Momentum Monday – Sideways Consolidation

MarketSmith powers the charts in this video

SPY and QQQ are consolidating above their rising 20-day moving average. In the meantime, there is a constant sector rotation. While semiconductor stocks have pulled back in the last couple of weeks, the biotech sector exploded higher. The majority of stocks that went up 10% or more last week were biotech. 

The market has been a bit choppy lately, trading in a range. It hasn’t been the easiest tape. A minor tweak can improve your odds and risk-to-reward significantly in this environment. Breakouts to new 52-week highs continue to get faded initially. We saw that in homebuilders last week which have been among the best-performing groups year-to-date. Meanwhile, the pullbacks to rising 20 or 50-day moving averages in strong stocks are getting bought on a regular basis. I don’t know how long this buy-the-dip mentality will last but currently, it is working better than chasing obvious breakouts.  

Gambling stocks were on fire last week. IGT, which makes slot machines made a new 52-week high. DKNG also broke out after a long consolidation. LVS crushed earnings estimates and gapped higher. MGM and WYNN are consolidating near their 52-week highs.

The earnings season has just begun. Expectations have fallen to a point where it is not too hard to get beaten. NFLX and TSLA missed estimates last week and pulled back after their reports but nothing major. The selling seems to be muted for now. It gets a lot more interesting next week with MSFT, META, AMZN, and V on deck.

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