December 20, 2021
Near-term Market Forecast: The market environment is neither favorable or unfavorable for appreciation of these stocks in the weeks ahead.
The small cap Russell 2000 tested the December lows and went a little below them as we discussed last week. Meanwhile, the Nasdaq went slightly below the prior swing low today but it continues to hold a trend-line going back to Match. The 150 day and 200 day moving average also continue to offer support. The initial reaction to the Fed statements was positive but was followed by a strong downward move the next day. Seasonality is in our favor now but investors have a more hawkish Fed to contend with. Fortunately, it generally takes years for the market to peak ahead of a recession after the Fed starts tightening and experts are still forecasting good economic growth for next year. Although the yield curve has been flattening a bit, its not falling out of bed and rates are so low that the inversion spread is not likely to be that great at this point if it does invert. After falling last week, the ten-year treasury yield closed today at 1.419%. The VIX volatility index moved higher last week, gapped much higher today but then faded into the close. Its still high at nearly 23. Lets see if it comes down with a typical Santa rally into year-end. In either case, the strategy is calling for holding the following 3 stocks until the next update:
This Weeks Stocks:
This week we have 1 new stock. So, to follow the system, you would sell CRM and use the proceeds to purchase MSFT. If you are just starting, you would buy equal dollar amounts of all 3 stocks when the market re-opens in your risk-capital account dedicated to this system. Be sure to view the complete introductory video before getting started.
Stock #1 – MSFT
Optional Protective Stop-loss Point: $269.49 (Be aware that a tighter stop-loss will likely severely reduce performance over the long-term based on back-testing for this strategy. See upgrade and performance video for further information and insight on optional stop-loss orders.)
Stock #2 – GOOGL
Optional Protective Stop-loss Point: $2395.90
Stock #3 – AZO
Optional Protective Stop-loss Point: $1,588.79
The strategy about matched the overall market over the past week as it gave up about 2% to 2.5%. The S&P 500 lost around the same amount since last Monday evening.
Generally the last 2 weeks of the year are strong for the market and this strategy. Lets hope the typical Santa rally comes through despite the latest pandemic wave and now hawkish Fed.
Brian C Neall
Founder – Investtobefree.com