Surviving Another Down Week as Markets Struggle

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

It was yet another down week for markets across the globe, with the Dow Jones down 1.59%, the S&P 500 falling 3.10% and the NASDAQ tumbling 5.44%. The MCSI Emerging Markets Index also fell 1.83%.

The only gainer in your portfolio was the Direxion Daily CSI 300 China A Share Bear ETF (CHAD), which rose 1.92%. Bearish bets are the only ones paying off consistently so far in 2016.

U.S. stocks have been a very difficult game to play in the opening weeks of this year. The same applies to stocks across the world. Only six out of 47 markets on the planet are up in 2016.

Last week’s Bull Market Alert recommendation is a good example: a fundamentally strong stock that is technically oversold and due for a bounce. It now has over 80% upside based on analysts estimates, yet it continues to sell-off sharply.

Many small speculators have now gone short on the U.S. market, and last week, the percentage rose to one of the highest levels since 1993.

For the past six years, when small speculators bet against stocks, they have rallied strongly each time. The question today (as always) is whether we’re still in the same market environment as the prior six years.

Given the current state of the market, I am not ready to recommend that you short the market through exchange-traded funds such as the ProShares Short S&P500 (SH) or leveraged versions of it like the ProShares UltraShort S&P500 (SDS).

From purely a chartist standpoint, the market has yet to breach last September’s lows, and it is still in a well-established trading range.

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But it is certainly something to keep an eye on if the market breaks below last September’s levels.

Until then, keep your investment powder dry for a new Bull Market Alert recommendation next week.

Portfolio Update

Direxion Daily CSI 300 China A Share Bear ETF (CHAD) rose 1.92%. The CSI 300 Index is somewhat like “the S&P 500 for China,” and is broadly followed by global investors as a proxy for that market. CHAD makes it easy to capitalize on a fall in the Chinese market. In a market where investors have watched $1 trillion go out the door over recent months and multiple trading halts be imposed by market regulators, CHAD is a good way to bet on continued downside in China. CHAD is a BUY.

Phillips 66 (PSX) dipped 2.27% over the last week, right along with the considerable drops in the major market indexes. PSX declared a quarterly dividend of $0.56 per share last week on its common stock. The dividend is payable on March 1 to shareholders of record as of the close of business on Feb. 16. PSX is a BUY.

Dycom Industries (DY) lost 15.99%. Zacks Research recently set a price target of $99 for Dycom, a potential 80% move higher, based upon five brokerage ratings. Zacks also set its 1-5 rating scale at 1.29 for DY, indicating a Strong Buy. DY is expected to report earnings per share (EPS) of $0.57 on Feb. 23 after markets close. DY is a BUY.

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Exchange-traded fund investment expert Doug Fabian discusses how the recent jobs report helped to cause this week's poor market performance.

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