Dividend Investing Weekly: Small-Cap Index Reaches a Key Inflection Point

You are receiving this email because you signed up to receive our free e-letter Dividend Investing Weekly, or you purchased a product or service from its publisher, Eagle Financial Publications. [Dividend Investing Weekly] [Cash Machine]( [Quick Income Trader]( [Breakout Profits Alert]( [Hi-Tech Trader]( Small-Cap Index Reaches a Key Inflection Point by Bryan Perry Editor, [Cash Machine]( 09/20/2021 Sponsored Content [Don’t Miss Out on These 3 Potential Winners…]( These three companies are well-positioned for growth... A diverse group of recommendations each with amazing potential... Not just for the remainder of 2021... But throughout 2022 as well. [Click here to get all three names and ticker symbols]( This past week saw a number of potential market headwinds emerge that pressured the major averages lower. Mixed data showing higher inflation at the wholesale level, tame inflation at the consumer level, surprisingly strong retail sales, upbeat manufacturing in the New York region and subdued consumer confidence, pushed Treasury yields marginally higher on a net basis. The yield on the 10-year Treasury note is at a key inflection point, where a move above 1.40% will likely trigger further technical selling. Several articles are circulating from the Wall Street Journal, Forbes, Barron’s and about every other news outlet regarding the potential collapse of Chinese mega-developer Evergrande and whether this will be a “Lehman moment” that has a systemic impact on global markets if Beijing allows for what could be a default of over $300 billion in debt payments. Evergrande’s business accounts for about 2% of China’s gross domestic product (GDP), and the stock of the company has lost roughly 90% of its value. Hence, at this point, it seems the worst-case scenario of a controlled crash, bankruptcy and breakup of the company by the state looks likely to be absorbed by Western rather than Chinese markets. Evergrande committed two great sins of using way too much leverage and financing a great deal of its development through the shadow banking industry. Yet, the company is probably too big to fail, requiring the intervention of Beijing as soon as this week. [What You Must Do Now to Protect and Grow Your Income Today]( Analysts at Goldman Sachs estimated dividends for S&P 500 stocks will decline by 25%… with companies globally laying off workers, cutting expenses and slashing dividends. If you don’t get out of these stocks now, you’ll find the stock market is a better place to lose your fortune than to make one. [Click here now to watch this special presentation.]( And then there is the Fed meeting this week to determine whether fiscal policy should include a scheduled scaling back of quantitative easing (QE) at a time when the full impact of inflation, the Delta variant of COVID-19 and the various supply chain disruptions are not yet known on business conditions for the current quarter. To this point, the market is trading as if the Fed will continue to jawbone the idea of tapering, but not act on it. Lastly, Congress has to raise the debt ceiling to avert a default on U.S. federal debt… again. This hot debate and political brinkmanship will occupy Capitol Hill for the next two weeks, putting further delays on the passage of a much-needed infrastructure package. Toss in the recent spike in WTI crude prices to $72/bbl. and one would think the market’s best-case scenario is a sideways finish to the year. Under this set of circumstances, it would seem that the least path of resistance for equities is lower, but markets are forward-looking and have likely priced in most of the pessimism brought about by these noted risks. Assuming there is progress on all these fronts in the next month, it might behoove investors to take a hard look at going long in the Russell 2000 and small-cap stocks, where the majority are domestic companies. This might be the most under-owned sector with the most room to run. What’s good about this investment setup is that the downside risk is very well-defined by looking at the year-to-date chart of the Russell 2000 iShares ETF (IWM), which has been consolidating in a 20-point range for the past eight months. Logic would have it that if the risks outlined above were going to truly undo the primary bull trend, shares of IWM would have already broken down through key support at $216, where its 200-day moving average (MA) sits. Instead, we see a chart pattern where both the 20- and 50-day MAs are converging with the 200-day MA and trying to turn higher. [Skyrocket Your Profits for 2021 and Beyond]( Traders who followed our lead reaped explosive profits because they had the tools at their fingertips to find profitable stocks. [Click here now](, and I’ll send you my "5 Tips for Overcoming Market Volatility" eBook and reserve a seat for you at my LIVE online training, so you can learn how to skyrocket your profits. A break of the $218 level and further violation of the $210 level would be where an appropriate mental or physical stop-loss would be appropriate. This implies downside risk of 1-3.5% and upside of, let’s say, 20-30%. The technical maxim of “the longer the base, the higher the space” comes to mind here. Eight months is by definition, a long technical base, and a huge opportunity for profits if this key support level holds. The Russell 2000 has missed out on this year’s rally. As of last Friday, Sept. 17, the Dow is up 13.00%, the S&P jumped 18.02% and the Nasdaq raced ahead by 16.73%. Considering that the small to mid-cap stocks hold the greatest amount of investment risk, to see this tier of the market looking to push higher in the midst of so much hand wringing is not only counterintuitive, it is starting to look very compelling. One thing market technicians will tell us about the IWM chart is that there is intense technical pressure at this inflection point to where the next move, be it up or down, will be powerful. This setup is one of the great and most interesting things about the stock market: it will behave in ways that defy logic only to be understood well after a big move has occurred. There are circumstances beneath the surface of the market’s veneer that are offsetting a weaker NYSE advance/decline line and other negative factors. What these factors are at present is elusive as far as I can tell, but if shares of IWM trade above $235 on heavy volume, it will be off to the races for the Russell and provide broad confirmation that the bull market has further to go. It is September, and pessimism is elevated due to the unknowns surrounding Fed policy, tax policy, the debt ceiling, rising bond yields, stalemated infrastructure spending, the Delta variant, a meltdown in Evergrande, slowing growth in China, rising oil prices and global supply bottlenecks. And yet, the Russell 2000 has not rolled over. It actually looks like it is staging for an upside breakout, which would be a most welcome event as it would indicate capital flows are increasing risk-on exposure to the U.S. economy. How this scenario will unfold is still a coin toss, but the one thing the IWM chart fully suggests is that we’ll know one way or the other in the near future. Sincerely, Bryan Perry Editor, Cash Machine Editor, Premium Income Editor, Quick Income Trader Editor, Breakout Profits Alert About Bryan Perry: [Bryan Perry]Bryan Perry specializes in high dividend paying investments. This weekly e-letter combines his decades-long experience in income investing with a simple, easy-to-read format that investors of all stripes can work into their portfolios. To ensure future delivery of Eagle Financial Publication and Bryan Perry emails please add financial@info2.eaglefinancialpublications.com to your address book or contact list. View this email in your [web browser](. This email was sent to {EMAIL} because you are subscribed to Bryan Perry's Dividend Investing Weekly. To unsubscribe please click [here](. If you have questions, please send them to [Customer Service](mailto:customerservice@eaglefinancialpublications.com). Legal Disclaimer: Any and all communications from Eagle Products, LLC. employees should not be considered advice on finances. 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