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Double-digit upside in Hong Kong stocks starts now



From Steve Sjuggerud at True Wealth Systems:

The recent sell-off in stocks wasn’t a U.S.-only event…

No major market escaped big declines. European and Asian markets also tumbled as U.S. stocks corrected for the first time in two years.

One market with a similar decline to the U.S. was Hong Kong. But just like U.S. stocks, Hong Kong stocks’ decline is setting up an opportunity.

Investors have overreacted in Hong Kong stocks… pushing the market into oversold territory. Based on history, that could mean a double-digit rally, starting now.

Let us explain…

U.S. Investors have been focusing on the pullback in U.S. stocks. But Hong Kong stocks crashed as well.

We can see this through the iShares MSCI Hong Kong Fund (EWH). The fund has fallen nearly 10% in two weeks. And the fall pushed EWH into oversold territory last Friday.

When we say “oversold,” we are referring to the relative strength index (RSI). The RSI indicator tells us if an investment has moved too far, too fast in either direction.

When the RSI hits an extreme, the smart move is to bet against the crowd. That’s the opportunity in Hong Kong today.

Shares of EWH recently fell below an RSI of 30 – signaling oversold territory – which means a rally is likely to follow. Take a look…


The chart shows the recent RSI extreme… it’s the first oversold extreme in Hong Kong stocks in more than a year.

This is also a good sign going forward. It could mean major outperformance is on the way in this market.

Over the past two decades, Hong Kong stocks have hit oversold territory roughly 1% of the time. And double-digit gains have been typical as it has come out of this oversold territory. Take a look at the returns…


Hong Kong stocks have delivered a low return of 2.8% a year since 1996. But that doesn’t mean you should disregard this market entirely…

Buying after RSI extremes led to dramatically better returns in Hong Kong stocks… Similar extremes have led to 5% returns in six months and a solid 11% return over the next year. These returns crush the simple buy and hold return for Hong Kong.

While we can’t know for sure what’s next, this oversold extreme says a rally in Hong Kong stocks could be starting soon.

If you are looking to add Hong Kong stocks to your portfolio, history says now may be a good time to do it.

Crux note: Longtime readers know our colleague Steve Sjuggerud has been calling for a “Melt Up” in stocks for a while now. But it wasn’t until recently that other highly regarded investors joined in on the growing Melt Up chorus…

To find out how you can take advantage before the rest of the market is “all in,” click here.

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Sears is dead meat walking




From Wolf Street:

Sears Holdings — the storied and once dominant retailer turned into the biggest tragedy in US retail history — reported fourth quarter earnings [March 14]. The quarter, ended February 3, covered the crucial holiday sales period. Revenues plunged 27.7% year-over-year to 4.4 billion.

Over the same period, total retail sales across the US by all retailers, including online, rose 5.2%.

In fact, Sears’ revenues were so bad that in the crucial holiday quarter they were about flat with Q1 and Q2. In other words, Q4 was an unmitigated fiasco-disaster quarter.

In Q4 2012, Sears still had $12.3 billion in revenues.

The chart below shows just how miserably terrible revenues were in Q4, with no holiday pickup whatsoever, likely the first quarter in Sears’ post-World War II history where holiday revenues were about flat with Q1 and Q2 of the same year:


Taking the revenue trend-line of all Q4s going back to 2012 and extending that line as a projection of where revenues might be over the next few years, we discover that revenues will hit zero sometime in 2019 and drop below zero in 2020 – a numerical joke because Sears will be liquidated in bankruptcy court long before then…

Continue reading at Wolf Street…

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Is it time to sell America’s largest retailer?




From Steve Sjuggerud, Editor, True Wealth Systems:

Walmart just finished its best year since 1999…

The company soared 47% in 2017. And it continued that trend in January, jumping another 11%. Then the stock came back to earth.

Walmart wiped out four months of gains in February, falling 16% in total. And not surprising, a 16% one-month loss is a rare extreme for the country’s largest retailer.

