This Week in Markets - Feb 08
The market's craze continues
Welcome back to another weekly market prep with The Dividend Journal! If this is your first time here, great timing. This newsletter is your one stop shop to stay ahead of the market and step into the week fully prepared.
Valentine’s day is next week so make sure you’re planning ahead!
🎯 Initial Thoughts
The DOW this past week broke 50,000 points for the first time ever with many of its recent gains coming from GS 0.00%↑ and CAT 0.00%↑. A large difference from the DOW vs the S&P500 is that higher priced stocks have higher weighting whereas the S&P500 is market cap weighted. NVDA 0.00%↑ actually makes up only 2.3% of the DOW since its price trades lower than companies like JNJ 0.00%↑. Meanwhile, NVDA 0.00%↑ has about a 7.5% weight on the S&P500.
CNBC does a great depiction of the journey to 50,000 points and just goes to show that time in the market always comes out on top vs timing the market.
This past week was quite tumultuous with tech heavy selling in what’s being called a “SaaSpocalypse” after wiping out over $300 billion. Companies like NOW 0.00%↑ , SNOW 0.00%↑ , and CRM 0.00%↑ pulling back aggressively amid AI disruption fears.
Despite this, Friday’s price action saw the markets rally hard with global market breadth continuing to improve and fund manager cash at a record low of 3.2%.
There is a clear divergence from SPY 0.00%↑ and QQQ 0.00%↑, with software stocks dragging QQQ 0.00%↑ down. However, when you compare QQQ 0.00%↑ in general to the RSP 0.00%↑, which is equal weights, we are making fresh highs. In a way, this is a healthy rotation of capital to non tech sectors that have needed some love. This is usually not a sign of a rapidly declining market that is on the brink of a bear market. More on this later ⬇️
📅 Key Earnings & Economic Calendar
Tuesday, February 10: M/M Retail Sales
Wednesday, February 11: Unemployment Rate
Thursday, February 12: Unemployment Claims
Friday, February 13: CPI
Earnings this week, courtesy of Earnings Whispers:
Lots of software stocks report this week like DDOG 0.00%↑, NET 0.00%↑, APP 0.00%↑, and SHOP 0.00%↑. The reactions off these reports will be notable to see if the selling pressure continues.
📈 Market Update: As of Friday, Feb 06
SPY 0.00%↑: The S&P pulled back and structurally broke down under the daily 50EMA. But once again, we have had a super aggressive rubber band reaction off that zone. Friday actually led to an over 900 point swing on NQ leading to a full reclaim of all the daily EMAs.
This week will be important to see if there is any follow through on this rebound. I think continuous chop in this two month zone is completely fine, because that represents sellers failing to really put pressure on price.
Breadth actually continues to improve, with more stocks making new 52 week highs. The only “sector” that’s taking on a lot of heat is software and tech heavy names. This is not only a healthy reset, but also a return to more realism in terms of valuations.
Bitcoin: We need to talk about crypto! Because WOW, just look at this break down from that bear flag we had mapped out. This was weeks in the making, and technical wise it is playing out exactly how it should. I think we are 100% in the midst of the crypto winter part of the cycle now. If price continues to act weak, look to see us break down 60k and head towards the low 50k spot.
I have already started DCA’ing, with my first two purchases at 75k and then 67k. Ready to stack some more if we head lower! This is NFA, but my strategy of slowly entering at lower prices as best as possible and planning to hold for at least 2 years.
🔍 What I’m Watching:
