Category: Uncategorized

MarketSmith powers the charts in this video.

Another new all-time high for the S&P 500 and the Nasdaq 100 despite of the Fed’s comments on interest rates. Powell said that they will very likely wait until May before they cut rates to make sure that high inflation won’t come back. The market initially sold off but quickly bounced and made new highs after strong earnings from Meta and Amazon. The economy is strong, the job market is strong, inflation is slowing down, companies’ earnings are beating estimates, there are 6 trillion dollars in money market funds, and it’s an election year, which means there will be more deficit spending. There are plenty of catalysts to fuel stocks higher. Nobody knows how high.

Granted, nothing goes straight up. Pullbacks and corrections are a normal part of every bull market. Seasonality is bearish between now and May and yet some parts of the market haven’t shown any traces of pausing. There are some bearish momentum divergences. Consumer staples are outperforming in the past few months which is typically defensive. Small and mid-caps stocks have significantly underperformed year-to-date. They are a much smaller part of the market than they used to be. The current market cap of all Russell 2000 companies is $2.5 Trillion. Just Microsoft alone has a market cap of 3.1 Trillion. Apple is at 2.9T. Google and Amazon are at 1.8T each. Nvidia is 1.6T. Meta is 1.2T. Each of these is big enough to be an index/ETF on its own.

Try my subscription service which includes a private Twitter 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.

I published a new trading book recently (2023). Check it out on Amazon.

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

MarketSmith powers the charts in this video.

Last week brought strong earnings from so many different industries – ASML (semiconductor machines), IBM (Cloud, AI), NOW (software), NFLX (entertainment), ALV (auto parts), AXP and COF (credit cards), VZ (telecom), LVS (casinos), PG (household products), VLO (refining), etc.

We also saw stronger-than-expected GDP growth. Granted mostly due to higher deficit spending and debt level but inflation is also coming down as expected. The economy might be just as strong as the stock market right now. If this is the conclusion the market makes this earnings season, we might see a rotation into small caps.

Small caps were in a game of whack-a-mole last week. IWM gapped up four days in a row and it faded immediately afterwards. A break above 198.50-199 would start a new leg higher. A break below 193 would start a new leg lower. 

The bulk of earnings season is still ahead of us. Most of the big tech reports in the next three weeks. Some of the big ones next week are MSFT, AMZN, GOOGL, META, AMD, etc. Many of them have already made a significant move in the past few weeks to a few months. A positive earnings surprise might be already baked in. This means a gap-up might be used as a reason to take some profits in some of the more popular names.

Try my subscription service which includes a private Twitter 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.

I published a new trading book recently (2023). Check it out on Amazon.

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

MarketSmith powers the charts in this video.

SPY and QQQ closed at all-time highs but we are in a stock picker’s market, not a wave that lifts all boats. The tape has been rather choppy with many fades and frequent changes of direction – not easy to navigate. 

There was a quick rug-pull on Wednesday (Jan 17th) – most stocks gapped down. A large number of tech stocks and ETFs tested their year-to-date volume-weighted-average price on that day and found support there – QQQ, FNGU, SOXL, META, AMZN. The real leaders like NVDA and AMD didn’t even blink during that pullback for the indexes. 

Then, on Thursday (Jan 18th), Taiwan Semiconductors (TSM) crushed earnings estimates and confirmed that the recession in semiconductors is over, mostly due to an enormous demand for AI-related chips. All semiconductors stocks gapped up lifting most of the tech sector with them. On Friday (Jan 19th), Super Micro Computer (SMCI) beat estimates and raised guidance, staging an acceleration in anything AI-related. 

The bulk of earnings season is still ahead. So far, we can say that AI remains the major theme in the market and the main source of growth. This is why stocks like AMD, NVDA, INTC, and many others are rising in anticipation of their earnings reports.

Small caps ETF, IWM tested its 200-week MA where it found support. It’s all about interest rates here. IWM has been almost perfectly negatively correlated to the 10-year yield in the past six months. If rates resume lower, small caps are likely to quickly catch up with large caps.

Try my subscription service which includes a private Twitter 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.

I published a new trading book recently (2023). Check it out on Amazon.

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