracks the Nasdaq, on February 24 but recommended doing it cautiously and selectively. I doubled down once it dropped below support at 13000 and tripled down once the Nasdaq hovered around 12600 on Monday (Mar. 8).

As I said before, the Nasdaq is up over 6.3% this week. If you followed my lead on this, you’d be pleased.

Inflation fears and the acceleration of bond yields are still a concern. But let’s have a little perspective here. It appears as if things have stabilized for now. Bond yields are still at a historically low level, and the Fed Funds Rate remains 0%. Plus, jobless claims beat estimates again and came in at 712,000. This is nearly the lowest they’ve been in a whole year.

We will see how President Biden’s newly signed $1.9 trillion stimulus package affects yields and inflation. But for now, with the Fed showing no signs of hiking rates shortly and inflation looking tamer than expected, we could see more firepower for stocks.

So is the downturn overblown and already finished?

Time will tell. I think that we could still see some volatile movements and consolidation to close the week out. That’s just what happens with surges and swings like this. While I maintain that I do not foresee a crash like what we saw last March and feel that the wheels remain in motion for an excellent 2021, Mr. Market still has to figure itself out.

A broad-based correction of some sort is still very possible. I mean, the Nasdaq’s already hit correction territory twice in the last week. Corrections are healthy and normal market behavior. Only twice in the previous 38 years have we had years WITHOUT a correction (1995 and 2017).

Most importantly, a correction right now would be an excellent buying opportunity. Once again- look at the Nasdaq since March 8.

It can be a very tricky time for investors right now. But never, ever, trade with emotion. There could be some more short-term pain, yes. But if you sat out last March when others bought, you are probably very disappointed in yourself.

You can never time the market.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

There is optimism but signs of concern. The market has to figure itself out. A further downturn is possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen any time soon.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Nasdaq- That’s Why I Called BUY

Figure 1- Nasdaq Composite Index $COMP

Can I flex again, please?

Flexing.

The Nasdaq’s performance this week is why I called BUY despite hitting two corrections in the last week. On Tuesday (Mar. 9), the Nasdaq saw its best day since November. The index’s gains continued after that and is now sitting pretty up over 6.3% for the week.

If you bought the dip, good on you. It’s an excellent time to be a little bit bold and fearless. Take Ark Funds guru Cathie Wood, for example. Many old school investors scoffed at her comments on Monday (Mar. 8) after she practically doubled down on her bullishness for her funds and the market as a whole. After crushing 2020, her Ark Innovation Fund (ARKK) tanked over 30%. Many called her the face of a bubble. Many laughed at her. Tuesday, March 9, ARKK saw its best day in history. Week-to-date, ARKK is up a staggering 16.71%.

I’m not saying that we’re out of the woods with tech. But I am saying not to try and time the market, not get scared, and have some perspective.

The Nasdaq is once again positive for the year, but unfortunately, I no longer think we’re at a BUY level. We could see some consolidation and profit-taking to end the week. Still, if we see a significant drop, especially below 13000, it could be a good buy again. It can’t hurt to keep nibbling- we’re still off the highs. I’m going to stick with the theme of “selectively buying” sub-sectors such as cloud computing, e-commerce, and fintech.

I think you should now HOLD and let the RSI guide your Nasdaq decisions. See what happens over subsequent sessions, research emerging tech sectors, and high-quality companies, and buy that next dip.

For an ETF that attempts to correlate with the performance of the NASDAQ directly, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as when small-caps will be buyable, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Markets Daily Recap: That’s Why You Buy the Dips

Days like Tuesday (Mar. 9) are why you buy the dips. It was nothing short of a reverse rotation from what we’ve seen as of late. Bond yields moved lower; tech stocks popped.

That’s why I called BUY on the Nasdaq.

Inflation fears and the acceleration of bond yields are still a concern. But it looks as if things are stabilizing, at least for one day. The lesson here, though, is to be bold, a little contrarian, and block out the noise.

Unless you’ve been living under a rock, you know that recent sessions have been characterized by accelerating bond yields driving a rotation out of high growth tech stocks into value and cyclical stocks that would benefit the most from an economic recovery. The Nasdaq touched correction territory twice in the last week and gave up its gains for the year.

But imagine if you bought the dip as I recommended.

The Nasdaq on Tuesday (Mar. 9) popped 3.7% for its best day since November. Cathie Wood’s Ark Innovation ETF (ARKK) surged more than 10% for its best day ever after tanking by over 30%. Semiconductors also rallied 6%.

Other tech/growth names had themselves a day too: Tesla (TSLA) +20%, Nvidia (NVDA) +8%, Adobe (ADBE) +4.3%, Amazon +3.8%, Apple (AAPL) +4.1%, and Facebook (FB) +4.1%.

