February 1, 2021
Near-term Market Forecast: The market environment is modestly favorable for appreciation of these stocks in the weeks ahead.
The market was hit with a sudden 6% pullback after the run from early November. Today the market rebounded sharply with the Nasdaq closing above the Friday high. The Russell 2000 led the way lower but the selling was pretty evenly distributed across both large and small caps. Earnings continue to come in strong and Q1 estimates keep rising and are now expected to be up over 14% after the earnings recession the past couple quarters. The banking index is sitting on the top of the prior consolidation while the ten-year treasury yield has stalled at 1.077% for now. The NYSE advance/decline line looks like it wants to test the recent highs again. The yield curve expanded a bit over the past week and continues to be wide enough. The VIX volatility index spiked last week on some systemic concerns that have been alleviated with the Robinhood capital raises. The action today is making the pullback look like just that – a pullback and not a correction looming. At least for now. We could continue to see bouts of higher volatility but the strategy is calling for holding positions in the 3 stocks below until the next update:
This Weeks Stocks:
This week we have 1 new stock. So, to follow the system, you would sell MODV and and use the proceeds to purchase FB. 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 – SHOP
Optional Protective Stop-loss Point: $948.90 (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 – FB
Optional Protective Stop-loss Point: $206.75
Stock #3 – CROX
Optional Protective Stop-loss Point: $58.39
The strategy weathered the sudden 6% drop in the Nasdaq and 4.5%+ drop in the S&P 500 pretty well. It about matched the market. Generally, the strategy has underperformed during corrections over the first 8+ years. Usually, it pulls back 2 to 2.5 times the overall market. However, its about matched the market or beaten the market over the past 2 large corrections as large caps were leading small caps.
Brian C Neall
Founder – Investtobefree.com