Momentum Monday – Dip Buyers Keep Showing Up

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For a brief moment last week, I thought that the meteoric surge of the so-called meme stocks like AMC, GME, BB, BBBY, DDS, etc. will “break” the market. The last time we saw similar short squeezes in late January of this year, the main indexes had a swift 4-5% pullback. They have held a lot better this time. The QQQ bounced near its 20-day EMA. SPY is close to new all-time highs. Small caps (IWM) are acting constructively. 

We are back in the phase where bad news for the economy is good news for the stock market because it means that the Fed’s injections are not going away. The stock averages had a decent rally last Friday on the back of weaker than expected employment numbers. 

Crude oil and oil stocks had one of their best weeks in years. Major breakouts in the entire space. The oil and gas exploration and production ETF  – XOP, went up 8%.

Steel stocks are holding well and digesting recent gains: CLF, X, STLD, NUE, SID

Car makers are reliving a renaissance. The push towards electric vehicles, the chip shortage, and the change in supply/demand dynamics because of COVID, have been a boon for the shares of Ford, GM, Toyota, and many others. So many new 52-week highs in the space. Chinese EV stocks are also waking up – NIO, LI, etc.

It’s not just inflation-related sectors that are perking up. Tech has stabilized and we are starting to see the emergence of appealing setups. Quite a few semiconductor stocks are setting up for potential breakouts: SMH, AMAT, LRCX, TSM, XLNX, HIMX, UCTT, etc.

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