 BUYERS’ EDGE |
| Growth stock breakouts are sticking. |
For the week, major indexes were little changed after falling back from attempts at new highs.
Buyers remain uninspired as fear of resurgent coronavirus cases and fruitless government stimulus negotiations dominate headlines. Heavy bets on the market may be off ahead of the Presidential election in two weeks.
| INDEX | WEEK CLOSE | CHANGE | WEEK % | YTD % |
| DJIA | 28,606 | 19 | 0.1 | 0.2 |
| Nasdaq | 11,672 | 92 | 0.8 | 30.1 |
| S&P 500 | 3,484 | 7 | 0.2 | 7.8 |
| Russell 2000 | 1,634 | -4 | -0.2 | -2.1 |
A Shift to small-cap stocks was evident as the Russell 2K plays catchup with major indexes. Lots of talk regarding who’s leading the election polls and what it means for the market. No need to get political here. Just observe.
Breadth and thrust stays bullish.
 | Weekly Adv/Decl Volume NYSE: 1.1, NASDAQ: 1.1 – Bullish. |
| Accum./Dist. Count – 20 Days S&P 500: 5/4, NASDAQ: 3/3 |
 | Weekly Adv/Dec Issues NYSE: 0.6, NASDAQ: 0.9 – Slightly Bearish. |
| New Highs – NYSE: 389, NASDAQ: 308 New Lows – NYSE: 60, NASDAQ: 82 |
Coronavirus numbers are reportedly up with 22 states hitting record of a thousand new cases. Germany, Italy and France have tightened social restrictions to fight contagion.
The big get bigger. Layoffs in the hundreds of thousands, as well as a record amount of small business closures, tell a different story than what Wall Street earnings portray.
Earnings boosts driven by government stimulus and a recovering economy have been cause for optimism.
Third quarter earnings for S&P 500 companies are expected to be down 20% from a year ago. But if so, would be better than predicted earlier in the year, as well as the 30% fall in the second quarter.
Expect growth stocks with business models that cater to stay at home at work from home to do very well, especially with the wind of a V-shaped economic recovery at their back. But keep in mind those earnings are last quarter.
Some hedge funds are reportedly shorting companies benefiting from covid closures, arguing the stay at home business has hit its peak. Ground up analysis key in this environment, watch your local cash registers.
WEEKLY SECTOR ACTION
| ETF | NAME | % CHG | 40WEMA | CHART |
| XLI | Industrial Sector Fund | 1.1 | | New High. |
| XLU | Utilities Sector Fund | 0.82 | | Right Base Forming. |
| XLK | Technology Sector Fund | 0.78 | | 5% Off High. |
| XLC | Communication Services Sector Fund | 0.75 | | 8% Off High. |
| XLP | Consumer Staples Sector Fund | 0.65 | | 2% Off High. |
| XLY | Consumer Discretionary Sector Fund | -0.35 | | New High. |
| XLB | Materials Sector Fund | -0.36 | | New High. |
| XLV | Health Care Sector Fund | -0.41 | | New High. |
| XLF | Financial Sector Fund | -0.95 | | Treading. |
| XLE | Energy Sector Fund | -1.95 | | 24% Off Low. |
| XLRE | Real Estate Sector Fund | -2.22 | | 31% Off Low. |
Financials (XLF, -0.95%) struggles to stay above its 40-week moving average as the sector threatens to pull the market lower.
It was a big news week for banks as JPMorgan Chase (JPM, +0.31%) and Citigroup (C, -3.87%) handily beat earnings expectations, though were less confident with their outlooks.
Bank of America (BAC, -4.42%) said consumer spending for its customers was up compared to a year ago, and that credit card delinquencies were down. But Don’t be surprised to see credit defaults spike after government stimulus wears off.
Retail (XRT, +0.44%) hit another new high since breaking out last week. Retail spending appears healthy with a 1.9% increase for the month, beating a consensus 0.8% increase.
Technology (XLK, +.78%) threatens to slow its climb as titans Apple (AAPL, +1.75%), whose stock didn’t have much reaction to the company’s revealing of its iPhone 12, and Microsoft (MSFT, +1.78%) posted a close in retreat from its weekly and all-time high.
Communication (XLC, +0.75%) was little changed as components Facebook (FB, +0.56%) and Alphabet (GOOG, +3.81%) , as well as Apple, face pressure from the European Union for being too powerful, and may be subject to more rules to make them more transparent with data collection.
Netflix (NFLX, -1.60%) struggled to breakout to a new high as it faces competition from Walt Disney (DIS), who said it would focus on making its growing streaming services the main part of its business. Growth stock Roku (ROKU, -0.78%) is holding a solid uptrend since breaking out of its base a month ago.
Semiconductors (SMH, -0.10%) hit a new high as it holds leadership status with a strong uptrend. PC sales rose 14.6% for the third quarter, their highest rate in a decade as work, and stay at home trends fueled demand.
On the cloud computing front Fastly (FSLY, -33%) dampened moods as it lost a third of its market value after announcing third quarter revenue would fall 5% short of expectations as customers, including its largest TikTok, used less of its service than expected.
