Louis Navellier - S&P 500 "Triple Bottom" Last Friday

Excerpts from a Louis Navellier email titled "The S&P 500 Reached a "Triple Bottom" Last Friday"

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-------- Forwarded Message --------

Subject:	The S&P 500 Reached a "Triple Bottom" Last Friday
Date:	Wed, 20 Jan 2016 08:05:08 -0500 (EST)
From:	Navellier and Associates <marketmail@navellier.com>

All content in this Introduction to Marketmail represents the opinion of Louis Navellier of Navellier & Associates, Inc.

The S&P 500 Reached a "Triple Bottom" Last Friday

Last Friday, the S&P 500 essentially tested its August 24th low on high trading volume; so we finally got the panic "capitulation" day that typically marks decisive stock market bottoms. I for one can tell you that I was putting new money into the stock market by funding my 2016 SEP and adding money to a family partnership Friday, because the stock market appears to be grossly oversold, as signaled by a "triple bottom," which was created by market lows set in mid-October 2014, August 24, 2015, and January 15, 2016.

The way High Frequency Trading (HFT) systems work, what is down today is likely to be up tomorrow; so the herky-jerky market action we've been seeing on a daily basis will likely persist. The fact that Friday was a capitulation day on high trading volume, aided by an option expiration day, gives me hope that we'll see a big bounce early in this holiday-shortened week; so be prepared for more daily gyrations, thanks to HFT. In addition, the S&P 500 dividend yield of 2.3% is now well above the 10-year Treasury bond (below 2%, intraday).

However, before we get too excited, theaverage energy stock now trades at 28.7 times trailing earnings, and their forecasted earnings are truly horrific. A while ago, my company published a white paper, warning investors to stay away from these stocks. The ETF industry is basically causing this excess valuation for energy companies with negative sales and earnings. Specifically, I've seen a wave of ETF "pop up" buttons lately, advertising ETFs with yields over 4%. The only problem is that to get that 4% dividend yield, the ETF industry has to buy a lot of multinational and commodity-related stocks that are characterized by negative sales and earnings. As a result, the tail (i.e., dividend yield) is wagging the dog.

Not surprisingly, energy stocks now dominate the "F"-rated stocks in our Navellier DividendGrader and PortfolioGrader services. In my opinion, it is futile to chase high-dividend stocks via ETFs since you are setting yourself up for persistent principal erosion, regardless of the dividend yield. In other words, while the S&P 500's generous dividend yield is putting a good foundation under the overall stock market, some of the highest dividend offerings are becoming dangerous, due to the ongoing woes in the energy sector.

Read

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Double Bottom Recovery - Market Update

Today the S&P500 recovered all the losses made since it crashed below its 200 day moving average in August. 

 Note the next graphic shows a test of the low to make a "W bottom" followed by a near perfect test from above of the tip "^" of the "W" between the two lows.  

The final image shows how far below the peaks the markets were during at the closing low just over two months ago.

Hopefully you all joined me in:

1. Significant Profit taking before the August crash
2. Significant buying while making and testing the lows
3. Taking some very nice profits NOW that we've recovered.

The final image shows how far below the peaks the markets were during at the closing low just over two months ago.

See:

• Sept. 29: Buying Opportunity: Market Testing August Lows
• Sept 9: Bob Brinker Market Projection & Outlook
• Brinker Moneytalk Radio Show Podcasts and Articles
  

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Successful Bottom Test; Day #1

As of today, we successfully tested the November 2008 low in the S&P500 at 741.02.

Click chart courtesy of Stockcharts.com for full size image

Hopefully this means November 21, 2008 was the start of a new cyclical bull market and yesterday was a day of fear similar to the low set in March 2003.

In 1999 and 2003, the years following the big downturns in 1998 and 2002, my newsletter explore portfolio gained 117% and 77%, respectively.

Brinker may have missed this bear market as fully invested, but he says he expects big gains to come before the recession ends. If Ben Bernanke is correct (see Fed Chairman Bernanke Said Recession Should End This Year) that the recession can (and does) end later this year, then we should see major gains start any day. NOW would be the time to add some high octane to your portfolio from my list of "explore stocks."

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 94% vs. S&P500 DOWN 14% vs. NASDAQ down 28% vs. Warren Buffett's Berkshire Hathaway (BRKA) up 37% (All through 12/31/08) (More Info)

Subscribe NOW and get the February 2009 Issue for FREE! ! (more information)
(Your 1 year, 12 issue subscription will start with the March 2009 issue.)

Don't miss out!

BTW, Jim Cramer (Fan Club) is on TV now saying we should get a "big rally" that he thinks is an opportunity to sell before the market goes lower because the fundamentals are terrible. Unlike Brinker who has been fully invested since the top, Cramer told his audience and NBC's "Today Show" national audience to raise 20% cash plus cash for anything you need to buy in the next five years late last year when the markets were about 30% higher.