The Best of the Best | Smart Chart Investor

Just thinking…

How is this dip timed so perfectly with the coronavirus breakout and the height of the impeachment hype? How will they time the reversal higher (very soon) with the end of the Impeachment and the waning of the coronavirus? You watch…I bet it’s going to be timed like a finely tuned watch. Insert Twilight Zone soundtrack.

Broader Market Review

The broader market has channeled down, as expected, into the area I circled last week as a probable support level to reverse higher from (see green lines and circle).

This is the DIA chart from last week with my green reversal levels…the BEFORE chart.

Dow Jones Industrial Average (DIA) before

This is the current DIA chart (with projection to 4/20) showing price trading right down into this reversal zone..the AFTER chart.

Dow Jones Industrial Average (DIA) after

This dip was expected. It was in the model. The Dow was positioned to correct after hitting new higher resistance. I wrote about it before it happened. It’s just another old fashioned good buying opportunity.

As you can imagine, it’s pretty hard to know exactly what’s going to happen with stock prices, especially as you compress the time horizon. On the other hand, you have seen how it can be done and how accurate cycle positioning analysis can be both long and short term.

While a one day, two percent drop (Dow down 603 on Friday) is never fun, this does not alter my opinion about where prices are headed in 2020. This dip was expected. While depth is always difficult to gauge price should stabilize this coming week and reverse higher.

There is always the possibility they will take it down another 700 Dow points to the yellow ascending support line which is converging with the old resistance ceiling that the market struggled with for 22 months but I don’t think so. Either way, my price cycle positioning analysis remains the same: a robust expansion for 2020.

Let’s take a wider and cleaner look at a chart of the Dow proxy ETF (DIA). This chart is from 2011 with my forecast out to 2021. It’s pretty clear where current cycle positioning is; the beginning stage of a robust expansion. The current dip was expected, perfectly normal and provides another opportunity to buy at lower prices.

DIA..2011-2021

Individual Stocks Best Positioned

We are looking for the instruments that are historically positioned to go up the most during the next phase of the current cycle.

Last week, in my report “Buying the Dip“, I listed the ETF’s that are best positioned for the 2020 expansion. This week I will cover many of the individual stocks that are best positioned.

My outlook remains the same; technology stocks and financials are positioned to benefit the most from current cycle positioning. Drilling down further in the technology sector, semiconductor and software companies (my favorite subsector) should lead and outperform all other sectors and subsectors.

Semiconductors and software have ripped higher over the past couple of months and this pullback is a welcome opportunity to gather and consolidate before resuming their rip higher (soon).

Financials are offering a similar opportunity. After being suppressed for ten years this sector is hovering just below the 2007 all time high made right before the Financial Crisis. I can’t imagine they are not going to cross over soon and just rocket higher.

So, as I filter and screen countries, regions, indexes, sectors, subsectors and individual stocks I present the best of the best…

Software Companies: