Month: October 2021

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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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The charts in this video are powered by MarketSmith

We saw a big upside move in reopening stocks across the board on Friday after Merck announced their Covid pill. Airlines, restaurants, gyms, entertainment, hotels, casinos are currently among the leaders. 

Inflation plays were also on fire. Oil, coal, food producers, fertilizer stocks had a notably strong week. It seems inflation might not be as transitory and low as previously expected by the Fed. One sector’s rising revenue is often another sector’s rising costs. Stocks rarely rise together in a bull market. Every major macro theme has big winners and big losers. 

Retailers were hit hard after Bed, Bath, and Beyond reported a big decline in sales and Bank of America downgraded Kohls. In both cases, supply chain pressures were cited as the main reason. The market didn’t wait long and extrapolated that in the entire retail sector. XRT was down almost 5% last Thursday. 

Many tech stocks were under heavy pressure for most of the week as interest rates spiked. The overall level of rates is still historically low, so this pullback might end up being a buying opportunity for the best among them but overall there is a good number of broken charts in the sector and they will need time to set up again.

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.