2018 is finally here and we’re going to hit the ground running by ripping cash out of the stock market…
I told you how to make money from the “January Slump” not too long ago, now let’s look at how you can pull heavy profits from the aftermath of the slump…
The stock market is in need of a healthy correction.
I’m not talking about the beginning of a bear market or anything—we’d need to see a massive drop for that to happen—but I’m expecting a healthy pullback to the 40-week moving average.
There’s a good chance that could happen this month.
As I mentioned in a previous article, the first month of each year historically contains some heavy selling action.
This is usually a reaction to the Santa Clause Rally which normally pushes the stock market to new highs in the last two weeks of each year.
As we start to see this slump kick in, we need to be thinking of the future and, more importantly, how to rip big profits out of the 2018 market.
Here’s how we’re going to do that:
We want the S&P 500 ($SPX) to get as close as possible to the 40-week moving average (the blue line on the chart below).
As you can see, the S&P 500 is quite far above that blue line, so that’s why I say we just need it to get close.
If it does come down and touches it, great, but there’s only a small chance that’d happen.
This movement would present us with some very profitable action.
The way we’d rip our 2018 profits out of the stock market is by finding stocks with very similar action in relation to their 40-week moving average.
Once the S&P 500 gets close to bouncing, the weight of the major index should pull up any stocks that have followed it in the healthy correction…
Remember, individual stocks drive the price of the S&P 500, but the S&P 500 has a paradoxically heavy influence on individual stocks.
Keep an eye out for this movement and I’ll make sure you remain well-informed.
