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Week 9 has always been historically bad in terms of performance for the S&P 500 Index, trading down almost at -1% on average for the past twenty years. But the past couple of years have been especially brutal, with outside forces at play that have heightened the traditional seasonal weakness.
In 2020, for example, Week 9 was right around when markets were having their initial reaction to the coronavirus headlines. That's right, we were already rolling over at this point in 2020 (much like we have this year), but the market got kicked in the side by breaking news of COVID-19.
But, with the right guidance, education, and trading strategies, you can not only survive market turmoil, but use it to your advantage. My readers back in 2020 came out net winners that week, despite the VIX spiking over 80 just afterward.
With that in mind, here are the things you need to be looking for in this unusually tumultuous week...
Here Are the Indicators I'm Watching
Things are moving fast and furious, but keeping your eye in the right place can reveal good trades and opportunities. Here are the big ones:
Of course, the continuing impact of Russia's invasion of Ukraine is going to dominate market flow. There are a number of likely impacts from this.
Look for sudden dips in companies with otherwise strong financials, as investors panic sell.
Prices for commodities will climb across the board amid global supply concerns. Oil recently shot over $100 a barrel, and natural gas is spiking, but you may want to look at sectors that are under the radar, like steel. The VanEck Steel ETF (NYSEArca: SLX) has been range-bound for all of 2022 so far, but that range has widened since October 2021. With Russia being cut off from the markets, domestic steel companies like Nucor Corp. (NYSE: NUE) and United States Steel Corp. (NYSE: X) could see a bump.
We're also probably going to see a spike in crypto from a wave of Russian buyers, as they struggle to find alternatives to traditional markets. Bitcoin (BTH) and Ethereum (ETH) will benefit most constantly, but smaller coins like Cardano (ADA) could as well.
The equity put/call ratio has yet to hit a reading in excess of 1.0, indicating this market has yet to hit a truly tradeable bottom. Though we had a short-term bounce toward the end of last week, I'm expecting that to taper off. The Invesco QQQ Trust Series 1 (NASDAQ: QQQ) is trading around $340-350 right now, and I expect this is where we'll start to see resistance. So I'm keeping an eye on QQQ and SPDR S&P 500 ETF Trust (NYSEArca: SPY) volumes, looking for a vote of confidence - without it, we can expect that the market has further to fall.
Big Discounts ($10 or Less)
When a stock falls under the $10 marker, it's much more significant than when it breaches, say, $12 or even $15.
That's because $10 is a psychological hurdle.
Think about being on a road trip. The 100-mile markers count the most, right?
No one cares 82 miles into Kentucky, trust me.
It's the same with stocks. Round numbers, especially $10, often act like mile markers on the charts. It's a frequent target for stops and targets because it's nice, easy number, which only reinforces the technical resistance... and keeps them in my sights.
Stocks dipping under that mark but that otherwise have fairly consistent performance ranges are great targets for discount buying and quick profit taking. Viatris Inc. (NASDAQ: VRTS) is a good example - it's an S&P 500 stock that tumbled down below the $10 range mid-Tuesday, but tends to hover between $13-15. If it stays down around $10 this week, it's got great upside potential when some of this chaos shakes out for a short-term trade.
This guide should get you started with finding ways to beat even the most bearish of markets, but I have plenty more picks for you.
I found all these after trying out a new technique for making plays on sub-$10 and even sub-$5 stocks, and I have to tell you - the returns have been amazing. Four hundred and thirty-five percent in seven months... 280% in 11 days... 311% in 29 weeks... even 788% in a year in some of my best plays.
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About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.