The US market: Stretched Index and Capped Exuberance

Here are the market observations for today

1. The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.~ George Soros
2. Everything looked ugly around August 19 and there was Taper tantrum fear. But fear got bought aggressively. 
3. There has been a big catch-up rally in the Emerging market since August 20, 2021. See for yourself.
4. Speculative Growth stocks also staged a strong comeback before cooling off yesterday. The ETF to watch is IWM.
5. The ETF I am watching for a potential breakout: Leveraged Semiconductor ETF SOXL
6. Momentum investors don’t buy low and wait for stocks to recover. Instead, they believe that “buying high and selling higher” is the way to make far more money in lesser time. This strategy becomes painful when the market is not in an exuberant mood.
7. Here’s how CLF has rallied without momentum since March 2021. It does tell us when to buy next.
8. Affirm AFRM has been a big winner this month. I recommended at $64 earlier this month and the stock is now trading above $90+. My second big recommendation was Lending Club
9. Momentum Pattern: Gap up to new high on strong fundamental newsflow. LendingClub is working out well following this pattern.
10. Earnings Momentum Breakout plays that are in the portfolio: 1. Macy’s and 2. Palo Alto Networks.
11. DVAX is turning out to be a momentum stock of August 2021. I discussed it when it was at $17.
12. Golden Ocean Group GOGL will give a quarterly dividend of $0.5/share to every stockholder as of Sep 10, 2020. It means annualized dividend of $2/share and a dividend yield of 16.5% at the current market price.
13. The Breakout in SentinelOne S has worked out well. It’s a cybersecurity company that uses AI to identify and eliminate cyber threats.
14. Breakout to a new high is working out well for MDXG. I recommended it last week.
15. Is Beyondspring going to surprise now as it breaks the barrier of $30? A highly risky momentum trade at 32 with stop loss below $28
16. It’s painful to watch when you miss out on an obvious trade. I saw it at $40 and just ignored 🙁
17. Small speculative stocks are risky but two stocks are moving up well: 1. ANY; and 2. PXLW
18. Buy Low and Sell High: StoneCo, a stock that is in the Warren Buffet portfolio is now very near to breakout support. Should one buy? Nope. But one should follow to see if the stock is stabilizing here.
19. StoneCo is a Brazilian fintech firm, in which Berkshire Hathaway owns more than 10.6 million shares.
20. Once a stock does a momentum run, then it’s vulnerable to the downside risk. Zoom is a classic example. The business momentum can continue, but not the stock momentum. Zoom just did a billion-dollar revenue last quarter.
21. The company that owns USA Today – Gannet GCI. Just FYI
22. News-driven moves in speculative stocks do not survive for more than a day. GSAT and IRDM are two classic examples.
23. Fear of Heights: The S&P 500 and Nasdaq are on pace for the ninth monthly gain in the past 10 months
24. The market does not care how you feel about the market. Just follow what the market is doing, and not what it should do.
25. Success is not final; failure is not fatal: It is the courage to continue that counts.

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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers