Author: Ivanhoff

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In the last quarter of 2018, the market priced in a potential recession at some point in 2019. Judging by the price action and earnings results we are seeing, the market is currently re-evaluating its thesis. Scars from violent corrections don’t heal fast. This is why there has been so much scepticism of the rally in the past few weeks. Now, we are at a point where the fear of missing out is starting to kick in.

There’s always a chance that this is just a bear market rally and everyone is being sucked in before another leg lower. Changes in sentiment don’t happen overnight. Before a major reversal, we will see an increasing number of failed breakouts and momentum stocks starting to underperform. There are not enough reasons to turn bearish.

In this Momentum Monday, we cover a few potential scenarios for the major stock indexes and go over some ideas in biotech and software.

Check out my latest book: Swing Trading with Options – How to trade big trends for big profits.

All charts on Momentum Monday are powered by MarketSmith

$260 is proving to be a tough nut to crack for SPY, which has been basing below it for the past few trading days. This is not unexpected. 260 was a major support in late 2018. It’s normal to act as short-term resistance after SPY broke below it.

So what’s next: a new leg lower or a higher low and a break above $260, which can spur a fear-of-missing-out rally? Dip buyers have been very insistent lately and bad news has not been punished harshly by the market. This is typically a sign of positive market sentiment. Sentiment is what drives prices in a short-term perspective.

On today’s Momentum Monday, we discuss LULU, NKE, enterprise software stocks, the state open-source software companies, some biotech ideas and the connection between private and public markets.

Check out my latest book: Swing Trading with Options – How to trade big trends for big profits.