In keeping with the theme of buying the dip, do you also know what happened a year ago yesterday to the date? The Dow tanked 7.8%!

There’s no way to time the market correctly. If you bought the Dow mirroring SPDR DJIA ETF (DIA) last March 9, you’d have still seen two weeks of pain until the bottom. However, you’d have also seen a gain of almost 36% if you bought that dip and held on until now.

Look, I get there are concerns and fears right now. The speed at which bond yields have risen is concerning, and the fact that another $1.9 trillion is about to be pumped into a reopening economy makes inflation a foregone conclusion. But let’s have a little perspective here.

Bond yields are still at a historically low level, and the Fed Funds Rate remains 0%.

So is the downturn overblown and already finished?

Time will tell. I think that we could still see some volatile movements over the next few weeks as bond yields stabilize and the market figures itself out. While I maintain that I do not foresee a crash like what we saw last March and feel that the wheels remain in motion for an excellent 2021, Mr. Market has to figure itself out.

A correction of some sort is still very possible. I mean, the Nasdaq’s already hit correction territory twice in the last week and is still about 3-4% away from returning to one. But don’t fret. Corrections are healthy and normal market behavior. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

Most importantly, a correction right now would be an excellent buying opportunity. Just look at the Nasdaq Tuesday (Mar. 9).

It can be a very tricky time for investors right now. But never, ever, trade with emotion. Buy low, sell high, and be a little bit contrarian. There could be some more short-term pain, yes. But if you sat out last March when others bought, you are probably very disappointed in yourself. Be cautious, but be a little bold too.

You can never time the market.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

There is optimism but signs of concern. The market has to figure itself out. A further downturn is possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen any time soon.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Nasdaq- That’s Why I Called BUY

Figure 1- Nasdaq Composite Index $COMP

For the second time in a week, the Nasdaq hit correction territory and rocketed out of it. It saw its best day since November and proved once again that with the Nasdaq, you always follow the RSI. There could be more uncertainty over the next few weeks as both the bond market and equity market figure themselves out. However, the Nasdaq declines were very buyable, as I predicted.

If you bought the dip before Tuesday’s (Mar. 9) session, good on you. Be a little bit bold and fearless right now. Take Ark Funds guru Cathie Wood, for example. Many old school investors scoffed at her comments on Monday (Mar. 8) after she practically doubled down on her bullishness for her funds and the market as a whole. After crushing 2020, her Ark Innovation Fund (ARKK) tanked over 30%. Many called her the face of a bubble. Many laughed at her.

Tuesday, March 9, ARKK saw its best day in history.

I’m not saying that we’re out of the woods with tech. All I’m saying is don’t try to time the market, don’t get scared and have perspective.

The Nasdaq is once again roughly flat for the year, its RSI is closer to oversold than overbought, and we’re still below the 50-day moving average, near a 2-month low, and right around support at 13000.

It can’t hurt to start nibbling now. There could be some more short-term pain, but if you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.

I think the key here is to “selectively buy.” I remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.

Mike Wilson , chief investment officer at Morgan Stanley, had this to say about recent tech slides- “I don’t think this is the end of the bull market or the end of tech stocks per se, but it was an adjustment that was very necessary.”

I like the levels we’re at, and despite the possibility of more “adjustments” in the short-run, it’s a good time to BUY. But just be mindful of the RSI, and don’t buy risky assets. Find emerging tech sectors or high-quality companies trading at a discount.

For an ETF that attempts to correlate with the performance of the NASDAQ directly, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as when small-caps will be buyable, more thoughts on inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Markets Daily Recap: Is the Pain Over?

The theme of last week was primarily the same as the previous few weeks- rising bond yields and inflation fears caused stocks to crumble.

Look, it’s not the fact that bond yields are rising that are freaking out investors. Bond yields are still at a historically low level, and the Fed Funds Rate remains 0%. But it’s the speed at which they’ve risen that are terrifying people. So far this year, the 10-year yield has soared 72%

Fed Chair Jay Powell’s statement that inflation could “temporarily return” did not help matters much last week either. However, despite the fears, the indices really did not perform all that badly the previous week after a Friday (Mar. 5) reversal. The Dow Jones managed to gain 1.8%, the S&P eked out a 0.8% gain, and after briefly touching correction territory and giving up its gains for the year, the Nasdaq managed to decline only -2.1%.

So what’s on tap for this week? Is the downturn overblown and already over?

This is a massive week for market sentiment. The Senate, first and foremost, passed President Biden’s $1.9 trillion stimulus plan over the weekend. On the one hand, stocks could pop from this. On the other hand, this makes inflation a foregone conclusion. Remember this, too- when the market gets what it expects, it’s usually a sell signal rather than a buy signal. Markets look forward. Not to the past, and not to the present.

Important data being released this week also includes inflation data, initial claims, and consumer sentiment.

