Momentum Monday – The Simulation Is Making Me Nervous

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Happy Monday.

As always, Ivanhoff and I do our weekly video and you can watch/listen right here.

Ivanhoff has a great synopsis of the market action and themes defining the price action in the US Markets:

1. Asset inflation and the U.S. Dollar. It is simple, if the U.S. Dollar continues to lose ground, people will attempt to protect of purchasing power of their capital and the price of many assets is likely to go up – stocks, real estate, crypto, precious metals.
2. So many breakdowns in software stocks after they reported earnings illustrating that the COVID-related restrictions and spending cuts are not favorable for all tech stocks. This has been an ongoing theme for a second week in a row.
3. Small caps finally woke up ($IWM). I don’t know if it is because of the expectations of another stimulus, a working vaccine, or just catching up with the rest of the market. A potential rotation into small-caps will only prolong the current rally in stocks.
4. More strength in solar ($TAN). Every single earnings report in solar has led to a gap and go this quarter. None of those reports showed spectacular growth. The market is forward-looking and buying in anticipation of a major new clean energy bill.
5. The dips in mega-cap tech stocks like $AAPL, $FB, $AMZN, and $GOOGL are still scooped up. Obviously, no company is completely invincible and politicians like to attack the big and successful.
6. We saw some epic melt-ups in highly shorted stocks – $CVNA, $W, $OSTK, $CELH, etc.. While fun while they last, typically those tend to happen towards the end of a bullish cycle. They are not the perfect timing indicator but it is something to be aware of.

Ivanhoff is a swing trader so he will attack the market from all sides.

I’m an old trend follower so at one level it’s easy…the big names (FAANG, $MSFT, $TSLA and the $QQQ) continue to be in good trends.


The digital war with China, the Friday night executive orders, the sloppiness/negligence of the White House (Kodak), the relentless money printing, the get the market higher at any cost on every day, combined with what looks like a broken street level economy is making me uncomfortable holding stocks just because prices are going up. You have to throw in that nobody seems fully prepared for what happens when school starts at scale across the country.

I won’t be shocked to be stopped out of long term trends in the next 30 days or have a rotation surface some strong new trends outside technology.

There is something for every type of trader in these markets, so I will let this week play without too much overthinking and I hope to have some better clarity next week.

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.