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Momentum Monday - An Uptrend With Some Froth... And Are We In The Winter Of Despair or A Spring of Hope?
Howard Lindzon
June 12, 2023
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Good morning everyone.
I have a busy Monday running around New York and New Jersey to meetings.
Yesterday, as always, Ivanhoff and I got together to discuss the momentum and trends in motion and taking shape. The technology stock uptrend continues, some froth is starting to show and ‘crypto’ is being kicked in the ‘alts’ led by The SEC and Gensler. I speculated on some of the reasons and as always we shared a few ideas. Late yesterday, Chris Dixon of A16z crypto dropped that they will be opening up a crypto office in the ‘friendlier’ confines of London. Look for more bigger ‘crypto’ firms to do same rather quickly and WeWork London to catch a bid for space.
You can watch this weeks episode right here on YouTube. It is easy to subscribe and if you do every Sunday you will get an alert when we post the show to YouTube.
Chapters:
‘This Is Not Financial Advice’ Premier (0:00)
Sector Rotation (1:10)
Big Tech (2:50)
IPO’s (5:10)
Crypto (6:00)
Gambling (9:40)
Rates (11:45)
Tesla (15:05)
AI (18:00)
Homebuilders (19:45)
Closing thoughts (21:00)
Here are Ivanhoff’s thoughts:
Bull markets rotate through sector rotation. This is exactly what we saw last week. Small caps followed through while large caps consolidated their recent gains. Towards the end of the week, we even had some old highflyers popping up – GME, BBWI, APRN, BYND, and PTON. Those are not even A.I. or quantum computing related. They are just highly-shorted former octane momentum stocks. When they reach for the bottom of the barrel, there is usually a rug pull around the corner. The timing of this signal is rarely exact. From a strictly psychological point, it makes sense – when there’s too much froth in the market, we tend to see a sudden pullback that scares people out. The FOMC meeting this Wednesday might be an excuse for it.
The overall uptrend for the large-cap indexes SPY and QQQ is still intact. A slight pullback to their 20-day moving averages would be completely normal. Dips during rising markets highlight potential future winners. The stocks that try to break out or go sideways while the indexes decline are likely to outperform when the indexes recover.
A.I. is still the hottest narrative in the market. We are at a stage where it is not driven by just a few stocks like NVDA, MSFT, GOOGL, AMD, and ADBE. Smaller, more speculative names are starting to perk up – AI, SOUN, YEXT, UPST, IONQ, QBTS.
I enjoyed Andy Kessler’s riff on where we are right now with the markets and economy which are not the same:
Are we in “a winter of despair”? High interest rates, debt overhang, money-supply overhang, the commercial real estate time bomb and pending corporate-earnings blowups. Feel free to add Ukraine, Taiwan and Biden-Trump part deux.
Or are we in “a spring of hope”? It sure feels as if inflation and rate increases are closer to the end than to the beginning. The U.S. is a relative haven of stability compared with the rest of the world. White-collar layoffs and blue-collar labor shortages are starting to peter out. Banking has stabilized, and a radical restructuring of work is happening right before our eyes and could trigger a productivity revolution.
A few more of my favorite links on markets:
Have a great Monday.
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.
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