Ivanhoff Capital

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The price leads the news. When stocks rise, the news says that the market is discounting a better future. When stocks fall, the news says that we are in the midst of a severe recession. Last week brought a little bit of both. First, the small caps had a face-ripping rally led by the worst-hit stocks during the February-March selloff – retailers, airlines, casinos, financials, homebuilders, etc. Then the week finished with heavy selling forming numerous reversal formations. 

The more companies report earnings, the more clear it becomes that some of the Q1 numbers still look good only because they don’t reflect the new normal – the lockdowns, the cost-cutting, and the lay-offs started in mid-March. The next quarter will be the one that will provide a reality check. 

Surprisingly, Amazon missed earnings estimates. Bezos said they will spend the entire operating profit of $4 Billion to protect their employees from the coronavirus. This is a big wake up call for the market. Not only are many companies’ revenues under pressure but their operating costs might have risen substantially for the foreseeable future.

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2020 is the year of Black Swans. A global pandemic, economic lockdown, record unemployment, negative crude oil prices. And yet, the Nasdaq 100 is actually up for the year. The bad news counts for nothing, for now. 

New leaders have emerged. 

The gold miners ETF, GDX broke out from a 7-year base and so far the breakout is looking sustainable. If the reflation thesis is correct, gold and gold miners will be in play for many months to come.

The biotech ETF, IBB broke out from a 6-year long base. Biotech stocks have been on fire ever since and are starting to dominate the Momentum 50 list.

Try my new subscription service which includes a private Twitter feed with option and stock ideas, a weekly newsletter with concise market commentary and actionable swing and position trade ideas, the Momentum 50 list of market leaders, and much more. My members have been really happy.

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.

The charts in this video are powered by MarketSmith

In the scope of three months, markets have experienced a range of moves that typically happen in a decade. The velocity of movement has been breath-taking. The sentiment went from “I can’t believe that the market has gone down so much so fast. This is just the flu. There’s something wrong” to “I can’t believe the market has gone up so much so fast. This is one in a 100-years health and economic crisis. There’s something wrong”.   

Financial markets constantly try to discount events that haven’t happened yet. Sometimes, they are great predictors of what’s to come. Other times, they are terribly wrong. The price action is  currently projecting that everything might be back to normal a year from now. It seems counter-intuitive, but the facts are the facts.

The digital economy stocks were thriving and the old-economy stocks were under pressure for a decade. The current health and economic challenge will only accelerate those trends.

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

PERFORMANCE

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

Check out my free weekly email.