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[3 Can’t-Miss Charts] Hot Coffee Can’t Jolt This Cold Stock

The Dow’s drop didn’t produce any panic on Wall Street yesterday.

But the 200-point skid still made history.

Yesterday marked the Dow Jones Industrial Average’s eighth straight close in the red. The Dow has only posted 30 eight-day losing streaks in its history, per market stat man Ryan Detrick. It hasn’t hit nine losses in a row since 1978.

Those are some crazy numbers — especially since we’re in a bull market!

Looking for stocks that can lead you to gains despite the weakness we’re seeing in the blue chips?

Let’s turn to the charts for answers…

1. Would you cry over spilled coffee?

Starbucks Corp. (NASDAQ:SBUX) shares have seen better days.

Investors sparked a mini-panic earlier this week when Starbucks announced it will close 150 locations due to poor sales. The stock fell as much as 10% on Wednesday. The carnage continued Thursday, dropping the sock to prices not seen since late 2016.

starbucks

“The coffee giant shocked Wall Street in several ways, all of which call into question the fundamental health of the company,” The Street reports. “Just days after Howard Schultz announced he will step out of the company (perhaps to run for President) later this month and into a chairman emeritus position, the news also calls into question the direction of Starbucks moving forward.”

Growth will continue to be a major issue for Starbucks moving forward. The company reported global same-store sales growth of just 1% this quarter. That’s clearly not going to cut it for investors. If the company can’t get costs under control and prove it can compete in our coffee-saturated economy, shares could continue to suffer.

2. Nothing can stop small-caps

While the mega-cap Dow components endured another tough trading week, small-cap stocks continue to build on their May breakout to new all-time highs.

Smaller stocks began separating themselves from the pack more than eight weeks ago as they pushed into positive territory for the year. These tiny troopers haven’t looked back since.

The Russell 2000 is up more than 10% year-to-date. Meanwhile, the Dow Jones Industrial Average has fallen into negative territory on the year.

Small Stocks

The media’s obsession with the ongoing trade dispute deserves some credit for holding back the major averages and giving small-caps the edge in this market. Of course, there are other forces in play that are giving smaller stocks an advantage right now.

Just check out the huge rally in the U.S. dollar…

3. Can the buck break out again?

The US Dollar index exploded to new 2018 highs in May following an impressive month-long rally.

After a quick pullback, the buck is on fire once again. It’s now targeting its early November highs as the trading week comes to an end.

US Dollar

As I hinted earlier, a strong dollar is good for smaller stocks, since most of their business is usually domestic and conducted in dollars. Conversely, multi-national conglomerates will take a hit if the dollar continues to strengthen. Add in some tax breaks and you have a formula for small-cap outperformance.

Trade war drama and a streaking dollar are working against the Dow and helping push small stocks to new highs. It’s that simple.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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