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Are you listening now? | The Crux

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From Dr. David Eifrig’s Health & Wealth Bulletin:

If you’ve been deeply hurt by the market over past few weeks, you haven’t been listening…

The S&P 500 is down 8% for the month and it’s down 8.5% from its 52-week high. We’re approaching correction territory but haven’t hit it yet.

On the other hand, tech stocks are in a bona fide correction. The tech-heavy Nasdaq Composite Index has fallen 11% in October and it’s down nearly 12% from its 52-week high. It’s been brutal.

In fact, the Nasdaq is on pace to post its worst month since late 2008. Back in October of that year, the Nasdaq fell a whopping 17.7% and 10.8% the following month. Depending on how the index closes later today, October should finish right in the middle of those two months.

The past four weeks certainly haven’t been kind to the tech giants either. We’ve seen Amazon shed more than 23% of its share price. Even Google’s hasn’t stayed out of the selling, dropping 13%. And Netflix has been absolutely crushed – down nearly 24%.

This has been one of the worst months in terms of stock performance over the past decade… But if you’ve been following us closely, you shouldn’t be surprised. And if you’ve lost 15% or more in your own portfolio, you haven’t been listening.

We’ve been preparing for this.

Over the past few months, regular Health & Wealth Bulletin readers know that I’ve gotten cautious about the stock market. Even while I was encouraging readers to take advantage of Steve Sjuggerud’s “Melt Up” recently, I mentioned my hesitations about the market, pointing out how there were a ton of red flags. I’ve been talking about these warning signals, whether debt or valuations or inflation, for a while now. I hope you’ve been following my advice and pared back some risk.

Now before anyone accuses me of playing both sides, let me explain…

I agree with Steve Sjuggerud that the market is likely to explode higher before the big crash. There’s going to be great gains.

Investors should have a bet on the Melt Up… But it should be a reasonable bet. My past experiences tell me that when there’s a fantastic money-making opportunity like the Melt Up, folks will throw caution out the window and push all their chips in the middle of the table.

Don’t do this.

Only a portion of your portfolio should be allocated to bullish bets right now. Even with a conservative portion of your portfolio betting on the Melt Up, you’ll make a ton of money if Steve is only half right.

You don’t need to risk everything.

I’ve seen it far too many times when investors take advantage of a great market call like the one Steve is making, and then ride the market all the way down. They don’t know when to get out.

That’s why I’ve been writing about all the different risks in the market for the past few months. I’ve been urging readers to get defensive.

You’ll make money in the Melt Up, I’m confident of that. But I don’t want you to lose it all in the “Melt Down.” My job is to make sure you understand the whole picture and help you allocate your money accordingly.

I always recommend that investors spread their money between a few asset classes. You should be invested in stocks, fixed income, cash, and chaos hedges.

If you take one thing from today’s issue, it’s that you should move some of your portfolio to cash. Have some money on the sidelines. It could be sitting in a money-market fund or in a certificate of deposit (CD). When the crash happens, you’ll be relieved you have some of your money parked there.

And now is also the time to increase your position in chaos hedges. Chaos hedges are protection for when things in the economy get really bad. Gold, for example, is a chaos hedge.

Earlier this month I told my Retirement Millionaire subscribers to buy gold. The timing was right. Since that issue came out, the price of gold is up nearly 3%.

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It’s not hard to figure out that when stocks go down, people buy gold, which pushes the price up. It’s important to buy before the big market crash. I don’t think this is the big market crash right now – just a normal correction. But in this case, it’s better to be early than late.

Based on the way things have gone this year, it appears volatility is here to stay. That plays into Steve’s Melt Up thesis. Have a portion of your portfolio invested in Melt Up stocks. Just to reiterate, a portion… Not everything you have.

Volatility also means that there’s going to be more market downturns… Including the bear market we’re all fearing. Now is the time to get ready. Increase your cash position, buy some gold, buy some safe bonds, and hold only your highest-conviction stocks.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team


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Stocks

Retail earnings reports, China trade impact

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CNBC’s Jim Cramer on Friday said he expects more of the same in the week ahead of stock trading.

“Next week, once again, is all about trade and retail,” the “Mad Money” host said. “This is the week when most retailers report, so we will be listening closely to what they say about the trade war.”

Monday: Trade watch

The stock market will confront the same issues on Monday as the week prior. The days following will see a lot of retailers hold conference calls, and Cramer is looking to see what they have to say about tariffs on Chinese imports.

“The market will punish companies that source in China and reward companies that don’t, because that’s what [President Donald Trump] is doing,” he said.

Tuesday: Home Depot, TJX, Nordstrom

Home Depot: The home improvement retail giant reports earnings before the bell. Cramer is expecting weather to weigh on earnings again.

“There’s much too much rain this gardening season, and I bet that hurt them,” he said. “I still believe Home Depot can tell a decent story about trade, but it won’t matter if gardening season, their equivalent of Christmas, turns out to be a bit of a bust.”

TJX: The T.J. Maxx parent delivers its quarterly results to shareholders in the morning.

Nordstrom: The luxury department chain has an earnings call at the end of trading. The stock is down more than 20% this year and more than 27% in the past 12 months.

“At these levels, it pays you a 4% yield. I think it may be too cheap to ignore,” Cramer said.

