Despite a late sell-off on Friday, the market put in a pretty solid bounce this week, reclaiming ground above its MA’s for a 1.5% gain. I’ve joked about wanting a letter other than a ‘V’, and I guess you should be careful what you wish for because it sure looks like we just traced out a ‘W’…
Seriously though, if you just look at price and try to shut out noise like I do, you really had your work cut out for you this week with commentary dominated by the WEF at Davos, the State Of The Union speech, the ECB, and God help us – the build-up to the Greek elections.
It’s hard to think of a collection of less-actionable world events than that.
It’s not that some of them aren’t capable of moving markets, it’s that you can’t possibly obtain any discernible edge from them. It’s not the news, it’s the reaction to the news that will tell you all you need to know, and that will manifest itself through price. Follow that, and manage the risk it entails, and you will reap far more than you will from any subjective interpretation of the latest news headlines.
Many of the trends I touched upon last week remain in place, especially those beyond US markets.
The DAX in particular staged a spectacular follow-through to the previous week’s breakout to all time highs.
That strength is even more pronounced shown relative to the S&P 500:-
Last week I also highlighted the continued long-term strength in China.
The following Monday the Shanghai Composite slumped 8%. Some financial websites masquerading as business journalism that need page views to drive ad revenues even called it a ‘crash’, or said that China stocks were ‘obliterated’. Except they weren’t, and instead of being removed from the face of the earth they staged the greatest comeback since Lazarus and by the end of the week were back at new highs. Not bad, having ‘crashed’ and been ‘obliterated’ just four days earlier.
Turning back to US markets and our own Marketfy portfolio, we had no changes this week but we did have the opportunity to trail many of our stops higher with several names reaching new highs.
The prevalent theme for me has been the strength in high-growth ‘momentum’ names, such as those found in IBD, and we saw that reflected in the five new trade ideas given this week. It’s clear the strength in biotech in particular is a major component, together with the resurgence in tech names.
Both healthcare and technology continue to feature heavily in our watchlist of 28 names, but it was also interesting to see some additions this week from the industrials and consumer discretionary sectors too.
Here’s a look at just 12 of those names:-