EarningsBeats.com Digest for February 14, 2022
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Join Us For Our February Educational Series
Last month, we told you that the market would be volatile this year and was heading lower. But now the question is HOW MUCH LOWER? We have a cyclical bear market on our hands and we've designed three specific events to help you navigate what will be a very difficult 2022:
- The January Effect | Recording is Available Now: There's an old Wall Street adage, "As goes January, so goes the year!" Tom Bowley, Chief Market Strategist, explains the meaning behind this and illustrates the historical implications of poor January performance. The S&P 500 just lost 10% in January 2022. What does history tell us to expect over the balance of 2022? Find out in this FREE recording, available now at the link
below.
- The Anatomy of a Cyclical Bear Market | Recording is Available Now: Given the first month of 2022, it's not too far-fetched to think this could evolve into a cyclical bear market, where the S&P 500 drops 20% or more. How does the current market action compare to previous cyclical bear markets and what should we expect moving forward? Find out in the recording, available now at the link below.
- The Most Overlooked Growth Stocks | Saturday, February 19th at 10am ET: Are all stocks created equally? They sure do seem to be, given the huge drops in nearly every growth stock. But have some been unfairly treated, given their propensity to produce better-than-expected results? Tom Bowley thinks so and he'll point out a number of his favorite stocks that could set up for MASSIVE returns later in 2022. Sign up below to join us live this
Saturday.
Interested in these sessions? Click below to learn more.
February's Performance is Starting to Look Like Checkmate
While many areas of U.S. equities were being trashed late in 2021, one area kept our major indices afloat - large cap growth ($DJUSGL). Yes, energy (XLE), financials (XLF), and consumer staples (XLP) performed well during this period, but their collective weighting in the S&P 500 pales in comparison with technology (XLK) and consumer
discretionary (XLY). And it's many of the large cap stocks in those two sectors that are beginning to deteriorate and that is REALLY bad news for those in the bullish camp. The DJUSGL had been beating small cap growth ($DJUSGS) like a drum for many months, but that has been changing very quickly. You may not have noticed the relative weakness in the large cap growth names like AAPL, MSFT, and GOOGL during the recent market rebound, but these giants have been obliterated on a
relative basis vs. their small cap growth peers. Check this chart out:
Large cap growth had outperformed for the past year - and by a wide margin. But you can see from the above 2-year chart that that's not always the case. The 2nd half of 2020 was dominated by small cap growth. Things have changed in February as large cap growth has suddenly been awful on a relative basis. The 10-day Rate of Change (ROC) of this ratio has reached a level not seen in over a year, reflecting the changing environment and move away
from large cap growth. In other words, the selling is now carrying over to an area of the market that's weighted very heavily in the S&P 500 and NASDAQ. Unless this relative weakness changes soon, it's quite likely that our major indices are going to see accelerating downside action - similar to what we saw on Thursday and Friday. I've been extremely bearish/cautious since late-December and, in my opinion, this rotation is really bad news for the U.S. stock market.
ETFs that track the S&P 500 and NASDAQ inversely will continue to perform extremely well if I'm correct. The S&P 500 has neckline support at 4300. If we lose that support and the ratio above is dropping, LOOK OUT BELOW!
We had a tremendous session on Saturday that was heavily attended, where I discussed the Anatomy of a Cyclical Bear Market. Things could very well get UGLY during the balance of this quarter. Please be careful right now. If you'd like to receive a copy of Saturday's recording to learn more about what we might be facing in 2022, simply sign up for a 30-day FREE trial. We have another Member-Only event this Saturday in our 3-part February
Educational Series. There are a number of excellent growth stocks that are being crushed right now, or on the verge of being crushed, that I really like longer-term. When the dust finally settles after this cyclical bear market ends, I expect these companies will be tremendous bargains. For more information on this event, CLICK HERE.
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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