Author: Ivanhoff

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Some market developments stood out last week: 

1. Anything related to electric vehicles went crazy. Quite a few EV stocks actually doubled in a week. Solar and other clean energy stocks also showed notable relative strength.  Some names that belong to that industry: TSLA, NIO, XPEV, LI, HCAC, GMHI, AYRO, GP, BLNK, SBE, FUV, KXIN, WKHS, KNDI, etc. There’s definitely an element of hubris and exuberance which depending on your perspective and time frame of operation can be good or bad. 
2. When the news about the first effective COVID vaccine hit two weeks ago, anything related to software and work from home was hit hard. Last week, those same so-called social distancing stocks had a major bounce after more states and cities adopted stricter measures to fight the COVID spread. I expect more rotations between the old and the new economy stocks for the rest of the year.  
3. Cryptocurrencies continue to make new highs while gold and silver are sleeping for the most part. The reason is not only the proverbial weakness in the U.S. Dollar. The surge in crypto has turned into a momentum move. When it comes to momentum, the major catalyst is price and FOMO.

In other words, while the main indexes are consolidating their recent gains, the bull market continues with full force. Capital is not leaving the market; it is merely rotating between sectors. 

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The week started with a 7% gap in the small-cap index Russell 2000. This is an extremely rare event even for the deepest and scariest bear markets. This time, the gap was to new all-time highs. Pfizer and BioNTech announced that their COVID vaccine is 90% effective and it is ready to ship in December. The market didn’t waste any time and decided to discount quicker than expected economic recovery. The sectors that were hit the hardest in 2020 gained the most – restaurants, hotels, airlines, anything related to leisure, financials, energy. In the meantime, the stocks that had one of their best years in 2020 due to social distancing and working from home were obliterated to the tune of 20-30% in a week. 

Later in the week small caps were faded before they bounced again on Friday. QQQ managed to recover some of its losses in the middle of the week but overall underperformed and lost about 1%. Something tells me we will see more short-term rotations between Small Caps and QQQ for the rest of the year as more companies come up with their vaccines and the market wonders if the normalization of the economy will come sooner rather than later. 

If the normalization of the economy means higher interest rates then many of the richly valued software names might be in trouble. There are no signs of that yet. In the meantime, stocks are rising around the world so it pays to remain long.

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Check out my free weekly email. to get an idea of the content I share with members.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.


The charts in this video are powered by MarketSmith

What a bounce in stocks last week. Almost everything went up while the U.S. Dollar was smashed.

Here are the ETFs that made new 52wk highs ahead of the indexes last week. They have the potential to be among the new leaders for the rest of the year: 

Biotech XBI, medical devices IHI, and healthcare providers IHF;

Clean tech- PBW, semiconductors – SMH, social media – SOCL, Internet – FDN, robotics and automation – ROBO;

China KWEB had a big breakout and held it despite relative weakness in its biggest holding BABA and the pull of the most anticipated IPO – Ant Financials;

Cannabis MSOS is another potential winner from the change in administration. 

Try my new subscription service which includes a private Twitter feed with option and stock ideas, emails with concise market commentary and actionable swing, intraday, and position trade ideas, the Momentum 50 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed option and stock ideas shared on my private Twitter stream and emails for subscribers.

Check out my free weekly email. to get an idea of the content I share with members.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.