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Momentum Monday .. Value Is Spreading...and Railroads Beat Technology Over Last 20 years

Author

Howard Lindzon
November 28, 2022

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

Good Monday morning...

My blog host (Beehiiv) has asked me to test out some ad formats for their email platform and I have decided to help them test the feature. The first ad is with Chartr a product I have used. I plan on donating this ad money to a local Phoenix charity (food banks).

Onwards,

There is a strong pulse brewing in the value sector and the Dow Industrials. The index I am following that tracks the value stocks is $VTV and you can search the ticker on Koyfin for the holdings of the ETF (I did that for you here and the product is free).

For most of the year it has been the energy sector and some commodities leading the way, but now it includes, drugs, financials, defense stocks, select healthcare and some consumer staples. Boring is definitely a strategy if your other choices are broken growth stocks.

As always, Ivanhoff and I tour the markets and discuss all of the above as well. You can watch the video right here and below:

Here are Ivanhoff’s thoughts and he lists the defense stocks that are strongest right now:

The market had its bounce in October and so far in November and SPY is back to its declining 200dma. Can we see some chasing and FOMO in December or will more selling follow? No one really knows. There are good arguments for both scenarios. I want to remain open-minded and trade the setups that show up instead of guessing the market direction.

Most breakouts have not been following through lately unless there is an immediate earnings catalyst. Such price behavior reveals a lack of urgency to own and chase in this market. In the meantime, some strong stocks have consistently accumulated on dips to potential support areas. The solar stock ENPH is a prime example. Every single breakout attempt has been met with fierce resistance, yet every pullback to its 10 or 20-day EMA has been scooped up.

My philosophy is that the market is forward-looking. It constantly tries to look 6-9 months ahead in the future and imagine what could happen. Take for example the price action in Zoom (ZM) – it has been declining for many months while its earnings and sales have been still impressive. Just now, we are starting to see a slowdown in their growth. The market anticipated that and acted accordingly. Price action has been a good leading indicator. Or take into account the market reaction in retailers this earnings season. The vast majority of them reported dismal numbers and yet, we saw rallies that seemed a bit counterintuitive. The market is seeing the potential for a recovery that is not reflected yet in those companies’ earnings. The former are forward-looking, and the latter are backward-looking. I rather trust price action than current earnings growth.

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Some other regular Momentum Monday links:

The price of energy is down year over year for first time in a whil - but energy stocks up 68 percent over the same time:

Finally, it is the railroads crushing even technology stocks over the last 20 years. People still need to eat and buy stuff...the cloud and software are magic but you can't eat it and we need those railroads:

Have a great week.

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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