{"id":19557,"date":"2022-03-29T07:30:04","date_gmt":"2022-03-29T11:30:04","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19557"},"modified":"2022-03-29T07:30:04","modified_gmt":"2022-03-29T11:30:04","slug":"its-deja-vu-all-over-again","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/its-deja-vu-all-over-again\/","title":{"rendered":"It’s Deja Vu All Over Again"},"content":{"rendered":"

The “dot-com” bubble burst in March 2000.<\/p>\n

It was a time when stock valuations were at their highest, investors had a “buy first, ask questions later” state of mind, and people were quitting their day jobs to day trade.<\/p>\n

In the beginning of this year, stock valuations were pretty much at the same levels.<\/p>\n

From there, the tech heavy Nasdaq 100 index fell 17% to its lows on March 14.<\/p>\n

But there were really two<\/em> parts of this selloff…<\/p>\n

First was a result of the market pricing in multiple rate hikes… A necessity that developed since the Fed was so behind the curve on controlling inflation.<\/p>\n

But the recent second leg down was all about the Russian war…<\/p>\n

Initial war headlines broke on February 10, and the Nasdaq 100 fell an additional 13%<\/p>\n

But when it became clear that the effects of the war (in its current form) on U.S. stocks had been priced in, we wrote several essays calling for a relief rally.<\/p>\n

So, has the rally now gotten ahead of itself?<\/p>\n

This chart comparing the price evolution of the tech sector then and now suggests that we have…<\/p>\n

Take a look…<\/p>\n

\"Chart\"<\/div>\n

It compares the tech sector then (blue line) to how it’s currently developing (grey line).<\/p>\n

The trajectory appears similar. Some may even call it a replay of 1999-2000, including the bear<\/a> market rally from the spring of 2000.<\/p>\n

These types of rallies are notoriously dangerous for investors… pulling them back in when it\u2019s time to be getting out.<\/p>\n

You see, the afterglow of the huge rally we’ve had since coming out of the pandemic is still fresh in people’s minds. After all, the market was at all-time highs as early as January 5.<\/p>\n

And now, mainstream pundits are starting to cheerlead this rally for more. The financial talking heads are a well-known contrarian indicator.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

This is concerning for investors thinking about rushing back into the tech sector after witnessing a 14% rally from recent lows in less than two weeks.<\/p>\n

As I mentioned last week<\/a>, not only is it a reactionary way of trading, but it also ignores a slew of underlying issues that makes me believe that we’ll see new lows quicker than we’ll see new highs.<\/p>\n

The biggest issue – tighter monetary policy from the Fed – is set to get even tighter.<\/p>\n

Take a look at this chart…<\/p>\n

\"Chart\"<\/div>\n

It shows the number of rate hikes the market is anticipating… Which keeps rising.<\/p>\n

If this was the reason for the market to sell-off in the first place, why should we expect new all-time highs if we’re slated for more <\/em>hikes, not less?<\/em><\/p>\n

Other issues are starting to pop up as well…<\/p>\n

Last week, I mentioned how the biggest component of GDP (consumer spending) is starting to take a hit.<\/p>\n

Now, the fixed income market is generating another signal the pundits love to talk about. It’s known as an inverted yield curve (when short term interest rates trade higher than long-term rates) and it’s usually a sign of an impending recession.<\/p>\n

But this is a murky indicator, and the Fed distorts the yield curve with its targeted bond buying programs. So, getting a pure read is hard.<\/p>\n

But it is<\/em> consistent at foretelling a recession with a lag… averaging about 18 months.<\/p>\n

After this recent rally, investors that took advantage of the situational trading setup to buy stocks should take profits at these levels.<\/p>\n

And those more concerned about the long-term picture should use this rally to allocate away from tech and into value.<\/p>\n

Because as we envisioned 2022 back in December<\/a>, this is the year of the value trade.<\/p>\n

Regards,<\/p>\n

Eric Shamilov
Analyst, Market Minute<\/em><\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

Last week, we asked Jeff Clark Alliance<\/em> members about their recent gains on my new trading strategy. These are some of their responses\u2026<\/p>\n

\n

I think that the earnings reversal strategy is a good one. I mostly appreciate the fact that the companies in the earnings situations are simply identified. It’s relatively easy to keep up on a few companies or indexes, but I lack the time to search earnings release schedules and multiple companies.<\/p>\n

With respect to the first five releases, I didn’t participate in all five recommendations, but I did take action in two of them: INTC and CWH.<\/p>\n

I was able to get in and out of CWH close to the recommended times and recorded a similar 61% gain (67% was posted). With INTC I wasn’t exactly in and out on time and only recorded a 3% gain (19% was posted). However, I followed up on the ensuing dip the following week and recorded a 77.5% gain in two days on the secondary bounce.<\/p>\n

I’ve learned a lot about trading following your explanations and advice in both the videos and the newsletters. From January 6 to March 23, my trading account is up 311%. Most of the winners were multiple recommendations in GDX and SPY. Hope we can do that every eleven weeks!<\/p>\n

Thank you, Jeff and your whole team!<\/p>\n

– Salvatore F.<\/strong><\/p>\n<\/blockquote>\n

\n

I’m most enthusiastic about the new strategy on earnings reversal trades. I made all five successfully, with results very close to the ones you have posted. In each trade I have waited for instructions from Jeff to exit. I hope that he is prepared with more of these trades soon.<\/p>\n

– Ed P.<\/strong><\/p>\n<\/blockquote>\n

\n

I bought Campbell’s at $1.40 and sold $1.71 on March 14. So, I made 22% in three days. Fine with me! Thank you.<\/p>\n

– James S.<\/strong><\/p>\n<\/blockquote>\n

Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Don\u2019t ignore these issues…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[13],"newsletter-type":[],"ticker":[],"class_list":["post-19557","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-eric-shamilov"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19557","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19557"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19557\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19557"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19557"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19557"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19557"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19557"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19557"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19557"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}