Don’t Let The Market Swings Shake You Out! – Mike Swanson (08/02/2019)

Yesterday right after I sent my email out I got an angry email from someone long AAPL telling that me I’m an idiot for saying that KL is a better stock, because KL had sold Wednesday on its earnings report even though it was a great one.

Well KL went up 8% yesterday to show why it isn’t just my top stock pick for July, but is likely to continue to outperform AAPL and the stock market averages for the rest of the year!

We are a time in which a segment of the population has become manic thanks to the influence of social media. If someone doesn’t say what they want to hear they just triggered, but all I care about is being in the sectors and stocks outperforming the stock market and avoiding those that lag.

Now I also got some emails from people selling various things because of the drop on the Fed day. A lot of people in gold and mining stocks – especially the toxic triple ETF’s sold in panic.

The reality is that it is hard to hold a big position in anything without eventually getting spooked so do not hold big positions. Don’t be 100% in anything – and that means don’t have all of your money in gold and don’t have all of it in the stock market either.

Gold rallied hard Thursday to show us that its initial Fed reaction was just one of the typical weird post-Fed temporary gyrations. There is a different story for oil though where oil broke down yesterday for a massive drop.

But take a look at the GDX ETF (which I do own) to see what happened in the gold world.

All the losses after the Fed announcement were simply a move off of recent highs for GDX and were all erased yesterday.

It’s a lesson in not getting shaken out by one day of action or headlines.

And this is a lesson for stock market bulls now.

There is no reason to think the stock market is going to crash at this moment. If it can shrug off Thursday’s loss today then it can go into a low volatility float period in August.

If it goes lower then it’s likely to just go to support and start another bounce or rally into the September FOMC meeting as a fall down to support will cause Federal Reserve members to reassure us as they are now prisoners of the stock market.

It’d probably be a repeat of the May pullback in the stock market that was linked to trade tensions and ended with Federal Reserve members talking rate cuts.

So where is support?

Support for the S&P 500 is now at its 50-day moving average at 2926. After that support is in the 2750-2826 zone – which is the area of its June low and its 150-day moving average.

There is no reason to think that support there would not hold and that June low is only 7% away from here. That’s not a big enough drop that should shake people out – unless they are on margin. But such people shouldn’t have been on margin with the market near highs like this going into the Fed meeting in the first place.

There is no real reason to panic right now and if you are a margin person then learn your lesson not to gamble like that again. And avoid stocks that are badly lagging the market. I had to put a sell alert on ACB the other week, because of the way it is acting and it fell 6.40% yesterday even if it is the most popular stock owned by the most number of people on Robinhood. Use your money for good trades and great stocks.

Did you see what KL did yesterday? It went up 8.16% while Apple was down over 2% and has done nothing but fade the Wednesday earnings gap up.

There is a reason why I made KL my top pick for July and now with the way things are lining up I think that next week I’ll be able to identify a new pick for August that can do even better for you! It may come Monday so stay tuned in.

-Mike



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