A strong Bureau of Labor Statistics reported on Friday, posting a gain of 945,000 jobs vs. expectations of anywhere from 845,000 to 925,000. The "hot" number brought potential Fed tapering back into the investor thought process, but this was weighed against the positive news of a strongly rebounding economy. Thus, the economically-sensitive areas of the market, including industrials and cyclicals, including "stuff stocks" like agriculturals and metals, pushed higher as the Dow and S&P 500 Indexes opened to the upside. The potential for tapering, hence higher interest rates, sent higher-PE and high PE-expansion tech and growth names lower, which in turn sent the NASDAQ Composite and the NASDAQ 100 Indexes heading lower.
On Thursday the NASDAQ Composite, led by the NASDAQ 100 Index, posted new highs before pulling back on Friday, but we continue to see weak breadth as measured by the NASDAQ Advance-Decline line, below. This market has been plagued by divergences and bifurcations that, while resulting in a lot of rotational action both up and down, have mostly led to a market where big-stock ideas with at least intermediate-term trend potential are far from plentiful despite the new highs in the major market indexes.
The Market Direction Model (MDM) remains on a BUY signal.
The strong jobs number sent interest rates higher, with the 10-Year Treasury Yield closing Friday at 1.XXXX%. As a result, precious metals did not take kindly to the idea of higher rates and headed back to their recent lows, negating their recent long entry signals.
Earnings season has produced the usual number of strong price reactions in leading and not-so-leading stocks. The success rate of long set-ups like Buyable Gap-Ups has been meager, with most showing little further upside progress or just failing altogether. This is one reason we have not been in a big rush to send out reports on buyable gap-ups in this environment. The typical upside thrust and price continuation has not been of the quality that we look for in BGUs in most cases.
This past week we saw Buyable Gap-Ups in cloud names DataDog (DDOG) and HubSpot (HUBS) which have so far held up well and above their respective BGU intraday lows at 126.33 and 622.05, respectively. The primary issue with high-PE techs is that they could be subject to PE-compression if we see interest rates begin to trend back to the upside again. Certainly, one can test any BGU move once a firm intraday low is set, which then becomes your selling guide, but the main issue is whether these will lead to significant, intermediate-term uptrends.
For the time being, we continue to find nothing that we feel is worthy of inclusion on the Focus List, so it will remain the null set until we see something that fits the criteria necessary for inclusion on the list. To some extent it is indicative of the rotational, bifurcated environment we find ourselves in currently, which in turn is more suitable for swing-traders and even day-traders rather than intermediate- to longer-term trend-following investors.
VoSI Focus List Review for the Week Ended August 6, 2021
|Published:||7 Aug 2021 19:28 ET|
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. ©2021 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.