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RoboStreet – September 30, 2021
Quarter Ends With Market In Spin Cycle
The third quarter ended characterized by rising volatility, higher bond yields, and lower equity prices, save for energy and bank stocks. Ongoing concerns about global supply chain disruptions were validated by Fed Chairman Jerome Powell’s testimony this week to the Senate Finance Committee stating the spike in inflation is lasting longer than expected. It was a big departure from his prior “transitory” view and highly disruptive.
The prevailing negative sentiment is being further fueled by the delay on the infrastructure bill, the unknown impact of the Evergrande bankruptcy in China, and the prospect of third-quarter earnings not living up to forecast because of shortages and higher prices to produce goods and deliver services. The general feeling that September is historically a tough month has played out with the market down 5%.
From a technical perspective, the $SPY staged an unimpressive rebound and settled on the main short-term support, $432. The value/reflationary stocks outperformed the broad market on the week and settled below the 50-day moving average. Technology continues to trade in the red, on the $TLT free fall, down 0.2%% right at the August lows.
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.
The $DXY is short-term overbought and continues to rise near $94, long-term overhead resistance from September 2020 high. The $TLT has pulled back and retesting key support levels (July and August lows), 200-day moving average. The $TLT pullback is the key development in the market.
Volatility jumped back to 25 (VIX was at 29) and SPY short-term oversold and will start rebound in the next 1-2 sessions (extreme levels at $TLT, $DXY, $VIX). The $SPY short-term support level is at $428, followed by $420 (a break below $428 is a low probability event at this point).
The SPY overhead resistance is at $443 and then $446. I expect the bottoming process to continue this week. At this point, I believe the recent low at $428 is set. The unemployment numbers this week might push the market to the recent lows. I would be a buyer of value stocks on pullbacks and sell technology stocks on rallies.
I would consider rebalancing my portfolio at this time and have a bullish portfolio. The market bottoming process may continue for the next 1-2 weeks. Market corrections are never a one-way trade.
Based on our models, the $SPY can pull back 5-7% from the all-time highs in the next 1-2 weeks. If you are trading options consider selling premium with November and December expiration dates. Based on our models, the market (SPY) will trade in the range between $428 and $455 for the next 2-4 weeks.
In the midst of the market correction where bond yields have popped higher, the defensive sectors pulled back to attractive levels that are now getting the attention of our AI models where we are considering purchases for our RoboInvestor advisory stock and ETF service.
Case in point, the Healthcare Select Sector SPDR ETF (XLV) that has pulled back from an all-time high of $137.05 set back in early September and now trades at $128 where many of the top holdings are now technically oversold. In fact, the top 10 positions in XLV account for almost 50% of total assets with the who’s who of best-in-class pharmaceutical and medical device companies occupying the top spots.
Our AI-driven Seasonal Chart is providing a very bullish outlook for XLV, with all four 20, 30, 40, and 50-day probability periods registering “Higher” readings. When we get such a strong set of signals, it fits our profile for the RoboInvestor Portfolio to a tee. I hope all readers of this blog join up and be sure to get in this trade when we act on it!
Another compelling setup is within the utility sector that has undergone a meaningful pullback. Shares of the Utilities Select Sector SPDR ETF (XLU) hit an all-time high of $70.07 in early September as well, and today trade at $64 where the 200-day moving average comes into play. The top holding comprises over 63% of total assets, making this ETF even more concentrated than XLV.
Here too, our AI models are giving strong indicators that XLU is setting up for a bullish move higher. Our Forecast Toolbox is looking for XLU to trade from its current price of $64 back up to near $74, representing a 15% gain in a very high-quality trade.
Every two weeks I email our RoboInvestor newsletter to our members over the weekend with two new recommendations so they can act on them come Monday morning. Being an unrestricted advisory service, our AI platform will identify trades in blue-chip stocks or ETFs where the underlying assets are indexes, market sectors, interest rates, currencies, commodities, and volatility.
Having the freedom to trade all asset classes of the market is how we’ve been able to boast such a strong track record. Our Winning Trades Percentage is 91.87% going back to April 2018 when we launched RoboInvestor. Imaging booking profits on 9 out of every 10 trades you put your risk capital to work. Well, we’re performing up to the task, and have been doing so for over three and a half years.
With the fourth quarter ahead of us, having a set of AI tools to put to use gives investors a big advantage. AI is agnostic, always learning, always crunching data 24/7, and is able to cancel out the noise of hyped-up financial media. Take us to task and put the power of AI into your wealth-building plan and join the RoboInvestor community of AI investors. Your first two recommendations will be coming your way this weekend!
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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