An ominous pattern is forming in the S&P 500… It’s a lot like the tops before the dot-com and 2008 wipeouts… Tonight at 8 p.m. ET: Jeff Clark on why it’s a profit opportunity…
For the past couple of days (catch up here and here), we’ve been focused on what colleague Jeff Brown calls the No. 1 tech investment for 2019 – 5G.
And we’ve been showing you how it’s the linchpin of the wide-scale rollout of a suite of sci-fi technologies. To name just a few, that includes self-driving cars… holographic communication… and augmented reality.
Today, we’re turning over to an urgent warning about the U.S. stock market from another Jeff… master trader Jeff Clark.
It’s all based on what he calls an “ominous” pattern he’s spotted, known as a “double top.”
Below is a one-year chart of the S&P 500. It’s our regular stand-in for the U.S. stock market.
As you can see from the two peaks circled in red, there are two tops one after another. (The first was last September and the second in April.)
And as Jeff explains it, that’s bad news for the bulls…
In technical terms, this is called a “double top” pattern. The first top formed last September/October. The second top formed last month. Typically, the two tops are separated by a drop of anywhere from 10% to 20%.
This is a bearish pattern that can indicate the reversal from a bull trend to a bear trend. So, it’s worth paying attention to.
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As Daily Cut regulars know, Jeff is a master trader.
Before taking up the helm at our Delta Report trading advisory, he managed $200 million in Silicon Valley.
One trading account he handled was worth $20 million. Another, $30 million.
And he made so much money for his clients… and for himself… that, at 42, he decided to retire to spend more time with his family.
It was only the promise of being able to write an independent advisory from his home office that coaxed him out of retirement.
Today, Jeff writes the Delta Report – a trading advisory that focuses on exploiting low-risk, high-reward setups in the stock market.
Here’s what Jeff told readers of Pro Trader, an e-letter from our colleagues at Stansberry Research, in January 13, 2008…
I can’t say this is a bear market just yet. I’ll wait until the end of the month and see how the S&P 500 monthly chart stacks up against its 20-month exponential moving average [a trend indicator Jeff follows] before I make that judgment. But it sure looks like the bear is on the hunt. And I couldn’t be happier…
Please understand I don’t relish the thought of a recession or the very real possibility of a financial meltdown. No one benefits from a financial collapse.
But bull markets make even the school dunce look like Einstein. And the world doesn’t work that way. Not for long, at least.
In October that year… the stock market crumbled.
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Think the Great Recession of 2008… the dot-com crash in 2000… or the Black Monday crash in 1987.
But not Jeff. The beauty of being a trader is that you can make money when stocks are falling… or when stocks are rising. It doesn’t really matter.
All you’re betting on is big moves in either direction.
That’s how Jeff made 10 times his money on the Friday before Black Monday. It took the Dow down 23% in a single day – the largest one-day percentage drop ever.
And Jeff made tens of millions of dollars on a single trade on March 2, 2000. That was just eight days before the dot-com bubble burst.
Then, in the dark days of 2007, 2008, and 2009 – when most investors were running for the hills – Jeff identified 84 winning trades for his subscribers.
These included 12 triple-digit windfalls… with gains as high as 133%, 166%, 182%, and 225%.
It’s why Jeff is one of the few people on the planet who looks forward to crises, crashes, and collapses.
Counterintuitively, it’s when he’s made his largest gains. (More on how this works below.)
But for that to happen, we have to break below a key “support level” (red line on the chart above).
Here’s Jeff on why that matters…
This pattern isn’t confirmed – yet. For that to happen the S&P 500 will have to break the support level of 2,800 to the downside and then fail to make a new high.
Since the S&P 500 bottomed in December, every pullback has formed a higher low on the chart. And that’s classic bullish behavior.
So, the first step to confirming this double-top pattern would be for the index to decline and make a lower low. That means we’ll need to see the S&P 500 drop below the 2,800 level.
At this writing, the S&P 500 just breached 2,854 points.
Take a look at the next chart. It’s of the double top that formed in the S&P 500 in 2007…
See that second peak circled in red?
That marked the high for stocks before the bloodbath of 2008.
From that double top, the S&P 500 fell 57% until it bottomed in March 2009.
And here’s a chart of the double top that formed in the S&P 500 in 2000, right before the dot-com crash…
It marked the ultimate top for the dot-com boom. After that double top, the S&P 500 plunged 49% over the next two years.
The takeaway is clear.
If the double-top pattern developing today plays out the same way it did in 2000 and 2007, stock investors are in for some pain in 2019.
And it’s an important one.
If you know what you’re doing, these crashes are opportunities to profit.
Remember that I said Jeff made 84 winning trades in the dark days of 2007, 2008, and 2009?