Time will tell where we go from here. While I still do not foresee a crash like we saw last March and feel that the wheels remain in motion for a healthy 2021, inflation is a genuine concern and could be here already.

According to Bloomberg , the price of gas and food already appear to be getting a head start on inflation. For January, Consumer Price Index data also found that the cost of food eaten at home rose 3.7 percent from a year ago — more than double the 1.4 percent year-over-year increase in all goods included in the CPI.

This could only be the start too. In its 2021 outlook report, the Economic Research Service for the U.S. Department of Agriculture forecast the food cost from grocery stores to rise 1 to 2% this year.

Moody’s Analytics chief economist Mark Zandi also believes that Wall Street is significantly underestimating inflation’s seriousness and warns it could affect every sector in the market — from growth to cyclicals.

“Inflationary pressures will develop very quickly,” he said. “I don’t think there’s any shelter here.”

I’m not trying to sound the alarm- but be very aware. These are just the early warning signs.

I still feel that a correction of some sort is imminent. The Nasdaq touched it briefly last week and is still about 2% away from one. Other indices could possibly follow. But don’t fret. Corrections are healthy and normal market behavior, and we have been long overdue for one. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

Most importantly, this correction could be an excellent buying opportunity.

It can be a very tricky time for investors right now. But never, ever, trade with emotion. Buy low, sell high, and be a little bit contrarian. There could be some more short-term pain, yes. But if you sat out last March when others bought, you are probably very disappointed in yourself. Be cautious, but be a little bold too.

There’s always a bull market somewhere, and valuations, while still somewhat frothy, are at much more buyable levels now.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

There is optimism but signs of concern. A further downturn by the end of the month is very possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Nasdaq- Buyable but Beware of the Risks

Figure 1- Nasdaq Composite Index $COMP

The Nasdaq is no longer in correction territory, nor is it negative for 2021 any longer. But beware- this could change very quickly. More pain could be on the horizon until we get some clarity on this bond market and inflation. However, this Nasdaq downturn is long overdue and starting to be buyable.

If you bought at the bottom on Friday before the afternoon reversal and made some quick gains, good on you. It actually didn’t end up being THAT bad of a week for the Nasdaq after Friday’s (Mar. 5) reversal.

Be that as it may, Friday’s (Mar. 5) reversal does not mean we’re out of the woods. According to Morgan Stanley’s chief U.S. equity strategist Mike Wilson , “10-year yields finally caught up to other asset markets. This is putting pressure on valuations, especially for the most expensive stocks that had reached nosebleed valuations.”

Expensive stocks? Nosebleed valuations? Sounds like tech to me.

Wilson also said that once valuation correction and repositioning are finished, then growth stocks can potentially “rejoin the party.”

The Nasdaq is now mostly flat for the year, its RSI is closer to oversold than overbought, and we’re at almost a 2-month low.

It can’t hurt to start nibbling now. There could be some more short-term pain, but if you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.

I think the key here is to “selectively buy.” I remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.

I also think it’s an outstanding buying opportunity for big tech companies with proven businesses and solid balance sheets. Take Apple (AAPL), for example. It’s about 15% off its January 26th highs. That is what I call discount shopping.

I like the levels we’re at, and despite the possibility of more losses in the short-run, it’s a good time to start to BUY. But just be mindful of the RSI, and don’t buy risky assets. Find emerging tech sectors or high-quality companies trading at a discount.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as when small-caps will be buyable, more thoughts on inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Correction for Nasdaq- More Indices to Follow?

Well, I was right to doubt him. The market didn’t like his change in tone Thursday (Mar. 5).

You see, when bond yields are rising as fast as they have, and Powell is maintaining that Fed policy won’t change while admitting that inflation may ” return temporarily ,” how are investors supposed to react? On the surface, this may not sound like a big deal. But there are six things to consider here:

  1. It’s a significant backtrack from saying that inflation isn’t a concern. By admitting that inflation “could” return temporarily, that’s giving credence to the fact that it’s inevitable.
  2. The Fed can’t expect to let the GDP scorch without hiking rates. If inflation “temporarily returns,” who is to say that rates won’t hike sooner than anyone imagines?
  3. Fool me once, shame on me, fool me twice…you know the rest. If Powell changed his tune now about inflation, what will he do a few weeks or months from now when it really becomes an issue?
  4. Does Jay Powell know what he’s doing, and does he have control of the bond market?
  5. A reopening economy is a blessing and a curse. It’s a blessing for value plays and cyclicals that were crushed during COVID and a curse for high-flying tech names who benefitted from “stay-at-home” and low-interest rates.
  6. The Senate will be debating President Biden’s $1.9 trillion stimulus plan. If this passes, as I assume it will, could it actually be worse for the economy than better? Could markets sell-off rather than surge? Once this passes, inflation is all but a formality.

