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How To Trade The Current Bear, And Planning For The Coming Bull

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The bull market, which showed no signs of slowing at the beginning of the year, was stopped in its tracks due to the coronavirus.

They ended their historic 11-year bull run the other week, after closing by more than -20% lower from their all-time highs just 4 weeks earlier.

It was the fastest we’ve ever seen a bull market turn into a bear.

But unlike previous bear markets, which are typically a result of a slowing economy, this one came about due to an unforeseen exogenous event.

Prior to the coronavirus, the U.S. economy was arguably considered the strongest of our lifetime with 50-year low unemployment, 20-year high in household income, near record high consumer confidence, record high corporate profits, and near record low interest rates.

But in an effort to slow/stop the spread of the virus, the travel bans (which affected the flow of people and goods), and the extreme social distancing measures (that have temporarily shuttered businesses and restaurants and kept people at home), have wreaked havoc on our economy.

If it can help save lives, it will all be worth it.

And once the worst is behind us, the economy and stocks are expected to soar as pent-up economic demand is unleashed.

At the moment, however, stocks are reacting to the shutdown.

Yet the pullback we’re seeing is also presenting what some are calling an opportunity of a lifetime.

More . . .


Deadline at Hand: Get Finding #1 Stocks Free

Zacks EVP Kevin Matras expects the economy and stock market to soar as pent-up economic demand is unleashed when the coronavirus outbreak subsides. The key is knowing where to find the stocks that will lead the market when it goes back up.

Today, Kevin is making his hardcover book, Finding #1 Stocks, available to you for free. In it, he shares his best stock-picking secrets, including the exact formulas for strategies that from 2017 through 2019, produced gains of +118.0%, +175.7%, and even +186.7%.

Opportunity ends when inventory is depleted and no later than midnight Saturday, March 21.

Learn more now >>


For Perspective

The top 10 worst bear markets (using the Dow), following the Great Depression, shows that it declines on average by -39.27%. And it lasts on average of 16.9 months.

The biggest bear market in that study was the last one (10/2007-3/2009) during the housing/financial crisis. It was dubbed the Great Recession and the market plunged by -54.43%. But it’s worth noting that our economy and financial system back then were on pretty shaky ground. A starkly different situation than how we entered this one.

This bear market, at its worst, saw the Dow down by -35.98%, the S&P down by -32.29%, and the Nasdaq down by -31.67%.

Not that far from the average. Although, a ways to go to the worst case study.

But the rallies that followed have been even bigger. Within a year after a bear market, stocks surge on average of 44.74%. And go on to gain on average 66.34% by year 3.

Following the Great Recession, the market gained 63.40% in year 1; 100.58% by year 3; 153.58% by year 5; and more than 357% during the entire 11+ year bull market.

And given the strength of the economy going into this, it’s all the more likely that we’ll bounce back big and in record time.

Trading The Bear

Just like stocks need to fall by -20% for a bull market to end and a bear market to begin, they also need to go up by 20% for a bear market to end and a bull market to begin.

For the Dow, it needs to close at or above 23,008.78 for a new bull market to begin.

For the S&P, it’s 2,765.90.

And for the Nasdaq, it’s 8,255.42.

Set yourself an alert. When we close above those levels, the bear market will officially be over and a new bull market will have begun.

But that doesn’t mean you have to wait to start nibbling at your favorite stocks and their discount bargain prices.

Some may go lower. And some may not. But they are likely much lower now than where they were just a few short weeks ago. And much closer to the bottom (if they haven’t already hit it).

That’s true for your favorite stocks. As well as plenty of new stocks that you probably haven’t even heard of yet.

This virus outbreak, and the upheavals it’s brought about for businesses and consumers, will usher in lots of new and exciting opportunities in the inevitable bull market that follows.

So now is the time to start putting your list of dream stocks together. And staying engaged so you can discover what new stocks will lead the market when it goes back up.

Riding The Bull

The big gains that follow a bear market can be quite spectacular.

But since a large part of any bull market recovery typically comes at the very beginning, it’s imperative that you stay in the market.

