Ivanhoff Capital

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It is a bull market out there but the bullishness is not equally distributed. This is why we call bull market stock-picker’s markets. Three industries are in favor at the moment – biotech, homebuilders, and semis (5G related). This can change next week and other industries might step up and shine but as of right now these are your leaders.

Bull markets often correct through sector rotation. While QQQ and SPY keep making new all-time highs, there are still quite a few stocks that are struggling – take a stroll in the retail universe and you might be surprised how much relative weakness there is: NKE, RH, LULU, MCD, CMG, SHAK, etc.

We saw some crazy earnings-related moves last week: PINS tested their IPO price at 19 where it bounced. ANET was completely obliterated after substantially reducing revenue guidance. MELI and ETSY took a hit – in a matter of a few months they turned from market leaders to several market laggards. FB and BABA could not muster a rally despite strong earnings reports. On the other side, we saw strong earnings breakouts in semiconductors and building-related stocks. Overall, there is a mixed message from the reactions to earnings reports. My thesis is that many stocks will continue to chop in a range under the end of earnings season and after that we will see them break out and sustaining an uptrend. 

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The charts on Momentum Monday are powered by MarketSmith

We spent the past few months in a range-bound trading environment which brought quick reversals and multiple sector rotations, confusing a large group of market participants and conditioning many traders to take their profits quickly. There are some signs that we might be entering a new trending market environment where more breakouts are likely to work and it will pay to hold to our winners longer.

We are finally starting to see breakouts in growth, story stocks that are following through. Look at the short squeeze in TSLA last week. 

AMZN missed estimates, went down 10% in the after-hours session on Thursday, only to almost fully recover the next day. Dip buyers are firmly in charge. There is no more positive indicator of an improving market sentiment than a positive reaction to a weak number. 

Granted, many software stocks are still in a downtrend and guilty until proven innocent but some of them are already starting to stabilize. For me, they remain strictly and intraday or swing trading vehicle. I don’t trust them as a longer-term holding just yet.

In other words, the indexes are just a few points away from a FOMO territory (fear of missing out).

P.S. You can now subscribe to my private Twitter feed and follow my options and stock ideas and commentary in real time. You don’t want to miss out on this opportunity.

The charts on Momentum Monday are powered by MarketSmith

The momentum from the previous week fizzled a bit with the start of the earnings season. It is still very early to judge, but so far we can say that bank earnings have been accepted very favorably and some of the tech earnings not so much. Look at the fade in NFLX and the breakdown in TEAM, for example. 

The same two major themes continue to persist in the market:

1. Homebuilders and building material stocks are shining and are basically the new momentum stocks. Many of them are already up 10-20% for the past couple of months. 
2. Many enterprise software stocks continue to decline due to fear of rich valuation. The Wework debacle really scared many investors and it has reset the valuations not only in the private but also in the public world.

P.S. You can now subscribe to my private Twitter feed and follow my options ideas and commentary in real time. You don’t want to miss out on this opportunity.