Ivanhoff Capital

MarketSurge powers the charts in this video.

The SP500 followed through and made new all-time highs last week. The reason is not that the Fed hasn’t increased interest rates in the face of high and rising inflation. It is not that there might be another peace agreement in the Middle East – the last one lasted only a couple of weeks. Almost 90% of the S&P 500 have already reported, and the index is on track to more than 50% year-over-year earnings growth. The question is how much of that is already priced in?

Not everything was roses and rainbows last week. Memory leaders WDC and SNDK absolutely crushed earnings estimates and still sold off harshly, reminding us that the sentiment in some AI areas is still sour. One of the cybersecurity leaders, DDOG, also beat estimates and declined 20%. In all of those cases, the market had already priced in the good news. The true earnings surprises are reflected in the market reaction. CRSR gained 35% and finished near its daily highs. SHOP and TWLO gapped up 20% and finished near their weekly highs. The same with PLTR and TEAM.

The jobs report came well below estimates -23k vs expected 85k. Counterintuitively, this might be good news for the stock market because it reduces the chances of a rate hike later this year. The Fed had a dual mandate – under 2% inflation and full employment. The latter is more important, especially in an election year. Maybe this is why we finally saw metals to wake up. The week was strong for gold, silver, copper, and steel, which benefited from the latest sector rotation. 

From a 10,000-foot view, the indexes just had a high-volume range expansion followed by a few days of sideways consolidation. People are looking for more risk – stocks in highly speculative areas like space, nuclear, solar, AI applications, rare earth metals, etc., are bouncing.

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MarketSurge powers the charts in this video.

Last week brought plenty of action to the tape. First, one of the most prominent highly levered in AI hedge funds was basically liquidated, losing 85% in a month. Then Jim Cramer urged people who bought data center stocks on margin to “sell it all, no matter what”. This message came after most of those stocks were down 50%+ from their recent highs. It is not necessarily bad advice; people should always use some type of stops, but it is a reflection of extreme sentiment, and the market likes to mean-revert every time there’s too much optimism or pessimism. This is probably why we saw a big gap and rally on Thursday. A rip within a downtrend, many would say, but then again, we have seen too many quick V-shaped recoveries to dismiss it easily. We had a similar start to the rally back on March 31st. The difference is that back then, there were quite a few AI stocks that had beautiful, strong setups and were ready to break out. Right now, we have a few software stocks that are looking decent, but they don’t have the same powerful growth story behind them – CRWD, DDOG, SNOW, OKTA, etc. More volatility and choppiness is the more likely scenario in August. 

The silver lining from last week was the reactions to MSFT and AMZN earnings. Both of the crushed earnings estimates, as they usually do. They did it by a huge margin, which means that either the analysts who follow them have no clue what they are doing, or that it is not that hard to manipulate their accounting and come up with almost any number they want. This is not the place to dive deeper into that. What matters to me as an active market participant is the positive reaction. Both MSFT and AMZN gapped up and finished strong. This is a clear shift in sentiment, as up until recently, any report related to AI has been punished with selling.

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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.

Range-bound markets are often mean-reversion environments. We saw it last week again as the previous hit AI stocks bounced. Granted, it was a weak 3-day bounce that was met with more selling. It is hard to see a stronger recovery when the overall sentiment towards AI remains bearish. Just look at the earnings reactions. Intel absolutely crushed estimates, reporting $0.42 vs. $0.22, and still sold off. GOOGL beat estimates and still sold off, as the market is suddenly worried about its first negative cash flow quarter. If the market is looking for a reason to sell, it will find it even in the strongest earnings report.

In the meantime, groups that have been holding relatively well are starting to break down. Software was a good example last week. All of the setups that were looking great and primed for a potential breakout, reversed lower – SNOW, DDOG, NET, CRWD, FLYW, FROG, FIVN, etc.

Healthcare continues to benefit from sector rotation. These are not the types of stocks we want to see lead, because they are a sign of a weak market with low risk appetite. Crude oil is now up three weeks in a row, recovering its entire June decline. Interest rates are also perking up and have also recovered their entire June drop. The US Dollar is at a 52-week high. All of them are a headwind for the overall stock market.

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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.

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.