How to Make Money by Ignoring the Headlines

Another day in the paradise of 2020... Why we're thankful for technical analysis... How to make money by ignoring the headlines... Human nature applies to all asset classes... Why December 23 is a critical date...

Just another ho-hum day in 2020...

This morning's headlines...

U.S. sees single-day record of COVID-19 deaths.

All states certify election results.

Facebook facing a breakup?

Congress still negotiating more stimulus.

FDA panel to meet to discuss Pfizer COVID-19 vaccine.

And that was all before 9 a.m.

In any case, this is the type of day when we're thankful...

No, not that we're relatively healthy, or that we have a job and plenty of things to write about. We are, and we do... but we'll delve into those details another day.

Today, we simply want to say we're thankful... for technical analysis. You probably won't hear many others say that. If you're unfamiliar, allow me to explain briefly...

Technical analysis is a brand of stock analysis that doesn't care about the headlines. It doesn't even really care about companies, in a sense... and certainly not anywhere close to the way fundamental analysis grades worthy investments.

The sole focus of technical analysis is price, which sounded refreshing to me the first time I heard it – given the barrage of headlines we're inundated with every day.

This is what Ten Stock Trader editor Greg Diamond wrote to you about over the weekend... And it's an approach we've shared frequently here in the Digest this year, particularly during the most volatile times.

As Greg wrote in the Masters Series on Saturday, while explaining how he got his start trading on Wall Street before joining Stansberry Research a few years ago...

Technical analysis focuses on price behavior of a stock or asset through various indicators and price patterns.

As my boss said... "Technical analysis focuses on now, fundamentals on what was."

That's what I want to share with you here this weekend. It's an entirely different way of looking at the markets. Fundamental analysis works for a lot of people, but it's not how I invest...

You might think of technical analysis as "chart reading"... But as Greg wrote on Sunday, that's too simple of a description. It's really an exercise in understanding human nature...

If enough people do things over and over again, patterns emerge over time...

This concept isn't necessarily the most easy to grasp or believe, and it might not be for everyone. Until you really practice it and understand it, a lot of this can sound vague or mystical... And frankly, it might feel that way today here in the Digest, too.

But once you understand the details – by following experts like Greg or our DailyWealth Trader editors Ben Morris and Drew McConnell, who also use technical analysis extensively – it can be a breakthrough for a lot of investors...

They walk you through everything they do, step by step. And as we hope you'll see, following their instructions is the best guidance we can give you about the topic.

Technical analysis can't pick great, high-quality companies...

Good fundamental research, understanding balance sheets, and realizing what makes a great company do that. Technical analysis isn't about things like free cash flow ("FCF"), for instance... And it doesn't pretend to be, as Greg alluded to over the weekend.

Technical analysis also won't tell you, at least directly, about the warts of the financial system... though it will reveal just how distorted things have gotten by showing how much influence the Federal Reserve has.

Rather, it's about things like "oversold" and "overbought" metrics, "moving averages," and "support" and "resistance" lines that mark key points of supply and demand. It's about what the picture looks like now. And trust me, that's just the start...

Greg wrote about "price divergence" over the weekend, for another example...

I look for price divergence across major indexes. This is a common focus in my weekly updates and in my live feed. When one index makes a new cycle low (or high) while another doesn't, this creates divergence.

That's usually a sign of a reversal on the horizon. It can be tricky to spot this pattern, but it's a valuable analysis to understand. A massive divergence occurred just before the crash in February. Take a look...

Notice the divergence between the Dow Jones Transportation Average in black and the Dow Jones Industrial Average in blue. The green circles marked a lower high in the Transports' price, while the black circles marked a higher high in the Industrials' price... setting up the divergence.

Obviously, this is an extreme example considering the massive crash that happened in the markets because of COVID-19. But such a big divergence provided a big warning that something was wrong – the two indexes were not in sync.

Indicators like these can't predict with certainty what's going to happen on any given day – nothing can predict the future, after all – but they can certainly narrow the range of possibilities you may want to prepare for.

And it works particularly well at big turning points, too...

When everyone else is going crazy, the numbers don't lie...

