Momentum Monday – The Same Trends Keep Working

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The big catalysts that move the stock market remain the same:

  • There’s a second COVID wave under way and many of the so-called social distancing stocks continue to ramp up, especially software;
  • A second COVID wave means more stimulus. More stimulus is positive for stocks in general but more so for small caps. Russell 2000 went up 10% in the past two weeks;
  • The pre-election period tends to be volatile as it often brings a large number of surprising turns. Clean energy stocks have accelerated their upside ascent in expectations of the changes that a new administration might bring. Cannabis-related stocks might be the next ones to rally.

The next week is also the start of a new earnings season. Financials are the first ones to report followed by tech a couple of weeks later. I would not be surprised to see pre-earnings rallies in strong stocks (mostly in tech) as many speculators try to front-run earnings reports. 

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