Thereâs a major story brewing⦠[TradeSmith Daily]( This Warning Sign Is Also a Buy Alert
By Michael Salvatore, Editor, TradeSmith Daily Right now may be the best time to buy consumer staples stocks — the âessentialsâ stocks that tend to do well in volatile times — since November 2021. Thatâs a double-edged sword of news… The edge facing away from you says consumer staples names could catch a big bid. Owners of those stocks would be happy. Meanwhile the edge facing toward you says almost everything but staples is about to drop. Owners of the S&P 500 — and thatâs pretty much all of us — have reason to fear. Iâll show you why I think this in just a moment. And Iâll share a couple tickers you can consider adding to your portfolio as a defensive measure against more volatility. But above all, todayâs TradeSmith Daily will reveal an easy analysis technique you should keep in your toolkit. One that can quickly reveal shifts in trends… baton-passes between sectors and world markets… and a whole lot more. It all comes down to the â/â key on your keyboard… RECOMMENDED LINK [Are you one of the 300 million who will be impacted?](
According to Goldman Sachs, 300 million people are about to find themselves on the wrong side of a great flood of destruction. And you might be one of them. How can you best prepare for whatâs coming?
[Click here now for all the details]( Dividing Tickers by Tickers
The technique Iâm talking about is finding relative performance between tickers. To do this, all you have to do is divide one tickerâs price by another. Applied to a stock chart, the result shows how the first ticker is performing against the second one. You can do this in most charting platforms. Let me demonstrate in my personal favorite, TradingView… Take a look at this weekly chart of the Consumer Staples Select Sector ETF (XLP) relative to (aka divided by) the S&P 500, going back to 2000.
This chart shows us when consumer staples are outperforming the S&P 500, and vice versa. When the chart goes up, staples are beating the broad market. When it goes down, the broad market is outperforming staples. Why is this important? Because consumer staplesâ outperformance correlates heavily with times of market volatility. Note the vertical white dotted lines and the labels at the bottom of the chart. Every time staples stocks have surged relative to the broad market over the past 20 years, itâs coincided with times of major market volatility:
- The dot-com bubble bursting in March 2000.
- The Great Financial Crisis beginning in October 2007.
- (Briefly) during the Covid Crash in March 2020.
- And most relevant to today, just before the beginning of the 2022 bear market.
So, consumer staplesâ outperformance has a strong track record of occurring right before long-term drawdowns. You might be saying, âSo what? Staples are at their lowest point relative to the S&P 500 since 2000.â To that, Iâd say, âExactly.â A Scary Regime Change in the Making?
Compared to the S&P 500, staples are at their lowest level since the washout that preceded the dot-com crash. That alone is worth noting. But when we dive into the technicals of the ratio chart, we see another potential regime change in the works. Take a look at the chart below. Itâs the same chart, zoomed in to the daily time frame, with the Relative Strength Index (RSI — shown in the middle) and Moving Average Convergence Divergence (MACD — at bottom) added on.
If youâve been following along in TradeSmith Daily since I started writing it a few months ago, you know that I put a lot of stock in momentum divergences. In my time trading the markets, Iâve found few other technical signals more consistent. This is when momentum indicators, like the RSI and MACD above, disagree with price action. And right now, thatâs exactly what weâre seeing. Both the RSI and MACD have been rallying while the relative performance of staples to the S&P 500 is falling. This has been happening since July of last year, suggesting a gradual but undeniable weakening in bearish bets on staples stocks even as the price falls. We saw a similar, though much more short-term, divergence right before the 2022 bear market kicked off and consumer staples stocks began a yearlong outperformance of the S&P. I donât know if weâre about to see another year of broad-based selling in the S&P 500. But I do know that quality consumer staples stocks are some of the best sleep-well-at-night investments you can possibly make. Staples stocks perform dependably through thick and thin economies, with the best ones throwing off dividends that investors can use as income or to build up bigger positions over time. Understand, Iâm not saying you should sell everything thatâs not a staples stock in your portfolio. But in whatâs proving to be a volatile year so far, it wouldnât hurt to allocate your chips more toward stable, sound businesses in a defensive sector. And in the consumer staples sector, thatâs hardly difficult to find… RECOMMENDED LINK [CRITICAL January 31st Warning](
Jason Bodner is going public today with [an urgent new warning](. He believes the most popular investment of 2023 is set to pop... And it could all start just days from now. This has NOTHING to do with A.I. stocks... It has NOTHING to do with crypto currency... And it has NOTHING to do with high-flying tech stocks. Instead, this corner of the market you likely have cash parked in has swelled to nearly $6 trillion.
[Click here to watch this warning now]( Two Staples Stocks to Consider Today
Procter & Gamble (PG) is the king of staples stocks. Its consumer products have stocked the shelves of department stores — and the medicine cabinets of American homes — for generations. Good economy or bad, you donât need me to tell you people will still buy deodorant, shampoo, and laundry detergent. The stock currently trades at 24 times earnings and pays out a 2.5% dividend, the latter of which itâs done for decades. It doesnât get much more defensive than that. Iâll also call out Walmart (WMT) here. Walmart has the unique quality of being a seller of consumer staples, and something of a staple itself. In times of high prices and price sensitivity — as weâre seeing with the American consumer — Walmart is where folks turn to get what they need. As a sweetener, WMT has some tech ambitions up its sleeve. Itâs building out an electric vehicle (EV) charging network for its thousands of U.S. stores, expected to be complete in 2030. Thatâs as much of a way to attract investment capital as it is another revenue stream to power its current 1.4% dividend yield and keep growing into its valuation — just below 27 times earnings. [Disclosure: I own shares of both of these stocks.] Market volatility always presents an opportunity to buy stocks at better prices. But from what Iâm seeing in the charts, you should consider focusing on the staples sector. If weâre in for a longer period of volatility than most seem to expect, higher inflation than economists expect, and a longer wait until the first rate cut from the Federal Reserve, itâll pay to be invested in stalwart businesses like these. To your health and wealth, [Michael Salvatore]Michael Salvatore
Editor, TradeSmith Daily P.S. Something unusual just crossed my desk that I felt you should see… I recently started delving into the work of Eric Fry, an analyst in our network whoâs had a long history of making major profit calls. My sources tell me heâs made 41 separate recommendations that have gone up 1,000% or more in his career — seriously impressive stuff. It should be no surprise Ericâs an expert in the tech space. Itâs the only kind of place you can expect returns like that. Thatâs why, when he recently uncovered [something startling hidden within the pages of a 394-page government document]( my ears perked up. Apparently, the U.S. government has already decided the winners of an imminent conflict between major A.I. players, beginning just two weeks from now on Feb. 1. And Eric, hoping to prepare as many investors as possible, is hosting [an urgent briefing on Tuesday, Jan. 23]( where heâll:
- Reveal the names and ticker symbols of two A.I. stocks — one to buy ASAP and one to avoid like the plague — completely free of charge.
- Host an interactive Q&A where you can submit your questions live during the broadcast.
- Show you a little-known trading strategy that will give you the opportunity to [double your money at least 10 different times in 2024]( regardless of what happens in the stock market.
To me, this all sounds fascinating, and Iâll definitely be tuning in. If youâd like to join and watch alongside me, you can [click here to secure your spot](. Get Instant Access
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