The trick is to get into the right stocks.

There’s nothing wrong with raising cash by getting out of your laggards and poorest performers – stocks you know you should have gotten out of long before this pullback even happened. Or getting rid of those stocks that will have an uphill battle recovering even when this is over.

But then make sure to replace them with the strongest stocks that will be the new market leaders.

The point is, you want to be building your dream portfolio now, near the bottom.

And by the time the new bull market is underway, you’ll be all in with the strongest stocks, and beating the market.

Proven Profitable Strategies 

Picking the best stocks is a lot easier when you focus on proven, profitable strategies to do it.

And by concentrating on what has proven to work in the past, you’ll have a better idea as to what your probability of success will be now and in the future.

For example, did you know that stocks with a Zacks Rank #1 Strong Buy have beaten the market in 26 of the last 32 years with an average annual return of 24.5% per year? That's nearly 2.5 x the S&P with an annual win ratio of more than 81%.

That includes 2 bear markets and 3 recessions.

Here are a few of my favorite strategies that utilize the Zacks Rank and have regularly crushed the market year after year, in both good times and bad.

New Highs: Studies have shown that stocks making new highs have a tendency of making even higher highs. And this strategy proves it. The alignment of positive price action and strong fundamentals creates all the necessary conditions to see these stocks soar to even greater heights. Over the last 20 years (2000 thru 2019), using a 1-week rebalance, the average annual return has been 47.8% vs. the S&P’s 6.0%, which is nearly 8 x the market.

Filtered Zacks Rank 5: This strategy leverages the Zacks Rank #1 Strong Buys, and adds two time-tested filters to narrow the list of stocks down to five high probability picks each week. Over the last 20 years (2000 thru 2019), using a 1-week rebalance, the average annual return has been 54.1%, which is 9 x the market.  

Small-Cap Growth: Small-caps have historically outperformed the market time and time again. Often these are newer companies in the early part of their growth cycle, which is when they grow the fastest. This strategy combines the aggressive growth of small-caps with our special blend of growth and valuation metrics for explosive returns. Over the last 20 years (2000 thru 2019), using a 1-week rebalance, the average annual return has been 54.7%, beating the market by 9.2 x the returns.

The best part about these strategies (aside from the returns) is that all of the testing and hard work has already been done. There’s no guesswork involved. Just point and click and start getting into better stocks on your very next trade.

Where To Start 

Now is the time to find tomorrow’s winners today. And there's a simple way to add a big performance advantage for your stock-picking success. It's called the Zacks Method for Trading: Home Study Course.

With this fun, interactive online program, you can master the Zacks Rank in your own home and at your own pace. You don’t have to attend a single class or seminar.

Zacks Method for Trading covers the investment ideas I just shared and guides you to better trading step by step, plus so much more.

You'll quickly see how to get the most out of the proven system that has more than doubled the market for over three decades. Discover what kind of trader you are, how to find stocks with the highest probability of success, and how to trade them so you can consistently beat the market no matter where stock prices are headed.

You’ll get the formulas behind our top-performing strategies suited for a variety of different trading styles. The best of these strategies produced gains of +118.0%, +175.7%, and even +186.7% from 2017 through 2019.

Those same strategies outperformed the S&P during the bear market of 2007-2009. And skyrocketed in the subsequent bull market that followed.

The course will also help you create and test your own stock-picking strategies.

Today is the perfect time to get in. I'm giving participants free hardbound copies of my book, Finding #1 Stocks, a $49.95 value. Its 300 pages unfold virtually every trading secret I’ve learned over the last 25 years to beat the market.

Please note: Copies of the book are limited and your opportunity to get one free ends midnight Saturday, March 21, unless we run out of books first. If you're interested, I encourage you to check this out now.

Find out more about Zacks Home Study Course >>

Thanks and good trading,

Zacks Executive VP Kevin Matras is responsible for all our trading and investing services. He developed many of our most powerful market-beating strategies and directs the Zacks Method for Trading: Home Study Course.