Technical analysis, which is really a school of thought, helped guide us through March's crash and ultimate bottom... and then through the market rebound afterward. Certain indicators told us the broader U.S. indexes were likely heading up, up, up again...

As we wrote back in June...

Understanding "what the chart looks like" can help you decide whether now or later would be a good time to buy or sell any number of assets that you already love... or that Wall Street hates.

For instance, think of arriving at Porter's recommendation to buy high-quality, capital-efficient stocks at the March lows, but with another – or, better yet, a supporting – method.

The same week Porter shared his bold call, we also shared one of the simplest technical indicators that someone could look at to "time the bottom" in the U.S. stock indexes. In the March 23 Digest, the exact day the market bottomed, we wrote...

Today, for example, fewer than 3% of the stocks trading on the New York Stock Exchange ("NYSE") are above their 200-day moving averages (200-DMAs). The 200-DMA is a good measure of whether stocks are in a long-term uptrend or downtrend.

For context, in late 2018 – the last time the major indexes dropped double-digits in short order – the number of NYSE stocks trading below their 200-DMA dropped to "only" 10%.

The last time the numbers were this low was during the financial crisis... And back then, the number of stocks trading above their 200-DMAs lingered below 10% for months, from October 2008 until the ultimate bottom in April 2009.

Throughout history, only when this number gets close to or above 15% is the market "safely" rebounding...

In June, we also said about this number, which is an indicator of "market breadth"...

Others are more comfortable with 10%. Sure enough, this range would have told you to buy stocks back in mid- to late April. And it would have done so by taking the emotion, or hunches, out of the equation, too.

Today, 85% of NYSE stocks trade above their 200-DMA... We haven't seen a percentage that high since mid-2016.

As we wrote in the November 23 Digest, a peak in "breadth" – which is what we're seeing now – has traditionally been a big bullish technical indicator for stocks over the next year or two.

During the dot-com boom, breadth peaked in early 1998... The stock market peaked in 2000.

More recently, breadth surged in 2013... then the benchmark S&P 500 Index rallied 45% before peaking in 2015. And in 2016, breadth surged again... and stocks went up another 35% into 2018.

And of course, human nature applies to all asset classes...

That's how Greg, Ben, and Drew can write about it on every trading day. Here's just one example... Ben and Drew sent this analysis to their DailyWealth Trader subscribers on Tuesday, as part of their updated instructions for an open trade...

An asset often builds up energy by trading sideways for an extended period of time. Then, it breaks out of its trading range and releases that pent-up energy.

When this happens, the asset tends to continue moving in the same direction of the breakout (higher) or breakdown (lower). And if you get on board, you can earn fantastic profits.

And second, when an asset's shorter- and longer-term moving averages start to move in the same direction – with the shorter-term moving average on top of the longer-term moving average – it's a good sign that the asset is ready to move in that direction.

Our point is... if you're interested in short-term trading, technical analysis – think the trading equivalent of the sports analytics described in Michael Lewis' best-selling book Moneyball – is a must-know, as far as we're concerned.

And even if you're a long-term investor, it's worth paying attention to – or at least worth considering – the place of technical analysis in your approach. It can help you figure out what big moves might be coming (like we wrote about ahead of September's pullback, for example)...

As Greg often describes so well, technical analysis can help you do this in advance. The biggest point is that these tools allow you to prepare and bet with defined risk and reward targets.

We'd rather do this than buy or sell the 'news'...

Heck, we'd rather do this than even read the news on most days. (No disrespect to our Stansberry NewsWire team, of course... But you know what I mean.)

For instance, instead of paying attention to headlines like the ones we listed above and the TV talking heads, Greg is urging all investors right now to focus on a particular date...

December 23.

That's less than two weeks from now. And as Greg wrote in a brand-new special report for his Ten Stock Trader subscribers on Sunday, one signal is showing him that on this date – or just around it – a big moment for the market will occur one way or another...

The important thing to know is that we have a time frame to monitor of WHEN an inflection point can happen – it's like a lighthouse you see in the distance while sailing through the ocean. Once we start getting closer and seeing how the market is trading into it, then we determine what to trade and in what direction (bullish or bearish trade).

