Will the Bull Market Continue to Soar?

by Options Sensei

The stock market tends to overshoot on both the downside and upside.  The way the indices came roaring back, the “Nasdaq 100 (QQQ – Get Rating)” hitting a new all-time high and the “S&P 500 (SPY – Get Rating)” on hopes of a “V” recovery, now looks increasingly-overly optimistic as a spike in COVID cases is causing a backpedaling of reopening the economy.

 

“Nike’s (NKE)” disappointing earnings report last night could be a harbinger that the upcoming earnings season will show Wall Street cannot continue to be disconnected from Main Street.  I need to reiterate how the big five and high growth tech stocks have carried the headline indices over the two months; due to their huge market cap weightings, “Apple (AAPL),” “Microsoft (MSFT),” “Amazon (AMZN),” and “Alphabet (GOOGLE)” now represents 42% of the QQQ and 23% of the SPY.

As those big 5 are hitting all-time highs, they can push the indices up, masking the fact that the average stock is now 18% below its highs and over 65% of stocks remain below their 200 day -moving average — meaning they remain in a downtrend.  But can we count on these ‘generals’ to remain bulletproof and keep charging higher if none of the soldiers follow?

Analysts were recently upgrading their price targets for S&P 500 stocks at the fastest pace ever. Keep in mind that at the S&P’s bottom in March, analysts were downgrading at the fastest ever. Prior instances of analysts chasing the rally almost always led to an S&P 500 pullback/correction in the next 2-3 months.

While there are some businesses that have clearly benefited from the work-from-home phenomenon. I don’t think… Continue reading at StockNews.com

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