I have been saying this was going to happen for some time. Now we are in the throes of the market, in part because the market is rallying. I learned a long time ago that new highs beget new highs and new lows beget new lows. Some observers deride these kinds of market moves higher as “melt-ups.” Certainly, there is a feeling that the market is on autopilot, but it couldn’t have gotten to this point without a foundation.
That foundation solidified with earnings that are nearly the best, and an economic backdrop that could improve dramatically in 2020.
Over the last few weeks, there have been fewer sessions with strong underlying market breadth. This kind of market breadth, when combined with strong volume, screams conviction.
NYSE
- Advancers: 2,145
- Decliners: 808
- New Highs: 135
- New Lows: 19
- Up Volume: 2.58 billion
- Down Volume: 942.4 million
NASDAQ
- Advancers: 2,445
- Decliners: 741
- New Highs: 195
- New Lows: 69
- Up Volume: 1.80 billion
- Down Volume: 452.9 million
The Message of the Market
There are several investing themes converging at the same time from bottom-fishing, value investing to chasing winners. When it comes to chasing winners, nothing increases a chip count faster than technology.
S&P 500 Index | +0.75% | |
Communication Services (XLC) | +0.31% | |
Consumer Discretionary (XLY) | +0.88% | |
Consumer Staples (XLP) | +0.11% | |
Energy (XLE) | +0.10% | |
Financials (XLF) | +0.64% | |
Health Care (XLV) | +1.17% | |
Industrials (XLI) | +0.72% | |
Materials (XLB) | +0.66% | |
Real Estate (XLRE) | +0.08% | |
Technology (XLK) | +1.46% | |
Utilities (XLU) | -0.33% |
The winners yesterday where a hodgepodge of momentum names led by semiconductors that in turn were led by Nvidia (NVDA), which was an earnings loser two weeks ago. The stock closed at a new 52-week high yesterday. There is a lot of hype in the tech world; some have been a bust thus far, but artificial intelligence is the real deal and Nvidia is the most important publicly traded company in the space.
After the Close
Nutanix (NTNX) posted financial results that weren’t super great but sent the right kind of message to send shares rocketing up more than 20% in after-hours trading.
The company makes a converged compute-and-storage system, along with a software management program called “hyperconvergence.” The company lost $0.71. The Street was looking for -$0.75. However, investors are really looking for a whole lot more in the future.
Behavioral Analysis
My mind starts to activate, rhymes collaborate
Cause when I heard the beat I just had to make
Something from the top of my head
So I fell into the groove of the wax and I said
How could I move the crowd
Eric B. & Rakim – Move the Crowd
Watching the game last night, as Lamar Jackson continues to electrify the NFL, I saw that the announcers gave a shout-out to the Baltimore Ravens assistant Daniel Stern. Stern has been with the team for three years and is one of the main reasons they go for it on the fourth down more than any other team in the league (Jackson is a big factor, too). Stern studied economic behavioral analysis at Yale and applies it to an offensive strategy.
Investors can and should do the same, as the crowd is easy to anticipate. Right now, they are just waking up to the fact they were led astray by the experts, and they need to get in the mix while there’s still time. The crowd is on the move, and there are opportunities to make money.
(Note: investing should be a life-long endeavor, although it doesn’t always mean an 100% vested decision.)