Growth Stocks (and Tech) keep hitting the high notes

September 6, 2021

Weekly Market Outlook

By Keith Schneider


blankGiven the positive move of our risk gauges into risk on all the major Indices and given the recent leg up in some of the largest capitalization growth stocks, is this a new bullish phase up or an eventual repeat of 1999-2000?

Entering the weakest period of the year, September-October, and our recent warning of the Hindenburg Omen (see August 30th update), we are fully participating in the market's up move, but we remain vigilant that our indicators can change quickly.

If you are a subscriber to our services, you will notice the recent tilt back into growth stocks.

If you are a follower of Mish’s Market Minute Premium service, hopefully, you participated in her recent recommendation of a large cap growth stock that had been dormant for some time and catapulted 30% higher in less than a month.

We are in the latter stages of the investment cycle, where large numbers of small retail investors are coming into the market. Evidence of this is the millions of new accounts that TD Ameritrade, Schwab, Fidelity, Robinhood, and Interactive Brokers report each month.

Most of these investors are playing the momentum game and investing alongside the institutional investors that are putting much of their reallocations into the big cap indices.

The biggest cap growth stocks get the lion’s share of these allocations.

The recent move higher in small-cap stocks (Grandpa Russell/IWM), however, shows investors are helping to broaden out the market. It also portends a more optimistic and positive viewpoint of the market, at least in the near term.

Our experience tells us to stay vigilant for a normal correction that is long overdue.  There has not been as much as a 5% correction in the S&P 500 for more than a year; a certain anomaly.

Our experience also tells us that Value and defensive stocks can come back into favor in a market minute.  However, we note that even though Growth is highly in favor, many of the new retirees (an estimated 2,000,000 people retired during & after Covid/2020) are seeking income.  Real Estate, Utilities, and high dividend-paying stocks fill this requirement for now.  Especially given the absence of positive return in the fixed income markets that remain range bound.

We echo last week’s message that we are pleased to be currently participating fully in the market.  However, we remain highly vigilant to a possible quick and sudden retracement.

We wish you and your family a good Labor Day Holiday.

Good luck in your investing.

 

This week’s market highlights:

  • Risk Gauges improved this week into Bullish mode
  • Real Motion has shown QQQ’s strongest readings since February with a move over its 200-DMA, confirming that the NASDAQ and growth stocks are currently the strongest of the key indices
  • QQQ also has the strongest Trend-Strength Indicator (TSI) score of the major indices
  • IWM is leading the bi-weekly reading for volume accumulation, with the strongest price performance over the last 5 trading days, up over 3.5%
  • Market internals are still in a positive mode, although the McLellan oscillator is running a bit rich for QQQ and potentially rolling over
  • New Highs/Lows ratio for SPY has improved
  • Growth stocks (VUG) continued to outperform Value (VTV), confirming a risk-on scenario with VUG driving the key indices higher
  • Sector rotation shows some deterioration this week, with both Transportation (IYT) and Retail (XRT) suffering from a weak jobs report
  • Semiconductors (SMH) and Biotech (IBB) continued to lead the Modern Family on good volume
  • Commodities were led by Gold (GLD) and Oil (USO), with strength in Lumber (WOOD) as well
  • Gold (GLD) could benefit greatly from weakness in the US Dollar (UUP) that is looking for support at its 50-WMA and is vulnerable to testing recent lows set January of this year
  • Long Bonds (TLT) backed off and are trading on its 50-DMA
  • Emerging Markets (EEM) saw Real Motion bounce from oversold levels, now testing the 50-DMA of Real Motion and its 200-DMA on price
  • SPY remains bullish when compared to Utilities (XLU) after briefly shifting into negative territory

This week’s Crypto Highlights
By Holden Millstein

  • Ethereum (ETH) beat Bitcoin (BTC) this week with a 20% increase vs. BTC's 3% over 7 days
  • Bitcoin has also lost over 1% of its market dominance now at 41.5% of overall market cap even with over $150 billion entering the crypto market this week
  • Ethereum (ETH) beat Bitcoin (BTC) this week with a 20% increase vs. BTC's 3% over 7 days
  • Bitcoin has also lost over 1% of its market dominance now at 41.5% of overall market cap even with over $150 billion of market cap gains for the crypto market this week
  • Solana (SOL) is once again the big winner of the week with another 50% increase over the past 7-days
  • Tons of traders will see SOL's major growth in recent weeks as unsustainable, waiting for a top. However, it is important to note that Solana is both a relatively new cryptocurrency (debuting in 2017) and touts the world’s fastest blockchain technology processing up to 50,000 transactions per second
  • News continues to leak from the SEC lawsuit against Ripple Labs which continues to keep US investors from being able to trade the Ripple coin (XRP) until the case is settled. Keep an eye on this case and what it means for the regulatory future of the cryptocurrency space.


Leave a Comment or Reply

Your email address will not be published. Required fields are marked *