MarketSurge powers the charts in this video.
Last week started with a big gap in most tech stocks, especially the semiconductors, after it became clear over the weekend that the United States and China are getting close to a trade deal. We have heard this many times before, as there seems to be a constant back and forth. Chinese stocks gapped up too; then retreated in the second half of the week. Chasing gaps on expected news has never been wise.
The Fed cut rates 25 basis points to 4% as anticipated. Just like last month, interest rates actually went up afterwards. The market rarely does the obvious. The endpoint might be clear, but the path there is often unpredictable. The only thing we can control is our position sizing and exit strategies.
QQQ and SPY are consolidating near their all-time highs, and yet there are plenty of stocks that are breaking down. The equal-weighted versions of those indexes have been lagging by a wide margin since July. A small number of mega- and large-caps are doing the heavy lifting. AMZN and GOOGL were good examples last week. Both crushed estimates and gapped up. Those are not stocks to chase. They often pull back to their rising 20-, 50-, and 200-day moving averages, offering much better risk/reward entry points.
We remain in a market of stocks environment. The bounces in the high-momentum groups of the summer are getting faded – nuclear, quantum, rare earth metals, robots, etc. New groups are starting to emerge. Contrary to all expectations, solar stocks keep making new 52-week highs – FSLR, DQ, CSIQ.
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