Quality Flight

Quick Take: Buy Bias. Despite significant economic uncertainty, buyers continue to step up to support growth stocks. But we’re long due for a pullback. 

Marauders:

Typical of June, a flight to quality bid shares higher as portfolio managers maneuvered to add leaders in their holdings.

Quadruple witching in the options market on Friday capped off a week that had the Nasdaq came just short of a new high. A small cap rally also added heat as the Russell 2000 index realigns itself (IWM, +2.31%). 

The Nasdaq’s +3.73% gain came on volume down 10% from last week’s heavy selling rout. It convincingly favored advancers to decliners by more than two to one. 

The S&P 500 posted posted a +1.86% gain and the Dow was +1.04% with NYSE volume off 15% from last week with advancers and decliners a near match. 

Stocks appear to be pricing in a V-shape recovery vs. the  Fed’s  U-shape prediction. The old adage that “You don’t fight the Fed,” as well as “Don’t fight the tape,” has been the winning mantra since stimulus plans were set in play. 

Friday’s heavy volume down day would be an ominous sign of institutional dumping if it weren’t for options expirations. However, the major indexes have been taking in more buy-volume than sell volume since putting in their lows in March. 

Though much uncertainty remains regarding the pandemic, which is still on, as well as what happens when stimulus money wears off, which may happen in the Fall. Let’s not forget it’s an election year and the country is going through historical social unrest. 

Covid-19 won’t kill economy. Rising infection rates in 15 states has raised fears. Though in ten of the states the increase is minor, and somewhat expected after reopening from lockdown. Rates have been falling in 16 states. 

The virus situation may be more severe for states such as Arizona, South Carolina and Alabama, which have seen more severe upticks. 

The market has rightly favored companies with business models that cater to the agoraphobic. 

Tech leadership from FB, AAPL, AMZN, NFLX, GOOG and MSFT was solid for the week. Take not that GOOG is showing relative weakness here, down -7% from its 52-week high, with the rest of the pack down less than 2%.

Internet, cloud computing, social media and esports stocks rage on.

Biotech (IBB, +7.33%) had a monumental week as it set a new high as it continues to breakout from a five year base. This was the most shorted sector, so no doubt covering  here. Though the virus has made the sector attractive for its potential to cure. 

Gold (GLD, +0.87%) holds near highs not seen in eight years, as gold miners (GDX, +2.79%) recover from pullback mode. Similar story for silver miners (SLVP, +0.34%.) 

TECHNICALLY SPEAKING, 

  • The S&P 500 is showing near-term weakness as it consolidates under a bearish island top.
  • Strength For The Week: Healthcare, Technology, Communications
  • Weakness: Utilities, Energy, Real Estate

GROWTH STOCKS

It’s breakout-palooza out there. Hit ‘em until it stops. I like to ring the cash register at 20%. Do it five times to more than double your money. 

Last week we saw from our list:

+40% in one week for this biotech.

+40% in one week for this Chinese educator.

+42% in one week for this Covid-19 vaccine hopeful.

BREAKOUTS:

ADBEAdobe IncSoftware & IT Services
APPSDigital Turbine IncSoftware & IT Services
EAElectronic Arts IncSoftware & IT Services
EPAMEpam Systems IncSoftware & IT Services
HOLXHologic IncHealthcare Equipment & Supplies
LOWLowe`s Companies IncSpecialty Retailers
PFSIPennyMac Financial Services IncBanking Services
PLMRPalomar Holdings IncInsurance
RAPTRapt Therapeutics IncBiotechnology & Medical Research

BASES

ALGNAlign Technology IncHealthcare Equipment & Supplies
BLFSBiolife Solutions IncHealthcare Equipment & Supplies
CORTCorcept Therapeutics IncPharmaceuticals
CPRXCatalyst Pharmaceuticals IncBiotechnology & Medical Research
DHXDHI Group IncProfessional & Commercial Services
FNDFloor & Decor Holdings IncSpecialty Retailers
GDDYGoDaddy IncSoftware & IT Services
KKellogg CoFood & Tobacco
LAKELakeland Industries IncTextiles & Apparel
LLLumber Liquidators Holdings IncSpecialty Retailers
MVISMicroVision IncElectronic Equipment & Parts
RMDResmed IncHealthcare Equipment & Supplies
SHWSherwin-Williams CoChemicals
SITESiteOne Landscape Supply IncFood & Tobacco

TOP INDUSTRY GROUPS, RANKED BY PROXIMITY TO 52-WEEK HIGH

Global X Social Media ETF (XNAS:SOCL)
Invesco NASDAQ Internet ETF (XNAS:PNQI)
VanEck Vectors Video Gaming and eSports ETF (XNAS:ESPO)
First Trust Cloud Computing ETF (XNAS:SKYY)
Invesco Dynamic Software ETF (ARCX:PSJ)
Amplify Online Retail ETF (XNAS:IBUY)
Global X Future Analytics Tech ETF (XNAS:AIQ)
Invesco Dynamic Networking ETF (ARCX:PXQ)
Sea Ltd (XNYS:SE)
SPDR S&P Health Care Equipment ETF (ARCX:XHE)

Get on, play it safe.

Dan