Ivanhoff Capital

Momentum Monday – Pullback Mode

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The market finally blinked and pulled back after it became clear that the coronavirus will have a significant impact on China’s and therefore, the world’s Q1 GDP growth. Starbucks said that half of their stores in China are closed while the rest are operating at reduced hours. Apple confirmed that one of their stores is close. Crude oil cannot find a proper bid. Copper is in a free fall. The semiconductor and biotech ETF which led the market higher late last year are already 9-10% below their 52-week highs.
There are some stocks are showing clear relative strength and trying to break out even in this weak tape. The odds are that they will remain in a range if the market continues to discount a potential negative impact from the coronavirus. We covered: NFLX, PTON, ZM, TNDM, RETA, AAXN, TSLA, AAPL, among others.

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PERFORMANCE

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Momentum Monday – Gold, Treasuries, and Software

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The new earnings season coupled with the coronavirus fearmongering is certainly contributing to a choppier tape. As a result, gold and U.S. Treasuries have been rallying. Both can be a good hedge. When the volatility genie escapes the bottle, it is hard to get him back in. A rise in volatility typically begets more volatility, at least in a short-term perspective.

Everyone is looking at the price action of the indexes for a clue if a correction is coming. The problem with this approach is that the indexes are lagging indicators.

The biotech ETF which was among the first ones to break out and lead this rally in October is now among the first ones to break below its 50-day moving average. 89-90 is a huge level for XBI and if it doesn’t hold, we might be in for a lot more volatility.

Of course, this might be just another sector rotation. On Friday, we saw enterprise software stocks showing clear relative strength. MDB, TWLO, EVBG, PLAN, and others were green in an ocean of red. It can be due to the strong earnings report from Atlassian (TEAM) or it can be because of a bigger industry-wide reason. We will know soon enough.

PERFORMANCE

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

Momentum Monday – Small Caps Are Waking Up

The charts on Momentum Monday are powered by MarketSmith

Three developments stood out last week:

1. The small-cap index, Russell 2000 had a big breakout. Small caps are trying to catch up with large caps, which many of which have been making new all-time highs every week in the past three months. For Russell 2000 to catch up with the S&P 500 and the Nasdaq 100, it will need some heavy lifting from energy and financial stocks which are still lagging for the most part.

2. The highest-shorted stocks outperformed again. So many stocks with high short interest continue to squeeze higher: CGC, TLRY, TSLA, LK, PETS, SHAK. Some potential candidates for the next week: DDOG, PTON, INMD, STNE.

3. The earnings season has just begun. So far, a few big banks and a few semiconductor companies reported. Starting next week, it gets a lot more interesting as companies like NFLX, SBUX, INTC, and TEAM.

We also talked about the impact of tariffs on semiconductors and why AMZN is lagging the other mega caps.

PERFORMANCE

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