Jeff Clark's Market Minute

Where the Money Goes in a Market Crash

The S&P 500 peaked in late July.

Since then, it has been stuck in a wide trading range between about 2850 on the downside and 3020 on the upside. As we approach the upper end of that trading range, and as technical conditions start to move into overbought territory, the odds of a significant decline increase.

That decline could start any day.

In fact, several months ago, I marked October 21 as a probable start date for that decline…

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Of course, predictions like this should always be given a little wiggle room. The exact date isn’t as important as merely recognizing the potential for such an event.

The stock market is vulnerable to a steep decline. Whether it starts on Monday the 21st, or a week later… or a month later… doesn’t matter.

What matters is that traders be on the lookout for it and adjust their portfolios to take advantage of it.

The next decline phase is likely to be a “rotational” bear market. Money is going to come out of the market’s best-performing names – those momentum stocks with wildly expensive valuations – and rotate into the beaten-down “value” names that have done nothing all year.

In other words, the best-performing stocks of 2019 are going to get hit, and this year’s worst stocks are going to outperform everything else…

Even though the S&P 500 is trading near its all-time highest level ever, many stocks and many sectors have already been through their own bear markets. Many retail stocks, for example, are down 50% or more in 2019. They’re trading at decade-low valuations. Many oil and gas stocks are in the same boat.

These are the stocks that are likely to behave best when the next downturn occurs. These stocks have already been “sold-out.” They’re already trading at cheap fundamental valuations. And, their charts are closer to forming bottoming patterns than topping patterns.

Money isn’t going to disappear from the stock market. There isn’t anywhere for it to go. So, it’s just going to rotate from vulnerable momentum stocks into cheap “value” stocks.

Traders should keep this in mind as we trade through the next few months. We don’t necessarily have to bet on downside action to profit in a declining stock market. We can often make even more money by identifying the stocks money will rotate into… and beating everyone else to them.

Best regards and good trading,

Jeff Clark

P.S. Whatever happens with the market on Monday, I’m taking some extra time in the morning to help guide you through it…

As a bonus for signing up to my first-ever stock-trading event next Wednesday at 8 p.m., you’ll get access to an exclusive live training session. (If you participated in my Mastermind class earlier this year, it will seem familiar.)

There I’ll show you exactly how I prepare for each trading day… talk more about what to do when the market crashes… and clue you in to my biggest trade ideas for the week ahead.

To sign up and ensure you don’t miss it, click right here. Then on Monday morning at 8:30 a.m., look out for an invite to the session in your inbox…

Reader Mailbag

Today a subscriber likens Jeff to a kind drill sergeant…

Thank you, Jeff, for being such a kind drill sergeant (aka Sergeant Carter) and drilling into our noggins that options are about limiting risk. I used to hang on way too long for the home runs (even while being up over 100% on some trades) only to see them expire worthless! Since signing up for the Delta Report I have erased $4,000 off of my “oops” trades for the year and am getting closer to breaking even.

I love the way you walk us through and hold our hand practically through each and every trade. It’s a revelation to secure even little gains rather than all in wait, hope, pray and ultimately disappoint. The Delta Report has given me hope and encouragement and it is game changing to say the least. Thanks again for your expertise and patience with us privates (Gomers). God bless.

– Jerry

Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].

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Jeff Clark's Market Minute Archives

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