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MarketSmith powers the charts in this video.

Stock prices change when expectations change. The market expectations for interest rates have changed drastically over the past month. This is why we have seen such a tremendous rally in many stocks. The most sensitive to interest rate changes groups are the best performers since October lows – software, biotech, regional banks, biotech, etc.

The move in software and Internet stocks hasn’t been based on dreams and anticipations for a better future. Almost every major software company that reported earnings this quarter, crushed estimates and raised guidance. Most of them also gapped up and continued higher as a result. Just from last week, we saw that in ESTC, PATH, SNOW, ZS, CRWD, WDAY, etc. The software space has been extremely hot.

Small caps finally broke out above their 200-day moving average and all hell broke loose. Stocks with high short interest squeezed higher – UPST, AFRM, AAOI, COIN among many others. The speculative frenzy is on. FOMO is back in full force. I hope you have been able to participate properly. 

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MarketSmith powers the charts in this video.

QQQ and SPY broke out from a tight-range consolidation but they didn’t go very far as both are extended in the short-term perspective. Consolidations happen when buyers don’t want to chase the current prices but are willing to buy the quick 3-5% dips. Typically those types of consolidations resolve higher. 

The small-cap index, Russell 2k is consolidating in a tight range right below its 200-day moving average. If it finally breaks out and starts trading above its 200dma, we are likely to see many faster movers among the more speculative, highly-shorted stocks like LMND, AFRM, CVNA, IOT, etc.

Nvidia crushed earnings estimates and raised guidance again. It didn’t break out on the news because it was already up 25% in the three weeks preceding the report. It could test 475-450 before it attempts to break out above 500-510 again.

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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.

As expected, small caps finally joined the rally attempt. They have been super-volatile, to put it mildly. It’s in their nature. Two weeks ago IWM had a big rally to its 50dma and then pulled back in the following few days. Last week, IWM had a strong rally on huge volume to its 200dma and then pulled back a little on lighter volume. After all was said and done, IWM still made a few higher lows and higher highs. It is starting to work on an uptrend, which will be somewhat confirmed if it starts to rise above its 200dma for more than a day or two. If this happens, all the worries about market breadth will slowly disappear. Market participants’ attention will shift from the mega-caps to the more speculative mid, small, and micro-caps which tend to move much faster, in both directions. 

In the meantime, earnings breakouts from various sectors continue to follow through – PLTR, DKNG, SHOP, DIS, etc. The mega-caps are acting constructively. AMZN, META, MSFT, and NVDA are hovering near their 52-week highs. AMD is working on the right side of a new base. TSLA is the only one still struggling below its declining 50-day moving average but even they are making higher lows and higher highs in the past couple of weeks. It’s interesting that lately TSLA is much better correlated with the small-cap index Russell 2k than with the Nasdaq 100.

The next trading week is shortened due to Thanksgiving. I hope you have a wonderful time with your family if you are celebrating. One big earnings event to be aware of is on Tuesday after the market close – the undisputed momentum leader of this year reports – NVDA. They have the potential to rattle the speculative juices of the market.

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.