Momentum Monday – Price Action Is Getting More Constructive

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We see more stocks from various sectors setting up. This season, the market reaction to earnings has been predominantly positive – many names didn’t sell off after missing estimates and cutting guidance; many broke out after stronger than expected earnings. This is a notable change in sentiment compared to the previous two earnings seasons.

Other than Facebook (META), all mega caps had positive reactions to their earnings this season – TSLA, GOOGL, MSFT, AAPL, AMZN. Why does it matter? Those stocks can only be moved by institutional money.

Two new Bills in the making have given a significant boost to two groups of stocks – semiconductors and clean energy. Those are shaping up to be among the current market leaders.

The Fed has given signs that interest rate increases will slow down if the economic data requires it. They are paying attention to inflation and jobs data primarily. GDP was negative in the past two Qs, so the US is basically in a recession. The market reads this as a reason for the Fed’s tightening to become a lot less aggressive.

Keep in mind that all major indexes are still below a declining 200dma so this is considered s bear market rally.

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