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As always, Ivanhoff and I got together to tour the markets. My friends at Lumida summed up the recent market activity with this ‘ Everything You Can’t Print Is Up’.
Uranium, oil, Bitcoin, gold - the World War 3 stocks were quiet.
It was a big bounce/rally week for the worst stocks of the year - small caps, unprofitable tech.
It was a great week for stocks that flexed their ability to go from unprofitable to profitable ($SHOP, $UDMY) and and that’s what I focused on most in this weeks conversation. Microsoft is now back leading the biggest of the big stocks.
You can watch this weeks episode right here on YouTube. It is easy to subscribe so please so that every Sunday you will get an alert when we post the show.
Here’s Riley’s screen that tracks new 52-week highs and lows sorted by the total followers on Stocktwits. For those unfamiliar, here’s the gist.
In uptrending markets the least followed stocks with the highest relative strength are most interesting to me.
In downtrending markets, the most followed stocks with the weakest price relative strength are most interesting to me.
Riley shared a few words on this week’s results…
Arista Networks ($ANET) is the New High Standout of the Week. The cloud networking provider gained +20.60% after it beat earnings expectations and raised guidance. $ANET closed at a new all-time high.
Dorian LPG ($LPG) is a notable New High. The liquefied petroleum gas transported accelerated +20.78% following its Q2 earnings report, closing at an all-time high.
GoDaddy ($GDDY) is a notable New High. The web service provider surged +13.79% following its Q3 earnings beat.
Paycom Software ($PAYC) is the New Low Standout of the Week. The cloud-based HR provider dropped -33.84% and closed at a 4-year low. $PAYC reported earnings on Halloween. It missed top line estimates and shared spooky guidance.
Bill Holdings ($BILL) is a notable New Low. The back-office software provider collapsed -25.23% after its earnings report. $BILL beat top and bottom line estimates, but lowered guidance.
Spirit Airlines ($SAVE) is a notable New Low. The budget airliner declined -23.55% as the Justice Department’s antitrust trial to block its sale to JetBlue began Tuesday. Here’s Reuters with the story. Loser average losers… On Thursday, Spirit announced it will end service at Denver International Airport early-2024.
Click here for the full weekend review.
Here are Ivanhoff’s thoughts:
Last week, we talked about the potential for the FOMC meeting to become pivotal for a market bounce. This is exactly what happened. Sentiment changed after the FOMC meeting. Powell finally said that the current risks are balanced between inflation and a recession. This means that the Fed is not likely to touch interest rates in the foreseeable future unless something breaks. This was enough for the stock market to rip higher. In the meantime, interest rates and the U.S. Dollar pulled back which is usually a green light for stocks.
A few days into this bounce, one can clearly see that the worst-hit groups in the past three months outperformed by a significant margin. Typically junk outperforms either during bear market rallies or after a deep and long market correction. It can easily be the former, but we are going to give the benefit of the doubt to this rally until we see some evidence of heavy selling.
The silver lining of last week is that there were several back-to-back high-volume accumulation days in the small-cap index – something we haven’t seen since June of this year when the stock market started its big summer rally. Another potential tailwind for the current bounce is the overall reluctance to believe in it after so many failed follow-through days in the past few months. The majority of market participants are underinvested, short, or want to get short. The first group is praying for a dip so it can enter with a tighter stop. This is not a bad approach, the problem is that when it finally happens, many will be too afraid to pull the trigger.
Keep in mind that the indexes haven’t made a higher high yet. They are up several days in a row, so it’s only normal if there’s some form of consolidation sometime soon. The new leaders will stand out during that consolidation.
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.