Beware the early ides of March⦠and black bears. [TradeSmith Daily]( A major correction may be about to begin… How to make money by getting âslapped in the faceâ… Japan abandons NIRP, and traders love it… Bigshot bitcoin investors open the kimono on May 15… The ultimate destination of trillions in sidelined funds…
By Michael Salvatore, Editor, TradeSmith Daily Itâs one of the scariest charts in the market. Because no matter who you are or what you invest in, thereâs no escaping its impact. It wonât take much more downside to trigger what could easily become a painful correction over the next few weeks. Iâm talking about the ever-tightening bearish rising wedge pattern in the S&P 500 — Americaâs retirement account and the guiding light for many financial assets. Take a look…
The S&P 500 has been forming this pattern since November. Bearish rising wedges occur when an asset makes a series of higher highs and higher lows that get gradually closer together. Because stocks have mostly gone up for the past five months, and because weâre at new highs, thereâs very little in the way of downside support. The former all-time highs that we broke through in January, around 4,800, are the next logical resistance point — down 7% from here. The 4,600 level, tested as resistance back in August and again in December before breaking through, is the next best argument we can make for support. And thatâs about 11% lower. Amid all this, the Relative Strength Index has been waning in momentum even as stocks have pushed higher. This is a major warning sign and tells me that the rising wedge is likely to resolve downward. You know what they say: The bigger they are, the harder they fall. The lagging action in major Magnificent 7 stocks and S&P 500 constituents — namely Apple (AAPL), Tesla (TSLA), and Google (GOOG) — are weighing the index down. The generals are beginning to fall in battle — another warning sign. One final warning sign: With 2024 being a leap year, the ides of March came a day early. And stocks closed down 0.2% yesterday. (OK, one more — the American Black Bearâs hibernation period runs from mid-December to mid-March. Yes, Iâm serious.) To be clear, I donât think a correction over the next few weeks is a death knell for the market. More a healthy cooling-off period thatâs necessary for a sustained bull market. RECOMMENDED LINK [BREAKING: Elon Muskâs Secret A.I. Project Set to Plunge Millions of Americans Into Poverty](
Luke Lango, one of Americaâs leading investors, just released shocking footage outside of the Tesla Gigafactory, in Austin, Texas. Whatâs happening behind the scenes right here is set to change the course of humanity as we know it. McKinsey analysts are warning that the tech behind Elon Muskâs new venture could throw 800 million workers worldwide into unemployment. Starting as early as this summer. But, like all of Elonâs projects, it will also mint many millionaires in the process. [Click here now to prepare yourself for whatâs around the corner](. ❖ Still, corrections can provide ample trading opportunities…
Just ask one of TradeSmithâs top-notch trading analysts, whoâs been warning of a downswing all this month. Hereâs William McCanless writing to his Trade Cycles subscribers in his March gameplan:
Markets are overbought… and, depending on who you ask, weâre either not âtoo overboughtâ yet or weâre in full-on bubble territory. This chart below of rolling four-months change in the S&P 500 shows that the current rally is indicative of either a post-recession rally or a bubble — but still hasnât âofficiallyâ reached those heights:
Bloomberg (via Deutsche Bank)
With conditions like these, William is waiting to get âslapped in the faceâ with a trade setup so obvious, heâd be a fool not to pull the trigger. More from William, again in Trade Cycles, reflecting on the most recent wins and losses:
We will short this again — for sure — when itâs the right time. And I expect that it will be one of the best trades we ever enter here at Trade Cycles. Somethingâs got to give, because this doesnât make sense. But hereâs the thing — Iâll know it when I see it. Iâll know it when it slaps me in the face. Our best trades so far in the first three months of the year have been âslapped in the faceâ trades. Hereâs what I mean by that… When I looked at gold, the chart practically reached out and slapped me in the face. It looked so completely obvious as to what was about to happen that Iâd have to be the biggest idiot in the world not to buy it right then and there. Oil was a similar trade. So was the China trade. But the other trades that we closed out for losses had no such slapped-in-the-face phenomenon. I was âmehâ about them. I did not have a super high conviction. I was confused on the market (and I still am until April). So, I was just trying to find halfway decent opportunities, long and short. This was the wrong approach. Because in my personal day trading — and also swing trading — I often have the mentality that I donât have to go out and âfindâ an opportunity. All I have to do is watch the market. At some point — how and when, I never know — there is going to be a trade setup that presents itself to me that is so completely obvious… so clear and so shockingly strong… that it slaps me right in the face, and Iâd have to be a complete moron not to act on it. You canât fight this irrational streak before it ends… thatâs a way to get your trading account slapped in the face. In other words, donât trade just to trade. Wait only for the trade setups that youâre confident to act on, and act on them. Thatâs the ticket to profits. Moving on to other areas of irrationality reversing… ❖ Japanâs interest rates are expected to rise… to zero…
