Over the past 2 weeks, the S&P 500 has managed to reverse a good part of this year's losses with a rally that's put the markets back into an uptrend that began on March 16th. Subscribers to my MEM Edge Report were immediately alerted to this new uptrend when the S&P 500 posted a bullish follow-through day, through the use of a system that's identified every market bottom going back over 40 years.
DAILY CHART OF S&P 500 INDEX
When the markets enter a new uptrend, that often marks an ideal time to identify new leadership stocks that will go on to trade higher than the broader markets. Historically, these leadership stocks possess several characteristics, among those being that they will be the first out of the gate among their peers, as their industry group begins to turn positive. Additionally, the company will exhibit strong growth prospects.
For example, as the markets entered a new uptrend on the 16th, we highlighted the Semiconductor group as being close to reversing its downtrend, while also identifying Nvidia (NVDA) as a leadership name in this group. NVDA's strong growth prospects is one reason, while the fact that it turned positive ahead of its peers was another, following its break back above its 50- and 200-day moving averages last Friday.
While I believe NVDA will continue to outpace the markets, as well as 2 other Semiconductor stocks I'll be adding in my Sunday MEM Edge Report, there are other areas of the market that are poised to trade higher as well. Specifically, stocks that act as a hedge against inflation are also ideal at this juncture. With inflation currently at a 40-year high and increased Oil prices pointing to a prolonged period of higher prices, buying high-yield stocks is a great hedge. The reason is that these high-dividend companies often have cyclical business models that hold up well when prices rise, as they have strong pricing power that allows them to maintain high profits.
DAILY CHART OF S&P 500 HIGH DIVIDEND ETF (SPDY)
A diversified ETF that contains high dividend stocks would be a great way to gain exposure. Above is a chart of the S&P 500 High Dividend ETF (SPYD), which broke out of a 2-month base today on its way to greater heights. SPYD is composed of 80 high-dividend-yielding companies within the S&P 500, including top Energy and REIT stocks. In addition, this ETF provides a 3.5% yield.
While the markets are in a confirmed uptrend, it's unclear what path will be taken or how long the current uptrend will be sustained. With the many crosscurrents taking place amid Russia's invasion of Ukraine, a shift in the Federal Reserve's monetary policy and high inflation and rising interest rates, you'll see how important it is to stay on top of the markets. If you'd like expert guidance during these trying times, trial my twice weekly MEM Edge Report for 4 weeks for a nominal fee. In addition to highlighting sectors and industry groups poised to benefit from the current environment, you'll also be provided with top stock candidates that will benefit. Last year, I posted 140 different stock picks and my success rate was 75%.
I hope you'll take advantage of this special offer.
On this week's edition of StockCharts TV's The MEM Edge, I review where the strength in the markets is and ways that you can capitalize on it. I also share stocks and ETFs that are breaking out of bases, as well as turnarounds that are taking place.
You can also watch me and Erin Swenlin on Chartwise Womenas we wrap up Women's History Month with a special panel featuring LBRGroup's Linda Raschke and Simpler Trading's Danielle Shay! We discuss our respective histories with market analysis, including how we got started and what our passions are, and end things with a bit of advice for those looking to get into trading. Don't miss this special extended StockCharts TV event!
Mary Ellen McGonagle, MEM Investment Research