Buying the 'V-Shaped Recovery' Could Juice Your Returns

If you bought stocks on August 12, you caught the market's best week all year... The S&P 500 Index has soared about 18% year to date. But at the start of the month, a mini panic sent the benchmark index reeling. [Chaikin PowerFeed]( Editor's note: Stocks recently suffered a massive bout of volatility. But as regular readers know, [the Power Gauge is "bullish" again on the S&P 500 Index](. And Chaikin Analytics founder Marc Chaikin still expects more gains to come by the end of the year. Meanwhile, our friend Sean Michael Cummings noticed a rare signal amid the recent volatility and the rally that followed... Regular readers will recognize Sean. He's an analyst over at our corporate affiliate Stansberry Research. And the essay we're sharing from him today published in Stansberry's free DailyWealth e-letter on Monday. In it, Sean explains how one signal amid the recent market action points to more gains ahead for stocks... Buying the 'V-Shaped Recovery' Could Juice Your Returns By Sean Michael Cummings, analyst, Stansberry Research If you bought stocks on August 12, you caught the market's best week all year... The S&P 500 Index has soared about 18% year to date. But at the start of the month, a mini panic sent the benchmark index reeling. Stocks fell 8.5% from mid-July to August 5. The market snapped back quickly, though... And the index regained most of those losses over the next two weeks. That included a record-breaking 3.9% surge the week of August 12. The low offered a great opportunity to "buy the dip." In fact, the downturn ended in the dip-buyer's Holy Grail... the "V-shaped recovery." A V-shaped recovery is exactly what it sounds like. The market takes a plunge – and bounces back just as quickly, tracing a letter "V" with its price action. Dip-buyers were rewarded with a classic V-shaped recovery this month. But history shows folks who buy after the dip will reap significant benefits, too. Let me explain... Recommended Links: [Here's What You Missed Last Night]( The man who called the 2020 and 2022 crashes explained why an upcoming, surprising twist to the Harris-Trump election could double your money 10 different times – as he showed during 2020's election year. Plus, he shared his terrifying blueprint of exactly where stocks could go next... and why it could be "lights out" for one of the candidates. [Click here to learn more](. [Read This BEFORE Nvidia's Earnings Release Today...]( Nvidia's stock is up 30% in anticipation of its earnings report this afternoon. But there's ONE thing CEO Jensen Huang likely won't mention. It has to do with three under-the-radar companies with exposure to Nvidia's new Blackwell chip technology... whose stock could skyrocket in the months ahead. [See this before today's earnings report](. On August 5, stocks suffered their worst day since September 2022. But if you let the volatility shake you out of your long positions, you missed the best-returning week so far this year. What's more, this wasn't a fluke. The market's best-returning days often happen when volatility is at its highest. One way to see this is by tracking the 25 best and worst days for stocks going back to 1988. You'll notice that the best days (in green) and worst days (in red) tend to cluster together. Take a look... This chart shows the crux of the "dip-buying" strategy. When stocks fall fast, they tend to spring back just as rapidly. This month was no exception. Stocks fell 8.5% in three weeks... and surged 8% in the two weeks that followed. But here's the kicker – the recent recovery triggered another rare bullish signal for stocks. It included eight consecutive days of higher closing prices. This is a very rare signal, even in the history of V-shaped recoveries. I wanted to know what similar rallies meant for stocks going forward. So I found every instance of eight-day win streaks in the S&P 500 going back to 1928... It's rare for stocks to rise eight days in a row. We've seen this action on fewer than 1% of days in the past 96 years. But as it turned out, this signal led to outperformance in the months that followed. Take a look... Stocks have returned about 6% a year since 1928. But buying after an eight-day win streak was an even better strategy. Stocks returned about 11% in a typical year after these moves – significantly better than a typical buy-and-hold strategy. What's more, this win-streak signal has a strong bullish track record. Stocks were up 74% of the time in the year following the signal. And the maximum return on this signal was 51%, compared to a max drawdown of 30%. In other words, the risk-to-reward setup for these win streaks is on the buyers' side, too. So if you missed the chance to buy the dip, don't lose heart. The bull market is still intact. If you're not long stocks already, I urge you to get on board... because history shows we should expect more outperformance from here. Good investing, Sean Michael Cummings --------------------------------------------------------------- Editor's note: In DailyWealth, Sean and his colleagues aim to share strategies to help you safely – and steadily – build a lifetime of wealth. They also share insights like this one today about the day-to-day setups they see forming in the markets. Like the Chaikin PowerFeed, DailyWealth publishes in the morning every weekday the markets are open. And it's completely free to read. You can sign up for it [right here](. Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 +0.03% 10 16 4 S&P 500 +0.12% 150 278 62 Nasdaq +0.3% 22 62 15 Small Caps -0.76% 611 975 341 Bonds -0.17% — According to the Chaikin Power Bar, Large Cap stocks and Small Cap stocks are Bullish. Major indexes are mixed. * * * * Sector Tracker Sector movement over the last 5 days Real Estate +3.08% Materials +2.74% Financial +2.07% Energy +1.88% Staples +1.77% Industrials +1.44% Health Care +0.77% Utilities +0.72% Discretionary +0.38% Communication +0.37% Information Technology -0.79% * * * * Industry Focus Telecom Services 14 18 6 Over the past 6 months, the Telecom subsector (XTL) has outperformed the S&P 500 by +16.21%. Its Power Bar ratio, which measures future potential, is Strong, with more Bullish than Bearish stocks. It is currently ranked #10 of 21 subsectors and has moved down 1 slot over the past week. Top Stocks [rating] ANET Arista Networks, Inc [rating] FFIV F5, Inc. [rating] NTGR NETGEAR, Inc. * * * * Top Movers Gainers [rating] RMD +7.26% [rating] PODD +6.58% [rating] RCL +4.3% [rating] MPWR +3.64% [rating] NCLH +3.61% Losers [rating] WBA -8.96% [rating] PARA -7.15% [rating] MLM -4.58% [rating] VMC -4.1% [rating] STX -3.87% * * * * Earnings Report Reporting Today Rating Before Open After Close NVDA BBWI, SJM CRM CRWD No earnings reporting today. Earnings Surprises [rating] PVH PVH Corp. Q2 $3.01 Beat by $0.73 [rating] AMBA Ambarella, Inc. Q2 $-0.13 Beat by $0.06 [rating] JWN Nordstrom, Inc. Q2 $0.96 Beat by $0.23 * * * * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, [click here](. You’re receiving this e-mail at {EMAIL}. For questions about your account or to speak with customer service, call [+1 (877) 697-6783 (U.S.)](tel:18776976783), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. Please note: The law prohibits us from giving personalized investment advice. © 2024 Chaikin Analytics, LLC. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Chaikin Analytics, LLC. 201 King Of Prussia Rd., Suite 650, Radnor, PA 19087. [www.chaikinanalytics.com.]( Any brokers mentioned constitute a partial list of available brokers and is for your information only. Chaikin Analytics, LLC, does not recommend or endorse any brokers, dealers, or investment advisors. Chaikin Analytics forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Chaikin Analytics, LLC (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.