Ivanhoff Capital

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Markets are cyclical. It feels like it’s 2006 all over again. Crocs is at all-time highs and basic material stocks are one of the hottest assets to own right now. If NFTs, doge coin and other cryptos didn’t exist, people would be talking about steel stocks all day long. 

 Lumber is up 130% year-to-date, lean hogs are up 60%, corn is up 50%. The list goes on and on. Inflation expectations continue to rise and as we all know very well, expectations can impact the reality. Soros defines that as reflexivity. The Fed keeps saying that inflation is not a threat right now but at some point (usually when it’s too late), the market action will force its hand. There’s a reason the market is called a leading indicator. 

The S&P 500 and the Dow Jones closed the week at another new all-time high. In the meantime, many former tech and biotech darlings are severely underperforming. Some are even down 40-50% from their 52-week highs. If you haven’t invested or traded before 2009, you have never seen a market like this. Tech was the undisputed leader for more than a decade while commodities and emerging markets were perennial dogs with a bad reputation. It seems the tables have turned this year. There is a clear paradigm shift. And while it might not mean that tech stocks will be dogs for the next few years, the price action alludes that the market might not be willing to pay 30-50x Sales for Saas companies anymore just because of their impressive sales growth. 

All the hot money from tech has moved into crypto now. There are over 5000 different cryptocurrencies right now and more popping up every day, so it’s funny to think that they are a hedge against the Fed and deficits. Bitcoin is the OG and it’s here to stay as a rare asset. 99.9% of the altcoins though are worthless or will become so at some point, so treat them as pure speculation and have an exit strategy. In the meantime, I don’t see why Ethereum’s market cannot exceed Bitcoin’s at some point in the foreseeable future. All interesting apps and use cases are built on Ethereum right now. 

Back to the boring, old stock market. The leaders remain the same. They are all related to rising inflation expectations (metals, oil, gold, silver, potash) or the recovery trade (retailers, car markets, infrastructure, auto parts, etc.). Semis are also trying to bounce. If SMH retakes its 20dEMA, we might see some hot action in AMAT, LRCX, NVDA, etc. 

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The charts in this video are powered by MarketSmith

Big Tech reported earnings last week. For the most part, record numbers. Google and Facebook stood out which is a good sign for advertising spending. The reactions to Apple, Amazon, Microsoft and Tesla were a lackluster which typically means that their growth was already expected. In the meantime, the S&P 500 and the Nasdaq 100 were flat as a pancake last week. I still believe that the main indexes will continue to consolidate in a choppy range until the bulk of earnings reports are behind us. This would mean another 2-3 weeks of digestion. 

You have probably noticed that quite a few breakouts have been failing lately. Breakdowns have not had a significant follow through either as dip buyers are around every corner. This is typical for range-bound markets. They never last long. Eventually, all consolidations are resolved and we have trending markets – up or down. Most of us prefer rising markets but money can be made during falling markets just as well. 

So where has the strength been lately. A few groups stood out last week:

Etherium keeps making new highs. It’s close to 3k as of the momentum of me writing this. Naturally, crypto and NFT-related stocks had their day in the sun last week. Nothing to write home about but stocks like MARA, RIOT, MSTR, DLPN, TKAT, HOFV have shown notable relative strength.

Vaccine stocks are also among the price leaders. It has become clear that vaccinating the world is the only cure and it seems we might need a booster shot once a year for the next 2-3 years. This is good news BNTX, MRNA, NVAX, etc. and this has been reflected in their prices. Most of them are quite extended and in need of some consolidation but don’t lose sight of them. They are likely to set up again for some sweet swings.

Select recovery stocks continue to shine. Homebuilders are reporting their best quarter in history, all of them sounding upbeat about the near-term future. Homebuilder stocks are not ones to be chased. I suggest a more patient approach here and wait for pullbacks to their 20 or 50day moving averages before opening a new position or adding to existing positions. Restaurant stocks also perked up last week. Government subsidies, easy comps, pent-up demand are sending the shares of CAKE, RUTH, BLMN, etc. to new 52-week highs. Granted, rising input costs and wages will take their toll but the market is not thinking that far ahead.

Try my 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 40 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed options 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

The price action in the indexes last week was like Christmas lights – red and green days alternating. At the end of the week, dip buyers won again. The large-cap indexes closed near all-time hghs. The small-cap ETF – IWM, closed above its 50-day moving average.

The U.S. Dollar continues to pull back. Naturally, capital is not leaving the stock market; it is just rotating between sectors. Beaten down former momentum darlings in clean energy bounced. NFT stocks woke up. Homebuilders made another all-time high. Biotech is back in the game with quite a few constructive setups in the space – CRSP, MGNX, AGIO, NTLA, HZNP,  etc. The semiconductor ETF – SMH, held its 50-day moving average and now we see some intriguing setups there – AMAT, KLAC, ICHR, etc. Industrial metal stocks keep showing relative strength – steel (X, CLF), copper (FCX), aluminum (AA), lithium (ALB, LIT). Potash is also looking attractive – MOS, CF, SQM, etc. Tech stocks are also holding their ground – NET had a high-volume breakout, XM is working on a new base, ETSY is setting up, etc. 

Big week for earnings is ahead. Big Tech reports – AAPL, GOOGL, MSFT, AMZN, FB, TSLA. Also, V, MA, TXN, MCD, QCOM, UPS, SBUX, CAT, AMD, and hundreds of others. Both, the Nasdaq 100 and Russell 2000 are setting up for a potential breakout. I suspect that they will remain range-bound until the bulk of earnings is behind us.

Try my 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 40 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed options 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.