Markets rallied yesterday on higher, above average volume as the European Central Bank suggested that it might expand its economic stimulus plan. With the weakening global economy, expect central banks to remain addicted to the QE morphine drip. Indeed, China today announced it will cut interest rates 25 basis points. Futures rallied strongly on the news.
At today's open, the NASDAQ Composite should gap up through its 200-day moving averaged helped by tech juggernauts Amazon (AMZN), Alphabet Inc (GOOGL), and Microsoft (MSFT), all of which reported strong earnings and are gapping significantly higher in pre-open trade. NASDAQ futures are outpacing S&P futures at the time of this writing as all three tech stocks are weighted in the NASDAQ-100 index as follows:
Microsoft Corp (MSFT) 7.483%
Amazon.com Inc (AMZN) 5.153%
Alphabet Inc (GOOG) 4.381%
A number of medium quality stocks had pocket pivots in yesterday's trade which implies market internals are shaping up, but as members know, we focus on the highest quality stocks on a risk/reward basis with leading fundamentals and technicals. We have seen a few of these do well such as MANH, SBUX, LGIH and IPHI. We could see a growing number of leading names start to perform as we did earlier this year, despite the trendless market. So should the market resume its trendless ways, that is never an excuse for an investor to take their eye off their stocks, watch lists, and screens.
Volatility which had been mostly noise is cleaning up for the time being, thus the path of least resistance for now is up, as discussed in today's Market Direction Model (MDM) report. The Volatility Model, for now, will remain in cash as its risk/reward given its more volatile ETFs and shorter term horizon is not optimal as of yet. That said, this could quickly change.
IT consultant Cognizant Technology Solutions (CTSH) had a pocket pivot breakout. Keep in mind it has been better in this QE-driven market environment to wait for a constructive pullback instead of buying on strength. Pretax margin 20.6%, ROE 23%, earnings and sales are accelerating, group rank 3.
This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2019 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.