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RoboStreet – January 16, 2020
Liquidity Driven Rally Keeps Firm Bid Under Stocks
The first two weeks of January have produced new all-time highs for the Dow, S&P, and Nasdaq with the Russell 2000 on the verge of taking out its record high. The rally has moved from being fundamentally driven to momentum-driven fueled by rising liquidity from the Fed reflating its balance sheet through the overnight repo market.
When the financial system is awash in cash with the objective of stimulating the economy, a good portion of that cash will find its way into a rising stock market. The temptation to garner capital appreciation in stocks when there is a strong tailwind of a Phase One deal with China, a clean Brexit strategy, a signed USMCA agreement and a de-escalation of risk from the Iranian situation has boosted short-term confidence.
“I’m investing my own money in each and every stock as my AI platform identifies.”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.
The bull trend has the SPY on the cusp of breaking above the $330 level as the mega-banks have delivered better-than-expected earnings on the front end of earnings season. Technology and healthcare sectors are playing a big part in the market making new highs. When combined, technology, healthcare and financials make up 49.9% of the S&P’s overall weighting which accounts for the powerful upside momentum.
Bond yields have retreated, the 10-yr Treasury yield at 1.81%, WTI crude has also pulled back from $63 to $58/bbl and the dollar is in a minor downtrend that is favoring U.S. multinationals. And building permits increased 0.9% for December coming in 1,474 and at its highest level for 2019. It’s a highly constructive landscape for stocks.
With that said, the CBOE Volatility Index (VIX) is trading below 12.0 for the first time yesterday since late November. This shows investors are complacent and that a shallow correction to $315-$320 sometime in the next couple weeks is a possibility. But at this time, the market is enamored with the Phase One deal and the early outline of a Phase Two deal that will be approached in sub-phases – Part A, Part B, Part C, etc.
From a continued and productive dialogue between the U.S. and China, it’s my view that China’s stock market will outperform in 2020. The best way to play this trend is through the iShares China Large Cap ETF (FXI), a widely traded basket of China’s most levered companies to a rebound in economic growth.
Source: YahooFinance.com
What makes the FXI so compelling is that it trades at 8 times forward earnings, significantly cheaper than the 18 times multiple on the S&P 500. When looking at a 15-year chart of a $10,000 investment, China’s large cap market has been in a range.
Source: ishares.com
The investment chart is a mirror of the long-term chart for FXI and argues well for a new bull trend to emerge, even if China’s GDP slows to 5% from 6%. There’s just a lot of value that is highly discounted in relation to the S&P.
The most important chart though belongs to my AI-driven Tradespoon Seasonal Chart that is giving a very bullish reading. All four probability indicators for the next 10, 20, 40 and 50-day periods are flashing “higher” as of this week. We’ve been trading FXI in our premium Tradespoon services, but now with the trade deal signed, FXI makes for a compelling investment going forward.
Shares of FXI have popped higher this past week on good volume, trading at just under $45 which represents minor overhead resistance. I’m looking to add FXI to our RoboInvestor Portfolio in the near term to go along with some huge winners we currently hold. Shares of iShares Russell 2000 (IWM), Invesco QQQ Trust (QQQ), Thermo Fisher Scientific (TMO), JP Morgan (JPM), NXPI Semiconductors (NXPI) and BlackRock Inc. (BLK) are lighting up our recent performance.
Speaking of performance, our Winning Trades Percentage is at 89.29%, meaning we’re booking profits on very 9 out of 10 trades going back to April 2018. This simply wouldn’t be possible without the most advanced AI platform available to investors offered anywhere in the marketplace.
Don’t miss out on any further winning trades. I only recommend blue-chip stocks and ETFs. There is no reason to trade second or third-tier names – not when our AI tools are producing so many winners. Get in on our next two new trades coming out this weekend and join RoboInvestor today.
When the market finally does back and fill in the weeks ahead, and rest assured it will, you’ll want to have some ready capital to deploy into the RoboInvestor Portfolio. I’m right there with you, investing in every recommendation that I publish. Make RoboInvestor a big part of your 2020 financial game plan and let’s make some money together for years to come.
“I’m investing my own money in each and every stock as my AI platform identifies.”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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