Author: Ivanhoff

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Most of last week’s price action can be summarized in one sentence: tech stocks continue to outperform the rest of the market while cryptos are outperforming the tech sector. 

Semis are hovering near all-time highs – SMH, NVDA.  AMD, AMAT, and LRCX are setting up for a potential breakout. 

Software stocks have been extremely strong – not only cybersecurity but also application and infrastructure software names – IGV, SKYY, ZS, OKTA, S, NET, MDB, WDAY, TEAM, U, SNOW, CRWD, BILL, SHOP, LSPD, etc.

The payment stocks – PYPL and SQ are both working on new bases. PYPL seems ready to close its earnings gap and push towards 300. SQ is setting up for a breakout near 275.

Covid-related stocks are perking up again. The mRNA vaccines – MRNA and BNTX finished on a high note last Friday. The testing stocks like DGX, TMO, HOLX, QDEL, have been slowly climbing as well. Health pass stock YOU is also setting up for a potential bounce.

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Neither Covid nor rising inflation or Fed’s plan of tapering is scaring investors off. The large-cap indexes – SPY and QQQ, hit new all-time highs. The small-cap Russell 2000 had one of its strongest weeks in 2021 and closed above its 50-day moving average. The stock market is hitting on all cylinders in the midst of what is supposed to be a seasonally weak period for stocks. I guess we should not be really surprised by all that strength and relentless dip-buying. Money supply has gone up 40% in the past two years alone which is the fastest pace of increase in U.S. financial history. There’s so much money in the system and so many new millionaires (56MM by the last count) that pictures of rocks are selling for millions of dollars as NFT digital art. The world has invented entirely new asset classes to speculate on.

Covid cases, hospitalizations, deaths, and restrictions are rising but it seems financial markets are looking past this threat and betting on a recovery six months or so from now. At least, this is how I read the recent price action in airlines, hotels, and department store stocks. Most of them took a sizable haircut during the summer and are now starting to stabilize and even look constructively. I am staying away from them for now but keeping a close eye on the development in the space. 

The negative correlation between tech and the so-called recovery stocks (mostly old-economy sectors like retail, financials, homebuilders, industrials) appears to be breaking. Both groups are now rising in unison. The software ETF- IGF closed at all-time highs. So did the semiconductor ETF – SMH. Financials and homebuilders are not too far behind.

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Here’s a Google spreadsheet tracking all closed options 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.

The charts in this video are powered by MarketSmith

The S&P500 and the Nasdaq 100 had a  minor 2-3% pullback but finished the week on a high note. Inflation-sensitive stocks fell because of the latest Fed minutes revealing discussions about tapering later in the year. The reopening stocks were under pressure because of the rising Covid cases around the world. In the end, the market was saved by another sector rotation – this time in tech, especially large-cap tech stocks. 

One would say that this is the same tape as in the middle of last year when anything tech outperformed in the face of lockdowns and restrictions, especially considering the recent rally in grocery stores and discount stores like BJ, COST, KR, ACI. The difference this time is that department store stocks were also strong – M, JWN, KSS.

In the meantime, many cryptocurrencies jumped higher – boosting crypto-related stocks like MARA, RIOT, SI, MSTR, COIN. At some point last week, I thought that the speculative frenzy in crypto will siphon capital from software stocks but this didn’t happen. Most of them held well and are looking higher – IGV, MDB, ZS, etc.

Overall, the decline last week has built some good risk/reward setups in strong stocks that held above their 20-day moving average. We picked up some last Thursday and Friday and I share below others to consider. 

I am leaning bullish for the first half of next week but I also don’t think it’s a time to be overly aggressive. Currently,  the bearish scenario involves the major indexes (IWM, SPY, QQQ) losing their lows from last Friday. The small-cap ETF – IWM, is still looking the most vulnerable –  making lower highs below its  50-day moving average.  If it loses  211, it can drop quickly to 205.

Try my 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 40 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed options 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.