Ivanhoff Capital

MarketSurge powers the charts in this video.

Last weekend, we discussed the market becoming a bit frothy and setting up for a potential shakeout. This is exactly what we saw. Those pullbacks are normal during bull markets, and they create better entry opportunities near rising 20, 50, and 100-day moving averages. 

When the market is in a pullback mode, a 1-2% drop in a popular index like the Nasdaq 100 could coincide with a 20% drop in a high-momentum stock. We saw that in recent high flyers in robotics, quantum, crypto, and nuclear last week. In fact, the behaviour of high-momentum stocks is a major sign of what to expect in the near term. If they just go sideways and continue to tighten up and set up, there’s probably a bounce around the corner. If they got pummeled, there’s likely more volatility ahead.

Typically, corrections in bull markets happen through sector rotation. Energy and metal stocks made a strong push last week. Can we see another group step up next week? Solar stocks seem to be setting up, but it is rare to see only one industry lead when the rest of the market is under pressure. The odds are we will see more choppiness. 

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MarketSurge powers the charts in this video.

The indexes are at all-time highs. This didn’t stop the Fed from cutting rates by 25bps last week. Powell said they are moving from a restrictive to a neutral Fed policy because there are some signs of weakening in the job market. The stock market loved it. We saw the most speculative areas explode higher—Quantum computing, nuclear stocks, and robot stocks led the charge, but there were so many other movers. In the meantime, we saw the so-called “sell the news” reaction in the US Dollar and rates, which bounced.

Price action has become a bit frothy in some areas of the stock market, so I would not be surprised if we see a shakeout next week. Typically, shakeouts take the form of a sector rotation in bull markets. The odds are that it won’t be any different this time. Any significant pullbacks to rising 20, 50, or 100-day moving averages will still be seen as good buying opportunities where one can enter with a tight stop for a swing trade.

Try my subscription service, which includes a Discord room and private X feed with options 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. See how my ideas/alerts performed.

You can find my trading books on Amazon here.

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.

Every time the AI group pulls back and one venture thinks that maybe its best performance is behind, we see another strong earnings report that proves that thesis wrong. Two weeks ago, it was Broadcom (AVGO) announcing a surprise new $10-billion client. Last week, Oracle (ORCL) reported massive expected future growth. Those two reports rekindled the momentum behind AI-related stocks. We saw AI data center equipment companies like VRT and MOD bouncing back; energy providers like CEG and VST recovering above their 50dma; semiconductors like ARM coming back to life. The AI group is as strong as ever.

In the meantime, we are entering the Fed’s week. The market has already priced in a 25bps rate cut. The question is what guidance the Fed will provide for future cuts. Some like to complicate things and believe that the market will pull back after an obvious event – buy the rumor, sell the news. The market has lately been more direct and has just continued in the direction of the established trend. Market breadth has expanded, including more groups – small caps, biotech, housing, and solar. Any corrections have been short-lived and tepid and typically taken the form of sector rotation – when one group pulls back, others step up. I expect more of the same. The one factor that might change market sentiment is the Fed’s comment on employment. The market trades on narratives. If all of a sudden, higher unemployment and recession become the new story, then we are likely to see more volatility. Not enough evidence for any of it yet, but something to keep an eye on.

Try my subscription service, which includes a Discord room and private X feed with options 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. See how my ideas/alerts performed.

You can find my trading books on Amazon here.

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