Now that the S&P has settled above 2400, investors are wondering how to maneuver their assets going forward. For those exposed to the market surge since the election, it has been rewarding, with returns over 12% in the S&P 500 alone. For those that overlooked the opportunity, there is now an urge to catch up with the rest of the pack. If you are in the later camp I know what you’re thinking…
How did I miss out on 12%!?!?!?
Maybe you were too cautious because you don’t feel you know enough about stocks. Maybe it was nervousness about the uncertainty surrounding the new administration. Understanding yourself and the psychology behind why you missed out is important. But more important is NOT missing the next opportunity, and NOT being fearful to take the risk that comes with nailing that move.
It is paramount to have a game plan. We could see a pullback with some consolidation, before ultimately moving higher into the end of the year. Upcoming pullbacks will be caused by market events fueled by anxious bears. This is the time to strike!
If investors know what sectors to buy and what stocks to focus on, the rewards can be far greater than 12%.
Continued . . .
Profit from High-Frequency Trading
How often have you owned a stock that gets pummeled with no logical explanation? This is often caused by computer-based High-Frequency Traders. They fire off massive amounts of short trades to drive stock prices down, then profit from the rebound. Their gains come at the expense of human investors.
Zacks’ Counterstrike portfolio turns these “manipulated price drops” into quick profit opportunities.
Access to these trades must be limited. The portfolio will close to new investors Saturday, September 2.
See Counterstrike Stocks Now >>
Below I talk about upcoming market risks, sector rotation winners and why buying the next big dip will be rewarding.
Short-term market risks
1) Trump doesn’t get it done – Perhaps the biggest risk is if the promises Trump made to the market (tax reform, deregulation, and infrastructure spending) don’t materialize. The most important issue for the market is taxes. If tax reform ever gets labeled as “dead” then watch out, expect a sell off. Deregulation of the financial sector is another promise and an important catalyst for the financial stocks to head higher. If deregulation doesn’t go far enough, financial stocks could lead the market lower. An infrastructure bill, because of the support from both parties, is likely to get passed. However, if it starts taking longer than anticipated, infrastructure stocks will sell off.
2) North Korea – The provocative missile launches keep coming. Will diplomacy work? Or will Japan, South Korea and the U.S. take action? It’s hard to speculate, but if any bombs go off it will move markets in a major way.
3) Debt ceiling – September 29 is a date to remember. While the debt ceiling always seems to be resolved before it’s a real concern, the divisions in Washington could put a snag into the process. On the small chance this issue isn’t resolved, the market will sell off and the VIX will spike on the uncertainty of the Treasury’s ability to pay bills.
4) Interest rates and the economy – Interest rates are rising and the effect on the economy will be seen after the fact. If the Fed decides to raise rates again in 2017, we could see slowing in certain sectors like housing that could cause fear in the markets. An overreaction in the markets in response to a rate hike could lead to long-term opportunity for investors.
Because of the surprising Trump victory, smart money had to reallocate their assets to areas that would benefit from a Trump presidency. This reallocation caused violent sector rotation causing certain sectors to surge.
Let’s go over some ETF stats since the election:
S&P 500 (SPY – Free Report) : 15%
Health Care (XLV – Free Report) : 16%
Industrials (XLI – Free Report) : 16%
Financials (XLF – Free Report) : 22%
Real ESTATE (XLRE – Free Report) : 6%
Technology (XLK – Free Report) : 22%
Utilities (XLU – Free Report) : 12%
Take note of these ETFs. The sectors that outperformed since the election will continue to perform through the Trump presidency. However, if the risks mentioned above come to light, these sectors will give investors opportunity at discount prices. Buying an ETF might be easy to do when this happens, but finding the right stocks to buy is much tougher.
Buying Stocks on a Dip
Buying stocks have more risk than an ETF, but lead to greater reward. When markets sell off, we can utilize the Zacks Rank to separate the weaker stocks from the profitable ones. By combing the fundamentals of the Zacks Rank and technical analysis, investors can decipher what stocks should be bought and which ones should be ignored.
In addition, sell-offs tend to be manipulated by computer-driven algorithm trading that can over exaggerate a move lower. By recognizing this abuse, an investor can squeeze a couple more percentage points out of a trade then a typical investor would.
Since early 2016 we have seen the earnings recession, the Brexit, and the election. Each time that investors bought the dips they have been rewarded handsomely. This should be a recurring theme for the rest of 2017.
How to Capitalize
The next three months might lead to some of the biggest market moves of 2017 (both down and up), so why not profit from them?
That is the mission of my portfolio, Zacks Counterstrike.
Counterstrike is designed to sniff out when High-Frequency Traders have manipulated a stock’s price. We take advantage by buying the best of these unfairly beaten-down stocks. Then when price moves our way, we lock in gains and look for the next opportunity.
We’re now holding 8 stocks and getting ready to trigger trades from my watch list at any moment. Our goal is to generate double-digit gains in 1-4 weeks.
To maximize the profit potential of our recommendations, we must limit the number of members who have access to these picks. So if you’re interested, be sure to look into Counterstrike right away. The portfolio closes to new investors Saturday, September 2.
See Our Counterstrike Trades Now >>
Wishing you great financial success,
Jeremy Mullin has been a professional trader for more than 12 years with specific expertise in profiting from patterns set by High-Frequency Traders. He is the editor of Zacks’ Counterstrike portfolio recommendation service.