Wednesday: Lowe’s, Target

Lowe’s: Lowe’s, the main rival to Home Depot, presents its quarterly earnings before the market opens. CEO Marvin Ellison is guiding the home rehab chain through a turnaround.

“Wall Street loves Ellison, though,” Cramer said. “If Lowe’s gets hit, either before or after the quarter, I’d be a buyer of the stock.”

Target: Target comes out with its latest results before trading begins. The stock is about $20 per share off its September high and has a 3.6% yield.

“I know it’s battling both Walmart and Amazon, which might be too much competition for any one company, ” Cramer said. “But I think CEO Brian Cornell’s doing a terrific job. You know what, I like the stock here.”

Thursday: Best Buy, Splunk

Best Buy: The tech gadget store reports earnings in the morning. The stock is up 30% this year, and Cramer is warning not to take a chance on it at current levels.

“I’m betting they’re going to have to talk about tariffs on the whole darned conference call,” he said.

Splunk: The software analytics company, one of Cramer’s “Cloud King” stocks, presents its financial report after the market closes. Cramer expects Splunk to put up a good conference call out of CEO Doug Merritt. He said Merritt continues to deliver on promises.

“I like it a lot. … [It’s got] no China exposure — I say buy,” he said.

Friday: Foot Locker

Foot Locker: The shoe retailer will lay out its quarterly report for investors before stocks start trading. With a presence in shopping centers across the country, Foot Locker carries Nike, Adidas, Under Armour and a range of other sports apparel brands in its stores.

“The stock’s been held back by trade war worries,” Cramer said. “I bet it will prove to be immune, or at least more immune than most people think.”

WATCH: Cramer breaks down the week ahead in earnings

Disclosure: Cramer’s charitable trust owns shares of Amazon.com and Home Depot.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer’s world? Hit him up!
Jim Cramer TwitterFacebookInstagram

Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com



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Charts suggest markets could soon get a deep correction

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CNBC’s Jim Cramer said Thursday that his colleague is warning that danger could be on the horizon for the stock market.

The “Mad Money” host took a look at chart analysis as interpreted by technician Carolyn Borogen, Cramer’s coworker at RealMoney.com who also runs FibonnacciQueen.com, to understand what could come of this volatile market.

The major U.S. averages were taken for a ride this week as investors attempted to gauge whether the United States would raise existing tariffs on imports from China on Friday. Because of this uncertainty, the best way to get an empirical reading of the market is through studying chart action, Cramer said.

The high-to-high cycles, as explained by Boroden, in the weekly chart of the S&P 500 is cause for concern, the host said.

Highs on the index have ranged between 31 weeks and 36 weeks, and the most recent peak was recorded last Friday, he said. Prior to that, the last major high was set in September, which preceded the stock sell-off in October.

Markets tend to repeat themselves, and because stocks sold off this week after a big run, Boroden thinks there could be cause for concern.

“In fact, she’s looked at a series of previous high-to-high cycles, and what she’s noticed is that there’s a whole confluence of them coming due this month,” Cramer said. “That’s why she’s throwing up a caution flag, because Boroden thinks we might finally get a deep downside correction — even deeper than what we’ve already experienced during hell week.”

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These 6 stocks could make or break the S&P 500’s run

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Call them the Supersized Six.

Microsoft, Amazon, Apple, Alphabet, Facebook and Berkshire Hathaway — six of the most highly valued companies in the S&P 500 — don’t just boast the index’s biggest market caps.

In fact, those six companies are worth about as much as the bottom 290 companies in the S&P combined. Taken together, their market caps total $4.2 trillion, while the bottom 290 S&P companies are worth roughly $4.3 trillion.

It’s fairly common knowledge that the top 50 S&P stocks are worth more than the bottom 450, and it’s not unusual that the market is frequently this “top-heavy,” says Carter Worth, chief market technician at Cornerstone Macro.

But the concentration in these six names is noteworthy, and it could mean trouble for the market, Worth said Tuesday on CNBC’s “Fast Money.”

Considering the influence they have over the S&P’s direction, it makes you wonder: “Is it an index, or is it a few big names that drive everything?” Worth said. “That’s what makes beating the index so hard.”

He called attention to this chart tracking the six-stock basket against its 150-day moving average, as well as the number of times it has traded above or below that average.

“Literally, every single time we have gotten this far above the 150-day moving average, we have peaked. It is right at that level yet again,” Worth said, pointing to the uptick in the bottom panel’s trend line. “So, as this goes, so goes the market. I think you’ve got a crowding that’s not so good. Just to put it in real context, think of those six names relative to the S&P. It’s all so dependent on these big names.”

Moreover, while the market’s “heavy hitters” have made up 15% of the S&P’s total market cap, on average, since at least the 1990s, that percentage is also ticking up, Worth noted.

“We’re starting to get back to a level that is typically indicative of when markets peak. That’s ’07, so forth and so on,” he said. “None of this is particularly healthy.”

By market cap, Microsoft is worth about $963 billion, Amazon is worth $949 billion, Apple is worth $969 billion, Facebook is worth $540 billion, and Berkshire Hathaway is worth $515 billion.

The broader market mounted a recovery Wednesday, with the S&P lifting off its Tuesday lows early in the session.



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