Ivanhoff Capital

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The main stock indexes continue to make new all-time highs while the majority of the largest companies are underperforming. Apple, Amazon, Facebook, Nvidia, Netflix, Facebook haven’t advanced an inch for the past three months. Google has done a bit better but nothing to rave about. The lackluster price action in mega caps can mean one of two or possibly both things:

1. People are seeking more risk and therefore, selling the biggest and strongest companies and venturing out further on the risk curve to capture a higher return.
2. The biggest companies can wake up and try to catch up with the indexes for the rest of the year.

In the meantime, the market is pricing in a potential normalization in the economy. If you look at the best performing stocks ever since Pfizer and BionTech announced their working vaccine, you will notice that it is all about the old-economy – energy, transportation, financial, leisure, industrial metals, retailers. All sectors that were hit hard in the first half of the year, have been shining as of late while intererst rate have perked up and the U.S. Dollar has been diminished. 

We continue to see elements of mania in select pockets of the market. A few weeks ago, it was all about electric vehicles and anything related to clean-tech. So many of those stocks doubled and even tripled in a couple of weeks or so. Many have since pulled back substantially, but still remain in uptrends, so we will keep an eye on them if they offer an excellent risk-to-reward entry. The manic hot money has most recently shifted to SPAC stocks. SPACs are special purpose acquisition companies, essentially blank check companies formed to merge or acquire with a target business or in other words, bring a promising private company (often a start-up) public in the fastest possible way. DKNG and SPCE were among the first companies that use the SPAC model to become public. They have been followed by hundreds more. I’ve already highlighted the most interesting and promising names – FEAC, LAZR, IPV, TRNE, LCA, SBE, MP, JWS, IPOB, IPOC, etc. I am sure I am missing many and I will discover them along the way. I am not going to sugarcoat it – there’s certainly a lot of froth in the space but as active traders, we have to be paying attention to where capital is flowing and be in that space, so we are doing exactly that but in a measured way.

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Here are the best-performing sectors last week – energy, cleantech, cannabis, biotech, small caps, semis, large-cap tech. A wide variety of winners. We are in the sweet spot where the markets are simultaneously trying to discount the impact of a working COVID vaccine and the new social distancing restrictions around the world. As a result, almost everything is going up, except gold and the U.S. Dollar. 

There’s a hint of hubris in the market. It is not only the electric vehicle stocks that have gone wild. Some recent IPOs in the software and equipment space have defied gravity too- PLTR, SNOW, U, CRSR, etc. Many SPACs have also been on the move. It’s a bit frothy. And yet, there are still plenty of long setups. I expect any corrections to be shallow and take the form of sector rotation.

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

Some market developments stood out last week: 

1. Anything related to electric vehicles went crazy. Quite a few EV stocks actually doubled in a week. Solar and other clean energy stocks also showed notable relative strength.  Some names that belong to that industry: TSLA, NIO, XPEV, LI, HCAC, GMHI, AYRO, GP, BLNK, SBE, FUV, KXIN, WKHS, KNDI, etc. There’s definitely an element of hubris and exuberance which depending on your perspective and time frame of operation can be good or bad. 
2. When the news about the first effective COVID vaccine hit two weeks ago, anything related to software and work from home was hit hard. Last week, those same so-called social distancing stocks had a major bounce after more states and cities adopted stricter measures to fight the COVID spread. I expect more rotations between the old and the new economy stocks for the rest of the year.  
3. Cryptocurrencies continue to make new highs while gold and silver are sleeping for the most part. The reason is not only the proverbial weakness in the U.S. Dollar. The surge in crypto has turned into a momentum move. When it comes to momentum, the major catalyst is price and FOMO.

In other words, while the main indexes are consolidating their recent gains, the bull market continues with full force. Capital is not leaving the market; it is merely rotating between sectors. 

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.