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RoboStreet – April 21, 2022
Inversion Of Yield Curve Caps Rally
Earnings season is coming into full bloom and they are very mixed with some big winners and some colossal losers – Netflix Inc. (NFLX). The market was trying to put a good week together and still might, but Thursday’s session showed the bond market not cooperating as the 3,5 and 7-yr Treasury yields all traded up to 3.0% with the 10-yr Treasury note trading at 2.95% and inverting on fears of aggressive rate hikes.
Higher interest rates are weighing on the high-growth price-to-sales stocks, proving once again that this market is highly favoring value and low-beta growth stocks until bond yields top out. Clearly, the bond market is pricing in at least two 50-basis point rate increases with some analysts saying the market now reflects three half-point hikes.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside the next 3 months, so my weekly updates are timely enough for you to act.
The same conditions that have hampered most market sectors continue to persist – namely elevated commodity prices brought on by the chronic global supply chain shortages, the war in Ukraine, sanctions on Russian exports, and 45 cities in China in full or partial lockdown due to rising numbers of Covid infections. Here too, until there is some clarity of when these challenging situations will find some relief, they will continue to prove to be stiff headwinds for the major indexes.
Conversely, investors who are long consumer staples, energy, big pharma, REITs, and utilities are seeing a great number of stocks in those sectors trade to new all-time highs as money rotates heavily into defensive equities at the expense of growth and the selling of all classes of bonds.
As of Wednesday, $SPY closed lower 0.01%, at $445, right below the 200 DMA. The value/reflationary ($VTV) closed higher 0.8%, at $151, above the all-time highs. The technology sector ($QQQ) closed lower 1.5%, at $341, below the 50 DMA and the 200 DMA.
The $DXY closed lower, near the $100.5 level, approaching the March 2020 high. The $TLT closed higher 2.0%, at $122, and below the July 20219 lows. The ten-year yield closed at 2.85%. The $VIX closed higher near the 20 levels, at the historical average.
The $SPY short-term support level is at $441 followed by $435. The SPY overhead resistance is at $447 and then $451.
Assuming the geopolitical risks in Ukraine have reached status quo, it is reasonable to assume that the $SPY February low is set and the pattern of higher highs and higher lows will continue in the next two to six weeks.
I would be a buyer of the low beta stocks into the pullbacks and have market BULLISH portfolio at this time.
I do not expect the $SPY to post new all-time highs in the first half of this year. There is a high probability that the $SPY main long-term support at $415 is now set but might be retested in the next few months.
If you are trading options consider selling premium with July and August expiration dates.
Based on our models, the market (SPY) will trade in the range between $415 and $470 for the next 2-4 weeks.
With the market in the late cycle of the economy maturing, marked by rising inflation and tighter fiscal policy, it has historically worked well for investors to be long banks, industrials, and low-beta technology stocks. As the market works through the issues noted above, any bouts of further selling should be where investors consider initiating and adding to these late-cycle sectors.
Our RoboInvestor advisory service is busy putting this very strategy to work. As a cutting-edge AI-driven platform that I’ve developed over the past several years, RoboInvestor is an unrestricted stock and ETF portfolio consisting of 15-25 positions at any given time. The portfolio will be invested in only the most highly regarded leading blue-chip stocks and ETFs that represent market indices, the 11 major market sectors, sub-sectors, commodities, currencies, interest rates, and shorting opportunities through the use of inverse ETFs.
For example, our AI-powered Seasonal Chart shows a very bullish reading on the Industrial Select Sector SPDR ETF (XLI), which “Higher” probability readings for the next 20, 30, and 40-day periods. A readout such as this provides our members with a high conviction rate to buy the stock in a volatile market.
We gain further conviction by applying the same security, Industrial Select Sector SPDR ETF (XLI), to another of our AI-powered algorithms, the Forecast Toolbox. In the case of XLI, we get a Model Grade “A” rating with a Predicted Resistance price target of $149.41 over the intermediate-term of six months.
At the stock’s current price of $101, that’s an implied gain of 48% in what is an ETF of the highest quality. Finding and building a portfolio of stocks and ETFs with this kind of upside potential is what RoboInvestor is all about.
We’ve been serving the RoboInvestor community going back to April 2018 and our performance can be described as consistently successful. To my knowledge, our Winning Trades Percentage of 91.37% is tops in our industry.
All great investors have a method to their success, and the use of artificial intelligence is the backbone of the strong track record delivered by RoboInvestor. Against a backdrop of so much uncertainty, having the power of AI that is always learning, always thinking, and always crunching data 24/7 is in my view – essential to winning in this market.
I hope every reader of this column takes the business of making money as seriously as I do. This is my life’s work and my team is highly dedicated to doing all we can to grow our subscribers’ net worth – and ours too! I invest my personal capital into every recommendation we bring to the RoboInvestor community.
Subscribers receive an online newsletter every other week, delivered over the weekend, where I examine market conditions, review our existing portfolio and provide two new recommendations to act on when the market opens Monday morning. Make RoboInvestor your best trade this week and let’s generate some profits together!
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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