Author: Ivanhoff

MarketSurge powers the charts in this video.

Since the CPI inflation readings came below estimates on July 11th, we saw a major rotation out of tech and into small caps, financials, biotech, and home builders. The last week was more of the same. The Nasdaq 100, QQQ sliced through its 50dma and tested its 100-day moving average. The S&P 500 barely closed above its 50dma. The small-cap ETF, IWM had another strong week and closed near its 52-week highs. 

The earnings season continues with full force. What I suspected last week about tech earnings was confirmed. The positive surprises are priced in. Any hick-up leads to a quick move down as we saw in TSLA and GOOGL.

The next week is full of market-moving events. AMZN, AAPL, MSFT, META, and AMD report earnings alongside 800+ other stocks. 

There is an FOMC meeting that will shed more light on the Fed’s interest rate policy. The expectation is to hint at a rate cut in September. This is the main reason behind the recent rally in small caps, financials, home builders, and biotech. If the market senses that the Fed wants to keep rates at the same level until the rest of the year, we might see a pullback in those areas. The latter might become a tailwind for tech.

I recently published a few children’s books. Check them out if you have kids or friends who have kids: Investing for babies, Trading for babies, Meditation for babies. You can find my other trading books on Amazon here.

Try my subscription service which includes a private X feed with option and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

Check out my free weekly email to get an idea of the content I share with members. How my ideas/alerts did.

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

MarketSurge powers the charts in this video.

The new earnings season has just begun and semiconductors have already experienced a significant drop. The 3x long semiconductors ETF, SOXL went from 70 to 48 in a week. ASML gave the tone. They beat estimates but gave soft guidance, which led to a sector-wide selloff. Then TSM came and they beat the estimates, raised guidance and still sold off. 

Netflix reported subscribers well above the estimates and still declined. Such a catalyst used to be good for a 10%+ rally in the recent past. 

I don’t like to generalize about all stocks but so far it seems the good earnings in tech have already been priced in and expected. It will take a truly solid forward guidance to surprise the market. Any minor disappointment and weakness in earnings reports is currently getting punished harshly. This should not shock anyone given how extended the tech sector was just a couple of weeks ago and yet, the quickness in sentiment change has caught many unprepared.

There are quite a few big earnings reports next week that will shed further light on the state of tech – GOOGL, TSLA, TXN, NOW, IBM, etc.

QQQ seems headed for a test of its 50-day moving average around 470. SPY’s 50-day moving average is currently around 540. In the meantime, small caps IWM continue to show relative strength. IWM (small caps) and XBI (biotech) had a strong start to the week but fizzled in the second half. It is already trading below the VWAP since the CPI gap (July 11th), so I am not sure one should be excited about buying dips here either. Homebuilders (XHB, NAIL) and financials (DPST, BNKU) are holding better.

Caution time in the market. One must be more selective and nimble in the current choppier tape. Don’t be stubborn and complacent, believing that anything AI-related will eventually bounce so you don’t need to worry about the current dip. It might happen, it might not. Meanwhile, stops should be honored without questions asked. Keeping drawdowns small during choppy markets is a main requirement for quick compounding and account growth over time.

The silver lining is that correlations haven’t been this low in a long time. It’s a stock pickers market. The domination of the mega-caps in the past year and a half has concentrated everyone’s attention on a tight segment of the market. Most people remain focused on those few names. While no one is watching, there have been other more obscure stocks rising and building bases.

I recently published a few children’s books. Check them out if you have kids or friends who have kids: Investing for babies, Trading for babies, Meditation for babies. You can find my other trading books on Amazon here.

Try my subscription service which includes a private X feed with option and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

Check out my free weekly email to get an idea of the content I share with members. How my ideas/alerts did.

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

MarketSurge powers the charts in this video.

Did you know that before last week, the small caps Russell 2000 index was flat year to date? This changed last week, as IWM had a massive rally. Inflation reports remain below estimates, improving the odds for one or more rate cuts this year. Lower rates are good news for companies with a lot of debt and no earnings. This is why laggards were among the top performers last week.

Keep in mind that historically the stock market pulls back after the first rate cut. Don’t be surprised to see a buy-the-rumor, sell-the-news scenario. This would mean a rally in anticipation of a potential rate cut/s and then a selloff after the Fed announces the first cut. This is just one way things can play out. The reasons behind it make sense – the Fed is considered too slow to move, so when they finally cut, it is usually because there’s undisputed proof that the economy has slowed down significantly. Being the contrarian and forward-looking beast the market is, I wouldn’t be surprised to see a selloff after the first cut is announced. There’s time until then. The next FOMC meeting is July 31. After that, Sept 18.

The new earnings season has just begun. As usual, financials rallied ahead of their earnings report and now are seeing lackluster reactions after the reports. I am more interested to see the reactions to tech earnings. NFLX, ASML, and TSM are among the first to report next week.

I recently published a few children’s books. Check them out if you have kids or friends who have kids: Investing for babies, Trading for babies, Meditation for babies. You can find my other trading books on Amazon here.

Try my subscription service which includes a private X feed with option and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

Check out my free weekly email to get an idea of the content I share with members. How my ideas/alerts did.

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