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As always, Ivanhoff and I get together over Zoom to tour the markets and cover what we are seeing in price acton and momentum.
The Nasdaq is at 13 month highs and the headlines could not be gloomier. Two things can be true…America can be imploding and we all may die because of AI, but stocks can go up (I guess that is 3 things). I have been harping on this for months, but the headlines will stay terrible for a long time. The debt ceiling, shitty Presidents and government leaders, expensive homes, expensive stocks, personal debt rising while we kick the can down the road on student debt yada yada yada and TRUE.
BUT, all of old media and most of new media is ‘all in’ on clicks that breed fear and anxiety. You do not get clicks by telling people to stay 100 percent invested and to turn off all news.
There are 50,000 Jim Cramer’s in 2023 with traffic that Jim Cramer 1.0 wishes he had. Most are focused on ‘them’ winning which means you may enjoy following them for a while, but eventually you will be disappointed as only they win. Two people I actually respect love AI and differ on the future of America. Stan Druckenmiller is worried and Stevie Cohen is bullish…
I believe in fundamentals, but the price is the truth. The trust is that tech stocks prices are rising. The question over the next few weeks and months is do tech prices catch ‘down’ to a slowing consumer, weak retail, bad banks which is pressuring credit, bad real estate. If I knew I would tell you.
Please do 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.
Here are Ivanhoff’s thoughts:
A few times every single year, market conditions are ripe to extract extraordinary returns while you can risk very little. They usually last a few weeks before trading profitably becomes significantly more challenging. Recognizing those special times is a valuable skill because they can account for more than 90% of our returns for the year. There are times to go long, times to go short, times to go fishing, and times to really get aggressive in the market. The opportunities that the market offered in the past two weeks were exceptional. Driven by the A.I. frenzy, stocks like NVDA, AMD, NFLX, GOOGL, AMZN, META, and MSFT made remarkable short-term moves. Those names offer all the liquidity in the world and one can easily build a sizable option position in them. Risk very little to make a lot. I managed to participate in some of those setups but I certainly wasn’t as aggressive as I should’ve been. I took partial profits too soon and I didn’t add to my winners. Maybe it is my traveling through Europe. Maybe, I didn’t recognize how special those opportunities were because I paid too much attention to scary macro rhetoric about the debt ceiling, recession, the Fed, small caps, and weak market breadth. Or maybe, hindsight is 20/20. I’d like to believe that proper preparation which includes staying in the right mindset can make a big difference.
Last week, we finally saw the rally spilling beyond mega-caps. Semiconductors had one of their best weeks this year. SMH closed at new 52-week highs. Stocks like MU, RMBS, and LRCX had major breakouts and followed through. Software stocks also made outstanding moves: NOW, SPLK, GLBE, NET, SMAR, etc. What’s interesting is that all that tech strength happened in the face of rapidly rising interest rates and the US Dollar. Those used to be major headwinds for stocks last year. It seems correlations and narratives have changed this time, at least for now.
The most important question is what’s next. No one knows with certainty, of course. My understanding is that all of a sudden many of the recent leaders are looking extended and I wouldn’t be surprised if we see some form of consolidation. They can either pull back toward their 10, 20, and 50-day moving averages or go sideways in a tight range until another catalyst appears. If this is a real breakout in QQQ, we should see money flowing into other stocks.
NVDA has been the top stock of 2023, riding on the coattails of A.I. It’s priced to perfection so I don’t expect a big upside surprise. Any potential dip will likely be bought as many institutions view it as a long-term A.I. play and some haven’t built their positions in it. It is expensive by many measures but sometimes perceived scarcity is much more important than valuation.
Some other great market reads this week…
The Rotation Report this week was awesome with ‘God’s Bubble’ .
Charlie’s ‘this week in charts’ is a must read this week. Charlie covers all the conflicting data and feelings.
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.