Greg used this same tool to warn investors about the importance of a particular few days in March... And that warning signal turned out to be spot-on. The cause was the COVID-19 panic... But based on Greg's signal, he was confident that a market turning point was bound to happen no matter what.

If you missed Greg's essays over the weekend and our notes on what we're talking about, make sure to watch this presentation from Greg for more details... You'll be happy you did. (Stansberry Alliance members and existing Ten Stock Trader subscribers, you can click here to access Greg's latest report right now.)

But don't take our word for it...

Over the past year, I've seen many heartfelt e-mails from Ten Stock Trader subscribers...

Everyone wants to thank Greg for his work, which he does around the clock. It's not out of the ordinary to see an 11 p.m. or a 5 a.m. post from Greg as he does the same type of work he used to do on Wall Street.

Here's what one of our Stansberry Alliance members, Juan A., said just this week after Greg released his special report about the critical December 23 date...

I like how passionate you are about trading and the fact you pay attention to the details. I like the detailed, timely and valuable reports you send us thru the app. I like how you share and keep us informed about your thought process and way of thinking. I like how personal you take your commitment to your job and your subscribers.

I notice in your writing that you translated your sports competitiveness to trading and want to win. I like the fact you encourage your readers to learn and provide tools for us to prepare to win. I like the fact you are enjoying working at Stansberry Research this motivates you to provide us with the knowledge you would like to have if the roles were reversed...

I have been addicted to the service you provide to your subscribers, which I believe is top of the line... I consider this is one of the best, high-quality services Stansberry Research currently has. I am making good money with your recommendations.

We've also seen Greg respond personally to notes like these... and other folks with questions. That was the case here, which included some personal details we won't share today. But the point is... here's how the conversation ended. More from Alliance member Juan A...

Thank you for your reply. It means a lot knowing that you are [super] busy. I am certain your subscribers appreciate and value the effort you put into your daily hard work and dedication. You have been a great addition to the Stansberry family. Hope you stay with us for the long run.

Greg embodies the guiding wisdom of our founder Porter Stansberry... He always strives to give subscribers "what we'd want if our roles were reversed." To Greg, that means technical analysis – and a lot of it. And again, you can click here to watch his latest presentation.

The Surprise in Pfizer's COVID-19 Vaccine Data

In a Stansberry Research exclusive, Stansberry Venture Technology editor Dave Lashmet shares a surprising revelation with our colleague Jessica Stone about drugmaker Pfizer's (PFE) latest COVID-19 vaccine data...

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.

New 52-week highs (as of 12/9/20): AbbVie (ABBV), Bunge (BG), Corteva (CTVA), Disney (DIS), Editas Medicine (EDIT), Fortescue Metals (FMG.AX), Green Thumb Industries (GTBIF), Innovative Industrial Properties (IIPR), Intellia Therapeutics (NTLA), Scotts Miracle-Gro (SMG), Trulieve Cannabis (TCNNF), TFI International (TFII), and Take-Two Interactive Software (TTWO).

In today's mailbag, feedback on yesterday's Digest about the booming housing market, more responses about Dan Ferris' most recent Digest, and a question about cryptocurrencies. Do you have a comment or question? As always, send it to us at feedback@stansberryresearch.com.

"My son and daughter are both married and in their early 30s. They have each recently purchased homes. As someone who endured 12% interest rates on their first home purchase, I'm amazed at today's ultra-low interest environment and the power it's putting into the housing market.

"My son has recently added a detached garage, which really serves as a gym for he and his wife. He also put in his own paver patio, built a bar area, a gas fire pit and put down his own sod in the backyard. Now, he's having a pool installed. His friends are tackling many of the same projects. Nesting and DIY are certainly both seeing huge activity at present.

"My daughter lives in a two-unit condo a block from the oceanfront that she purchased two years ago for $650,000. Today, she could get $800,000 for that same unit. It's definitely a seller's market as realtors have multiple clients looking for properties in the area. She and her husband are considering selling, and then buying a bigger home for less money and with more yard area away from the oceanfront.

"Mine is just one small perspective, but there's no sign of this activity slowing down anytime soon." – Paid-up subscriber Bob T.

