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RoboStreet – December 30, 2021
Strong Finish To A Challenging Year
This year will go down as one of the most difficult times in recent American history for the U.S. and the rest of the world that had to contend with three variants of Covid-19 and all the ways this deadly virus impacted our lives. As of this week, the CDC has shortened the quarantine time to 5 days from 10 days and Dr. Fauci went on record Wednesday during a CNBC interview saying he thinks the Omicron variant will start to burn out by the end of January.
This is the first time where there is a consensus that the pandemic might be coming to a point of minimal risk and a broader return to normalcy for society. This change of tone to one of more optimism is a major shift and very bullish for market sentiment if in fact, this scenario plays out. Assuming it does, as it did in South Africa, where Omicron burned out in 25 days, then whatever pull back the market provides in early January should be bought.
The Santa Claus rally is defined as the five trading days between Christmas and New Year’s Day – and true to form – investors have been treated to a textbook year-end rally, even if only on light volume. It’s been a wonderful ending to a challenging year and yet, there is a rainbow of getting back to life as we know after the storms of Covid-19 have passed.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
CURRENT TRADING LANDSCAPE
The $SPY continued to trade higher and closed at the all-time high at $477, closed flat. The value/reflationary stocks traded higher and closed up 0.2% at the all-time high. The technology closed flat, and right below the all-time high.
The $DXY pulled back and closed below $96 above the key breakout level of $94.5. The $TLT pulled back, at $146 and closed below the 50-days moving average. The $VIX traded lower, back to the 17 levels.
The $SPY short-term support level is at $472 followed by $466. The SPY overhead resistance is at $485. The short-term market is overbought and due for a shallow pullback.
I would consider starting accumulating reflationary/values stocks ($XME, $XLI, $XLF, $XLB, and $XLE). I expect the market to have shallow pullbacks and continue to make new highs.
I would consider rebalancing my portfolio at this time and have an overall bullish portfolio. If you are trading options consider selling premium with February and March expiration dates. Based on our models, the market (SPY) will trade in the range between $450 and $490 for the next 2-4 weeks.
Heading into January, two areas of the market are registering strong signals on my AI platform – banks and small caps. Both showed good relative strength during the front end of December and have spent the balance of the month consolidating and setting up very nicely to begin 2022 with some upside momentum.
As Treasury yields have increased this week, the stage is set for the bank sector to push higher. The other catalysts for the banks are robust proprietary trading operations and strong lending trends. More stock buybacks will also play a part in what should be a bullish earnings season for the banks.
Shares of the Financial Select Sector SPDR (XLF) are trading within a couple of points to their all-time high of $40.86 after trading in a fairly tight range for several months. The top ten holdings in XLF make up about 55% of total assets with Berkshire Hathaway Inc. Class B (BRK-B) being the top holding and in the midst of a fresh upside breakout.
When we apply our AI-driven Forecast Toolbox to XLF, we get a Model Grade “B” rating that qualifies as a trade with a strong risk/reward probability for future gains.
Gradually rising bond yields are a green light for investors to own the bank sector and thus will be a core holding of our RoboInvestor portfolio throughout 2022.
For the small caps, just buying the index should produce excellent profits as the passing of the pandemic will really open up the small-to-mid cap business environment. The most valued asset to invest and trade in is the iShares Russell 2000 ETF (IWM) that mirrors the price movement of the Russell 2000 Index (RUT).
Just in the past week, shares of IWM have started to move up and through their 200-day moving average (black line) after getting sold down from the Omicron headlines that foiled the previous breakout attempt. IWM has literally been building a base since February and so when it does successfully clear resistance at $240, it will likely stage one of the most impressive performances of 2022.
When we plug in IWM into the Forecast Toolbox, we also get a Model Grade “B” rating and a price target of around $250, which is considerably above its current $224 price. I find this to be a very compelling investment proposition for our RoboInvestor model portfolio, where an index that has lagged for almost a year, has the potential to outperform the other major averages as well as many leading stocks.
This is the power of AI at work and is why our RoboInvestor advisory service has been so successful going on its fourth year of strong performance, delivering an enviable Winning Trades Percentage of 91.89% going back to April 2018.
Our AI platform identifies high-probability trades in blue-chip stocks and ETFs that cover indexes, market sectors, commodities, precious metals, currencies, interest rates, volatility, and bearish strategies by utilizing inverse ETFs. It’s an unrestricted model that pursues the best risk/reward trades to dedicate capital to.
By the way, my capital is invested alongside our member’s capital in every trade I recommend. We’re on this journey to grow our wealth together. I wouldn’t have it any other way. As we close out 2021 and ring in 2022, take a moment to consider how to up your portfolio performance for the year ahead and join our RoboInvestor community to gain the full advantage of having the power of AI work 24/7 for you. Make it a New Year’s resolution gain a bigger edge on the market and let’s have a great year in 2022.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of 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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