Editor’s note: Yesterday, we introduced you to Palm Beach Trader editor Jason Bodner, who’s set to reveal his newest proprietary trading technique – with the potential to spot winning trades 30 days in advance – tonight. (Sign up for free right here if you haven’t already.)
In his essay last night, Jason showed how you can strike it rich from the coming rush of investment in a specific kind of computer part – all thanks to the next generation of cellular networks: 5G.
And today, Jason shows how the “domino effect” will soon prove this true…
Perhaps you’ve heard of the “domino effect.”
It’s basically a chain reaction. It happens when one event kicks off a chain of related events.
And there are times when a domino effect can have catastrophic consequences.
Take the curious case of Cerise Mayo’s Brooklyn bees…
Hitting the Juice
In 2010, New York City allowed beekeeping for the first time. That year, the city also had its hottest summer on record at the time.
Cerise was a devoted beekeeper in Red Hook, Brooklyn. But that summer, the bees’ normal amber bands suddenly started turning bright red.
The sight of glowing red bees in the late evening enchanted many in Brooklyn. Oddly enough, their honey was red, too. But here’s the thing…
The red bees and honey had nothing to do with the hot weather.
Eventually, Cerise realized the bees had been “hitting the juice” at Dell’s Maraschino Cherries factory.
Someone sent samples of the honey for testing and found they were amped with FD&C Red 40 dye – the same dye used to color the neon red cherries that sweeten countless Shirley Temples.
The bees must’ve liked the sweet cherries…
Anyway, the case drew the attention of the city’s environmental protection department, which began looking into illegal dumping of wastewater from the factory into the city’s sewers.
To make a long story short… around the same time, the city also started getting complaints about marijuana odors coming from the factory. So the district attorney’s office began to investigate the owner.
A few years later, investigators raided the factory. Right before they found the city’s largest pot farm underneath, the owner barricaded himself in the bathroom and shot himself dead.
So a woman named Cerise (which ironically means “cherry” in French)… who kept bees in Red Hook, Brooklyn… which had bands and honey tainted by the red dye from red cherries… led to a massive pot farm bust and the suicide of the factory’s owner.
And that’s the domino effect.
I bring this up because the same thing happens in markets…
Forced Selling
We witnessed the domino effect in last year’s market. From October 1 to December 24 last year, the S&P 500 fell nearly 20%.
On Wall Street, a lot of firms use systematic trading systems, or algorithms. These systems control the buying and selling of stocks.
Now, when stocks go up, it’s great. The systems say to keep buying, so that’s what portfolio managers do. And that helps the market steadily rise over time.
But eventually, the market stalls or falls. There has to be a hiccup somewhere.
Anything can cause it.
And in October, we had a perfect storm of uncertainty around the midterm elections, trade war fears, rising interest rates, and other events.
This uncertainty made some investors nervous, and they stopped buying.
That was the first domino.
This lack of buying set up the market for a fall. And once the market goes down by a certain level – 3%, 5%, or whatever – these systems eventually flash sell signals.
When that happens, it exacerbates the sell-off – which leads to a domino effect.
The market bottomed out on December 24, 2018. And the S&P 500 was down 14% in the final quarter of 2018.
But the dominoes can fall in reverse, too.
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Massive Recovery
From Christmas Eve lows, the recovery has been massive. Small- and mid-caps have led the rise – the S&P SmallCap 600 and S&P MidCap 400 indexes are both up over 20%.
The domino that kicked off the climb?
For readers who don’t know, I developed a system that tracks what I call “unusual institutional buying.” I’m talking about the very big money that can move stock prices by simply taking a huge position.
My system scans nearly 5,500 U.S. stocks every day, looking for the best of the best companies that big institutions are buying up. And I use 80 complex algorithms to score and rank each one of them for strength across 29 factors.
And from what I’m seeing, big institutional investors have been plowing into stocks at a breakneck speed…
Perhaps the biggest evidence of a rush back to growth is being seen again in semiconductors. Semis got smoked last year and were essentially a toxic wasteland.
Yet the iShares PHLX Semiconductor ETF (SOXX) has shot up more than 30% year-to-date – its best start ever.
Plus, we’re still seeing heavy accumulation in the sector – which means more gains ahead for investors in these types of companies.
There’s still room to run in this sector… and the best one-click way to get exposure is SOXX. This fund holds large semiconductor companies like Nvidia, Intel, and Broadcom.
The point is that the first domino to fall may not get noticed until long after the fact.
But it helps to pay attention along the way and watch what the market tells us. So keep in mind that for now, the smart money is expecting a strong economy and growth to continue.
Regards,
Jason Bodner
Editor, Palm Beach Trader
P.S. I mentioned my proprietary money-making system earlier… But what I didn’t tell you is why I developed it.
It was so I could stop working 11-hour days on Wall Street…
So I could spend time with family… Make a ton of money on my own time… And help others do the same.
Tonight at 8 p.m. ET, I’ll show you how to use my breakthrough system for yourself. I’ll reveal how it identifies America’s fastest-growing stocks up to 30 days before they soar… And I’ll be giving away a special three-part masterclass for free.