The Bull Market Now Has What It Really Needed
The biggest market positive right now is that there doesn't appear to be any major economic worries.
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A solid earnings report from Netflix NFLX helped to keep market sentiment positive on Friday. Volume was light, but the S&P 500 managed to rise 0.4%, while the Russell 2000 IWM lost 0.2%. Money rotated back into the Magnificent Seven (MAGS) names, with Netflix driving the Nasdaq 100 QQQ to a gain of 0.7%
Despite dull action in small-caps, breadth was solid with 5,900 advancers to 3,500 decliners and over 800 new 12-month highs. There was also a long list of stocks moving up more than 10%, which indicates a strong interest in speculative trading.
We will see more earnings reports next week but will have to wait until the following week before the big-cap technology names start to report. So far, earnings season has been quite upbeat, with the banks and Netflix seeing strong positive responses.
The biggest market positive is that there doesn’t appear to be any major economic worries, although interest rates have been rising, and there is some concern about slowing in the semiconductor sector outside of AI. Minor signs of inflationary pressures are being offset by some minor signs of economic slowing. Odds of Fed rate cuts have fallen slightly, but two more quarter-point cuts are still heavily expected.
From a trading standpoint, the resurgence in small-caps has provided good opportunities. The group is choppy and volatile, but it is refreshing to see more momentum. What the bull market needed more than anything was more strength outside of the Magnificent Seven, and we definitely have it right now.
Have a great weekend. I’ll see you on Monday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