Look, it’s not the fact that bond yields are rising that are freaking out investors. Bond yields are still at a historically low level, and the Fed Funds Rate remains 0%. But it’s the speed at which they’ve risen that are terrifying people.

According to Bloomberg , the price of gas and food already appear to be getting a head start on inflation. For January, Consumer Price Index data also found that the cost of food eaten at home rose 3.7 percent from a year ago — more than double the 1.4 percent year-over-year increase in all goods included in the CPI.

The month of January. Can you imagine what this was like for February? Can you imagine what it will be like for March?

I’m not trying to sound the alarm- but be very aware. These are just the early warning signs.

So, where do we go from here? Time will tell. While I still do not foresee a crash like we saw last March and feel that the wheels remain in motion for a healthy 2021, that correction that I’ve been calling for has already started for the Nasdaq. Other indices could potentially follow.

Finally.

Corrections are healthy and normal market behavior, and we have been long overdue for one. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

Most importantly, this correction could be an excellent buying opportunity.

It can be a very tricky time for investors right now. But never, ever, trade with emotion. Buy low, sell high, and be a little bit contrarian. There could be some more short-term pain, yes. But if you sat out last March when others bought, you are probably very disappointed in yourself. Be careful, but be a little bold right now too.

There’s always a bull market somewhere, and valuations, while still somewhat frothy, are at much more buyable levels now.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

There is optimism but signs of concern. A further downturn by the end of the month is very possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Nasdaq– From Overbought to Oversold in 3 Weeks?

Figure 1- Nasdaq Composite Index $COMP

The Nasdaq is finally in correction territory! I have been waiting for this. It’s been long overdue and valuations, while still frothy, are much more buyable. While more pain could be on the horizon until we get some clarity on this bond market and inflation, its drop below 13000 is certainly buyable.

The Nasdaq has also given up its gains for 2021, its RSI is nearly oversold at about 35, and we’re almost at a 2-month low.

It can’t hurt to start nibbling now. There could be some more short-term pain, but if you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.

Plus, it’s safe to say that Cathie Wood, the guru of the ARK ETFs, is the best growth stock picker of our generation. Bloomberg News ’ editor-in-chief emeritus Matthew A. Winkler seems to think so too. Her ETFs, which have continuously outperformed, focus on the most innovative and disruptive tech companies out there. Not to put a lot of stock in one person. But it’s safe to say she knows a thing or two about tech stocks and when to initiate positions- and she did a lot of buying the last few weeks.

I think the key here is to “selectively buy.” I remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.

I also think it’s an outstanding buying opportunity for big tech companies with proven businesses and solid balance sheets. Take Apple (AAPL), for example. It’s about 30% off its all-time highs. That is what I call discount shopping.

What’s also crazy is the Nasdaq went from overbought 3 weeks ago to nearly oversold this week. The Nasdaq has been trading in a clear RSI-based pattern, and we’re at a very buyable level right now.

I like the levels we’re at, and despite the possibility of more losses in the short-run, it’s a good time to start to BUY. But just be mindful of the RSI, and don’t buy risky assets. Find emerging tech sectors or high-quality companies trading at a discount.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Markets Daily Recap: Mixed Start for Stocks in March

At least Rocket Mortgage (RKT) had a good day, though! And, at least the 10-year yield didn’t spike either. But that could change. Yields ticked up overnight to 1.433%, after President Biden pledged enough vaccine supply to inoculate every American adult by the end of May.

So, where do we go from here? This positive economic and health news is excellent for reopening. But rising bond yields are a blessing and a curse. On the one hand, bond investors see the economy reopening and heating up. On the other hand, with the Fed expected to let the GDP scorch without hiking rates, inflation may return.

I don’t care what Chairman Powell says about inflation targets this and that. The price of gas and food is increasing already. In fact, according to Bloomberg, food prices are soaring faster than inflation and incomes.

For January, Consumer Price Index data also found that the cost of food eaten at home rose 3.7 percent from a year ago — more than double the 1.4 percent year-over-year increase in the prices of all goods included in the CPI.

Can you imagine what this was like for February? Can you imagine what it will be like for March? I’m not trying to sound the alarm – but be very aware. These are just the early warning signs.

So about March. Will it be more like Monday or Tuesday? Was the second half of February the start of the correction that I’ve been calling for? Or is the “downturn” already over? Only time will tell. While I still do not foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of this month could happen.

Rising bond yields are concerning. Inflation signs are there. But structurally, I don’t think it will crash the market (yet).

Corrections are also healthy and normal market behavior, and we are long overdue for one. It’s been almost a year now. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

There is optimism but signs of concern. A further downturn by the end of the month is very possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Nasdaq- a Buyable Slowdown?

