So, the market exhibited some grit yesterday after the pre-opening action suggested a potentially ugly session. The broad market couldn’t climb into the plus column. The Dow Jones Industrial Average (DJI) paced by Nike (NKE), JPMorgan Chase (JPM), and Goldman Sachs (GS), finished the day higher.

The market never came close to violating the lowest levels established in the premarket. But the spike in the CBOE Market Volatility Index (VIX), also known as the (fear index), underscored a high level of concern.  

The VIX spurted north of 31 in the 5 AM hour and trickled by 29 during the session. It pulled back into the close but remains very elevated relative to the stock market. It underscores jitteriness that could materialize at any time.

In some ways, the VIX lends the rally credibility by offsetting the notion the market is drunk on optimism. There is enough doubt reflected in the VIX that should mitigate the argument that there is also too much complacency.

VIX

Message of Market

For the S&P 500, only one of the eleven sectors finished the day higher…surprise… Financials was the lone winner. On the downside, Energy got hit pretty good, followed by traditional havens Utilities, and Real Estate.

S&P 500 Index		-0.39%
Communication Services XLC		-1.01%
Consumer Discretionary XLY		-1.31%
Consumer Staples XLP		-1.90%
Energy XLE		-3.22%
Financials XLF	+0.81%
Health Care XLV		-1.41%
Industrials XLI		-1.01%
Materials XLB		-1.02%
Real Estate XLRE		-2.17%
Technology XLK		-0.13%
Utilities XLU		-2.04%

New S&P 500 Leadership

Since the September 2 market top, there has been a distinct rotation out of Technology and Communication Services into Financials, Industrials, Energy, and Materials. 

Note: tech stocks not in the S&P 500 are rocking like I have never seen – even in 1999.

Cloud Shines

Each day, the world creates gargantuan amounts of data that need to be stored, secured, mined, and sold. It means the investment proposition in the cloud grows exponentially. That’s the main driver behind the big moves in top cloud stocks. They can become oversold, but in the grand scheme of things, they are not overhyped.

1) Zscaler, Inc. (ZS)

• Price Gain: 289.76% 2020 year-to-date
• Market Capitalization: $24.32 billion

2) Twilio Inc. (TWLO)

• Price Gain: 251.14% 2020 year-to-date
• Market Capitalization: $55.38 billion

3) Shopify Inc. (SHOP)

• Price Gain: 170.16% 2020 year-to-date
• Market Capitalization: $130.7 billion

 4) Five9, Inc. (FIVN)

• Price Gain: 155.32% 2020 year-to-date
• Market Capitalization: $10.94 billion

 5) MongoDB, Inc. (MDB)

• Price Gain: 154.68% 2020 year-to-date
• Market Capitalization: $20.2 billion

 6) HubSpot, Inc. (HUBS)

• Price Gain: 139.68% 2020 year-to-date
• Market Capitalization: $17.43 billion

 7) Coupa Software Incorporated (COUP)

• Price Gain: 119.49% 2020 year-to-date
• Market Capitalization: $23.17 billion

 8) MicroStrategy Incorporated (MSTR)

• Price Gain: 100.37% 2020 year-to-date
• Market Capitalization: $2.65 billion

 9) ServiceNow, Inc. (NOW)

• Price Gain: 86.80% 2020 year-to-date
• Market Capitalization: $102.89 billion

Solar Wins

Apparently, $35B is tucked away in the fiscal stimulus plan to pay for energy R&D Programs, a two-year extension of the Investment Tax Credit (ITC) for solar power, a one-year extension of the Production Tax Credit (PTC) for wind power projects, and a five-year extension for the Offshore Wind Tax Credit.

That sent solar names soaring during the session, including two Hotline positions: Jinko Solar and Enphase Energy.   

• JinkoSolar (JKS): +9.3%
• Sunnova Energy (NOVA): +8.8% 
• SunPower (SPWR): +7.8% 
• Canadian Solar (CSIQ): +6.5%
• Sunrun (RUN): +5.5%
• Enphase Energy (ENPH): +3.8% 

Golden Tan

TAN, the solar exchange-traded fund (ETF) has gone parabolic. It could move even higher. A Biden administration would use every tool from executive orders to regulations, as well as massive spending programs to fund the dream component of the Green New Deal.

Most of these stocks are in the tech sector, and all can have the ability to continue moving higher.

 

TAN Chart

Portfolio Approach

We added to Consumer Discretionary yesterday in the Hotline Model Portfolio.  This morning, we are closing a position in Industrials and adding a new position in Consumer Discretionary.

Today’s Session

After the close, Peloton (PTON) announced the acquisition of fitness-equipment company Precor, which should immediately pay dividends, helping the company meet demand and alleviate its massive backlog.

I suspect we are going to see a ton of deals with stocks generally trading at all-time highs.

The markets are rather muted this morning.  Existing home sales will be out at 10a ET.

 

Comments

Gosh! What to think! Buy solar, green energy? Put it in the mattress!? Lorin K on 12/22/2020 1:47:37 PM

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