After posting its worst week in about two years, the stock market bounced back some yesterday. This move higher was a welcome respite after the S&P 500 and Dow both declined sharply in the past week. However, the market still remains volatile. In today’s blog, we’ll take a look at what’s going on in the stock market right now and how you can insulate yourself from the current carnage.
The folks at Bespoke recently reported that since the market peaked on January 26, there was nowhere to hide during the recent market correction. Last Monday, the S&P 500 made an intraday low, which was then "retested" on Thursday with a slightly lower low. And although the S&P 500 made a new intraday low on Friday, there was decent trading volume to the upside when the stock market reversed on Friday afternoon. So this was very encouraging.
I will admit that this correction was very different and can best be described as the “tail wagging the dog,” since failed option products were aggressively liquidated last week. The flawed portfolio insurance in risk-parity products now appears to be a major catalyst in the sharp market decline last week. There is about $4 billion tied up in these "kinky" ETFs, and unfortunately, many of them are tied to big S&P 500 companies. So what we saw last week was a forced selling of options and futures, as these portfolio insurance products failed.
Now, until all the option and futures portfolios that were created to protect investors are liquidated, the S&P 500 will most likely continue to gyrate. So this week, I’m expecting that we’ll see more retests of last week’s lows. But, as long as trading volume and volatility diminishes, it will be a welcome sign that selling pressure is finally abating.
Fortunately, the fourth-quarter earnings announcement season remains strong and we’ve continued to see wave-after-wave of positive earnings surprises. Case in point: NVIDIA Corporation (NVDA) crushed analysts’ fourth-quarter estimates on Thursday. The company reported 70.7% annual earnings growth and 34.1% annual sales growth–and posted a stunning 53.5% earnings surprise. As a result, shares are up about 6% in the past week.
Overall, the underlying earnings environment remains strong and is growing even stronger. In fact, I look for my Ultimate Growth stocks to continue to post better-than-respected results and for their shares to rebound from the recent market correction. We had nine Buy List companies release results last week, and all nine topped analysts’ estimates. And we have six more scheduled to report this week.
Ultimate Growth is made up of the top 1% of stocks on the market, and my research reveals each of these stocks is about to be hit with a growth surge. Our intention is to ride this surge to double-digit profits, typically in a matter of weeks. And the results are extraordinary. This strategy has a record of beating the market by nearly 9-to-1. If you’re interested in joining Ultimate Growth today, I urge you to click here now.