MARKET UPDATE #163

Free weekly stock market education service with 3 stock ideas.

Disclaimer: The content is for educational purpose only. No investment advice. Please read the full disclaimer.

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Hi ,

the stock market is very weak, especially growth stocks. Value stocks reached a new high last week, but be careful: If the overall market will continue to correct, value stocks will be dragged down too! Market corrections are driven by liquidation and 80% of all stocks follow the market.

The next weeks will be important: Will we see continuation of the correction or not? What will value stocks do? Nobody knows how far a correction will go and how long. But one thing is clear: Every correction will create new buying opportunities!

Here is what you will find in this newsletter:

Questions and answers from the subscribers forum
Comment on the current market situation: Stocks follow the 10 years interest rate
Stocks I am watching at the moment: $XLE, $XLF, $IWO
Trading tips: Shorting the market, value stock or cash?

If you have questions, please use the subscribers forum.

Thank you and good trading,
Julian

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QUESTION AND ANSWERS

No new question or answer this week. You have to register for the forum! If you have an account, you have to login.

Do you have a question for me? Use the free forum. Links are below!

Visit the forum

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MARKET CONDITIONS

Stocks follow the 10 years interest rate

The 10 years interest rate broke out to a new high last week! We saw a dramatic explosion of the 2 years interest rate in the recent months, but now the 10 years moved up too. That's bad for growth stocks …

On the other side we saw new highs in value and conservative stocks. But be careful: Only because value stocks have a couple of good days it does not mean that they are totally decoupled from the general market! Often they move sideways when S&P 500 and NASDAQ correct and move up sharply if the pressure in the general market eases. In my experience it's better to wait at the sidelines instead of putting all your money into value stocks.

If you don't want to short the market, you can stay in cash and wait for the next window of opportunity. Maybe we need another strong down move in the stock market before we can move higher.

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10 years interest rate and stocks: You can see that the 10 years interest rate is negative correlated with the $ARKK (ARK Innovation) and $QQQ (NASDAQ 100). $VLUE (Value Factor ETF) tends to move sideways or slightly up. But you can see that the upmoves were not explosive.

NASDAQ Composite: The sideways trend is very weak! Of course the index can move sideways for another couple of weeks, but I expect a fast and stronger correction to the downside.

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3 LEADING STOCKS

This week I have 14 stocks on my watchlist, 3 less as last week. There is almost no growth stock on my list! I have some value or cyclical stocks on my list. Instead of trading them you can trade ETFs too.

Would you like to learn how to find stocks like below? Look into my video course Growth Traders Toolbox.

$XLE: Energy stocks could outperform the stock market if the interest rates continue to move up. $XLE is an ETF which covers a lot of different energy stocks. Instead of selecting the best energy stocks, which can be difficult, you could trade the ETF instead.

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$XLF: Another ETF which could outperform if the interest rates continue to outperform. $XLF covers a lot of financial stocks. It's difficult for me to select the best or right financial stock. That's why I prefer ETFs.

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$IWO: If you want to go short in the market, ETFs can be a good way to do that. The most of them are very liquid and you don't have the risk of a buy-out. $IWO covers small and mid cap growth stocks. You can see the 1 years double top formation. Watch the index closely for a lasting breakout to the downside.

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TRADING TIPS

Shorting the market, value stock or cash?

The markets are never easy! The problem is that there is always an opportunity to make money. There is always a stock or trading vehicles which is going up or down and that means there is an opportunity to go long or short.

You must find out for yourself what to do: Are you a very flexible trader or focused trader? There is no right or wrong. You can make money by being very focused and staying at the sidelines if you don't have an edge or you can adjust to the market.

I am a very focused trader. I trade growth stocks and I make money 2-3 times per year in just a couple of weeks or months, depending on the market. The rest of the year I am either in cash or very defensive. That means I can short the market and I can trade value or cyclical stocks but I do that with smaller position sizes and I take profits much faster than usual.

Growth usually outperforms value in bull markets. That's why I focus on growth stocks. Shorting stocks is very difficult and needs a different style. In addition the potential is limited! That's why I swing trade when I short stocks.

I cannot give you a clear recommendation what you should do. You must define that for yourself. There is no need for me to make money if the markets are in a down trend. I try to make little money but first of all I try to protect what I have!

One thing I discovered for myself is trading ETFs instead of stocks when I short the market or trade value stocks. It is much easier to trade an ETF instead of finding the best or leading value stocks. The problem: If financial, oil or mining stocks are going up, they all go up. There is not much difference between all these companies (for me). I look for technical strength, but mostly ignore the fundamental side.

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