Forget The Death Cross, This Indicator is Flashing a Screaming Buy Signal

You're receiving this email as part of your subscription to Lou Basenese’s Trend Trader Daily. [Unsubscribe](. [Trend Trader Daily]( Forget The Death Cross, This Indicator is Flashing a Screaming Buy Signal Thursday, January 20, 2022 Leave it to the financial press to exaggerate to get clicks and stir up investor panic. What am I talking about? Look no further than the latest headline from Bloomberg, which leverages an ominous sounding technical indicator to try to scare us out of stocks. (click image to enlarge) So what should we do? The exact opposite of what they’re suggesting. Here’s why… > ADVERTISEMENT < Elon Musk's Shocking Split Elon Musk just got dumped. But this is no ordinary breakup. It has potentially multi-billion-dollar implications for his business. Get the whole sordid story [here](... And see how Musk's shocking split could be a [huge opportunity]( for us. Debunking the Death Cross The selling in small-cap stocks to start 2022 has been relentless. Consider: The Russell 2000 Index is down by almost double digits. Already. A big contributor to the decline has been [biotech stocks](. Over a dozen in the index plummeted by more than 40% to start the year. But as I shared not long ago, [small cap valuations]( have dropped so far, so fast, they’re trading into value territory. In other words, the selling is (way) overdone and we’re closer to a bottom than a top. (More on that in a moment, including the most reliable buy signal in existence.) Of course, the fear mongers over at Bloomberg and MarketWatch, among others, want us to believe otherwise. And they’re justifying their doom and gloom articles by pointing to a technical pattern known as the death-cross. This is when the price for a stock (or index) over the last 50 days drops below the 200-day moving average. As Jake Gordon, an analyst at Bespoke Investment Group notes, “Death crosses are often interpreted as a bearish chart pattern.” I’ll concede they often are, and headlines certainly lead investors to believe the same. But here’s the thing: interpretation doesn’t always match historical reality. In fact, it turns out that death crosses for the Russell 2000 Index are hardly bearish at all. That’s right. Although the authors fail to cite all the data, I have access to it. And it doesn’t lie. Just the Facts, Ma’am Consider: - Following the 18 “death-crosses” since 1980, small-cap stocks averaged a decline of 0.63% one week later. - But if we go out one, three, six and twelve months after each occurrence, small-cap stocks have averaged gains of 1.13%, 7.03%, 8.11% and 14.78%. I’m sorry. But a 0.63% decline over the course of a week is nothing to worry about. Especially when small-cap stocks averaged meaningful gains the majority of the time if we were willing to hold onto them. Or as Bespoke sums it up (emphasis mine): “Death crosses are considered to be a negative technical formation, but the performance of the Russell 2000 following prior occurrences, while not better than average, has been hardly as scary as the name of the pattern implies.” Indeed, instead of curling up in a ball, sucking our thumbs, and bracing for more nasty declines, we should actually be doing the opposite — buying more. (click image to enlarge) That’s easier said than done, of course, which is why I want to provide some extra data and encouragement. You see, there’s one contrarian indicator that’s within spitting distance of flashing a screaming “Buy” signal right now. It’s never been wrong. Tomorrow, I’ll share all the details — and of course, the smartest way to position your portfolio for maximum small-cap gains in the months ahead. So keep an eye on your inbox. TREND TRADER PRO TRADE OF THE WEEK [ ACTION TO TAKE ] FOR TREND TRADER PRO READERS ONLY [> Learn more]( Ahead of the tape, [Lou Basenese] Lou Basenese Founder & Chief Investment Strategist Copyright © 2022 Trend Trader Daily, All rights reserved. You signed up on []( Our mailing address is: Trend Trader Daily 301 S. Perimeter Park Dr. Suite 100 Nashville, Tennessee 37211 [Update Subscription Preferences]( | [Unsubscribe from this list]( RISK NOTICE: All investing comes with risk. That includes the investments teased in this letter. You should never invest more than you can afford to lose. Please use this research for the purpose that it's intended — as research only. You should consult a professional financial advisor before ever taking a position in any securities you see herein. 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