Momentum Monday – So Many Rotations

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Bull markets correct thorough sector rotations. While one group of sectors is pulling back, another rises until the roles reverse. This has been the market pattern for most of this year so far. When the market was worried about inflation, the small caps went up while tech pulled back. When the market was worried about Covid and deflation, capital went into tech stocks while small caps were under pressure. Last week, we saw a little bit of both. First tech and other Covid-related stocks rallied. Then, later in the week, interest rates perked up boosting financials and industrial metals.

In the meantime, crypto-trading is hot again. Ethereum has rallied 75% in three weeks spurring speculations in smaller cryptocurrencies and crypto-related stocks like MSTR, SI, MARA, RIOT.

Gene editing stocks have shown notable relative strength as of late – EDIT, NTLA, CRSP, FATE, BEAM.

Market breadth has been lacking with more names selling off than rallying. This can change if the small-cap ETF – Russell 2k rallies above its 50-day moving average near 225. It’s actually setting up. If financials continue their rally, IWM is likely to break out. 

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