It is said that every truth goes through three main stages – first it is ridiculed, second- it is violently opposed and third – it is accepted as being self-evident. Bull and bear markets go through similar psychological stages. When the market reaches that third stage, price becomes the news. You have probably seen some of the headlines recently: S & P 500 at 1500, Down 14k, SPX just closed it best month in 15 years.
Everything is rosy and rising. There is not a single cloud in the sky. Bad news is ignored. Good news is considered a confirmation of already well-established positive price action.
And yet, there are some signs of potential troubles ahead and soon. I am not talking about ‘overbought’ readings. Bull markets are constantly overbought; have been so for the past several weeks by various breadth measures and yet the indexes continued to climb the proverbial ‘wall of worry’. Corrections have happened under the surface in the form of sector rotation. Money never left the equity market. It just moved from one sector to another.
Here is what is wrong with the market right now. Momentum stocks are starting to fall behind. For the week, the St50 index dropped 0.4% while the $SPY and $QQQ gained more than 1%. Momentum stocks typically lead on the way up and on the way down. The indexes are usually lagging as sector rotation and fear of missing out prop them up.
On the bright side, enterprise software stocks continue to shine on the St50 list. $MANH, $CVLT, $AZPN and $N crushed analysts’ estimates and tagged new multi-year highs during the week. $ULTI is back on the list. $CRM continues to consolidate near all-time highs, bringing sleepless nights to the shorts.
$ABAX cleared a 6-month long base after reporting much better than expected earnings on Friday.
3-D printing stocks expectedly tested their rising 50dmas. They need time to carve new bases.
$TASR crumbled below its 50dma. Its uptrend is still intact.
You can easily follow any or all of the stocks in the ST50 on StockTwits by clicking here.
Have A Great Weekend!