Month: August 2020

Some of the major themes that are currently defining the price action in the U.S. stock market:

1. Asset inflation and the U.S. Dollar. It is simple, if the U.S. Dollar continues to lose ground, people will attempt to protect of purchasing power of their capital and the price of many assets is likely to go up – stocks, real estate, crypto, precious metals.
2. So many breakdowns in software stocks after they reported earnings illustrating that the COVID-related restrictions and spending cuts are not favorable for all tech stocks. This has been an ongoing theme for a second week in a row.
3. Small caps finally woke up. I don’t know if it is because of the expectations of another stimulus, a working vaccine, or just catching up with the rest of the market. A potential rotation into small-caps will only prolong the current rally in stocks.
4. More strength in solar. Every single earnings report in solar has led to a gap and go this quarter. None of those reports showed spectacular growth. The market is forward-looking and buying in anticipation of a major new clean energy bill.
5. The dips in mega-cap tech stocks like AAPL, FB, AMZN, and GOOGL are still scooped up. Obviously, no company is completely invincible and politicians like to attack the big and successful.
6. We saw some epic melt-ups in highly shorted stocks – CVNA, W, OSTK, CELH, etc.. While fun while they last, typically those tend to happen towards the end of a bullish cycle. They are not the perfect timing indicator but it is something to be aware of.

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So far this earnings season has confirmed what the market has long suspected and priced – Big Tech, e-commerce, network infrastructure, social media, and 5G stocks are thriving in the new COVID world. Now, the big question is, how many of those stellar earnings gaps in stocks that have already run 50% in the past few months are “sell the news” events and how many will just keep going higher? My suspicion is that we will get a little bit of both. Some of the gaps in popular stocks will be initially faded (see SHOP and AMZN after their best earnings ever) but the pullbacks in those same names to their 20 and 50-day moving averages will continue to get bought. Some of the old leaders will continue to lead (FB, AAPL). There will be quite a few new leaders emerging out of this earnings season.

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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.