I consider myself lucky to have begun my career before the catastrophe of the dot-com crash. I got to see up close what a boom and bust looks like.
As a 20-year-old on the Philadelphia trading floor, it was truly shocking. Friends, family and colleagues were getting suckered into companies that had no real business being publicly traded, let alone recommended by financial advisors.
In the beginning they laughed at me when I said it was all a pipe dream. But in a few short months, I witnessed fellow traders with much more experience than me break down in tears. Some never recovered.
It was hard to watch, and I was fortunate to not get caught up in the frenzy. I was able to sidestep the wreckage and come away in the black.
Most importantly, that experience has helped me spot and profit from many corrections since. Currently, I see several red flags that suggest the market could be in line for a correction this year.
Today, I'd like to share the first warning flag that has me concerned.
The No.1 Red Flag
In March 2011, I spotted a problem similar to what we're seeing today. The last time this happened, the market corrected by 14% over the next six months.
You see, the U.S. dollar and the S&P 500 are both on the upswing, something that doesn't usually happen.
Going back to 2005, the S&P 500 typically has had an inverse relationship to the U.S. dollar. It's called a negative correlation. If the dollar is strong, then the S&P 500 tends to be weaker and vice versa.
Well, the dollar has been on a tear lately.
And at the same time, as I'm sure you already know, the S&P 500 is near all-time highs.
Something's gotta give here, and I don't think it will be the dollar. As the Federal Reserve raises rates, it's likely the dollar will get even stronger in the short-term. And as we saw from my 2011 call, that could be bad news for the stock market.
This is especially true when you consider that we're now in a particularly dangerous period. That's because this isn't the only red flag I'm seeing in the market right now.
Now, it's one thing for me to tell you that I think the market is poised to drop. But it's another thing to actually set you up to profit from it.
That's where my premium newsletter, Profit Amplifier, comes in. I've been telling readers for months how to make money from negative moves in an overvalued market. And so far, our track record has been pretty solid. Recent winners include:
-- A bet against Keurig Green Mountain (Nasdaq: GMCR): 33.9% in 56 days
-- A bet against Yelp (NYSE: YELP): 40.4% in 29 days
-- A bet against PowerShares DB US Dollar ETF (NYSE: UUP): 22.4% in 58 days
-- A bet against Wynn Resorts (Nasdaq: WYNN): 30.4% in 9 Days
-- A bet against iShares 20+ Yr Treasury Bond ETF (NYSE: TLT): 49.5% in 15 Days
-- A bet against Dillard's (NYSE: DDS): 40.5% in 7 Days
Needless to say, the market could be on shaky footing in the coming months. It's time for investors to tread carefully. When a correction or even a crash occurs, many investors will be left in the dust, while only a select few savvy traders will come out ahead.
I plan on using my proprietary earnings algorithm to spot overvalued stocks and leverage our gains from their bearish moves -- just like we've done in the examples above.
In the coming weeks, I will be outlining other red flags I've spotted in the market and further detailing how I plan to profit.
But a market correction could happen tomorrow and I don't want you waiting around me. So I put together a video explaining my argument of why certain stocks could see 10%-to-30% drop in the coming days, weeks and months. What's more, I'll tell you how you can protect yourself -- and even profit -- from a correction, much like I did during the dot-com bubble, 2008 and more recently, when Russia entered a bear market.
To watch the video, simply click the play button below.