The Bank of Japanâs short-term rate has been stuck in negative territory for almost 10 years. As soon as June, theyâre set to rise into positive (OK, more like null) territory. Negative interest rates were an unusual experiment by Japanâs central bank. Enacted in 2016, the move was designed to fend off deflation and stimulate economic growth. With negative rates, holding money in a bank account would penalize the saver — costing them for the privilege of giving their money to the bank. That meant the only alternative was to spend and invest. Strange as it was, the effect on Japanâs stock market was altogether positive, if muted. Check out this chart of Japanese interest rates and the Nikkei 225 index going back to the previous all-time high:
Since Japanâs rates went negative, the Nikkei 225 has risen a modest 115%. Thatâs got nothing on U.S. stocks, obviously. But it was at the very least a sustained bull market that broke through the previous highs from over 30 years ago. Now that rates are set to go positive, again, the playbook has changed. But investors clearly like what they see, with Japanese stocks up over 16% year-to-date, outperforming the U.S. stock market. Our take? The momentum is behind Japanese stocks, and this normalization of the economy is a step in the right direction. Japan has been one of the standouts in the ex-U.S. stock trade, and chances are strong itâll stay that way. Buying a few high-quality Japanese company American depository receipts (ADRs) to round out your portfolio would be a prudent move. RECOMMENDED LINK [2024 Could be Your Last Chance to Ever Get Rich From Crypto](
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[Click here to discover his top 5 coins for 2024]( ❖ Whoâs buying the bitcoin ETFs? Weâll learn soon…
The bitcoin ETFs were a watershed moment that many a bull have been waiting years for. Finally, there was a simple, turnkey, no-nonsense way for not just everyday investors, but major institutions to buy into bitcoin. The obvious question then becomes: whoâs buying? Weâll find out in about two months. May 15 marks 45 days after the calendar quarter. Thatâs the deadline for investors with more than $100 million under management to file their 13F forms, which disclose their holdings of publicly traded stocks. That level of AUM covers thousands of institutional investors, including firms like Berkshire Hathaway (Warren Buffett), Pershing Square Holdings (Bill Ackman), Bridgewater Associates (Ray Dalio)… but also massive money managers like Vanguard, BlackRock, and Fidelity. Itâll be fascinating to see if the bigshots are putting their money where their mouth is — either by buying into the bitcoin ETFs, or by missing out on this trade entirely. Another interesting thing to note: the bitcoin ETFs have attracted $10 billion in flows over the last two months, and now hold about 4% of the total circulating supply of bitcoin in the market — or about 800,000 bitcoin. Clearly, the ETFs were a hit. And theyâve been a big driver of bitcoinâs price gains over the past few months. Our advice, though, remains the same: buy the ETFs if all youâre looking to do is trade bitcoin. If you want not just the price gains of bitcoin, but also its utility as a store of value and a transferable asset, youâll need the genuine article. ❖ Finally, Louis Navellier is preparing for a generational wealth transfer to rival COVID…
The COVID era was in many ways a massive wealth transfer from the bottom of the wealth spectrum to the tippy top. While countless blue-collar jobs were lost in the immediate shutdowns, the U.S. government and Federal Reserve ensured that financial markets would be just fine. The result was a massive stock market bubble, totally detached from reality, that largely benefitted the top 1% of wealth in the country. At the same time, paycheck protection programs and other incentives were abused by business owners to the tune of millions of dollars… making the few rounds of stimulus checks almost insulting by comparison. Today, though, [a different kind of wealth transfer is taking place](. One that doesnât require already being in the top 1%, or having a business, or anything else like it. Quite simply, there are unstoppable forces at play in the financial world that are [set to move close to $9 trillion from the sidelines and into the worldâs top growth stocks](. 40-year stock-picking expert Louis Navellier is doing everything he can to share these ideas with his readers, ensuring they get to take part in the wealth transfer and benefit. And with the market set to correct over the next few weeks, all that means is better entry points on the five growth stocks he thinks every investor should own to take part of this guaranteed wealth transfer. Louis has all the details in [this exclusive replay of Wednesdayâs launch event](. (In that event, Louis revealed the name of one stock set to benefit from this unique situation.) We may be in for a rough patch these next few weeks. But no matter what happens, weâll have you covered right here in TradeSmith Daily. Just as one example, tomorrow Iâm talking to a brilliant analyst from outside TradeSmith whoâs clued in on an A.I. trade most of the market is ignoring… but could become the single most important application of the technology thus far. Stay safe out there, and have a great weekend, [Michael Salvatore]Michael Salvatore
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