Here We Go Again...

Are you having fun in the stock market yet?

If you are a long-term INVESTOR, then hopefully, you have mostly ignored the last couple of months. You may have opportunistically added to some of your favorite holdings.

Remember this great table from Ben Carlson from A Wealth of Common Sense regarding holding stocks for the long term…

Sticking with stocks and being patient is ABSOLUTELY the best way to create life-changing wealth.

Hopefully, you can also have some particularly good stock picks like the ones we publish in our INVESTING publication HX Legacy.

That publication has strongly outperformed the S&P 500 since we launched our firm last February.

If you are a TRADER, this stock market should be very profitable for you!

It has been for our TRADING publications – HX Trader and HX Income.

At HX Research, we are not afraid of making short-term trading calls on the overall stock market. Since we started publishing in February, we have made two “Take Your Profits” calls. Here is a chart showing those calls…

In HX Trader, we took advantage of these situations by profiting from many (most) of our positions.

We could then use the ensuing sell-off to take advantage and create some great trading profits.

Today, we are making another one of these calls. We think it is TIME TO TAKE PROFITS.

Let’s be clear about what kind of call we are making.

This does NOT mean sell everything.

As mentioned above, if you are a long-term investor, you should be doing nothing.

What we are saying is that as a trader, you should take any easy profits you have made in recent weeks. Park that money on the sidelines, waiting for better opportunities to emerge.

We often use gambling examples and the game of blackjack.

How much you bet (and whether you bet at all) should be dictated by the cards you are dealt and what the dealer is showing.

Sometimes, you should be doubling down and maximizing your betting. Sometimes, you should walk away from the table.

We are not necessarily making as strong a call as we were back in July, but it makes sense to cash in profits and wait.

In July, the stock market was highly overbought, with an RSI of over 81 on the S&P 500. That is a rare occurrence, and we showed in that report how near-term future returns historically had been poor. You can read that report here.

Sentiment had also gone to historical extremes.

We didn’t like that combination and thought it was a clear signal to take profits and sell.

Right now, the stock market is not as overbought (RSI of 61), as you can see from the RSI in the chart above.

Sentiment, though, is back towards the extremes.

Here is a chart of the American Association of Individual Investors Investor Sentiment data showing a “Bullish” outlook…

You can see that it is back near the previous highs.

We also go back to a couple of other points that we have made in recent weeks.

While “V” recoveries after periods of extreme volatility CAN happen, they are the EXCEPTION and NOT the rule. We can't discount the historical precedent set in recent years with episodes like the Yuan devaluation and the "Volmageddon" episode.

There is also STILL seasonality to consider.

During this whole month of August—and especially during the sell-off at the start—everyone was pointing out that this is historically the worst time of year for stock performance.

We published a table on this data in our July 15 “Take Profits” note. Here is that table again…

Historically, August hasn’t been great in recent years, but September has been AWFUL.

Many investors and traders are taking a victory lap after listening to the commentary after Federal Reserve Chairman Jerome Powell's speech last Friday.

We think the best way to do that is to TAKE YOUR PROFITS and wait for another great trading opportunity.

Have you been taking profits recently or adding to your trades? Let us know in the comments section online or at [email protected]