The Market is Overbought and Likely to Deliver Slower, More Selective Gains

Excerpt from Louis Navellier's Marketmail - 2/26/2019

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I hate to be a party pooper, but I have to tell you that the stock market is grossly overbought. According to our friends at Bespoke Investment Group, 70.8% of the stocks in the S&P 500 are now overbought, which is the highest level in nearly three years (since March 2016). This 70% overbought threshold has only happened eight times in the past decade, according to Bespoke, and the S&P 500 has usually kept rising – by a median 2.1% and 5.6% in the next month and three months, respectively. So, the good news is that, based on historical parallels, the S&P 500 may continue to move higher, but at a slower pace.

Essentially, the stock market is entering a “funnel,” which I expect to become progressively narrower, with fewer stocks showing leadership. First-quarter 2019 S&P 500 earnings are expected to “hit a wall” due to more difficult year-over-year comparisons. Furthermore, due to a strong U.S. dollar, multinational stocks that account for about 50% of the S&P 500’s sales are fighting a strong currency headwind. 

As a result, companies that post strong sales and earnings momentum in a slower earnings environment – like my A-rated dividend growth and conservative growth stocks – should continue to exhibit relative strength and emerge as market leaders. Here are links to my Dividend Grader & Portfolio Grader services.


In This Issue of Marketmail (Click Here to Read)

This week, President Trump may negotiate a denuclearization deal with North Korea and a trade deal with China in the same week – after former Presidents have failed to make progress on either front. Bryan Perry covers the China deal and Ivan Martchev writes about North Korean investment options. In between those columns, Gary Alexander writes about media bias when covering stock markets, with media silence greeting this historically rapid recovery. Jason Bodner covers the phenomenal 8-week recovery in growth stocks, while I close with a look at Brexit, Europe, and what looks like Maduro’s final days in Venezuela.

Income Mail: The March 1 Trade Truce Extension is Looking Like a Done Deal 

     By Bryan Perry

Dealing with China’s Hyper-Growth Cyber Crime Network 

Growth Mail: The Market is Getting Boring – and That’s Great News

     By Gary Alexander

No News is Good News

Global Mail: How to Invest in North Korean Denuclearization

     By Ivan Martchev

Investment Surrogates Are Not Created Equal

Sector Spotlight: Growth Has Been Leading Us Out of the Ashes

     By Jason Bodner

Don’t Fight a Rising Market!

A Look Ahead: Brexit Problems Overshadow a Brewing European Recession

     By Louis Navellier

U.S. Energy Production Aids in Policing Venezuela and Other Dictators