October 12, 2020
Near-term Market Forecast: The market environment is modestly favorable for appreciation of these stocks in the weeks ahead.
The Nasdaq pulled back briefly last Tuesday before surging ahead after stimulus negotiation restarted. Amazon and Apple drove the Nasdaq 2.5% higher today on a catalyst this week for both stocks. Earnings estimates continue to rise from depressed levels into Q3 earnings season which kicks off this week with the banks reporting and are expected to report plenty of reserves with unemployment now down below 8%, far ahead of what was expected. The move higher over the past couple days has been on lower volume as we near earnings season and the election. Both the Nasdaq and S&P 500 are within 2% of the highs made in early September. The indices are due for a pullback near this overhead resistance but its a good sign that the market indices are trending higher after the correction and bullish confirmation signal. The ten-year treasury yield trend is looking a bit stronger now as it consolidated in a tight range around .77% with the yield curve a little better. The banking index has rebounded but is now near a resistance level. Lets see if it can break through and if the ten year yield can move back towards the pre-pandemic levels. The NYSE advance/decline has broken into new highs which is a good sign. Meanwhile, the Dow transports are breaking into new highs again. We continue to expect 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 no new stocks. So, to follow the system, you would do nothing. 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 – AMZN
Optional Protective Stop-loss Point: $2469.89 (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 – PFSI
Optional Protective Stop-loss Point: $46.89
Stock #3 – EBS
Optional Protective Stop-loss Point: $82.40
A great week for the strategy with both PFSI and AMZN both up nearly 10%. EBS was about flat but is is in a strong technical pattern. Overall, the strategy saw about 6% gains and crushed the S&P 500. It continues to be a terrific year for the strategy but with plenty of volatility although drawdowns have been much smaller than years past. We should see more volatility in the weeks ahead as we near the election and start earnings season where estimates are trending higher for a change.
Brian C Neall
Founder – Investtobefree.com