Figure 1- Nasdaq Composite Index $COMP

The Nasdaq’s slowdown has been long overdue. Even though more pain could be on the horizon, I like the Nasdaq at this level for some buying opportunities.

But I’d prefer it drop below support at 13000 for real buying opportunities.

But it can’t hurt to start nibbling now. If you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.

Plus, it’s safe to say that Cathie Wood, the guru of the ARK ETFs, is the best growth stock picker of our generation. Bloomberg News ’ editor-in-chief emeritus Matthew A. Winkler seems to think so too. Her ETFs, which have continuously outperformed, focus on the most innovative and disruptive tech companies out there. Not to put a lot of stock in one person. But it’s safe to say she knows a thing or two about tech stocks and when to initiate positions- and she did a lot of buying the last few weeks.

I also remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.

Before February 12, I would always discuss the Nasdaq’s RSI and recommend watching out if it exceeds 70.

Now? As tracked by the Invesco QQQ ETF , the Nasdaq has plummeted almost 5.5% since February 12 and is closer to oversold than overbought!

But it’s still not enough.

Outside of the Russell 2000, the Nasdaq has been consistently the most overheated index. But after its recent slowdown, I feel more confident in the Nasdaq as a SHORT-TERM BUY.

The RSI is king for the Nasdaq . Its RSI is now around 45.

I follow the RSI for the Nasdaq religiously because the index is merely trading in a precise pattern.

In the past few months, when the Nasdaq has exceeded an overbought 70 RSI, it has consistently sold off.

  • December 9- exceeded an RSI of 70 and briefly pulled back.
  • January 4- exceeded a 70 RSI just before the new year and declined 1.47%.
  • January 11- declined by 1.45% after exceeding a 70 RSI.
  • Week of January 25- exceeded an RSI of over 73 before the week and declined 4.13% for the week.

Again- if the index drops below 13000, and the RSI hits undeniably overbought levels, get on the train.

But because we haven’t declined just enough, I am making this a SHORT-TERM BUY. But follow the RSI literally and take profits once you have the chance to.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA

Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

US Stock Market Daily Recap: Worst for Stocks Over?

The way that bond yields have popped has weighed heavily on growth stocks. Outside of seeing a minor comeback on Friday (Feb. 26), the Nasdaq dropped almost 7% between February 12 and Friday’s (Feb. 26) close.

Other indices didn’t fare much better either.

The spike bond yields, however, in my view, are nothing more than a catalyst for stocks to cool off and an indicator of some medium to long-term concerns. But calling them a structural threat is a bit of an overstatement.

Rising bond yields are a blessing and a curse. On the one hand, bond investors see the economy reopening and heating up. On the other hand, with the Fed expected to let the GDP heat up without hiking rates, inflation may return.

I don’t care what Chairman Powell says about inflation targets this and that. He can’t expect to keep rates this low, buy bonds, permit money to be printed without a care, and have the economy not overheat.

He may not have a choice but to hike rates sooner than expected. If not this year, then in 2022. I no longer buy all that talk about keeping rates at 0% through 2023. It just can’t happen if bond yields keep popping like this.

So was the second half of February the start of the correction that I’ve been calling for? Or is this “downturn” already over?

Time will tell. While I still do not foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of this month could happen.

Corrections are also healthy and normal market behavior, and we are long overdue for one. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017), and we haven’t seen one in almost a year.

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

Pay attention to several things this week. The PMI composite, jobs data, and consumer credit levels will be announced this week.

We have more earnings on tap this week too. Monday (March 1), we have Nio (NIO) and Zoom (ZM), Tuesday (March 2) we have Target (TGT) and Sea Limited (SE), Wednesday (March 3), we have Okta (OKTA) and Snowflake (SNOW), and Thursday (March 3) we have Broadcom (AVGO).

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

The downturn we experienced to close out February could be the start of a short-term correction- or it may be a brief slowdown. A further downturn by the end of the month is very possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Nasdaq- a Buyable Slowdown?

Figure 1- Nasdaq Composite Index $COMP

The Nasdaq’s downturn was so overdue. Even though more pain could be on the horizon, I like the Nasdaq at this level for some buying opportunities.

If more losses come and the tech-heavy index dips below support at 13000, then it could be an even better buying opportunity. It can’t hurt to start nibbling now, though. If you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.

Plus, if Cathie Wood, the guru of the ARK ETFs that have continuously outperformed, did a lot of buying the last two weeks, it’s safe to say she knows a thing or two about tech stocks and when to initiate positions. Bloomberg News ’ editor-in-chief emeritus Matthew A. Winkler wouldn’t have just named anyone the best stock picker of 2020.

Before February 12, I would always discuss the Nasdaq’s RSI and recommend watching out if it exceeds 70.

Now? As tracked by the Invesco QQQ ETF , the Nasdaq has plummeted almost 7% since February 12 and is closer to oversold than overbought. !

