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RoboStreet – February 4, 2021
Buy The Dip Crowd Shows Up In Force
In a normal market, extended rallies are historically reliable to deliver a garden variety correction of 10% every few months, depending on the recent advance. Going back to the beginning of last November, the SPY has rallied just over 20% with the biggest pullback being nearly 5% – and that was last week.
As of Monday, the market’s leadership has broadened out from technology to include financials and energy as outperforming sectors showing strong relative strength, accumulation and bullish price action. The yield on the 10-year rose to 1.13% and WTI crude topped $56/bbl, both of which are strong tailwinds to financials and energy stocks.
If last week is all the market is going to give back, then we’re on to new all-time highs. But I’m still of the view that a revisit of last week’s lows is quite possible once the earnings season runs its course. And that prognosis could easily change too if Congress pushes through a stimulus package that exceeds $1 trillion or more.
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.
On a purely technical basis, the SPY was able to continue retesting recent highs with value stocks (XLI, XLF, XLE) maintaining leadership. The short-term range remains between $364 and $385. DXY is trading near $91-92 key overhead resistance. TLT remains in the downward momentum.
The question on everyone’s mind: Is this the beginning of the next leg up in the market or short-term bounce followed by another retest of recent lows. I think there might be another retest of recent lows ($364-$370) next week due to unemployment numbers scheduled to be released on Friday. For now, let’s observe market price action during the next few trading sessions.
The bottoming process has started and the worse part of the sell-off is now behind us. Market will finish the bottoming process by end of February and will resume bullish momentum as we approach the end of February/ early March.
I would be a buyer using any short-term corrections and use a dollar-cost averaging strategy to accumulate positions. If you are trading options consider selling premium with April and May expiration dates.
With earnings season about to become history, the next major catalyst for the bull trend is the stimulus. Senate leader Chuck Schumer is pressing for the full $1.9 trillion “economic rescue package” while the GOP wants to consider $600 billion now and phase in more as needed. The bill will likely fall along party lines with a simple majority vote by Democrats ultimately pushing it through.
President Biden noted yesterday he is open to changes but after a modern record of 28 executive orders being issued in his first month of office. Only FDR issued more, 30 of them, back in 1933 when the unemployment rate soared to 25%. The market doesn’t seem to mind that he is rolling back the Trump tax cuts of 2017, at least not yet, but that may change in the months ahead if tax policy becomes increasingly progressive.
Democrats’ proposal includes $1,400 direct payments to most Americans, a $400 per week federal jobless benefit through September, and $350 billion for state, local and tribal relief. It also puts $170 billion into K-12 schools and higher education institutions, along with $20 billion into a national vaccination program, among a slew of other provisions.
The major rub with the GOP is the $350 billion in state bailout funds. Prior to the pandemic New York, New Jersey, Illinois, and Massachusetts were sitting on huge budget deficits from what critics argue is highly mismanaged state fiscal policies. New York alone is sitting on over $200 billion in debt at the end of 2019 after years of a booming economy in that state.
It used to be back in the days of fiscal accountability that people paid down debt in good times so there was room to save and potentially borrow in bad times. The ironic thing is that every U.S. state other than Vermont has some form of balanced budget provision that applies to its operating budget. I’ll leave it up to readers of this blog to marinate on this and do all we can on our side to create wealth now to live well and secure a solid retirement plan that doesn’t depend on government handouts.
Taking this thought to task, one blue-chip stock that is making its presence known after years of underperformance is Exxon Mobil Corp. (XOM). The company is on track to resume profitability this year with forecasted earnings of $2.10 per share and rising by 50% in 2022 to at least $3.20 per share. At its current level, the dividend yield is 7.34%.
What is intriguing about XOM is that it made huge investments in natural gas years ago and with gas being the cleanest and most rapidly growing of fossil fuels, the company is sitting pretty good as major utilities move from coal to natural gas on renewables. The jury is out as to whether oil and gas prices can hold their recent gains, but the trend is currently the friend of the energy sector and XOM is breaking higher as a result.
The one-year chart shows a textbook “golden cross” formation of the 20 and 50-day moving averages crossing up through the 200-day M.A.
Our proprietary AI-driven Forecast Toolbox predicts a strong move higher for XOM in the next 6 months, targeting $75 as Predicted Resistance, and implying a gain of nearly 60% not including dividends.
I’ll be looking to add XOM to the RoboInvestor portfolio in the near future as our internal signals warrant, and you’ll want to be in on this trade when we execute that buy alert. It’s how we’ve generated significant profits for our RoboInvestor members for the better part of three years.
Our Winning Trades Percentage is a staggering 91.0%, which is getting about as close to perfection in the investment advisory business as it gets. I know of no other service that can claim this performance. Imagine stepping into the batter’s box and getting a clean hit 9 out of every 10 times at bat – a lot of singles, some doubles, a few triples, and even a few home runs.
Every two weeks, we issue a RoboInvestor newsletter that is published over the weekend so you can act on Monday. It goes over my thoughts on the market landscape, what our data is telling us about it, an update on the current portfolio that typically numbers from 15-22 positions, and includes 2 brand new recommendations.
Our AI platform is unrestricted in its ability to find money-making opportunities. It might be in all manner of blue-chip equities or ETFs that involve indexes, sub-sectors of the stock market, bonds, interest rates, currencies, commodities, precious metals, and volatility. We can go long or short, depending on market cycles. For now, the least path of resistance for the majority of asset classes is higher.
With many policy changes forthcoming and a host of other variables that will certainly impact market behavior, having the power of AI working for you 24/7 is a tool kit you don’t’ want to be without. Take me up on my offer to invest alongside you in every trade recommended in RoboInvestor and join the community of members that are experiencing life-changing wealth-building of their portfolios. I can’t guarantee perfection, but our track record speaks for itself. My many years of hard work and dedication to developing the finest asset selection algorithmic model is producing fantastic results and I personally invite you to take part in RoboInvestor and know that when the market is closed, our AI platform is still hard at work – always thinking, always learning and always winning.
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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