The Market Keeps Changing Horses. Will ‘Ordinary’ Become the New Opportunity?
From AI to quantum computing to rocket stocks, what’s the next thing for the trend followers? Maybe it’s hiding in plain sight.
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Was it just a few months ago that semiconductor stocks were all the rage?
Was it just a few months ago that “AI” was all we heard when it came to the stock market?
And let’s not forget the quantum and rocket stocks. Gosh, they too were all the rage. I even know a bond manager who was trading Rigetti Computing (RGTI) because it was so much fun.
I don’t see him — or anyone else — waxing poetic over the quantum stocks now, do you?
But then these hot stocks fell and no one was interested in them. They have become so ordinary. But fear not, then folks were onto the “broadening out” trade. I won’t harp away about that since you know my views on it, but now that the market has narrowed enough for all to see — and sadly feel —in their portfolios we don’t hear much about the broadening trade anymore, do we?
Energy is still hot, and everyone seemed to like that breakout in oil (see my column here for the chart). But the Daily Sentiment Indicator is at 85 (no change from yesterday) so I view the runway as short there now.
So what’s left? I suppose it could be bios and drugs, even though most of them have stalled out over the last week. I suspect — and this is not new for me — they will rotate back to tech at some point this fall.
Just take a look at Alphabet (GOOGL). It’s become so ordinary as it now trades where it was in late January. But it hasn’t broken the uptrend line. Now imagine if we can ever get this chop-fest market back to a decent oversold condition, and maybe even instill a bit of fear into the market, maybe Google, by being down so much already doesn’t break, and maybe by then it has gone sideways long enough that it becomes attractive. Meta (META) has also been making higher lows.
But I would like us to get there. I would like us to get to a good oversold condition, both short and intermediate term. By that I mean when I look at the math behind the Oscillator I am staring at a long string of red numbers to be dropped (that’s what makes it a good oversold).
By that I mean I want to see the Volume Indicator at 49% or — even better —47%. That makes it oversold.
By that I mean I want to see folks buying puts like their portfolios depend on it. Tuesday was a start with the put/call ratio at 0.95 but as soon as we rallied on Wednesday it fell to 0.80. That is not what we want to see.
If this type of action continues I think the market will just continue to frustrate folks, especially the trend-following folks. Because if we don’t get a proper setup then just as they think we’ve got a trend the market will change horses and rotate somewhere else. And that is not helpful because it just gives way to chop.
