How to Avoid the Next Market Crash – and Profit Instead

We could easily have a 50% market crash…

That’s not a prediction, mind you. It’s just an uncomfortable truth. Stocks go up. Stocks go down.  I don’t have the power to stop them. No one does. Yet you rarely hear anyone on financial TV talking about outlier events like a global mega-crash. No one wants to spook the herd—not even the most important financial smarty-pants out there…

Take Wharton finance professor Jeremy Siegel’s outlandish “predictions” for this year’s market action. Siegel told the folks at CNBC late last year that the market will probably end 2016 with a gain of 8% – 10%.

“Where’s that number coming from?” says our newest trend following firebrand Michael Covel. “He literally pulled that number out of his hat. We know he’s just making that up. As far as I know, Siegel’s always bullish. Meaning he will never tell you to sell stocks.”

But even Siegel is spooked after a historically bad performance in January. We’re just six weeks into the year—yet Siegel is already walking back his bullish prognosis. Turmoil in the markets will probably continue, he told CNBC yesterday morning, “I was far too bullish last December.”

Better late than never…

Still, it’s pretty clear that even some of the smartest investors don’t know when to pack up their chips and leave the table. In the crazy game we call trading, you got to know when to hold ‘em, know when to fold ‘em. Know when to walk away. And know when to run.

Not a Kenny Rogers fan? Too bad. Even The Gambler himself has important trading wisdom to impart today.

With the market cratering this year, there are plenty of bag holders out there. These poor souls are stuck hanging onto slumping stocks, resigned to the idea that they have to buy and hold—and wait out bearish markets.

But Michael Covel has spent his entire career trying to convince everyone otherwise. You see, Covel is a trend follower. He rides winning stocks until they buck him off—and pockets the profits.

And he has just developed a brand-new proprietary profit system. (You can see his system in action here.)

“Using a mathematical formula, my system can tell when the uptrend may be turning into a downtrend,” Covel explains. “So it triggers a sell signal just at the right time.”

Covel’s mantra is simple: trend followers don’t worry about the “why.” They just react to what’s happening in the market.

Let’s check out a real-world example of this strategy in action—and how it ignores all the noise and focuses solely on the trends that can make you money…

Right now, the CEO of Credit Suisse thinks you should buy bank stocks. In fact, there are a lot of analysts saying now is a good time to buy financials. Michael notes that Barron’s just published an article saying that shares of Citi, JPMorgan, BofA, and Wells Fargo could jump 20%.

Should you get onboard?

“The thing is… my system, over the last month, has triggered a sell signal in ALL of these three stocks,” Covel explains. “And that means stay the hell away from them. It means the trend in financials is definitely down. And betting against the trend is one of the quickest ways to go broke.”

Thing is, nobody knows when the trend will change. Which is why the best way to deal with the volatility, and uncertainty, according to Covel’s strategy, is to follow the trend.

“And, according to my proprietary profit system, the trend for bank stocks turned lower in January 4th,” Covel continues. “That’s when my computer system triggered a sell signal, as you can see in the chart below.”

How My System

Here’s some good news. You can actually profit from this downtrend. In fact, there’s an ETF out there that specifically allows you to bet on a downtrend in financials.

The ProShares Short Financials ETF (NYSE:SEF) is designed to return the inverse of the daily performance of the Dow Jones U.S. Financials Index.

“When the Dow Jones US Financials Index drops 1%, SEF goes up 1%. It’s a good way to bet against bank stocks,” Covel says. “In case you’re wondering… Yes, my system did trigger a buy signal on SEF recently.”

Check out the chart:

Pro Shares

SEF is rocketing to new 52-week highs this week. Let’s follow Covel into this trade today…

Sincerely,

Greg Guenthner
for The Daily Reckoning

P.S: Michael Covel’s previous books have been called “gold to any smart investor” and a “must-read bible for a new generation of traders.” No wonder they’ve sold hundreds of thousands of copy. Here’s the good news… Covel has just published a brand-new book. But it’s NOT available in any bookstore (including Amazon). And it’s definitely not online at any price…

That’s because this new 200-page book explains in detail the concept behind his proprietary system for making money in ANY market — up, down or sideways. For that reason, Michael doesn’t want this to be available at bookstores. But we’ve got a hold of a limited number of copies for our readers. Click here to learn how you can claim your FREE copy. We’ll even pay for shipping and handling.

P.P.S. Want to know what to do when the market tanks? Sign up for my Rude Awakening e-letter, for FREE, right here. Stop missing out.  Click here now to sign up for FREE.