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RoboStreet – March 11, 2021
Rates Pushed Up Too Far And Too Fast
The recent spike in bond yields seems more of a sudden reset than a major new trend in the making. We live in a modern marketplace where sudden resets are more common among asset classes where there has been a seismic shift in sentiment, and this occurred in the bond market recently.
Economic data and fourth-quarter earnings and guidance came in at better-than-forecast estimates over a very short period of time, and the bond market simply made a radical adjustment to better reflect the current economic and inflationary outlook. To this point, commodity prices also underwent a reset as bottlenecks in supply chains forced prices higher over the near-term.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
This week’s bond auctions went much better than last week’s where bond yields backed off and providing for a nice level from which stocks were able to rally off of. The SPY continued its rebound led by the strong rebound in the value stocks. Short-term, the SPY range remains between $368 and $395. The SPY is reaching overhead resistance at $387 and can retest recent lows next week. The DXY is losing momentum. TLT is in the process of building a bottom.
The short-term correction has reached its lowest point. The key support is now at $368-$375 and potentially the SPY to retest these levels the next week (low probability event at this point).
The bottoming process has started and the worse part of the sell off is now behind us. Market will finish the bottoming process in the next two weeks and will resume bullish momentum by the end of March.
I would be a buyer using any short-term corrections, and use dollar-cost averaging strategy to accumulate positions.
As noted, TLT is in the process of building a bottom, implying that yields will pull back to some extent going forward for a period. The bond market is simply oversold and due for a bounce, which will fortify the stock market to trade to new highs per my forecast.
From the one-year chart above, there is good technical support at $136 for TLT and where I’m considering a purchase for our RoboInvestor Portfolio. Our proprietary AI tools that include the Seasonal Chart is indicating that TLT is in a bottoming process with the next 30-40 days forecasting bullish price action.
Looking at other sectors that will benefit from a resumption of higher bond prices, the utility sector stands out as a go-to place for profits within this scenario. Share of the Utilities Select Sector SPDR (XLU) has started to make an early move higher this past week, and our AI-driven Forecast Toolbox is forecasting a short-term move for XLU to trade up to $66.64 from its current price of $62.
As rates stabilize, the upside for the tech-rich Invesco QQQ Trust Series ETF (QQQ) and the Consumer Staples Select Sector ETF (XLP) has strong potential to trade higher as the cyclical and value trade is now technically overbought. Hence, there should be some rotation back into these bond-friendly sectors, which is already happening this week.
Our RoboInvestor advisory service is highly disciplined so as to no chase overextended stocks and ETFs, but instead adhere to our AI platform that provides a selection system where high-probability of profits are what make up our stellar track record. Going back almost three years, our Winning Trades Percentage is 91.39%, giving our RoboInvestor members a very smooth and profitable ride.
RoboInvestor offers its members the opportunity to participate in blue-chip stocks, the leading ETFs in sectors, indexes, commodities, currencies, interest rates, and volatility as well as short strategies using inverse ETFs. It’s an unrestricted model that keys off of data being generated from our AI system that is always thinking, always learning, and always finding great investments 24/7/365.
Take a serious step forward and put the proven power of AI to work for your portfolio today and start to build on our winning ways here at RoboInvestor. I personally look forward to welcoming you to our community of wealth-building sojourners in our quest to grow our coveted nest eggs on a consistent basis month after month, year after year.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of 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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