Category: Momentum Mondays

All charts on Momentum Monday are powered by MarketSmith

Dip buyers continue to dominate the tape. The tech sector is leading again. Enterprise software, semiconductors, the FANGs are all looking strong, breaking out or setting up for a potential breakout.

Emerging markets are also starting to wake up. We are seeing notable relative strength in India, select Brazil and Chinese names. It’s usually good news when the more sectors join the market rally.

We continue to trade in a market of stocks environment, where stock picking matters.

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

All charts on Momentum Monday are powered by MarketSmith

After a big run in January and the first half of February, the S&P 500 is consolidating in a tight range above its 200-day moving average. While some of the tech leaders are starting to lose upside momentum and the FANGs are treading water, there are quite a few other sectors that are stepping up to the plate. Biotech had a monster breakout last week and it is likely to remain the pond to fish for active traders in the next few weeks.

People are obsessed with catching bottoms and tops. One can understand the fascination with this market approach. It’s based on a mean-reversion, which is contrarian by nature and everyone wants to be a contrarian. It has the potential to deliver a reward multiple times bigger than the taken risk assuming you are willing to cut your losses quickly. It looks good in theory but it is too hard to implement in practice. In the long-term, playing against the established trend is a losing proposition for most market participants. Focusing on capturing parts of trends is a much more common-sense approach, which can deliver a lot better return with a lot less hassle over time.

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

The small-cap index, Russell 2000 (IWM) is up 18% for the year and kissing its 200-day moving average. The market continues to react mostly favorably to earnings. Market breadth hasn’t been so good in years. We see strength in so many different sectors and countries – solar, biotech, enterprise software, semiconductors, gold, palladium, Brazil. Even Chinese names have started to break out and hold their gains. It’s hard not to be bullish in this market environment.

I will be watching closely how the SPY will react near $280, which has been a major area of resistance for a long time. If it breaks and holds above it, there are no significant stops before new all-time highs.

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