Elsewhere in the cloud industry, Cloudfare Inc. (NET, +25.76%) scorched higher as the new cloud darling, and Twilio (TWLO) bought customer data startup Segment for $3.2B. Recent IPO Snowflake (SNOW, +1.90%) struggles to rise above its open price from a month ago.
Healthcare (XLV, -0.41%) scratched a new high before retreating as Biotech (IBB, -1.98%) closed lower for the week despite several names holding breakout form and setting up in bases. See Setups.
Autonomous vehicles are coming closer to streets near you. Google’s Waymo said it would put driverless cars with no human backups on the streets of the Phoenix are. General Motors (GM, +4%) will be joining in after receiving a permit for California to do the same.
GSRTRADES BREAKOUTS & PULLBACKES – These breakout stocks met the strict GSRTrades fundamental criteria and have broken out of technical bases.
Strong representation from biotech, cloud computing, stay at home, work at home, software and online retail.
| Ticker | Company Name | Industry | Grade | Demand |
| EXAS | Exact Sciences Corporation | Biotechnology | 2X | + |
| FATE | Fate Therapeutics, Inc. | Biotechnology | 3X | ++ |
| FOLD | Amicus Therapeutics, Inc. | Biotechnology | 4X | ++ |
| INSM | Insmed Incorporated | Biotechnology | 2X | ++ |
| TWST | Twist Bioscience Corp. | Biotechnology | 4X | ++ |
| BPMC | Blueprint Medicines Corp. | Biotechnology | 2X | + |
| FVRR | Fiverr International Ltd. | Data Processing Services | 3X | ++ |
| TER | Teradyne, Inc. | Electronic Production Equipment | 4P | + |
| ROKU | Roku, Inc. Class A | Electronics/Appliances | 4X | ++ |
| STRL | Sterling Construction Company, Inc. | Engineering & Construction | 4P | |
| COOP | Mr. Cooper Group, Inc. | Finance/Rental/Leasing | 2P | ++ |
| PFSI | PennyMac Financial Services, Inc. | Finance/Rental/Leasing | 1P | ++ |
| EXPI | eXp World Holdings, Inc. | Financial Conglomerates | 4P | ++ |
| BYND | Beyond Meat, Inc. | Food: Major Diversified | 2X | + |
| FRPT | Freshpet Inc | Food: Specialty/Candy | 4P | ++ |
| GRBK | Green Brick Partners, Inc. | Homebuilding | 4P | ++ |
| FIVN | Five9, Inc. | Information Technology Services | 4X | ++ |
| GLOB | Globant SA | Information Technology Services | 4P | ++ |
| NOW | ServiceNow, Inc. | Information Technology Services | 4P | ++ |
| QTWO | Q2 Holdings, Inc. | Information Technology Services | 4X | + |
| UPLD | Upland Software, Inc. | Information Technology Services | 4X | |
| NET | Cloudflare Inc Class A | Information Technology Services | 4X | ++ |
| SQ | Square, Inc. Class A | Information Technology Services | 4P | ++ |
| MELI | MercadoLibre, Inc. | Internet Software/Services | 4X | ++ |
| APPS | Digital Turbine, Inc. | Internet Software/Services | 3P | ++ |
| FRHC | Freedom Holding Corp. | Investment Banks/Brokers | 3P | ++ |
| PIPR | Piper Sandler Companies | Investment Banks/Brokers | 4P | |
| PJT | PJT Partners, Inc. Class A | Investment Banks/Brokers | 4P | + |
| PODD | Insulet Corporation | Medical Specialties | 4P | ++ |
| NVCR | NovoCure Ltd. | Medical Specialties | 4P | ++ |
| PRPL | Purple Innovation, Inc. | Miscellaneous | 4P | ++ |
| ETSY | Etsy, Inc. | Miscellaneous Commercial Services | 3P | ++ |
| KNSL | Kinsale Capital Group, Inc. | Multi-Line Insurance | 4P | ++ |
| PTON | Peloton Interactive, Inc. Class A | Other Consumer Services | 1X | ++ |
| AVLR | Avalara Inc | Packaged Software | 4X | ++ |
| MDB | MongoDB, Inc. Class A | Packaged Software | 4X | ++ |
| OKTA | Okta, Inc. Class A | Packaged Software | 4X | ++ |
| TEAM | Atlassian Corp. Plc Class A | Packaged Software | 4X | ++ |
| TENB | Tenable Holdings, Inc. | Packaged Software | 4X | ++ |
| ZS | Zscaler, Inc. | Packaged Software | 4X | ++ |
| DDOG | Datadog Inc Class A | Packaged Software | 2P | ++ |
| TWLO | Twilio, Inc. Class A | Packaged Software | 4X | ++ |
| BMY | Bristol-Myers Squibb Company | Pharmaceuticals: Major | 4X | + |
| GMRE | Global Medical REIT Inc | Real Estate Investment Trusts | 4P | + |
| NVDA | NVIDIA Corporation | Semiconductors | 4P | ++ |
| TRUP | Trupanion, Inc. | Specialty Insurance | 4P | ++ |
| LOVE | Lovesac Company | Specialty Stores | 4X | ++ |
These top names serve as leadership, and will help determine the success of other potential breakouts found on our Bases and Lower Bases lists.
Keep your head clear,
Dan