While rising bond yields are concerning for high-flying tech stocks, I, along with much of the investing world, was somewhat comforted by Chairman Powell’s testimony last week (even if I don’t totally buy into it). Inflation and rate hikes are definitely a long-term concern, but for now, if their inflation target isn’t met, who’s to fight the Fed?

Outside of the Russell 2000, the Nasdaq has been consistently the most overheated index. But after its recent slowdown, I feel more confident in the Nasdaq as a SHORT-TERM BUY.

The RSI is king for the Nasdaq . Its RSI is now around 40.

I follow the RSI for the Nasdaq religiously because the index is merely trading in a precise pattern.

In the past few months, when the Nasdaq has exceeded an overbought 70 RSI, it has consistently sold off.

  • December 9- exceeded an RSI of 70 and briefly pulled back.
  • January 4- exceeded a 70 RSI just before the new year and declined 1.47%.
  • January 11- declined by 1.45% after exceeding a 70 RSI.
  • Week of January 25- exceeded an RSI of over 73 before the week and declined 4.13% for the week.

I like that the Nasdaq is almost at its support level of 13000, and especially that it’s below its 50-day moving average now.

I also remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.

Because of the Nasdaq’s precise trading pattern and its recent decline, I am making this a SHORT-TERM BUY. But follow the RSI literally.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Markets Daily Recap: Finally the Stock Market Tanks

Surging bond yields continues to weigh on tech stocks. When the 10-year yield pops by 20 basis points to reach a 1-year high, that will happen.

Tuesday (Feb. 23) saw the Dow down 360 points at one point, and the Nasdaq down 3% before a sharp reversal that carried to Wednesday (Feb. 24).

Thursday (Feb. 25) was a different story and long overdue.

Overall, the market saw a broad sell-off with the Dow down over 550 points, the S&P falling 2.45%, the Nasdaq tanking over 3.50%, and seeing its worst day since October, and the small-cap Russell 2000 shedding 3.70%.

Rising bond yields are a blessing and a curse. On the one hand, bond investors see the economy reopening and heating up. On the other hand, with the Fed expected to let the GDP heat up without hiking rates, say welcome back to inflation.

I don’t care what Chairman Powell says about inflation targets this and that. He can’t expect to keep rates this low, buy bonds, permit money to be printed without a care, and have the economy not overheat.

He may not have a choice but to hike rates sooner than expected. If not this year, then in 2022. I no longer buy all that talk about keeping rates at 0% through 2023. It just can’t happen if bond yields keep popping like this.

This slowdown, namely with the Nasdaq, poses some desirable buying opportunities. The QQQ ETF, which tracks the Nasdaq is down a reasonably attractive 7% since February 12. But there still could be some short-term pressure on stocks.

That correction I’ve been calling for weeks? It may have potentially started, especially for tech. While I don’t foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of March could happen.

I mean, we’re already about 3% away from an actual correction in the Nasdaq…

Bank of America also echoed this statement and said, “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and as good as it gets’ earnings revisions.”

Look. This has been a rough week. But don’t panic, and look for opportunities. We have a very market-friendly monetary policy, and corrections are more common than most realize.

Corrections are also healthy and normal market behavior, and we are long overdue for one. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017), and we haven’t seen one in a year.

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Nasdaq- To Buy or Not to Buy?

Figure 1- Nasdaq Composite Index $COMP

This downturn is so overdue. More pain could be on the horizon, but this road towards a correction was needed for the Nasdaq.

Before February 12, I would always discuss the Nasdaq’s RSI and recommend watching out if it exceeds 70.

Now? As tracked by the Invesco QQQ ETF , the Nasdaq has plummeted by nearly 7% since February 12 and is trending towards oversold levels! I hate to say I’m excited about this recent decline, but I am.

While rising bond yields are concerning for high-flying tech stocks, I, along with much of the investing world, was somewhat comforted by Chairman Powell’s testimony the other day (even if I don’t totally buy into it). Inflation and rate hikes are definitely a long-term concern, but for now, if their inflation target isn’t met, who’s to fight the Fed?

Outside of the Russell 2000, the Nasdaq has been consistently the most overheated index. But after its recent slowdown, I feel more confident in the Nasdaq as a SHORT-TERM BUY.

The RSI is king for the Nasdaq . Its RSI is now under 40, which makes it borderline oversold.

I follow the RSI for the Nasdaq religiously because the index is simply trading in a precise pattern.

In the past few months, when the Nasdaq has exceeded an overbought 70 RSI, it has consistently sold off.

  • December 9- exceeded an RSI of 70 and briefly pulled back.
  • January 4- exceeded a 70 RSI just before the new year and declined 1.47%.
  • January 11- declined by 1.45% after exceeding a 70 RSI.
  • Week of January 25- exceeded an RSI of over 73 before the week and declined 4.13% for the week.

