Colin’s Note: Markets have rolled over… But there’s no reason to panic.
We’re in the middle of this year’s most critical weeks for investors. As I warned in your April 1 dispatch, corporate earnings were just around the corner… and likely to bring stocks down from the soaring highs we’ve been seeing this year.
So far, my forecast is playing out pretty much to a T.
The good news is that while these slumps seem scary while they’re happening… they are always, in retrospect, great opportunities to buy stocks at a discount.
It’s all in today’s video. This is a relatively chart-heavy Bleeding Edge, so I encourage the folks who usually prefer to read to follow along in the video as well. And as always, you can reach me with any questions or comments at [email protected].
Bleeding Edge subscribers, hopefully, you guys are doing well.
On April 1, I said the four weeks that follow will shape the 2024 markets.
At the time, seemingly every market was pushing higher and higher. Bitcoin, gold, everything was going higher. But a fresh round of corporate earnings were about to come, And so far it’s gone according to plan. Here’s what I said on April 1…
This round of earnings, over the next four weeks, will likely see stocks fall from the highs, giving us excellent buying opportunities for high-quality stocks at lower prices.
And that’s exactly what’s happened.
Today, I’m going to show you where I think these markets are heading and give you specific levels to monitor so you can be prepared.
Look, I know, there are a lot of things going on in the world that are downright scary. But I’ve been investing through terrorist attacks, 9/11, multiple wars in the Middle East, the Great Financial Crisis, and even a global pandemic.
In each case, it was a buying opportunity for long-term investors. And I want you to capitalize on what I think will just be a temporary pullback in the stock market. Let’s move over to the charts so I can show you exactly what I mean.
So the first round of earnings came from the financial sector. That’s the large banks – JPMorgan, Wells Fargo, Bank of America today… And it’s done exactly what we thought.
Markets have rolled over.
This is represented by the XLF ETF. We’ll be going through the sector ETFs – or exchange-traded funds. And if you’re in a Vanguard ETF or another ETF out there, they’re all going to look relatively similar. From the highs that we made when our newsletter was published, we’re off about 6%. But I think we’ve got lower to go in the XLF.
The longer-term trend over the last seven years or so looks to me like we’re going to see a deeper pullback on this one… probably another 10–12% on the XLF. Specifically, you’re looking for a drop below about $36 per share as your first buying opportunity.
Now, we look at XLV. It’s the healthcare sector fund. For several years, this was consolidating more or less sideways between about $120 to about $130 per share.
Now, more recently, the fund has broken through. But it, like a lot of other sectors, is putting up some red. Since the first of the month, we’re down about 6% on the XLV.
If you need some more healthcare exposure to your portfolio, the first area is a backtest to the top of the support line back here at $135. It wouldn’t be overly aggressive in that area. But that’d be the first area where I would expect we’re just a couple of dollars short of it.
For even better areas, if you get a deeper pullback – maybe 15% off the highs, or down around $125. I’ll say anything south of $129 on the XLV Health Care ETF would be a smoking good buying opportunity.
Now, the IBB – the biotech healthcare ETF – is a little bit more speculative. It’s a very difficult sector to pick on your own. I suggest sticking to ETFs. Let these mega-fund managers make all the decisions for you.
We are approaching longer-term support. From the highs that we made back in March, we’re off almost 90% on this index. I think you’ve got a little bit more to go. Currently, shares are trading right around $127. I like this one just a little bit lower, probably close to $120 or $121.
Now, the SMH – the VanEck Semiconductor ETF – has just been rocketing higher. And it’s not just recently. If you look at the SMH trend, over the past 12 years we’ve been locked in this elevator shaft type uptrend.
SMH tracks the semiconductor industry, so think Nvidia, Intel, AMD, TSM, or anyone involved in that industry. While this one doesn’t have the telltale signs of a rollover, we are certainly looking like we could top out. We’re not quite in the zone where this index has historically topped out, but it looks like to me we want to potentially move lower.
Now, this one you absolutely want some exposure in. And you probably don’t want to wait too long. Anything south of $190 on this one would be a great buying opportunity.
Now, we don’t get retail earnings for another 30 days or so. We will hear from Amazon before then, but Target and Walmart don’t report for another month or so. But on the retail ETF – the XRT – from the highs right around when our newsletter was published, we are down about 11% on the XRT retail ETF.
You’ve got a beautiful bed of support at about $55 per share. That’s another 28% lower. I don’t know if I’d let it get all the way down there. Anything south of about $63 or another $7 or $8 off the share price certainly could be a buying opportunity.
And then finally we’ve got the XLY, which is consumer discretionary. Think Amazon or Tesla. It’s not your main staple or your main line type of retail… but this is discretionary items like your vehicles and maybe some things that you buy on Amazon.
Surprisingly enough, the discretionary index is not far from a buying opportunity. It’s currently trading at about $173. I’d say a pullback south of $163 would be a buying opportunity.
And now you can see this all come together on the SPY. It’s one of the most liquid S&P 500 ETFs. We’ve been on just an absolute breakneck rally since October 2023. There have only been maybe three weeks where you’ve had a negative week on the SPY since then.
More recently though – again, since we published our newsletter on April 1 saying that markets are looking a little toppy – things are starting to look a little overstretched. It’s not that I have a crystal ball. It’s that this is what the stock chart is indicating to us. Things are starting to look a little toppy.
And then, on top of that, you have corporate earnings… which don’t tend to match up to the expectations and can push these markets even higher. You’re seeing the market start to roll over.
You’ve got an excellent buying opportunity, probably another 5% or 6% lower on the SPY ETF. Anything south of maybe $470 – currently you’re about $503 – on the SPY would be your buying opportunity.
Folks, I told you on April 1 that the four weeks coming will be critical to the 2024 markets. So far, it’s playing out perfectly.
Be prepared. These moments only come up a few times a year. Make sure you’re ready.
These markets, and most of these indexes, are in sometimes decade-long uptrends. That is when you step in and buy… and your moment is likely coming in the next couple of weeks.
I’ll certainly keep you updated here in the newsletter. Hopefully, you have a wonderful day. We’ll see you again later this week.