MarketSurge powers the charts in this video.
Last week started with a big upside gap after the US and China reached an agreement to significantly decrease tariffs while they negotiate a trade deal. Other deals are also on the horizon, while inflation is coming down, which has calmed the market down. Inside four weeks, market sentiment went from talking about deep recession and stagflation to believing that testing the all-time highs is inevitable. We’ve had a quick lockout V-shape recovery that has left even the biggest optimists surprised.
The recent rally was led by the groups that were hit the hardest in March and early April – megacaps, semiconductors, and AI-related stocks. If it continues, most of those stocks are likely to close their DeepSeek gaps: NVDA, GEV, ALAB, MU, VRT, CLS, ARM, TSM, etc.
Most momentum leaders are quite extended from their 10 and 20-day moving averages, which makes them a difficult target to chase right now. This might change early next week. Moody’s downgraded the US debt rating on Friday, which caused an after-market selloff across the board. We will likely see a 1-2% gap down on Monday. This will be viewed as a buying opportunity. There are so many underinvested speculators and money averages that the first pullback to 10 or 20dma in momentum leaders is likely to get bought. Bull markets like to climb a wall of worry.
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