I like that the Nasdaq is almost the 13100-level, and especially that it’s below its 50-day moving average now.

I also remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.

Because of the Nasdaq’s precise trading pattern and its recent decline, I am making this a SHORT-TERM BUY. But follow the RSI literally.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Market Daily Recap: Shortest Stock Correction Ever

It was an overdue plummet- at least that’s what I thought at the start of the day. The Dow was down 360 points at one point, and the Nasdaq was down 3%.

But by the end of the day, Jay Powell played the role of Fed Chair and investor therapist and eased the fears of the masses.

The Dow closed up, the S&P snapped a 5-day losing streak, and the Nasdaq only closed down a half of a percent!

You really can’t make this up.

The day started gloomily with more fears from rising bond yields.

Sure, the rising bonds signal a return to normal. But they also signal inflation and rate hikes from the Fed.

But Powell said “not so fast” and eased market fears.

“Once we get this pandemic under control, we could be getting through this much more quickly than we had feared, and that would be terrific, but the job is not done,” Powell said .

He also alluded to the Fed maintaining its commitment to buy at least $120 billion a month in U.S. Treasuries and agency mortgage-backed securities until “substantial further progress is made with the recovery.

While the slowdown (I’d stop short of calling it a “downturn”) we’ve seen lately, namely with the Nasdaq, poses some desirable buying opportunities, there still could be some short-term pressure on stocks. That correction I’ve been calling for weeks may have potentially started, despite the sharp reversal we saw today.

Yes, we may see more green this week. But while I don’t foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of Q1 could happen.

Bank of America also echoed this statement and said, “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and as good as it gets’ earnings revisions.”

With more earnings on tap for this week with Nvidia (NVDA) on Wednesday (Feb. 24) and Virgin Galactic (SPCE) and Moderna (MRNA) on Thursday (Feb. 25), buckle up.

The rest of this week could get very interesting.

Look. Don’t panic. We have a very market-friendly monetary policy, and corrections are more common than most realize. Corrections are also healthy and normal market behavior, and we are long overdue for one. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017), and we haven’t seen one in a year.

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

 Nasdaq- To Buy or Not to Buy?

Figure 1- Nasdaq Composite Index $COMP

What a difference a few weeks can make!

Before, I was talking about the Nasdaq’s RSI and to watch out if it exceeds 70.

Now? As tracked by the Invesco QQQ ETF , the Nasdaq has plummeted by 4.5% since February 12 and is trending towards oversold levels! I hate to say I’m excited about this recent decline, but I am. This has been long overdue, and I’m sort of disappointed it didn’t end the day lower.

Now THAT would’ve been a legit buying opportunity.

While rising bond yields are concerning for high-flying tech stocks, I, along with much of the investing world, was somewhat comforted by Chairman Powell’s testimony. Inflation and rate hikes are definitely a long-term concern, but for now, if their inflation target isn’t met, who’s to fight the Fed?

Outside of the Russell 2000, the Nasdaq has been consistently the most overheated index. But after today, I feel more confident in the Nasdaq as a SHORT-TERM BUY.

But remember. The RSI is king for the Nasdaq . If it pops over 70 again, that makes it a SELL in my book.

Why?

Because the Nasdaq is trading in a precise pattern.

In the past few months, when the Nasdaq has exceeded 70, it has consistently sold off.

  • December 9- exceeded an RSI of 70 and briefly pulled back.
  • January 4- exceeded a 70 RSI just before the new year and declined 1.47%.
  • January 11- declined by 1.45% after exceeding a 70 RSI.
  • Week of January 25- exceeded an RSI of over 73 before the week and declined 4.13% for the week.

I like that the Nasdaq is below the 13500-level, and especially that it’s below its 50-day moving average now. I also remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.

But the pullback hasn’t been enough.

Because of the Nasdaq’s precise trading pattern and its recent decline, I am making this a SHORT-TERM BUY. But follow the RSI literally.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Stock Market Daily Recap: The Yield Harbinger for Stocks

That correction I’ve been calling for weeks could have potentially started.

While I don’t foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of Q1 could happen.

Bank of America also echoed this statement and said last week that “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and as good as it gets’ earnings revisions.”

But rather than looking at the past, let’s take a look at what’s on tap this week to get you ready for what could potentially be a volatile week ahead.

This coming week, be on the lookout for the January leading indicator index, durable goods orders, and personal income and spending.

On Tuesday, we will also receive the February Consumer Confidence Index; on Wednesday, the Census Bureau will release upcoming home sales. On Friday, the University of Michigan will release its Consumer Sentiment Index.

Of course, as we’ve seen in weeks past, jobless claims from the previous week will be announced on Thursday too. After outperforming the last few weeks, the jobless claims announced last Thursday (Feb. 18) grossly underperformed and reached their worst levels in nearly a month.

