Month: October 2021

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We judge current sentiment by the market’s reaction to the news. Apple, Amazon, Shopify missed earnings estimates citing supply chain difficulties and yet finished the week where they started it or higher. Google and Microsoft reported another set of strong numbers and rocketed to new all-time highs. Bad news counts for nothing and good news leads to big moves higher. This is one resilient market. 

Anything clean energy continues to be on fire. TSLA had another banner week cementing its place in the trillion-dollar market cap club. Enphase (ENPH) crushed earnings estimates and fueled a major rally in the solar industry. The easiest way to gain exposure to this theme is the ETF PBW, which doesn’t include only solar stocks, but also electric vehicles makers, batteries, other parts, clear energy utilities, lithium, and other rare-earth metals, fuel cells, charging stations, etc.

US Treasuries rallied, interest rates calmed down for the moment which has been a tailwind for high-multiple software stocks. Yes, there were the usual sizable earnings blowups in the sector like ZEN, UPWK, TWLO but for the most part software names have been stable and pushing higher – U, SNOW, CRWD, ZS, DDOG, NCNO, TEAM, MANH, IGV, etc. 

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Earnings season is like war. Every war has its heroes and casualties. Just three months ago, Snapchat’s earnings inspired a rally in all stocks that derive their income from advertising. Last week, we saw the opposite. The new iOS privacy features are impacting social media companies and they will need some time to adjust to the new reality. 

Other than the hiccup in ad-based businesses and the occasional fake breakout, the price action in the indexes has been mostly constructive. SPY is almost at all-time highs. The small-caps ETF – IWM, is making higher lows and setting up for a potential breakout. Inflation-sensitive sectors like Oil & gas, financials, metals continue to lead. Most software names are also holding remarkably well which is not typical for a rising interest rate environment – OKTA, TEAM, ZS, DDOG, U, SNOW, BILL, MDB, NOW, etc.

There’s a lot of speculative money that is not leaving the market. It’s just rotating. Just look at what happened with DWAC, PHUN, HX, SOLANA last week. 

A big earnings week is ahead – all the FAANG stock report, plus Visa, Mastercard, Exxon, Shopify, Walmart, AMD, and more than 600 other stocks. There will be thousands of reports during the next 3-4 weeks. And while the meat of earnings season is typically a choppy period for the indexes as they digest all information, it is also a time of big opportunities. Many new leaders and losers will appear on the scene. Our job is to recognize them and hop on some new trends.

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Here’s a Google spreadsheet tracking all closed options 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.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.

The charts in this video are powered by MarketSmith

The latest earnings season has just begun. So far, it is passing with flying colors. Most financials rallied in the two weeks preceding their earnings reflecting rising interest rates and expectations. This time around, we did not see the usual “buy the rumor, sell the news” event. In fact, most financials continued higher post their reports. Add to that the high-volume breakouts in aluminum producer Alcoa and transportation company J.B. Hunt, and it seems the market is forming a new narrative – earnings growth is catching up with high valuations and some stocks might actually be not as expensive as previously thought. 

In the meantime, crypto is on fire and becoming more mainstream with every passing week. Bitcoin passed 60k in anticipation of the launch of its first ETF. Ethereum is approaching a potential breakout near 4k. No one really knows how to value them and therefore they can be worth anything – this is a good quality to have when there’s plenty of liquidity and risk appetite going around and a terrible weakness when everyone suddenly decides to run for the exits. As a result, most crypto-related stocks are rising to the occasion – MARA, RIOT, COIN, HUT, BTBT, BLOK, MSTR.

In other words, market breadth is improving as more and more industries are starting to break out. Most tech stocks report earnings in the next 3 weeks or so. If they don’t disappoint, I won’t be surprised if we see new all-time highs in the indexes.

Try my subscription service which includes a private Twitter feed with option and stock ideas, emails with concise market commentary and actionable swing, intraday, and position trade ideas, the Momentum 40 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed options 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.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.