Market Outlook
"markets can stay irrational longer than you can remain solvent"
After 6 weeks of bullish price action, last week the sugar high started to wear off marginally. No sugar rush crash, but the momentum started to slow. Since the April low, the market has continued day after day gifting us with higher price action and new ATHs.
After the last run the market went on from the 700 breakout, it does seem like another mini flag is starting to form before the next push through 750 can occur. Now Semi's have been the obvious sector leading the rally as of late.
But last week Semi names have started to do things other then go up in a vertical line higher. QCOM pulled back 20% off its recent high, INTC pulled back 10%, while MU lost 50 points on Friday in a candle that looks so small on the daily chart, that it looks inconsequential even if it was a nearly a 7% sell off.
Now all 3 of these names have increased by over 100% in the last month, so are they really losing anything other than recent price action? As the famous saying goes "markets can stay irrational longer than you can remain solvent," this could be a temporary pause before a real blow off top that could send this sector on another leg up to even higher highs. My rational brain is saying how these vertical moves can't last much longer, but sometimes irrational thoughts prevail.
As this run starts to cool in the short term, all that really means is a broad market that starts to flag out as nothing has really changed. Where new ATHs are still very much in the horizon.
The semi's with last weeks doji at highs will be the leading indicator to continue to focus on. If they somehow takes out last weeks high, the party continues. If it does not and instead takes out the weekly lows, then it may be a time to look to take some profits if you are in any of the semi names that have recently doubled in a month.
The good thing for us, is that when you only buy stocks and avoid using margin, you can benefit from the irrational price action the longer you can hold on. But we still have to know when to fold them as LOD and PLOD stops after 100% runs are usually good signs to ring the register.
From Bennett
Founder Big Picture Trading
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