Momentum Monday – Relentless Market

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The main indexes pulled back earlier last week to their rising 10-day moving average. Then, July CPI readings came a bit below expectations and most stocks just took off. This time, the biggest gainers didn’t come from biotech and software. Last week was all about energy and metals. Lithium stocks ALB, SQM, LTHM, PLL had a massive rally. Coal, oil & gas names had one of their best weeks in a while. 

The market reaction to earnings continues to be overwhelmingly positive this season. Semis, Micron (MU) and Nvidia (NVDA) guided down. Both gapped down only to completely recover by the end of the week. Going up on bad news is bullish. In the meantime, stocks that beat earnings estimates broke out on volume and followed through for the most part – TTD, SWAV, STAA, ARRY, GFS, QLYS, etc. 

The small caps ETF – Russell 2k (IWM) went up 25% in the past couple of months and it is back above its 200-day and 50-day moving averages for the first time since November of 2021. The large-cap S&P 500 is less than 1% from its 200-day moving average. Bearish rally or not, capital is getting put to work, dips are getting bought, stocks are breaking out and following through, and there are almost no distribution days. No one knows how long it is going to last. The last time, I thought we had a bear market rally was April 2020 and the markets just kept going higher. I don’t think it’ll happen again but I’ll keep an open mind.

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