Earnings season has been outstanding but is winding down now. Be on the lookout this week for earnings from Royal Caribbean (RCL) on Monday (Feb. 22), Square (SQ) on Tuesday (Feb. 23), Nvidia (NVDA) on Wednesday (Feb. 24), and Virgin Galactic (SPCE) and Moderna (MRNA) on Thursday (Feb. 25).

We have the makings of a volatile week, and as I mentioned before, a possible correction.

Look. Don’t panic. We have a very market-friendly monetary policy, and corrections are more common than most realize. Corrections are also healthy and normal market behavior, and we are long overdue for one. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017), and we haven’t seen one in a year.

While it won’t happen for sure, I feel like it’s inevitable because of how much we have surged over the last few months.

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Will the Russell 2000 Overheat Again?

Figure 1- iShares Russell 2000 ETF (IWM)

The Russell 2000 popped on Friday (Feb. 19) after seeing a bit of a pullback since February 9. Between February 9 and the close on February 18, the Russell 2000 lagged behind the other indices after significantly overheating. I switched my call to a SELL then on the 9th, and it promptly declined by 3.40% before Friday’s session.

I foresaw the pullback but cautiously saw a rally and switched to a HOLD call before it popped over 2% on Friday (Feb. 19).

I do love small-caps for 2021, and I liked the decline before Friday. However, I feel like the index needs a minimum decline of 5% from its highs before switching it to a BUY.

As tracked by the iShares Russell 2000 ETF (IWM) , small-cap stocks have been on a rampage since November.

Since the market’s close on October 30, the IWM has gained nearly 47.56% and more than doubled ETFs’ returns tracking the larger indices. If you thought that the Nasdaq was red hot and frothy, you have no idea about the Russell 2000.

Not to mention, year-to-date, it’s already up a staggering 16.38%.

It pains me not to recommend you to BUY the Russell just yet. I love this index’s outlook for 2021. Aggressive stimulus, friendly policies, and a reopening world could bode well for small-caps. Consumer spending, especially for small-caps, could be very pent-up as well.

But we just need to hold on and wait for it to cool down just a little bit more for a better entry point.

HOLD. If and when there is a deeper pullback, BUY for the long-term recovery.

For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Got Bond Concerns?

The sentiment remains mostly rosy thanks to earnings that continue to impress, plummeting virus numbers worldwide, indicators that the economic recovery is gaining steam, and imminent stimulus.

But we’re not out of the woods yet, and I still worry about complacency and valuations.

But now, you can add one more concern to the list- rising bond yields.

On Tuesday (Feb. 16), the 10-year Treasury yield jumped 9 basis points to top 1.30% for the first time since February 2020. The 30-year rate also hit its highest level in a year.

Why is this concerning?

Rising interest rates=less attractive stocks.

Sure, the banks benefit. But what do you think this means for growth sectors such as tech that have benefited from low-rates?

You couple that with the fact that according to the Buffet Indicator (Total US stock market valuation/GDP), the market could be 228% overvalued, and tech stocks may be at valuations not seen since the dotcom bubble? Genuine concerns.

A rebound in rates could also put a dent in the economic recovery if both companies and consumers find it increasingly expensive to borrow.

While I don’t foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of Q1 could happen.

Bank of America also echoed this statement and said last week that “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and ‘as good as it gets’ earnings revisions.”

Corrections are healthy and normal market behavior, and we are long overdue for one. They are also way more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

The Streaky S&P Is Back at a Record

S&P 500 Large Cap Index $SPX

The S&P continues to trade as a streaky index. It seemingly rips off multiple-day winning streaks or losing streaks weekly.

Before Tuesday’s (Feb. 16) “decline” (if you can call it that), here’s how the S&P has traded in February. It kicked off the month by ripping off a streak of gains in 6 of 7 days. It then promptly went on a 3-day losing streak, followed by a two-day winning streak and more record closes.

Then it declined a 0.06% to kick off the President’s Day shortened trading week.

More than 80% of S&P stocks that have reported earnings have beaten estimates, which is quite impressive. Yes, the forward P/E ratio is historically high. However, this P/E ratio has coincided with growing earnings.

With the index also up 5.9% month-to-date and a healthy outlook for the second half of the year, we could have some more room to run.

While the S&P’s RSI is still hovering around overbought levels, it’s remained stable at a HOLD level, mainly reflecting its muted moves over the last week and change.

A short-term correction could inevitably occur by the end of Q1 2021, but for now, I am sticking with the S&P as a HOLD.

For an ETF that attempts to directly correlate with the performance of the S&P, the SPDR S&P ETF (SPY) is a good option.

For more of my thoughts on the market, such as red-hot small-caps and emerging market opportunities, sign up for my premium analysis today.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care


All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.