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RoboStreet – June 16, 2022
Managing Money In A Protracted Downtrend
The big story this week has been the Federal Reserve’s abrupt shift in monetary policy, opting to increase the Fed Funds rate by 75 basis points on Wednesday accompanied by a statement they could likely raise it by another 75 basis points at the July FOMC meeting. The move was followed by other global central banks also raising key lending rates overnight which caught the market by surprise, triggering Thursday’s selloff.
All 11 market sectors are under selling pressure as the major averages are trading at new lows for 2022 and are in technical open water as to find the next level of support where fund managers will step in. The sudden change in sentiment from just a week ago was sparked by the hotter-than-forecast CPI data where bond yields spiked and stocks declined sharply in response.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside the next 3 months, so my weekly updates are timely enough for you to act.
One analyst from Bank of America posted an interesting note recently, stating that during the past 140 years there have been 19 bear markets, with the average decline being 37% and lasting an average of 289 days. By his calculation, the market bottom will occur in the third week of October, which makes sense since the Fed will have likely raised rates three times by then with inflation data likely trending lower due to demand destruction and lower consumer spending.
Under this scenario, our AI-powered RoboInvestor advisory service will be tactically trading this market, where buying steep sell-offs and selling into oversold rallies is the blueprint to managing money in a protracted downtrend for the next 3-4 months. With the AI tools we have created, we can put our emotions on the shelf and let the data determine tactical risk/reward strategies that carry a high probability of profit.
As of Wednesday’s close, the $SPY closed higher 1.4%, at $379, right below the key long-term support – $380 that was violated Thursday. The value/reflationary ($VTV) closed higher 0.5%, at $132, breaking below the 52 weeks low. The technology sector ($QQQ) closed higher 2.5%, at $282, trading above the 52-week low, but failed to hold the low during Thursday’s session.
The $DXY closed lower, near the $105 level, trading above December 2016 high, and pulled further back to $103.50 Thursday. The $TLT closed higher 1.8%, at $110, and facing the key long-term support. The ten-year yield closed lower at 3.3%. The $VIX trades near the 33 level.
The $SPY short-term support level is at $372 followed by $364. The SPY overhead resistance is at $383 and then $396.
I would be a seller into the rally and have NEUTRAL portfolio at this time. Short-term the market is oversold and undergoing the bottoming process.
If you are trading options consider selling premium with September and October expiration dates.
Based on our models, the market (SPY) will trade in the range between $350 and $440 for the next 2-8 weeks.
When there is now a global synchronous tightening of interest rates with GDP forecasts getting slashed, the emphasis is to position portfolios in defensive assets while also using extreme oversold conditions to buy institutional favorite stocks and ETFs for short-term trades. Investors have to respect the long-term down-trend (3-4 months) while capitalizing on bear-market rallies.
This is where the RoboInvestor does its best work – crunching the data to find optimal trades in difficult markets. The service encompasses the trading of blue-chip stocks and ETFs that represent the major market indexes (U.S. and global), the 11 market sectors, sub-sectors, commodities, precious metals, interest rates, currencies, volatility, and shorting opportunities via inverse ETFs.
Take the Technology Select Sector SPDR (XLK) for instance, trading at $124 and down 30% from its 52-week of $177. The top ten holdings make up about 66% of total assets with the Microsoft Corp. (MSFT) and Apple Inc. (AAPL) accounting for 44%. It stands to reason that when the tech sector gets an oversold bounce, this ETF will be right in the thick of where funds flow will be focused.
When our proprietary AI algorithms are applied to XLK the Seasonal Chart shows a “Higher” reading over the short and intermediate-term. While this is a powerful read, we want to be sure we also have the wind of the market to our back and not be fighting a negative tape. So, XLK makes for an excellent setup when the market pivots higher.
This is how the power of AI can work for your portfolio, identifying great trades and the timing of which we provide in the RoboInvestor service. Members receive an online newsletter every other week, delivered over the weekend, with my opening market commentary, technical take on the investing landscape, and commentary on our current holdings followed by one or two new stock and/or ETF recommendations to take action on when the market opens Monday morning.
Our AI platform that RoboInvestor is built on has produced some amazing results over the past four years, delivering a Winning Trades Percentage of 88.85% and a near doubling of capital back-tested per our model.
Investors are dealing with the most volatile market conditions since the pandemic broke out in early 2020, and now is not the time to go it alone. My personal capital is invested in every recommendation within RoboInvestor. We are on this wealth-making journey together with the intended goal of growing our net worth consistently by profiting on nearly 9 of every 10 trades we put our investment capital to work.
Make an intelligent decision today and let me welcome you into our AI-driven system that is working in all market conditions. Make RoboInvestor your best trade of 2022!
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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