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I am in Spain on my twice year hard, but fun European cycling trips. Tomorrow I head into France and the Pyrenees.
As always though, I caught up on the markets with Ivanhoff to see what is working and not working.
Energy is still underweighted in the indexes and by individual investors and one look at Exxon’s chart which we share shows you that while boring, the stock looks ready to go higher.
Apple is moving up market with price increases for new iPhones which makes sense because they are a luxury brand. They want to create silly priced iPhones and suckers like me will upgrade.
That said, luxury stock leaders look exhausted (LVMH and Apple) and stocks like Livenation and Bowlero have charts that show the slowdown that is happening at the consumer level. What is good for creators like Taylor Swift is not really great for consumers.
You can watch this weeks episode right here on YouTube. It is easy to subscribe and if you do so, every Sunday you will get an alert when we post the show. We break it down by chapters so you can go right to the parts that interest you…
Chopping around (0:38)
Fizzling breakouts (1:20)
Luxury, Entertainment, and Speculation (3:40)
Tech & Software (7:30)
Underneath the indices (10:15)
Here are Ivanhoff’s thoughts:
Market breadth has been deteriorating. 10-15 large-cap stocks account for the majority of the indexes’ gains year-to-date. Typically weak market breadth precedes market weakness but not always. The last time rally participation was small back in March/April, we saw an expansion into more sectors. This time we have weak seasonality so things might play out differently.
The Nasdaq 100 and S&P 500 held above their 20-day moving averages. If they lose them, we will probably see an acceleration in selling. A lot will depend on market rates. The 10-year rates are hovering around 4.3%. A breakout there will weigh down on tech stocks. We are already seeing some of them breaking down. If NVDA loses 450, it can pull back to 435.
AAPL was under significant pressure last week on news that China doesn’t allow Federal government employees to use iPhones at their workplace. The China/U.S. relations seem to be souring. The rally in Chinese ADRs lasted a blink of an eye. It failed quickly just like it did many times this year. U.S. officials keep saying that doing business in China is not possible for Western businesses anymore. Deriving a significant income from China is turning into a liability again. Just look at the price action in SBUX, NKE, AAPL, WYNN, LVS, and many semiconductors.
One has to remain nimble and tactical in this choppy environment. There are decent opportunities on both the long and short side but if you don’t stay in them for too long. Stocks like ABNB, UBER, GOOGL, and AMZN are building new bases. Cyber security stocks like CRWD, ZS, OKTA, PANW, ANET are setting up for potential breakouts. September is seasonally weak so most breakouts are not likely to last for too long. It is a scalping market environment. If the indexes lose last week’s lows, I will go heavier on the short side for a quick trade.
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. -