The major indexes lost some ground, but under the surface there was a lot more strength than weakness. 26 dropped 10% or more for the week as opposed to 68 gaining 10% or more.
The weakest links were ex-dividend stocks and some small-cap semiconductors. $CRUS, which derives 80% of its income from Apple, was one of them. Remember November 1st, when $CRUS gapped down 10% despite having an amazing earnings quarter that blew out expectations? Cirrus lost another 30% from there, which comes to remind us that reaction to news is much more important than news itself. There is simply no better indication of major shift in sentiment than poor reaction to what appears to be good news. Don’t forget that momentum stocks have very special supply/demand dynamics. On the way up, valuation does not matter, because momentum investors simply don’t care about it. But, once a trend is broken, valuation starts to matter. With that in mind, $CRUS is at an important technical level here, where buyers are likely to emerge.
On the strong side last week, we saw quite a diversity.
Refiners and airline stocks continue to shine as crude oil is parked at 5-month lows. Let’s see how long this continues. Both group are usually very volatile and cyclical, so at some point they will become epic shorts. No reason to guess when. Price action will tell us.
Steel and coal stocks rallied from the bottom of the pits after better than expected economic data came from China.
Emerging markets continue to outperform. And they are not the only international markets doing well lately. Germany, Belgium, Holland’s ETF are also at 52-week highs
For the week, the St50 index lost 0.59%. It is still a market of stocks that provides good opportunities for both shorts and longs.
$CRM was widely watched and telegraphed long setup and yet it worked. This happens in the beginning stages of a recovery. In fact, obvious setups stop to work when the market is ready to turn over, so don’t overthink it. If you see a good setup, just take it and let the market take you out, if it happens that you’re wrong. A few failed setups in a row would mean that the market is not healthy and you need to re-evaluate your positioning.
$LULU followed up on its strong earnings gain, but it met some resistance near $75. This seems to be the next level of pain that shorts will try to protect next week. 22% of Lululemon float has been sold short, so there is plenty of ammo for a short squeeze.
$N recovered from a really vulnerable position below its 50dma and it is back near all-time highs. It continues to be an appetite acquisition target for a few of the software giants.
$INXN is already comfortably above its 50dma and it is looking to test its all-time highs soon.
$ISRG tested its earnings breakout from October successfully and it is back above its 50dma. It looks decent on both weekly and daily time frames. It is important to see high-ticket stocks like $ISRG get their mojo back as it is an indication of institutional interest in the market. $GOOG is not on the St50 list, but it is in the camp of high-ticket stocks that have been acting extremely well lately.
You can easily follow any or all of the stocks in the ST50 on StockTwits by clicking here.
Have A Great Weekend!