Happy Monday everyone.
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As always, Ivanhoff and I get together Sunday’s to discuss the momentum in markets.
You can watch this weeks episode here and I have embedded it below:
Mr. $VIX finally reared his head and it was another strain of COVID that set it off. The small caps were already pulling back into support and the growth stocks of the last few years were already getting hammered. The bright spot for consumers would be that oil was crushed on this news.
The $VIX had one of its biggest one day move ever…but don’t despair, Charlie charted the markets one year out from big $VIX moves and the markets are generally much higher:
The Small Caps are forecasting a ‘crisis’ of some sort so I will be watching the price action closely this week…
If the ‘crisis’ is this new strain of COVID, the airline stocks are telegraphing that they can’t handle it well. The hotels and mall stocks hung in better last week but the airline stocks and Boeing look like hell. That makes sense to me as the government has so much new power that the airlines will be the easiest to shut and keep the citizens happy with local eating and shopping and less strict rules.
Investors are not too scared at the moment as they hide out in FAANG stocks for the moment which yield more than treasuries anyway.
Ivan has his quick summary below:
The market has been telegraphing the Covid threat for the past three weeks. The recent acceleration in big tech stocks’ ascent and the decimation of the so-called reopening industries have been clear signs and we often talked about them here. What we saw on Friday was something different. It was a panic. There is a new significant mutation of Covid and we know very little about it yet – is it more transmissible, is it more deadly, how efficient are vaccines against it. When things become clearer, the market will calm down. Until then, we might see more widespread weakness.
At some point, the smart market participants will realize that there’s still plenty of liquidity in the market and an accommodating Fed. All that money is not going to sit idle on the sidelines. It will rotate somewhere. That somewhere can be vaccine stocks – they have proven to be effective, the same technology can be used to quickly produce a version that will deal with any mutation, and it seems the world might need an annual booster shot for the next couple of years. Or enough people will realize that the virus mutations and lockdowns will accelerate “the work and play from home” trend which will benefit the companies that are building the metaverse – U, RBLX, NVDA, FB, MANA, etc. Or what if Pfizer’s antiviral drug turns out to be very efficient against any of the virus mutations – in this case, all the so-called reopening stocks will have a major rally. In other words, after the panic subsides, money will rotate somewhere and very quickly.
In the meantime, the clean-tech space is holding relatively well. Look at the major EV stocks. Most gained ground last week, even the Chinese ones.
Elsewehere…here is Charlie’s 7 Chart Sunday.
Charlie also has another great post up discussing asset allocation and how to avoid another lost decade if this market has you too worried.
Finally, here is this weeks Stocktwits Momentum 25 Lists where I start my work each weekend.
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