How Louis is trading oil for short-term gains … gold’s recent pop, and the indicators that predicted it … Eric Fry’s latest megatrend … Louis’ look-ahead to rates in 2024

 

It’s a trader’s market. So, where are the opportunities?

According to legendary investor Louis Navellier, the answer is a no-brainer…

Energy.

From Friday’s Flash Alert Podcast in Growth Investor:

Crude oil prices are above $90 a barrel…

Energy stocks are going to have spectacular results in the fourth, first, and second quarter. They’re going to have very easy year-over-year comparisons.

For the third quarter, the absolute earnings may not be that spectacular, but they’re going to be beating analysts’ estimates….

We have a big energy bet, and we expect to profit from the chaos in the world.

Though the price of West Texas Intermediate Crude has pulled back slightly as I write Monday (into the upper $80s), energy stocks have been climbing all summer. To illustrate, below we look at XLE, the Energy Select Sector SPDR ETF.

As you can see, since June, it’s up 19% while the S&P is barely up 1%.

Meanwhile, if we look at broad investor behavior, we see anticipation of higher oil prices on the way.

From Bloomberg last Friday:

The United States Oil Fund ETF pulled in more than $200 million as traders bet that crude futures will continue their recent rally.

The inflow was the largest addition since August 2020 for the oil market’s second-largest ETF, which has assets of $1.7 billion.

Now, if you follow the oil markets, you know that volatility is the name of the game in this sector. If a headline comes out that suggests a slowing global economy, oil prices crater. If there’s news of escalation of violence in the Mideast (suggestive of disruptions to oil production), prices soar.

If that type of volatility doesn’t have you enthused about an oil trade that extends all the way into Q2 of next year, I’ll quickly point you toward Louis’ new trading service, AI Advantage.

It’s a short-term trading system that combines the heart of Louis’ multi-decade market approach – fundamentally superior stocks – with artificial intelligence. The cutting-edge AI system predicts where these fundamentally strong stocks will be trading 21 trading days into the future with 82% accuracy.

You can learn more about its methodology here. But whether you’re looking for a short-term trade over just a handful of weeks, or a medium-term trade of a few months, oil is on the move.

Meanwhile, gold’s price action is illustrating why maintaining a variety of asset classes in your portfolio is wise

If you haven’t noticed, gold is up more than 8% since the first week of the month. It’s now less than 5% below its all-time-high.

It’s also behaved as you would expect during times of global chaos – it’s zigged while the market has zagged, as you can see below.

Here’s gold and the S&P over the last two weeks.

This is a great illustration of why owning different asset classes can help hedge and diversify your portfolio.

But you didn’t have to be a buy-and-hold investor to take advantage of gold’s surge. Regular Digest readers know we’ve been urging investors to sharpen their trading skills. So, had you not owned gold, were there clues suggesting it was time to gamble on a short-term, opportunistic trade?

Absolutely.

Below, we look at gold’s chart over the last three months. We’ve added two technical indicators that we’ve been featuring recently in the Digest – the Relative Strength Index (RSI) and the MACD (Moving Average Convergence/Divergence).

As we’ve explained, when a stock’s RSI is climbing above 30 (which marks “oversold”) it suggests an increased chance of bullishness; and when the MACD crosses north of its signal line, it also indicates an elevated likelihood of gains.

Here’s what happened after both signals triggered earlier this month…

If you’re looking for “oversold” trade ideas, there are all sorts of free screeners available that show oversold stocks.

For example, here’s a screenshot from FinScreener.org providing a handful of the current stocks that fit the bill, their RSI level, MACD, PE ratio, and volume.

Just be careful – not all oversold stocks are good mean-reversion trades.

Meanwhile, if you want to know one of tomorrow’s most influential trends, our macro investor Eric Fry has you covered

After months of dealing with regulatory hurdles, Microsoft has finally completed its $69 billion acquisition of game developer Activision Blizzard (ATVI). This cements Microsoft as a gaming leader and ensures a steady stream of revenues for years to come.

Older Digest readers may not recognize this, but the videogame business is enormous. For context, here’s GamerHub:

According to a report by SuperData Research, the global gaming market was valued at $159.3 billion in 2020. This includes revenue from console games, PC games, mobile games, and esports.

To put that in perspective, the music industry was valued at $19.1 billion in 2020, while the movie industry was valued at $41.7 billion.

That means the gaming industry is making more than three times as much money as the music industry and almost four times as much as the movie industry.

Keep in mind, this statistic in three years old. Gaming is even bigger today.

Now, what’s the latest trend within the video game sector?

3D animation.

From 300 Mind (a top gaming blog):

3D animation will advance towards becoming even more realistic than it is today. And with it, it will take the gaming industry to a great extent.

So, if you’re planning to use 3D game animation, then do it without a doubt because it is and will remain relevant and competitive in this rapidly evolving gaming industry.

But video games (and their enormous revenues) are just the beginning for 3D’s coming growth. Here’s Eric:

Today, most of our screen-based interactions – from images we post on Facebook, to Zoom calls, to streaming videos, to computer games, to dating apps – operate in 2D.

But 3D is coming… quickly. That means programmers will be spending years converting our 2D paradigm into a 3D metaverse, while also creating entirely new 3D products and solutions.

3D is the obvious “next-gen” progression from 2D, and computer games are already leading the way. Many gamers now don virtual reality headsets to play certain of their favorite computer games.

But the identical technology that brings these games to life has direct application to many other businesses use. Real-estate agents could conduct “virtual showings.” Architects could “walk around” their designs pre-construction. Advertisers could enable customers to examine their products up close, from every angle.

The list goes on and on… engineering, movie production, driver training for teenagers, flight training for civilian pilots, or tutorials for constructing complex or confusing furniture designs (think Ikea).

Eric recently recommended a 3D leader in his Investment Report service. I can’t reveal it out of respect for paying subscribers, but there are a handful of leading 3D software stocks to investigate – Meta (META), Immersion (IMMR), and Vuzix (VUZI) are a good start.

To learn more about Eric’s favorite pick as an Investment Report subscriber, click here. In any case, it’s time to look at 3D leaders.

Finally, let’s circle back to Louis for his thoughts on the single greatest influencer of trading conditions over the next year…

Here in the Digest, we have been focusing on a trader’s approach to today’s market. But the Fed’s actions will dictate which areas of the market we want to trade. Whether they hold rates high or cut them next year will quite literally make or break certain opportunities.

With that said, let’s jump back to Louis’ Growth Investor podcast from Friday for his take:

The shocking statement [last Friday] came from Atlanta Fed President Raphael Bostic, who basically said the Fed won’t be cutting rates until late 2024…

If the Fed is smart, they’re going to be cutting rates next year. And they ought to because they’re killing the economy.

The question is how many industries they need to kill.

That is a critical question. But remember, for every dying industry, there’s an opposite, thriving trade.

For example, as the Fed has waged war on inflation, crushing portfolios everywhere, the inverse bond ETF TBT has exploded 146% over the last two years.

It just goes to support the point we make often here in the Digest: There’s always a bull market somewhere. We’ll help you find them no matter what the Fed does.

Have a good evening,

Jeff Remsburg