The Shakedown 5-10-20

Relentless Market

LAST WEEK, S&P 500 (+3.44%):

Monday: +0.28%

Tuesday: +0.92%

Wednesday: -0.68%

Thursday: +1.21%

Friday: +1.65%

We walked into an early gap down Monday morning, and the first thought had to be "is this the beginning of a greater pullback, or is this the first dip to buy?" The market's price action proved as strong as ever as it lead to a broad based rally all week. The Nasdaq is especially strong as it posted 5 straight green days amidst a 6% advancement for the week. It is now trading just 5.5% from all time highs.

We saw record job losses Friday as 20.5 million Americans lost their jobs in April, bringing the unemployment rate to 14.7%. The market continues to shrug off bad news and we can look at this information a few different ways; Is this just a major disconnect between Wall St & Main St? Are stocks simply the ultimate forward looking vehicle and have already priced in the worst - and further pricing in a massive recovery? Or is this all just pre mature exuberance with states beginning to open up slowly & could have another sell off if a second wave of Corona is to appear? No matter which way you slice it, stocks are 30% off lows in two months and look to trend higher. 

We're seeing so many internet and digitally related stocks going crazy. We're still seeing the leaders of the FB AAPL AMZN MSFT NFLX GOOGL consortium move higher, but we're seeing market wide bullish action in anything internet/digital/software/cloud related. Shopify is up over 100% in 5 weeks, Paypal is now worth almost 3 Goldman Sachs, online furniture retailer Wayfair is up 750% since April began, Docusign is up nearly 100% since March lows, and on and on. Could list 100 more of these. While the party can't last forever, there is definitely price action to take advantage of in this environment as we continue to move higher against the average investors wishes.

After five days up in Nasdaq I'm anticipating some sort of natural pullback as a reversion to the mean in that space. S&P and small caps still have healthy charts that can move higher. While financials and Industrials lag, we could see money rotate there if tech names decide they need a rest. Will be watching how this develops in the front half of the week and if this leads to some sector rotation.

Focusing on earnings flags has been paying so far this season, let's keep it up.

Earnings Season Rolls On

Click the above picture for a full list of the companies reporting this week

Another monster week of earnings ahead!


LITE released earnings last week, and the stock responded positively and has consolidated in a tight range since. While the impact of coronavirus is impeding on their ability to satisfy strong customer demand, it shows they are positioned well for growth in the future. Coming directly from their quarterly 10k,  

"We believe the world's experience with COVID-19 will accelerate the shift to increasingly digital and virtual approaches to work, education, health care, entertainment, social interaction, and commerce, creating even more opportunity for Lumentum over the long-term."

LITE's prospects of future business is definitely trending in the right direction. Since earnings, the stock has given us 3 inside days, creating a very nice entry location for this week. I will for look at the 81.50 area, Friday's high, then 82 and 83 areas for my first entry. The trade technically triggers through earnings day highs at 84.17. 

Trigger 81.50/82-84.17

Stop: 78.89/76.89

Target: 100+

Hope to see you in the chat Monday!

Watchlist coming in the following email.

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