Even in a strong market, stocks will pull back from time to time. And a bigger breather doesn't automatically mean it's time to panic.
Over at our corporate affiliate Stansberry Research, Jeff Havenstein agrees...
Regular readers will recognize Jeff. He's a senior analyst at Stansberry and a member of our good friend Dr. David "Doc" Eifrig's research team. He also regularly contributes to Doc's free daily e-letter, Health & Wealth Bulletin.
Today, we're sharing an essay from Jeff that first appeared in the March 12 edition of Health & Wealth Bulletin. In it, he shares his perspective on staying calm during the current volatility...
The Market Won't Stay Down for Long
By Jeff Havenstein, senior analyst, Stansberry Research
If you're worried, take a deep breath...
It has admittedly been a rough couple of weeks for the market.
The S&P 500 Index is down 8% from its all-time high. The tech-heavy Nasdaq Composite Index is down about 12%, meaning it's officially in correction territory. And popular stocks like Tesla (TSLA) and Nvidia (NVDA) have taken it on the chin lately... fueling further investor panic about Big Tech.
I am here to tell you that everything is OK.
At Stansberry, Doc Eifrig and I have previously told our readers that the markets were due for a breather. And that's exactly what we've been seeing lately.
But a breather doesn't mean we're in for a brutal bear market.
Rather, I think this is just a healthy market correction, and the bull market we've been enjoying for the past few years still has some life left.
The reason? Everyone is too bearish right now. That means sentiment will likely flip soon.
Even though stocks have suffered several $1 trillion swings in recent weeks... March 19 has the potential to generate three times higher volatility than anything we've seen so far. That's devastating news for anyone whose portfolio is sitting near all-time highs or is approaching retirement. But there's a bright side. According to the former hedge-fund trader who once made $4.6 million in a single day, right now is the PERFECT time for a totally different strategy than what most folks are using.
You may already sense that the tide is turning against Elon Musk and DOGE. Just last week, President Donald Trump promised to buy a Tesla to help support Musk in the face of a boycott against his company. But according to one research group with connections to the Pentagon and the U.S. government, Musk's preparing to strike back in a much bigger way in the days ahead. Full story here.
To gauge sentiment, I often check out the American Association of Individual Investors' ("AAII") Investor Sentiment Survey. Since 1987, AAII members have been answering the same simple question each week: "Do you feel the direction of the stock market over the next six months will be up (bullish), no change (neutral), or down (bearish)?"
Historically, 31% of investors answer that they are bearish. But lately, the survey has shown an extreme level of bearishness. Take a look...
The bearish percentage stands at 59% today, but it recently hit a high of 61%. We haven't seen this many investors this scared since late September 2022, when a full-fledged bear market was raging.
Take a guess when the bear market bottomed...
October 12, 2022.
That low came just a few weeks after we reached the same extreme level of bearishness that we're seeing today.
To figure out what the markets will do next, you just need to look at the extremes...
When everyone is giddy and thinks that their favorite crypto is going "to the moon," it's probably time to sell and take profits. By that point, there are few buyers left to keep prices high.
But when everyone is scared and thinks the market is heading for another 2008-like collapse, it's time to buy.
Today we're seeing the latter. Bearishness has reached extreme levels thanks to overvaluations in the tech sector and tariffs imposed by President Donald Trump. But businesses are still enjoying profits, and it doesn't seem like a recession is here just yet.
Sure, markets may continue to fall over the next few days. But I believe this is nothing more than a healthy market correction... something we needed.
Plus, a lot of Big Tech speculators are running for the exits, which is a good thing for a long and healthy bull market.
As Doc always says, corrections are just a normal part of the market cycle. They're nothing to fear... especially if you've been following our advice to stay diversified and not have too much money in overhyped, overvalued tech names.
So don't panic sell.
This bull market isn't over yet.
Here's to our health, wealth, and a great retirement,
Jeff Havenstein
Editor's note: For regular insights like this from Doc and Jeff, consider signing up for Health & Wealth Bulletin. As Doc says, he and his team share ideas with their readers on how to live a "millionaire lifestyle"... but on far, far less than you can imagine.
This e-letter publishes every weekday afternoon that the markets are open. And just like the Chaikin PowerFeed, it's free to read. Learn how to sign up for Health & Wealth Bulletinright here.
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+1.61%
4
19
7
S&P 500
+2.07%
35
328
135
Nasdaq
+2.42%
6
77
17
Small Caps
+2.42%
181
1212
508
Bonds
-0.53%
Information Technology
+3.02%
4
52
13
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain Bearish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Energy
+2.66%
Utilities
+2.04%
Financial
-1.22%
Materials
-2.1%
Information Technology
-2.1%
Industrials
-2.32%
Real Estate
-2.4%
Health Care
-2.91%
Communication
-3.7%
Staples
-4.04%
Discretionary
-4.36%
* * * *
Industry Focus
Mining Services
0
27
7
Over the past 6 months, the Mining subsector (XME) has underperformed the S&P 500 by -1.54%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #19 of 21 subsectors and has moved up 2 slots over the past week.
Indicative Stocks
CMP
Compass Minerals Int
UEC
Uranium Energy Corp.
KALU
Kaiser Aluminum Corp
* * * *
Top Movers
Gainers
ULTA
+13.68%
SNDK
+13.17%
CCI
+8.55%
PLTR
+8.31%
SMCI
+7.91%
Losers
ABT
-2.45%
DLTR
-2.18%
BMY
-2.11%
REGN
-2.02%
GILD
-1.69%
* * * *
Earnings Report
No earnings reporting today.
Earnings Surprises
No significant Earnings Surprises in the Russell 3000.
* * * *
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