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QQQ started last week strong and accelerated its ascent, only to be shaken by a 10% correction in two days. No one knows if we have already seen the high for 2020 but after the selloff, the odds are that chasing is not going to be as mindless as before. Many of the momentum high flyers have reached absurd valuations. Some of them will have 50-80% corrections. OSTK, for example, is already down 50% from its highs. Others will limit their drop to 10-20% and just form new bases but they will need time to do so.
The truth is that stocks still don’t have an alternative in a perpetual zero interest rate world, constant fiscal and monetary stimulus, and relatively low supply of new stocks. The capital has to go somewhere. While tech paused last week, we saw many lagging industries perking up – banks, airlines, cruise ships, hotels, retail outlets. Some of them are looking constructive and might try to break out next week.
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