Month: August 2020

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Liquidity, FOMO, weak U.S. Dollar and Treasuries, career risk for money managers continue to drive stock prices higher. The large-cap indexes, SPY and QQQ have gone parabolic. In the meantime, the small-cap Russell 2000 has consolidated in a tight range and it looks primed for a breakout.

This bull market continues to correct the excesses through sector rotation – when one sector pulls back, another step up and leads higher. Many of the stocks that sky-rocketed during the COVID crises started to pull back while the ones that were hurt the most are perking up – restaurants, casinos, cruise ships, retailers, etc. The likely reasons behind that rotation – The FDA approved a 15-minute COVID test that costs $5 and several vaccines are in their trial stage and it is very likely they get approved.

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The charts in this video are powered by MarketSmith

The S&P 500 hit new all-time highs and it is now up 5% for the year. The Nasdaq 100 accelerated lifted by the big five tech stocks that now account for 50% of it – AAPL, AMZN, GOOGL, MSFT, FB. 

Stock splits seem to be moving prices again. A Deja Vu from the late 90s. In theory, a stock split should have zero impact on a price. In practice, it has done crazy miracles. Apple announced a 4 to 1 stock split, then the company hit a $2 Trillion valuation and kept going. Tesla went up almost 50% after announcing a 5 to 1 split.

In the meantime, the small-cap ETF Russell 2000 tested its 20-day moving average and market breadth hasn’t looked this bad in a while. Will it matter this time? In a strong bull market, such divergences can be resolved through sector rotation. The small-caps can bounce next week and everything will be forgotten. We saw it numerous times in the past few months. Just when a sector was looking ready to roll over, it woke up and jumped higher. Software and biotech are the most recent examples. 

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Check out my free weekly email. to get an idea of the content I share with members.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.

The most followed indexes – QQQ, SPY, and IWM are above their 10, 20, and 50-day moving averages; In other words, in a clear uptrend. Six stocks account for more than 50% of the Nasdaq 100 and 23% of the S&P 500  – AAPL, FB, AMZN, GOOGL, MSFT, TSLA. All of them are looking constructively. 

In the meantime, many momentum leaders have been under pressure. Biotech is among the worst-performing sectors for the past month. XBI is looking vulnerable to further downside pressure. If XBI loses 107.50, it might test 110. Most software stocks didn’t have a great earnings season. We saw quite a few selloffs and the usual bounces have not been very convincing: AYX, CRWD, BILL, TWLO, etc. There are more bearish setups but most of those setups have been failing and reversing higher.

Try my new subscription service which includes a private Twitter feed with option and stock ideas, emails with concise market commentary and actionable swing, intraday, and position trade ideas, the Momentum 50 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed option and stock ideas shared on my private Twitter stream and emails for subscribers.

Check out my free weekly email. to get an idea of the content I share with members.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.