Hello friends,
At the moment, money is rotating in and out of certain stocks & groups, as is generally characteristic of a choppy environment. Money comes in for a little while to give certain groups a push, the illusion of the start to a substantial move – but really, even for short-term swing traders there are only limited profits to be made, to say nothing of longer-term speculative endeavaors.
Currently, the popular indices and especially the NASDAQ are melting up – and that is the right choice of words, as there is something melting … the ice below the feet of these indices. NASDAQ made a significant move on abysmal volume, and is the only index to do so. Single corroboration came from the SP500 attempting to move above its February High as NASDAQ did a few days ago, and of course both SP500 and NASDAQ are both cap-weighted and almost completely driven by the old juggernaut large- and mega-caps AAPL, MSFT, GOOGLE, NFLX, META, NVDA, etc. On Friday, SPX reversed on slightly rising but not strong volume.
Specifically NVDA & GOOGL seem to be leading this melt-up, both still heavily trafficked by amateurs looking to pile into the latest AI vogue stocks. All old leaders, and all old news. One look at the NYSE will show that the broader market is not following in lock-step, and the intermediate-term trend might actually be looking towards logging lower Lows again.
This thin rally dynamic though may stay protracted for longer – the market still has not been washed out of the 2020 Tech speculators that still cling to their darling stocks, and the amateur horde (including amateurish fund managers) can keep a market up longer than one would expect.
Some changes in leadership
The two noteworthy developments from this week were the sagging back of mid- & large-cap consumer retail stocks, and dropping price action in precious and industrial metals.
Over the last couple of months, there had been a clear bettering in price action of many retailer stocks, however often driven by low volumes and thus most likely small speculators betting against a consumer recession. Stocks like DECK, DKS, ASO, CROX, TPX had been performing well – but right now, money is starting to flee and move on to greener pastures again, with bad price action appearing or exacerbating.
Meanwhile, copper started again into an intermediate-term down-trend – at least for the moment. Many copper stocks attempting to move out of digestions thus failed and rolled over (prominently, SCCO).
Gold has pulled back slightly, but erratic price action is no stranger to gold futures. As of this moment, it looks more like it is consolidating near all-time price Highs. Over the last months and years, money has started betting heavily against central banks causing inflation and eroding purchasing power of fiat currency. In March/April, the resurgence of bank insolvencies has brought some fear into the markets (though clearly not enough), and gold might just be taking a breather here before commencing a multi-month/year rally. It is too early to tell, but despite a good group movement, not many stocks are anywhere near actionable.
More amateur speculation in heavily depressed stocks
Success in the stock market is all about being in sync with the large capital flows. It is always amusing though and instructive to watch amateur betting happening.
Last 1-2 weeks, a bunch of the old dogs that were beaten into a coma by sellers in 2021/22 have reignited – some on speculation on AI, others on earnings presented on golden platters. NNOX, AI, IONQ, PLTR, UPST, and many more showed clear amateurish betting on obvious and long-discounted news, or stocks that are far from actionable. Another sign of a market full of complacency.
Only few silver linings in the true leaders
A lot of renewed bad price action has accumulated in the better-grade ideas, again emphasizing the hostile nature of this market environment.
SWAV, as predicted, has failed to resolve its relatively strong digestion in a positive way, whipsawed heavily, and is on the brink of rolling over. It’s a heavily crowded stock, and the fact that it can’t attract follow-up buying demand (much like LNTH or CELH) all while NASDAQ is leaping up should be enough of a red flag to anyone still in the stock to keep open risk tight.
The hip Swiss footwear retailer ONON has been sold heavily during the liquidity window of its late earnings report. I wrote earlier that the time to venture into this was not on the horizon yet by a long shot, and the FOMO traders that bought the gap-up will now start to sit on losses. It’s another typical example of what happens to a stock with strong overhead supply when subjected to a jittery market – even a positive surprise can tank the stock, with holders selling into the awe-moment to pare back open risk. ONON beat expectations by 76% – massive in its own right – and the stock proceeds to sell off >20% on heavy volume. Not a good sign.
More bad action was visible in the recently leading INTA and PERI, both more thinly traded and starting to show choppy (INTA) or down-ward (PERI) price action. PERI has declined ~28% on heavy volume from its top, and far below recent support.
Meanwhile, the few left leading tech stocks have staged somewhat of interesting rallies following NASDAQ. RMBS and especially ACLS have shown great price action, though ACLS displays a rigorous lack of buying volume, which is along its recent ~1month price action reminiscent of AEHR just before it keeled over. Should it not, then it would remain one of the few great quality stocks maintaining strength in this market and worth monitoring.
Last, SMCI is likely the strongest stock in the market at the moment. It has been displaying very questionable price action for months, likely marked up and distributed heavily by institutional insiders. Right now, it is showing signs of climaxing, but such parabolic moves can go longer than one may think possible. All this does not mean that SMCI is topping, not yet at least. But it has been trading very choppy for a long time, and risk management is near impossible in this stock. Whether it can survive what’s likely about to happen to it is still very much in doubt at this juncture.
All in all, there is some price action in some good-quality stocks, but as I’ve been lamenting for months on end it is just not enough to show a changing market as of yet.
Tread with care, and perhaps direct your attention to greener pastures as well.