Momentum Monday…My Kingdom For a Rally

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Happy Monday.

As always, Ivanhoff and I tour the markets to look at what is working. You can watch the video here and I have embedded it below:

I have a hunch the combination of time of year and the fact that financials are rising on ok numbers and most of small amd midcap tech trying to stop going down on bad numbers will help the new leadership – drugs, defense, food, large cap biotech ($amgn and $vrtx) get the S&P back to and over the 200-day moving average.

Here is what Ivanhoff has to say:

Amazon, Meta, Google, and Microsoft missed their estimates and/or gave very weak guidance. They sold off and the main indexes didn’t even blink. The Nasdaq 100 and the S&P 500 still finished the week deep in the green. People wanted a “market of stocks” environment. This is what we are having right now. While some of the mega-caps are struggling, there are plenty of stocks from various sectors that are breaking out after earnings and following through. I don’t know if this is just a short squeeze before another rug pull, but last week certainly provided good opportunities to make money on both the long and the short side, if you were nimble enough.

FOMC is this Wednesday. One can make the argument that the market is currently betting that the Fed is going to somehow pivot. Other central banks (ECB, Canada, Australia) have already said that they plan to slow down with their rate increases. The Bank of Japan is already doing more QE. Can the Fed also blink and fold? I would not bet on it, so I would expect further volatility next week. If the market really wants to continue to rally, it doesn’t matter what the Fed is going to do or say next Wednesday. News is always explained based on the price action:

The Fed raises 75bps and stocks go down – “What did you expect? They said they will keep raising”.

The Fed raises 75bps and stocks go up – “The worst has already been priced in”.

See. It is easy to come up with a viable explanation after any price move.

The real question here is how do you make money or at least, how do you make sure that you don’t lose too much of it? For me personally, earnings plays have been working well on the day of earnings and as a follow-through the next day or a few days later. Some recent examples include NFLX, ISRG, SHOP, DXCM, WING, ENPH, etc. The earnings season is still young. There are plenty of companies left to report. Fresh news leads to big short-term moves and sometimes, to big longer-term moves. In the meantime, I am keeping an eye on volatility and correlations. If two of the main three indexes (SPY, QQQ, IWM) close below their 20-day EMA, this bounce can be considered over and I’d focus on the bearish setups.

Here is the Stocktwits momentum 25 lists.

Have a great week.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here.