"Regarding the comments on the recent surge in home buying, thought I'd chime in since I'm part of the stats. My wife and I are high earning, older millennials and always lived in expensive cities. It's where you get the best career opportunity but also where buying a house never made financial sense. For much of the last decade, the cost of renting in Los Angeles was always cheaper than JUST the interest on buying a house. Sure you could buy further out for cheaper, but then the cost of commuting would eat up 'deals' that could have been had. So we happily rented and saved money.

"A couple years ago, we both ended up working remotely just by the nature of the job. Both of us working in a tiny condo in the city... thinking maybe we should move where we have more space...

"Then COVID hit. The city became claustrophobic really fast. And reasons to even live in a city disappeared even faster. What's the point of living in the exciting hustle and bustle when everything is closed?

"Because location didn't matter, we exercised a little 'geographical arbitrage' and within a couple months moved far away from L.A. while still working for L.A. wages.

"My point of the story is that we had a head start and acted quickly. I'm guessing there's a lot of people my age in a similar boat looking to make a move of their own... at least that's how I see the latest housing stats." – Paid-up subscriber Beau E.

"I have been building for years [near a major metropolitan city] and you are correct in your newsletters... It is fantastic for sellers and builders. Market is tight and new construction is fetching more than they should... I have built several thousand houses over the years and not sure I have seen it this good here.

"When the big crash comes in one, two, or maybe four years, it will all change and be worse than '08, but right now builders are printing money if they have the lots." – Stansberry Alliance member G.S.

"[Dan,] I think [last] Friday's Digest is maybe the most timely issue I've read from you over all the years I have been reading your articles. I have been an Alliance member since 2009 and it is good to read feedback from someone who is down to earth and doesn't hype the next great trend coming along.

"At 73 I cannot afford to make any big mistakes in investing because there is no time left to recover. If I make it into the mid 90's like my dad's side of the family I'll need funds to keep the ship afloat!

"You, Steve, and Doc are the ones I focus on to keep from making any big mistakes. My only regret is I wish I have taken your advice a few years back on some investments but we all live and learn.

"BTW, I agree with your political views! I hope you have many more great years ahead." – Stansberry Alliance member Jim M.

"In response to a previous Digest (last week), could the pandemic or another similar world crisis be the catalyst for One World Government and a new controlled currency that would make both gold and cryptos illegal to possess? The people must never profit from a crisis, only governments!!! I may be glad that I am an old man." – Paid-up subscriber John S.

Corey McLaughlin comment: John, our colleague and Crypto Capital editor Eric Wade gets this question a lot... And we addressed it back in our August 6 Digest. Eric said the question you raise is a great one. As we wrote in August...

In short, Eric says the idea of government intervention is the "single largest existential threat to bitcoin," but one that raises a lot of other practical questions...

How far would the governments be willing to go to enforce the illegality of bitcoin? Would they pass laws? Would they conduct house-to-house searches? Would they scour all Internet traffic looking for signs of cryptocurrency usage?

Eric's point is that banning bitcoin – at this point – would be hard to do... But as he argues, let's say governments crack down on cryptocurrencies anyway. What happens next? Well, prices would become extremely volatile in countries where that happened.

However, as Eric first wrote in a mailbag response in the May 21 Digest, bitcoin has a few things going for it that make him optimistic...

First, governments have had more than a decade to ban bitcoin. And yet, most haven't.

Second, a government can ban the ownership of bitcoin, but there's simply no way for them to shut down the network. That would require coordination with every government on the planet. Attempting to seize your bitcoin or force you to "turn it in" would take an army.

The simple move of making bitcoin illegal would certainly be enough to discourage a lot of people and companies from owning it... but not everyone. Banning bitcoin would simply push it into the shadows similar to the bootleggers running bottles of booze during Prohibition.

Third, the countries that didn't ban bitcoin would attract all of the industry's entrepreneurs, businesses, and tax revenue. They would also accumulate the vast majority of what could become the world's largest and most valuable asset.

All in all, Eric believes a ban would stifle innovation in the U.S., or anywhere that doesn't accept bitcoin (or use blockchain technology)... And it would ultimately put that country at a competitive disadvantage in the global economy.

All the best,

Corey McLaughlin
Baltimore, Maryland
December 10, 2020