Just when everyone had written them off, those Mega-Cap growth stocks came back like the latest installment of those Transformer movies. Those trillion-dollar stocks and other heavyweights were listed with the so-called FAANG names that peaked in early September. 

In the latest Bank of America Merrill Lynch (BAML) Global Fund Manager Survey, Technology was sold big time to buy Energy, Materials, and banks.  

Message of the Market

Market breadth wasn’t as wide as one might assume on another record-breaking day (the best inauguration session since 1937). But new highs to new lows stood out for sure. The NASDAQ Composite is up 3.5% for the week and regaining that old 2020 momentum.

Market Breadth	NYSE	NASDAQ
Advancing	2,037	2,204
Declining	1,115	1,640
52 Week High	228	518
52 Week Low	1	7
Up Volume	1.98B	3.78B
Down Volume	1.85B	2.48

Those MAGA stocks came to life in a big way:

• Microsoft (MSFT) +3.65%
• Apple (AAPL) +3.29%
• Google (GOOG) +5.36%
• Amazon (AMZN) +4.57%

What was also interesting about the strength in those mega-cap names yesterday is they had coattails.  For 2021, there are now 775 NASDAQ winners against only 248 losers. And now more than 86% of the components on the NASDAQ are trading above their 200-day moving average.

Is This Good or Bad?

Newton’s first law states that if a body is at rest or moving at a constant speed in a straight line, it will remain at rest or keep moving in a straight line at constant speed unless it is acted upon by a force.

I understand that with so many components on the NASDAQ changing hands above their 200-day moving average, it would seem the index is ready to pull back. It’s indeed hard to find something cheap, but we are talking about the leadership of names that are modern-day monopolies that will only get stronger.

It’s not great for society and free speech, but it’s a cash machine for investors. More than likely, these MEGA -Cap names will prove Isaac Newton right again – a body in motion will keep moving in a straight line at constant speed unless or until acted upon.

Another Hot Spot

Homebuilders are picking up steam and ready to make a run at rallying to new highs. The iShares U.S. Home Construction Index (ITB) closed at a perfect double top. It’s a potentially bearish formation unless the index breaks out.

Among the top ten percentage gainers in the S&P 500 yesterday, the following names remain attractive:

• Pulte Homes (PHM)
• Lennar (LEN)
• D.R. Horton (DHI)

Portfolio Review

We added to Materials yesterday.

Comments

mr payne your the best PAUL MCALDUFF on 1/21/2021 9:58:14 AM

Some win some loose. Thanks Charles. Lorin K on 1/21/2021 10:37:29 AM

I understand that some builders are holding back on new construction of houses due to the significant increase in building materials. I know that there are regional issues also based on the cost of living in some areas. How might this effect the market? Michael Payne on 1/21/2021 11:09:14 AM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.