Ivanhoff Capital

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Two of the main characteristics of a bull market are corrections through sector rotation and dips in market leaders being bought aggressively. We saw both in the past week or so. As AI-related stocks took a break, software and solar broke out. Then, the semiconductor ETF, SMH, tested its 20-day EMA, where it quickly found support and returned to new all-time highs despite weakness in its largest holding, NVDA. 

This was the first proper pullback after the rally began on March 31. Small caps IWM tested its previous highs near 271 and bounced. AI data center stock NBIS, semis like INTC, AMD, ARM, and QCOM had a 20% or so pullback above their rising 20EMA, which was welcomed as a buying opportunity. In the meantime, quantum computing stocks received a cash injection from the government and woke up – RGTI, INFQ, QBTS, IONQ, etc. Space-related stocks accelerated their ascent in anticipation of SpaceX IPO – RKLB, RDW, LUNR, VOYG, VELO, etc. 

There is currently a lot more fear of missing out and greed than fear of losing in the tape. The market still does not care about elevated inflation, high oil prices, and galloping interest rates. This is what bull markets do. They climb a constant wall of worry. 

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My subscription service includes a Discord room and private X feed with options and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

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Disclaimer: Everything I share is for educational and informational purposes only, and it should not be considered financial advice. Read my full disclaimer here.

MarketSurge powers the charts in this video. They are currently running a great special.

Last week, we discussed that QQQ and SMH are more than 10 ATR (average true range) above their 50dma, which is very unusual. When an index or a stock becomes very extended, they tend to correct either through price or time. A price correction is a pullback. A time correction is a sideways action, while the major moving averages catch up with the price. It seems we are seeing more of the latter lately. 

Well-diversified indexes, such as the S&P 500, can often continue to rise or remain sideways while the actual correction occurs beneath the surface through sector rotation. We saw a glimpse of it last week. When semis pulled back, software showed relative strength. Energy rose while consumer discretionary declined. Solar stocks broke out while metals and biotech went lower. 

Interest rates are near new multi-year highs, and the latest inflation readings came well above estimates. The market doesn’t seem too worried about it yet. The market is a voting machine in the short-term, driven by fear, hype, and sentiment. The market is a weighing machine in the long-term, driven by value and growth. The rates and inflation matter. They are at the basis of everything, so eventually the market will care. The current behavior might be due to the new Fed chair, who is expected to be complacent and lenient. When you pour alcohol on fire, the rational behavior of the market is to actually buy certain stocks and asset classes because they are the best protection of purchasing power in the midst of rising inflation.

Sign up for my premium service to read the rest of my market view and ideas.

My subscription service includes a Discord room and private X feed with options and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

Check out my free weekly email to get an idea of the content I share with members. See how my ideas/alerts performed.

You can find my trading books on Amazon here.

Disclaimer: Everything I share is for educational and informational purposes only, and it should not be considered financial advice. Read my full disclaimer here.

INTC joined the Momentum 40 list 9 weeks ago, on March 13th, when it was still working on its base. The stock just exited the list after a 138% again. The exit might be too early. Its slightly out-of-the-money $50 May-15 Calls were trading around $3 at the time and ended the period near $59, reaching $80 on May 11th. I didn’t buy the Calls, but it is good to be aware of how much the options of strong trending stocks are capable of.
Every week, the Momentum 40 list highlights 40 of the current market leaders – typically high-growth stocks with high relative strength and powerful technical setups. The Momentum 40 list is an excellent idea generation tool for long-term trend-followers, position traders, and short-term swing traders.
I’ve been posting the Momentum 40 list since 2010. Every Friday, I would send the changes an hour or so before the market closes – which stocks are leaving and which are joining. It’s basically a trend-following system that requires action once per week. The losers are cut as quickly as possible, and the winners stay as long as needed.

My subscription service includes a Discord room and private X feed with options and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

Check out my free weekly email to get an idea of the content I share with members. See how my ideas/alerts performed.

You can find my trading books on Amazon here.

Disclaimer: Everything I share is for educational and informational purposes only, and it should not be considered financial advice. Read my full disclaimer here.