(Please enjoy this updated version of my weekly commentary published December 20^th, 2021 from the POWR Growth newsletter).

Last week, the S&P 500 ended in consolidation while the Russell 2000 was trending lower. After a brief spurt higher following the FOMC, the S&P 500 also joined the bear party and moved lower. Currently, it’s about 1.5% above its lows from early December, while the Russell 2000 tested these levels today.

The trigger for today’s move lower was Senator Joe Manchin of West Virginia saying he is a No on the BBB bill. I do think this slightly lowers growth expectations given the bill’s $2 trillion size and consensus that it would be passed.

The Next Move

In terms of the market’s next move, my thesis is that we are currently in a range between 4,740 and 4,500 in the S&P 500 and are now at the lower end of this range. These types of ranges tend to have multiple breakouts and breakdowns that fail, so it’s not an environment for making big gains or holding stocks with losses.

As I’ve noted in past commentaries, we’re also in the window for maximum bullish seasonality. The market is also reaching oversold levels by many technical measures indicating a bounce, and today’s low is providing us with a nice risk-reward.

Therefore, I wouldn’t be surprised if we start moving higher into Christmas.

Adjustments to Our Strategy

In terms of our strategy, I think an effective summation would be that we believe in this bull market and are staying fully invested as this is the most prudent thing to do. At times, we adjust allocations and rotate into various sectors based on our assessment of the market.

This includes during drawdowns. Often, the worst thing to do is wholeheartedly change strategies during extreme periods of market behavior, as we have now.

Think about the investor who dumps all their stocks and buys bonds just as the market is bottoming. Turning one recoverable mistake into two unrecoverable mistakes.

So, this isn’t the time to make radical changes in strategy. However, one adjustment is to be more aggressive in terms of cutting losers and taking profits. We are clearly not in a trending market environment like we had in October and early November.

Given this is a trending environment, this change in strategy is appropriate.

Trending environments can certainly be frustrating and require patience. They can also go on for longer than expected. But, one silver lining is that it gives us clues about accumulation and distribution, helping us increase exposure to the best stocks and sectors.

In fact, we have been doing that, and it has helped us tread water the last few weeks, while growth and small-caps have been trending lower. Examples are semiconductors with 2 of our stocks sporting 15% gains and positive today despite the market sell-off.

Two more, we added due to strong earnings reports and bullish price action in a weak tape. Both are also up about 15% over the last couple of weeks.

Ideally, this environment will give us the opportunity to identify more stocks that can also outperform.

What To Do Next?

The POWR Growth portfolio was launched in early April and is off to a fantastic start.

What is the secret to success?

The portfolio gets most of its fresh picks from the Top 10 Growth Stocks strategy which has stellar +46.42% annual returns.

If you would like to see the current portfolio of growth stocks, and be alerted to our next timely trades, then consider starting a 30 day trial by clicking the link below.

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All the Best!

Jaimini Desai
Chief Growth Strategist, StockNews
Editor, POWR Growth Newsletter

SPY shares were trading at $458.60 per share on Tuesday morning, up $3.62 (+0.80%). Year-to-date, SPY has gained 23.86%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles. More...

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