That wasn’t just some fluke. It’s all down to the core strategy Jeff has honed over his 30 years as a trader… playing what he calls the “rubber band effect.”
As regular readers know, Jeff compares the way stocks move to a rubber band. If you stretch a rubber band too far in one direction, it snaps back.
It’s the same with stocks. When they move too far in one direction, they violently snap back. This is what folks on Wall Street call “volatility.”
And Jeff loves it. Here he is with more…
I had the best year of my trading career in 2008. What made that possible wasn’t necessarily betting on stock prices falling. It was betting on the big moves higher during that bear market.
Think of a rubber band stretching… then violently snapping back. The way you want to trade in a bear market is to wait until stocks get hammered and then buy ahead of these wicked two- and three-day rallies that typically follow these big plunges.
The trick is to take gains quickly. Jeff again…
The “rubber band” can get overstretched on the way up… as well as on the way down. Stocks can go from incredibly oversold to incredibly overbought very quickly. That’s why, in a bear market like the one I see coming, one of the most important things you can do is to shorten your time frames.
You have to be willing to move in and out of positions within days. By making that one change, you can make a lot of money in a bear market.
It’s why Jeff isn’t worried about a bear market. In fact, he encourages his readers to be optimistic about the bear market he sees coming.
Going back to 1929, bear market “drawdowns” (peak-to-trough falls) for the S&P 500 have ranged from 28% to 86%.
So losing half your stock market wealth… or more… is well within the range of possibilities.
It’s why, here at the Cut, we always recommend you follow an “asset allocation” strategy. That means spread your wealth over stocks, bonds, gold, cash, real estate, commodities, cryptos, collectibles, etc.
It keeps your exposure to a stock market crash at a survivable level. And it’s the single best way to manage your risk as an investor.
Traders like Jeff don’t fear market crashes. They look forward to them… and the volatility they create.
As scary as they seem, market crashes are a gold mine for profits… if you know how to approach them.
That’s why tonight, at 8 p.m. ET, Jeff is holding a special on-camera event. He’ll be revealing details on how he trades bear markets for profit.
Jeff will also reveal the specific day he believes this bull market will finally crash.
As I (Chris) have been telling you, Jeff is not just a master trader. He’s also a great teacher. And if you’ve been put off by trading jargon in the past, I guarantee you won’t have that problem with Jeff.
One thing I’m looking forward to in particular is learning about a five-minute shortcut Jeff’s been using for 30 years to double his money in times of crisis.
Jeff will be walking through that strategy tonight. So I hope you’ll join me in tuning in.
A reader of our Delta Report and Jeff Clark Trader advisories wrote in…
Wanted to first thank you for providing the great guidance to a newbie options trader. Since I joined your program on about February 20, I have already paid for the cost of your yearly membership with mostly five option trades (although, I have upped that to six to make it easier to sell half to recover the cost of the trade).
It has been a fascinating experience. I am enjoying learning a new skill at age 74 from a world-class teacher. Your explanations and setups are clear, and I appreciate your detail with the specifics of each trade you recommend. Many thanks from an enthusiastic subscriber.
– Stephen W.
Meantime, turning back to the question of win-win versus win-lose, Legacy Research cofounder Bill Bonner wrote in his Diary e-letter on Monday…
There are win-win rights… such as the rights to life, liberty, and property – things we can all enjoy.
And there are fake, win-lose rights, such as the right to a new Tesla. You may get a new car, but someone has to pay for it. Likewise, somebody has to get up on the roof or you’re not going to have a house.
And it got at least one of your fellow readers thinking…
I like your description of win-win rights. Things we can all enjoy. I have thought a lot about the rights of man. Whenever nonexistent rights are claimed, people are endorsing theft. So the important question is, what do people really have a “right” to have?
Life, liberty, and property are historically understood to be human rights. Rights to medical care, housing, food, shelter, internet, are claimed more recently by dim-wits.
Life – We all have a right to our life. Whether you believe you were endowed with it by a Creator, or you evolved from something that came from nothing, your life is uniquely and demonstrably yours.
Liberty is conducting your life in a way that does not take from others.
Property is acquired by using your life to get it, or by receiving it from someone else as a free gift or in a win-win exchange.
Life, liberty, and property can all be refined into one idea. Each person has an absolute right to their life. Conversely, they have no claim on anyone else’s life.
– Stephen J.
Do you agree with Stephen J.’s definition of absolute rights? Can rights be separated into win-win and win-lose, as Bill writes? Give us your take at feedback@legacyresearch.com.
Regards,
Chris Lowe
May 22, 2019
Mahón, Menorca
This will keep you up all night…
Fair warning: This two-minute video is disturbing.
But if you can get through it, you’ll learn why May 22 could set the stage for one of the biggest and fastest investment gains of the year… If you play it right.
That’s tonight… Close the door and watch it here.