Breakouts Fail – February 26th 2021

The rotation away from momentum names was on full display the prior week. The trend continued as the Nasdaq was one of the weakest indexes in the world again. The big drop in the markets (NDX down >4.9%) suggests more caution. While you may or may not watch the videos each week, try to watch the video up to the 40-minute mark. I mentioned the expensive price multiple times this week.

I continue to be distracted each week by subtle positive moves, but the underlying for the market looks so risky. The areas I liked last week were down the least, but they were down, with the exception of energy. Issues like: market price action this week with a big down percentage overall, the drop in Tesla that fell 16% in two days before a buyer stepped in, lots of 10-week moving averages breaking on the high-flying names, the weakness of all of the big-name tech stocks; is definitely concerning.

 The US vaccination rollout is greater than 20% of the eligible population. JNJ’s vaccine was approved over the weekend. America will have 3 vaccines for distribution, so March should be a massive month for vaccination. We also saw the 1.9T stimulus get rolled through congress, following the $900B in December, and now the infrastructure bill has a nod of $3T. WOWZA.

Interesting Reading.

Two Questions I Have. When Everyone’s A Genius. Jay Woods Former NYSE Board Member on GME.

It’s been two weeks since my Two Questions I Have article. So far, that marked the recent market high. The charts are playing out like they should if I am right. This newsletter focuses on that data. The article When Everyone’s A Genius is also relevant. The market rallied extravagently when we all saw the economy cratering. But not only did it rally, it became one of the most expensive valuations of all time, with little hope of a damaged economy keeping up. Another question of mine is : While the economy improves, will the stock market suffer, to bring valuations back into line with market prices?

From all the success with the ARK investing group, it sounds like the world can go to infinity and beyond. Unfortunately, they have already pushed pricing there (infinity), well in advance. When Tesla plummeted, they stepped in and started buying in the $600’s. The real question is: Where were the rest of the buyers? Tesla has dropped 30% in 4 weeks, and it has been 3 weeks since they announced they will accept Bitcoin for cars and hold $1.5B in Bitcoin in the corporate treasury.

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