Momentum Monday – Energy and Financials Are Leading

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Interest rates continue to rise which is putting downside pressure on most momentum stocks. There are always exclusions like AFRM which staged a major short squeeze last week. The norm for most momentum names lately has been downside to choppy. Inflation expectations are rising- not so much because of pent-up demand and rising wages or skyrocketing money supply but mostly because of supply chain disruptions and shortages which might take many months to resolve. As long as this remains the case, most high-multiples stocks are in danger  –  think tech and biotech.

In the meantime, financials and oil stocks are owning the 52-week highs list. Less than 18 months ago WTI Crude oil went into negative territory because there was too much of it in storage. Right now,  it is pushing $80 per barrel and the energy space is having a massive comeback – not just oil & gas but also coal and uranium.

The so-called recovery stocks (travel, leisure, entertainment) had a brief moment under the sun in late September. They gave back most of their gains in the past week.

Chinese stocks finally woke up. I don’t know if this is just another dead-cat bounce. What I know is that sentiment towards them has never been so negative. Low expectations plus a good technical setup typically equal potential for significant profits. Speaking strictly from a short-term swing point of view. Long-term, they are still in a downtrend. Personally, I would not hold them overnight. 

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