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How to Play These 3 “Baby New Year” Sectors

By Costas Bocelli January 5, 2023 Facebook Logo Twitter Logo Email Logo LinkedIn Logo

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Hello and Happy New Year!

I hope you had a restful holiday.

On Tuesday the market officially entered what is historically its strongest quarter out of the 16 quarters (4 years) that make up a Presidential election cycle. On top of that, the quarter after this one, Q2 2023, is historically the third strongest quarter of the 16.

So we should be in for quite a run. Even better, right now stocks are on sale, following a year when the market showed its worst performance since the Great Recession.

Here’s a chart showing how each quarter typically performs over the span of one 4-year election cycle.

The yellow arrow points to the quarter we’re currently in – Q1 of “Year 3.” (The midterm year – last year – was “Year 2.”)

(Click any image to enlarge)

If you’ve been following me (And Chris and Bill) for any amount of time, you know that we rest our investing approach on two pillars – Market Internals and Relative Strength.

Market Internals (aka “Breadth”) tells us when to buy, and Relative strength tells us what to buy.

We can look at Market Internals on our US Industry Bell Curve, one of the premium tools that comes bundled with Sector Prophets Pro, our sector research and data platform.

This tool arranges all 45 sectors of the market – 41 industry groups and 4 international groups – into an easy to digest image.

Here’s the curve as of yesterday’s close:

The blue boxes show sectors that are under the control of Demand (Aka the bulls) while the red boxes show sectors in the hands of Supply (aka the bears). (The curve shows a lot of other very useful information about sectors, but for now we’ll just focus on the Supply/Demand dynamic.)

The purple arrows show three sectors currently under the control of the bulls. They are: Latin America (an international group)... Europe (an international group) and Precious Metals.

As you can see in the images below, all three of these sectors are in rising columns of X’s on their respective bullish percent index (BPI) charts. When a sector is in X’s on its BPI chart, it means that Demand has control over the sector in the short-term.

LATIN AMERICA

EUROPE

PRECIOUS METALS

As mentioned, all three BPIs are in X’s. And two of the three are also on point-and-figure Buy signals. This tells us that these sectors are also strong over the intermediate- to longer-term. 

(If you’re an eagle-eyed chartist, you might quibble that Precious Metals isn’t technically on Buy signal, as its current X-column has yet to surpass its previous X-column. That is true. But, given how tall the current X-column is, many chartists would consider the chart to be on a Buy signal by invoking something called a “long pole” signal.)

Now, we can zoom out and take a higher-level view of the market by looking at the rankings of our six major asset classes.

When we do, what we find confirms what we’re seeing on the Bell Curve and on those BPI charts.

Right now the three strongest asset classes are: Cash - International Equities - and Commodities. (The three weakest are: US Equities - Fixed Income - and Currencies.)

Europe and Latin America are subsectors of International Equities… and of course Precious Metals is a subsector of Commodities. In fact, Latin America can also be considered part of Commodities, as the economy of Latin America is very heavily driven by commodities.

My friend and colleague Chris Rowe wrote about international equities just a few weeks ago, when he focused on China and Europe. (And also gave two actionable ETFs to play these international groups.)

As for me, I’ve been all over Precious Metals for months now. And with gold hitting 6 month highs, I’m more bullish than ever on the yellow metal.

In fact, it was strength in gold that led me to my latest recommendations in my paid Monthly Trend Trader service.

The S&P 500 was down -6% in December as we closed out a miserable year for stocks.

But both of my monthly recommendations – MLCO and AGI – blew that benchmark out of the water. 

Both trades returned a total of +17% in the month of December – a +23% outperformance!

And I think both of those stocks continue to go even higher.

But turning back to the New Year, I’m picking two additional brand new bullish stocks to ride over the coming weeks.

And I just released the first of them to my Monthly Trend Trader subscribers.

Here’s its price chart. 

I can’t give you full details of this high-probability play (for example, I gave my readers a juicy Call option and also instructions on managing risk). That wouldn’t be fair to my paid readers.

But if you want more information, give us a call at: 855-822-0269 and ask about Monthly Trend Trader.

Here’s wishing you and your family a happy, healthy and prosperous 2023!

Costas

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