The Million Dollar Question

One of my favorite things to do is talk stocks with people. That’s why I travel to investment conferences, give speeches, do interviews with the media and host live chats for my subscribers. I talk with thousands of investors each year, and the overwhelming theme right now is the same one that I have had to address for the last several years.

Care to guess what it is?

It used to be which stocks I think are going to make the most money – and believe me, I still talk about those. But that’s not want investors most want to talk about right now. Instead, it’s their fear of buying stocks with the market at all-time highs. They’re paralyzed. They don’t want to invest at a market top, but they also don’t want to keep watching it hit new highs from the sidelines.

I get it. The higher stocks go, the scarier the headlines seem to get. And those who lived through the bear markets of 2001 and 2008 don’t ever want to suffer losses like that again.

So here we are at the beginning of the strongest time of the year for stocks with the market again making new highs. That means the million dollar question – perhaps literally – is: Will you invest in stocks or sit back waiting and watching?

Just in case my opinion isn’t clear: INVEST!

Look, there will always be reasons to wait, and I’ve heard people say for years now that the market can’t keep making new highs. Well, it can and it has. And sadly those people haven’t made any money. In many cases, we’re talking years of lost profits.

At the same time, I get the concern about new highs and the long bull run having to end. That’s why every investor needs a downside strategy, and that’s true whether you’re investing in a raging bull market or a nasty bear market. Investing at all-time highs is not the same thing as reckless speculation (unless you’re doing something wildly wrong).

Bull markets don’t just end. There are warning signs, and the best place to see those signs is in the charts of stocks, indices, exchange-traded funds and more. I spent this weekend poring over thousands of just such charts, and what I found is even more evidence that you need to be in this market right now.

Must-See Charts

One market truism is that key sectors historically lead rallies, and what I found in looking at all of these charts is that several of them are looking particularly strong as we move into the fourth quarter. I highlighted a few for my NexGen Profit Multiplier readers earlier this week, and I can share a couple of them with you now.

Homebuilders: The Dow Jones U.S. Home Construction Index was one of the first areas to stand out to me after it confirmed a major breakout last week to a decade high, which you can see circled below on the chart of the ETF that tracks it.

When the index is doing well, it means there is a strong underlying housing market, in this case thanks to an improving employment picture and still low interest rates. It’s a sign that the U.S. economy is on solid ground and nowhere near a recession.

Not only are the homebuilders doing well right now, so are the secondary plays that benefit from a strong housing market. Home Depot (HD), Sherwin-Williams (SHW) and little-known TopBuild (BLD) have all hit record highs in recent days.

Transports: The Dow Jones Transportation Index is made up of 20 stocks in the airlines, rail, trucking and package delivery industries. New highs for this basket of stocks, seen below on the iShares Transportation Average ETF (IYT), is another tried and true economic signal.

More people are flying, and there is more demand to move goods via rail and trucks. Strength in the package delivery companies suggests that Americans are spending more money that will ultimately boost businesses.

The evidence on these charts (and others) cannot be denied. Both sectors are critical to the health of the economy, and when they’re firing on all cylinders the market has a good foundation beneath it. That’s the kind of clear chart action that’s worth trusting your investments to.

Fourth-Quarter Fireworks

The fourth quarter began this week with momentum clearly on the side of the bulls, and these final three months of the year tend to be very strong for stocks. Since 1950, the S&P 500 has averaged a gain of nearly 4% in just the fourth quarter, and it has moved higher 79% of the time.

According to LPL Financial, the fourth-quarter outlook is even brighter after a positive September and when the market is already up 10%+ for the year. This has occurred just 12 times since 1950, with the S&P 500 up 11 of those 12 times and showing an average return in the quarter of 5.9%.

If you’ve followed me at all, you know that my whole NexGen system is based on the fundamentals, charts and intangibles (catalysts or themes). The overall market meets that criteria in all three areas right now, and when we combine the bullish historical trends with the strength in those areas, the case for being in this market is absolutely clear. Anyone who sits it out thinking they’ll find the perfect time to get back in is simply leaving money on the table.

I spent the weekend with a good friend and mentor who originally taught me how to read charts many years ago. They are like x-rays that let you see the inside of the market and stocks. We filled up legal pads with notes and chart drawings – who would have thought a NexGen tech guy like me would say such a thing? – and we both agree that the opportunities right now are spectacular.

We’re going at them full speed ahead in NexGen Investor, NexGen Trader and NexGen Profit Multiplier. I have 28 recommendations across all three services, and 23 (82%) are making us money. That’s on top of 17 of 19 (nearly 90%) closed positions that have already made us money. If we weren’t in the market, we’d have much less and possibly even none of that. We’re not crazy speculators but instead methodical investors who have a multidimensional system, stay disciplined and ride the best investments in the most powerful NexGen investment themes playing out today.

If you’re in the market, I congratulate you and hope you’re doing well. If you’re out of the market, it’s not too late. You can still make money – especially right now – and do it smartly and sensibly without taking on too much risk.

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