Momentum Monday – Constructive Price Action

MarketSmith powers the charts in this video.

As expected, small caps finally joined the rally attempt. They have been super-volatile, to put it mildly. It’s in their nature. Two weeks ago IWM had a big rally to its 50dma and then pulled back in the following few days. Last week, IWM had a strong rally on huge volume to its 200dma and then pulled back a little on lighter volume. After all was said and done, IWM still made a few higher lows and higher highs. It is starting to work on an uptrend, which will be somewhat confirmed if it starts to rise above its 200dma for more than a day or two. If this happens, all the worries about market breadth will slowly disappear. Market participants’ attention will shift from the mega-caps to the more speculative mid, small, and micro-caps which tend to move much faster, in both directions. 

In the meantime, earnings breakouts from various sectors continue to follow through – PLTR, DKNG, SHOP, DIS, etc. The mega-caps are acting constructively. AMZN, META, MSFT, and NVDA are hovering near their 52-week highs. AMD is working on the right side of a new base. TSLA is the only one still struggling below its declining 50-day moving average but even they are making higher lows and higher highs in the past couple of weeks. It’s interesting that lately TSLA is much better correlated with the small-cap index Russell 2k than with the Nasdaq 100.

The next trading week is shortened due to Thanksgiving. I hope you have a wonderful time with your family if you are celebrating. One big earnings event to be aware of is on Tuesday after the market close – the undisputed momentum leader of this year reports – NVDA. They have the potential to rattle the speculative juices of the market.

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