Momentum Monday – From Frothy To Constructive

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This weeks episode of Momentum Monday has many fresh ideas as Ivanhoff and I tour the markets looking for momentum and trends. Here you go.

As Ivanhoff clearly points out:

Bull markets correct through sector rotation. This is exactly what happened last week. While many tech stocks pulled back to their rising 20 and 50-day moving averages, we saw capital rotating into other sectors – transportation, solar, medical devices, homebuilders, biotech, gold and silver miners. In other words, the money is not leaving the market; it’s merely rotating into other sectors. This is why the dips in the indexes continue to get bought ferociously.

I have had the full range of market emotions since February.

Over the last six months I have moved from complacency to panic, to speculation, to FOMO, to froth, to defensive (just me it seems) to now constructive. Yes constructive.

The frothy stocks seem contained to the Reddit and young Robinhood traders.

The FOMO has trapped some people chasing FAANG stocks as well as Microsoft and Tesla, but the global demand likely ahead from 1000 Robinhood clones should bail these buyers out in this global easy money environment.

Why I moved so quickly from last week defensive to this week constructive is the price action beyond technology and biotech stocks.

There is continued strength in biotech and foreign stocks (maybe the weakness in the dollar) and a solid rotation into healthcare, solar, transportation, materials and homebuilders (of course interest rates help)

The shining stars this week were Medical Instruments and Solar. The ETF for medical instruments is $IHI (that has been on my 8 to 80 list) and for solar it is $TAN.

Charlie’s five chart Friday is always a good read to offering concise, additional context to the week ahead.

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.