Ivanhoff Capital

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SPY and QQQ tested their 50-day moving average. The initial bounce was faded near their declining 20-day EMA. Then, both came back to their 50dma again on Friday. In the meantime, many of the momentum favorites took quick a beating last week –  OSTK, W, DOCU, CVNA, etc. Most major earnings reports were heavily sold or faded – PTON, LULU, CHWY, ORCL. Small caps broke below their 50-day moving average led by weakness in financials and energy. The tape has changed.

The only thing that is still holding the indexes from breaking down is the constant sector rotation. Homebuilders showed notable relative strength on Friday as the 30-year fixed mortgage rate reached new all-time lows of 2.86%. There were also quite a few consumer cyclical stocks that broke out or are setting up for a potential breakout – CROX, NKE, UA. Can rotation save the day again? It’s quite possible but for the first time in a while, there are short setups that are looking more appealing than long setups. Some momentum leaders seem to be forming topping formations and setting up for potential breakdowns.

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The charts in this video are powered by MarketSmith

QQQ started last week strong and accelerated its ascent, only to be shaken by a 10% correction in two days. No one knows if we have already seen the high for 2020 but after the selloff, the odds are that chasing is not going to be as mindless as before. Many of the momentum high flyers have reached absurd valuations. Some of them will have 50-80% corrections. OSTK, for example, is already down 50% from its highs. Others will limit their drop to 10-20% and just form new bases but they will need time to do so.  

The truth is that stocks still don’t have an alternative in a perpetual zero interest rate world, constant fiscal and monetary stimulus, and relatively low supply of new stocks. The capital has to go somewhere. While tech paused last week, we saw many lagging industries perking up – banks, airlines, cruise ships, hotels, retail outlets. Some of them are looking constructive and might try to break out next week.

Try my new subscription service which includes a private Twitter feed with option and stock ideas, emails with concise market commentary and actionable swing, intraday, and position trade ideas, the Momentum 50 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed option and stock ideas shared on my private Twitter stream and emails for subscribers.

Check out my free weekly email. to get an idea of the content I share with members.

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


The charts in this video are powered by MarketSmith

Liquidity, FOMO, weak U.S. Dollar and Treasuries, career risk for money managers continue to drive stock prices higher. The large-cap indexes, SPY and QQQ have gone parabolic. In the meantime, the small-cap Russell 2000 has consolidated in a tight range and it looks primed for a breakout.

This bull market continues to correct the excesses through sector rotation – when one sector pulls back, another step up and leads higher. Many of the stocks that sky-rocketed during the COVID crises started to pull back while the ones that were hurt the most are perking up – restaurants, casinos, cruise ships, retailers, etc. The likely reasons behind that rotation – The FDA approved a 15-minute COVID test that costs $5 and several vaccines are in their trial stage and it is very likely they get approved.

Try my new subscription service which includes a private Twitter feed with option and stock ideas, emails with concise market commentary and actionable swing, intraday, and position trade ideas, the Momentum 50 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed option and stock ideas shared on my private Twitter stream and emails for subscribers.

Check out my free weekly email. to get an idea of the content I share with members.

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