Yesterday’s session never really got off the ground, and the few hot stocks and sectors had no coattails.  Technology (XLK) powered the NASDAQ higher, and the XLK is up more than 30% for the year.

This is what is so intriguing for investors and even observers. On one hand, the move in tech could be argued as excessive - and yet, the underlying fundamentals improve daily. So, what looks obvious is that tech is overbought. Just about everything else is “cheap” and looks sound on paper, but cannot gain traction in real life.

The S&P 500, up more than 7% for the year, is not unreasonable in a regular year. However, this is not a regular year. Investors continue to assume the index will go higher, powered by those sectors that have not lived up to their potential.

XLK versus SPX

Real Sloppy Under the Hood

When the final bell rang, market breadth was uglier than major indices implied. Once again, the lone bright spot was the up volume on the NASDAQ. For the most part, the market was sleepwalking.  Moreover, the winners just keep winning, and all the other stocks are watching from the stands – many in the upper levels.

NYSE 899 advancers 2,105 decliners 77 new highs 9 new lows 1.31 billion up volume 3.12 billion down volume

NASDAQ 1,285 advancers 2,118 decliners 153 new highs 29 new lows 1.86 billion up volume 1.74 billion down volume

After the close, Zoom Video Communications (ZM) posted blowout financial results, beating the Street on revenue and earnings by $0.47. Management hiked its guidance well above consensus for the current quarter and full year. I suspect other names in the space will rally as well, but so far, Zoom has held its own and then some. 

Meanwhile, Amazon (AMZN) received FAA approval for its unmanned aircraft delivery system. These autonomous unmanned aircraft are now deemed safe and okay to deliver lightweight packages to customers. The government pushed back on this from its inception, but Bezos & Co. never wavered. 

Winners just keep winning.

Portfolio Approach

We took a 19.8% profit in a Consumer Discretionary name that we held in our Hotline Model Portfolio for less than a week.  While this is much shorter than our typical hold of 2-6 months, the return was simply too great.  We added a new position on Consumer Discretionary today, lowering Cash to 1.

Today’s Session

Stock of the Day: Zoom

Move over Tesla (TSLA) and Apple (AAPL) here comes Zoom (ZM).  In what arguably could be one of the best quarters in history the videoconference call company posted, these results simply annihilated Wall Street consensus.

• Revenue +355%
• Operating Margin 41.7 from 14.2
• Free cash flow +2084%
• Earnings +1050%
• Customers > 10 employees +458%
• FY Guidance $2.47 consensus $1.29

Upgrades

Wall Street did not believe, and this morning are playing catch up. 

• BTIG buy from neutral target $500
• Citigroup neutral from sell target $402

We have been in and out of Zoom (ZM) this year mostly on the Swing service, but this is one of those mornings, where it feels like the most amazing no-brainer. Established players with deep pockets will have to put up a bigger fight.

Historically, September is a tough month although that has changed over the last 10 years with the caveat being election years.

I suspect more bouts of profit-taking. Right now, the market is working on a presumptive Trump win, better coronavirus trends and the Federal Reserve.

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