The Power Gauge Helps Investors Navigate Market Turbulence
Editor's note: Investment opportunities hide in "overlooked" areas...
That's why Vic Lederman – editorial director of our corporate affiliate Chaikin Analytics – stresses that investors must look for every edge they can to pinpoint winners. And his Power Gauge system helps him identify the best investing opportunities.
In today's Masters Series, adapted from the April 8 and May 2 issues of the Chaikin PowerFeed daily e-letter, Vic details how you can spot buying opportunities in the market's most neglected corners...
The Power Gauge Helps Investors Navigate Market Turbulence
Folks, we all know the market has suffered a brutal year so far...
The trade war has evolved. And it looks like it'll touch just about every corner of the market.
Politics aside, this is a volatile environment for investors. Most folks' portfolios have taken a beating.
Even with the recent bounce, the S&P 500 Index is still down roughly 4% this year. And the tech-heavy Nasdaq 100 Index has fallen about 5%.
But looking at the largest stocks only gives us a partial picture. After all, thousands of equities trade on U.S. exchanges every day. And if you think the broad market has been bad, it has been even worse for smaller companies.
In the Power Gauge, we use the iShares Russell 2000 Fund (IWM) to measure small-cap stocks. And even with the recent market bounce, that index is still down about 9% this year.
I don't want to sugarcoat this situation. It has been rough. And the Power Gauge agrees...
Just four of the 11 top-level sectors that our system tracks earn a "bullish" or better rating. And only six of the 21 subsectors are in "bullish" territory.
At the top level, one sector even has zero "bullish" or better stocks in it. And two subsectors are in the same position.
So, if you feel like there have been few places to hide in this market, you're not alone.
We've also seen a lot of pain in midcap stocks. The SPDR S&P MidCap 400 Fund (MDY) is down roughly 5% so far this year. And it makes sense when you think about it...
These companies are particularly sensitive to tariffs, economic uncertainty, and the kind of volatility that we've seen in the market lately.
They also suffer from not having the "safe haven" status that some larger companies do. For example, everyone knows that a consumer-products juggernaut like Procter & Gamble (PG) isn't going out of business anytime soon.
But what about a midcap company you barely know by name... one that depends on imported steel, aluminum, or electronics from China? When things get rough, investors flee these companies.
But even in challenging times, the Power Gauge still spots opportunities in some overlooked areas... Many of these smaller stocks are ones that Wall Street "big shots" wish they could load up on, but often can't.
I'm talking about the stocks that drive America's economy... They have some of the biggest opportunities for growth that you can find.
Now, you might think the Power Gauge would be warning investors to run away from this market segment. And, yes, the two indexes I outlined above look particularly rough...
Right now, in our system, IWM earns a "neutral" rating. And the vast majority of the stocks in this fund are either in "bearish" or "neutral" territory.
But there are still a lot of opportunities... Specifically, 350 stocks in this fund earn a "bullish" or "very bullish" rating.
And we see something similar with MDY... When it comes to midcaps, just 70 stocks in MDY earn a "bullish" or "very bullish" grade. That's about 23% of the fund's rated stocks.
Again, it shows that not all midcaps look bad right now. And as any investor knows, it doesn't take 70 names to beat the broad market.
Does that mean every position in a volatile market is going to be a winner? Absolutely not...
But as investors, we can still use the tools available to us to push the odds in our favor. And when the market finds its next leg up – or even soars – we'll be positioned to get the most out of it.
The point is simple... We're living in a tumultuous time.
Right now, our job is to use the Power Gauge to find the bright spots. And beyond that, we need to stay disciplined.
No one knows exactly how long this will last. And it's possible for certain companies to take a massive beating. So follow your stop losses. Continue to look for opportunities. And be ready to act when conditions change.
With the help of the Power Gauge, we'll get through this tough market environment together.
Good investing,
Vic Lederman
Editor's note: At Chaikin Analytics, we know things have been volatile recently. But even in the most uncertain markets, opportunities still exist...
In fact, Chaikin Analytics founder Marc Chaikin says the recent turbulence has opened the door for a lucrative buying opportunity in one little-known stock. He believes it's on the verge of a major catalyst that could help it soar 91% in two months.
That's why Marc just went on camera to detail how investors can take advantage of this rare opportunity. Learn more here...