October 5, 2020
Near-term Market Forecast: The market environment is modestly favorable for appreciation of these stocks in the weeks ahead.
The Nasdaq was about to generate a strong bullish confirmation signal last Wednesday before news that a 2nd stimulus deal was still far off Wednesday afternoon. However, the next day, the Nasdaq moved further and finished strongly ahead of the news that the President had the coronavirus. The action last week qualifies as a weak bullish confirmation signal. Normally, we want to see a few more weeks of consolidation or further correction before a bullish market signal. However, the market has held up well in the face of some negative headlines. Enough to test top stocks and set up a potential run from here. However, volatility continues to be high and we expect plenty of volatility from here through at least the election. The Nasdaq is leading on this rebound again as it has over the past decade overall. The small cap Russell 2000 surged much higher today but on lower volume and perhaps will start to lead in the weeks ahead as we get closer to earnings season. Today the yield on the ten-year treasury surged to close at .762%. This is sparking a bit of a rally in financials but the banking index is still in an entrenched long-term downtrend below a declining 200 day moving average. The NYSE advance/decline is surging higher and nearing new highs which is a good sign. Meanwhile, the Dow transports are in a narrow consolidation and look ready to break to new highs. 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
It was a nice week with all 3 stocks making progress led by PFSI with about a 3.5% gain so far. Overall, the strategy slightly beat the S&P 500 with about a 2% gain. From a technical standpoint, these stocks and the overall market are poised to move higher. However, sudden headlines that are both positive and negative will be hitting the market in the weeks ahead.
Brian C Neall
Founder – Investtobefree.com