By Jeff Clark, editor, Delta Report The S&P 500 peaked in late July. Since then, it has been stuck in a wide trading range between about 2850 on the downside and 3020 on the upside. As we approach the upper end of that trading range, and as technical conditions start to move into overbought territory, the odds of a significant decline increase. That decline could start any day. In fact, several months ago, I marked October 21 (this Monday) as a probable start date for that decline… Of course, predictions like this should always be given a little wiggle room. The exact date isn’t as important as merely recognizing the potential for such an event. The stock market is vulnerable to a steep decline. Whether it starts on Monday, or a week later... or a month later... doesn’t matter. What matters is that traders be on the lookout for it and adjust their portfolios to take advantage of it. The next decline phase is likely to be a “rotational” bear market. Money is going to come out of the market’s best-performing names – those momentum stocks with wildly expensive valuations – and rotate into the beaten-down “value” names that have done nothing all year. In other words, the best-performing stocks of 2019 are going to get hit, and this year’s worst stocks are going to outperform everything else… Even though the S&P 500 is trading near its all-time high, many stocks and many sectors have already been through their own bear markets. Many retail stocks, for example, are down 50% or more in 2019. They’re trading at decade-low valuations. Many oil and gas stocks are in the same boat. These are the stocks that are likely to behave best when the next downturn occurs. These stocks have already been “sold-out.” They’re already trading at cheap fundamental valuations. And their charts are closer to forming bottoming patterns than topping patterns. Money isn’t going to disappear from the stock market. There isn’t anywhere for it to go. So it’s just going to rotate from vulnerable momentum stocks into cheap “value” stocks. Traders should keep this in mind as you trade through the next few months. You don’t necessarily have to bet on downside action to profit in a declining stock market. You can often make even more money by identifying the stocks money will rotate into… and beating everyone else to them. Best regards and good trading, Jeff Clark
Editor, Delta Report P.S. On Wednesday, October 23, I’m holding a special training event at 8 p.m. ET for folks who want to learn the best ways to take advantage of the market… no matter which way it goes. You see, over the past 18 months, I’ve developed a new contrarian way of trading a small group of fast-moving stocks. And the results have been impressive so far. It’s spotted stocks that went on to soar as high as 60%… 90%… 236%… 308%… even 600% – all over a short timeframe. I’ll even be including the three top trade setups I’m watching right now. To join me next week, secure your spot here. 
Reader Mailbag Do you think a bear market is around the corner? Where are you putting your money for the downturn? Let us know what’s on your mind by reaching out to us at feedback@caseyresearch.com.
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