In fact, falls like this have only happened four other times since 1980… And history says this could be reason for Walmart investors to sell.

Let us explain…

We last wrote about Walmart on October 25. And back then, we told you about a major opportunity in the company…

Walmart had spiked 9.5% in a week. And that meant 26% upside was possible, based on history.

History turned out to be right… as Walmart rallied 25% through its January peak.

But again, things have reversed since then.

The stock wiped out more than half of those gains in one month. Take a look…

This is an ugly chart… Unlike the overall market, Walmart’s shares haven’t recovered since the correction. Instead, they’ve continued to hit new lows.

But while the chart is ugly, history says it could get uglier.

You see, after previous 15%-plus one-month falls, Walmart has dramatically underperformed over the next year. Take a look…

Walmart has been a home-run investment since 1980, returning roughly 19% a year. But buying after the company has fallen 15%-plus in a month greatly diminishes those returns.

Specifically, similar extremes have led to a 4% loss in one month… a 0% return in three months… and just a 6% return over the next year.

That’s still a positive return. But it’s much worse than you’d typically do in Walmart shares. And simply owning the S&P 500 Index would have doubled this annual return over the same period.

Remember, this extreme has only happened four times since 1980… so our sample size is small. But all four instances led to less-than-stellar returns going forward.

Buying after today’s extreme is a bad idea. And if you’re a Walmart shareholder, history says the next year or so may be rough.

Good investing,

Steve Sjuggerud and Brett Eversole

Crux note: Steve and Brett always have an exit plan…

In fact, their True Wealth Systems computers recently issued five “sell” signals to subscribers. They closed out for an average gain of 25% in just 11 months. 

Right now, Steve’s looking for new opportunities as the “Melt Up” approaches… when a huge run-up in stocks will offer triple-digit gains before the bull market ends.

To access his research, sign up for a risk-free trial subscription right here.

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Volatility is ready for an encore




From Jeff Clark, Editor, Jeff Clark’s Market Minute:

The Volatility Index (VIX) has been cut in half over the past month. But it’s still the top-performing index of the year so far. And it looks ready to surge higher again.

The VIX started the year below 10. That’s a historically low level of volatility – which, given the relatively quiet action in the stock market for all of last year, seemed appropriate. But, as I warned back on January 1

Low levels of volatility are always followed by higher levels of volatility. That’s why I suspect we’ll have lots of opportunities to profit off of wild movements in the VIX in 2018.

As it turns out, the VIX closed at its lowest level so far this year on the following day. It marched steadily and methodically higher all through January. Then, as sellers clobbered the stock market in early February, the VIX spiked to 39.

Yesterday, the VIX closed just below 19. That’s down 50% over the past month. But it’s still 90% higher than where it started the year. And, by the look of the following chart, it looks like volatility is ready to spike higher again…

When the VIX spiked higher in early February, it was trading well above its 50-day moving average (MA). And all of the various technical indicators you see on the chart jumped into “extremely overbought” territory.

Since then, the VIX has moved back down towards its 50-day MA – which should now serve as support. In other words, the VIX should hold above the 16 level. At the same time, all of the technical indicators have recycled back to neutral. So, there’s plenty of energy stored up in these indicators to fuel a move higher.

Of course, a higher VIX usually accompanies a lower stock market. So, all of this lines up with my argument that the S&P 500 will soon retest its 2581 closing low.

To me, it looks like the VIX could be headed higher – soon. Traders ought to prepare for it.

If you’ve profited off the market’s bounce over the past few weeks, then consider taking some gains off the table, or at least tightening stop losses on those positions. Aggressive traders should consider adding some short exposure.

Best regards and good trading,


P.S. No matter which direction the markets go, my Market Minute subscribers are always up to date on the trends taking shape – and the best ways to profit on them – hours before the opening bell rings.

Sign up for the Market Minute for free right here… and get your next issue at 7:30 sharp tomorrow morning.

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