You Gained 26% in 2 Days — Here’s What’s Next

Last week, I told you the S&P 500 Index was in a rare setup … and ready for a fall.

It closed 355 points above its 200-day moving average. And it’s only closed that far above its average one other time in history.

When that happened, the market fell 10.2% over the next two weeks.

So far, the market has dropped almost 2% this time.

That’s why I gave you four ways to hedge your bets last week. And each trade made gains over that period (despite a recent rebound).

(Source: Bloomberg)

In fact, the ProShares Ultra VIX Short-Term Futures ETF (NYSE: UVXY) was nearly 26% higher as of Monday’s close as fears of the coronavirus outbreak in China dominated headlines.

If you took advantage of these trades, congratulations! You hedged yourself against larger losses when the market fell.

But we’re not out of the woods yet.

The coronavirus is not yet under control, and markets hate uncertainty. So today, I want to lay out what to expect next — and how you can prepare.

The Market Fears Disruptions to Everyday Life

The SARS virus in the early 2000s killed 800 people globally. The U.S. stock market fell 12% in the four months after SARS broke out in China.

To put that in perspective, flu season in the U.S. kills 12,000 to 60,000 people each year.

But the market doesn’t react to things it considers common … normal. Instead, markets worry about Black Swan events … unexpected incidents.

In the case of sudden outbreaks, the market worries about disruptions to travel, business activity and everyday life. These risks — and the uncertainty around them — is reflected in stock prices.

The longer people stay away from work … the longer airlines shut down travel … the longer resorts and casinos are closed…

The longer uncertainty remains. But as we saw over the last week, there are ways to prepare your portfolio.

We Can Learn From the SARS Outbreak

We can’t know how long it will take to bring the effects of this virus under control. China now has more cases of this coronavirus than it did of SARS.

The first reported case of SARS in China was November 16, 2002. Just less than four months later, the U.S. stock market bottomed on March 11, 2003. (To be clear, it took more months to get the virus under control.)

I’m optimistic there will be a faster resolution this time. With SARS, China didn’t advise the World Health Organization of the outbreak for 86 days. This time, only 23 days passed.

But understand that the stock market isn’t in the clear just because it bounced back after its drop. Markets hate uncertainty.

So it’s a smart move to protect yourself in the near term.

If you missed my article from last week, there’s still time to get into the four trades I listed earlier.

All you need to do is buy shares as soon as possible, and then make an alert to reassess the position one
week later. So if you invest on Friday, January 31, you’d revisit it on Friday, February 7.

If the trade is moving in the right direction, continue to hold. Sell the day it closes lower.

And there’s one more thing you can do…

A Special Announcement

My colleague Jeff Yastine is going to tell you about an incredible investment strategy next week during a special live presentation.

This previously-unreleased investment strategy can boost your profits by 5 times, 10 times or even 27 times better than your normal return. And that’s without trading options.

Jeff will reveal all the details next week. Check back later for more info on how you can watch his special presentation for free.

I believe you’ll be happy with what you learn.

This method has made me lots of money over the course of my life. And it can do the same for you.

Good investing,

Brian Christopher

Editor, Profit Line

P.S. Jeff and I just put the finishing touches on our brand-new trading strategy. We call it the Profit Line. It often flashes right before stocks soar. To learn more about our exclusive new strategy, click here.