by Staff Reports Money Morning, Money Morning
— this post authored by D.R. Barton, Jr., Technical Trading Specialist, Money Morning
Unfortunately, the political and personal fault lines in the United States are about as raw and volatile as they’ve ever been. But that’s a subject for another time and place.
As investors, whatever our personal politics or feelings are, now is the time to quickly come to terms with what’s happening and what likely will happen in the stock market.
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Because, despite the market’s action Tuesday, it has drawn a line of its own – a “line in the sand” – and where your money is in relation to this line will make a big difference.
I’m going to show you where that line lies, because there are some dangers, no doubt, but there are also some unique profit opportunities…
Here’s the Critical Market Level to Watch
Pay close attention to this technically important level, because it’s going to have a huge role to play in price action for the foreseeable future:
Accordingly, it should also loom large in your investing and trading decisions right now. If the S&P 500 closes below 3,200 for two or more sessions, protect your long-term investments – your nest egg – and begin to move your capital around…
Now Is the Time to Buy Here
But that still leaves us with plenty of safe moneymaking opportunities. I’ve recommended two of these to my Dark Edge Project Members and, with the way the markets are behaving, they’re already deep in the green.
THREE STOCKS every investor should consider owning today… and dozens of stocks to drop immediately. Watch now…
I’d enthusiastically recommend building or adding to a gold allocation; the metal itself is still a great holding during the “flight to quality” we often see when times are uncertain – and they’re as uncertain as they’ve ever been. With an exchange-traded fund like the SPDR Gold Trust ETF (NYSEArca: GLD), it’s never been easier to own the yellow metal.
But that’s not the only thing I’d recommend. There are even smarter buys in the stock market. Some of my favorite low-risk, high-profit investments at times like this are utilities.
The S&P 500 Utilities Sector is undervalued today, and actually down slightly for the year; it’s lagged behind its bunkmates on the broader S&P 500, but then again, on balance, 2020 – a pandemic year that’s seen all-time highs, five-year lows, trillions in stimulus, and a prompt return to all-time highs – has been a uniquely bullish year… so far.
But there’s a very real risk that that’s about to change, thanks in large part to scorched-earth politics in Washington, D.C., and when the market takes a turn for the worse, capital pours into safe havens like utilities. It pays to be there early.
A stock like NextEra Energy Inc. (NYSE: NEE), the world’s largest solar and wind power generator, is an excellent way to keep some capital in what could be brutally uncertain markets, working and growing and collecting a $1.40 dividend, to boot.
Less than a month ago, this $145 billion company unceremoniously dethroned ExxonMobil Corp. (NYSE: XOM) – recently deleted from the Dow and once the largest company in the world – as the biggest, most valuable energy company out there.
NextEra has a world-beating portfolio of wind and solar, plus battery storage, but it also has a rather broad fossil fuel electricity generation and distribution business. In other words, it leverages clean technologies like wind, solar, nuclear, and natural gas and coal and oil, which makes it uniquely positioned to profit however energy policy priorities win out.
Buy NEE shares at market.
And move out of these at the best price you can get…
Sell These Stocks Now
Plenty of folks have made speculative bets and even long-term plays on the airlines and other stocks in the U.S. Global Jets ETF (NYSEArca: JETS).
Now, the thinking driving the investing here is fairly straightforward: “Airlines like Southwest Airlines Co. (NYSE: LUV), American Airlines Group Inc. (NASDAQ: AAL), and United Airlines Holdings Inc. (NASDAQ: UAL) are so severely beaten down, there’s nowhere to go but up, so I might as well hop on for the ride.”
TOXIC STOCK ALERT: 22 million shares of this popular stock trade hands every day… just make sure your “hands” are nowhere near it. Watch and learn the ticker…
I think folks are about to find out what goes down can go down a lot more before U.S. and global travel patterns begin to return to normal.
We are facing a long, difficult “COVID winter” in the northern hemisphere. Many countries are already reinstating lockdowns and restricting the movement of people. If you own this ETF, or any of the airline and travel stocks it has among its holdings, consider pulling the ripcord today.
I’m likewise very leery of the biotech and pharma sector, as tracked by the VanEck Vectors Pharmaceutical ETF (NASDSAQ: PPH).
That’s right: I realize this warning may sound counterintuitive and even strange, given pharma’s strong performance year to date. Plus, there’s emerging expert consensus that, if research continues along its present pace and course, we’re probably weeks away from emergency approval for the world’s first SARS-CoV-2 vaccine.
And all that is certainly true, but the current investor outlook in pharma is way too optimistic.
Even if a vaccine were to emerge by Christmas, it would still be as late as summer or autumn 2021 before enough people were inoculated to begin to halt the global pandemic, and months before bottom lines felt any benefit.
And those months are likely to be filled with powerful downward price pressure, given the uncertainty inherent in both Republican and Democrat healthcare policy priorities.
Travel will return to normal someday. We will get improved COVID-19 therapeutics and probably even a vaccine someday. But that day is not today.
These stocks should be avoided, or exposure minimized, until further notice.
With all that said, as trying as these times can be, ultimately, I believe certainty will return to the markets. Until it does, I’d consider each pullback as an opportunity to go shopping for quality stocks like NEE. For all that’s happening right now, we are headed into a period of strong seasonal performance, and I believe there are still trillions in stimulus waiting to come in from the sidelines.
And if you do as I’ve recommended here and keep quality and safety uppermost on your mind, you’ll be in the best possible position to profit from this outlook.
Before you go, make sure you catch my colleague Shah Gilani’s presentation on the best (and worst) stocks in America…
You see, our Chief Investment Strategist is going to run through all 50-plus stocks every investor should know about – for better or worse.
It’s all on the table right now: Prices, targets, tickers, company names will all be coming your way.
Word to the wise: Grab a pen to take notes – this is one fast, no-holds-barred video. Watch now…
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