Hello friends,
The market has bounced from a somewhat oversold state over the last few weeks. The tepid rally was largely on questionable volume, as expected.
So far, the popular indices of NASDAQ Composite and S&P 500 have both been rebutted by their down-sloping 50DMAs which were met with distribution:
Again, dip-buying and likely remaining over-bullish sentiment in the tech mega-caps have propped up those two indices, masking wider damage and more aggressive selling in the rest of the market. See for example the steeper angle in the IWO (growth segment of the Russell 2000 mid- and smallcaps) or the IWC (microcaps) which have yet again made another 3-year Low in price:
Legacy energy leads the market
Coal has been the winner over the last few weeks, with many important equities sprinting sustainably into new High price.
Oil futures have been (temporarily?) rebutted by their down-trend line, however at least moderate action in many stocks lend strength to the hypothesis that we might see a trendline break or even a trend reversal in the coming months:
Though some strength is appreciable in a group of O&G socks (e.g. FANG, see below), they have been trading sloppy and with many whipsaws – so far free price exploration near new Highs remains a higher-risk undertaking and profit potential appears limited – any advances lack conviction and speed (e.g. VIST), which however is not rare for basic materials equities.
Capital continues to flow into defensive plays
Apart from energy and as before, sectors and industries attracting the most mutual fund inflows are construction and capital goods stocks, large biopharma and healthcare and insurances. Please see the previous reports, as virtually no change has appeared.
Bounce flares up old FOMO
New markets need new names. In this bounce, the only stocks that have been substantially rallying were once again collapsed past leaders and AI euphoria plays, such as SYM (44%), PLTR (35%), AI (18%), IONQ (27%) or SMCI (39%). As long as crappy old names under distribution continue to attract market participant buying in lieu of novel stocks under accumulation, there is no firepower for a new bull market.
Keep your powder dry for speculating in stock positions – this market is only good for short-term trading.
So long,
TGS