There is so much liquidity in the system that everything is rising – U.S. stocks, emerging markets, junk bonds, Treasuries, gold, crude oil, crypto. Granted, there are still prominent negative momentum divergences but they can resolve through a sideways consolidation.
After rising anywhere between 300% and 2000% in the past three years, cloud stocks continue to make new highs and deliver solid earnings reports: SHOP, AYX, TEAM, etc. While cloud is still popular, there are other hot topics that are mesmerizing the momentum cloud – space (SPCE), online sports gambling (DEAC, IBKR, etc), AI and clean energy (TSLA).
Even Warren Buffett has become a momentum investor. His company just increased its stake in Restoration Hardware – a company that is selling $15k couches. Fun times. The good news is that premium are cheap, so buying some insurance while riding the uptrend might not be a bad idea. Just in case.
The U.S. stock market proved its resilience once again. SPY bounced near its 50-day moving average and it is back at new all-time highs. Granted, the latest new highs came with a weak market breadth but negative momentum divergences can be resolved through a sideways consolidation.
Another big week of earnings report is on the horizon. Will Shopify (SHOP) and AYX (Alteryx) continue their ascent or they will pull back like many other software names did last week? It is a big trend to watch. If there’s a rotation from momentum to value, software stocks might have a sizable pullback in the next few months just like they did in September/October of last year.
In the meantime, the mega-caps continue to advance. AMZN is close to breaking out from a 3-year long base. GOOGL is consolidating new its all-time highs.
We also talked about TSLA, AAXN, RETA, UBER, SMH, TCEHY in the show.
The market finally blinked and pulled back after it became clear that the coronavirus will have a significant impact on China’s and therefore, the world’s Q1 GDP growth. Starbucks said that half of their stores in China are closed while the rest are operating at reduced hours. Apple confirmed that one of their stores is close. Crude oil cannot find a proper bid. Copper is in a free fall. The semiconductor and biotech ETF which led the market higher late last year are already 9-10% below their 52-week highs. There are some stocks are showing clear relative strength and trying to break out even in this weak tape. The odds are that they will remain in a range if the market continues to discount a potential negative impact from the coronavirus. We covered: NFLX, PTON, ZM, TNDM, RETA, AAXN, TSLA, AAPL, among others.